The monthly installment will start April 6, 1985; the amount of P1,800.
00 and the
G.R. No. 151319 November 22, 2004
MANILA MEMORIAL PARK CEMETERY, INC., petitioner,
vs.
PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the law on
agency.
This is a petition for review assailing the Decision1 of the Court of Appeals dated 22
June 2001, and its Resolution2 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.
The facts of the case are as follows:
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 No. 25012 was no longer
interested in acquiring the lot and had opted to sell his rights subject to reimbursement
of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured
Atty. Linsangan that once 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
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 protested, but Baluyot assured him
that he would still be paying the old price of P95,000.00 with P19,838.00 credited as
full down payment leaving a balance of about P75,000.00.5
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15),
Block 83, Garden Estate I denominated as Contract No. 28660 and the Official Receipt
No. 118912 dated 6 April 1985 for the amount of P19,838.00. Contract No. 28660 has
a listed price of P132,250.00. Atty. Linsangan objected to the new contract price, as
the same was not the amount previously agreed upon. To convince Atty. Linsangan,
Baluyot executed a document6 confirming that while the contract price is P132,250.00,
Atty. Linsangan would pay only the original price of P95,000.00.
The document reads in part:
difference will be issued as discounted to conform to the previous price as previously
agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
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 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.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official
Receipt No. 118912. As 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.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was
cancelled for reasons the latter could not explain, and presented to him another
proposal for the purchase of an equivalent property. He refused the new proposal and
insisted that Baluyot and MMPCI honor their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint7 for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No.
28660 was cancelled conformably with the terms of the contract8 because of non-
payment of arrearages.9 MMPCI stated that Baluyot was 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 installments as
indicated in the contract.11 Official receipts showing the application of payment were
turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to receive
the same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may
have had must have been rectified by the Account Updating Arrangement signed by
Atty. Linsangan which states that he "expressly admits that Contract No. 28660 'on
account of serious delinquencyis now due for cancellation under its terms and
conditions.'''12
The trial court held MMPCI and Baluyot jointly and severally liable.13 It found that
Baluyot was an agent of MMPCI 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 payment, it allowed her to continue to receive postdated checks from Atty.
Linsangan, which it in turn consistently encashed.14
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of
plaintiff declaring Contract No. 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 made by plaintiff to defendants should be credited for his accounts. NO
DAMAGES, NO ATTORNEY'S FEES but with costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against
defendant Baluyot is GRANTED up to the extent of the costs.
SO ORDERED.15
MMPCI appealed the trial court's decision to the Court of Appeals.16 It claimed that Atty.
Linsangan is bound by the written contract with MMPCI, the terms of which were clearly
set forth therein and read, understood, and signed by the former.17 It also alleged that
Atty. Linsangan, a practicing lawyer for over thirteen (13) years at the time he 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
implemented the same pursuant to its clear terms. In view thereof, because of Atty.
Linsangan's delinquency, MMPCI validly cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as
the latter exceeded the terms of her agency, neither did MMPCI ratify Baluyot's acts.
It added that it cannot be charged with making any 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, MMPCI merely enforced the terms and conditions imposed
therein.18
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the
former's obligation, as a party knowingly dealing with an alleged agent, to determine
the limitations of such agent's authority, particularly when such alleged agent's actions
were patently questionable. According to MMPCI, Atty. Linsangan did not even bother
to verify Baluyot's authority or ask copies of official receipts for his payments.19
The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's
finding that Baluyot was an 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 Baluyot bound MMPCI when the latter allowed the
former to act for and in its behalf and stead. While Baluyot's 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 Appeals noted, innocent third persons such as Atty.
Linsangan should not be prejudiced where the principal failed to adopt the needed
measures to prevent misrepresentation. Furthermore, if an agent misrepresents to a
purchaser and the principal accepts the benefits of such misrepresentation, he cannot
at the same time deny responsibility for such misrepresentation.22 Finally, the Court of
Appeals declared:
There being absolutely nothing on the record that would show that the court a quo
overlooked, disregarded, or misinterpreted facts of weight and significance, its factual
findings and conclusions must be given great weight and should not be disturbed by
this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed
decision in Civil Case No. 88-1253 of the Regional Trial Court, National Capital Judicial
Region, Branch 57 of Makati, is hereby AFFIRMED in toto.
