Agency Week 5

7/27/2019 Agency Week 5

1/61

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-7912 August 30, 1955

HORTENSIA ZIALCITA-YUSECO assisted by her husbandJOAQUIN P. YUSECO, Jr., plaintiffs-appellants,vs.WILLIAM SIMMONS, defendant-appellee.

Yuseco, Abdon and Yuseco for appellants.Ross, Selph, Carrascoso and Janda for appellee.

BENGZON, Act ing C.J.:

Action for damages resulting from plaintiff's allegedly illegalseparation from the service of the National City Bank of NewYork.

In June, 1952 HortensiaZialcita was employed by the NationalCity Bank of New York, a foreign banking corporation doingbusiness in the Philippines, under a contract of employment,signed by her, including the following clause:

I understand that I am being hired as a single femaleemployee. In the event of my marriage you may terminatethis employment in which case I shall be entitled to noother benefits except my salary through the last day onwhich I worked.

Because she intended to marry soon, and pursuant to theabove stipulation, plaintiff filed on July 7, 1952, her writtenresignationwhich was acceptedeffective August 15, 1952.

On July 13, 1952 she married her co-plaintiff; and on August18, 1952 she commenced, in the Manila court of first instance,this suit against William Simmons, the general manager of theNational City Bank of New York asserting that said defendant"urged by his distorted notion of a new policy" in the said bank

"as manager thereof, forced the herein plaintiff to sign" theabove letter of resignation "in implementation of theaforementioned immoral and illegal agreement in the contractof employment." She demanded that said defendant beordered to pay her damages totalling P15,000.

For answer the defendant averred that: (a) plaintiff signed thecontract voluntarily, (b) the above condition of employmentwas valid, and (c) before marriage plaintiff resigned herposition; and asserting she had no cause of action againsthim; he asked for damages.

The case was heard; and on March 31, 1953 the HonorableAlejandro Panlilio, Judge, entered judgment absolving thedefendant for the reason that the plaintiff had signed thecontract voluntarily and clause in question was a validcondition of employment not repugnant to public policy. HisHonor furthermore opined that plaintiff had no cause of action"taking into consideration the undeniable fact that said plaintiffwas not employed by the defendant William Simmons, but bythe National City Bank of New York, of which said defendanthappened to be the general manager. If at all, that is, if byreason of the termination of her employment contract with thebank, plaintiff HortensiaZialcita had any cause of action, theaction should have been directed, not against the National CityBank of New York."

The plaintiff appealed, contending in her brief that the lowercourt erred in declaring she had no cause to complain againstdefendant, and in sustaining the validity of the aforesaidcondition of her employment. She argues that the defense of


2/61

failure to state a cause of action was not raised by thedefendant in his answer, nor in a motion to dismiss; and underthe Rules such defense was waived and was unavailable,when appellee for the first time pleaded it in his memorandum.

This argument is without merit, because in the defendant'sanswer he specifically alleged:

That plaintiff has no cause of action against defendant;that the action instituted by her against defendant (is)unwarranted; . .."

Now, then, does plaintiff have the right to compel the managerof the National City Bank to pay damages by reason of herseparation? She does not rebut the court's reasoning thatdefendant merely acted as agent of the Bank, and that herremedy, if any, is to sue such Bank. Indeed such reasoning isin line with well-known principles of agency. According to thecomplaint itself, in requiring her to sign the contract, defendantacted as managerof the Bank, and in requiring her resignationhe also acted as managerof the Bank. There is no allegationthat he exceeded his power as manager or that his actuationwas repudiated by his principal, the Bank. Consequently anyclaim for damages supposedly resulting from his acts asmanagershould be directed against his principal, the Banknot against him personally.

"The agent who acts as such is not personally liable to theparty with whom he contracts, unless he expressly bindshimself or exceeds the limits of his authority . . ..""The principalmust comply with all the obligations which the agent may havecontracted within the scope of his authority." (Arts. 1897 and1910 New Civil Code.)

Of course it is not necessary to cite authorities to conclude thatthe defendant as managerhad authority to contract plaintiff's

services for the corporation and to accept or require herresignation. (See Guevarra, Phil. Corporation Law pp. 54-55and Nepomuceno vs. Parlatone 40 Off. Gaz. 119.)

In Macias vs. Warner Barnes & Co., 43 Phil., 155 action to

enforce a fire policy was filed against the insurer'sagentthathad issued a policy in the name of the insurer. Applying thedoctrine of the principal's responsibility, the courts dismissedthe action.

In this view of the litigation, we find it unnecessary to decidethe issue extensively discussed in the briefs, whether theemployment clause is in restraint of marriage, and/orcontravenes public policy. That issue would be a propersubject for debate in a proceeding against the Bank, the trueemployer of plaintiff. To consider the point now, would beunfair to said Bank, which is not presently before the Court todefend its side of the debate.

The judgment absolving defendant is affirmed with costs.

Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo,

Labrador, Concepcion, and Reyes, J. B. L., JJ.,concur.


Manila

EN BANC

G.R. No. L-2246 January 31, 1951

JOVITO R. SALONGA, plaintiff-appellee,vs.WARNER, BARNES AND CO., LTD., defendant-appellant.


3/61

Perkins, Ponce Enrile, Contreras and Gomez for appellant.

Pedro L. Yap for appellee.

BAUTISTA ANGELO, J .:

This is an appeal from a decision of the Court of First Instanceof Manila ordering the defendant, as agent of Westchester FireInsurance Company of New York, to pay to the plaintiff thesum of P727. 82 with legal interest thereon from the filing ofthe complaint until paid, and the costs. The case was taken tothis court because it involves only questions of law.

On August 28, 1946, Westchester Fire Insurance Company ofNew York entered into a contract with Tina J. Gamboawhereby said company insured one case of rayon yardage

which said Tina J. Gamboa shipped from San Francisco,California, on steamerClovis Victory, to Manila, Philippinesand consigned to JovitoSalonga, plaintiff herein. According tothe contract of insurance, the insurance company undertook topay to the sender or her consignee the damages that may becaused to the goods shipped subject to the condition that theliability of the company will be limited to the actual loss whichthe insured may suffer not to the exceed the sum of (2,000.The ship arrived in Manila on September 10, 1946. OnOctober 7, the shipment was examined by C. B. Nelson andCo., marine surveyors, at the request of the plaintiff, and in

their examination the surveyors found a shortage in theshipment in the amount of P1,723,12. On October 9, plaintifffiled a claim for damages in the amount of P1,723.12 againstthe American President Lines, agents of the ship ClovisVictory, demanding settlement, and when apparently no actionwas taken on this claim, plaintiff demanded payment thereoffrom Warner, Barnes and Co., Ltd., as agent of the insurancecompany in the Philippines, and this agent having refused topay the claim, on April 17, 1947, plaintiff instituted the presentaction.

In the meantime, the American President Lines, in a letterdated November 25, 1946, agreed to pay to the plaintiff theamount of P476.17 under its liability in the bill of lading, andwhen this offer was rejected, the claim was finally settled in theamount of P1,021.25. As a result, the amount claimed in the

complaint as the ultimate liability of the defendant under theinsurance contract was reduced to P717.82 only.

After trial, at which both parties presented their respectiveevidence, the court rendered judgment as stated in the earlypart of this decision. The motion for reconsideration filed bythe defendant having been denied, the case was appealed tothis court.

Appellant now assigns the following errors:

I

The trial court erred in finding that the loss or damage ofthe case of rayon yardage (Pilferage, as found by themarine surveyors)is included in the risks insured againstas enunciated in the insurance policy.

II

The trial court erred in holding that defendant, as agent ofWestchester Fire Insurance Company of New York,United States of America, is responsible upon theinsurance claim subject to the suit.

III

The trial court erred in denying defendant's motion fornew trial and to set aside the decision. (Appellant'sassignments of error).


4/61

We will begin by discussing the second error assigned byappellant for the reason that if our view on the question raisedis in favor of the claim of appellant there would be no need toproceed with the discussion of the other errors assigned, forthat would put an end to the controversy.

