6. ANITA CAOILE and ERLINDA GATCHALIAN v. THE COURT OF APPEALS and SOLEDAD F.

DE
JESUS
G.R. No. 106929. September 21, 1993.

Facts:

Sometime in January 1986, Soledad de Jesus met Erlinda Domingo, a resident of Sterling Life Homes,
Las Piñas, Metro Manila. Soledad de Jesus intimated to Domingo that she was interested in buying a
residential lot. Upon reaching home, Domingo got in touch with her Erlinda Gatchalian, also a resident
of Sterling Life Homes, and informed her of Soledad de Jesus’ desire to buy a residential lot.
Gatchalian told Domingo that she knew of a lot for sale in the subdivision by Domingo and Gatchalian,
and Soledad went to the office of the developer of Sterling Life Homes Subdivision. Soledad was
introduced to Anita Caoile, Chief Accountant and Assistant Vice-President of Sterling Life Assurance
Corporation. Anita assured Soledad that the lot was for sale and gave the latter a photocopy of the
certificate of title over the lot in the name of the corporation.

Anita required Soledad to pay P10,000.00 as a deposit for the lot on 3 February 1986, which the latter
paid as evidenced by a receipt signed by Anita Caoile as "agent." The total agreed price for the lot was
P120,000.00 or P500.00 per square meter. Soledad verified the status of the property from the
Register of Deeds of Makati and was informed that the lot was not mortgaged and was still in the
name of the Sterling Life Assurance Corporation. On 5 February 1986, Soledad paid a second
installment in the amount of P61,000.00 to Anita Caoile at the office, a receipt for which was signed
by Anita as "agent" and by Gatchalian, also as "agent." After she had finished paying the price of the
lot, Soledad demanded from Anita Caoile the delivery of the corresponding Deed of Sale and the
Transfer Certificate of Title but the latter could not comply. Soledad then discovered upon inquiry that
Caoile is not an authorized agent and that the said lot was already sold to another person.

Soledad thus filed a complaint for a sum of money against Caoile, Domingo, Gatchalian and Sterling
Life Assurance Corporation with the Regional Trial Court of Manila. RTC decided in favor of Soledad
and against Caoile. However, the court dismissed the complaint against Gatchalian and Sterling Life
Assurance Corporation. Soledad then appealed the decision with the CA. CA affirmed but modified the
RTC’s decision by declaring Gatchalian jointly and severally liable with Caoile.

Issue:

Whether on the sole basis of the receipt for P61,000.00, which she signed as "agent" with Anita
Caoile, the petitioner became solidarily liable with Anita.

Ruling:

The instant petition is GRANTED. The decision appealed from is SET ASIDE and the decision of Branch
53 of the Regional Trial Court of Manila is REINSTATED. (Caoile liable, Gatchalian not liable)

Ratio:

There is as well no evidence to show that it was Gatchalian who received the P61,000.00. That
Soledad did not include Gatchalian as a co-respondent of Anita in the estafa case and did not demand
reimbursement from Gatchalian before filing Civil Case No. 86-36543 are strong indications that the
latter never received anything on account of the subject transaction.
7. NATIONAL POWER CORPORATION (NPC) v. NATIONAL MERCHANDISING CORPORATION
(Namerco) and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES (DIC)
G.R. Nos. L-33819 and L-33897. October 23, 1982

Facts:

National Power Corporation (NPC) and National Merchandising Corp. (Namerco), the latter as
representative of New York-based International Commodities Corporation (ICC), a New York firm,
executed in Manila a contract for the purchase by NPC from ICC of crude sulfur for NPC’s Maria
Cristina Fertilizer Plant in Iligan City. A performance bond was executed by Domestic Insurance
Company (DIC), an insurance company, in favor of NPC to guarantee ICC’s obligations. ICC was not
able to deliver the sulfur due to its inability to secure shipping space. Under the contract, the non-
availability of a steamer to transport the sulfur was not a ground for non-payment of the liquidated
damages in case of non-performance by the seller, and Namerco even guaranteed and made itself
“responsible for the availability of bottom or vessel.