SO ORDERED.23
MMPCI filed its Motion for Reconsideration,24 but the same was denied for lack of
merit.25
In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously
erred in disregarding the plain terms of the written contract and Atty. Linsangan's
failure to abide by the terms thereof, which justified its 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. MMPCI likewise claims that the Court of Appeals erred in failing to
consider that the facts and the applicable law do not support a judgment against
Baluyot only "up to the extent of costs."26
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 case
at bar.28 According to him, MMPCI had practically admitted in its Petition that Baluyot
was its agent, and thus, the only issue left to be resolved is whether MMPCI allowed
Baluyot to act as though she had full powers to be held solidarily liable with the latter.29
We find for the petitioner MMPCI.
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 evidence on record or the assailed
judgment is based on misapprehension of facts.30 In BPI Investment Corporation v.
D.G. Carreon Commercial Corporation,31 this Court ruled:
There are instances when the findings of fact of the trial court and/or Court of Appeals
may be reviewed by the 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 abuse
of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the trial 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
evidence and contradicted by the evidence on record.32
In the case at bar, the Court of Appeals committed several errors in the apprehension
of the facts of the case, as well as made conclusions devoid of evidentiary support,
hence we review its findings of fact.
By the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of
the latter.33 Thus, the elements of agency are (i) consent, express or implied, of the
parties to establish the relationship; (ii) the object is the execution of a juridical act in
relation to a third person; (iii) the agent acts as a representative and not for himself;
and (iv) the agent acts within the scope of his authority.34
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under
its Agency Manager Agreement; an agency manager such as Baluyot is considered an
independent contractor and not an agent.35 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 was an independent contractor, the fact remains that she was
authorized to solicit solely for and in behalf of MMPCI. 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 clients/prospective buyers.
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.
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 the buyer and an
authorized officer of MMPCI, becomes binding on both parties.
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,
warranties or representations other than those contained herein."37 By signing the Offer
to Purchase, Atty. Linsangan 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
authority. To repeat, Baluyot's authority was limited only to soliciting purchasers. She
had no authority to alter the 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.
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 controverted, the burden of proof
is upon them to establish it.38 The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent.39 If he does 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
As noted by one author, the ignorance of a person dealing with an agent as to the
scope of the latter's authority is no excuse to such person and the fault cannot be
thrown upon the principal.41 A person dealing with an agent assumes the risk of lack of
authority in the agent. He cannot charge the principal by relying upon the agent's
assumption of authority that proves to be unfounded. The principal, on the other hand,
may act on the presumption that third persons dealing with his agent will not be
negligent in failing to ascertain the extent of his authority as well as the existence of
his agency.42
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 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 should have been put on guard when their
agreement was not reflected in the contract. More importantly, Atty. Linsangan should
have been alerted by the fact that Baluyot failed to effect the transfer of rights earlier
promised, and was unable to make good her written commitment, nor convince MMPCI
to assent thereto, as evidenced by several attempts to induce him to enter into other
contracts for a higher consideration. As properly pointed out by MMPCI, as a lawyer, a
greater degree of caution should be expected of Atty. Linsangan especially in dealings
involving legal documents. He did not even bother to ask for official receipts of his
payments, nor inquire from MMPCI directly to ascertain the real status of the contract,
blindly relying on the representations of Baluyot. A lawyer by profession, he knew what
he was doing when he signed the written contract, knew the meaning and value of
every word or phrase used in the contract, and more importantly, knew the legal effects
which said document produced. He is bound to accept responsibility for his negligence.
The trial and appellate courts found MMPCI liable based on ratification and estoppel.
For the trial court, MMPCI's acts of accepting and encashing the checks issued by Atty.
Linsangan as well as allowing Baluyot to receive checks 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.
The Court does not agree. Pertinent to this case are the following provisions of the Civil
Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of
his authority, and the principal 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 ratification.
Art. 1910. The principal must comply with all the obligations that the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
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.
Thus, the acts of an agent beyond the scope of his authority do not bind the principal,
unless he ratifies them, expressly or impliedly. Only the principal can ratify; the agent
cannot ratify his own unauthorized acts. Moreover, the principal must have knowledge
of the acts he is to ratify.44
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 authority. Ordinarily,
the principal must have full knowledge at the time of ratification of all the material facts
and circumstances relating to the unauthorized act of the person who assumed to act
as agent. Thus, if material facts were suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or lack thereof in concealing such facts
and regardless of the parties between whom the question of ratification may arise.45
Nevertheless, this principle does not apply if the principal's ignorance of the material
facts and circumstances was 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
No ratification can be implied in the instant case.