As regards the second assignment of error, counsel claimsthat the defendant cannot be made responsible to pay theamount in litigation because (1) said defendant has nocontractual relation with either the plaintiff or his consignor; (2)the defendant is not the real party in interest against whom thesuit should be brought; and (3) a judgment for or against anagent in no way binds the real party in interest.

1. We are of the opinion that the first point is well taken. It is awell known rule that a contractual obligation or liability, or anaction ex-contractu, must be founded upon a contract, oral orwritten, either express or implied. This is axiomatic. If there isno contract, there is no corresponding liability, and no cause ofaction may arise therefrom. This is what is provided for inarticle 1257 of the Civil Code. This article provides thatcontracts are binding upon the parties who make them andtheir heirs, excepting, with respect to the latter, where therights and obligations are not transmissible, and when thecontract contains a stipulation in favor of a third person, hemay demand its fulfillment if he gives notice of his acceptancebefore it is revoked. This is also the ruling laid down by thiscourt in the case of E. Macias and Co. vs. Warner, Barnes and

Co. (43 Phil. 155) wherein, among others, the court said:

x xx x xx x xx

. . . There is no contract of any kind, either oral or written,between the plaintiff and Warner, Barnes and Company.Plaintiff's contracts are with the insurance companies, andare in writing, and the premiums were paid to the

insurance companies and the policies were issued by,and in the name of, the insurance companies, and on theface of the policy itself, the plaintiff knew that thedefendant was acting as agent, for, and was representing,the respective insurance companies in the issuance and

delivery of the policies. The defendant company did notcontract or agree to do anything or to pay the plaintiff anymoney at any time or on any condition, either as agent orprincipal.

x xx x xx x xx

Every cause of action ex-contractu must be founded upona contract, oral or written, either express or implied.

Warner, Barnes and Co., as principal or agent, did not

make any contract, either oral or written, with the plaintiff.The contracts were made between the respectiveinsurance companies and the insured, and were made bythe insurance companies, through Warner, Barnes andCo., as their agent.

As in the case of a bank draft, it is not the cashier of thebank who makes the contract to pay the moneyevidenced by the draft, it is the bank, acting through itscashier, that makes the contract. So, in the instant case, itwas the insurance companies, acting through Warner,

Barnes and Co., as their agent, that made the writtencontracts with the insured. (E. Macias andCo. vs. Warner, Barnes and Co., 43 Phil., 155, 161, 162.)

Bearing in mind the above rule, we find that the defendant hasnot taken part, directly or indirectly, in the contract in question.The evidence shows that the defendant did not enter into anycontract either with the plaintiff or his consignor Tina J.Gamboa. The contract of marine insurance, Exhibit C, wasmade and executed only by and between the Westchester Fire


5/61

Insurance Company of New York and Tina J. Gamboa. Thecontract was entered in New York. There is nothing thereinwhich may affect, in favor or adversely, the defendant, thefulfillment of which may be demanded by or against it. Thatcontract is purely bilateral, binding only upon Gamboa and the

insurance company. When the lower court, therefore, imposedupon the defendant an obligation which it has never assumed,either expressly or impliedly, or when it extended to thedefendant the effects of a contract which was entered intoexclusively by and between the Westchester Fire InsuranceCompany of New York and Tina J. Gamboa, the error it hascommitted is evident. This is contrary to law.

We do not find any material variance between this case andthe case of E. Macias and Co. vs. Warner, Barnes andCo., supra, as pointed out by counsel for appellee, in so far as

the principle we are considering is concerned. Both casesinvolve similar facts which call for the application of a similarruling. In both cases the issue is whether an agent, who actswithin the scope of his authority, can assume personal liabilityfor a contract entered into by him in behalf of his principal. Andin the Macias case we said that the agent did not assumepersonal liability because the only party bound was theprincipal. And in this case this principle acquires added forceand effect when we consider the fact that the defendant didnot sign the contract as agent of the foreign insurancecompany as the defendant did in the Macias case. The Macias

case, therefore, is on all fours with this case and is decisive ofthe question under consideration.

2. Counsel next contends that Warner, Barnes and Co., Ltd., isnot the real party in interest against whom the suit should bebrought. It is claimed that this action should have been filedagainst its principal, the Westchester Fire Insurance Companyof New York. This point is also well taken. Section 2, Rule 3 ofthe Rules of Court requires that "every action must be

prosecuted in the name of the real party in interest." Acorollary proposition to this rule is that an action must bebrought against the real party in interest, or against a partywhich may be bound by the judgment to be rendered therein(Salmon and Pacific Commercial Co. vs. Tan Cueco, 36 Phil.,

556). The real party in interest is the party who would bebenefited or injured by the judgment, or the "party entitled tothe avails of the suit" (1 Sutherland, Court Pleading Practiceand Forms, p. 11). And in the case at bar, the defendantissued upon in its capacity as agent of Westchester FireInsurance Company of New York in spite of the fact that theinsurance contract has not been signed by it. As we have said,the defendant did not assume any obligation thereunder eitheras agent or as a principal. It cannot, therefore, be made liableunder said contract, and hence it can be said that this casewas filed against one who is not the real party in interest.

We agree with counsel for the appellee that the defendant is asettlement and adjustment agent of the foreign insurancecompany and that as such agent it has the authority to settleall the losses and claims that may arise under the policies thatmay be issued by or in behalf of said company in accordancewith the instructions it may receive from time to time from itsprincipal, but we disagree with counsel in his contention thatas such adjustment and settlement agent, the defendant hasassumed personal liability under said policies, and, therefore,it can be sued in its own right. An adjustment and settlement

agent is no different from any other agent from the point ofview of his responsibility, for he also acts in a representativecapacity. Whenever he adjusts or settles a claim, he does it inbehalf of his principal, and his action is binding not uponhimself but upon his principal. And here again, the ordinaryrule of agency applies. The following authorities bear this out:

An insurance adjuster is ordinarily a special agent for theperson or company for whom he acts, and his authority


6/61

is prima facie coextensive with the business intrusted tohim. . . .

An adjuster does not discharge functions of a quasi-judicial nature, but represents his employer, to whom he

owes faithful service, and for his acts, in the employer'sinterest, the employer is responsible so long as the actsare done while the agent is acting within the scope of hisemployment. (45 C. J. S., 1338-1340.)

It, therefore, clearly appears that the scope and extent of thefunctions of an adjustment and settlement agent do not includepersonal liability. His functions are merely to settle and adjustsclaims in behalf of his principal if those claims are proven andundisputed, and if the claim is disputed or is disapproved bythe principal, like in the instant case, the agent does not

assume any personal liability. The recourse of the insured is topress his claim against the principal.

3. This brings us to the consideration of the third point. It isclaimed that a judgment, for or against an agent, in no waybinds the real party in interest. In our opinion this point is alsowell taken, for it is but a sequel to the principle we havepointed out above. The reason is obvious. An action is broughtfor a practical purpose, nay to obtain actual and positive relief.If the party sued upon is not the proper party, any decision thatmay be rendered against him would be futile, for it cannot be

enforced or executed. The effort that may be employed will bewasted. Such would be the result of this case if it will beallowed to proceed against the defendant, for even if afavorable judgment is obtained against it, it cannot be enforcedbecause the real party is not involved. The defendant cannotbe made to pay for something it is not responsible. Thus, inthe following authorities it was held:

. . . Section 114 of the Code of Civil Procedure requiresan action to be brought in the name of the real party in

interest; and a corollary proposition requires that anaction shall be brought against the persons or entitieswhich are to be bound by the judgment obtained therein.

