Dominion Insurance vs CA Page 1 of 3

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 129919

February 6, 2002

DOMINION INSURANCE CORPORATION, petitioner,

vs.
COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
DECISION
PARDO, J.:
The Case
This is an appeal via certiorari1 from the decision of the Court of Appeals2 affirming the decision3 of
the Regional Trial Court, Branch 44, San Fernando, Pampanga, which ordered petitioner Dominion
Insurance Corporation (Dominion) to pay Rodolfo S. Guevarra (Guevarra) the sum of P156,473.90
representing the total amount advanced by Guevarra in the payment of the claims of Dominions
clients.
The Facts

"On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff and counsel
were present. Despite due notice, defendant and counsel did not appear, although a messenger,
Roy Gamboa, submitted to the trial court a handwritten note sent to him by defendants counsel
which instructed him to request for postponement. Plaintiffs counsel objected to the desired
postponement and moved to have defendant declared as in default. This was granted by the trial
court in the following order:
"ORDER
"When this case was called for pre-trial this afternoon only plaintiff and his counsel Atty. Romeo
Maglalang appeared. When shown a note dated May 21, 1992 addressed to a certain Roy who
was requested to ask for postponement, Atty. Maglalang vigorously objected to any postponement
on the ground that the note is but a mere scrap of paper and moved that the defendant corporation
be declared as in default for its failure to appear in court despite due notice.
"Finding the verbal motion of plaintiffs counsel to be meritorious and considering that the pre-trial
conference has been repeatedly postponed on motion of the defendant Corporation, the defendant
Dominion Insurance Corporation is hereby declared (as) in default and plaintiff is allowed to
present his evidence on June 16, 1992 at 9:00 oclock in the morning.
"The plaintiff and his counsel are notified of this order in open court.
"SO ORDERED.
"Plaintiff presented his evidence on June 16, 1992. This was followed by a written offer of
documentary exhibits on July 8 and a supplemental offer of additional exhibits on July 13, 1992.
The exhibits were admitted in evidence in an order dated July 17, 1992.

The facts, as found by the Court of Appeals, are as follows:

"On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of
money against defendant Dominion Insurance Corporation. Plaintiff sought to recover thereunder
the sum of P156,473.90 which he claimed to have advanced in his capacity as manager of
defendant to satisfy certain claims filed by defendants clients.
"In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim for
P249,672.53, representing premiums that plaintiff allegedly failed to remit.
"On August 8, 1991, defendant filed a third-party complaint against Fernando Austria, who, at the
time relevant to the case, was its Regional Manager for Central Luzon area.
"In due time, third-party defendant Austria filed his answer.
"Thereafter the pre-trial conference was set on the following dates: October 18, 1991, November
12, 1991, March 29, 1991, December 12, 1991, January 17, 1992, January 29, 1992, February 28,
1992, March 17, 1992 and April 6, 1992, in all of which dates no pre-trial conference was held. The
record shows that except for the settings on October 18, 1991, January 17, 1992 and March 17,
1992 which were cancelled at the instance of defendant, third-party defendant and plaintiff,
respectively, the rest were postponed upon joint request of the parties.

"On August 7, 1992 defendant corporation filed a MOTION TO LIFT ORDER OF DEFAULT. It
alleged therein that the failure of counsel to attend the pre-trial conference was due to an
unavoidable circumstance and that counsel had sent his representative on that date to inform the
trial court of his inability to appear. The Motion was vehemently opposed by plaintiff.
"On August 25, 1992 the trial court denied defendants motion for reasons, among others, that it
was neither verified nor supported by an affidavit of merit and that it further failed to allege or
specify the facts constituting his meritorious defense.
"On September 28, 1992 defendant moved for reconsideration of the aforesaid order. For the first
time counsel revealed to the trial court that the reason for his nonappearance at the pre-trial
conference was his illness. An Affidavit of Merit executed by its Executive Vice-President
purporting to explain its meritorious defense was attached to the said Motion. Just the same, in an
Order dated November 13, 1992, the trial court denied said Motion.
"On November 18, 1992, the court a quo rendered judgment as follows:
"WHEREFORE, premises considered, judgment is hereby rendered ordering:

Dominion Insurance vs CA Page 2 of 3

"1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of
P156,473.90 representing the total amount advanced by plaintiff in the payment of the
claims of defendants clients;
"2. The defendant to pay plaintiff P10,000.00 as and by way of attorneys fees;
"3. The dismissal of the counter-claim of the defendant and the third-party complaint;
"4. The defendant to pay the costs of suit."4
On December 14, 1992, Dominion appealed the decision to the Court of Appeals.5
On July 19, 1996, the Court of Appeals promulgated a decision affirming that of the trial court. 6 On
September 3, 1996, Dominion filed with the Court of Appeals a motion for reconsideration.7 On July
16, 1997, the Court of Appeals denied the motion.8

PERSONAL ACCIDENT, and BONDING with the right, upon our prior written consent, to
appoint agents and sub-agents.
"2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and
Bonds for and on our behalf.
"3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for
and receive and give effectual receipts and discharge for all money to which the FIRST
CONTINENTAL ASSURANCE COMPANY, INC.,18 may hereafter become due, owing
payable or transferable to said Corporation by reason of or in connection with the abovementioned appointment.
"4. To receive notices, summons, and legal processes for and in behalf of the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal
proceedings against the said Corporation."19 [Emphasis supplied]
The agency comprises all the business of the principal,20 but, couched in general terms, it is limited
only to acts of administration.21

Hence, this appeal.9

The Issues
The issues raised are: (1) whether respondent Guevarra acted within his authority as agent for
petitioner, and (2) whether respondent Guevarra is entitled to reimbursement of amounts he paid
out of his personal money in settling the claims of several insured.