A perusal of Baluyot's Answer48 reveals that the real arrangement between her and
Atty. Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas
Baluyot was to shoulder the counterpart amount of P1,455.00 to meet the P3,255.00
monthly installments as indicated in the contract. Thus, every time an installment falls
due, payment was to be made through a check from Atty. Linsangan for P1,800.00 and
a cash component of P1,455.00 from Baluyot.49 However, it appears that while Atty.
Linsangan issued the post-dated checks, Baluyot failed to come up with her part of the
bargain. This was supported by Baluyot's statements in her letter50 to Mr. Clyde
Williams, Jr., Sales Manager of MMPCI, two days after she received the copy of the
Complaint. In the letter, she admitted that she was remiss in her duties when she
consented to Atty. Linsangan's proposal that he will pay the old price while the
difference will be shouldered by her. She likewise admitted that the contract suffered
arrearages because while Atty. Linsangan issued the agreed checks, she was unable to
give her share of P1,455.00 due to her own financial difficulties. Baluyot even asked
for compassion from MMPCI for the error she committed.
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 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 through a check and partly in cash. In view of Baluyot's failure
to give her share in the payment, MMPCI received only P1,800.00 checks, which were
clearly insufficient payment. In fact, Atty. Linsangan would have incurred arrearages
that could have caused the earlier cancellation of the contract, if not for MMPCI's
application of some of the checks to his account. However, the checks alone were not
sufficient to cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latter's check
payments for being insufficient. It would not have applied to his account the P1,800.00
checks. Moreover, the fact that Baluyot had to practically explain to MMPCI's Sales
Manager the details of her "arrangement" with Atty. Linsangan and admit to having
made an error in entering such arrangement confirm that MMCPI had no knowledge of
the said agreement. It was only when Baluyot filed her Answer that she claimed that
MMCPI was fully aware of the agreement.
Neither is there estoppel in the instant case. The essential elements of estoppel are (i)
conduct of a party amounting to false representation or concealment of material facts
or at least calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (ii) intent, or
at least expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (iii) knowledge, actual or constructive, of the real facts.51
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 had any
knowledge of Baluyot's commitment to Atty. Linsangan. One who claims the benefit of
an estoppel on the ground that he has been misled by the representations of another
must not have been misled through his own want of reasonable care and
circumspection.52 Even assuming that Atty. Linsangan was misled by MMPCI's
actuations, he 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 breach of their separate agreement. To review, Baluyot obligated herself to pay
injustice.53 In view of the lack of sufficient proof showing estoppel, we refuse to hold P1,455.00 in addition to Atty. Linsangan's P1,800.00 to complete the monthly
MMPCI liable on this score. installment payment under the contract, which, by her own admission, she was unable
to do due to personal financial difficulties. It is undisputed that Atty. Linsangan issued
Likewise, this Court does not find favor in the Court of Appeals' findings that "the
the P1,800.00 as agreed upon, and were it not for Baluyot's failure to provide the
authority of defendant Baluyot may not have been expressly conferred upon her;
balance, Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan has
however, the same may have been derived impliedly by habit or custom which may
a cause of action against Baluyot, which he can pursue in another case.
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 WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals
custom in MMPCI that allows its agents to enter into agreements for lower prices of its dated 22 June 2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No.
interment spaces, nor to assume a portion of the purchase price of the interment 49802, as well as the Decision in Civil Case No. 88-1253 of the Regional Trial Court,
spaces sold at such lower price. No evidence was ever presented to this effect. Makati City Branch 57, are hereby REVERSED and SET ASIDE. The Complaint in Civil
Case No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to
As the Court sees it, there are two obligations in the instant case. One is the Contract
costs.
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. SO ORDERED.
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 incurred delinquencies in
payment, MMCPI merely enforced its rights under the said contract by canceling the
same.
Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what
he claims to be the terms of Contract No. 28660. The agreement, insofar as the
P95,000.00 contract price is concerned, is void and cannot be enforced as against
MMPCI. Neither can he hold Baluyot liable for damages under the same contract, since
there is no evidence showing that Baluyot undertook to secure MMPCI's ratification. At
best, the "agreement" between 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
payments in accordance with the same contract. If the contract was cancelled due to
arrearages, Atty. Linsangan's recourse should only be against Baluyot who personally
undertook to pay the difference between the true contract price of P132,250.00 and
the original proposed price of P95,000.00. To surmise that Baluyot was acting on behalf
of MMPCI when she promised to shoulder the said difference would be to conclude that
MMPCI undertook to pay itself the difference, a conclusion that is very illogical, if not
antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate action to
recover damages from Baluyot, not as an agent of MMPCI, but in view of the latter's
G.R. No. 174610 July 14, 2009
SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners,
vs.
SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing business
under the style PAPA TRANSPORT SERVICES, Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of
Court, is the Decision1 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.
3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount
equivalent to twenty-five percent (25%) of the total amount claimed for and as
attorneys fees plus Two Thousand Pesos (2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6
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 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
Soriamont.
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;
20,000.00 as attorneys fees.
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
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, in its Decision dated 22 June 2006, found the following facts to
be borne out by the records: (1) Sprint and Soriamont entered into an ELA whereby
the former leased chassis units to the latter for the specified daily rates. The ELA
covered the period 21 October 1993 to 21 January 1994, but it contained an
"automatic" renewal clause; (2) on 22 and 25 June 1996, Soriamont, through PTS and
Rebson Trucking, withdrew Sprint Chassis 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 the subject equipment from the container yard of Sprint; and (4)
the subject pieces of equipment were never returned to Sprint. In a letter to Sprint
dated 19 June 1997, Soriamont relayed that it was still trying to locate the subject
equipment, and requested the former to refrain from releasing more equipment to
respondent PTS and Rebson Trucking.
Hence, the Court of Appeals decreed:
WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed,
subject to the modification that the specific rate of legal interest per annum on both
the 320,000.00 representing the value of the two chassis 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
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 Decision.
Aggrieved, Soriamont12 filed the present Petition for Review with the following
assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS
SOLE ISSUE FOR RESOLUTION OF WHETHER OR NOT AN AGENCY RELATIONSHIP
EXISTED BETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN
PETITIONERS SORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA
TRUCKING BUT TOTALLY DISREGARDING AND FAILING TO RULE ON THE LIABILITY
OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY
OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF
THE THIRD-PARTY COMPLAINT WAS TOTALLY IGNORED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING
HEREIN PETITIONERS STEAMSHIP AGENCIES SOLELY LIABLE. EVIDENCE ON RECORD
SHOW THAT IT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW
THE SUBJECT CHASSIS. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN
POSSESSION OF THE SAID SUBJECT CHASSIS AND IT SHOULD BE HELD SOLELY
LIABLE FOR THE LOSS THEREOF;
III.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT
IGNORED A MATERIAL INCONSISTENCY IN THE TESTIMONY OF PRIVATE
RESPONDENT SPRINT TRANSPORTS WITNESS, MR. ENRICO G. VALENCIA. THE
TESTIMONY OF MR. VALENCIA WAS ERRONEOUSLY MADE THE BASIS FOR HOLDING
HEREIN PETITIONERS LIABLE FOR THE LOSS OF THE SUBJECT CHASSIS.
We find the Petition to be without merit.
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 authorization issued
by Soriamont to PTS established an agency relationship, with Soriamont as the principal
and PTS as an agent. Resultantly, the actions taken by PTS as regards the subject
equipment were binding on Soriamont, making the latter liable to Sprint for the unpaid
rentals for the use, and damages for the subsequent loss, of the subject equipment.
Soriamont anchors its defense on its denial that it issued an authorization to PTS to
withdraw the subject equipment from the container yard of Sprint. Although Soriamont
admits that the authorization letter dated 19 June 1996 was under its letterhead, said
letter was actually meant for and sent to Harman Foods as shipper. It was then Harman
Foods that tasked PTS to withdraw the subject equipment from Sprint. Soriamont
insists that the Court of Appeals 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 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 authorization from Soriamont when
it withdrew the subject equipment from the container yard of Sprint. Assuming, for the
sake of argument that an agency relationship did exist between Soriamont and PTS,
the latter should not 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, such
acts of PTS.
Soriamont is essentially challenging the sufficiency of the evidence on which the Court
of Appeals based its 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 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
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
These questions of fact were threshed out and decided by the trial court, which had
the firsthand opportunity to 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, 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
Given that Soriamont is precisely asserting in the instant Petition that the findings of
fact of the Court of Appeals are 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.
