PHILIPPINE NATIONAL BANK vs.
MANILA SURETY and
FIDELITY CO., INC. and THE COURT OF APPEALS (Second
Division)
Facts:
The Philippine National Bank had opened a letter of credit and
advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000
tons of hot asphalt. Of this amount, 2,000 tons worth P279,000.00
were released and delivered to Adams & Taguba Corporation (known
as ATACO) under a trust receipt guaranteed by Manila Surety &
Fidelity Co. up to the amount of P75,000.00. To pay for the asphalt,
ATACO constituted the Bank its assignee and attorney-in-fact to
receive and collect from the Bureau of Public Works the amount
aforesaid out of funds payable to the assignor under Purchase Order
No. 71947. This assignment (Exhibit "A") stipulated that:
The conditions of this assignment are as follows:
1. The same shall remain irrevocable until the said credit
accomodation is fully liquidated.
2. The PHILIPPINE NATIONAL BANK is hereby appointed
as our Attorney-in-Fact for us and in our name, place and
stead, to collect and to receive the payments to be made by
virtue of the aforesaid Purchase Order, with full power and
authority to execute and deliver on our behalf, receipt for all
payments made to it; to endorse for deposit or encashment
checks, money order and treasury warrants which said Bank
may receive, and to apply said payments to the settlement of
said credit accommodation.
This power of attorney shall also remain irrevocable until our
total indebtedness to the said Bank have been fully
liquidated. (Exhibit E)
ATACO delivered to the Bureau of Public Works, and the latter
accepted, asphalt to the total value of P431,466.52. Of this amount the
Bank regularly collected, from April 21, 1948 to November 18, 1948,
P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to
collect, until in 1952 its investigators found that more moneys were
payable to ATACO from the Public Works office, because the latter had
allowed mother creditor to collect funds due to ATACO under the same
purchase order to a total of P311,230.41.
Its demands on the principal debtor and the Surety having been
refused, the Bank sued both to recover the balance of P158,563.18 as of
February 15, 1950, plus interests and costs.
RTC: In favour of Philippine National Bank. Ordered Adams & Tuguba
Corp and Manila Surety and Fidelity to pay PNB.
1. Ordering defendants, Adams & Taguba Corporation and
Manila Surety & Fidelity Co., Inc., to pay plaintiff,
Philippines National Bank, the sum of P174,462.34 as of
February 24, 1956, minus the amount of P8,000 which
defendant, Manila Surety Co., Inc. paid from March, 1956 to
October, 1956 with interest at the rate of 5% per annum from
February 25, 1956, until fully paid provided that the total
amount that should be paid by defendant Manila Surety Co.,
Inc., on account of this case shall not exceed P75,000.00,
and to pay the costs;
CA: Found the Bank to have been negligent in having stopped
collecting from the Bureau of Public Works the moneys falling due in
favor of the principal debtor, ATACO, from and after November 18,
1948, before the debt was fully collected, thereby allowing such funds
to be taken and exhausted by other creditors to the prejudice of the
surety, and held that the Bank's negligence resulted in exoneration of
respondent Manila Surety & Fidelity Company.
Issue:
1. W/N the Bank is the agent of ATACO. Yes
2. W/N ATACO the Bank is liable to ATACO. Yes.
Ruling:
The Bank contends the power of attorney obtained from ATACO was
merely in additional security in its favor, and that it was the duty of the
surety, and not that of the creditor, owed see to it that the obligor
fulfills his obligation, and that the creditor owed the surety no duty of
active diligence to collect any, sum from the principal debtor.
This argument of appellant Bank misses the point. The Court of
Appeals did not hold the Bank answerable for negligence in failing to
collect from the principal debtor but for its neglect in collecting the
sums due to the debtor from the Bureau of Public Works, contrary to
its duty as holder of an exclusive and irrevocable power of attorney to
make such collections, since an agent is required to act with the care of
a good father of a family (Civ. Code, Art. 1887) and becomes liable for
the damages which the principal may suffer through his non-
performance (Civ. Code, Art. 1884). Certainly, the Bank could not
expect that the Bank would diligently perform its duty under its power
of attorney, but because they could not have collected from the Bureau
even if they had attempted to do so. It must not be forgotten that the
Bank's power to collect was expressly made irrevocable, so that the
Bureau of Public Works could very well refuse to make payments to the
principal debtor itself, and a fortiori reject any demands by the surety.
Even if the assignment with power of attorney from the principal
debtor were considered as mere additional security still, by allowing
the assigned funds to be exhausted without notifying the surety, the
Bank deprived the former of any possibility of recoursing against that
security. The Bank thereby exonerated the surety, pursuant to Article
2080 of the Civil Code:
ART. 2080. — The guarantors, even though they be solidary,
are released from their obligation whenever by come act of
the creditor they cannot be subrogated to the rights,
mortgages and preferences of the latter. (Emphasis
supplied.)
The appellant points out to its letter of demand, Exhibit "K", addressed
to the Bureau of Public Works, on May 5, 1949, and its letter to ATACO,
Exhibit "G", informing the debtor that as of its date, October 31, 1949,
its outstanding balance was P156,374.83. Said Exhibit "G" has no
bearing on the issue whether the Bank has exercised due diligence in
collecting from the Bureau of Public Works, since the letter was
addressed to ATACO, and the funds were to come from elsewhere. As
to the letter of demand on the Public Works office, it does not appear
that any reply thereto was made; nor that the demand was pressed, nor
that the debtor or the surety were ever apprised that payment was not
being made. The fact remains that because of the Bank's inactivity the
other creditors were enabled to collect P173,870.31, when the balance
due to appellant Bank was only P158,563.18. The finding of negligence
made by the Court of Appeals is thus not only conclusive on us but fully
supported by the evidence.
Even if the Court of Appeals erred on the second reason it advanced in
support of the decision now under appeal, because the rules on
application of payments, giving preference to secured obligations are
only operative in cases where there are several distinct debts, and not
where there is only one that is partially secured, the error is of no
importance, since the principal reason based on the Bank's negligence
furnishes adequate support to the decision of the Court of Appeals that
the surety was thereby released.
G.R. No. L-39037 October 30, 1933
THE PHILIPPINE NATIONAL BANK vs. PAZ AGUDELO Y
GONZAGA, ET AL.,
Facts:
The defendant Paz Agudelo y Gonzaga executed in favor of her nephew,
Mauro A. Garrucho, the document conferring upon him a special power
of attorney sufficiently broad in scope to enable him to sell, alienate
and mortgage in the manner and form he might deem convenient, all
her real estate situated in the municipalities of Murcia and Bacolod,
Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral
survey of Bacolod, Occidental Negros, together with the improvement
thereon.
Amparo A. Garrucho executed the document whereby she conferred
upon her brother Mauro A Garrucho a special power of attorney
sufficiently broad in scope to enable him to sell, alienate, mortgage or
otherwise encumber, in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia
and Bago, Occidental Negros.
Nothing in the aforesaid powers of attorney expressly authorized
Mauro A. Garrucho to contract any loan nor to constitute a mortgage
on the properties belonging to the respective principals, to secure his
obligations.
Mauro A. Garrucho executed in the favor of the plaintiff entity, the
Philippine National bank, the document whereby he constituted a
mortgage on lot No. 878 of the cadastral survey of Murcia, Occidental
Negros, with all the improvements thereon, described in transfer
certificate of title No. 2415 issued in the name of Amparo A. Garrucho,
to secure the payment of credits, loans, commercial overdrafts, etc., not
exceeding P6,000, together with interest thereon, which he might
obtain from the aforesaid plaintiff entity, issuing the corresponding
promissory note to that effect.
During certain months of the year 1921 and 1922, Mauro A. Garrucho
maintained a personal current account with the plaintiff bank in the
form of a commercial credit withdrawable through checks (Exhibits S, 1
and T).
The said Mauro A. Garrucho executed in favor of the plaintiff entity,
the Philippine National Bank, the document whereby he constituted a
mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod
together with the buildings and improvements thereon, described in
original certificates of title Nos. 2216 and 1148, respectively, issued in
the name of Paz Agudelo y Gonzaga, to secure the payment of credits,
loans and commercial overdrafts which the said bank might furnish
him to the amount of P16,00, payable on August 24, 1922, executing
the corresponding promissory note to that effect.
The mortgage deeds as well as the corresponding promissory notes for
P6,000 and P16,000, respectively, were executed in Mauro A.
Garrucho's own name and signed by him in his personal capacity,
authorizing the mortgage creditor, the Philippine National Bank, to
take possession of the mortgaged properties, by means of force if
necessary, in case he failed to comply with any of the conditions
stipulated therein.
The manager of the Iloilo branch of the Philippine National Bank
notified Mauro A. Garrucho that his promissory note for P6,000 of 10
days within which to make payment thereof.
On May 9, 1922, the said manager notified Mauro A. Garrucho that his
commercial credit was closed from that date.
