Full text: https:www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html
Facts:
From January to April 1995, petitioner sold to Impact Systems various products. Respondents sought to buy from petitioner one unit of sludge pump valued at ₱250,000.00 with respondents making a down payment of ₱50,000.00. When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner. Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump.
RTC Ruling:
The trial court granted petitioner’s prayer for the issuance of writ of preliminary attachment. A study of the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or represented Impact Systems Sales; that Impact Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. Another study reveals that Impact Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down payment of ₱50,000.00, thereby showing that Impact Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that Impact Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted the down payment of ₱50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment of ₱50,000.00 two days later. In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant.
CA Ruling:
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. Petitioner’s motion for reconsideration was denied by the appellate court.
Issue:
WON respondent EDWIN acted beyond the authority granted by his principal?
SC Ruling:
No, Edwin did not act beyond the authority granted by his principal.
Legal Basis:
“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”.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third-party sufficient notice of his powers.
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management.
Application:
Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for Impact Systems’ indebtedness. The significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact Systems’ perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to protect the business of his principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would have violated his fiduciary relation with his principal. It must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and the agent
Hence, Edwin did not act beyond the authority granted by his principal.
Other laws/rulings/cases used in this case:
In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter’s consent. The underlying principle of the contract of agency is to accomplish results by using the services of others – to do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal.
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.