In Republic v. Court of Appeals,16 we explained that:
In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. Stated differently, the general rule in civil cases is that a
party having the burden of proof of an essential fact must produce a preponderance of
evidence thereon (I Moore on Facts, 4, cited in Vicente J. Francisco, The Revised Rules
of Court 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 term 'preponderance
of evidence' means the weight, credit and value of the aggregate evidence on either
side and is usually considered to be synonymous with the terms `greater weight of
evidence' or 'greater weight, of the credible evidence.' Preponderance of the evidence
is a phrase which, in the last analysis, means probability of the 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)
After a review of the evidence on record, we rule that the preponderance of evidence
indeed supports the existence of an agency relationship between Soriamont and PTS.
It is true that a person dealing with an agent is not authorized, under any
circumstances, to trust blindly the agents 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 ascertain not only the fact of agency, but
also the nature and extent of authority, and in case either is controverted, the burden
of proof is upon them to prove it. Sprint has successfully discharged this burden.
The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as
lessee, of chassis units, explicitly authorized the latter to appoint a representative who
shall withdraw and return the leased chassis units to Sprint, to wit:
EQUIPMENT LEASE AGREEMENT
between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And Q. Who among the two, who withdrew?
SORIAMONT STEAMSHIP AGENCIES, INC. A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.
(LESSEE) Atty. Porciuncula:
TERMS and CONDITIONS Q. And when were these chassis withdrawn, Mr. Witness?
xxxx A. June 1996, Sir.
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the
accomplished every time a chassis is withdrawn and returned to a designated depot. chassis units from your container yard?
The EIR relates the condition of the chassis at the point of on-hire/off-hire duly
Witness:
acknowledged by the LESSOR, Property Custodian and the LESSEES authorized
representative. Before they can withdraw the chassis they have to present withdrawal authority, Sir.
xxxx Atty. Porciuncula:
5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the And what is this withdrawal authority?
LESSEE authorizes his representative to withdraw/return the chassis on his behalf. Only A. This is to prove that they are authorizing their representative to get from us a chassis
persons with a duly accomplished and signed authorization slip shall be entertained by unit.
the LESSOR for purposes of withdrawal/return of the chassis. The signatory in the
Withdrawal/Return Slip has to be the signatory of the corresponding Lease Agreement Q. And who is this authorization send to you, Mr. Witness?
or the LESSEEs duly authorized representative(s).17 (Emphases ours.) A. Sometime a representative bring to our office the letter or the authorization or
Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to sometime thru fax, Sir.
21 January 1994, and no longer in effect at the time the subject pieces of equipment Q. In this particular incident, Mr. Witness, how was it sent?
were reportedly withdrawn and lost by PTS. This contention of Soriamont is without
merit, given that the same ELA expressly provides for the "automatic" renewal thereof A. By fax, Sir.
in paragraph 24, which reads: Q. Is this standard operating procedure of Sprint Transport Services, Inc.?
There shall be an automatic renewal of the contract subject to the same terms and A. Yes, Sir, if the trucking could not bring to our office the original copy of the
conditions as stipulated in the original contract unless terminated by either party in authorization they have to send us thru fax, but the original copy of the authorization
accordance with paragraph no. 23 hereof. However, in this case, termination will take will be followed.
effect immediately.18
Atty. Porciuncula:
There being no showing that the ELA was terminated by either party, then it was being
automatically renewed in accordance with the afore-quoted paragraph 24. 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
It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson authority that you mentioned awhile ago?
Trucking should appear before Sprint in June 1996 with authorization letters, issued by
Soriamont, for the withdrawal of the subject equipment.19 On the witness stand, A. Yes, Sir.
Valencia testified, as the operations manager of Sprint, as follows: Atty. Porciuncula:
Atty. Porciuncula: Your Honor, at this point may we request that these documents identified by the
Q. Mr. Witness, as operation manager, are you aware of any transactions between witness be marked as Exhibits JJ and KK, Your Honor.
Sprint Transport Services, Inc. and the defendant Soriamont Steamship Agencies, Inc.? Court:
A. Yes, Sir. Mark them.
Q. What transactions are these, Mr. Witness? xxxx
A. They got from us chassis, Sir. Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?
Court: A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.
Q. And are these trucking companies authorized to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal authority.
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 awhile ago authorized to
withdraw?
