Title
Araneta vs. De Joya
Case
G.R. No. L-25172
Decision Date
May 24, 1974
A corporate officer's negligence in signing unauthorized payroll checks for an employee's overseas studies led to joint liability for quasi-delict, affirming contractual roles do not bar tort liability.
unauthorized expenses
review
indemnify

Case Summary (A.C. No. 8560)

Factual Background

In November 1952, respondent proposed to the board of directors that an employee, Ricardo Taylor, be sent to the United States for special studies in television. The board did not act on the proposal. Despite the lack of board action, respondent sent Taylor abroad in September 1953.

During Taylor’s departure and early period in the United States, J. Antonio Araneta, a company director, inquired about the trip and was assured by respondent that Taylor’s expenses would be defrayed by other parties rather than by the corporation. That assurance was later confirmed by respondent in a memorandum.

While abroad—from September 1, 1953 to March 15, 1954—Taylor continued to receive salaries from Ace Advertising. The salary items appeared in vouchers prepared upon orders of respondent, approved by him, and included in semi-monthly payroll checks for corporate employees. Petitioner signed three of the payroll checks dated November 27, 1953, December 15, 1953, and December 29, 1953. The remaining payroll checks were signed either by respondent or by Vicente Araneta, who also put up part of the bill connected with the trip and handed Taylor letters for delivery in the United States.

In total, Ace Advertising disbursed P5,043.20 for Taylor’s travel and studies.

Suit for Recovery and the 3rd-Party Complaint

On August 23, 1954, Ace Advertising filed a complaint in the Court of First Instance of Manila against respondent for recovery of the total P5,043.20, alleging that the trip and the related disbursements were made without the corporation’s knowledge, authority, or ratification.

Respondent denied the allegations. He asserted that the trip had been ratified by the board of directors and, alternatively, argued that under the corporation’s by-laws he had discretion, as general manager, to authorize the trip for the corporation’s benefit.

Respondent then filed a 3rd-party complaint against Vicente Araneta, petitioner, and Ricardo Taylor. He presented evidence that Vicente, as treasurer, signed a check representing the corporation’s share of transportation expenses to the United States. Respondent also showed that payroll checks covering Taylor’s salaries from September 15, 1953 to December 31, 1953, inclusive, were signed by either Vicente or petitioner, who was a vice-president.

The Trial Court’s Decision

The trial court rendered judgment on April 13, 1964. It ordered respondent to pay Ace Advertising the sum of P5,043.20 with interest at the legal rate from August 23, 1954 until full payment, and it dismissed the 3rd-party complaint. Thus, although the corporation recovered the disbursed amount, Vicente and petitioner were not held liable in that court’s final disposition.

Proceedings in the Court of Appeals

Respondent appealed to the Court of Appeals. On August 2, 1965, the appellate court affirmed the trial court’s judgment in favor of Ace Advertising but reversed the dismissal of the 3rd-party complaint.

The Court of Appeals made categorical factual findings that Taylor’s trip had been neither authorized nor ratified by the corporation. It also made specific findings on petitioner’s and Vicente’s participation. The appellate court emphasized that Vicente was the first to be broached about sending Taylor abroad, that Vicente showed unusual interest and even entrusted Taylor with letters for delivery in the United States to certain principals of Gregorio Araneta, Inc., and that Vicente signed checks connected with tax clearance, documentary stamps, passport fees, and the plane ticket. As to petitioner, the Court of Appeals found that while Taylor was already in America, Taylor’s salaries were paid through vouchers and checks signed by petitioner himself, by Vicente, or by respondent; it also found that petitioner approved three payroll checks for Taylor’s salary.

From those findings, the Court of Appeals concluded that petitioner and Vicente were informed and gave approval to the unauthorized disbursement of corporate funds for both the trip expenses and the salaries paid during Taylor’s absence. It treated the conduct as an unauthorized corporate expenditure made possible by the participation of the three individuals, and it characterized the resulting juridical situation as a quasi-delict committed upon the corporation. Invoking Article 2194 of the New Civil Code, the Court of Appeals reasoned that solidary liability should have been imposed upon the joint tortfeasors in the first instance, while respondent—being the one sued and made liable by the corporation—retained the right to demand proportional responsibility from the other joint tortfeasors through the 3rd-party proceeding.

Issue Before the Supreme Court

The basic legal issue before the Supreme Court was whether petitioner was guilty of the quasi-delict as held below, particularly in light of his claim that he signed the questioned payroll checks in good faith.

The Parties’ Contentions

Petitioner maintained that his signatures on payroll checks were made in good faith. He argued, implicitly, that his corporate position did not translate into personal tort liability, and that he should not be held to quasi-delict liability for the disbursements connected with Taylor’s unauthorized travel and studies.

Respondent, as appellee and as the party invoking the 3rd-party claim, relied on the factual findings of the Court of Appeals showing that petitioner was actively involved in approving payroll checks for Taylor’s salary during his overseas stay and that petitioner remained passive despite being a corporate officer, thereby contributing to unauthorized expenditures from corporate funds.

Legal Basis and Reasoning

The Supreme Court held that the judgment of the Court of Appeals should be upheld. It ruled that petitioner’s assertion of good faith was not substantiated, particularly because petitioner did not testify or present evidence to support the claim. The Court noted that petitioner, despite being a vice-president and director of Ace Advertising, remained passive throughout Taylor’s period abroad concerning the unauthorized disbursements of corporate funds. The Court considered his act of approving three payroll checks for Taylor’s salary as demonstrative of a neglect of duty in a manner that caused damage to the firm.

The Court further rejected the notion that petitioner’s contractual position within the corporation barred tort liability. It declared that the existence of a contract between the parties did not prevent the commission of a tort by one against another and did not foreclose damages arising therefrom. In support, the Supreme Court cited Singson vs. Bank of the Phil. Islands and Air France vs. Carras

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