An action upon a cause of action pertaining to hisprincipal cannot be brought by an attorney-in-fact in his

name (Arroyo vs. Granada and Gentero, 18 Phil., 484);nor can an action based upon a right of action belongingto a principal be brought in the name of his representative(Lichauco vs. Limjuco and Gonzalo, 19 Phil., 12). Actionsmust be brought by the real parties in interest and againstthe persons who are to be bound by the judgmentobtained therein. (Salmon and Pacific CommercialCo. vs. Tan Cueco, 36 Phil., 557-558.)

x xx x xx x xx

An action to set aside an instrument of transfer of landshould be brought in the name of the real party in interest.An apoderado or attorney in fact is not a real party. Hehas no interest in the litigation and has absolutely no rightto bring the defendant into court or to put him to theexpense of a suit, and there is no pro-vision of lawpermitting action to be brought in such manner. A

judgment for or against the apoderadoin no way binds oraffects the real party, and a decision in the suit would beutterly futile. It would touch no interest, adjust noquestion, bind no one, and settle no litigation. Courtsshould not be required to spend their time solemnly

considering and deciding cases where no one could bebound and no interest affected by such deliberation anddecision. (Arroyo vs. Granada and Gentero, 18 Phil.,484.)

If the case cannot be filed against the defendant as we havepointed out, what then is the remedy of the plaintiff under thecircumstances? Is the case of the plaintiff beyond remedy? Webelieve that the only way by which the plaintiff can bring theprincipal into this case or make it come under the courts in this


7/61

jurisdiction is to follow the procedure indicated in section 14,Rule 7, of the Rules of Court concerning litigations involvingforeign corporations. This rule says that if the defendant is aforeign corporation and it has not designated an agent in thePhilippines on whom service may be made in case of litigation,

such service may be made on any agent it may have in thePhilippines. And in our opinion the Westchester Fire InsuranceCompany of new York comes within the import of this rule foreven if it has not designated an agent as required by law, ithas however a settling agent who may serve the purpose. Inother words, an action may be brought against said insurancecompany in the Philippines and the process may be served onthe defendant to give our courts the necessary jurisdiction.This is the way we have pointed out in the case of GeneralCorporation of the Philippines and Mayon InvestmentCo. vs. Union Insurance Society of Canton Ltd. et al., (87 Phil.,

313).

In view of the foregoing, we are of the opinion and so hold thatthe lower court erred in holding the defendant responsible forthe loss or damage claimed in the complaint. And havingarrived at this conclusion, we do not deem it necessary to passupon the other errors assigned by the appellant.

Wherefore, the decision appealed from is hereby reversed.The complaint is hereby dismissed, with costs against theappellee.

Moran, C.J., Paras, Feria, Pablo, Bengzon, Padilla, Tuason,Montemayor, Reyes and Jugo, JJ., concur.


Manila

EN BANC

G.R. No. 16492 March 9, 1922

E. MACIAS & CO., importers and exporters, plaintiff-appellant,vs.WARNER, BARNES & CO., in its capacity as agents of"The China Fire Insurance Co.," of "The Yang-Tsze" and

of "The State Assurance Co., Ltd.," defendant-appellant.

Ramon Sotelo for plaintiff-appellant.Cohn, Fisher & DeWitt for defendant-appellant.

STATEMENT

The plaintiff is a corporation duly registered and domiciled inManila. The defendant is a corporation duly licensed to dobusiness in the Philippine Islands, and is the resident agent ofinsurance companies "The China Fire Insurance Company,Limited, of Hongkong," "The Yang-Tsze Insurance AssociationLimited, of Shanghai," and "The State Assurance Company,Limited, of Liverpool. The plaintiff is an importer of texturesand commercial articles for wholesale.

In the ordinary course of business, it applied for, and obtained,

the following policies against loss by fire:

Policy No. 4143, issued by The China Fire InsuranceCo., Ltd., for .......................................................................P12,000

Policy No. 4382, issued by The China Fire InsuranceCo., Ltd., for.......................................................................... 15,000


8/61

Policy No. 326, issued by The Yang-Tsze InsuranceAss'n., Ltd., for..................................................................... 10,000

Policy No. 796111, issued by The State Assurance

Co., Ltd., for............................................................................ 8,000

Policy No. 4143, of P12,000, recites that Mrs. RosarioVizcarra, having paid to the China Fire Insurance Company,Limited, P102 for insuring against or damage by fire certainmerchandise the description of which follows, "the companyagrees with the insured that, if the property above described,or any party thereof, shall be destroyed or damaged by firebetween September 16, 1918, and September 16, 1919," etc.,"The company will, out of its capital, stock and funds, pay or

make good all such loss or damage, not exceeding" theamount of the policy. This policy was later duly assigned to theplaintiff.

Policy No. 4382, for P15,000, was issued by the samecompany to, and in the name of, plaintiff.

Policy No. 326, for P10,000, was issued to, and in the name ofpolicy No. 326, for P10,000, was issued to, and in the name ofthe plaintiff by The Yang-Tsze Insurance Association, Limited,and recites that the premium of P125 was paid by the plaintiff

to the association, and that, in the event of loss by firebetween certain dates, "the funds and property of the saidassociation shall be subject and liable to pay, reinstate, ormake good to the said assured, their heirs, executors, oradministrators, such loss or damage as shall be occasioned byfire to the property above-mentioned and hereby insured," notexceeding the amount of the policy.

Policy No. 796111, for P8,000, was issued by The StatesAssurance Company, Limited, to the plaintiff for a premium ofP100, which was paid to the Assurance Company through thedefendant, its authorized agent, and recites that "the companyagrees with the insured that in the event of loss by fire

between certain dates, the company will, out of its capital,stock and funds, pay the amount of such loss or damage," notexceeding the amount of the policy, and it is attested by thedefendant, through its "Cashier and Accountant and Manager,

Agents, State Assurance Co., Ltd.," authorized agents of theAssurance Company.

Policy No. 4143 is attested "on behalf of The China FireInsurance Company, Limited," by the cashier and accountantand manager of the defendant, as agents of The China FireInsurance Company, Limited. The same is true as to policy no.

4382.

Policy No. 326 recites the payment of a premium of P125 bythe plaintiff to The Yang-Tsze Insurance Association, Limited,and that, in the event of loss, "the funds and property of thesaid association shall be subject and liable to pay, reinstate, ormake good to the said assured, their heirs, executors, oradministrators, such loss or damage as shall be occasioned byfire or lightning to the property" insured, not exceeding theamount of the policy, and it is attested by the defendant,through its cashier and accountant and manager, as agents ofthe association "under the authority of a Power of Attorneyfrom The Yang-Tsze Insurance Association, Limited," "to sign,for and on behalf of the said Association, etc."

March 25, 1919, and while the policies were in force, a lossoccurred in which the insured property was more or lessdamaged by fire and the use of water resulting from the fire.


9/61

The plaintiff made a claim for damages under its policies, butcould not agree as to the amount of loss sustained. It sold theinsured property in its then damaged condition, and broughtthis action against Warner, Barnes & Co., in its capacity asagents, to recover the difference between the amount of the

policies and the amount realized from the sale of the property,and in the first cause of action, it prayed for judgment forP23,052.99, and in the second cause of action P9,857.15.

The numbers and amounts of the policies and the names ofthe insurance companies are set forth and alleged in thecomplaint.

The answer admits that the defendants is the resident agent ofthe insurance companies, the issuance of the policies, andthat a fire occurred on March 25, 1919, in the building in whichthe goods covered by the insurance policies were stored, andthat to extinguish the fire three packages of goods weredamage by water not to exceed P500, and denies generally allother material allegations of the complaint.

As a further and separate defense, the defendant pleadscertain provisions in the policies, among which was a writtennotice of loss, and all other insurance and certain detailedinformation. It is then alleged

That although frequently requested to do so, plaintifffailed and refused to deliver to defendant or to any otherperson authorized to receive it, any claim in writingspecifying the articles or items of property damaged ordestroyed and of the alleged amount of the loss ordamage caused thereto.

That defendant was at all times ready and willing to pay,on behalf of the insurance companies by whom saidpolicies were issued, and to the extent for which each

was proportionately liable, the actual damage to plaintiff'sgoods covered by the risks insured against, uponcompliance within the time limited, with the terms of theclause of the contracts of insurance above set forth.

Defendants prays judgment for costs.