A general power permits the agent to do all acts for which the law does not require a special
power.22 Thus, the acts enumerated in or similar to those enumerated in the Special Power of
Attorney do not require a special power of attorney.
Article 1878, Civil Code, enumerates the instances when a special power of attorney is required.
The pertinent portion that applies to this case provides that:

The Court's Ruling

"Article 1878. Special powers of attorney are necessary in the following cases:
The petition is without merit.
"(1) To make such payments as are not usually considered as acts of administration;
By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.10 The basis for
agency is representation.11 On the part of the principal, there must be an actual intention to
appoint12 or an intention naturally inferrable from his words or actions;13 and on the part of the
agent, there must be an intention to accept the appointment and act on it,14 and in the absence of
such intent, there is generally no agency.15
16

A perusal of the Special Power of Attorney would show that petitioner (represented by third-party
defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship.
Despite the word "special" in the title of the document, the contents reveal that what was
constituted was actually a general agency. The terms of the agreement read:
"That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC.,17 a corporation duly organized
and existing under and by virtue of the laws of the Republic of the Philippines, xxx represented by
the undersigned as Regional Manager, xxx do hereby appoint RSG Guevarra Insurance Services
represented by Mr. Rodolfo Guevarra xxx to be our Agency Manager in San Fdo., for our place
and stead, to do and perform the following acts and things:
"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance
business as usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR,

"x x x

xxx

xxx

"(15) Any other act of strict dominion."

The payment of claims is not an act of administration. The settlement of claims is not included
among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to
the acts enumerated therein. A special power of attorney is required before respondent Guevarra
could settle the insurance claims of the insured.
Respondent Guevarras authority to settle claims is embodied in the Memorandum of Management
Agreement23 dated February 18, 1987 which enumerates the scope of respondent Guevarras
duties and responsibilities as agency manager for San Fernando, Pampanga, as follows:
"x x x

xxx

xxx

"1. You are hereby given authority to settle and dispose of all motor car claims in the
amount of P5,000.00 with prior approval of the Regional Office.

Dominion Insurance vs CA Page 3 of 3

"2. Full authority is given you on TPPI claims settlement.
"xxx

xxx

x x x "24

In settling the claims mentioned above, respondent Guevarras authority is further limited by the
written standard authority to pay,25 which states that the payment shall come from respondent
Guevarras revolving fund or collection. The authority to pay is worded as follows:
"This is to authorize you to withdraw from your revolving fund/collection the amount of PESOS
__________________ (P ) representing the payment on the _________________ claim of
assured _______________ under Policy No. ______ in that accident of ___________ at
____________.
"It is further expected, release papers will be signed and authorized by the concerned and
attached to the corresponding claim folder after effecting payment of the claim.
"(sgd.) FERNANDO C. AUSTRIA
Regional Manager"26

The instruction of petitioner as the principal could not be any clearer.1wphi1 Respondent
Guevarra was authorized to pay the claim of the insured, but the payment shall come from the
revolving fund or collection in his possession.
Having deviated from the instructions of the principal, the expenses that respondent Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from petitioner
Dominion. This conclusion is in accord with Article 1918, Civil Code, which states that:
"The principal is not liable for the expenses incurred by the agent in the following cases:
"(1) If the agent acted in contravention of the principals instructions, unless the latter
should wish to avail himself of the benefits derived from the contract;
xxx

In this case, when the risk insured against occurred, petitioners liability as insurer arose.1wphi1
This obligation was extinguished when respondent Guevarra paid the claims and obtained
Release of Claim Loss and Subrogation Receipts from the insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished, respondent
Guevarra may demand for reimbursement from his principal. To rule otherwise would result in
unjust enrichment of petitioner.
The extent to which petitioner was benefited by the settlement of the insurance claims could best
be proven by the Release of Claim Loss and Subrogation Receipts27 which were attached to the
original complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-l, in the total amount of
P116,276.95.
However, the amount of the revolving fund/collection that was then in the possession of
respondent Guevarra as reflected in the statement of account dated July 11, 1990 would be
deducted from the above amount.

[Emphasis supplied]

"xxx

"Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor."

xxx"

However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement,
his right to recover may still be justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:

The outstanding balance and the production/remittance for the period corresponding to the claims
was P3,604.84. Deducting this from P116,276.95, we get P112,672.11. This is the amount that
may be reimbursed to respondent Guevarra.
The Fallo
IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the Court of
Appeals28 and that of the Regional Trial Court, Branch 44, San Fernando, Pampanga,29 in that
petitioner is ordered to pay respondent Guevarra the amount of P112,672.11 representing the total
amount advanced by the latter in the payment of the claims of petitioners clients.
No costs in this instance.
SO ORDERED.
Davide, Jr., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.