Ba Finance Corp Vs Ca 14231c

BA Finance Corp vs. CA

1. General Obligation of Agent Who Accepts the Agency Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the damages which, through his nonperformance, the principal may suffer.

CASE: Facts:  

He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718). Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity

   



2. Duties DUTY OF OBEDIENCE



An agent must act in accordance with the instructions of the principal. (Art. 1887) CONTROL: One factor which most distinguishes agency from other legal concepts is control; one persons (the agent) agrees to act under the control or direction of another (the principal). Since the agent acts in representation of the principal, he must enter into juridical relations on behalf of the principal where he represents the will or consent of the principal, and not the agent’s own will.



Respondents Manuel Cuady and Lilia Cuady obtained a credit from Supercars, Inc. to cover the cost of the unit of one Ford Escort 1300. The obligation was evidenced by a promissory note executed by the respondents in favor of Supercars, Inc., obligating themselves to pay the latter or order the sum of P39,574.80, inclusive of interest at 14% per annum, payable on monthly installments To secure the faithful and prompt compliance of the obligation, the Cuady spouses constituted a chattel mortage on the aforementioned motor vehicle. After a few days, Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to B.A. Finance Corporation. After partial payments, they have an unpaid balance of P2,344.65 B.A. Finance Corporation obtained the renewal of the insurance coverage over the vehicle with Zenith Insurance Corporation, when the Cuadys failed to renew said insurance coverage themselves. The car got into an accident and was badly damaged. The accident was reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance Corporation. The Cuadys asked the B.A. Finance Corporation to consider the same as a total loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining and give them the surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A. Finance Corporation insisted to just have the car repaired When the car broke the second time, the Cuadys again wrote B.A. Finance Corporation requesting the latter to pursue their prior instruction of enforcing the total loss provision in the insurance coverage. However, their requests fell on deaf ears. This pushed the Cuadys to stop paying

  



their monthly installments on the promissory note In view of the failure of the Cuadys to pay the remaining installments on the note, B.A. Finance Corporation sued them for the recovery of the said remaining installments RTC dismissed the case, and the Court of Appeals affirmed the dismissal, and also dismissed the company’s Motion for Reconsideration. On appeal before the Supreme Court, B.A. Finance Corporation claimed that its failure to enforce the total loss provision in the insurance policy did not extinguish the unpaid balance on the promissory note. Such, it claimed, was not one of the modes of extinguishing an obligation as provided for in Article 1231 of the Civil Code. On the other hand, the Cuadys insisted that due to its failure to enforce the total loss provision in the insurance policy, the company lost not only its opportunity to collect the insurance proceeds, but also the remaining balance on the promissory note.

Issue: Whether or not B.A. Finance Corporation has waived its right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel mortgage?





 

Held. 



YES. As it had become subrogated to the rights and obligations of Supercars, Inc. by virtue of the assignment, B.A. Finance Corporation is bound by the and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. The chattel mortgage authorized B.A. Finance Corporation

to “file, follow-up, prosecute, compromise or settle insurance claims; to sign execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage.” In other words, the Cuady spouses created an agency in B.A. Finance Corporation’s favor. Under Article 1884 of the Civil Code, B.A. Finance Corporation is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys may suffer. The records show that instead of acting on the instruction of the Cuadys to enforce the total loss provision in the insurance policy, the company refused and instead insisted on just having the motor vehicle repaired. However, Rea Auto Center, the auto repair shop chosen by the insurer to repair the car, misrepaired it, making it completely useless and unserviceable. Despite this, the company still refused to follow the Cuady’s repeated request to heed their previous instructions, which caused the spouses to stop paying the remaining balance on the promissory note. Clearly, the Cuadys suffered pecuniary loss in the form of salvage value of the car, as well as the unpaid balance on the promissory note due to the company’s actions. Considering that their agent’s disregard of their request and refusal to avail of the insurance policy that would’ve been used to pay the debt was the reason the spouses’ payments ceased, it would be unjust to require the spouses to pay the balance of their debt.