It appeared that before the contract was signed, ICC advised Namerco that the sale was subject to the
availability of a steamer, and that Namerco should not sign the contract unless it wished to assume
full responsibility for the shipment. Namerco did not disclose the cable to NPC when it finalized the
contract. ICC disclaimed responsibility for the contract.

NPC sued ICC, Namerco, and DIC for the recovery of liquidated damages. The case against ICC was
dismissed by the trial court for lack of jurisdiction because it was not doing business in the Philippines.
DIC contended that it was not liable to NDC because its bond was posted, not for Namerco, but for
ICC, which was not liable on the contract of sale.

Issue:

Whether Namerco and DIC are liable to NPC for the recovery of the stipulated liquidated damages.

Ruling:

National Merchandising Corporation and Domestic Insurance Company of the Philippines are ordered
to pay solidarily to the National Power Corporation the sum of P45,100.00 as liquidated damages.

Ratio:

AN AGENT WHO EXCEEDS THE LIMITS OF HIS AUTHORITY IS PERSONALLY LIABLE.

Under Article 1897 of the Civil Code the agent who exceeds the limits of his authority without giving
the party with whom he contracts sufficient notice of his powers is personally liable to such party.

In the present case, Namerco, the agent of a New York-based principal, entered into a contract of sale
with the National Power Corporation without disclosing to the NPC the limits of its powers and,
contrary to its principal’s prior cabled instructions that the sale should be subject to availability of a
steamer, it agreed that non-availability of a steamer was not a justification for nonpayment of the
liquidated damages.

The rule that every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent would apply only in cases where the principal is
sought to be held liable on the contract entered into by the agent. The said rule is not
applicable in the instant case since it is the agent, not the principal, that is sought to be held liable on
the contract of sale which was expressly repudiated by the principal because the agent took chances,
it exceeded its authority and, in effect. it acted in its own name.

THE CONTRACT ENTERED INTO BY AN AGENT WHO ACTED BEYOND HIS POWERS IS
UNENFORCEABLE ONLY AS AGAINST THE PRINCIPAL BUT NOT AGAINST THE AGENT AND ITS
SURETY.
Article 1403 of the Civil Code which provides that a contract entered into in the name of another
person by one who has acted beyond his powers is unenforceable, refers to the unenforceability of the
contract against the principal.

In the instant case, the contract containing the stipulation for liquidated damages is not being
enforced against its principal but against the agent and its surety. It being enforced against the agent
because Article 1897 implies that the agent who acts in excess of his authority is personally
liable to the party with whom he contracted. And that rule is complimented by Article 1898
of the Civil Code which provides that "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." Namerco never disclosed to the NPC the cabled or written instructions of
its principal. For that reason and because Namerco exceeded the limits of its authority, it virtually
acted in its own name and not as agent and it is, therefore, bound by the contract of sale which,
however, it not enforceable against its principal.

The contention of the defendants that the Domestic Insurance Company is not liable to the NPC
because its bond was posted, not to Namerco, the agent, but for the New York firm which is not liable
on the contract of sale, cannot be sustained because it was Namerco that actually solicited the bond
from the Domestic Insurance Company and, Namerco is being held liable under the contract of sale
because it virtually acted in its own name. In the last analysis, the Domestic Insurance Company
acted as surety for Namerco. The rule is that "want of authority of the person who executes an
obligation as the agent or representative of the principal will not, as a general rule, affect
the surety thereon, especially in the absence of fraud, even though the obligation is not
binding on the principal."

8. EUROTECH INDUSTRIAL TECHNOLOGIES, INC. vs EDWIN CUIZON and ERWIN CUIZON

Facts:

Impact System, a sole proprietorship owned by respondent Erwin Cuizon, sought to buy from Eurotech
Industrial, a business engaged in importation and distribution of various European industrial
equipment for customer in the Philippines, one unit of sludge pump valued at ₱250,000.00. When the
sludge pump arrived from the United Kingdom, Eurotech refused to deliver the same to Impact
without their having fully settled their indebtedness to the former. EDWIN and Alberto de Jesus,
general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner.
Impact systems is owed by Erwin Cuizon. Edwin Cuizon, sales manager of Impact, and Alberto de
Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of
petitioner in which the receivables from Toledo Power Corp was assigned to the petitioner.

