PROFESSIONAL ACADEMIC PLANS, INC (PAPI) v. CRISOSTOMO (2005) By Justice Callejo, Sr.

FACTS Plaintiff Crisostomo Defendants PAPI, Colayco (Pres of PAPI) and Dino (AVP for Marketing; responsible for the memo fixing Crisostomos commission at 2%) Action for Collection of Sum of Money and for Damages Dinnah Crisostomo, as the PAPI District Manager of Metro Manila, was paid only through commission equivalent o 10% of the payments of remittances of clients whose contracts she negotiated. She was later on promoted as Regional Manager. In May 1988, PAPI wrote to Col. Andaya, the President of Armed Forces of the Philippines Savings and Loan Association, Inc. (AFPSLAI) offering an Academic Assistance Program for its members, their children and dependents. The contract with AFPSLAI was initially negotiated by Noel Ruda. However, Rudas services was terminated before the agreement became final. As Rudas immediate supervisor, Crisostomo, along with AVP for Sales Guillermo Macariola, took over the negotiations and closed the deal. In Nov 1988, PAPI and AFPSLAI executed a Memorandum of Agreement (MOA) regarding the scholarship funding agreements. The parties agreed that any amendments/or modifications in the MOA would be effective only upon approval of both parties. The franchise commission for the deal went to Crisostomo. (Ruda was no longer with the company. Macariola declined and waived his right to the commission.) Initially, Crisostomo received the original 10% commission. Then it was reduced to 5% to support the operational expenses of PAPI. After several months, it was reduced again to 4% until finally it dwindled down to 2%. Crisostomo agreed to the final reduction of the commission to 2% only if it was agreed to in writing. So a Memorandum was signed between Crisostomo and Petitioner AVP for Marketing Dino and VP for Finance and Administration Cruz stating that Crisostomo was to receive 2% commission from the AFPSLAI remittances for as long as she was employed in the company. Crisostomo received her commission until October 1991. In the meantime, Col Punzalan succeeded Col Andaya as President of AFPSLAI. In Dec 1991, Col Punzalan sent a letter to PAPI telling them he wanted to review the 1988 MOA. As a result, PAPI and AFPSLAI executed another MOA in 1992, amending the 1988 MOA. AFPSLAI resumed its remittances. But this time, CRisostomo no longer got paid. The reason for this was explained in an Inter-Office Memorandum: (1) the new AFPSLAI management cancelled the old MOA in October 1991 due to various anomalies and the misrepresentation committed by PAPIs sales force; (2) the new MOA is largely due to managements effort; hence, no franchise would be granted to any sales associates; and (3) the franchise guidelines as per the Memorandum dated November 1988 prescribed that in order to maintain her franchise, 100 new paid plans should be completed on a month to month

basis and respondent Crisostomo was not able to meet these parameters for the period of November 1991 to May 1992. But Crisostomo still insisted she receive her commission. First, she approached her immediate supervisor but was denied. Next she went to Dino who, allegedly, even threatened her with termination if she persisted. Finally, she talked to the President of PAPI Colayco but still to no avail. She sent a demand letter to PAPI but was still denied relying on the grounds stated in the Internal Office Memo. She talked to Colayco again who told her to make a formal proposal. In her proposal, she gave 2 options: Option 1: That I am willing to settle for a P5 Million amount settlement and an immediate irrevocable resignation from your good company, Option 2: That the 2% franchise fee/commission be retained even if and when the undersigned is no longer connected with Professional Group, Inc. for as long as the AFPSLAI is still doing business with the Professional Group. This is considered as the royalty fee. Her proposal was again rejected. But this time, she was placed under Preventive Suspension and was even advised not to come back after her suspension. In effect, she was fired from the company. So Crisostomo filed a complaint for sum of money and damages. Defense of PAPI 1. Crisostomo is not entitled to the contract because she did not participate in the execution of the 1988 MOA. - PAPI introduced testimonial evidence to the effect that, as a rule, the commission should have reverted back to PAPI after Ruedas termination. The Executive Committee agreed to award Crisostomo the 5% commission which was eventually reduced to 2%. 2. Her franchise was terminated because she was unable to meet the required monthly 100 new paid plans. 3. AFPSLAI did not resume payments in 1992. Rather, it entered into a new MOA with PAPI under which no one is entitled to a franchise. TRIAL COURT Ruled in favor of Crisostomo Awarded: 2% commission as of Oct 1992 and the equivalent 2% of all future remittances of AFPSLAI, Moral Damages, Exemplary Damaged, Attys fees and cost of suit