Inasmuch as Mauro A. Garrucho had overdrawn his credit with the
plaintiff-appellee, the said manager thereof, in a letter dated June 27,
1922 (Exhibit T), requested him to liquidate his account amounting to
P15,148.15, at the same time notifying him that his promissory note for
P16,000 giving as security for the commercial overdraft in question,
had fallen due some time since.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff
entity the deed Exhibit C whereby he constituted a mortgage on lots
Nos. 61 and 207 of the cadastral survey of Bacolod, together with the
improvements thereon, described in transfer certificates of title Nos.
2216 and 1148, respectively, issued in the name of Paz Agudelo y
Gonzaga, and on lot No. 878 of the cadastral survey of Murcia,
described in transfer certificate of title No. 2415, issued in the name of
Amparo A. Garrucho.
In connection of the credits, loans, and commercial overdrafts
amounting to P21,000 which had been granted him, Mauro A.
Garrucho, on the said date July 15, 1922, executed the promissory note,
Exhibit B, for P21,000 as a novation of the former promissory notes for
P6,000 and P16,000, respectively.
In view of the aforesaid consolidated mortgage, Exhibit C, the
Philippine National Bank, on the said date of July 15, 1922, cancelled
the mortgages constituted on lots Nos. 61, 207 and 878 described in
Torrens titles Nos. 2216, 1148 and 2415, respectively.
On November 25, 1925, Amparo A. Garrucho sold lot No. 878
described in certificate of title No. 2415, to Paz Agudelo y Gonzaga
(Exhibit M).
On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga
signed the affidavit, Exhibit N, which reads as follows:
Know all men by these presents: That I, Paz
Agudelo y Gonzaga, single, of age, and resident of
the City of Manila, P. I., by these present do hereby
agree and consent to the transfer in my favor of lot
No. 878 of the Cadastre of Murcia, Occidental
Negros, P. I., by Miss Amparo A. Garrucho, as
evidenced by the public instrument dated
November 25, 1925, executed before the notary
public Mr. Genaro B. Benedicto, and do hereby
further agree to the amount of the lien thereon
stated in the mortgage deed executed by Miss
Amparo A. Garrucho in favor of the Philippine
National Bank.
In testimony whereof, I hereunto affix my
signature in the City of Manila, P.I., this 15th of
January, 1926.
(Sgd.) PAZ AGUDELO Y GONZAGA.
Pursuant to the sale made by Amparo A. Garrucho in favor of Paz
Agudelo y Gonzaga, of lot No. 878 of the cadastral survey of Murcia,
described in certificate of title No. 2145 issued in the name of said
Amparo A. Garrucho, and to the affidavit, Exhibit N, transfer certificate
of title No. 5369 was issued in the name of Paz Agudelo y Gonzaga.
Without discussing and passing upon whether or not the powers of
attorney issued in favor of Mauro A. Garrucho by his sister, Amparo A.
Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to
mortgage their respective real estate, authorized him to obtain loans
secured by mortgage in the properties in question, we shall consider
the question of whether or not Paz Agudelo y Gonzaga is liable for the
payment of the loans obtained by Mauro A. Garrucho from the
Philippine National Bank for the security of which he constituted a
mortgage on the aforesaid real estate belonging to the defendant-
appellant Paz Agudelo y Gonzaga.
Issue:
1. W/N Mauro exceeded in his authority as agent. Yes.
2. W/N Paz Agueldo is principally liable with Mauro. No, only
subsidiarily liable.

Ruling:
Article 1709 of the Civil Code provides the following:
ART. 1709. By the contract of agency, one person binds
himself to render some service, or to do something for the
account or at the request of another.
And article 1717 of the same Code provides as follows:
ART. 1717. When an agent acts in his own name, the
principal shall have no right of action against the persons
with whom the agent has contracted, or such persons against
the principal.
In such case, the agent is directly liable to the person with
whom he has contracted, as if the transaction were his own.
Cases involving things belonging to the principal are
excepted.
The provisions of this article shall be understood to be
without prejudice to actions between principal and agent.
Aside from the phrases "attorney in fact of his sister, Amparo A.
Garrucho, as evidenced by the power of attorney attached hereto" and
"attorney in fact of Paz Agudelo y Gonzaga" written after the name of
Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J,
respectively, there is nothing in the said mortgage deeds to show that
Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of
Paz Agudelo y Gonzaga, and that he obtained the loans mentioned in
the aforesaid mortgage deeds and constituted said mortgages as
security for the payment of said loans, for the account and at the
request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The
above-quoted phrases which simply described his legal personality, did
not mean that Mauro A. Garrucho obtained the said loans and
constituted the mortgages in question for the account, and at the
request, of his principals. From the titles as well as from the signatures
therein, Mauro A. Garrucho, appears to have acted in his personal
capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his
capacity as mortgage debtor, appointed the mortgage creditor
Philippine National Bank as his attorney in fact so that it might take
actual and full possession of the mortgaged properties by means of
force in case of violation of any of the conditions stipulated in the
respective mortgage contracts. If Mauro A. Garrucho acted in his
capacity as mere attorney in fact of Amparo A. Garrucho and of Paz
Agudelo y Gonzaga, he could not delegate his power, in view of the
legal principle of "delegata potestas delegare non potest" (a delegated
power cannot be delegated), inasmuch as there is nothing in the
records to show that he has been expressly authorized to do so.
He executed the promissory notes evidencing the aforesaid loans,
under his own signature, without authority from his principal and,
therefore, were not binding upon the latter. Neither is there anything to
show that he executed the promissory notes in question for the
account, and at the request, of his respective principals.
Furthermore, it is noted that the mortgage deeds, Exhibits C and J,
were cancelled by the documents, Exhibits I and L, on July 15, 1922,
and in their stead the mortgage deed, Exhibit C, was executed, in which
there is absolutely no mention of Mauro A. Garrucho being attorney in
fact of anybody, and which shows that he obtained such credit fro
himself in his personal capacity and secured the payment thereof by
mortgage constituted by him in his personal capacity, although on
properties belonging to his principal Paz Agudelo y Gonzaga.
Furthermore, the promissory notes executed by Mauro A. Garrucho in
favor of the Philippine National Bank, evidencing loans of P6,000 and
P16,000 have been novated by the promissory notes for P21,000
(Exhibit B) executed by Mauro A. Garrucho, not only without express
authority from his principal Paz Agudelo y Gonzaga but also under his
own signature.
It has been intimated, and the trial judge so stated. that it was the
intention of the parties that Mauro A. Garrucho would execute the
promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his
capacity as attorney in facts of Paz Agudelo y Gonzaga, and that
although the terms of the aforesaid documents appear to be contrary to
the intention of the parties, such intention should prevail in accordance
with article 1281 of the Civil Code.
Furthermore, the loan obtained by Mauro A. Garrucho, evidenced by
the promissory note, was for his principal Paz Agudelo y Gonzaga. The
special power of attorney, does not authorize Mauro A. Garrucho to
constitute a mortgage on the real estate of his principal to secure his
personal obligations. Therefore, in doing so by virtue of the document,
he exceeded the scope if his authority and his principal is not liable for
his acts.
It is further claimed that inasmuch as the properties mortgaged by
Mauro A. Garrucho belong to Paz Agudelo y Gonzaga, the latter is
responsible for the acts of the former although he acted in his own
name, in accordance with the exception contained in article 1717 of the
Civil Code. It would be an exception with the properties of his own
name in connection with the properties of his principal, does so within
the scope of his authority. It is noted that Mauro A. Garrucho was not
authorized to execute promissory notes even in the name of his
principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her
real properties to secure such promissory notes. The plaintiff
Philippine National Bank should know this inasmuch as it is in duty
bound to ascertain the extent of the agent's authority before dealing
with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y
Gonzaga is personally liable for the amount of the promissory note.
However, Paz Agudelo y Gonzaga in an affidavit dated January 15,
1926, and in a letter dated January 16, 1926, gave her consent to the
lien on lot No. 878 of the cadastre of Murcia, Occidental Negros,
described in Torrens title No. 5369, the ownership of which was
transferred to her by her niece Amparo A. Garrucho. This
acknowledgment, however, does not extend to lots Nos. 207 and 61 of
the cadastral survey of Bacolod, described in transfer certificates of title
Nos. 1148 and 2216, respectively, inasmuch as, although it is true that a
mortgage is indivisible as to the contracting parties and as top their
successors in interest (article 1860, Civil Code), it is not so with respect
to a third person who did not take part in the constitution thereof
either personally or through an agent, inasmuch as he can make the
acknowledgment thereof in the form and to the extent he may deem
convenient, on the ground that he is not in duty bound to acknowledge
the said mortgage. Therefore, the only liability of the defendant-
appellant Paz Agudelo y Gonzaga is that which arises from the
aforesaid acknowledgment, but only with respect to the lien and not to
the principal obligation secured by the mortgage acknowledged by her
to have been constituted on said lot No. 878 of the cadastral survey of
Murcia, Occidental Negros. Such liability is not direct but a subsidiary
one.