Despite the existence of the Deed of Assignment, Impact proceeded to collect from Toledo Power
Company the amount of P365,135.29. Alarmed by this development, Eurotech 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,
petitioner's counsel sent respondents a final demand letter wherein it was stated that as of 11 June
1996, respondents' total obligations stood at P295,000.00 excluding interests and attorney's fees.
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

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.
RTC the Court directed that defendant Edwin B. Cuizon be dropped as party defendant. Aggrieved by
the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which,
however, affirmed the lower court’s decision.

Issue:

Whether Edwin Cuizon, as agent of Impact Systems Sales/Erwin Cuizon, is personally liable because
he acted beyond the scope of his agency and participated in the perpetuation of a fraud.

Ruling:

SC affirmed the decision of the RTC.

Ratio:

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.”
xxx

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority
when he signed the Deed of Assignment.

9. BACALTOS COAL MINES and GERMAN A. BACALTOS vs. HON. COURT OF APPEALS and SAN
MIGUEL CORPORATION

Facts: Petitioner German A. Bacaltos signed an authorization in favor of Rene R. Savellon the pertinent
portions of which read as follows:

“GERMAN A. BACALTOS, of legal age, Filipino, widower, and residing at second street,
Espina Village, Cebu City, province of Cebu, Philippines, do hereby authorize RENE R.
SAVELLON, of legal age, Filipino and residing at 376-R Osmeña Blvd., Cebu City,
Province of Cebu, Philippines, to use the coal operating contract of BACALTOS COAL
MINES of which I am the proprietor, for any legitimate purpose that it may serve.
Namely, but not by way of limitation, as follows:

(1) To acquire purchase orders for and in behalf of BACALTOS COAL MINES;

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;
 (3) To collect all receivables due or in arrears from people or companies having dealings
under BACALTOS COAL MINES/RENE SAVELLON; law library

(4) To extend to any person or company by substitution the same extent of authority
that is granted to Rene Savellon;

(5) In connection with the preceeding paragraphs to execute and sign documents,
contracts, and other pertinent papers.

Further, I hereby give and grant to RENE SAVELLON full authority to do and perform all
and every lawful act requisite or necessary to carry into effect the foregoing stipulations
as fully to all intents and purposes as I might or would lawfully do if personally present,
with full power of substitution and revocation.”

A Trip Charter Party was executed by and between BACALTOS COAL MINES, represented by its Chief
Operating Officer, RENE ROSEL SAVELLON" and private respondent San Miguel Corporation to
charterer SMC “for three round trips to Davao.’’ The vessel was able to make only one trip. Its
demands to comply with the contract having been unheeded, SMC filed against the petitioners and
Rene Savellon the complaint for specific performance and damages.

RTC ruled in favor of SMC stating that the Authorization given by German Bacaltos to Savellon
necessarily included the power to enter into the Trip Charter Party. Petitioner appealed with the CA
and the lower court’s decision was affirmed.

Issue:

Whether Savellon was duly authorized by petitioners BMC and Bacaltos to enter into the trip charter
party under and by virtue of the authorization.

Ruling:

SC Reversed and Set Aside the judgment of the lower court.

Ratio:

I. Duty of every person dealing with an agent.

“Every person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of
the agent’s authority, and his ignorance of that authority will not be an excuse. Persons
dealing with an assumed agent, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in case either is controverted, the
burden of proof is upon them to establish it.’’

