Case Summary (G.R. No. 167552)
Petitioner
Eurotech sold various products to Impact Systems between January and April 1995 and later agreed to sell a Selwood Spate 100D sludge pump upon security for outstanding indebtedness. Eurotech contends it was deceived and that Edwin exceeded his authority (or personally bound himself) when executing the Deed of Assignment, thereby incurring personal liability under Article 1897 of the New Civil Code and by reason of alleged fraudulent conduct by the Cuizon brothers.
Respondents
Erwin H. Cuizon is the sole proprietor of Impact Systems Sales; Edwin B. Cuizon is the sales manager and signed the Deed of Assignment as agent for Impact Systems. Edwin maintained he acted in his capacity as agent and therefore is not a real party in interest and should be dropped as defendant. Respondents also point to ratification and the principal–agent relationship as recognized by petitioner.
Key Dates and Procedural Posture
Relevant transactions: January–April 1995 (initial sales); 28 June 1995 (Deed of Assignment executed); 30 June 1995 (invoice/delivery and down payment). Procedural history: writ of preliminary attachment granted 8 January 1997; Edwin answered 25 June 1997 alleging lack of real party status; trial court ordered Edwin dropped as defendant on 29 January 2002; Court of Appeals affirmed 10 August 2004; petition for review to the Supreme Court denied and affirmance ordered (petition dismissed, records remanded to continue proceedings against Erwin).
Applicable Law and Authorities
Constitutional framework: 1987 Philippine Constitution (applicable as the decision date is post-1990). Statutory and judicial authorities relied upon in the decision: New Civil Code (Article 1868 regarding agency; Article 1897 regarding agent’s personal liability), Rule 3 of the Revised Rules of Court (real party in interest), and relevant jurisprudence and secondary authorities cited in the decision (including Yu Eng Cho v. Pan American, Philippine Products Co. v. Primateria, and textbook authorities on agency).
Undisputed Factual Findings
The parties do not dispute the existence of an agency relationship: Edwin served as sales manager and signed the Deed of Assignment that expressly indicated his representative capacity for Impact Systems. Eurotech accepted a down payment from Impact Systems after the Deed of Assignment and delivered the sludge pump. Impact Systems collected receivables from Toledo Power Corporation thereafter; petitioner alleges respondents collected funds in derogation of the Assignment and failed to fully pay petitioner, triggering the present suit.
Issue Presented to the Court
Whether Edwin, who signed the Deed of Assignment as sales manager of Impact Systems, acted beyond his authority or otherwise bound himself personally so as to be liable to Eurotech under Article 1897 of the New Civil Code, and whether the trial court erred in dropping Edwin as a defendant.
Legal Standard on Agency and Agent’s Liability
The decision reiterates established agency principles: agency is representation by which an agent acts for and on behalf of a principal; the legal effect of such acts ordinarily binds the principal (qui facit per alium facit per se). Elements of agency include consent, object (juridical act related to a third person), representative action, and action within the agent’s authority. Article 1897 provides that an agent acting as such is not personally liable unless (1) he expressly binds himself, or (2) he exceeds his authority without giving sufficient notice of such limitation to the third party.
Court’s Analysis — Application of Article 1897 and Managerial Authority
The Court found that Edwin did not fall within either exception of Article 1897. The Deed of Assignment explicitly showed Edwin acted in his capacity as sales manager for Impact Systems. The Court emphasized the characteristic breadth of authority attendant to a managerial position: a manager is presumed to possess liberal powers to enter into contracts reasonably necessary or requisite for the protection of the principal’s business. Given Eurotech’s refusal to deliver the sludge pump without assurance of payment, the execution of the Deed of Assignment by Impact Systems’ sales manager was a transaction reasonably necessary to protect the principal’s business interests. The Court reasoned that, in that context, Edwin acted within his authority and did not expressly bind himself personally.
Court’s Analysis — Ratification and Knowledge of Principal
The Court also relied on facts showing ratification and knowledge by the principal and the seller: Impact Systems made a down payment two days after the Deed of Assignment, and petitioner accepted the down payment and delivered the pump. This conduct evidenced ratification of the agent’s act and petitioner’s awareness of the principal’s involvement, undermining petitioner’s contention that it was deceived or that Edwin had misrepresented his authority. The existence of ratification and petitioner’s conduct supported the conclusion that Edwin acted as agent, not personally.
Court’s Reasoning on Fraud and Joint Liability Claims
Petitioner alleged a fraudulent scheme and conspiracy betwe
...continue readingCase Syllabus (G.R. No. 167552)
Case Citation and Court Composition
- Reported at 550 Phil. 165, Third Division; G.R. No. 167552; Decision promulgated April 23, 2007.
- Decision penned by Justice Chito A. (Chico-) Nazario.
- Concurring: Justices Ynares-Santiago (Chairperson), Austria-Martinez, Callejo, Sr., and Nachura.