Before the trial, counsel for the defendant objected to theintroduction of any evidence in the case, and moved "that

judgment be entered for the defendant on the pleadings uponthe ground that it appears from the averment of the complaintthat the plaintiff has had no contractual relations with thedefendant, and that the action has not been brought againstthe real party in interest." The objection and motion wasoverruled and exception duly taken. After trial the court foundthat there was due the plaintiff from the three insurance

companies p18,493.29 with interest thereon at the rate of 6per cent per annum, from the date of the commencement ofthe action, and costs, and rendered the following judgment:

It is, therefore, ordered that judgment be entered againstWarner, Barnes & Co., Ltd., in its capacity as agent andrepresentative in the Philippine Islands for The China fireInsurance Company, Ltd., The Yang-Tsze Insurance

Association, Ltd., and The State Assurance Co., Ltd., forthe payment to the plaintiff, E. Macias & Co., of the sumof P18,493.29, the amount of this judgment to be prorated

by Warner, Barnes & Co., among the three insurancecompanies above-mentioned by it represented, inproportion to the interest insured by each of said threeinsurance companies, according to the policies issued bythem in favor of the plaintiff, and sued upon in this action.

The defendant then filed a motion to set aside the judgmentand for a new trial, which was overruled and exception taken.From this judgment the defendant appealed, claiming that "thecourt erred in overruling defendant's motion for judgment on


10/61

the pleadings; that the court erred in giving judgment for theplaintiff; that the court erred in denying defendants motion for anew trial," and specifying other assignments which are notmaterial to this opinion, Plaintiff also appealed.

JOHNS, J .:

The material facts are not in dispute it must be conceded thatthe policies in question were issued by the different insurancecompanies, through the defendant as their respective agent;that they were issued in consideration of a premium which waspaid by the insured to the respective companies for theamount of the policies, as alleged; that the defendant was, andis now, the resident agent in Manila of the companies, andwas authorized to solicit and do business for them as suchagent; that each company is a foreign corporation. Theprincipal office and place business of the The China FireInsurance Company is at Hongkong; of The Yang-TszeInsurance Association is at Shanghai; and of The State

Assurance Company is at Liverpool. As such foreigncorporations they were duly authorized and licensed to doinsurance business in the Philippine Islands, and, to that endand for that purpose, the defendant corporation, Warner,Barnes & Co., was the agent of each company.

All of the policies are in writing, and recite that the premiumwas paid by the insured to the insurance company whichissued the policy, and that, in the event of a loss, theinsurance company which issued it will pay to the insured theamount of the policy.

This is not a case of an undisclosed agent or an undisclosedprincipal. It is a case of a disclosed agent and a disclosedprincipal.

The policies on their face shows that the defendant was theagent of the respective companies, and that it was acting assuch agent in dealing with the plaintiff. That in the issuanceand delivery of the policies, the defendant was doing businessin the name of, acting for, and representing, the respective

insurance companies. The different policies expressly recitethat, in the event of a loss, the respective companies agree tocompensate the plaintiff for the amount of the loss. thedefendant company did not insure the property of the plaintiff,or in any manner agree to pay the plaintiff the amount of anyloss. There is no contract of any kind. either oral or written,between the plaintiff and Warner, Barnes & Co. Plaintiff'scontracts are with the insurance companies, and are in writing,and the premiums were paid to the insurance companies, andare in writing, and the premiums were paid to the insurancecompanies and the policies were issued by, and in the name

of, the insurance companies, and on the face of the policyitself, the plaintiff knew that the defendant was acting as agentfor, and was representing, the respective insurance companiesin the issuance and deliver of the policies. The defendantcompany did not contract or agree to do anything or to pay theplaintiff any money at any time or on any condition, either asagent or principal.

There is a very important distinction between the power andduties of a resident insurance agent of a foreign company andthat of an executor, administrator, or receiver. An insurance

agent as such is not responsible for, and does not have, anycontrol over the corpus or estate of the corporate property, asdoes an executor, administrator, or receiver. Subject only tothe order of the court, such officers are legal custodians andhave actual possession of the corporate property. It is undertheir control and within their jurisdiction.

As stated by counsel for Warner, Barnes & Co., an attorney ofrecord for an insurance company has greater power and


11/61

authority to act for, and bind, the company than does asoliciting agent of an insurance company. Yet, no attorneywould contend that a personal action would lie against localattorneys who represent a foreign corporation to recover on acontract made by the corporation. On the same principles by

which plaintiff seeks to recover from the defendant, an actioncould be maintained against the cashier of any bank on everyforeign draft which he signed for, and on behalf of, the bank.

Every cause of action ex contractu must be founded upon a

contract, oral or written, either express or implied.

Warner, Barnes & Co., as principal or agent, did not make anycontract, either or written, with the plaintiff. The contracts weremade between the respective insurance companies and theinsured, and were made by the insurance companies, throughWarner, Barnes & Co., as their agent.

As in the case of a bank draft, it is not the cashier of the bankwho makes the contract to pay the money evidenced by thedraft, it is the bank, acting through its cashier, that makes thecontract. So, in the instant case, it was the insurancecompanies, acting through Warner, Barnes & Co., as theiragent, that made the written contracts wit the insured.

The trial court attached much importance to the fact that in the

further and separate answer, an admission was made "thatdefendant was at all times ready and will not to pay, on behalfof the insurance companies by whom each wasproportionately liable, the actual damage" sustained by theplaintiff covered by the policies upon the terms and conditionstherein stated.

When analyzed, that is nothing more than a statement that thecompanies were ready and willing to prorate the amount whenthe losses were legally ascertained. Again, there is not claim

or pretense that Warner, Barnes & Co. had any authority to actfor, and represent the insurance companies in the pendingaction, or to appear for them or make any admission whichwould bind them. As a local agent, it could not do that withoutexpress authority. That power could only exercised by an

executive officer of the company, or a person who was dulyauthorized to act for, and represent, the company in legalproceedings, and there is no claim or pretense, either expressor implied, that the defendant has any such authority.

Plaintiff's cause of action, if any, is direct against the insurancecompanies that issued the policies and agreed to pay thelosses.

The only defendant in the instant case is "Warner, Barnes &Co., in its capacity as agents of:" the insurance companies.Warner, Barnes & Co. did not make any contract with theplaintiff, and are not liable to the plaintiff on any contract, eitheras principal or agent. For such reason, plaintiff is not entitled torecover its losses from Warner, Barnes & Co., either asprincipal or agent. There is no breach of any contract with theplaintiff by Warners, Barnes & Co., either as agent or principal,for the simple reason that Warner, Barnes & Co., as agent orprincipal, never made any contract, oral or written, with theplaintiff. This defense was promptly raised before the taking ofthe testimony, and again renewed on the motion to set asidethe judgment.

Plaintiff's own evidence shows that any cause of action it mayhave is against the insurance companies which issued thepolicies.

The complaint is dismissed, and the judgment of the lowercourt is reversed, and one will be entered here in favor ofWarner, Barnes & Co., Ltd., against the plaintiff, for costs inboth this and the lower court. So ordered.


12/61

Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor,

Ostrand and Romualdez, JJ., concur.


Manila

THIRD DIVISION

G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES,INC., Petitioner,

vs.EDWIN CUIZON and ERWIN CUIZON, Respondents.

D E C I S I O N

CHICO-NAZARIO, J .:

Before Us is a petition for review by certiorari assailing theDecision1of the Court of Appeals dated 10 August 2004 andits Resolution2dated 17 March 2005 in CA-G.R. SP No. 71397entitled, "Eurotech Industrial Technologies, Inc. v. Hon.

Antonio T. Echavez." The assailed Decision and Resolutionaffirmed the Order3dated 29 January 2002 rendered by Judge

Antonio T. Echavez ordering the dropping of respondentEDWIN Cuizon (EDWIN) as a party defendant in Civil CaseNo. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation anddistribution of various European industrial equipment forcustomers here in the Philippines. It has as one of itscustomers Impact Systems Sales ("Impact Systems") which isa sole proprietorship owned by respondent ERWIN Cuizon

(ERWIN). Respondent EDWIN is the sales manager of ImpactSystems and was impleaded in the court a quo in saidcapacity.

