International Films (China), Ltd. v. The Lyric Film Exchange, Inc.

No. 42465 (19 November 1936)

Villa-Real J. kmd
SUBJECT MATTER: The law on agency; Responsibility for acts of substitute
CASE SUMMARY:
International Film (lessor) and Lyric Film (lessee) entered into a lease contract for the showing of the film “Monte Carlo
Madness.” Upon expiration of the contract, Gabelman, an agent of International Film, requested that the film be kept in Lyric
Film’s vault since International Film had no vault of its own. Gabelman assumed responsibility for the film. The vault burned
down. The Court held that Lyric Film was not liable to International Film for the destruction by fire of the film.
DOCTRINES:
Subagent of the petitioner in the exhibition of the film "Monte Carlo Madness", was not obliged to insure it against fire, not
having received any express mandate to that effect, and it is not liable for the accidental destruction thereof by fire. 

FACTS:
Bernard Gabelman was the agent of petitioner International Films by virtue of a power of attorney. Petitioner, through its agent
Gabelman, leased the film “Monte Carlo Madness” to respondent Lyric Film Exchange to be shown in several cinemas (Cavite,
Cauartel de Espana, University Theater, Stotsenberg, Paz Theatre).
One of the conditions of the contract was that the respondent company would answer for the loss of the film in question
whatever the cause.
After the last day of show of the film in Paz Theatre, Petitioner’s agent, Gabelman, went to the Vicente Albo’s office in Lyric
Film. Vicente Albo is the chief of film department of Lyric Film. Gabelman asked Albo if he could deposit the film in the vault of
the Lyric Film, as the petitioner did not yet have a safety vault, as required by the regulations of the fire department. Lyric Film’s
O’Malley (Albo’s boss) refused because the said film would not be covered by the insurance carried by the Lyric Film.
So Gabelman then requested Albo to permit him to deposit said film in the vault of the Lyric Fil, under Gabelman’s own
responsibility. As there was a verbal contract between Gabelman and the Lyric Film, where by the film would be shown
elsewhere, O’Malley agreed, the film was deposited in the vault of the respondent company under Gabelman’s responsibility.
Later on, Gabelman severed his connection with International Films and was replaced by Lazarus Joseph. Upon turnover,
Gabelman informed Joseph of the deposit of the film “Monte Carlo Madness” in the vault of Lyric Film, and that Joseph would
act as a subagent of International Films with authority to show the film “Monte Carlo Madness: in any theater where Lyric Film
might wish to show it.
However, Lyric Film’s bodega was burned together with the film “Monte Carlo Madness” which was not insured. Other films of
Lyric Film that were covered by an insurance policy and stored in the same Bodega were also burned. Lyric Film was then able to
collect the proceeds of the fire insurance policy of its films.
ISSUE/S:
1. WON Lyric Film is responsible to International Films for the destruction by fire of the film. (NO)
2. WON Lyric Film should pay the part corresponding to the film which was deposited therein since Lyric Film was able to
collect proceeds of the fire insurance policy of its films. (NO)
HOLDING/RATIO:
1. Petitioner’s argument:
Monte Carlo was not yet returned to International Film because the period for the delivery thereof was extended in
order that it may be shown in Cebu.
Respondent’s argument:
When it wanted to return the film to Gabelman upon expiration of the contract, Gabelman requested Albo to keep the
said film in Lyric Film’s vault under Gabelman’s own responsibility, stipulating that the Lyric Film might show the film in
question in its theaters.

The preponderance of evidence shows that the verbal agreement between Gabelman and Albo was that the said film
would remain deposited in the safety vault of Lyric Film under the responsibility of Gabelman and that the Lyric Film
could show it in its theaters, the International Films receiving 5% of the receipt upto a certain amount, and 15% of the
excess of said amount.

If the verbal contract between Gabelman and Albo was a subagency or a submandate, Lyric Film is not civilly liable for
the destruction by fire of the film in question because as a mere submandatary or subagent, it was not obliged to fulfill
 more than the contents of the mandate and to answer for the damages caused to the principal by his failure to do so
(Art. 1718, CC ). The fact that the film was not insured against fire does not constitute fraud or negligence on the part
of Lyric Film because as a subagent, it received no instruction to that effect from its principal and the insurance of the
film does not form a part of the obligation imposed upon it by law.

2. Evidence shows that the film “Monte Carlo Madness” under consideration was not included in the insurance of the
Lyric Film, as this was the reason why O’Malley initially refused to receive said film for deposit and he consented
thereto only when Gabelman insisted upon his request assuming all responsibility. Furthermore, the respondent did
not collect from the insurance company an amount greater than that for which its films were insured, despite the fact
that the film in question was included in its vault, and it would have collected the same amount even if said film had
not been deposited in its safety vault. Lyric Film had not been enriched by the destruction by fire of the plaintiff
company's film, it is not liable to the latter.

WHEREFORE, and although on a different ground, the appealed judgment is affirmed, with the costs to the appellant. So
ordered.