G.R. No.

L-6485

March 17, 1911

GUTIERREZ HERMANOS, plaintiffs-appellees, vs. ORIA HERMANOS, defendants-appellants. This is an appeal from a judgment of the Court of First Instance of the city of Manila, Hon. Simplicio del Rosario presiding, in favor of the plaintiff and against the defendant for the sum of P12, 218.51, with costs. This is an action to recover the sum of P12,218.51, premiums paid by the plaintiff upon insurance policies covering two vessels belonging to the defendant. The two commercial houses parties to this action had sustained intimate commercial relations for nine years prior to the commencement of this action, beginning in the year 1900. During that time, the plaintiff, acting for and on behalf of the defendant, obtained from an insurance company in Paris, France, insurance on two vessels known as Serantes and Comillas, owned by the defendant. The insurance was first obtained in the year 1900. The plaintiff secured the insurance on the two ships aforesaid through the intervention of its agents in Paris, Messrs. Movellan & Angulo. The plaintiff continued to keep said vessels insured on behalf of the defendant, causing the policies to be renewed each year for nine years. The insurance premiums were paid by the plaintiff each year up to and including a portion of the year 1909, the sums so paid being charged by the plaintiff on its books against the defendant in its current account. In the month of June of that year the plaintiff began an action against the defendant for the recovery of the amount due upon its current account with the defendant, no reference being made in the complaint in that action to the sum sued for in the action at bar. What the status of that action is we do not know. Later, and on the 18th of March, 1910, the plaintiff began this action for the recovery of premiums paid during the years 1907, 1908, and 1909. During these three years one of the vessels in question, the Serantes, was insured in the name of the plaintiff. The appellant raises six questions on this appeal, asserting (1) that the vessel Serantes, having been insured in the name of Gutierrez Hermanos, the defendant is not chargeable with the payment of the insurance premiums, although it is admitted that it is the owner of the vessel; (2) that having paid the said insurance premiums after the plaintiff had closed its current account with the defendant, such payments can not be said to have been made on behalf of the defendant, for the reason that the closing of the account and the commencement of an action thereon severed all relations of every kind between the parties and the plaintiff had no authority to act thereafter for the defendant; (3) that at the time of the payment by the plaintiff of the insurance premiums in controversy the insurance company to which such premiums were paid was owing to the defendant the sum of P8,000 upon a contract of insurance for the payment of repairs made by the defendant on said vessels, which repairs were covered by said policies of insurance, and that the plaintiff having paid, without protest or objection of any kind, said premiums while the claim of defendant for said sum was still pending and unsettled, such act of the plaintiff had precluded the defendant from recovering said sum from such insurance company; (4) that the plaintiff was not acting as the agent of the defendant in securing the insurance for which the premiums in controversy were paid; (5) that the plaintiff, having already brought an action upon its account current in which should appear the premiums in controversy and all of the other premiums paid prior to the year 1909, the plaintiff can not now maintain a separate action upon the theory that it was acting as the commission agent of the defendant; and (6) that the premiums in controversy paid by the plaintiff resulted in no benefit to the defendant. Relative to the first question, it is undoubted from the proofs that the vessel Serantes was insured in the name of the plaintiff, while the Comillas was insured in the name of the defendant. It appears, however, from the letters of the defendant to the plaintiff and by the testimony of Tomas Oria, manager of the defendant company, that the plaintiff in insuring the Serantes acted merely as the commercial agent of the defendant and under its orders; that all of the payments made by the plaintiff of insurance premiums prior to the 1st day of June, 1909, were charged to the

defendant in the account current upon the books of the plaintiff; that the plaintiff had charged no commission; and that all of the damages which had occurred to the vessels prior to that time had been paid by the insurance company to the defendant, notwithstanding the fact that the Serantes was insured in the name of the plaintiff. Moreover, we find no terms in the insurance policy which forbid the insurance of the vessel in the name of the plaintiff. Furthermore, it appears from the correspondence between the defendant and the insurance company, through Movellan & Angulo of Paris, that, although it was the fact that the vessel Serantes was insured in the name of the plaintiff, instead of the defendant, a fact known, of course, to the insurance company, the latter, nevertheless, recognized its responsibility to the defendant upon the policy covering the said ship. It should be further noted that, in the correspondence passing between the plaintiff and the defendant, it is continually recognized that the insurance of the vesselSerantes, as well as the Comillas, was made for and on behalf and in benefit of the defendant. In that correspondence the plaintiff was continually asking defendant for funds with which to pay the insurance premiums on said vessel, as well as on the Comillas. (Art. 246, Commercial Code and art. 717, Civil Code.) Relative to the second question raised by the appellant, namely, that the plaintiff having closed the current account with the defendant prior to the payment of the insurance premiums which are the subject-matter of this action, it could not, thereafter, begin a separate action to recover for the payment of said premiums, it appears that the objection urged in this question is directed rather at a method of procedure than to a question of substantive law. From this point of view the defendant has some cause for complaint. Under the practice prevailing in the Islands under the Code of Civil Procedure, the plaintiff should have brought one action instead of two, combining its claim upon the account current with its claim for the payment of the insurance premiums involved in this suit. The payment of the insurance premiums in controversy having been made after the commencement of the action upon the account-current, the plaintiff, instead of beginning a separate action for the recovery of said premiums, would have followed a better practice if it had amended its complaint in the other action or added thereto a supplementary complaint. It was not, however, as a matter of law, obliged to do this, but it could have been forced to do so by the defendant if had taken the proper steps. It is undoubted that it would have been the duty of the trial court, upon proper motion of the defendant, to consolidate the two actions into one. The defendant, however, not having taken any steps whatever to accomplish this result, cannot be heard to raise that question in the manner in which it seeks to raise it. As to the second and fourth questions raised by the appellant, little needs to be said. The whole case as presented, both by the oral testimony and the exhibits, demonstrates beyond shadow of doubt that the plaintiff was acting as the agent of the defendant in placing the insurance upon the vessels in question and that such act redounded to its benefit. The idea presented in argument of counsel for appellant, that all relations were broken off and terminated by the commencement of the action upon the account current by the plaintiff in March, 1909, and that, therefore, the plaintiff could do nothing whatever on behalf of the defendant thereafter, wholly loses its force when we observe that, in reality, the plaintiff did not do anything on behalf of the defendant after that time. What it did and all it did was to fulfill a contract which it had made with the insurance company prior to the beginning of that action. The plaintiff had secured the insurance of the two vessels during the years 1907, 1908, and 1909, and had agreed to pay the insurance company the premiums thereon. The three contracts for those years had been made by the plaintiff and it had become liable to fulfill the same on its part prior to the commencement of the action on the 30th of March, 1909. The payment thereafter of the insurance premiums for those three years is no proof that the plaintiff was still exercising a relation which existed after the commencement of that action, but indicates simply that it was completing an obligation which it had made when that relation was admittedly in force. As to the third question raised by the appellant, involving the proposition that the plaintiff had paid the insurance premiums at a time when there was pending between the defendant and the insurance company a claim for P8,000 on account of repairs made to said vessels, and that, therefore, the payment by the plaintiff resulted in an injury rather than a benefit to the defendant, it need only be said that there is no proof in the record which is sufficient to sustain the