In view of the foregoing consideration, we are of the opinion and so
hold that when an agent negotiates a loan in his personal capacity and
executes a promissory note under his own signature, without express
authority from his principal, giving as security therefor real estate
belonging to the letter, also in his own name and not in the name and
representation of the said principal, the obligation do constructed by
him is personal and does not bind his aforesaid principal. Wherefore, it
is hereby held that the liability constructed by the aforesaid defendant-
appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro
A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, described in Torrens title No. 2415. However,
inasmuch as the principal obligator, Mauro A. Garrucho, has been
absolved from the complaint and the plaintiff- appellee has not
appealed from the judgment absolving him, the law does not afford any
remedy whereby Paz Agudelo y Gonzaga may be required to comply
with the said subsidiary obligation in view of the legal maxim that the
accessory follows the principal. Wherefore, the defendant herein
should also be absolved from the complaint which is hereby dismissed,
with the costs against the appellee.
G.R. No. 75640 April 5, 1990
NATIONAL FOOD AUTHORITY, (NFA) vs. INTERMEDIATE
APPELLATE COURT, SUPERIOR (SG) SHIPPING
CORPORATION
Facts:
Gil Medalla, as commission agent of the plaintiff Superior Shipping
Corporation, entered into a contract for hire of ship known as "MV Sea
Runner" with defendant National Grains Authority. Under the said
contract Medalla obligated to transport on the "MV Sea Runner" 8,550
sacks of rice belonging to defendant National Grains Authority from
the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.
Upon completion of the delivery of rice at its destination, plaintiff on
October 17, 1979, wrote a letter requesting defendant NGA that it be
allowed to collect the amount stated in its statement of account. The
statement of account included not only a claim for freightage but also
claims for demurrage and stevedoring charges amounting to
P93,538.70.
Paintiff wrote again defendant NGA, this time specifically requesting
that the payment for freightage and other charges be made to it and not
to defendant Medalla because plaintiff was the owner of the vessel "MV
Sea Runner". In reply, defendant NGA on November 16, 1979 informed
plaintiff that it could not grant its request because the contract to
transport the rice was entered into by defendant NGA and defendant
Medalla who did not disclose that he was acting as a mere agent of
plaintiff. Thereupon on November 19, 1979, defendant NGA paid
defendant Medalla the sum of P25,974.90, for freight services in
connection with the shipment of 8,550 sacks of rice.
On December 4, 1979, plaintiff wrote defendant Medalla demanding
that he turn over to plaintiff the amount of P27,000.00 paid to him by
defendant NFA. Defendant Medalla, however, "ignored the demand."
Plaintiff was therefore constrained to file the instant complaint.
Defendant-appellant National Food Authority admitted that it entered
into a contract with Gil Medalla whereby plaintiffs vessel "MV Sea
Runner" transported 8,550 sacks of rice of said defendant from San
Jose, Mindoro to Manila.
For services rendered, the National Food Authority paid Gil Medalla
P27,000.00 for freightage.
RTC: Rendered in favor of the plaintiff. Defendant National Food
Authority appealed to this court on the sole issue as to whether it is
jointly and severally liable with defendant Gil Medalla for freightage.
CA: Affirmed the judgment of RTC.
Issue:
W/N the instant case falls within the exception of the general rule
provided for in Art. 1883 of the CC.
Ruling:
Yes.
NFA contends that it is not liable under the exception to the rule (Art.
1883) since it had no knowledge of the fact of agency between
respondent Superior Shipping and Medalla at the time when the
contract was entered into between them (NFA and Medalla). Petitioner
submits that "(A)n undisclosed principal cannot maintain an action
upon a contract made by his agent unless such principal was disclosed
in such contract. One who deals with an agent acquires no right against
the undisclosed principal."
Petitioner NFA's contention holds no water. It is an undisputed fact
that Gil Medalla was a commission agent of respondent Superior
Shipping Corporation which owned the vessel "MV Sea Runner" that
transported the sacks of rice belonging to petitioner NFA. The context
of the law is clear. Art. 1883, which is the applicable law in the case at
bar provides:
Art. 1883. If an agent acts in his own name, the principal has
no right of action against the persons with whom the agent
has contracted; neither have such persons against the
principal.
In such case the agent is the one directly bound in favor of
the person with whom he has contracted, as if the
transaction were his own, except when the contract involves
things belonging to the principal.
The provision of this article shall be understood to be
without prejudice to the actions between the principal and
agent.
Consequently, when things belonging to the principal (in this case,
Superior Shipping Corporation) are dealt with, the agent is bound to
the principal although he does not assume the character of such agent
and appears acting in his own name. In other words, the agent's
apparent representation yields to the principal's true representation
and that, in reality and in effect, the contract must be considered as
entered into between the principal and the third person (Sy Juco and
Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be
obliged to perform his duties under the contract, then it can also
demand the enforcement of its rights arising from the contract.
G.R. No. 82040 August 27, 1991
BA FINANCE CORPORATION vs. HON. COURT OF APPEALS,
Hon. Presiding Judge of Regional Trial Court of Manila,
Branch 43, MANUEL CUADY and LILIA CUADY
Facts:
Respondents Manuel Cuady and Lilia Cuady obtained from Supercars,
Inc. a credit of P39,574.80, which amount covered the cost of one unit
of Ford Escort 1300, four-door sedan. Said obligation was evidenced by
a promissory note executed by respondents in favor of Supercars, Inc.,
obligating themselves to pay the latter or order the sum of P39,574.80,
inclusive of interest at 14% per annum, payable on monthly
installments of P1,098.00 To secure the faithful and prompt
compliance of the obligation under the said promissory note, the Cuady
spouses constituted a chattel mortage on the aforementioned motor
vehicle. Supercars, Inc. assigned the promissory note, together with the
chattel mortgage, to B.A. Finance Corporation. The Cuadys paid a total
of P36,730.15 to the B.A. Finance Corporation, thus leaving an unpaid
balance of P2,344.65. In addition thereto, the Cuadys owe B.A. Finance
Corporation P460.00 representing penalties or surcharges for tardy
monthly instalments.
Parenthetically, the B.A. Finance Corporation, as the assignee of the
mortgage lien obtained the renewal of the insurance coverage over the
aforementioned motor vehicle for the year 1980 with Zenith Insurance
Corporation, when the Cuadys failed to renew said insurance coverage
themselves. Under the terms and conditions of the said insurance
coverage, any loss under the policy shall be payable to the B.A. Finance
Corporation.
On April 18, 1980, the aforementioned motor vehicle figured in an
accident and was badly damaged. The unfortunate happening was
reported to the B.A. Finance Corporation and to the insurer, Zenith
Insurance Corporation. The Cuadys asked the B.A. Finance
Corporation to consider the same as a total loss, and to claim from the
insurer the face value of the car insurance policy and apply the same to
the payment of their remaining account and give them the surplus
thereof, if any. But instead of heeding the request of the Cuadys, B.A.
Finance Corporation prevailed upon the former to just have the car
repaired. Not long thereafter, however, the car bogged down. The
Cuadys wrote B.A. Finance Corporation requesting the latter to pursue
their prior instruction of enforcing the total loss provision in the
insurance coverage. When B.A. Finance Corporation did not respond
favorably to their request, the Cuadys stopped paying their monthly
installments on the promissory note.
On June 29, 1982, in view of the failure of the Cuadys to pay the
remaining installments on the note, B.A. Finance Corporation sued
them, for the recovery of the said remaining instalments.
RTC: Dismissed the complaint for failure of BA Finance Corp to
adduce evidence.
CA: Affirmed the decision of the trial court.
Issue:
W/N BA Finance is the Attorney-In-fact of the Cuadys to claim in the
insurance policy.
Ruling:
Yes.
B.A. Finance Corporation contends: that even if it failed to
enforce the total loss provision in the insurance policy of the motor
vehicle subject of the chattel mortgage, said failure does not operate to
extinguish the unpaid balance on the promissory note, considering that
the circumstances obtaining in the case at bar do not fall under Article
1231 of the Civil Code relative to the modes of extinguishment of
obligations.
Cuadys insist: that owing to its failure to enforce the total loss
provision in the insurance policy, B.A. Finance Corporation lost not
only its opportunity to collect the insurance proceeds on the mortgaged
motor vehicle in its capacity as the assignee of the said insurance
proceeds pursuant to the memorandum in the insurance policy which
states that the "LOSS: IF ANY, under this policy shall be payable to BA
FINANCE CORP., as their respective rights and interest may appear"
(Rollo, p. 91) but also the remaining balance on the promissory note.
B.A. Finance Corporation was deemed subrogated to the rights and
obligations of Supercars, Inc. when the latter assigned the promissory
note, together with the chattel mortgage constituted on the motor
vehicle in question in favor of the former. Consequently, B.A. Finance
Corporation is bound by the terms and conditions of the chattel
mortgage executed between the Cuadys and Supercars, Inc. Under the
deed of chattel mortgage, B.A. Finance Corporation was constituted
attorney-in-fact with full power and authority to file, follow-up,
prosecute, compromise or settle insurance claims; to sign execute and
deliver the corresponding papers, receipts and documents to the
Insurance Company as may be necessary to prove the claim, and to
collect from the latter the proceeds of insurance to the extent of its
interests, in the event that the mortgaged car suffers any loss or
damage. In granting B.A. Finance Corporation the aforementioned
powers and prerogatives, the Cuady spouses created in the former's
favor an agency. Thus, under Article 1884 of the Civil Code, B.A.
