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G.R. No.

151319 November 22, 2004 Prepared by:



PEDRO L. LINSANGAN, respondent. Agency Manager

Holy Cross Memorial Park

DECISION 4/18/85

Dear Atty. Linsangan:

TINGA, J.: This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that the total price
of P132,250.00 your undertaking is to pay only the total sum of P95,000.00 under the old price. Further the total
sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985 has been credited in the total
For resolution in this case is a classic and interesting texbook question in the law on agency.
purchase price thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00 including interests
(sic) charges for a period of five (5) years.
This is a petition for review assailing the Decision1 of the Court of Appeals dated 22 June 2001, and its Resolution2 (Signed)
dated 12 December 2001 in CA G.R. CV No. 49802 entitled "Pedro L. Linsangan v. Manila Memorial Cemetery, Inc. et
al.," finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and severally liable with Florencia C. Baluyot to
respondent Atty. Pedro L. Linsangan.

By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No. 118912. As
The facts of the case are as follows:
requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI.
The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated checks in favor of MMPCI.
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot under Contract
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons the
No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to reimbursement of
latter could not explain, and presented to him another proposal for the purchase of an equivalent property. He
the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking.
reimbursement is made to the former buyer, the contract would be transferred to him. Atty. Linsangan agreed and
gave Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer and to complete the down
payment to MMPCI.3 Baluyot issued handwritten and typewritten receipts for these payments.4 For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint 7 for
Breach of Contract and Damages against the former.
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No. 28660, a new
contract covering the subject lot in the name of the latter instead of old Contract No. 25012. Atty. Linsangan Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was cancelled
protested, but Baluyot assured him that he would still be paying the old price of P95,000.00 with P19,838.00 conformably with the terms of the contract8 because of non-payment of arrearages.9 MMPCI stated that Baluyot was
credited as full down payment leaving a balance of about P75,000.00.5 not an agent but an independent contractor, and as such was not authorized to represent MMPCI or to use its name
except as to the extent expressly stated in the Agency Manager Agreement.10 Moreover, MMPCI was not aware of
the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and monthly
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden Estate I
installments as indicated in the contract.11 Official receipts showing the application of payment were turned over to
denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for the amount of
Baluyot whom Atty. Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore,
P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the new contract
whatever misimpression that Atty. Linsangan may have had must have been rectified by the Account Updating
price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot executed a
Arrangement signed by Atty. Linsangan which states that he "expressly admits that Contract No. 28660 'on account
document6 confirming that while the contract price is P132,250.00, Atty. Linsangan would pay only the original price
of serious delinquencyis now due for cancellation under its terms and conditions.'''12
of P95,000.00.

The trial court held MMPCI and Baluyot jointly and severally liable.13 It found that Baluyot was an agent of MMPCI
The document reads in part:
and that the latter was estopped from denying this agency, having received and enchased the checks issued by Atty.
Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down
The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be issued as payment, it allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently
discounted to conform to the previous price as previously agreed upon. --- P95,000.00 encashed.14
The dispositive portion of the decision reads: SO ORDERED.23

WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of plaintiff declaring Contract No. MMPCI filed its Motion for Reconsideration,24 but the same was denied for lack of merit.25
28660 as valid and subsisting and ordering defendants to perform their undertakings thereof which covers burial lot
No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park located at Novaliches, Quezon City. All payments
In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in disregarding the plain
made by plaintiff to defendants should be credited for his accounts. NO DAMAGES, NO ATTORNEY'S FEES but with
terms of the written contract and Atty. Linsangan's failure to abide by the terms thereof, which justified its
costs against the defendants.
cancellation. In addition, even assuming that Baluyot was an agent of MMPCI, she clearly exceeded her authority
and Atty. Linsangan knew or should have known about this considering his status as a long-practicing lawyer.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against defendant Baluyot is GRANTED up MMPCI likewise claims that the Court of Appeals erred in failing to consider that the facts and the applicable law do
to the extent of the costs. not support a judgment against Baluyot only "up to the extent of costs."26