From January to April 1995, petitioner sold to Impact Systemsvarious products allegedly amounting to ninety-one thousandthree hundred thirty-eight (P91,338.00) pesos. Subsequently,respondents sought to buy from petitioner one unit of sludgepump valued at P250,000.00 with respondents making a downpayment of fifty thousand pesos (P50,000.00).4When thesludge pump arrived from the United Kingdom, petitioner

refused to deliver the same to respondents without theirhaving fully settled their indebtedness to petitioner. Thus, on28 June 1995, respondent EDWIN and Alberto de Jesus,general manager of petitioner, executed a Deed of Assignmentof receivables in favor of petitioner, the pertinent part of whichstates:

1.) That ASSIGNOR5has an outstanding receivables fromToledo Power Corporation in the amount of THREEHUNDRED SIXTY FIVE THOUSAND (P365,000.00)PESOS as payment for the purchase of one unit of

Selwood Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN,TRANSFER, and CONVEY unto the ASSIGNEE6the saidreceivables from Toledo Power Corporation in the amountof THREE HUNDRED SIXTY FIVE THOUSAND(P365,000.00) PESOS which receivables the ASSIGNORis the lawful recipient;
http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt1


13/61

3.) That the ASSIGNEE does hereby accept thisassignment.7

Following the execution of the Deed of Assignment, petitionerdelivered to respondents the sludge pump as shown by

Invoice No. 12034 dated 30 June 1995.8

Allegedly unbeknownst to petitioner, respondents, despite theexistence of the Deed of Assignment, proceeded to collectfrom Toledo Power Company the amount of P365,135.29 asevidenced by Check Voucher No. 09339prepared by saidpower company and an official receipt dated 15 August 1995issued by Impact Systems.10Alarmed by this development,petitioner made several demands upon respondents to paytheir obligations. As a result, respondents were able to makepartial payments to petitioner. On 7 October 1996, petitioners

counsel sent respondents a final demand letter wherein it wasstated that as of 11 June 1996, respondents total obligationsstood at P295,000.00 excluding interests and attorneysfees.11Because of respondents failure to abide by said finaldemand letter, petitioner instituted a complaint for sum ofmoney, damages, with application for preliminary attachmentagainst herein respondents before the Regional Trial Court ofCebu City.12

On 8 January 1997, the trial court granted petitioners prayerfor the issuance of writ of preliminary attachment.13

On 25 June 1997, respondent EDWIN filed hisAnswer14wherein he admitted petitioners allegations withrespect to the sale transactions entered into by ImpactSystems and petitioner between January and April 1995.15He,however, disputed the total amount of Impact Systemsindebtedness to petitioner which, according to him, amountedto only P220,000.00.16

By way of special and affirmative defenses, respondentEDWIN alleged that he is not a real party in interest in thiscase. According to him, he was acting as mere agent of hisprincipal, which was the Impact Systems, in his transactionwith petitioner and the latter was very much aware of this fact.

In support of this argument, petitioner points to paragraphs 1.2and 1.3 of petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married,a resident of Cebu City. He is the proprietor of a singleproprietorship business known as Impact Systems Sales("Impact Systems" for brevity), with office located at 46-Adel Rosario Street, Cebu City, where he may be servedsummons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino,

married, a resident of Cebu City. He is the Sales Managerof Impact Systems and is sued in this action in suchcapacity.17

On 26 June 1998, petitioner filed a Motion to DeclareDefendant ERWIN in Default with Motion for SummaryJudgment. The trial court granted petitioners motion to declarerespondent ERWIN in default "for his failure to answer withinthe prescribed period despite the opportunity granted"18but itdenied petitioners motion for summary judgment in its Orderof 31 August 2001 and scheduled the pre-trial of the case on

16 October 2001.19

However, the conduct of the pre-trialconference was deferred pending the resolution by the trialcourt of the special and affirmative defenses raised byrespondent EDWIN.20

After the filing of respondent EDWINs Memorandum21insupport of his special and affirmative defenses and petitionersopposition22thereto, the trial court rendered its assailed Orderdated 29 January 2002 dropping respondent EDWIN as aparty defendant in this case. According to the trial court
http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt9http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt10http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt10http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt11http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt11http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt11http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt12http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt12http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt12http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt16http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt16http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt16http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt17http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt17http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt17http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt18http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt18http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt18http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt18http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt17http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt16http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt12http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt11http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt10http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt9http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt7


14/61

A study of Annex "G" to the complaint shows that in the Deedof Assignment, defendant Edwin B. Cuizon acted in behalf ofor represented [Impact] Systems Sales; that [Impact] SystemsSale is a single proprietorship entity and the complaint showsthat defendant Erwin H. Cuizon is the proprietor; that plaintiff

corporation is represented by its general manager Alberto deJesus in the contract which is dated June 28, 1995. A study of

Annex "H" to the complaint reveals that [Impact] SystemsSales which is owned solely by defendant Erwin H. Cuizon,made a down payment of P50,000.00 that Annex "H" is datedJune 30, 1995 or two days after the execution of Annex "G",thereby showing that [Impact] Systems Sales ratified the act ofEdwin B. Cuizon; the records further show that plaintiff knewthat [Impact] Systems Sales, the principal, ratified the act ofEdwin B. Cuizon, the agent, when it accepted the downpayment of P50,000.00. Plaintiff, therefore, cannot say that it

was deceived by defendant Edwin B. Cuizon, since in theinstant case the principal has ratified the act of its agent andplaintiff knew about said ratification. Plaintiff could not say thatthe subject contract was entered into by Edwin B. Cuizon inexcess of his powers since [Impact] Systems Sales made adown payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendantEdwin B. Cuizon be dropped as party defendant.23

Aggrieved by the adverse ruling of the trial court, petitioner

brought the matter to the Court of Appeals which, however,affirmed the 29 January 2002 Order of the court a quo. Thedispositive portion of the now assailed Decision of the Court of

Appeals states:

WHEREFORE, finding no viable legal ground to reverse ormodify the conclusions reached by the public respondent in hisOrder dated January 29, 2002, it is hereby AFFIRMED.24

Petitioners motion for reconsideration was denied by theappellate court in its Resolution promulgated on 17 March2005. Hence, the present petition raising, as sole ground for itsallowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLEERROR WHEN IT RULED THAT RESPONDENT EDWINCUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWINCUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HASNEITHER ACTED BEYOND THE SCOPE OF HIS AGENCYNOR DID HE PARTICIPATE IN THE PERPETUATION OF AFRAUD.25

To support its argument, petitioner points to Article 1897 of theNew Civil Code which states:

Art. 1897. The agent who acts as such is not personally liableto the party with whom he contracts, unless he expressly bindshimself or exceeds the limits of his authority without givingsuch party sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed toappreciate the effect of ERWINs act of collecting thereceivables from the Toledo Power Corporationnotwithstanding the existence of the Deed of Assignmentsigned by EDWIN on behalf of Impact Systems. While saidcollection did not revoke the agency relations of respondents,petitioner insists that ERWINs action repudiated EDWINspower to sign the Deed of Assignment. As EDWIN did notsufficiently notify it of the extent of his powers as an agent,petitioner claims that he should be made personally liable forthe obligations of his principal.26

Petitioner also contends that it fell victim to the fraudulentscheme of respondents who induced it into selling the one unitof sludge pump to Impact Systems and signing the Deed of
http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt23http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt23http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt23http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt23


15/61

Assignment. Petitioner directs the attention of this Court to thefact that respondents are bound not only by their principal andagent relationship but are in fact full-blooded brothers whosesuccessive contravening acts bore the obvious signs ofconspiracy to defraud petitioner.27

In his Comment,28respondent EDWIN again posits theargument that he is not a real party in interest in this case andit was proper for the trial court to have him dropped as adefendant. He insists that he was a mere agent of ImpactSystems which is owned by ERWIN and that his status assuch is known even to petitioner as it is alleged in theComplaint that he is being sued in his capacity as the salesmanager of the said business venture. Likewise, respondentEDWIN points to the Deed of Assignment which clearly statesthat he was acting as a representative of Impact Systems in

said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render someservice or to do something in representation or on behalf ofanother with the latters consent.29The underlying principle ofthe contract of agency is to accomplish results by using theservices of others to do a great variety of things like selling,buying, manufacturing, and transporting.30Its purpose is toextend the personality of the principal or the party for whomanother acts and from whom he or she derives the authority toact.31It is said that the basis of agency is representation, thatis, the agent acts for and on behalf of the principal on matterswithin the scope of his authority and said acts have the samelegal effect as if they were personally executed by theprincipal.32By this legal fiction, the actual or real absence ofthe principal is converted into his legal or juridical presencequi facit per aliumfacit per se.33