II. Extent and scope of Savellon”s powers.

“Since the agency of Savellon is based on a written document, the Authorization of 1 March
1988, the extent and scope of his powers must be determined on the basis thereof. The
language of the Authorization is clear. x x x There is only one express power granted to
Savellon, viz., to use the coal operating contract for any legitimate purpose it may serve. The
enumerated “five prerogatives’’ — to employ the term used by the Court of Appeals — are
nothing but the specific prerogative subsumed under or classified as part of or as examples of
the power to use the coal operating contract. The clause “but not by way of limitation’’ which
 precedes the enumeration could only refer to or contemplate other prerogatives which must
exclusively pertain or relate or be germane to the power to use the coal operating contract.

The conclusion then of the Court of Appeals that the Authorization includes the power to enter
into the Trip Charter Party because the “five prerogatives’’ are prefaced by such clause, is
seriously flawed. It fails to note that the broadest scope of Savellon’s authority is limited to
the use of the coal operating contract and the clause cannot contemplate any other power not
included in the enumeration or which are unrelated either to the power to use the coal
operating contract or to those already enumerated. In short, while the clause allows some
room for fl exibility, it can comprehend only additional prerogatives falling within the primary
power and within the same class as those enumerated.

The trial court, however, went further by hastily making a sweeping conclusion that “a
company such as a coal mining company is not prohibited to engage in entering into a Trip
Charter Party contract.’’ But what the trial court failed to consider was that there is no
evidence at all that Bacaltos Coal Mines as a coal mining company owns and operates vessels,
and even if it owned any such vessels, that it was allowed to charter or lease them.’’

III. Authorization, a special power of attorney.

“The trial court also failed to note that the Authorization is not a general power of attorney. It
is a special power of attorney for it refers to a clear mandate specifically authorizing the
performance of a specific power and of express acts subsumed therein. In short, both courts
below unreasonably expanded the express terms of or otherwise gave unrestricted meaning to
a clause which was precisely intended to prevent unwarranted and unlimited expansion of the
powers entrusted to Savellon.’’

IV. SMC failed to exercise due diligence and prudence.

“The suggestion of the Court of Appeals that there is obscurity in the Authorization which must
be construed against German Bacaltos because he prepared the Authorization has no leg to
stand on inasmuch as there is no obscurity or ambiguity in the instrument. If any obscurity or
ambiguity indeed existed, then there will be more reason to place SMC on guard and for it to
exercise due diligence in seeking clarifi cation or enlightenment thereon, for that was part of
its duty to discover upon its peril the nature and extent of Savellon’s written agency.
Unfortunately, it did not.

Howsoever viewed, the foregoing conclusions of the Court of Appeals and the trial court are
tenuous and farfetched, bringing to unreasonable limits the clear parameters of the powers
granted in the Authorization.

Furthermore, had SMC exercised due diligence and prudence, it should have known in no time
that there is absolutely nothing on the face of the Authorization that confers upon Savellon the
authority to enter into any Trip Charter Party.

Its conclusion to the contrary is based solely on the second prerogative under the
Authorization, to wit:

To engage in trading under the style of Bacaltos Coal Mines/Rene Savellon; unmindful that
such is but a part of the primary authority to use the coal operating contract which it did not
even require Savellon to produce. x x x Since the principal subject of the Authorization is the
coal operating contract, SMC should have required its presentation to determine what it is and
how it may be used by Savellon. Such a determination is indispensable to an inquiry into the
extent or scope of his authority. x x x SMC’s negligence was further compoundedby its failure
to verify if Bacaltos Coal Mines owned a vessel.

A party desiring to charter a vessel must satisfy itself that the other party is the owner of the
vessel or is at least entitled to its possession with power to lease or charter the vessel. In the
 instant case, SMC made no such attempt. It merely satisfied itself with the claim of Savellon
that the vessel it was leasing is owned by Bacaltos Coal Mines and relied on the presentation
of the Authorization as well as its test on the seaworthiness of the vessel. x x x.

The Authorization itself does not state that Bacaltos Coal Mines owns any vessel, and since it
is clear therefrom that it is not engaged in shipping but in coal mining or in coal business, SMC
should have required the presentation of pertinent documentary proof of ownership of the
vessel to be chartered.’’