allegation that there was pending a claim between the defendant and the insurance company for any sum which could in any way be affected by the payment of insurance premiums made by the plaintiff. We can imagine a situation in which the objections made by the defendant in this regard would be well founded, but there is absolutely nothing in the record upon which we can found any decision touching that question adverse to the plaintiff. For these reasons, we see no other course than to affirm the judgment of the learned trial court, which we hereby do, without special finding as to costs. So ordered.

G.R. No. L-24543

July 12, 1926

ROSA VILLA MONNA, plaintiff-appellee, vs. GUILLERMO GARCIA BOSQUE, ET AL., defendants. GUILLERMO GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE, appellants. This action was instituted in the Court of First Instance of Manila by Rosa Villa y Monna, widow of Enrique Bota, for the purpose of recovering from the defendants, Guillermo Garcia Bosque and Jose Romar Ruiz, as principals, and from the defendants R. G. France and F. H. Goulette, as solidary sureties for said principals, the sum of P20,509.71, with interest, as a balance alleged to be due to the plaintiff upon the purchase price of a printing establishment and bookstore located at 89 Escolta, Manila, which had been sold to Bosque and Ruiz by the plaintiff, acting through her attorney in fact, one Manuel Pirretas y Monros. The defendant Ruiz put in no appearance, and after publication judgment by default was entered against him. The other defendants answered with a general denial and various special defenses. Upon hearing the cause the trial judge gave judgment in favor of the plaintiff, requiring all of the defendants, jointly and severally, to pay to the plaintiff the sum of P19,230.01, as capital, with stipulated interest at the rate of 7 per centum per annum, plus the further sum of P1,279.70 as interest already accrued and unpaid upon the date of the institution of the action, with interest upon the latter amount at the rate of 6 per centum per annum. From this judgment Guillermo Garcia Bosque, as principal, and R. G. France and F.H. Goulette, as sureties. appealed. It appears that prior to September 17, 1919, the plaintiff, Rosa Villa y Monna, viuda de E. Bota, was the owner of a printing establishment and bookstore located at 89 Escolta, Manila, and known as La Flor de Cataluna, Viuda de E. Bota, with the machinery, motors, bindery, type material furniture, and stock appurtenant thereto. Upon the date stated, the plaintiff, then and now a resident of Barcelona, Spain, acting through Manuel Pirretas, as attorney in fact, sold the establishment above-mentioned to the defendants Guillermo Garcia Bosque and Jose Pomar Ruiz, residents of the City of Manila, for the stipulated sum of P55,000, payable as follows: Fifteen thousand pesos (P15,000) on November 1, next ensuing upon the execution of the contract, being the date when the purchasers were to take possession; ten thousand pesos (P10,000) at one year from the same date; fifteen thousand pesos (P15,000) at two years; and the remaining fifteen thousand pesos (P15,000) at the end of three years. By the contract of sale the deferred installments bear interest at the rate of 7 per centum per annum. In the same document the defendants France and Goulette obligated themselves as solidary sureties with the principals Bosque and Ruiz, to answer for any balance, including interest, which should remain due and unpaid after the dates stipulated for payment of said installments, expressly renouncing the benefit of exhaustion of the property of the principals. The first installment of P15,000 was paid conformably to agreement. In the year 1920, Manuel Pirretas y Monros, the attorney in fact of the plaintiff, absented himself from the Philippine Islands on a prolonged visit to Spain; and in contemplation of his departure he executed a document, dated January 22, 1920, purporting to be a partial substitution of agency, whereby he transferred to "the mercantile entity Figueras Hermanos, or the person, or persons, having legal representation of the same," the powers that had been previously conferred on Pirretas by the plaintiff "in order that," so the document runs, "they may be able to effect the collection of