The elements of the contract of agency are: (1) consent,express or implied, of the parties to establish the relationship;(2) the object is the execution of a juridical act in relation to athird person; (3) the agent acts as a representative and not forhimself; (4) the agent acts within the scope of his authority.34

In this case, the parties do not dispute the existence of theagency relationship between respondents ERWIN as principaland EDWIN as agent. The only cause of the present dispute iswhether respondent EDWIN exceeded his authority when hesigned the Deed of Assignment thereby binding himselfpersonally to pay the obligations to petitioner. Petitioner firmlybelieves that respondent EDWIN acted beyond the authoritygranted by his principal and he should therefore bear the effectof his deed pursuant to Article 1897 of the New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, whoacts as such, is not personally liable to the party with whom hecontracts. The same provision, however, presents twoinstances when an agent becomes personally liable to a thirdperson. The first is when he expressly binds himself to theobligation and the second is when he exceeds his authority. Inthe last instance, the agent can be held liable if he does notgive the third party sufficient notice of his powers. We hold thatrespondent EDWIN does not fall within any of the exceptionscontained in this provision.

The Deed of Assignment clearly states that respondentEDWIN signed thereon as the sales manager of ImpactSystems. As discussed elsewhere, the position of manager isunique in that it presupposes the grant of broad powers withwhich to conduct the business of the principal, thus:
http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt28http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt28http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt28http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt32http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt32http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt32http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt33http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt33http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt33http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt34http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt34http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt34http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt34http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt33http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt32http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt28http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt27


16/61

The powers of an agent are particularly broad in the case ofone acting as a general agent or manager; such a positionpresupposes a degree of confidence reposed and investiturewith liberal powers for the exercise of judgment and discretionin transactions and concerns which are incidental or

appurtenant to the business entrusted to his care andmanagement. In the absence of an agreement to the contrary,a managing agent may enter into any contracts that he deemsreasonably necessary or requisite for the protection of theinterests of his principal entrusted to his management. x x x.35

Applying the foregoing to the present case, we hold that EdwinCuizon acted well-within his authority when he signed theDeed of Assignment. To recall, petitioner refused to deliver theone unit of sludge pump unless it received, in full, the paymentfor Impact Systems indebtedness.36We may very well assume

that Impact Systems desperately needed the sludge pump forits business since after it paid the amount of fifty thousandpesos (P50,000.00) as down payment on 3 March 1995,37itstill persisted in negotiating with petitioner which culminated inthe execution of the Deed of Assignment of its receivablesfrom Toledo Power Company on 28 June 1995.38Thesignificant amount of time spent on the negotiation for the saleof the sludge pump underscores Impact Systemsperseverance to get hold of the said equipment. There is,therefore, no doubt in our mind that respondent EDWINsparticipation in the Deed of Assignment was "reasonably

necessary" or was required in order for him to protect thebusiness of his principal. Had he not acted in the way he did,the business of his principal would have been adverselyaffected and he would have violated his fiduciary relation withhis principal.

We likewise take note of the fact that in this case, petitioner isseeking to recover both from respondents ERWIN, theprincipal, and EDWIN, the agent. It is well to state here that

Article 1897 of the New Civil Code upon which petitioneranchors its claim against respondent EDWIN "does not holdthat in case of excess of authority, both the agent and theprincipal are liable to the other contracting party."39Toreiterate, the first part of Article 1897 declares that the

principal is liable in cases when the agent acted within thebounds of his authority. Under this, the agent is completelyabsolved of any liability. The second part of the said provisionpresents the situations when the agent himself becomes liableto a third party when he expressly binds himself or he exceedsthe limits of his authority without giving notice of his powers tothe third person. However, it must be pointed out that in caseof excess of authority by the agent, like what petitioner claimsexists here, the law does not say that a third person canrecover from both the principal and the agent.40

As we declare that respondent EDWIN acted within hisauthority as an agent, who did not acquire any right nor incurany liability arising from the Deed of Assignment, it follows thathe is not a real party in interest who should be impleaded inthis case. A real party in interest is one who "stands to bebenefited or injured by the judgment in the suit, or the partyentitled to the avails of the suit."41In this respect, we sustainhis exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition isDENIED and the Decision dated 10 August 2004 and

Resolution dated 17 March 2005 of the Court of Appeals inCA-G.R. SP No. 71397, affirming the Order dated 29 January2002 of the Regional Trial Court, Branch 8, Cebu City, is

AFFIRMED.

Let the records of this case be remanded to the Regional TrialCourt, Branch 8, Cebu City, for the continuation of theproceedings against respondent Erwin Cuizon.
http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt35http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt35http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt35http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt36http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt36http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt36http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt37http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt37http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt37http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt38http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt38http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt38http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt39http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt39http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt39http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt40http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt40http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt40http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt41http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt41http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt41http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt41http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt40http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt39http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt38http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt37http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt36http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#fnt35


17/61

SO ORDERED.


Manila

EN BANC

G.R. No. L-17160 November 29, 1965

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant,vs.PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE

EXTERIEUR: PRIMATERIA (PHILIPPINES) INC.,ALEXANDER G. BAYLIN and JOSE M. CRAME, defendants-

appellees.

Jose A. Javier for plaintiff-appellant.Ibarra and Papa for defendants-appellees.

BENGZON, C.J.:

This is an action to recover from defendants, the sum ofP33,009.71 with interest and attorney's fees of P8,000.00.

Defendant PrimateriaSocieteAnonyme Pour Le CommerceExterieur (hereinafter referred to as Primateria Zurich) is aforeign juridical entity and, at the time of the transactionsinvolved herein, had its main office at Zurich, Switzerland. Itwas then engaged in "Transactions in international trade withagricultural products, particularly in oils, fats and oil-seeds andrelated products."

The record shows that:

On October 24, 1951, Primateria Zurich, through defendantAlexander B. Baylin, entered into an agreement with plaintiffPhilippine Products Company, whereby the latter undertook to

buy copra in the Philippines for the account of PrimateriaZurich, during "a tentative experimental period of one monthfrom date." The contract was renewed by mutual agreement ofthe parties to cover an extended period up to February 24,1952, later extended to 1953. During such period, plaintiffcaused the shipment of copra to foreign countries, pursuant toinstructions from defendant Primateria Zurich, thru Primateria(Phil.) Inc. referred to hereafter as Primateria Philippines acting by defendant Alexander G. Baylin and Jose M. Crame,officers of said corporation. As a result, the total amount due tothe plaintiff as of May 30, 1955, was P33,009.71.

At the trial, before the Manila court of first instance, it wasproven that the amount due from defendant Primateria Zurich,on account of the various shipments of copra, wasP31,009.71, because it had paid P2,000.00 of the originalclaim of plaintiff. There is no dispute about accounting.

And there is no question that Alexander G. Baylin andPrimateria Philippines acted as the duly authorized agents ofPrimateria Zurich in the Philippines. As far as the recorddiscloses, Baylin acted indiscriminately in these transactions inthe dual capacities of agent of the Zurich firm and executivevice-president of Primateria Philippines, which also acted asagent of Primateria Zurich. It is likewise undisputed thatPrimateria Zurich had no license to transact business in thePhilippines.

For failure to file an answer within the reglementary period,defendant Primateria Zurich was declared in default.


18/61

After trial, judgment was rendered by the lower court holdingdefendant Primateria Zurich liable to the plaintiff for the sumsof P31,009.71, with legal interest from the date of the filing ofthe complaint, and P2,000.00 as and for attorney's fees; andabsolving defendants Primateria (Phil.), Inc., Alexander G.