Finance Corporation is bound by its acceptance to carry out the agency,
and is liable for damages which, through its non-performance, the
Cuadys, the principal in the case at bar, may suffer.
Unquestionably, the Cuadys suffered pecuniary loss in the form of
salvage value of the motor vehicle in question, not to mention the
amount equivalent to the unpaid balance on the promissory note, when
B.A. Finance Corporation steadfastly refused and refrained from
proceeding against the insurer for the payment of a clearly valid
insurance claim, and continued to ignore the yearning of the Cuadys to
enforce the total loss provision in the insurance policy, despite the
undeniable fact that Rea Auto Center, the auto repair shop chosen by
the insurer itself to repair the aforementioned motor vehicle,
misrepaired and rendered it completely useless and unserviceable.
On the allegation that the respondent court's findings that B.A. Finance
Corporation failed to claim for the damage to the car was not supported
by evidence, the records show that instead of acting on the instruction
of the Cuadys to enforce the total loss provision in the insurance policy,
the petitioner insisted on just having the motor vehicle repaired, to
which private respondents reluctantly acceded. As heretofore
mentioned, the repair shop chosen was not able to restore the
aforementioned motor vehicle to its condition prior to the accident.
Thus, the said vehicle bogged down shortly thereafter. The subsequent
request of the Cuadys for the B.A. Finance Corporation to file a claim
for total loss with the insurer fell on deaf ears, prompting the Cuadys to
stop paying the remaining balance on the promissory note.
G.R. No. L-21237 March 22, 1924
JAMES D. BARTON vs. LEYTE ASPHALT & MINERAL OIL
CO., LTD.,
Facts:
The plaintiff Barton is a citizen of the United States, resident in the City
of Manila, while the defendant Leyte Asphalt & Mineral Oil Co., is a
corporation organized under the law of the Philippine Islands with its
principal office in the City of Cebu. Said company appears to be the
owner by a valuable deposit of bituminous limestone and other asphalt
products, located on the Island of Leyte and known as the Lucio mine.
One William Anderson, as president and general manager of the
defendant company, addressed a letter, to the plaintiff Barton,
authorizing the latter to sell the products of the Lucio mine in the
Commonwealth of Australia and New Zealand upon a scale of prices
indicated in said letter.
Plaintiff alleges that during the life of the agency, he rendered services
to the defendant company in the way of advertising and demonstrating
the products of the defendant and expended large sums of money in
visiting various parts of the world for the purpose of carrying on said
advertising and demonstrations, in shipping to various parts of the
world samples of the products of the defendant, and in otherwise
carrying on advertising work. For these services and expenditures the
plaintiff sought, in said third cause of action, to recover the sum of
$16,563.80, United States currency.
Besides, the authority was admittedly superseded by the authority
expressed in a later letter dated October 1, 1920. This document bears
the approval of the board of directors of the defendant company and
was formally accepted by the plaintiff.
Upon careful perusal of the fourth paragraph from the end of this letter
it is apparent that some negative word has been inadvertently omitted
before "prepared," so that the full expression should be "unless we
should notify you specifically prior to that date that we are unprepared
to load at that rate," or "not prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff
requested the defendant company to give him a similar selling agency
for Japan. To this request the defendant company, through its
president, Wm. Anderson, replied “In re your request for Japanese
agency, will say, that we are willing to give you, the same commission
on all sales made by you in Japan, on the same basis as your
Australian sales, but we do not feel like giving you a regular agency
for Japan until you can make some large sized sales there, because
some other people have given us assurances that they can handle our
Japanese sales, therefore we have decided to leave this agency open
for a time.”
Meanwhile the plaintiff entered into an agreement with Ludvigsen & be made on these additional shipments if you will signify your ability to
McCurdy, of that city, whereby said firm was constituted a subagent fulfill these orders on the dates mentioned." No name was mentioned
and given the sole selling rights for the bituminous limestone products as the purchaser, or purchases, of these intended Australian
of the defendant company. The territory assigned to Ludvigsen & consignments.
McCurdy included San Francisco and all territory in California north of
said city. Upon an earlier voyage during the same year to Australia, the
Soon after writing the letter last above-mentioned, the plaintiff
plaintiff had already made an agreement with Frank B. Smith, of
embarked for China and Japan. With his activities in China we are not
Sydney, whereby the latter was to act as the plaintiff's sales agent for
here concerned, but we note that in Tokio, Japan, he came in contact
bituminous limestone mined at the defendant's quarry in Leyte.
with one H. Hiwatari, who appears to have been a suitable person for
Ludvigsen & McCurdy, of San Francisco, addressed a letter to the
handling bituminous limestone for construction work in Japan. In the
plaintiff, then in San Francisco, advising him that he might enter an
letter, Hiwatari speaks of himself as if he had been appointed exclusive
order for six thousand tons of bituminous limestone to be loaded at
sales agent for the plaintiff in Japan, but no document expressly
Leyte. Upon this letter the plaintiff immediately indorsed his
appointing him such is in evidence.
acceptance.

While the plaintiff was in Tokio he procured the letter Exhibit W,

The plaintiff then returned to Manila; and on March 2, 1921, Anderson
addressed to himself, to be signed by Hiwatari. This letter, endited by
wrote to him from Cebu, to the effect that the company was behind
the plaintiff himself, contains an order for one thousand tons of
with construction and was not then able to handle big contracts. On
bituminous limestone from the quarries of the defendant company, to
March 12, Anderson was in Manila and the two had an interview in the
be delivered as soon after July 1, 1921, as possible. In this letter
Manila Hotel, in the course of which the plaintiff informed Anderson of
Hiwatari states, "on receipt of the cable from you, notifying me of date
the San Francisco order. Anderson thereupon said that, owing to lack
you will be ready to ship, and also tonnage rate, I will agree to transfer
of capital, adequate facilities had not been provided by the company for
through the Bank of Taiwan, of Tokio, to the Asia Banking Corporation,
filling large orders and suggested that the plaintiff had better hold up
of Manila, P. I., the entire payment of $16,000 gold, to be subject to
in the matter of taking orders. The plaintiff expressed surprise at this
our order on delivery of documents covering bill of lading of
and told Anderson that he had not only the San Francisco order (which
shipments, the customs report of weight, and prepaid export tax
he says he exhibited to Anderson) but other orders for large quantities
receipt. I will arrange in advance a confirmed or irrevocable letter of
of bituminous limestone to be shipped to Australia and Shanghai. In
credit for the above amounts so that payment can be ordered by cable,
another interview on the same Anderson definitely informed the
in reply to your cable advising shipping date."
plaintiff that the contracts which be claimed to have procured would
not be filled.
In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff
that he had shown the contract, signed by himself, to the submanager
Three days later the plaintiff addressed a letter to the defendant
of the Taiwan Bank who had given it as his opinion that he would be
company in Cebu, in which he notified the company to be prepared to
able to issue, upon request of Hiwatari, a credit note for the contracted
ship five thousand tons of bituminous limestone to John Chapman Co.,
amount, but he added that the submanager was not personally able to
San Francisco, loading to commence on May 1, and to proceed at the
place his approval on the contract as that was a matter beyond his
rate of one thousand tons per day of each twenty-four hours, weather
authority. Accordingly Hiwatari advised that he was intending to make
permitting.
further arrangements when the manager of the bank should return
from Formosa.
Frank B. Smith, of Sydney, had cabled the plaintiff an order for five
thousand tons of bituminous limestone; and in his letter of March 15 to
In the letter of May 5, 1921, containing Hiwatari's order for one
the defendant, the plaintiff advised the defendant company to be
thousand tons of bituminous limestone, it was stated that if the
prepared to ship another five thousand tons of bituminous limestone,
material should prove satisfactory after being thoroughly tested by the
on or about May 6, 1921, in addition to the intended consignment for
Paving Department of the City of Tokio, he would contract with the
San Francisco. The name Henry E. White was indicated as the name of
plaintiff for a minimum quantity of ten thousand additional tons, to be
the person through whom this contract had been made, and it was
used within a year from September 1, 1921, and that in this event the
stated that the consignee would be named later, no destination for the
contract was to be automatically extended for an additional four years.
shipment being given. The plaintiff explains that the name White, as
The contents of the letter of May 5 seems to have been conveyed,
used in this letter, was based on an inference which he had erroneously
though imperfectly, by the plaintiff to his attorney, Mr. Frank B.
drawn from the cable sent by Frank B. Smith, and his intention was to
Ingersoll, of Manila; and on May 17, 1921, Ingersoll addressed a note to
have the second shipment consigned to Australia in response to Smith's
the defendant company in Cebu in which he stated that he had been
order.
requested by the plaintiff to notify the defendant that the plaintiff had
accepted an order from Hiwatari, of Tokio, approved by the Bank of
It will be noted in connection with this letter of the plaintiff, of March Taiwan, for a minimum order of ten thousand tons of the stone
15, 1921, that no mention was made of the names of the person, or firm, annually for a period of five years, the first shipment of one thousand
for whom the shipments were really intended. The obvious explanation tons to be made as early after July 1 as possible. It will be noted that
that occurs in connection with this is that the plaintiff did not then care this communication did not truly reflect the contents of Hiwatari's
to reveal the fact that the two orders had originated from his own letter, which called unconditionally for only one thousand tons, the
subagents in San Francisco and Sydney. taking of the remainder being contingent upon future eventualities.