such sums of money as may be due to the plaintiff by reason of the sale of the bookstore and printing establishment already mentioned, issuing for such purpose the receipts, vouchers, letters of payment, and other necessary documents for whatever they shall have received and collected of the character indicated." When the time came for the payment of the second installment and accrued interest due at the time, the purchasers were unable to comply with their obligation, and after certain negotiations between said purchasers and one Alfredo Rocha, representative of Figueras Hermanos, acting as attorney in fact for the plaintiff, an agreement was reached, whereby Figueras Hermanos accepted the payment of P5,800 on November 10, 1920, and received for the balance five promissory notes payable, respectively, on December 1, 1920, January 1, 1921, February 1, 1921, March 1, 1921, and April 1, 1921. The first three of these notes were in the amount of P1,000 each, and the last two for P2,000 each, making a total of P7,000. It was furthermore agreed that the debtors should pay 9 per centum per annum on said deferred installments, instead of the 7 per centum mentioned in the contract of sale. These notes were not paid promptly at maturity but the balance due upon them was finally paid in full by Bosque on December 24, 1921. About this time the owners of the business La Flor de Catalua, appear to have converted it into a limited partnership under the style of Guillermo Garcia Bosque, S. en C.;" and presently a corporation was formed to take over the business under the name "Bota Printing Company, Inc." By a document executed on April 21, 1922, the partnership appears to have conveyed all its assets to this corporation for the purported consideration of P15,000, Meanwhile the seven notes representing the unpaid balance of the second installment and interest were failing due without being paid. Induced by this dilatoriness on the part the debtor and supposedly animated by a desire to get the matter into better shape, M. T. Figueras entered into the agreement attached as Exhibit 1 to the answer of Bosque. In this document it is recited that Guillermo Garcia Bosque. S. en C., is indebted to Rosa Villa, viuda de E. Bota, in the amount of P32,000 for which R. G. France and F. H. Goulette are bound as joint and several sureties, and that the partnership mentioned had transferred all its assets to the Bota Printing Company, Inc., of which one George Andrews was a principal stockholder. It is then stipulated that France and Goulette shall be relieved from all liability on their contract as sureties and that in lieu thereof the creditor, Doa Rosa Villa y Monna, accepts the Bota Printing Company, Inc., as debtor to the extent of P20,000, which indebtedness was expressly assumed by it, and George Andrews as debtor to the extent of P12,000, which he undertook to pay at the rate of P200 per month thereafter. To this contract the name of the partnership Guillermo Garcia Bosque, S. en C., was affixed by Guillermo Garcia Bosque while the name of the Bota Printing Company, Inc., was signed by G. Andrews, the latter also signing in his individual capacity. The name of the plaintiff was affixed by M.T. Figueras in the following style: "p.p. Rosa Villa, viuda de E. Bota, M. T. Figueras, party of the second part." No question is made as to the authenticity of this document or as to the intention of Figueras to release the sureties; and the latter rely upon the discharge as complete defense to the action. The defendant Bosque also relies upon the same agreement as constituting a novation such as to relieve him from personal liability. All of the defendants furthermore maintain that even supposing that M. T. Figueras authority to novate the original contract and discharge the sureties therefrom, nevertheless the plaintiff has ratified the agreement by accepting part payment of the amount due thereunder with full knowledge of its terms. In her amended complaint the plaintiff asserts that Figueras had no authority to execute the contract containing the release (Exhibit 1) and that the same had never been ratified by her. The question thus raised as to whether the plaintiff is bound by Exhibit 1 constitutes the main controversy in the case, since if this point should be determined in the affirmative the plaintiff obviously has no right of action against any of the defendants. We accordingly address ourselves to this point first. The partial substitution of agency (Exhibit B to amended complaint) purports to confer on Figueras Hermanos or the person or persons exercising legal representation of the same all of the powers that had been conferred on Pirretas by the plaintiff in the original power of attorney. This original power of attorney is not before us, but assuming, as is stated in Exhibit B, that this document contained a general power to Pirretas to sell the business known as La Flor de