SO ORDERED.15 Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact faithfully
performed his contractual obligations and complied with them in good faith for at least two years.27 He claims that
contrary to MMPCI's position, his profession as a lawyer is immaterial to the validity of the subject contract and the
MMPCI appealed the trial court's decision to the Court of Appeals.16 It claimed that Atty. Linsangan is bound by the
case at bar.28 According to him, MMPCI had practically admitted in its Petition that Baluyot was its agent, and thus,
written contract with MMPCI, the terms of which were clearly set forth therein and read, understood, and signed by
the only issue left to be resolved is whether MMPCI allowed Baluyot to act as though she had full powers to be held
the former.17 It also alleged that Atty. Linsangan, a practicing lawyer for over thirteen (13) years at the time he
solidarily liable with the latter.29
entered into the contract, is presumed to know his contractual obligations and is fully aware that he cannot belatedly
and unilaterally change the terms of the contract without the consent, much less the knowledge of the other
contracting party, which was MMPCI. And in this case, MMPCI did not agree to a change in the contract and in fact We find for the petitioner MMPCI.
implemented the same pursuant to its clear terms. In view thereof, because of Atty. Linsangan's delinquency,
MMPCI validly cancelled the contract.
The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not fact, unless the factual findings complained of are devoid of support by the
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter exceeded the evidence on record or the assailed judgment is based on misapprehension of facts.30 In BPI Investment Corporation
terms of her agency, neither did MMPCI ratify Baluyot's acts. It added that it cannot be charged with making any v. D.G. Carreon Commercial Corporation,31 this Court ruled:
misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written contract
expressly stated the terms and conditions which Atty. Linsangan accepted and understood. In canceling the contract,
There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed by the
MMPCI merely enforced the terms and conditions imposed therein.18
Supreme Court, such as (1) when the conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the former's obligation, as a party abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are
knowingly dealing with an alleged agent, to determine the limitations of such agent's authority, particularly when conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same
such alleged agent's actions were patently questionable. According to MMPCI, Atty. Linsangan did not even bother to is contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial
verify Baluyot's authority or ask copies of official receipts for his payments.19 court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the
respondents; and (10) the findings of fact of the Court of Appeals are premised on the supposed absence of
The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's finding that Baluyot was an
evidence and contradicted by the evidence on record.32
agent of MMPCI at the time the disputed contract was entered into, having represented MMPCI's interest and acting
on its behalf in the dealings with clients and customers. Hence, MMPCI is considered estopped when it allowed
Baluyot to act and represent MMPCI even beyond her authority.20 The appellate court likewise found that the acts of In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts of the case, as
Baluyot bound MMPCI when the latter allowed the former to act for and in its behalf and stead. While Baluyot's well as made conclusions devoid of evidentiary support, hence we review its findings of fact.
authority "may not have been expressly conferred upon her, the same may have been derived impliedly by habit or
custom, which may have been an accepted practice in the company for a long period of time." 21 Thus, the Court of
By the contract of agency, a person binds himself to render some service or to do something in representation or on
Appeals noted, innocent third persons such as Atty. Linsangan should not be prejudiced where the principal failed to
behalf of another, with the consent or authority of the latter.33 Thus, the elements of agency are (i) consent, express
adopt the needed measures to prevent misrepresentation. Furthermore, if an agent misrepresents to a purchaser
or implied, of the parties to establish the relationship; (ii) the object is the execution of a juridical act in relation to a
and the principal accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility for
third person; (iii) the agent acts as a representative and not for himself; and (iv) the agent acts within the scope of
such misrepresentation.22 Finally, the Court of Appeals declared:
his authority.34

There being absolutely nothing on the record that would show that the court a quo overlooked, disregarded, or
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency Manager
misinterpreted facts of weight and significance, its factual findings and conclusions must be given great weight and
Agreement; an agency manager such as Baluyot is considered an independent contractor and not an agent.35
should not be disturbed by this Court on appeal.
However, in the same contract, Baluyot as agency manager was authorized to solicit and remit to MMPCI offers to
purchase interment spaces belonging to and sold by the latter.36 Notwithstanding the claim of MMPCI that Baluyot
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed decision in Civil Case No. 88- was an independent contractor, the fact remains that she was authorized to solicit solely for and in behalf of MMPCI.
1253 of the Regional Trial Court, National Capital Judicial Region, Branch 57 of Makati, is hereby AFFIRMED in toto. As properly found both by the trial court and the Court of Appeals, Baluyot was an agent of MMPCI, having
represented the interest of the latter, and having been allowed by MMPCI to represent it in her dealings with its acts of accepting and encashing the checks issued by Atty. Linsangan as well as allowing Baluyot to receive checks
clients/prospective buyers. drawn in the name of MMPCI confirm and ratify the contract of agency. On the other hand, the Court of Appeals
faulted MMPCI in failing to adopt measures to prevent misrepresentation, and declared that in view of MMPCI's
acceptance of the benefits of Baluyot's misrepresentation, it can no longer deny responsibility therefor.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the contract procured by
Atty. Linsangan and solicited by Baluyot.
The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on forms
provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms and, when signed by Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal
the buyer and an authorized officer of MMPCI, becomes binding on both parties. does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal's
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a total list
price of P132,250.00. Likewise, it was clearly stated therein that "Purchaser agrees that he has read or has had read
to him this agreement, that he understands its terms and conditions, and that there are no covenants, conditions, Art. 1910. The principal must comply with all the obligations that the agent may have contracted within the scope of
warranties or representations other than those contained herein."37 By signing the Offer to Purchase, Atty. Linsangan his authority.
signified that he understood its contents. That he and Baluyot had an agreement different from that contained in the
Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyot's
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it
authority. To repeat, Baluyot's authority was limited only to soliciting purchasers. She had no authority to alter the
expressly or tacitly.
terms of the written contract provided by MMPCI. The document/letter "confirming" the agreement that Atty.
Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the
same came from MMPCI or any of its officers. Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to act as though he had full powers.
It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the principal liable,
to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them,
controverted, the burden of proof is upon them to establish it.38 The basis for agency is representation and a person expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the
dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.39 If he does principal must have knowledge of the acts he is to ratify.44
not make such an inquiry, he is chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse.40 Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another
without authority. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior
As noted by one author, the ignorance of a person dealing with an agent as to the scope of the latter's authority is authority. Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts and
no excuse to such person and the fault cannot be thrown upon the principal.41 A person dealing with an agent circumstances relating to the unauthorized act of the person who assumed to act as agent. Thus, if material facts
assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon the agent's were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in
assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the presumption concealing such facts and regardless of the parties between whom the question of ratification may arise.45
that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well Nevertheless, this principle does not apply if the principal's ignorance of the material facts and circumstances was
as the existence of his agency.42 willful, or that the principal chooses to act in ignorance of the facts.46 However, in the absence of circumstances
putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant
of the facts.47
In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was
authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her
commitment with respect to such agreements. Even if Baluyot was Atty. Linsangan's friend and known to be an No ratification can be implied in the instant case.
agent of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her
authority.43 Atty. Linsangan as a practicing lawyer for a relatively long period of time when he signed the contract A perusal of Baluyot's Answer48 reveals that the real arrangement between her and Atty. Linsangan was for the latter
should have been put on guard when their agreement was not reflected in the contract. More importantly, Atty. to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the counterpart amount of P1,455.00 to
Linsangan should have been alerted by the fact that Baluyot failed to effect the transfer of rights earlier promised, meet the P3,255.00 monthly installments as indicated in the contract. Thus, every time an installment falls due,
and was unable to make good her written commitment, nor convince MMPCI to assent thereto, as evidenced by payment was to be made through a check from Atty. Linsangan for P1,800.00 and a cash component of P1,455.00
several attempts to induce him to enter into other contracts for a higher consideration. As properly pointed out by from Baluyot.49 However, it appears that while Atty. Linsangan issued the post-dated checks, Baluyot failed to come
MMPCI, as a lawyer, a greater degree of caution should be expected of Atty. Linsangan especially in dealings up with her part of the bargain. This was supported by Baluyot's statements in her letter50 to Mr. Clyde Williams, Jr.,
involving legal documents. He did not even bother to ask for official receipts of his payments, nor inquire from Sales Manager of MMPCI, two days after she received the copy of the Complaint. In the letter, she admitted that she
MMPCI directly to ascertain the real status of the contract, blindly relying on the representations of Baluyot. A lawyer was remiss in her duties when she consented to Atty. Linsangan's proposal that he will pay the old price while the
by profession, he knew what he was doing when he signed the written contract, knew the meaning and value of difference will be shouldered by her. She likewise admitted that the contract suffered arrearages because while Atty.
every word or phrase used in the contract, and more importantly, knew the legal effects which said document Linsangan issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial
produced. He is bound to accept responsibility for his negligence. difficulties. Baluyot even asked for compassion from MMPCI for the error she committed.