To the plaintiff's letter of March 15, the assistant manager of the
defendant company replied on March, 25, 1921, acknowledging the
receipt of an order for five thousand tons of bituminous limestone to be
consigned to John Chapman Co., of San Francisco, and the further
amount of five thousand tons of the same material to be consigned to
Henry E. White, and it was stated that "no orders can be entertained
unless cash has been actually deposited with either the International
Banking Corporation or the Chartered Bank of India, Australia and
China, Cebu.
To this letter the plaintiff in turn replied from Manila, under date of
March, 1921, questioning the right of the defendant to insist upon a
cash deposit in Cebu prior to the filling of the orders. In conclusion the
plaintiff gave orders for shipment to Australia of five thousand tons, or
more, about May 22, 1921, and ten thousand tons, or more, about June
1, 1921. In conclusion the plaintiff said "I have arranged for deposits to
It will be noted that the only written communications between the
plaintiff and the defendant company in which the former gave notice of
having any orders for the sale of bituminous limestone are the four
letters Exhibit Y, AA, BB, and II. In the first of these letters, dated
March 15, 1921, the plaintiff advises the defendant company to be
prepared to ship five thousand tons of bituminous limestone, to be
consigned to John Chapman, Co., of San Francisco, to be loaded by
March 5, and a further consignment of five thousand tons, through a
contract with Henry E. White, consignees to be named later. In the
letter Exhibit BB dated May 17, 1921, the plaintiff's attorney gives
notice of the acceptance by plaintiff of an order from Hiwatari, of
Tokio, approved by the Bank of Taiwan, for a minimum of ten
thousand annually for a period of five years, first shipment of a
thousand tons to be as early after July 1 as possible. In the letter
Exhibit H the plaintiff gives notice of an "additional" (?) order from H.
E. White, Sydney, for two lots of bituminous limestone of five thousand
tons each, one for shipment not later than June 30, 1921, and the other
by July 20, 1921. In the same letter thousand tons from F. B. Smith, to
be shipped to Brisbane, Australia, by June 30, and a similar amount
within thirty days later.
After the suit was brought, the plaintiff filed an amendment to his
complaint in which he set out, in tabulated form, the orders which he
claims to have received and upon which his letters of notification to the
defendant company were based. In this amended answer the name of
Ludvigsen & McCurdy appears for the first time; and the name of
Frank B. Smith, of Sydney, is used for the first time as the source of the
intended consignments of the letters, Exhibits G, L, M, and W,
containing the orders from Ludvigen & McCurdy, Frank B. Smith and
H. Hiwatari were at no time submitted for inspection to any officer of
the defendant company, except possibly the Exhibit G, which the
plaintiff claims to have shown to Anderson in Manila on March, 12,
1921.
The different items conspiring the award which the trial judge gave in
favor of the plaintiff are all based upon the orders given by Ludvigsen &
McCurdy (Exhibit G), by Frank B. Smith (Exhibit L and M), and by
Hiwatari in Exhibit W; and the appealed does not involve an order
which came from Shanghai, China. We therefore now address ourselves
to the question whether or not the orders contained in Exhibit G, L, M,
and W, in connection with the subsequent notification thereof given by
the plaintiff to the defendant, are sufficient to support the judgment
rendered by the trial court.
Issue:
W/N the Barton is the agent of the Corporation.
Ruling:
The transaction indicated in the orders from Ludvigsen, & McCurdy
and from Frank B. Smith must, in our opinion, be at once excluded
from consideration as emanating from persons who had been
constituted mere agents of the plaintiff. The San Francisco order and
the Australian orders are the same in legal effect as if they were orders
signed by the plaintiff and drawn upon himself; and it cannot be
pretended that those orders represent sales to bona fide purchasers
found by the plaintiff. The original contract by which the plaintiff was
appointed sales agent for a limited period of time in Australia and the
United States contemplated that he should find reliable and solvent
buyers who should be prepared to obligate themselves to take the
quantity of bituminous limestone contracted for upon terms consistent
with the contract. These conditions were not met by the taking of these
orders from the plaintiff's own subagents, which was as if the plaintiff
had bought for himself the commodity which he was authorized to sell
to others. Article 267 of the Code of Commerce declares that no agent
shall purchase for himself or for another that which he has been
ordered to sell. The law has placed its ban upon a broker's purchasing
from his principal unless the latter with full knowledge of all the facts
and circumstances acquiesces in such course; and even then the
broker's action must be characterized by the utmost good faith. A sale
made by a broker to himself without the consent of the principal is
ineffectual whether the broker has been guilty of fraudulent conduct or
not. (4 R. C. L., 276-277.) We think, therefore, that the position of the
defendant company is indubitably sound in so far as it rest upon the
contention that the plaintiff has not in fact found any bona fide
purchasers ready and able to take the commodity contracted for upon
terms compatible with the contract which is the basis of the action.
It will be observed that the contract set out at the beginning of this
opinion contains provisions under which the period of the contract
might be extended. That privilege was probably considered a highly
important incident of the contract and it will be seen that the sale of
five thousand tons which the plaintiff reported for shipment to San
Francisco was precisely adjusted to the purpose of the extension of the
contract for the United States for the period of an additional year; and
the sales reported for shipment to Australia were likewise adjusted to
the requirements for the extention of the contract in that territory.
Given the circumstances surrounding these contracts as they were
reported to the defendant company and the concealment by the
plaintiff of the names of the authors of the orders, -- who after all were
merely the plaintiff's subagents, — the officers of the defendant
company might justly have entertained the suspicion that the real and
only person behind those contracts was the plaintiff himself. Such at
least turns out to have been the case.
Much energy has been expended in the briefs upon his appeal over the
contention whether the defendant was justified in laying down the
condition mentioned in the letter of March 26, 1921, to the effect that
no order would be entertained unless cash should be deposited with
either the International Banking Corporation of the Chartered Bank of
India, Australia and China, in Cebu. In this connection the plaintiff
points to the stipulation of the contract which provides that contracts
with responsible parties are to be accepted "subject to draft attached to
bill of lading in full payment of such shipment." What passed between
the parties upon this point appears to have the character of mere
diplomatic parrying, as the plaintiff had no contract from any
responsible purchaser other than his own subagents and the defendant
company could no probably have filled the contracts even if they had
been backed by the Bank of England.
Upon inspection of the plaintiff's letters, there will be found ample
assurance that deposits for the amount of each shipment would be
made with a bank in Manila provided the defendant would indicated its
ability to fill the orders; but these assurance rested upon no other basis
than the financial responsibility of the plaintiff himself, and this
circumstance doubtless did not escape the discernment of the
defendant's officers.
With respect to the order from H. Hiwatari, we observe that while he
intimates that he had been promised the exclusive agency under the
plaintiff for Japan, nevertheless it does not affirmatively appear that he
had been in fact appointed to be such at the time he signed to order
Exhibit W at the request of the plaintiff. It may be assumed, therefore,
that he was at that time a stranger to the contract of agency. It clearly
appears, however, that he did not expect to purchase the thousand tons
of bituminous limestone referred to in his order without banking
assistance; and although the submanager of the Bank of Taiwan had
said something encouraging in respect to the matter, nevertheless that
official had refrained from giving his approval to the order Exhibit W.
It is therefore not shown affirmatively that this order proceeds from a
responsible source.
[G.R. No. 141485. June 30, 2005]
PABLITO MURAO and NELIO HUERTAZUELA vs. PEOPLE
OF THE PHILIPPINES
Petitioner Pablito Murao is the sole owner of Lorna Murao Industrial
Commercial Enterprises (LMICE), a company engaged in the business
of selling and refilling fire extinguishers. Petitioner Nelio Huertazuela
is the Branch Manager of LMICE in Puerto Princesa City, Palawan.
Petitioner Murao and private complainant Chito Federico entered into
a Dealership Agreement for the marketing, distribution, and refilling of
fire extinguishers within Puerto Princesa City. According to the
Dealership Agreement, private complainant Federico, as a dealer for
LMICE, could obtain fire extinguishers from LMICE at a 50% discount,
provided that he sets up his own sales force, acquires and issues his
own sales invoice, and posts a bond with LMICE as security for the
credit line extended to him by LMICE. Failing to comply with the
conditions under the said Dealership Agreement, private complainant
Federico, nonetheless, was still allowed to act as a part-time sales agent
for LMICE entitled to a percentage commission from the sales of fire
extinguishers.
The amount of private complainant Federicos commission as sales
agent for LMICE was under contention. Private complainant Federico
claimed that he was entitled to a commission equivalent to 50% of the
gross sales he had made on behalf of LMICE, while petitioners
maintained that he should receive only 30% of the net sales. Petitioners
even contended that as company policy, part-time sales agents were
entitled to a commission of only 25% of the net sales, but since private
complainant Federico helped in establishing the LMICE branch office
in Puerto Princesa City, he was to receive the same commission as the
full-time sales agents of LMICE, which was 30% of the net sales.