Catalua upon conditions to be fixed by him and power to collect money due to the plaintiff upon any account, with a further power of substitution, yet it is obvious upon the face of the act of substitution (Exhibit B) that the sole purpose was to authorize Figueras Hermanos to collect the balance due to the plaintiff upon the price of La Flor de Catalua, the sale of which had already been affected by Pirretas. The words of Exhibit B on this point are quite explicit ("to the end that the said lady may be able to collect the balance of the selling price of the Printing Establishment and Bookstore above-mentioned, which has been sold to Messrs. Bosque and Pomar"). There is nothing here that can be construed to authorize Figueras Hermanos to discharge any of the debtors without payment or to novate the contract by which their obligation was created. On the contrary the terms of the substitution shows the limited extent of the power. A further noteworthy feature of the contract Exhibit 1 has reference to the personality of the purported attorney in fact and the manner in which the contract was signed. Under the Exhibit B the substituted authority should be exercised by the mercantile entity Figueras Hermanos or the person duly authorized to represent the same. In the actual execution of Exhibit 1, M. T. Figueras intervenes as purpoted attorney in fact without anything whatever to show that he is in fact the legal representative of Figueras Hermanos or that he is there acting in such capacity. The act of substitution conferred no authority whatever on M. T. Figueras as an individual. In view of these defects in the granting and exercise of the substituted power, we agree with the trial judge that the Exhibit 1 is not binding on the plaintiff. Figueras had no authority to execute the contract of release and novation in the manner attempted; and apart from this it is shown that in releasing the sureties Figueras acted contrary to instructions. For instance, in a letter from Figueras in Manila, dated March 4, 1922, to Pirretas, then in Barcelona, the former stated that he was attempting to settle the affair to the best advantage and expected to put through an arrangement whereby Doa Rosa would receive P20,000 in cash, the balance to be paid in installments, "with the guaranty of France and Goulette." In his reply of April 29 to this letter, Pirretas expresses the conformity of Doa Rosa in any adjustment of the claim that Figueras should see fit to make, based upon payment of P20,000 in cash, the balance in installments, payable in the shortest practicable periods, it being understood, however, that the guaranty of Messrs. France and Goulette should remain intact. Again, on May 9, Pirretas repeats his assurance that the plaintiff would be willing to accept P20,000 down with the balance in interest-bearing installments "with the guaranty of France and Goulette." From this it is obvious that Figueras had no actual authority whatever to release the sureties or to make a novation of the contract without their additional guaranty. But it is asserted that the plaintiff ratified the contract (Exhibit 1) by accepting and retaining the sum of P14,000 which, it is asserted, was paid by the Bota Printing Co., Inc., under that contract. In this connection it should be noted that when the firm of Guillermo Garcia Bosque, S. en C., conveyed all it assets on April 21, 1922 to the newly formed corporation, Bota Printing Co., Inc., the latter obligated itself to pay al the debts of the partnership, including the sum of P32,000 due to the plaintiff. On April 23, thereafter, Bosque, acting for the Bota Printing Co., Inc., paid to Figueras the sum of P8,000 upon the third installment due to the plaintiff under the original contract of sale, and the same was credited by Figueras accordingly. On May 16 a further sum of P5,000 was similarly paid and credited; and on May 25, a further sum of P200 was likewise paid, making P14,000 in all. Now, it will be remembered that in the contract (Exhibit 1), executed on May 17, 1922, the Bota Printing Co., Inc., undertook to pay the sum of P20,00; and the parties to the agreement considered that the sum of P13,800 then already paid by the Bota Printing Co., Inc., should be treated as a partial satisfaction of the larger sum of P20,000 which the Bota Printing Co., Inc., had obligated itself to pay. In the light of these facts the proposition of the defendants to the effect that the plaintiff has ratified Exhibit 1 by retaining the sum of P14,000, paid by the Bota Printing Co., Inc., as above stated, is untenable. By the assumption of the debts of its predecessor the Bota Printing Co., Inc., had become a primary debtor to the plaintiff; and she therefore had a right to accept the payments made by the latter and to apply the same to the satisfaction of the third installment of the original indebtedness. Nearly all of this money was so paid prior to the execution of Exhibit 1 and although the sum of P200 was paid a few days later, we are of the opinion that the plaintiff was entitled to accept and retain the whole, applying it in the manner above stated. In other words the plaintiff may lawfully retain that money notwithstanding her refusal to be bound by Exhibit 1.

A contention submitted exclusively in behalf of France and Goulette, the appellant sureties, is that they were discharged by the agreement between the principal debtor and Figueras Hermanos, as attorney in fact for the plaintiff, whereby the period for the payment of the second installment was extended, without the assent of the sureties, and new promissory notes for unpaid balance were executed in the manner already mentioned in this opinion. The execution of these new promissory notes undoubtedly constituted and extension of time as to the obligation included therein, such as would release a surety, even though of the solidary type, under article 1851 of the Civil Code. Nevertheless it is to be borne in mind that said extension and novation related only to the second installment of the original obligation and interest accrued up to that time. Furthermore, the total amount of these notes was afterwards paid in full, and they are not now the subject of controversy. It results that the extension thus effected could not discharge the sureties from their liability as to other installments upon which alone they have been sued in this action. The rule that an extension of time granted to the debtor by the creditor, without the consent of the sureties, extinguishes the latter's liability is common both to Spanish jurisprudence and the common law; and it is well settled in English and American jurisprudence that where a surety is liable for different payments, such as installments of rent, or upon a series of promissory notes, an extension of time as to one or more will not affect the liability of the surety for the others. The contention of the sureties on this point is therefore untenable. There is one stipulation in the contract (Exhibit A) which, at first suggests a doubt as to propriety of applying the doctrine above stated to the case before us. We refer to cause (f) which declares that the non-fulfillment on the part of the debtors of the stipulation with respect to the payment of any installment of the indebtedness, with interest, will give to the creditor the right to treat and declare all of said installments as immediately due. If the stipulation had been to the effect that the failure to pay any installment when due would ipso facto cause to other installments to fall due at once, it might be plausibly contended that after default of the payment of one installment the act of the creditor in extending the time as to such installment would interfere with the right of the surety to exercise his legal rights against the debtor, and that the surety would in such case be discharged by the extension of time, in conformity with articles 1851 and 1852 of the Civil Code. But it will be noted that in the contract now under consideration the stipulation is not that the maturity of the later installments shall be ipso facto accelerated by default in the payment of a prior installment, but only that it shall give the creditor a right to treat the subsequent installments as due, and in this case it does not appear that the creditor has exercised this election. On the contrary, this action was not instituted until after all of the installments had fallen due in conformity with the original contract. It results that the stipulation contained in paragraph (f) does not affect the application of the doctrine above enunciated to the case before us. Finally, it is contended by the appellant sureties that they were discharged by a fraud practiced upon them by the plaintiff in failing to require the debtor to execute a mortgage upon the printing establishment to secure the debt which is the subject of this suit. In this connection t is insisted that at the time France and Goulette entered into the contract of suretyship, it was represented to them that they would be protected by the execution of a mortgage upon the printing establishment by the purchasers Bosque and Pomar. No such mortgage was in fact executed and in the end another creditor appears to have obtained a mortgage upon the plant which is admitted to be superior to the claim of the plaintiff. The failure of the creditor to require a mortgage is alleged to operate as a discharge of the sureties. With this insistence we are unable to agree, for the reason that the proof does not show, in our opinion, that the creditor, on her attorney in fact, was a party to any such agreement. On the other hand it is to be collected from the evidence that the suggestion that a mortgage would be executed on the plant to secure the purchase price and that this mortgage would operate for the protection of the sureties came from the principal and not from any representative of the plaintiff. As a result of our examination of the case we find no error in the record prejudicial to any of the appellants, and the judgment appealed from will be affirmed, So ordered, with costs against the appellants.

