AGENCY TRUST AND PARTNERSHIP

CASE DIGEST

Orient-Air Services and Hotel Representatives vs. Court of Appeals

May 29, 1991

FACTS:
American Air entered into a General Sales Agency Agreement between Orient Air Services and
Hotel Representatives (Orient Air) whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger transportation.

In 1981, Orient Air reneged in its obligations by failing to promptly remit the net proceeds of
sales for the months of January to March 1981 amounting to $254,400.

American Air instituted a suit against Orient Air with CFI Manila for Accounting with Preliminary
Attachment/Garnishment, Mandatory Injuction and Restraining Order.

Orient Air answered with counterclaim denying the material allegation and contends the
following:
- American Air still owed Orient Air a balance in unpaid overriding commission. Orient Air
contends that the contractual stipulation of a 3% overriding commission covers the
total revenue of American Air and not merely that derived from the ticketed sales
undertaken by the former.
- The termination of the contract is untenable
- American Airs precipitous conduct had occasioned prejudice to its business interests.

Trial Court ruled in favor of Orient Air ordering American Air to reinstate defendant as its
general sales agent for passenger transportation in the Philippines in accordance with the said
GSA Agreement.

Court of Appeals affirmed the decision of the Trial Court.

Issue:
Whether the respondent appellate court correctly ruled that Orient Air be reinstated again as
sales agent of American Air?

Ruling:
SC affirmed the decision of the CA however, set aside the portion of the ruling by the appellate
court reinstating Orient Air as the General Sales Agent of American Air.

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American
Air to extend its personality to Orient Air. Such would be violative of the principles and essence
of agency, defined by law as a contract whereby 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.

In an agent-principal relationship, the personality of the principal is extended through the facility
of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to
perform all acts which the latter would have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in any way, be compelled by law or by any
court.