The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial court, MMPCI's Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is concerned, the
contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI's incurred delinquencies in payment, MMCPI merely enforced its rights under the said contract by canceling the same.
authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was in accordance with the contract
as well. Payments of P3,235.00 for at least two installments were likewise in accord with the contract, albeit made
Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what he claims to be the terms of
through a check and partly in cash. In view of Baluyot's failure to give her share in the payment, MMPCI received
Contract No. 28660. The agreement, insofar as the P95,000.00 contract price is concerned, is void and cannot be
only P1,800.00 checks, which were clearly insufficient payment. In fact, Atty. Linsangan would have incurred
enforced as against MMPCI. Neither can he hold Baluyot liable for damages under the same contract, since there is
arrearages that could have caused the earlier cancellation of the contract, if not for MMPCI's application of some of
no evidence showing that Baluyot undertook to secure MMPCI's ratification. At best, the "agreement" between
the checks to his account. However, the checks alone were not sufficient to cover his obligations.
Baluyot and Atty. Linsangan bound only the two of them. As far as MMPCI is concerned, it bound itself to sell its
interment space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and had in fact received several
If MMPCI was aware of the arrangement, it would have refused the latter's check payments for being insufficient. It payments in accordance with the same contract. If the contract was cancelled due to arrearages, Atty. Linsangan's
would not have applied to his account the P1,800.00 checks. Moreover, the fact that Baluyot had to practically recourse should only be against Baluyot who personally undertook to pay the difference between the true contract
explain to MMPCI's Sales Manager the details of her "arrangement" with Atty. Linsangan and admit to having made price of P132,250.00 and the original proposed price of P95,000.00. To surmise that Baluyot was acting on behalf of
an error in entering such arrangement confirm that MMCPI had no knowledge of the said agreement. It was only MMPCI when she promised to shoulder the said difference would be to conclude that MMPCI undertook to pay itself
when Baluyot filed her Answer that she claimed that MMCPI was fully aware of the agreement. the difference, a conclusion that is very illogical, if not antithetical to its business interests.

Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a party amounting However, this does not preclude Atty. Linsangan from instituting a separate action to recover damages from Baluyot,
to false representation or concealment of material facts or at least calculated to convey the impression that the facts not as an agent of MMPCI, but in view of the latter's breach of their separate agreement. To review, Baluyot
are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (ii) intent, or at obligated herself to pay P1,455.00 in addition to Atty. Linsangan's P1,800.00 to complete the monthly installment
least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (iii) payment under the contract, which, by her own admission, she was unable to do due to personal financial
knowledge, actual or constructive, of the real facts.51 difficulties. It is undisputed that Atty. Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot's
failure to provide the balance, Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan has a
cause of action against Baluyot, which he can pursue in another case.
While there is no more question as to the agency relationship between Baluyot and MMPCI, there is no indication
that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the authority to alter the
standard contracts of the company. Neither is there any showing that prior to signing Contract No. 28660, MMPCI WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2001 and its
had any knowledge of Baluyot's commitment to Atty. Linsangan. One who claims the benefit of an estoppel on the Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of
ground that he has been misled by the representations of another must not have been misled through his own want the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET ASIDE. The Complaint in Civil Case
of reasonable care and circumspection.52 Even assuming that Atty. Linsangan was misled by MMPCI's actuations, he No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to costs.
still cannot invoke the principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and could have
easily determined, had he only been cautious and prudent, whether said agent was clothed with the authority to
change the terms of the principal's written contract. Estoppel must be intentional and unequivocal, for when
misapplied, it can easily become a most convenient and effective means of injustice.53 In view of the lack of
sufficient proof showing estoppel, we refuse to hold MMPCI liable on this score.

Likewise, this Court does not find favor in the Court of Appeals' findings that "the authority of defendant Baluyot
may not have been expressly conferred upon her; however, the same may have been derived impliedly by habit or
custom which may have been an accepted practice in their company in a long period of time." A perusal of the
records of the case fails to show any indication that there was such a habit or custom in MMPCI that allows its
agents to enter into agreements for lower prices of its interment spaces, nor to assume a portion of the purchase
price of the interment spaces sold at such lower price. No evidence was ever presented to this effect.

As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660 between MMPCI
and by Atty. Linsangan for the purchase of an interment space in the former's cemetery. The other is the agreement
between Baluyot and Atty. Linsangan for the former to shoulder the amount P1,455.00, or the difference between
P95,000.00, the original price, and P132,250.00, the actual contract price.

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the latter ratifies
the same. It also bears emphasis that when the third person knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the agent. If the said third person was aware of such
limits of authority, he is to blame and is not entitled to recover damages from the agent, unless the latter undertook
to secure the principal's ratification.54

This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty. Linsangan. By affixing his
signature in the contract, Atty. Linsangan assented to the terms and conditions thereof. When Atty. Linsangan
G.R. No. 174610 July 14, 2009






Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, is the Decision 1 dated
22 June 2006 and Resolution2 dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987. The
appellate court affirmed with modification the Decision3 dated 22 April 2002 of the Regional Trial Court (RTC),
Branch 46, of Manila, in Civil Case No. 98-89047, granting the Complaint for Sum of Money of herein respondent
Sprint Transport Services, Inc. (Sprint) after the alleged failure of herein petitioner Soriamont Steamship Agencies,
Inc. (Soriamont) to return the chassis units it leased from Sprint and pay the accumulated rentals for the same.

The following are the factual and procedural antecedents:

Soriamont is a domestic corporation providing services as a receiving agent for line load contractor vessels. Patrick
Ronas (Ronas) is its general manager.

On the other hand, Sprint is a domestic corporation engaged in transport services. Its co-respondent Ricardo Cruz
Papa (Papa) is engaged in the trucking business under the business name "Papa Transport Services" (PTS).

Sprint filed with the RTC on 2 June 1998 a Complaint4 for Sum of Money against Soriamont and Ronas, docketed as
Civil Case No. 98-89047. Sprint alleged in its Complaint that: (a) on 17 December 1993, it entered into a lease
agreement, denominated as Equipment Lease Agreement (ELA) with Soriamont, wherein the former agreed to lease
a number of chassis units to the latter for the transport of container vans; (b) with authorization letters dated 19
June 1996 issued by Ronas on behalf of Soriamont, PTS and another trucker, Rebson Trucking, were able to
withdraw on 22 and 25 June 1996, from the container yard of Sprint, two chassis units (subject equipment),5
evidenced by Equipment Interchange Receipts No. 14215 and No. 14222; (c) Soriamont and Ronas failed to pay
rental fees for the subject equipment since 15 January 1997; (d) Sprint was subsequently informed by Ronas,
through a letter dated 17 June 1997, of the purported loss of the subject equipment sometime in June 1997; and (e)
despite demands, Soriamont and Ronas failed to pay the rental fees for the subject equipment, and to replace or
return the same to Sprint.

Sprint, thus, prayed for the RTC to render judgment:

1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages, in the amount of Five
Hundred Thirty-Seven Thousand Eight Hundred Pesos (537,800.00) representing unpaid rentals and the
replacement cost for the lost chassis units.

2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of Fifty-Three Thousand Five
Hundred Four Pesos and Forty-Two centavos (53,504.42) as interest and penalties accrued as of March 31, 1998
and until full satisfaction thereof. Hence, the Court of Appeals decreed:

3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount equivalent to twenty-five WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject to the modification
percent (25%) of the total amount claimed for and as attorneys fees plus Two Thousand Pesos (2,000.00) per that the specific rate of legal interest per annum on both the 320,000.00 representing the value of the two chassis
court appearance. units, and on the 270,124.42 representing the unpaid rentals, is six percent (6%), to be increased to twelve
percent (12%) from the finality of this Decision until its full satisfaction.11
4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6
In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion for Reconsideration of Soriamont
for failing to present any cogent and substantial matter that would warrant a reversal or modification of its earlier
Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim.7 Soriamont admitted therein to
having a lease agreement with Sprint, but only for the period 21 October 1993 to 21 January 1994. It denied
entering into an ELA with respondent Sprint on 17 December 1993 as alleged in the Complaint. Soriamont further
argued that it was not a party-in-interest in Civil Case No. 98-89047, since it was PTS and Rebson Trucking that Aggrieved, Soriamont12 filed the present Petition for Review with the following assignment of errors:
withdrew the subject equipment from the container yard of Sprint. Ronas was likewise not a party-in-interest in the
case since his actions, assailed in the Complaint, were executed as part of his regular functions as an officer of

Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint8 against Papa, who was doing
business under the name PTS. Soriamont and Ronas averred in their Third-Party Complaint that it was PTS and
Rebson Trucking that withdrew the subject equipments from the container yard of Sprint, and failed to return the
same. Since Papa failed to file an answer to the Third-Party Complaint, he was declared by the RTC to be in default.9
After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, finding Soriamont liable for the
claim of Sprint, while absolving Ronas and Papa from any liability. According to the RTC, Soriamont authorized PTS
to withdraw the subject equipment. The dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered in favor of [herein respondent] Sprint Transport Services, Inc. and
against [herein petitioner] Soriamont Steamship Agencies, Inc., ordering the latter to pay the former the following:
Three hundred twenty thousand pesos (320,000) representing the value of the two chassis units with interest at
the legal rate from the filing of the complaint;
Two hundred seventy thousand one hundred twenty four & 42/100 pesos (270,124.42) representing unpaid
rentals with interest at the legal rate from the filing of the complaint;
The rate of interest shall be increased to 12% per annum once this decision becomes final and executory.

Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability.10
We find the Petition to be without merit.

Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 74987.
The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized by Soriamont to
secure possession of the subject equipment from Sprint, pursuant to the existing ELA between Soriamont and Sprint.
The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne out by the records: The authorization issued by Soriamont to PTS established an agency relationship, with Soriamont as the principal
(1) Sprint and Soriamont entered into an ELA whereby the former leased chassis units to the latter for the specified and PTS as an agent. Resultantly, the actions taken by PTS as regards the subject equipment were binding on
daily rates. The ELA covered the period 21 October 1993 to 21 January 1994, but it contained an "automatic" Soriamont, making the latter liable to Sprint for the unpaid rentals for the use, and damages for the subsequent loss,
renewal clause; (2) on 22 and 25 June 1996, Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis of the subject equipment.
2-07 with Plate No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-55 with Plate No. NUP-533 Serial MOTZ-
160080, from the container yard of Sprint; (3) Soriamont authorized the withdrawal by PTS and Rebson Trucking of
Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw the subject equipment
the subject equipment from the container yard of Sprint; and (4) the subject pieces of equipment were never
from the container yard of Sprint. Although Soriamont admits that the authorization letter dated 19 June 1996 was
returned to Sprint. In a letter to Sprint dated 19 June 1997, Soriamont relayed that it was still trying to locate the
under its letterhead, said letter was actually meant for and sent to Harman Foods as shipper. It was then Harman
subject equipment, and requested the former to refrain from releasing more equipment to respondent PTS and
Foods that tasked PTS to withdraw the subject equipment from Sprint. Soriamont insists that the Court of Appeals
Rebson Trucking.
merely presumed that an agency relationship existed between Soriamont and PTS, since there was nothing in the
records to evidence the same. Meanwhile, there is undisputed evidence that it was PTS that withdrew and was last the burden of proof is upon them to prove it. Sprint has successfully discharged this burden.
in possession of the subject equipment. Soriamont further calls attention to the testimony of Enrico Valencia
(Valencia), a witness for Sprint, actually supporting the position of Soriamont that PTS did not present any
The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, of chassis units,
authorization from Soriamont when it withdrew the subject equipment from the container yard of Sprint. Assuming,
explicitly authorized the latter to appoint a representative who shall withdraw and return the leased chassis units to
for the sake of argument that an agency relationship did exist between Soriamont and PTS, the latter should not
Sprint, to wit:
have been exonerated from any liability. The acts of PTS that resulted in the loss of the subject equipment were
beyond the scope of its authority as supposed agent of Soriamont. Soriamont never ratified, expressly or impliedly,

Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appeals based its between
conclusion that PTS withdrew the subject equipment from the container yard of Sprint as an agent of Soriamont. In
effect, Soriamont is raising questions of fact, the resolution of which requires us to re-examine and re-evaluate the SPRINT TRANSPORT SERVICES, INC. (LESSOR)
evidence presented by the parties below.

Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for review under Rule 45 of
the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing errors of law, the findings of fact of the appellate court being conclusive. We have emphatically SORIAMONT STEAMSHIP AGENCIES, INC.
declared that it is not the function of this Court to analyze or weigh such evidence all over again, its jurisdiction
being limited to reviewing errors of law that may have been committed by the lower court.13 (LESSEE)

These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to TERMS and CONDITIONS
hear the parties conflicting claims and to carefully weigh their respective sets of evidence. The findings of the trial
court were subsequently affirmed by the Court of Appeals. Where the factual findings of both the trial court and the
Court of Appeals coincide, the same are binding on this Court. We stress that, subject to some exceptional instances, xxxx
only questions of law not questions of fact may be raised before this Court in a petition for review under Rule 45
of the Revised Rules of Court.14 4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished every time a chassis is
withdrawn and returned to a designated depot. The EIR relates the condition of the chassis at the point of on-
Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the Court of Appeals are hire/off-hire duly acknowledged by the LESSOR, Property Custodian and the LESSEES authorized representative.
premised on the absence of evidence and are contradicted by the evidence on record,15 we accommodate Soriamont
by going over the same evidence considered by the Court of Appeals and the RTC. xxxx

In Republic v. Court of Appeals,16 we explained that: 5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE authorizes his
representative to withdraw/return the chassis on his behalf. Only persons with a duly accomplished and signed
In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Stated authorization slip shall be entertained by the LESSOR for purposes of withdrawal/return of the chassis. The signatory
differently, the general rule in civil cases is that a party having the burden of proof of an essential fact must produce in the Withdrawal/Return Slip has to be the signatory of the corresponding Lease Agreement or the LESSEEs duly
a preponderance of evidence thereon (I Moore on Facts, 4, cited in Vicente J. Francisco, The Revised Rules of Court authorized representative(s).17 (Emphases ours.)
in the Philippines, Vol. VII, Part II, p. 542, 1973 Edition). By preponderance of evidence is meant simply evidence
which is of greater weight, or more convincing than that which is offered in opposition to it (32 C.J.S., 1051), The Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January 1994, and no longer
term 'preponderance of evidence' means the weight, credit and value of the aggregate evidence on either side and in effect at the time the subject pieces of equipment were reportedly withdrawn and lost by PTS. This contention of
is usually considered to be synonymous with the terms `greater weight of evidence' or 'greater weight, of the Soriamont is without merit, given that the same ELA expressly provides for the "automatic" renewal thereof in
credible evidence.' Preponderance of the evidence is a phrase which, in the last analysis, means probability of the paragraph 24, which reads:
truth. Preponderance of the evidence means evidence which is more convincing to the court as worthy of belief than
that which is offered in opposition thereto. x x x." (20 Am. Jur., 1100-1101)
There shall be an automatic renewal of the contract subject to the same terms and conditions as stipulated in the
original contract unless terminated by either party in accordance with paragraph no. 23 hereof. However, in this
After a review of the evidence on record, we rule that the preponderance of evidence indeed supports the existence case, termination will take effect immediately.18
of an agency relationship between Soriamont and PTS.
There being no showing that the ELA was terminated by either party, then it was being automatically renewed in
It is true that a person dealing with an agent is not authorized, under any circumstances, to trust blindly the agents accordance with the afore-quoted paragraph 24.
statements as to the extent of his powers. Such person must not act negligently but must use reasonable diligence
and prudence to ascertain whether the agent acts within the scope of his authority. The settled rule is that persons
dealing with an assumed agent are bound at their peril; and if they would hold the principal liable, they must It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking should appear before
ascertain not only the fact of agency, but also the nature and extent of authority, and in case either is controverted, Sprint in June 1996 with authorization letters, issued by Soriamont, for the withdrawal of the subject equipment. 19
On the witness stand, Valencia testified, as the operations manager of Sprint, as follows: Q. Is this standard operating procedure of Sprint Transport Services, Inc.?

Atty. Porciuncula: A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorization they have to send us
thru fax, but the original copy of the authorization will be followed.
Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint Transport Services, Inc.
and the defendant Soriamont Steamship Agencies, Inc.? Atty. Porciuncula:

A. Yes, Sir. Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc. letter head with the
headings Authorization, are these the same withdrawal authority that you mentioned awhile ago?
Q. What transactions are these, Mr. Witness?
A. Yes, Sir.
A. They got from us chassis, Sir.
Atty. Porciuncula:
Your Honor, at this point may we request that these documents identified by the witness be marked as Exhibits JJ
and KK, Your Honor.
Q. Who among the two, who withdrew?

A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.

Mark them.
Atty. Porciuncula:

Q. And when were these chassis withdrawn, Mr. Witness?

Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?
A. June 1996, Sir.

A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.
Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis units from your container
Q. And are these trucking companies authorized to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal authority.
Before they can withdraw the chassis they have to present withdrawal authority, Sir.
Atty. Porciuncula:
Atty. Porciuncula:
Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ and KK, could you please go
over the same and tell this Honorable Court where states there that the trucking companies which you mentioned
And what is this withdrawal authority?
awhile ago authorized to withdraw?

A. This is to prove that they are authorizing their representative to get from us a chassis unit.
A. Yes, Sir, it is stated in this withdrawal authority.