Development Bank of the Philippines v. Court of Appeals G.R. No. 109937 March 21, 1994

PETITIONER: Development Bank of the Philippines (DBP) RESPONDENTS: Court of Appeals, and the Estate of the late Juan B. Dans (ESTATE), represented by Candida Dans, and the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool) FACTS: Dans, together with his wife, son and daughter-in-law, applied for a loan with DBP. Dans, then 76 years old, was advised to obtain a mortgage redemption insurance (MRI) with the DBP MRI Pool. The loan was approved, and from the proceeds thereof DBP deducted a sum as payment for the MRI premium. Later, Dans died of cardiac arrest. The DBP MRI Pool informed BDP that Dans was not eligible for MRI coverage because he was over the acceptance age limit of 60 years at the time of application. When the DBP informed the wife of the disapproval of the MRI application, they offered to refund the premium. The wife refused to accept and demanded the payment of the face value of the MRI or an amount equivalent to the loan. The wife, as administratrix of the Estate, filed a complaint with the RTC for a Collection of Sum of Money. The RTC ruled in favour of the Estate, against DBP and absolved DBP MRI Pool. The CA affirmed. ISSUE(S): Whether or not DBP is liable. RULING: YES. RATIO: In dealing with Dans, DBP acted as both as a lender, and as an insurance agent. Instead of allowing Dans to look for his own insurance carrier, DBP compelled him to apply with DBP MRI Pool for MRI coverage. Under Article 1987 of the Civil Code of the Philippines, "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 DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee. The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages

to him. The rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes to act. Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.

G.R. No. L-17160

November 29, 1965

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant, vs. PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE EXTERIEUR: PRIMATERIA (PHILIPPINES) INC., ALEXANDER G. BAYLIN and JOSE M. CRAME, defendants-appellees. This is an action to recover from defendants, the sum of P33,009.71 with interest and attorney's fees of P8,000.00. Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur (hereinafter referred to as Primateria Zurich) is a foreign juridical entity and, at the time of the transactions involved herein, had its main office at Zurich, Switzerland. It was then engaged in "Transactions in international trade with agricultural products, particularly in oils, fats and oil-seeds and related products." The record shows that: On October 24, 1951, Primateria Zurich, through defendant Alexander B. Baylin, entered into an agreement with plaintiff Philippine Products Company, whereby the latter undertook to buy copra in the Philippines for the account of Primateria Zurich, during "a tentative experimental period of one month from date." The contract was renewed by mutual agreement of the parties to cover an extended period up to February 24, 1952, later extended to 1953. During such period, plaintiff caused the shipment of copra to foreign countries, pursuant to instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc. referred to hereafter as Primateria Philippines acting by defendant Alexander G. Baylin and Jose M. Crame, officers of said corporation. As a result, the total amount due to the plaintiff as of May 30, 1955, was P33,009.71. At the trial, before the Manila court of first instance, it was proven that the amount due from defendant Primateria Zurich, on account of the various shipments of copra, was P31,009.71, because it had paid P2,000.00 of the original claim of plaintiff. There is no dispute about accounting. And there is no question that Alexander G. Baylin and Primateria Philippines acted as the duly authorized agents of Primateria Zurich in the Philippines. As far as the record discloses, Baylin acted indiscriminately in these transactions in the dual capacities of agent of the Zurich firm and executive vice-president of Primateria Philippines, which also acted as agent of Primateria Zurich. It is likewise undisputed that Primateria Zurich had no license to transact business in the Philippines. For failure to file an answer within the reglementary period, defendant Primateria Zurich was declared in default. After trial, judgment was rendered by the lower court holding defendant Primateria Zurich liable to the plaintiff for the sums of P31,009.71, with legal interest from the date of the filing of the complaint, and P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.), Inc., Alexander G. Baylin, and Jose M. Crame from any and all liability. Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three defendants.