Petitioners alleged that it was contrary to the standard operating
procedure of LMICE that private complainant Federico was named
payee of the Landbank check on behalf of LMICE, and that private
complainant Federico was not authorized to encash the said check.
Despite the supposed irregularities committed by private complainant
Federico in the collection of the payment from Landbank and in the
premature withholding of his commission from the said payment,
petitioners forgave private complainant Federico because the latter
promised to make-up for his misdeeds in the next transaction.[10]
Private complainant Federico, on behalf of LMICE, subsequently
facilitated a transaction with the City Government of Puerto Princesa
for the refill of 202 fire extinguishers. Because of the considerable cost,
the City Government of Puerto Princesa requested that the transaction
be split into two purchase orders, and the City Government of Puerto
Princesa shall pay for each of the purchase orders separately.[11]
Pursuant to the two purchase orders, LMICE refilled and delivered all
202 fire extinguishers to the City Government of Puerto Princesa: 154
units on 06 January 1994, 43 more units on 12 January 1994, and the
last five units on 13 January 1994.[12]
The subject of this Petition is limited to the first purchase order,
Purchase Order No. GSO-856, dated 03 January 1994, for the refill of
99 fire extinguishers, with a total cost of P309,000.00.[13] On 16 June
1994, the City Government of Puerto Princesa issued Check No. 611437
to LMICE to pay for Purchase Order No. GSO-856, in the amount of
P300,572.73, net of the 3% withholding tax.[14] Within the same day,
petitioner Huertazuela claimed Check No. 611437 from the City
Government of Puerto Princesa and deposited it under the current
account of LMICE with PCIBank.[15]
On 17 June 1994, private complainant Federico went to see petitioner
Huertazuela at the LMICE branch office in Puerto Princesa City to
demand for the amount of P154,500.00 as his commission from the
payment of Purchase Order No. GSO-856 by the City Government of
Puerto Princesa. Petitioner Huertazuela, however, refused to pay
private complainant Federico his commission since the two of them
could not agree on the proper amount thereof.[16]
Private complainant Federico went to the police station to file an
Affidavit-Complaint for estafa against petitioners.
RTC: Guilty of estafa.
CA: Affirmed the RTC’s judgment.
Issue:
W/N Federico as agent is the automatic owner of the 50% commission.
Ruling: No.
The findings of the RTC and the Court of Appeals that petitioners
committed estafa rest on the erroneous belief that private complainant
Federico, due to his right to commission, already owned 50% of the
amount paid by the City Government of Puerto Princesa to LMICE by
virtue of Check No. 611437, so that the collection and deposit of the
said check by petitioners under the account of LMICE constituted
misappropriation or conversion of private complainant Federicos
commission.
However, his right to a commission does not make private
complainant Federico a joint owner of the money paid to
LMICE by the City Government of Puerto Princesa, but merely
establishes the relation of agent and principal.[25] It is unequivocal
that an agency existed between LMICE and private complainant
Federico. Article 1868 of the Civil Code defines agency as a special
contract whereby 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. Although private complainant
Federico never had the opportunity to operate as a dealer for LMICE
under the terms of the Dealership Agreement, he was allowed to act as
a sales agent for LMICE. He can negotiate for and on behalf of LMICE
for the refill and delivery of fire extinguishers, which he, in fact, did on
two occasions with Landbank and with the City Government of Puerto
Princesa. Unlike the Dealership Agreement, however, the agreement
that private complainant Federico may act as sales agent of LMICE was
based on an oral agreement.[26]
As a sales agent, private complainant Federico entered into
negotiations with prospective clients for and on behalf of his principal,
LMICE. When negotiations for the sale or refill of fire extinguishers
were successful, private complainant Federico prepared the necessary
documentation. Purchase orders, invoices, and receipts were all in the
name of LMICE. It was LMICE who had the primary duty of picking up
the empty fire extinguishers, filling them up, and delivering the refilled
tanks to the clients, even though private complainant Federico
personally helped in hauling and carrying the fire extinguishers during
pick-up from and delivery to clients.
All profits made and any advantage gained by an agent in the execution
of his agency should belong to the principal.[27] In the instant case,
whether the transactions negotiated by the sales agent were for the sale
of brand new fire extinguishers or for the refill of empty tanks,
evidently, the business belonged to LMICE. Consequently, payments
made by clients for the fire extinguishers pertained to LMICE. When
petitioner Huertazuela, as the Branch Manager of LMICE in Puerto
Princesa City, with the permission of petitioner Murao, the sole
proprietor of LMICE, personally picked up Check No. 611437 from the
City Government of Puerto Princesa, and deposited the same under the
Current Account of LMICE with PCIBank, he was merely collecting
what rightfully belonged to LMICE. Indeed, Check No. 611437 named
LMICE as the lone payee. Private complainant Federico may claim
commission, allegedly equivalent to 50% of the payment received by
LMICE from the City Government of Puerto Princesa, based on his
right to just compensation under his agency contract with LMICE,[28]
but not as the automatic owner of the 50% portion of the said payment.
Since LMICE is the lawful owner of the entire proceeds of the check
payment from the City Government of Puerto Princesa, then the
petitioners who collected the payment on behalf of LMICE did not
receive the same or any part thereof in trust, or on commission, or for
administration, or under any other obligation involving the duty to
make delivery of, or to return, the same to private complainant
Federico, thus, the RTC correctly found that no fiduciary relationship
existed between petitioners and private complainant Federico. A
fiduciary relationship between the complainant and the accused is an
essential element of estafa by misappropriation or conversion, without
which the accused could not have committed estafa.[29]
The current Petition concerns an agency contract whereby the principal
already received payment from the client but refused to give the sales
agent, who negotiated the sale, his commission. As has been
established by this Court in the foregoing paragraphs, LMICE had a
right to the full amount paid by the City Government of Puerto
Princesa. Since LMICE, through petitioners, directly collected the
payment, then it was already in possession of the amount, and no
transfer of juridical possession thereof was involved herein. Given that
private complainant Federico could not claim ownership over the said
payment or any portion thereof, LMICE had nothing at all to deliver
and return to him. The obligation of LMICE to pay private complainant
Federico his commission does not arise from any duty to deliver or
return the money to its supposed owner, but rather from the duty of a
principal to give just compensation to its agent for the services
rendered by the latter.
Based on the very same definition, this Court finds that petitioners did
not convert nor misappropriate the proceeds from Check No. 611437
because the same belonged to LMICE, and was not anothers property.
Petitioners collected the said check from the City Government of
Puerto Princesa and deposited the same under the Current Account of
LMICE with PCIBank. Since the money was already with its owner,
LMICE, it could not be said that the same had been converted or
misappropriated for one could not very well fraudulently appropriate
to himself money that is his own.
Although petitioners refusal to pay private complainant Federico his
commission caused prejudice or damage to the latter, said act does not
constitute a crime, particularly estafa by conversion or
misappropriation punishable under Article 315(1)(b) of the Revised
Penal Code. Without the essential elements for the commission thereof,
petitioners cannot be deemed to have committed the crime.
While petitioners may have no criminal liability, petitioners themselves
admit their civil liability to the private complainant Federico for the
latters commission from the sale, whether it be 30% of the net sales or
50% of the gross sales. However, this Court is precluded from making a
determination and an award of the civil liability for the reason that the
said civil liability of petitioners to pay private complainant Federico his
commission arises from a violation of the agency contract and not from
a criminal act. It would be improper and unwarranted for this Court to
impose in a criminal action the civil liability arising from a civil
contract, which should have been the subject of a separate and
independent civil action.
G.R. No. 130423 November 18, 2002
VIRGIE SERONA vs. HON. COURT OF APPEALS and THE
PEOPLE OF THE PHILIPPINES
Facts:
During the period from July 1992 to September 1992, Leonida Quilatan
delivered pieces of jewelry to petitioner Virgie Serona to be sold on
commission basis. By oral agreement of the parties, petitioner shall
remit payment or return the pieces of jewelry if not sold to Quilatan,
both within 30 days from receipt of the items.
Upon petitioner’s failure to pay on September 24, 1992, Quilatan
required her to execute an acknowledgment receipt indicating their
agreement and the total amount due, to wit: Ako, si Virginia Serona,
nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga
alahas kay Gng. Leonida Quilatan na may kabuohang halaga na
P567,750.00 para ipagbili para ako magkakomisyon at ibibigay ang
benta kung mabibili o ibabalik sa kanya ang mga nasabing alahas
kung hindi mabibili sa loob ng 30 araw. Las Pinas, September 24,
1992.1
The receipt was signed by petitioner and a witness, Rufina G.
Navarette.
Unknown to Quilatan, petitioner had earlier entrusted the jewelry to
one Marichu Labrador for the latter to sell on commission basis.
Petitioner was not able to collect payment from Labrador, which
caused her to likewise fail to pay her obligation to Quilatan.
Subsequently, Quilatan, sent a letter of demand to the petitioner and
for failure to settle her obligation Quilatan filed for Estafa.