Q. And who is this authorization send to you, Mr. Witness?

Atty. Porciuncula:

A. Sometime a representative bring to our office the letter or the authorization or sometime thru fax, Sir.
At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking identified by the witness
be bracketed and mark as our Exhibits JJ-1 and KK-1, Your Honor.
Q. In this particular incident, Mr. Witness, how was it sent?
A. By fax, Sir.
Mark them. Are these documents have dates? Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the withdrawal of the subject
equipment was not authorized by it, but by the shipper/consignee, Harman Foods, which actually designated PTS
and Rebson Trucking as truckers. However, a scrutiny of the Equipment Interchange Receipts will show that these
Atty. Porciuncula:
documents merely identified Harman Foods as the shipper/consignee, and the location of said shipping line. It bears
to stress that it was Soriamont that had an existing ELA with Sprint, not Harman Foods, for the lease of the subject
Yes, Your Honor, both documents are dated June 19, 1996. equipment. Moreover, as stated in the ELA, the outgoing Equipment Interchange Receipts shall be signed, upon the
withdrawal of the leased chassis units, by the lessee, Soriamont, or its authorized representative. In this case, we
Q. Mr. Witness, after this what happened next? can only hold that the driver of PTS signed the receipts for the subject equipment as the authorized representative
of Soriamont, and no other.

A. After they presented to us the withdrawal authority, we called up Soriamont Steamship Agencies, Inc. to verify
whether the one sent to us through truck and the one sent to us through fax are one and the same. Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, which stated:

Q. Then what happened next, Mr. Witness? As we are currently having a problem with regards to the whereabouts of the subject trailers, may we request your
kind assistance in refraining from issuing any equipment to the above trucking companies.

A. Then after the verification whether it is true, then we asked them to choose the chassis units then my checker
would see to it whether the chassis units are in good condition, then after that we prepared the outgoing Equipment reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis units from Sprint,
Interchange Receipt, Sir. hence, necessitating an express request from Soriamont for Sprint to discontinue recognizing said authority.1avvphi1

Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment Interchange Receipt means? Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of the subject
equipment, since PTS acted beyond its authority as agent. Soriamont cites Article 1897 of the Civil Code, which
A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc. really withdraw (sic)
the chassis units, Sir.
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
xxxx powers.

Atty. Porciuncula: The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner in excess of its
authority as agent, thus, resulting in the loss of the subject equipment. To recall, the subject equipment was
Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoing Equipment Interchange withdrawn and used by PTS with the authority of Soriamont. And for PTS to be personally liable, as agent, it is vital
Receipt? that Soriamont be able to prove that PTS damaged or lost the said equipment because it acted contrary to or in
excess of the authority granted to it by Soriamont. As the Court of Appeals and the RTC found, however, Soriamont
did not adduce any evidence at all to prove said allegation. Given the lack of evidence that PTS was in any way
A. Yes, Sir. responsible for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even to Soriamont as its
agent. In the absence of evidence showing that PTS acted contrary to or in excess of the authority granted to it by
Q. Are there incoming Equipment Interchange Receipt Mr. Witness? its principal, Soriamont, this Court cannot merely presume PTS liable to Soriamont as its agent. The only thing
proven was that Soriamont, through PTS, withdrew the two chassis units from Sprint, and that these have never
been returned to Sprint.
A. We have not made Incoming Equipment Interchange Receipt with respect to Soriamont Steamship Agencies, Inc.,
Considering our preceding discussion, there is no reason for us to depart from the general rule that the findings of
fact of the Court of Appeals and the RTC are already conclusive and binding upon us.
Q. And why not, Mr. Witness?

Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal interest on the
A. Because they have not returned to us the two chassis units.20 320,000.00, representing the value of the subject equipment, and on the 270,124.42, representing the unpaid
rentals awarded in favor of Sprint, is proper and with legal basis. Under Article 2209 of the Civil Code, when an
In his candid and straightforward testimony, Valencia was able to clearly describe the standard operating procedure obligation not constituting a loan or forbearance of money is breached, then an interest on the amount of damages
followed in the withdrawal by Soriamont or its authorized representative of the leased chassis units from the awarded may be imposed at the discretion of the court at the rate of 6% per annum. Clearly, the monetary
container yard of Sprint. In the transaction involved herein, authorization letters dated 19 June 1996 in favor of PTS judgment in favor of Sprint does not involve a loan or forbearance of money; hence, the proper imposable rate of
and Rebson Trucking were faxed by Sprint to Soriamont, and were further verified by Sprint through a telephone call interest is six (6%) percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court of Appeals, 22 the interim
to Soriamont. Valencias testimony established that Sprint exercised due diligence in its dealings with PTS, as the period from the finality of the judgment awarding a monetary claim until payment thereof is deemed to be
agent of Soriamont. equivalent to a forbearance of credit. Eastern Shipping Lines, Inc. v. Court of Appeals23 explained, to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

Consistent with the foregoing jurisprudence, and later on affirmed in more recent cases,24 when the judgment
awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent of a forbearance of credit.
Thus, from the time the judgment becomes final until its full satisfaction, the applicable rate of legal interest shall be
twelve percent (12%).