It is plaintiff's theory that Primateria Zurich is a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law, and since it has transacted business in the Philippines without the necessary license, as required by said provisions, its agents here are personally liable for contracts made in its behalf. Section 68 of the Corporation Law states: "No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippines shall be permitted to transact business in the Philippines, until after it shall have obtained a license for that purpose from the Securities and Exchange Commission .. ." And under Section 69, "any officer or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shall be punished by imprisonment for etc. ... ." The issues which have to be determined, therefore, are the following: 1. Whether defendant Primateria Zurich may be considered a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law; 2. Assuming said entity to be a foreign corporation, whether it may be considered as having transacted business in the Philippines within the meaning of said sections; and 3. If so, whether its agents may be held personally liable on contracts made in the name of the entity with third persons in the Philippines. The lower court ruled that the Primateria Zurich was not duly proven to be a foreign corporation; nor that a societe anonyme ("sociedad anomima") is a corporation; and that failing such proof, the societe cannot be deemed to fall within the prescription of Section 68 of the Corporation Law. We agree with the said court's conclusion. In fact, our corporation law recognized the difference between sociedades anonimas and corporations. At any rate, we do not see how the plaintiff could recover from both the principal (Primateria Zurich) and its agents. It has been given judgment against the principal for the whole amount. It asked for such judgment, and did not appeal from it. It clearly stated that its appeal concerned the other three defendants. But plaintiff alleges that the appellees as agents of Primateria Zurich are liable to it under Art. 1897 of the New Civil Code which reads as follows: 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. But there is no proof that, as agents, they exceeded the limits of their authority. In fact, the principal Primateria Zurich who should be the one to raise the point, never raised it, denied its liability on the ground of excess of authority. At any rate, the article does not hold that in cases of excess of authority, both the agent and the principal are liable to the other contracting party. This view of the cause dispenses with the necessity of deciding the other two issues, namely: whether the agent of a foreign corporation doing business, but not licensed here is personally liable for contracts made by him in the name of such corporation.1 Although, the solution should not be difficult, since we already held that such foreign corporation may be sued here (General Corporation vs. Union Ins., 87 Phil. 509). And obviously, liability of the agent is necessarily premised on the inability to sue the principal or non-liability of such principal. In the absence of express legislation, of course. IN VIEW OF THE FOREGOING CONSIDERATIONS, the appealed judgment is affirmed, with costs against appellant.

National Power Corporation vs. National Merchandising Corp. Facts: National Power Corporation (buyer) entered into contract with National Merchandising Corp (Agent) for purchase of 4,000 ong tons of sulfur (NewYork Firm Principal). To secure it, a performance bond was executed by Domestic Insurance Company (surety). It was stipulated that seller will deliver the object within 60 days. In addition, there will a payment of liquated damages in case of failure to deliver. Buyer advised the agent and surety that nonavailability of bottom or vessel was not a fortuitous event (so seller will still be liable). Although contrary to the instructions of the Principal, the agent still entered into the contract in behalf of the Principal. The seller failed to deliver the sulfur (object) because of unavailability of vessel. Buyer then sued Principal, Agent and Surety for the recovery of liquidated damages. Trial court dismissed the case as to Principal because of lack of jurisdiction. (Wallick assignee of Principal sued agent for damages for the same transaction but was dismissed because the assignment was champertous in character). Issue: W/N the Principal or the surety is liable for the liquidated damages or not Held: No! It is the agent only that is liable Ratio: The court concluded that Agent acted beyond the bounds of its authority because it violated its principals instructions: (1) that the delivery should be C & F Manila and not C & F Iligan; (2) sale be subject to the availabilty of a steamer (vessel); (3) seller should be allowed to withdraw right away the full amount of the letter of credit and not merely 80% thereof. Agent argued that the buyer should know or ask the scope of the agents authority. But the buyer contends that the agent must have advised the buyer of the limitations on its authority. The court was in favor of the buyer. Agent was liable for damages because he 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. Agent contends that the contract is unenforceable as to the buyer is concern because agent exceeds in his authority, but the court said it is unenforceable as to the principal-agent relationship. And the liquidated damages was enforced against the agent and surety and not to the principal. But the court said that the surety was not liable because he is bound to the seller and not to the agent. And since the agent is at fault here (meaning personally liable) then the surety is not liable. The liquidated damages were reduced to 20% of the total amount because the courts has the right to reduce it if found to be unconscionable. The seller were not able to deliver not because of failure to secure shipping space and not because of the agent.

G.R. No. L-19118

January 30, 1965

MARIANO A. ALBERT, plaintiff-appellant, vs. UNIVERSITY PUBLISHING CO., INC., defendant-appellee. No less than three times have the parties here appealed to this Court.