A. Yes, Sir, it is stated in this withdrawal authority.
Atty. Porciuncula:
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.
Court:
Mark them. Are these documents have dates?
Atty. Porciuncula:
Yes, Your Honor, both documents are dated June 19, 1996.
Q. Mr. Witness, after this what happened next?
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.
Q. Then what happened next, Mr. Witness?
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 Interchange Receipt,
Sir.
Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment
Interchange Receipt means?
A. This is a document proving that the representative of Soriamont Steamship Agencies,
Inc. really withdraw (sic) the chassis units, Sir.
xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned awhile ago that your company issued
outgoing Equipment Interchange Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange Receipt Mr. Witness?
A. We have not made Incoming Equipment Interchange Receipt with respect to
Soriamont Steamship Agencies, Inc., Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two chassis units.20
In his candid and straightforward testimony, Valencia was able to clearly describe the
standard operating procedure followed in the withdrawal by Soriamont or its authorized
representative of the leased chassis units from the container yard of Sprint. In the
transaction involved herein, authorization letters dated 19 June 1996 in favor of PTS
and Rebson Trucking were faxed by Sprint to Soriamont, and were further verified by
Sprint through a telephone call to Soriamont. Valencias testimony established that
Sprint exercised due diligence in its dealings with PTS, as the agent of Soriamont.
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 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 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 can only hold that the driver of PTS
signed the receipts for the subject equipment as the authorized representative of
Soriamont, and no other.
Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of
Soriamont, which stated:
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.
reveals that PTS did have previous authority from Soriamont to withdraw the leased
chassis units from Sprint, hence, necessitating an express request from Soriamont for
Sprint to discontinue recognizing said authority.1avvphi1
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 provides:
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 powers.
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 withdrawn and used by PTS with the
authority of Soriamont. And for PTS to be personally liable, as agent, it is vital 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 responsible
for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even for the computation of legal interest shall, in any case, be on the amount finally
to Soriamont as its agent. In the absence of evidence showing that PTS acted contrary adjudged.
to or in excess of the authority granted to it by its principal, Soriamont, this Court
3. When the judgment of the court awarding a sum of money becomes final and
cannot merely presume PTS liable to Soriamont as its agent. The only thing proven
executory, the rate of legal interest, whether the case falls under paragraph 1 or
was that Soriamont, through PTS, withdrew the two chassis units from Sprint, and that
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
these have never been returned to Sprint.
this interim period being deemed to be by then an equivalent to a forbearance of credit.
Considering our preceding discussion, there is no reason for us to depart from the
Consistent with the foregoing jurisprudence, and later on affirmed in more recent
general rule that the findings of fact of the Court of Appeals and the RTC are already
cases,24 when the judgment awarding a sum of money becomes final and executory,
conclusive and binding upon us.
the rate of legal interest shall be 12% per annum from such finality until its satisfaction,
Finally, the adjustment by the Court of Appeals with respect to the applicable rate of this interim period being deemed to be by then an equivalent of a forbearance of credit.
legal interest on the 320,000.00, representing the value of the subject equipment, Thus, from the time the judgment becomes final until its full satisfaction, the applicable
and on the 270,124.42, representing the unpaid rentals awarded in favor of Sprint, is rate of legal interest shall be twelve percent (12%).
proper and with legal basis. Under Article 2209 of the Civil Code, when an obligation
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is
not constituting a loan or forbearance of money is breached, then an interest on the
hereby DENIED. The Decision dated 22 June 2006 and Resolution dated 7 September
amount of damages awarded may be imposed at the discretion of the court at the rate
2006 of the Court of Appeals in CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs
of 6% per annum. Clearly, the monetary judgment in favor of Sprint does not involve
against petitioner Soriamont Steamship Agencies, Inc.
a loan or forbearance of money; hence, the proper imposable rate of interest is six
(6%) percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court of Appeals,22 SO ORDERED.
the interim period from the finality of the judgment awarding a monetary claim until
payment thereof is deemed to be 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
G.R. No. 167552 April 23, 2007
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,
vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision1 of the Court of
Appeals dated 10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP
No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez." The assailed Decision and Resolution affirmed the Order3 dated 29 January
2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent
EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.