Baylin, and Jose M. Crame from any and all liability.

Plaintiff appealed from that portion of the judgment dismissingits complaint as regards the three defendants.

It is plaintiff's theory that Primateria Zurich is a foreigncorporation within the meaning of Sections 68 and 69 of theCorporation Law, and since it has transacted business in thePhilippines without the necessary license, as required by saidprovisions, its agents here are personally liable for contractsmade in its behalf.

Section 68 of the Corporation Law states: "No foreigncorporation or corporation formed, organized, or existing underany laws other than those of the Philippines shall be permittedto transact business in the Philippines, until after it shall haveobtained a license for that purpose from the Securities andExchange Commission .. ." And under Section 69, "any officeror agent of the corporation or any person transacting businessfor any foreign corporation not having the license prescribedshall be punished by imprisonment for etc. ... ."

The issues which have to be determined, therefore, are thefollowing:

1. Whether defendant Primateria Zurich may be considered aforeign corporation within the meaning of Sections 68 and 69of the Corporation Law;

2. Assuming said entity to be a foreign corporation, whether itmay be considered as having transacted business in thePhilippines within the meaning of said sections; and

3. If so, whether its agents may be held personally liable on

contracts made in the name of the entity with third persons inthe Philippines.

The lower court ruled that the Primateria Zurich was not dulyproven to be a foreign corporation; nor thatasocieteanonyme ("sociedadanomima") is a corporation; andthat failing such proof, the societe cannot be deemed to fallwithin the prescription of Section 68 of the Corporation Law.We agree with the said court's conclusion. In fact, ourcorporation law recognized the differencebetween sociedadesanonimas and corporations.

At any rate, we do not see how the plaintiff could recoverfrom both the principal (Primateria Zurich) and its agents. Ithas been given judgment against the principal for the wholeamount. It asked for such judgment, and did not appeal from it.It clearly stated that its appeal concerned the other threedefendants.

But plaintiff alleges that the appellees as agents of PrimateriaZurich are liable to it under Art. 1897 of the New Civil Codewhich reads as follows:

Art. 1897. The agent who acts as such is not personallyliable to the party with whom he contracts, unless heexpressly binds himself or exceeds the limits of hisauthority without giving such party sufficient notice of hispowers.

But there is no proof that, as agents, they exceededthe limitsof their authority. In fact, the principal Primateria Zurich


19/61

who should be the one to raise the point, never raised it,denied its liability on the ground of excess of authority. At anyrate, the article does not hold that in cases of excess ofauthority, both the agent and the principal are liable to the

other contracting party.

This view of the cause dispenses with the necessity ofdeciding the other two issues, namely: whether the agent of aforeign corporation doing business, but not licensed here ispersonally liable for contracts made by him in the name ofsuch corporation.1 Although, the solution should not bedifficult, since we already held that such foreign corporationmay be sued here (General Corporation vs. Union Ins., 87Phil. 509). And obviously, liability of the agent is necessarilypremised on the inability to sue the principal or non-liability ofsuch principal. In the absence of express legislation, of course.

IN VIEW OF THE FOREGOING CONSIDERATIONS, theappealed judgment is affirmed, with costs against appellant.

Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala,

Makalintal, Bengzon, J.P., and Zaldivar, JJ.,concur.

Barrera, J., took no part.


Manila

EN BANC

G.R. No. L-11442 May 23, 1958

MANUELA T. VDA. DE SALVATIERRA, petitioner,vs.HON. LORENZO C. GARLITOS, in his capacity as Judge ofthe Court of First Instance of Leyte, Branch II, and

SEGUNDINO REFUERZO, respondents.

Jimenez, Tantuico, Jr. and Tolete for petitioner.

Francisco Astilla for respondent SegundinoRefuerzo.

FELIX, J .:

This is a petition forcertiorarifiled by Manuela T. Vda.deSalvatierra seeking to nullify the order of the Court of FirstInstance of Leyte in Civil Case No. 1912, dated March 21,1956, relieving SegundinoRefuerzo of liability for the contractentered into between the former and the Philippine Fibers

Producers Co., Inc., of which Refuerzo is the president. Thefacts of the case are as follows:

Manuela T. Vda. deSalvatierra appeared to be the owner of aparcel of land located at Maghobas, Poblacion, Burauen,Teyte. On March 7, 1954, said landholder entered into acontract of lease with the Philippine Fibers Producers Co.,Inc., allegedly a corporation "duly organized and existing underthe laws of the Philippines, domiciled at Burauen, Leyte,Philippines, and with business address therein, represented inthis instance by Mr.Segundino Q. Refuerzo, the President". Itwas provided in said contract, among other things, that thelifetime of the lease would be for a period of 10 years; that theland would be planted to kenaf, ramie or other crops suitableto the soil; that the lessor would be entitled to 30 per cent ofthe net income accruing from the harvest of any, crop withoutbeing responsible for the cost of production thereof; and thatafter every harvest, the lessee was bound to declare at theearliest possible time the income derived therefrom and todeliver the corresponding share due the lessor.


20/61

Apparently, the aforementioned obligations imposed on thealleged corporation were not complied with because on April 5,1955, Alanuela T. Vda, de Salvatierra filed with the Court ofFirst Instance of Leyte a complaint against the PhilippineFibers Producers Co., Inc., and Segundino Q. Refuerzo, for

accounting, rescission and damages (Civil Case No. 1912).She averred that sometime in April, 1954, defendants plantedkenaf on 3 hectares of the leased property which crop was, atthe time of the commencement of the action, alreadyharvested, processed and sold by defendants; thatnotwithstanding that fact, defendants refused to render anaccounting of the income derived therefrom and to deliver thelessor's share; that the estimated gross income was P4,500,and the deductible expenses amounted to P1,000; that asdefendants' refusal to undertake such task was in violation ofthe terms of the covenant entered into between the plaintiff

and defendant corporation, a rescission was but proper.

As defendants apparently failed to file their answer to thecomplaint, of which they were allegedly notified, the Courtdeclared them in default and proceeded to receive plaintiff'sevidence. On June 8, 1955, the lower Court rendered

judgment granting plaintiff's prayer, and required defendants torender a complete accounting of the harvest of the landsubject of the proceeding within 15 days from receipt of thedecision and to deliver 30 per cent of the net income realizedfrom the last harvest to plaintiff, with legal interest from the

date defendants received payment for said crop. It was furtherprovide that upon defendants' failure to abide by the saidrequirement, the gross income would be fixed at P4,200 or anet income of P3,200 after deducting the expenses forproduction, 30 per cent of which or P960 was held to be duethe plaintiff pursuant to the aforementioned contract of lease,which was declared rescinded.

No appeal therefrom having been perfected within thereglementary period, the Court, upon motion of plaintiff, issueda writ of execution, in virtue of which the Provincial Sheriff ofLeyte caused the attachment of 3 parcels of land registered inthe name of SegundinoRefuerzo. No property of the Philippine

Fibers Producers Co., Inc., was found available forattachment. On January 31, 1956, defendantSegundinoRefuerzo filed a motion claiming that the decisionrendered in said Civil Case No. 1912 was null and void withrespect to him, there being no allegation in the complaintpointing to his personal liability and thus prayed that an orderbe issued limiting such liability to defendant corporation. Overplaintiff's opposition, the Court a quo granted the same andordered the Provincial Sheriff of Leyte to release all propertiesbelonging to the movant that might have already beenattached, after finding that the evidence on record made no

mention or referred to any fact which might hold movantpersonally liable therein. As plaintiff's petition for relief fromsaid order was denied, Manuela T. Vda.deSalvatierrainstituted the instant action asserting that the trial Judge inissuing the order complained of, acted with grave abuse ofdiscretion and prayed that same be declared a nullity.