In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we found plaintiff entitled to damages (for breach of contract) but reduced the amount from P23,000.00 to P15,000.00. Then in Albert vs. University Publishing Co., Inc., L-15275, October 24, 1960, we held that the judgment for P15,000.00 which had become final and executory, should be executed to its full amount, since in fixing it, payment already made had been considered. Now we are asked whether the judgment may be executed against Jose M. Aruego, supposed President of University Publishing Co., Inc., as the real defendant. Fifteen years ago, on September 24, 1949, Mariano A. Albert sued University Publishing Co., Inc. Plaintiff allegedinter alia that defendant was a corporation duly organized and existing under the laws of the Philippines; that on July 19, 1948, defendant, through Jose M. Aruego, its President, entered into a contract with plaintifif; that defendant had thereby agreed to pay plaintiff P30,000.00 for the exclusive right to publish his revised Commentaries on the Revised Penal Code and for his share in previous sales of the book's first edition; that defendant had undertaken to pay in eight quarterly installments of P3,750.00 starting July 15, 1948; that per contract failure to pay one installment would render the rest due; and that defendant had failed to pay the second installment. Defendant admitted plaintiff's allegation of defendant's corporate existence; admitted the execution and terms of the contract dated July 19, 1948; but alleged that it was plaintiff who breached their contract by failing to deliver his manuscript. Furthermore, defendant counterclaimed for damages.1wph1.t Plaintiff died before trial and Justo R. Albert, his estate's administrator, was substituted for him. The Court of First Instance of Manila, after trial, rendered decision on April 26, 1954, stating in the dispositive portion IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiff and against the defendant the University Publishing Co., Inc., ordering the defendant to pay the administrator Justo R. Albert, the sum of P23,000.00 with legal [rate] of interest from the date of the filing of this complaint until the whole amount shall have been fully paid. The defendant shall also pay the costs. The counterclaim of the defendant is hereby dismissed for lack of evidence. As aforesaid, we reduced the amount of damages to P15,000.00, to be executed in full. Thereafter, on July 22, 1961, the court a quo ordered issuance of an execution writ against University Publishing Co., Inc. Plaintiff, however, on August 10, 1961, petitioned for a writ of execution against Jose M. Aruego, as the real defendant, stating, "plaintiff's counsel and the Sheriff of Manila discovered that there is no such entity as University Publishing Co., Inc." Plaintiff annexed to his petition a certification from the securities and Exchange Commission dated July 31, 1961, attesting: "The records of this Commission do not show the registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership." "University Publishing Co., Inc." countered by filing, through counsel (Jose M. Aruego's own law firm), a "manifestation" stating that "Jose M. Aruego is not a party to this case," and that, therefore, plaintiff's petition should be denied. Parenthetically, it is not hard to decipher why "University Publishing Co., Inc.," through counsel, would not want Jose M. Aruego to be considered a party to the present case: should a separate action be now instituted against Jose M. Aruego, the plaintiff will have to reckon with the statute of limitations. The court a quo denied the petition by order of September 9, 1961, and from this, plaintiff has appealed. The fact of non-registration of University Publishing Co., Inc. in the Securities and Exchange Commission has not been disputed. Defendant would only raise the point that "University Publishing Co., Inc.," and not Jose M. Aruego, is the party defendant; thereby assuming that "University Publishing Co., Inc." is an existing corporation with an independent juridical personality. Precisely, however, on account of the non-registration it cannot be considered a corporation, not

even a corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no personality separate from Jose M. Aruego; it cannot be sued independently. The corporation-by-estoppel doctrine has not been invoked. At any rate, the same is inapplicable here. Aruego represented a non-existent entity and induced not only the plaintiff but even the court to believe in such representation. He signed the contract as "President" of "University Publishing Co., Inc.," stating that this was "a corporation duly organized and existing under the laws of the Philippines," and obviously misled plaintiff (Mariano A. Albert) into believing the same. One who has induced another to act upon his wilful misrepresentation that a corporation was duly organized and existing under the law, cannot thereafter set up against his victim the principle of corporation by estoppel (Salvatiera vs. Garlitos, 56 O.G. 3069). "University Publishing Co., Inc." purported to come to court, answering the complaint and litigating upon the merits. But as stated, "University Publishing Co., Inc." has no independent personality; it is just a name. Jose M. Aruego was, in reality, the one who answered and litigated, through his own law firm as counsel. He was in fact, if not, in name, the defendant. Even with regard to corporations duly organized and existing under the law, we have in many a case pierced the veil of corporate fiction to administer the ends of justice. * And in Salvatiera vs. Garlitos, supra, p. 3073, we ruled: "A person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent." Had Jose M. Aruego been named as party defendant instead of, or together with, "University Publishing Co., Inc.," there would be no room for debate as to his personal liability. Since he was not so named, the matters of "day in court" and "due process" have arisen. In this connection, it must be realized that parties to a suit are "persons who have a right to control the proceedings, to make defense, to adduce and cross-examine witnesses, and to appeal from a decision" (67 C.J.S. 887) and Aruego was, in reality, the person who had and exercised these rights. Clearly, then, Aruego had his day in court as the real defendant; and due process of law has been substantially observed. By "due process of law" we mean " "a law which hears before it condemns; which proceeds upon inquiry, and renders judgment only after trial. ... ." (4 Wheaton, U.S. 518, 581.)"; or, as this Court has said, " "Due process of law" contemplates notice and opportunity to be heard before judgment is rendered, affecting one's person or property" (Lopez vs. Director of Lands, 47 Phil. 23, 32)." (Sicat vs. Reyes, L-11023, Dec. 14, 1956.) And it may not be amiss to mention here also that the "due process" clause of the Constitution is designed to secure justice as a living reality; not to sacrifice it by paying undue homage to formality. For substance must prevail over form. It may now be trite, but none the less apt, to quote what long ago we said in Alonso vs. Villamor, 16 Phil. 315, 321-322: A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing side as wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that Justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities. The evidence is patently clear that Jose M. Aruego, acting as representative of a non-existent principal, was the real party to the contract sued upon; that he was the one who reaped the benefits resulting from it, so much so that partial payments of the consideration were made by him; that he violated its terms, thereby precipitating the suit in question; and that in the litigation he was the real defendant. Perforce, in line with the ends of justice, responsibility under the judgment falls on him.