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED. The Decision
dated 22 June 2006 and Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987 are
hereby AFFIRMED. Costs against petitioner Soriamont Steamship Agencies, Inc.

by said power company and an official receipt dated 15 August 1995 issued by Impact Systems. 10 Alarmed by this
development, petitioner made several demands upon respondents to pay their obligations. As a result, respondents
G.R. No. 167552 April 23, 2007
were able to make partial payments to petitioner. On 7 October 1996, petitioners counsel sent respondents a final
demand letter wherein it was stated that as of 11 June 1996, respondents total obligations stood at 295,000.00
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner, excluding interests and attorneys fees.11 Because of respondents failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against
vs. herein respondents before the Regional Trial Court of Cebu City.12

EDWIN CUIZON and ERWIN CUIZON, Respondents. On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary attachment.13

DECISION On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted petitioners allegations with respect to
the sale transactions entered into by Impact Systems and petitioner between January and April 1995.15 He, however,
disputed the total amount of Impact Systems indebtedness to petitioner which, according to him, amounted to only
CHICO-NAZARIO, J.: 220,000.00.16

Before Us is a petition for review by certiorari assailing the Decision 1 of the Court of Appeals dated 10 August 2004 By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this
and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his
Hon. Antonio T. Echavez." The assailed Decision and Resolution affirmed the Order3 dated 29 January 2002 transaction with petitioner and the latter was very much aware of this fact. In support of this argument, petitioner
rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party points to paragraphs 1.2 and 1.3 of petitioners Complaint stating
defendant in Civil Case No. CEB-19672.

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single
The generative facts of the case are as follows: proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity), with office located at 46-A
del Rosario Street, Cebu City, where he may be served summons and other processes of the Honorable Court.
Petitioner is engaged in the business of importation and distribution of various European industrial equipment for
customers here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact Systems") which is 1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of
a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact Systems and is sued in this action in such capacity.17
Impact Systems and was impleaded in the court a quo in said capacity.

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one Judgment. The trial court granted petitioners motion to declare respondent ERWIN in default "for his failure to
thousand three hundred thirty-eight (91,338.00) pesos. Subsequently, respondents sought to buy from petitioner answer within the prescribed period despite the opportunity granted"18 but it denied petitioners motion for summary
one unit of sludge pump valued at 250,000.00 with respondents making a down payment of fifty thousand pesos judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001.19 However, the
(50,000.00).4 When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to conduct of the pre-trial conference was deferred pending the resolution by the trial court of the special and
respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent affirmative defenses raised by respondent EDWIN.20
EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor
of petitioner, the pertinent part of which states:
After the filing of respondent EDWINs Memorandum21 in support of his special and affirmative defenses and
petitioners opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE respondent EDWIN as a party defendant in this case. According to the trial court
HUNDRED SIXTY FIVE THOUSAND (365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate
100D Sludge Pump;
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in
behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE6 the said receivables complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its
from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (365,000.00) PESOS general manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex "H" to the
which receivables the ASSIGNOR is the lawful recipient; complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down
payment of 50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G", thereby
3.) That the ASSIGNEE does hereby accept this assignment.7 showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew
that [Impact] Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted the down
payment of 50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could
by Invoice No. 12034 dated 30 June 1995.8 not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact]
Systems Sales made a down payment of 50,000.00 two days later.
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to
collect from Toledo Power Company the amount of 365,135.29 as evidenced by Check Voucher No. 09339 prepared
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant.23 acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal
effect as if they were personally executed by the principal.32 By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence qui facit per alium facit per se.33
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. The dispositive portion of the now assailed
Decision of the Court of Appeals states: 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 a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.34
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent
in his Order dated January 29, 2002, it is hereby AFFIRMED.24
In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as
principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN exceeded his
Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March
authority when he signed the Deed of Assignment thereby binding himself personally to pay the obligations to
2005. Hence, the present petition raising, as sole ground for its allowance, the following:
petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority granted by his principal and
he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with
whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds
his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the powers with which to conduct the business of the principal, thus:
receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by
EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of respondents,
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a
petitioner insists that ERWINs action repudiated EDWINs power to sign the Deed of Assignment. As EDWIN did not
position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of
sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally
judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted
liable for the obligations of his principal.26
to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the entrusted to his management. x x x.35
one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention of
this Court to the fact that respondents are bound not only by their principal and agent relationship but are in fact
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he
full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud
signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it
received, in full, the payment for Impact Systems indebtedness.36 We may very well assume that Impact Systems
desperately needed the sludge pump for its business since after it paid the amount of fifty thousand pesos
In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this case (50,000.00) as down payment on 3 March 1995,37 it still persisted in negotiating with petitioner which culminated in
and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent of the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June 1995.38 The
Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is alleged in significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact Systems
the Complaint that he is being sued in his capacity as the sales manager of the said business venture. Likewise, perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent EDWINs
respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to protect the
Impact Systems in said transaction. business of his principal. Had he not acted in the way he did, the business of his principal would have been
adversely affected and he would have violated his fiduciary relation with his principal.
We do not find merit in the petition.
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN,
In a contract of agency, a person binds himself to render some service or to do something in representation or on the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which
behalf of another with the latters consent.29 The underlying principle of the contract of agency is to accomplish petitioner anchors its claim against respondent EDWIN "does not hold that in case of excess of authority, both the
results by using the services of others to do a great variety of things like selling, buying, manufacturing, and agent and the principal are liable to the other contracting party."39 To reiterate, the first part of Article 1897 declares
transporting.30 Its purpose is to extend the personality of the principal or the party for whom another acts and from that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is
whom he or she derives the authority to act.31 It is said that the basis of agency is representation, that is, the agent completely absolved of any liability. The second part of the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third person. However, it must be pointed out that in case of excess of
authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover
from both the principal and the agent.40

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

WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and
Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29
January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the
proceedings against respondent Erwin Cuizon.