COURT OF APPEALS - Affirmed TCs decision - Col Punzalans letter did not indicate any intention to abrogate 1988 MOA. It merely suspended the acceptance of application for pre-need plans while they were still reviewing the terms of the 1988 MOA - The 1992 MOA showed no incompatibility with the 1988 MOA that would amount to an implied extinguishment of the old MOA. The 1992 MOA was merely a modification of the first. - The requirement of monthly completion the 100 new plans was superseded by the 1991 Memorandum which reduced Crisostomos commission to 2%.

The non-fulfillment of the remittance from Nov 1991 until May 1992 was due to Col Punzalans order of suspension. It cannot be imputed to Crisostomo. Hence, she still had a claim over her commission for that period.

ISSUES 1. WON the old memorandum of agreement had been cancelled and rescinded by AFPSLAI.- NO 2. WON Crisostomo is entitled to the franchise fee or commission under the new memorandum of agreement under which she had no participation whatsoever in the negotiation and execution.YES WON Petitioners PAPI et. al. have committed acts that render them legally liable for moral and exemplary damages and attorney's fees and cost of suit. -NO

3.

HELD SUPREME COURT - Affirmed CAs decision ISSUE 1: WON the old memorandum of agreement had been cancelled and rescinded by AFPSLAI.- NO 1. The 1988 MOA was only modified by 1992 MOA. It was not cancelled. 2. Col. Punzalan did not unilaterally cancel of rescind the 1988 MOA. In his letter, he only intended for suspension of acceptance of new applications until the 1988 MOA has been reviewed. Petitoners failed to present evidence that it agreed to such rescission. ABANDONMENT OF CONTRACT RIGHTS REQUIRES PROOF OF ACTUAL INTENT TO ABANDON. ONCE A CONTRACT IS ENTERED INTO, NO PARTY CAN RENOUNCE IT UNILATERALLY OR WITHOUT THE CONSENT OF THE OTHER. THIS IS THE ESSENCE OF THE PRINCIPLE OF MUTUALITY OF CONTRACTS ENTOMBED IN ARTICLE 1308 OF THE CIVIL CODE. TO EFFECTUATE ABANDONMENT OF A CONTRACT, MUTUAL ASSENT IS ALWAYS REQUIRED. THE MERE FACT THAT ONE HAS MADE A POOR BARGAIN MAY NOT BE A GROUND FOR SETTING ASIDE THE AGREEMENT. 3. The 1992 MOA clearly shows that the parties merely made substantial modifications to the first MOA, and agreed that only those provisions inconsistent with those of the second were considered rescinded or modified. a. The parties agreed to continue with the implementation of the Academic Assistance Program under the acronym "LOVES" (Loans to Offset Very Expensive Schooling) and to continue implementing the same. The rights and obligations of the parties under the first MOA were maintained but with modifications. ISSUE 2: WON Crisostomo is entitled to the franchise fee or commission under the new memorandum of agreement under which she had no participation whatsoever in the negotiation and execution.-YES 1. Even though CRisostomo did not participate in the negotiations of the new MOA, she should still receive her commission. The franchise commission is awarded as an incentive to the one who initiated and successfully negotiated the AFPSLAI account within a certain period. There were

only 2 conditions attached to it: (1) that the respondent must remain connected with the company, and (2) that it is not transferable. At the time the new MOA was executed, she was still working for the company. Even with the modifications in the new MOA, she still has the right to receive her commission. 2. Petitioners are now estopped to question her entitlement as she had been continuously receiving her commission until Col. Punzalans request for review of the MOA. ISSUE 3: WON Petitioners PAPI et. al. have committed acts that render them legally liable for moral and exemplary damages and attorney's fees and cost of suit. -NO - Trial Court has no basis for awarding Moral Damages. Since no Moral Damages, it also follows that no award of Exemplary Damages could be made.

DECISION: CAs decision affirmed minus the award for Moral and Exemplary Damages.