We need hardly state that should there be persons who under the law are liable to Aruego for reimbursement or contribution with respect to the payment he makes under the judgment in question, he may, of course, proceed against them through proper remedial measures. PREMISES CONSIDERED, the order appealed from is hereby set aside and the case remanded ordering the lower court to hold supplementary proceedings for the purpose of carrying the judgment into effect against University Publishing Co., Inc. and/or Jose M. Aruego. So ordered.

EUGENIO V. CA AND PEPSI-COLA GR NO. 103737 Agent: Jovinio Estrada Prinpical: Pepsi 3rd Party: Nora Eugenio Facts: Nora Eugenio is an authorized dealer of Pepsi-cola. Pepsi cola is a bottling company. The dispute started when pepsi sought to collect money from Nora which it alleges that Nora owes pepsi for non-payment. in return, Nora claims that she has 4 Trade Provisional Receipts (what pepsi cola issues to dealers when dealers pay for the deliveries) and if these TPRs are credited t her account, its actually Pepsi who would have been liable to her. the dispute arose when pepsi-cola questioned the authenticity of the TPRs allegedly given to Nora for her alleged payment to pepsi-cola. she gave her payment to Jovinio Estrada, as the Route Manager of the Malate warehouse. The background of this dispute was actually when the husband of Nora Eugenio was allegedly illegally dismissed and Jovinio Estrada was investigated with him. Jovinio Estrada then absconded after the investigation and therefore, he was not presented as a witness to deny the validity of the TPRs. The only proof given by Pepsi-cola regarding the TPRs was an alleged affidavit of Estrada stating that he never gave the TPRs to Eugenio. Issue: Whether the TPRs are valid? Held: The TPRs are presumed to be valid. Under the laws, business transactions have a presumption of validity and the person questioning the validity of it has the burden of proof of proving the invalidity of a transaction. In this case, Pepsi failed to prove that the TPRs were invalid since their only proof was an affidavit of Estrada which was also inadmissible because Estrada was not presented as a witness. Also under the law on agency, with regard to 3rd parties, an act is deemed to have been performed within the scope of the agents authority, if such is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and agent. In this case, Estrada, being a Route Manager, was considered an agent of Pepsi. The payment made by Eugenio to him is considered as payment to Pepsi since Eugenio, being a route manager, is with regard to 3rd parties, authorized to receive payment in favor of Pepsi.

GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner vs. THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION, respondents. Facts: On November 3, 1969, Squibb and Green Valley entered into a letter agreement concerning veterinary products which, in part, said: E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied Products, Inc. as a nonexclusive distributor for Squibb Veterinary Products, as recommended by Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor. For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as aforesaid gave judgment in favor of Squibb which was affirmed by the Court of Appeals. In both the trial court and the Court of Appeals, the parties advanced their respective theories. Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its commission, or to return the goods if not sold, and since it had sold the goods but had not been able to collect from the purchasers thereof, the action was premature. Issue: Whether or not Green Valley is liable. Held: Green Valley: Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its commission, or to return the goods if not sold, and since it had sold the goods but had not been able to collect from the purchasers thereof, the action was premature. Squibb: Squibb claimed that the contract was one of sale so that Green Valley was obligated to pay for the goods received upon the expiration of the 60-day credit period. Court: We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley is indubitable. Adopting Green Valleys theory that the contract is an agency to sell, it is liable because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads: Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale. Note: If the commission agent without the express or implied consent of the principal, sells on credit the principal has two options: (1) require from the agent, payment in cash, in which case the latter is entitled to any interest or benefit resulting from the sale on credit; or (2) ratify the sale on credit, in which case, all the benefits will belong to the principal as well as the risk of collection.

KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner, vs. THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.

G.R. No. 88539 October 26, 1993 FACTS: Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap, with places of business at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates, on the other hand, is a partnership duly organized and existing under the laws of the Philippines with business address at Kalookan City. From December 4, 1979 to February 15, 1980, private respondent delivered various kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdated checks to private respondent as payment for the paper products. Unfortunately, sad checks were later dishonored by the drawee bank. Thereafter, private respondent made several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with private respondent and Lilian Tan. Petitioner denied any involvement in the transaction entered into by Tiu Huy Tiac and refused to pay private respondent the amount corresponding to the selling price of the subject merchandise. ISSUE: Whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the latter liable for the disputed transaction RULING/RATIO: Yes. For all intents and purposes, Tiu Huy Tiac is the petitioners agent and he is liable for all transactions he gets into where he represents the principal. It is a well-established rule that one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be. From the facts and the evidence on record, there is no doubt that this rule obtains. It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the manager of his store. This general perception of Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted his close relationship with Tiu Huy Tiac when he said that they are "like brothers". There was thus no reason for anybody especially those transacting business with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo branch. But of even greater weight than any of the testimonies, is petitioner's categorical admission on the witness stand that Tiu Huy Tiac was the manager of his store in Sto. Cristo, Binondo. Such admission, spontaneous no doubt, and standing alone, is sufficient to negate all the denials made by petitioner regarding the capacity of Tiu Huy Tiac to enter into the transaction in question.

By his representations, petitioner is now estopped from disclaiming liability for the transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional or merely negligent so long as innocent, third persons relied upon such representations in good faith and for value. Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Taken in this light, petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had full powers, as in the case at bar. Finally, although it may appear that Tiu Huy Tiac defrauded his principal in not turning over the proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as 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.