The generative facts of the case are as follows:
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 a sole proprietorship
owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products
allegedly amounting to ninety-one thousand three hundred thirty-eight (91,338.00)
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge
pump valued at 250,000.00 with respondents making a down payment of fifty
thousand pesos (50,000.00).4 When the sludge pump arrived from the United
Kingdom, petitioner refused to deliver the same to respondents without their having
fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent
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:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in
the amount of THREE HUNDRED SIXTY FIVE THOUSAND (365,000.00) 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
ASSIGNEE6 the said receivables from Toledo Power Corporation in the amount of
THREE HUNDRED SIXTY FIVE THOUSAND (365,000.00) PESOS which receivables the
ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.7
Following the execution of the Deed of Assignment, petitioner delivered to respondents
the sludge pump as shown by Invoice No. 12034 dated 30 June 1995.8
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 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 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 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 herein
respondents before the Regional Trial Court of Cebu City.12
On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ
of preliminary attachment.13
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 220,000.00.16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not
a real party in interest in this case. According to him, he was acting as mere agent of
his principal, which was the Impact Systems, in his transaction with petitioner and the
latter was very much aware of this fact. In support of this argument, petitioner points
to paragraphs 1.2 and 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 single 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.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu
City. He is the Sales Manager of Impact Systems and is sued in this action in such
capacity.17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with
Motion for Summary Judgment. The trial court granted petitioners motion to declare
respondent ERWIN in default "for his failure to answer within the prescribed period
despite the opportunity granted"18 but it denied petitioners motion for summary
judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001.19 However, the conduct of the pre-trial conference was deferred pending
the resolution by the trial court of the special and affirmative defenses raised by
respondent EDWIN.20
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 respondent EDWIN as a party
defendant in this case. According to the trial court
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 complaint shows that
defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by
its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A
study of Annex "H" to the 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
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 the instant case the principal has ratified the act of its agent and plaintiff knew about
said ratification. Plaintiff could 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.
In view of the Foregoing, the Court directs that defendant Edwin 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. The dispositive portion of the now assailed Decision of the Court of Appeals states:
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
Petitioners motion for reconsideration was denied by the appellate court in its
Resolution promulgated on 17 March 2005. Hence, the present petition raising, as sole
ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN
CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND
THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A
FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:
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 powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs
act of collecting the 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,
petitioner insists that ERWINs action repudiated EDWINs power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an
agent, petitioner claims that he should be made personally liable for the obligations of
his principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who
induced it into selling the 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
full-blooded brothers whose successive contravening acts bore the obvious signs of
conspiracy to defraud petitioner.27
In his Comment,28 respondent EDWIN again posits the argument that he is not a real
party in interest in this case and it was proper for the trial court to have him dropped
as a defendant. He insists that he was a mere agent of Impact Systems which is owned
by ERWIN and that his status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of the said
business venture. Likewise, respondent EDWIN points to the Deed of Assignment which
clearly states that 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 some service or to do
something in representation or on behalf of another with the latters consent.29 The
underlying principle of the contract of agency is to accomplish results by using the
services of others to do a great variety of things like selling, buying, manufacturing,
and transporting.30 Its purpose is to extend the personality of the principal or the party
for whom another acts and from whom he or she derives the authority to act.31 It is
said that the basis of agency is representation, that is, the agent 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
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
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 authority when he signed the Deed
of Assignment thereby binding himself personally to pay the obligations to 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 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 his powers. We hold that respondent EDWIN
does not fall within any of the exceptions contained in this provision.
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 powers with which to conduct the
business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general
agent or manager; such a position presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of judgment and discretion in
transactions and concerns which are incidental or appurtenant to the business
entrusted 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 entrusted to
his management. x x x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-
within his authority when he 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 (50,000.00) as down payment on 3 March 1995,37 it still persisted
in negotiating with petitioner which culminated in the execution of the Deed of
Assignment of its receivables from Toledo Power Company on 28 June 1995.38 The
significant amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems perseverance to get hold of the said equipment. There
is, therefore, no doubt in our mind that respondent EDWINs participation in the Deed
of Assignment was "reasonably necessary" or was required in order for him to protect
the 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 likewise take note of the fact that in this case, petitioner is seeking to recover both
from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here
that Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN "does not hold that in case of excess of authority, both the agent
and the principal are liable to the other contracting party."39 To reiterate, the first part
of Article 1897 declares that the principal is liable in cases when the agent acted within
the bounds of his authority. Under this, the agent is 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.
SO ORDERED.