Petitioner pleaded not guilty to the charge upon arraignment.
Quilatan testified that petitioner was able to remit P100,000.00 and
returned P43,000.00 worth of jewelriy;7 that at the start, petitioner
was prompt in settling her obligation; however, subsequently the
payments were remitted late;8 that petitioner still owed her in the
amount of P424,750.00.9
On the other hand, petitioner admitted that she received several pieces
of jewelry from Quilatan and that she indeed failed to pay for the same.
She claimed that she entrusted the pieces of jewelry to Marichu
Labrador who failed to pay for the same, thereby causing her to default
in paying Quilatan.10 She presented handwritten receipts (Exhibits 1 &
2)11 evidencing payments made to Quilatan prior to the filing of the
criminal case.
Marichu Labrador confirmed that she received pieces of jewelry from
petitioner worth P441,035.00. She identified an acknowledgment
receipt (Exhibit 3)12 signed by her dated July 5, 1992 and testified that
she sold the jewelry to a person who absconded without paying her.
Labrador also explained that in the past, she too had directly
transacted with Quilatan for the sale of jewelry on commission basis;
however, due to her outstanding account with the latter, she got jewelry
from petitioner instead.13
RTC: Petitioner is guilty of estafa.
CA: Affirmed the RTc’s decision.
Issue:
W/N Sarona is liable to the acts of her sub-agent Labrador. Yes.
Then too, an agent who is not prohibited from appointing a sub-agent
but does so without express authority is responsible for the acts of the
sub-agent.
Ruling:
Petitioner Sarona argues that the prosecution failed to establish the
elements of estafa, she submits that her giving the pieces of jewelry to a
sub-agent for sale on commission basis did not violate her undertaking
with Quilatan. Moreover, petitioner delivered the jewelry to Labrador
under the same terms upon which it was originally entrusted to her. It
was established that petitioner had not derived any personal benefit
from the loss of the jewelry. Consequently, it cannot be said that she
misappropriated or converted the same.
The elements of estafa through misappropriation or conversion as
defined in Article 315, par. 1(b) of the Revised Penal Code are: (1) that
the money, good or other personal property is received by the offender
in trust, or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to return, the
same; (2) that there be misappropriation or conversion of such money
or property by the offender or denial on his part of such receipt; (3)
that such misappropriation or conversion or denial is to the prejudice
of another; and (4) that there is a demand made by the offended party
on the offender.18 While the first, third and fourth elements are
concededly present, we find the second element of misappropriation or
conversion to be lacking in the case at bar.
Petitioner did not ipso facto commit the crime of estafa through
conversion or misappropriation by delivering the jewelry to a sub-agent
for sale on commission basis. We are unable to agree with the lower
courts’ conclusion that this fact alone is sufficient ground for holding
that petitioner disposed of the jewelry "as if it were hers, thereby
committing conversion and a clear breach of trust."19
It must be pointed out that the law on agency in our jurisdiction allows
the appointment by an agent of a substitute or sub-agent in the absence
of an express agreement to the contrary between the agent and the
principal.20 In the case at bar, the appointment of Labrador as
petitioner’s sub-agent was not expressly prohibited by Quilatan, as the
acknowledgment receipt, Exhibit B, does not contain any such
limitation. Neither does it appear that petitioner was verbally
forbidden by Quilatan from passing on the jewelry to another person
before the acknowledgment receipt was executed or at any other time.
Thus, it cannot be said that petitioner’s act of entrusting the jewelry to
Labrador is characterized by abuse of confidence because such an act
was not proscribed and is, in fact, legally sanctioned.
The essence of estafa under Article 315, par. 1(b) is the appropriation or
conversion of money or property received to the prejudice of the owner.
The words "convert" and "misappropriated" connote an act of using or
disposing of another’s property as if it were one’s own, or of devoting it
to a purpose or use different from that agreed upon. To misappropriate
for one’s own use includes not only conversion to one’s personal
advantage, but also every attempt to dispose of the property of another
without right.21
In the case at bar, it was established that the inability of petitioner as
agent to comply with her duty to return either the pieces of jewelry or
the proceeds of its sale to her principal Quilatan was due, in turn, to the
failure of Labrador to abide by her agreement with petitioner. Notably,
Labrador testified that she obligated herself to sell the jewelry in behalf
of petitioner also on commission basis or to return the same if not sold.
In other words, the pieces of jewelry were given by petitioner to
Labrador to achieve the very same end for which they were delivered to
her in the first place. Consequently, there is no conversion since the
pieces of jewelry were not devoted to a purpose or use different from
that agreed upon.
Similarly, it cannot be said that petitioner misappropriated the jewelry
or delivered them to Labrador "without right." Aside from the fact that
no condition or limitation was imposed on the mode or manner by
which petitioner was to effect the sale, it is also consistent with usual
practice for the seller to necessarily part with the valuables in order to
find a buyer and allow inspection of the items for sale.
In People v. Nepomuceno,22 the accused-appellant was acquitted of
estafa on facts similar to the instant case. Accused-appellant therein
undertook to sell two diamond rings in behalf of the complainant on
commission basis, with the obligation to return the same in a few days
if not sold. However, by reason of the fact that the rings were
delivered also for sale on commission to sub-agents who failed to
account for the rings or the proceeds of its sale, accused-appellant
likewise failed to make good his obligation to the complainant thereby
giving rise to the charge of estafa. In absolving the accused-appellant
of the crime charged, we held:
Where, as in the present case, the agents to whom personal property
was entrusted for sale, conclusively proves the inability to return the
same is solely due to malfeasance of a subagent to whom the first
agent had actually entrusted the property in good faith, and for the
same purpose for which it was received; there being no prohibition to
do so and the chattel being delivered to the subagent before the owner
demands its return or before such return becomes due, we hold that
the first agent can not be held guilty of estafa by either
misappropriation or conversion. The abuse of confidence that is
characteristic of this offense is missing under the circumstances.23
Labrador admitted that she received the jewelry from petitioner and
sold the same to a third person. She further acknowledged that she
owed petitioner P441,035.00, thereby negating any criminal intent on
the part of petitioner. There is no showing that petitioner derived
personal benefit from or conspired with Labrador to deprive Quilatan
of the jewelry or its value. Consequently, there is no estafa within
contemplation of the law.
Notwithstanding the above, however, petitioner is not entirely free
from any liability towards Quilatan. The rule is that an accused
acquitted of estafa may nevertheless be held civilly liable where the
facts established by the evidence so warrant. Then too, an agent who is
not prohibited from appointing a sub-agent but does so without
express authority is responsible for the acts of the sub-agent.29
Considering that the civil action for the recovery of civil liability arising
from the offense is deemed instituted with the criminal action,30
petitioner is liable to pay complainant Quilatan the value of the unpaid
pieces of jewelry.
G.R. No. L-10099 January 27, 1916
TEOFILA DEL ROSARIO DE COSTA and BERNARDO COSTA
vs. LA BADENIA, a corporation
Facts:
The plaintiffs, Teofila del Rosario de Costa and her husband,
Bernardino Costa, brought this action to recover from the defendant
corporation the sum of P1,795.25 a balance alleged to be due Teofila del
Rosario de Costa as the agent of the defendant corporation for services
rendered and expenses incurred in the sale of its products. The
defendant denied the claim and set up counterclaim for P55.43.
Judgment having been rendered in favor of the defendant, the record is
now before us on plaintiff's bill of exceptions.
The plaintiffs are residents of Legaspi, Albay, and the defendant
corporation is engaged in the manufacture and sale of tobacco products
with its head office in the city of Manila. The defendant corporation, a
new concern, inaugurated an extensive selling campaign for the
purpose of introducing its products to the retail trade. Celestino
Aragon, a general agent of the defendant corporation, was in charged of
this campaign in Albay, Sorsogon, and other provinces in the southern
end of Luzon.
He established a central distributing agency or depot at Legaspi with
the plaintiff, Teofila del Rosario de Costa, nominally in charge, though
her husband, Bernardino de Costa appears to have been the actual
manager of the agency. The business relations between the plaintiffs
and the defendant extended from February 1, 1911, to March 24, 1912,
and during this time no settlement of their accounts was ever had.
When Aragon, the general agent, came to Legaspi in 1911 he
established his headquarters there and took up his residence with the
plaintiffs, using the lower part of their house as a store room or
depository for large quantities of cigarettes and cigars. He employed a
number of persons as solicitors and paid their salaries; he paid the
internal revenue fees incident to the conduct of the business in Legaspi,
and also the rent of the building in which he lived with the plaintiffs
and which he made use of as the general headquarters for the agency.