From the foregoing narration of facts, it is clear that the ordersought to be nullified was issued by tile respondent Judgeupon motion of defendant Refuerzo, obviously pursuant toRule 38 of the Rules of Court. Section 3 of said Rule, however,

in providing for the period within which such a motion may befiled, prescribes that:

SEC. 3.WHEN PETITION FILED; CONTENTS ANDVERIFICATION. A petition provided for in either of thepreceding sections of this rule must be verified,filed within sixty days after the petitioner learns of the

judgment, order, or other proceeding to be set aside, andnot more than six months after such judgment or orderwas entered, or such proceeding was taken; and must be


21/61

must be accompanied with affidavit showing the fraud,accident, mistake, or excusable negligence relied upon,and the facts constituting the petitioner is good andsubstantial cause of action or defense, as the case maybe, which he may prove if his petition be granted". (Rule

38)

The aforequoted provision treats of 2 periods, i.e., 60 daysafter petitioner learns of the judgment, and not more than 6months after the judgment or order was rendered, both ofwhich must be satisfied. As the decision in the case at bar wasunder date of June 8, 1955, whereas the motion filed byrespondent Refuerzo was dated January 31, 1956, or after thelapse of 7 months and 23 days, the filing of theaforementioned motion was clearly made beyond theprescriptive period provided for by the rules. The remedy

allowed by Rule 38 to a party adversely affected by a decisionor order is certainly an alert of grace or benevolence intendedto afford said litigant a penultimate opportunity to protect hisinterest. Considering the nature of such relief and the purposebehind it, the periods fixed by said rule are non-extendible andnever interrupted; nor could it be subjected to any condition orcontingency because it is of itself devised to meet a conditionor contingency (Palomares vs. Jimenez, * G.R. No. L-4513,January 31, 1952). On this score alone, therefore, the petitionfor a writ ofcertiorarifiled herein may be granted. However,taking note of the question presented by the motion for relief

involved herein, We deem it wise to delve in and pass uponthe merit of the same.

Refuerzo, in praying for his exoneration from any liabilityresulting from the non-fulfillment of the obligation imposed ondefendant Philippine Fibers Producers Co., Inc., interposedthe defense that the complaint filed with the lower courtcontained no allegation which would hold him liable personally,for while it was stated therein that he was a signatory to thelease contract, he did so in his capacity as president of the

corporation. And this allegation was found by the Court a quoto be supported by the records. Plaintiff on the other hand triedto refute this averment by contending that her failure to specifydefendant's personal liability was due to the fact that all thetime she was under the impression that the Philippine Fibers

Producers Co., Inc., represented by Refuerzo was a dulyregistered corporation as appearing in the contract, but asubsequent inquiry from the Securities and ExchangeCommission yielded otherwise. While as a general rule aperson who has contracted or dealt with an association in sucha way as to recognize its existence as a corporate body isestopped from denying the same in an action arising out ofsuch transaction or dealing, (Asia Banking Corporation vs.Standard Products Co., 46 Phil., 114; Compania Agricola deUltramar vs. Reyes, 4 Phil., 1; Ohta Development Co.; vs.Steamship Pompey, 49 Phil., 117), yet this doctrine may not

be held to be applicable where fraud takes a part in the saidtransaction. In the instant case, on plaintiff's charge that shewas unaware of the fact that the Philippine Fibers ProducersCo., Inc., had no juridical personality, defendant Refuerzogave no confirmation or denial and the circumstancessurrounding the execution of the contract lead to theinescapable conclusion that plaintiff Manuela T. Vda.deSalvatierra was really made to believe that such corporationwas duly organized in accordance with law.

There can be no question that a corporation with registered

has a juridical personality separate and distinct from itscomponent members or stockholders and officers such that acorporation cannot be held liable for the personalindebtedness of a stockholder even if he should be itspresident (Walter A. Smith Co. vs. Ford, SC-G.R. No. 42420)and conversely, a stockholder or member cannot be heldpersonally liable for any financial obligation be, the corporationin excess of his unpaid subscription. But this rule isunderstood to refer merely to registered corporations and


22/61

cannot be made applicable to the liability of members of anunincorporated association. The reason behind this doctrine isobvious-since an organization which before the law is non-existent has no personality and would be incompetent to actand appropriate for itself the powers and attribute of a

corporation as provided by law; it cannot create agents orconfer authority on another to act in its behalf; thus, those whoact or purport to act as its representatives or agents do sowithout authority and at their own risk. And as it is anelementary principle of law that a person who acts as an agentwithout authority or without a principal is himself regarded asthe principal, possessed of all the rights and subject to all theliabilities of a principal, a person acting or purporting to act onbehalf of a corporation which has no valid existence assumessuch privileges and obligations and comes personally liable forcontracts entered into or for other acts performed as such,

agent (Fay vs. Noble, 7 Cushing [Mass.] 188. Cited in IITolentino's Commercial Laws of the Philippines, Fifth Ed., P.689-690). Considering that defendant Refuerzo, as presidentof the unregistered corporation Philippine Fibers ProducersCo., Inc., was the moving spirit behind the consummation ofthe lease agreement by acting as its representative, his liabilitycannot be limited or restricted that imposed upon corporateshareholders. In acting on behalf of a corporation which heknew to be unregistered, he assumed the risk of reaping theconsequential damages or resultant rights, if any, arising out ofsuch transaction.

Wherefore, the order of the lower Court of March 21, 1956,amending its previous decision on this matter and ordering theProvincial Sheriff of Leyte to release any and all properties ofmovant therein which might have been attached in theexecution of such judgment, is hereby set aside and nullifiedas if it had never been issued. With costs against respondentSegundinoRefuerzo. It is so ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., BautistaAngelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia,JJ., concur.


Manila

EN BANC

G.R. No. L-19118 January 30, 1965

MARIANO A. ALBERT, plaintiff-appellant,

vs.UNIVERSITY PUBLISHING CO., INC., defendant-appellee.

Uy&Artiaga and Antonio M. Molina for plaintiff-appellant.

Aruego, Mamaril& Associates for defendant-appellees.

BENGZON, J.P., J .:

No less than three times have the parties here appealed to thisCourt.

InAlbert vs. University Publishing Co., Inc., L-9300, April 18,1958, we found plaintiff entitled to damages (for breach ofcontract) but reduced the amount from P23,000.00 toP15,000.00.

Then inAlbert vs. University Publishing Co., Inc., L-15275,October 24, 1960, we held that the judgment for P15,000.00which had become final and executory, should be executed to


23/61

its full amount, since in fixing it, payment already made hadbeen considered.

Now we are asked whether the judgment may be executedagainst Jose M. Aruego, supposed President of University

Publishing Co., Inc., as the real defendant.

Fifteen years ago, on September 24, 1949, Mariano A. Albertsued University Publishing Co., Inc. Plaintiff alleged interalia that defendant was a corporation duly organized andexisting under the laws of the Philippines; that on July 19,1948, defendant, through Jose M. Aruego, its President,entered into a contract with plaintifif; that defendant hadthereby agreed to pay plaintiff P30,000.00 for the exclusiveright to publish his revised Commentaries on the RevisedPenal Code and for his share in previous sales of the book's

first edition; that defendant had undertaken to pay in eightquarterly installments of P3,750.00 starting July 15, 1948; thatper contract failure to pay one installment would render therest due; and that defendant had failed to pay the secondinstallment.

Defendant admitted plaintiff's allegation of defendant'scorporate existence; admitted the execution and terms of thecontract dated July 19, 1948; but alleged that it was plaintiffwho breached their contract by failing to deliver hismanuscript. Furthermore, defendant counterclaimed for

damages.1wph1.t

Plaintiff died before trial and Justo R. Albert, his estate'sadministrator, was substituted for him.

The Court of First Instance of Manila, after trial, rendereddecision on April 26, 1954, stating in the dispositive portion

IN VIEW OF ALL THE FOREGOING, the Court rendersjudgment in favor of the plaintiff and against thedefendant the University Publ ishing Co., Inc., ordering thedefendant to pay the administrator Justo R. Albert, thesum of P23,000.00 with legal [rate] of interest from the

date of the filing of this complaint until the whole amountshall have been fully paid. The defendant shall also paythe costs. The counterclaim of the defendant is herebydismissed

Date post:	14-Apr-2018
Category:	Documents
Upload:	jerome-morada
View:	221 times
Download:	0 times

Agency Week 5

Documents