V. SMC made possible the wrong to be done.

“There is likewise no proof that the petitioners received the consideration of the Trip Charter
Party. The petitioners denied having received it. The evidence for SMC established beyond
doubt that it was Savellon who requested in writing on 19 October 1988 that the check in
payment therefor be drawn in favor of Bacaltos Coal Mines/Rene Savellon and that SMC drew
the check in favor of Rene Savellon in Trust for Bacaltos Coal Mines and delivered it to
Savellon who thereupon issued a receipt. We agree with the petitioners that SMC committed
negligence in drawing the check in the manner aforestated. It even disregarded the request of
Savellon that it be drawn in favor of Bacaltos Coal Mines/Rene Savellon.

Furthermore, assuming that the transaction was permitted in the Authorization, the check
should still have been drawn in favor of the principal. SMC then made possible the wrong
done.”

There is an equitable maxim that between two innocent parties, the one who made it
possible for the wrong to be done should be the one to bear the resulting loss. For
this rule to apply, the condition precedent is that both parties must be innocent. In
the present case, however, SMC is guilty of not ascertaining the extent and limits of the
authority of Savellon. In not doing so, SMC dealt with Savellon at its own peril.’’

10. METROPOLITAN BANK & TRUST COMPANY vs. COURT OF APPEALS, GOLDEN SAVINGS &
LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO
G.R. No. 88866, February 18, 1991

Facts:

Eduardo Gomez opened an account with Golden Savings & Loan Association, Inc. (GSLA), a savings
and loan association, and deposited over a period of two months 38 treasury warrants drawn by a
government agency with a total value of more than P1.7 million. Six of these were directly payable to
Gomez while the others appear to have been indorsed by their respective payees followed by Gomez
as second indorser. The warrants were subsequently indorsed by Gloria Castillo, Cashier of GSAL, and
deposited to GSAL’s savings account with a branch of Metrobank which forwarded them to the Bureau
of Treasury for special clearing. In the meantime, Gomez was not allowed to withdraw from his
account.

After more than two weeks, “exasperated” over Castillo’s repeated inquiries as to whether the
warrants had been cleared, and also as an accommodation for a “valued client,” Metrobank finally
decided to allow GSAL to withdraw from the proceeds of the warrants. In turn, GSAL subsequently
allowed Gomez to make withdrawals from his own account. Later, Metrobank informed GSAL that 32
of the warrants had been dishonored by the Bureau of Treasury and demanded the refund of the
amount GSAL had previously withdrawn, to make up for the deficit in its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of
Mindoro. After trial, judgment was rendered in favor of Golden Savings. It filed an MR but was denied,
then appealed to the CA. However, the CA affirmed RTC’s decision.
Issue:

Whether Metrobank is liable for its negligence

Ruling:

SC affirmed the decision. Metrobank was negligent.

Ratio:

Article 1909 of the Civil Code clearly provides that —

Art. 1909. — The agent is responsible not only for fraud, but also for negligence,
which shall be judged 'with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it
was the clearance given by it that assured Golden Savings it was already safe to allow
Gomez to withdraw the proceeds of the treasury warrants he had deposited
Metrobank misled Golden Savings. There may have been no express clearance, as
Metrobank insists (although this is refuted by Golden Savings) but in any case that
clearance could be implied from its allowing Golden Savings to withdraw from its account
not only once or even twice but three times. The total withdrawal was in excess of its
original balance before the treasury warrants were deposited, which only added to its belief
that the treasury warrants had indeed been cleared.

Metrobank exhibited extraordinary carelessness. The amount involved was not trifling —
more than one and a half million pesos (and this was 1979). There was no reason why it
should not have waited until the treasury warrants had been cleared; it would not have lost
a single centavo by waiting. Yet, despite the lack of such clearance — and notwithstanding
that it had not received a single centavo from the proceeds of the treasury warrants, as it
now repeatedly stresses — it allowed Golden Savings to withdraw — not once, not twice,
but thrice — from the uncleared treasury warrants in the total amount of P968,000.00