The record shows that business amounting to more than P24,000
(wholesale) was done by the Legaspi agency from February 1, 1911, to
March 24, 1912. All goods sent to Legaspi were charged by the head
office at Manila against the general agent, Aragon, while on the books
kept by Aragon these goods were charged against the plaintiffs, and as
goods were withdrawn by himself, he credited the amount of the
withdrawals to the account of the plaintiffs. The business at Legaspi
appears to have been that of a distributing agency actively in charge of
the plaintiffs but over which the general agent maintained a close
supervision. Goods were withdrawn from the depository at Legaspi
from time to time by the general agent for shipment to other points;
goods were likewise withdrawn by plaintiffs and shipped to
neighboring towns without any intervention on the part of the general
agent. All accounts incident to the business were carried on the books
of Aragon. The plaintiffs do not appear to have kept a separate set of
books. The account as carried on the books of Aragon, the general
agent, was between Teofila del Rosario de Costa and La Badenia, the
defendant corporation. On March 24, 1912, the general agent had a
settlement with the plaintiffs and acknowledged over his signature that
these books showed a balance in favor of the plaintiffs amounting to
P1,795.25.
In this statement presented by the plaintiff goods received by the
Legaspi agency from the factory in Manila are charged against Teofila
del Rosario de Costa, while credits are given on various items, such as,
withdrawals of goods from the depository at Legaspi shipped to other
towns, remittances made to the head office in Manila, money paid over
to the general agent, advertising expenses, commissions on sales,
salaries of employees, and other expenses incident to the conduct of the
business.
When this final settlement of accounts was had on the 24th of March,
1912, both Aragon and the plaintiff, Teofila del Rosario de Costa,
confirmed it as a true statement of the account. The defendant
corporation however, refused to pay over to plaintiffs the balance of
P1,795.25, claiming that plaintiffs had been improperly allowed a credit
of P1,850.68 which represented unpaid accounts due the business in
Legaspi for cigars and cigarettes sold by it. If these uncollected claims
are charged to the defendant corporation a balance is left in favor of
plaintiffs amounting to P1,795.25; and if charged to plaintiffs there
remains a balance in favor of the defendant corporation amounting to
P55.43.
It is the contention of the defendant corporation that the plaintiffs were
simply merchants who purchased the goods at fixed wholesale prices
and sold them on their own account, and that they were never
employed as their agents. On the other hand plaintiffs contend that
they were the agents of the defendant corporation; that they received
commissions on the sales made by the agency; and that they were
authorized to extend a reasonable credit under the supervision of the
general agent.
Issue:
W/N the plaintiff is the agent of the defendant corporation.
Ruling: Yes.
It is not clear from the record just what were the precise terms of the
arrangement made by Aragon with the plaintiffs. It is not denied
however, that Aragon was acting as the general agent of the defendant
corporation and that as such he was invested with authority to
inaugurate and carry out a selling campaign with a view of interesting
the sale of the defendant's products in the territory assigned to him.
The record does not show what limitations, if any, were placed upon his
powers to act for the corporation. The general conduct of the selling
campaign intrusted to him was approved and commended by the head
office, and judging from the amount of the sales the business appears
to have been a very prosperous one for the corporation.
It appears further that the head office at Manila was fully informed of
plaintiffs' relations with the general agent in extending the sales of its
products. Plaintiffs made direct remittances to the head office in
Manila and these remittances were credited to the account of the
agency at Legaspi, and acknowledgment was made directly to the
plaintiffs. Neither the head office nor Aragon appear to have made any
distinction between the business done by Aragon and that done by the
plaintiffs. The purchases, sales and remittances made by the plaintiffs
do not seem to have been considered as those of an independent
business concern, but rather as a part of the work of the Legaspi agency
under the control and supervision of Aragon. The fact that the
defendant corporation carried the Legaspi account in the name of the
general agent, Aragon, and carried no account with the plaintiffs,
would seem to negative the contention that plaintiffs were simply
merchants purchasing their goods in Manila at wholesale and selling
them locally on their own account.
The active management and participation of the plaintiffs in the
conduct of the business at Legaspi are fully recognized in the following
letters written by the assistant manager of the defendant corporation to
one of the plaintiffs.
Several other letters received by the plaintiffs from the defendant
corporation were offered in evidence, but the two letters just quoted are
sufficient to show that the defendant was fully aware of plaintiffs'
connection with the agency at Legaspi, and recognized them as agents
of the company, and clearly did not consider them as independent
merchants buying solely on their own account, but rather as subagents
working under the supervision of the general agent, Aragon.
It seems equally clear that Aragon did not consider the plaintiffs as
independent merchants operating on their own account, but rather as
agents cooperating with him and working under his supervision. This
fact is clearly borne out by the nature of the entries made in his books
of account. A reference to that statement taken from the books of
account shows that the plaintiffs were given credit on various items,
such as advertising expenses, the free distribution of cigars and
cigarettes for advertising purposes, freight and carriage charges on
shipments to neighboring towns, and the like, and it does not seem at
all likely that plaintiffs would have been allowed credit on such items if
they had been conducting the business solely on their own account.
Aragon extended credit to certain purchasers of cigars and cigarettes
and the entries made by him on his books of account show that he
knew that the plaintiffs were also extending credit to some of the
purchasers of the goods shipped from Legaspi. He approved the very
items now questioned when as general agent of the defendant
corporation he signed the statement of account showing a balance of
P1,795.25 in favor of the plaintiffs. Aragon thereby admitted that he, at
least, considered these outstanding claims as properly chargeable
against the defendant corporation, and unless the plaintiffs had been
specifically authorized by him to extend credit it seems certain that he
would never have approved this balance in their favor.
It is contended that it is unreasonable that plaintiffs would have so
large a balance in their favor, and that they are now merely seeking to
saddle upon the defendant corporation a lot of unpaid accounts. In
view of the fact that plaintiffs are only seeking to enforce the payment
of a balance admitted by the general agent of the defendant corporation
to be rightly due them, we fail to see how it can be reasonably urged
that plaintiffs are attempting to saddle these unpaid claims on the
defendant. The general agent who was in control of the Legaspi
business, and who was fully conversant with all of its details, clearly
recognized the right of the plaintiffs to have credit on their account for
the amount of these unpaid claims. This agent had employed the
plaintiffs to assist him in extending the sale of the defendant's
products, and the defendant was well aware of this fact. Certainly the
only reliable source of information as to what plaintiffs' account with
the defendant corporation was, is to be found in the books kept by the
general agent, Aragon. The defendant carried no account whatever with
the plaintiffs, and having intrusted the entire management of the
Legaspi business to Aragon, it can not now come into court and
repudiate the account confirmed by him, unless it can show that he
acted beyond the scope of his authority in making the arrangement he
did with the plaintiffs. Aragon's powers as a selling agent appear to
have been very broad, and there is no evidence in the record to indicate
that he acted beyond his powers in conducting the business at Legaspi
as he did; and there can be no doubt that plaintiffs had been authorized
by him to extend credit on behalf of the agency. There is no other
reasonable explanation of the entries made by Aragon in his books of
account, and his approval of the balance in favor of the plaintiffs.
It appears that the plan under which the business was conducted was
as follows: a shipment of cigars and cigarettes was made from the
Manila office and charged against the account of the general agent,
Aragon; these goods were deposited in the store room at Legaspi, and
in the account carried by Aragon were charged against the plaintiffs.
Withdrawals were made from the Legaspi stock by Aragon and the
plaintiffs, and credit was given the plaintiffs for the amount of the
withdrawals by Aragon. Both Aragon and the plaintiffs drew on the
Legaspi stock for advertising purposes, such as the free distribution of
cigars and cigarettes, and plaintiffs were credited with the value of the
goods so withdrawn. The stock on hand was being replenished from
time to time by new shipments received from Manila. The plaintiffs
made remittances to Manila which were credited to the account of the
Legaspi agency and this account included not only the goods sold and
withdrawn from stock by the plaintiffs, but also the goods withdrawn
by Aragon. Thus evidently these remittances were not in payment of
any particular shipments, but were simply payments on account and
covered goods sold by Aragon as well as those sold by the plaintiffs.
Remittances were doubtless made to Manila by Aragon and credited on
the agency account in the same manner. Under this method of
conducting the business a balance for or against the plaintiffs might
well remain at any time, and such a balance would not be determined
solely by the value of the goods withdrawn from stock by the plaintiffs,
and the amount of the remittances made by them, but would be
determined by the total value of the stock of the Legaspi agency
charged against the plaintiffs and the amounts allowed them as credits;
these credits would include not only the remittances made to Manila,
but also goods withdrawn by Aragon, and such other items as might
constitute proper credits on the account. We do not therefore think it at
all unreasonable that a balance should have remained in favor of the
plaintiffs when the settlement was made, nor do we see that the
existence of such a balance would necessarily indicate that the
plaintiffs had overpaid their account with the defendant corporation.
It is further contended that the goods were charged to plaintiffs at
wholesale prices, and that they were to have as profits any amounts
received over and above the wholesale cost price on the goods sold by
them, and it is urged that such an arrangement indicates that they were
independent merchants doing business on their own account. Even
granting that such was the arrangement made with the plaintiffs by
Aragon, it does not necessarily follow that they were conducting an
independent business on their own account. As already stated, the
record does not disclose what were the precise terms of arrangement
made with the plaintiffs. The record does show however, that in many
instances the plaintiffs were allowed commissions on sales made by
them, but whether or not these were in addition to other profits
allowed them the record does not show. Upon a careful examination of
the whole record we are satisfied that plaintiffs were not conducting an
independent business but were the agents of the defendant corporation
operating under the supervision of the general agent, Aragon.