- The Court reviewed the Decision of the Court of Appeals dated August 10, 2004 and its Resolution dated March 17, 2005 in CA-G.R. SP No. 71397 (Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez), which affirmed the trial court’s Order dated January 29, 2002 of Judge Antonio T. Echavez, Branch 8, Regional Trial Court, Cebu City, dropping respondent Edwin B. Cuizon as a party defendant.
Parties and Roles
- Petitioner: Eurotech Industrial Technologies, Inc., an importer and distributor of European industrial equipment in the Philippines.
- Respondents: Erwin H. Cuizon — proprietor of Impact Systems Sales (a sole proprietorship); Edwin B. Cuizon — sales manager of Impact Systems and impleaded in the court a quo in his capacity as sales manager.
- Other persons referenced: Alberto de Jesus — General Manager of petitioner; Toledo Power Corporation — debtor of Impact Systems for assigned receivables.
Underlying Commercial Transactions
- Between January and April 1995, petitioner sold various products to Impact Systems allegedly amounting to P91,338.00.
- Respondents sought to purchase one unit of Selwood Spate 100D sludge pump, valued at P250,000.00.
- Respondents made a down payment of P50,000.00.
- Petitioner withheld delivery of the sludge pump until full settlement of Impact Systems’ indebtedness to petitioner.
Deed of Assignment and Delivery
- On June 28, 1995, respondent Edwin (signed along with Alberto de Jesus for petitioner) executed a Deed of Assignment of receivables in favor of petitioner, with pertinent recitals:
- Assignor (Impact Systems Sales) had receivables from Toledo Power Corporation amounting to P365,000.00 for the pump purchase.
- Assignor assigned, transferred, and conveyed those receivables to the Assignee (petitioner).
- The Assignee accepted the assignment. (Annex "G"; records, p. 17)
- Following execution of the Deed of Assignment, petitioner delivered the sludge pump to respondents, evidenced by Invoice No. 12034 dated June 30, 1995. (Annex "H"; records, p. 18)
Alleged Collection by Respondents from Toledo Power Corporation
- Despite the Deed of Assignment, respondents allegedly collected the receivable from Toledo Power Corporation in the amount of P365,135.29.
- Evidence cited: Check Voucher No. 0933 prepared by Toledo Power Corporation (Annex "I"; records, p. 19) and an official receipt issued by Impact Systems dated August 15, 1995 (Annex "J"; records, p. 20).
Demands, Partial Payments, and Final Demand Letter
- Petitioner made repeated demands on respondents to pay outstanding obligations.
- Respondents made partial payments to petitioner in response to demands.
- On October 7, 1996, petitioner’s counsel sent a final demand letter stating that as of June 11, 1996, respondents’ total obligations amounted to P295,000.00, excluding interests and attorney’s fees. (Annex "L"; records, p. 22)
Commencement of Suit and Early Procedural Steps
- Petitioner filed a complaint for sum of money, damages, with application for preliminary attachment against respondents before the Regional Trial Court of Cebu City. The case was raffled to Branch 8. (Records)
- On January 8, 1997, the trial court granted petitioner’s application for a writ of preliminary attachment. (Records, p. 27)
- On June 25, 1997, respondent Edwin filed his Answer:
- He admitted the sale transactions from January to April 1995.
- He disputed the claimed total amount of indebtedness, asserting it was only P220,000.00. (Records, pp. 38–41; p. 38)
- He raised special and affirmative defenses, principally that he was not a real party in interest because he acted merely as agent of Impact Systems with petitioner’s knowledge; his status as sales manager and being sued in that capacity was alleged in the Complaint (paras. 1.2 and 1.3). (Records, p. 1)
Motions, Defaults, and Pre-trial Proceedings
- On June 26, 1998, petitioner filed a Motion to Declare Defendant Erwin in Default with Motion for Summary Judgment.
- The trial court declared respondent Erwin in default for failure to answer within the prescribed period. (Records, p. 50)
- The trial court denied petitioner’s motion for summary judgment in its Order dated August 31, 2001 and set pre-trial for October 16, 2001. (Records, p. 61)
- Conduct of pre-trial was deferred pending resolution of Edwin’s special and affirmative defenses; Edwin’s counsel requested that those defenses be treated as a Motion to Dismiss. (Order dated October 16, 2001; records, p. 78)
- Edwin filed a Memorandum in support of his defenses (records, pp. 82–86); petitioner filed an opposition Memorandum dated November 16, 2001 (records, pp. 87–91).
Trial Court Order Dropping Edwin (January 29, 2002) — Findings and Rationale
- The trial court studied Annex "G" (Deed of Assignment) and Annex "H" (invoice/down payment) and concluded:
- Edwin acted on behalf of or represented Impact Systems when signing the Deed of Assignment.
- Impact Systems Sales is a sole proprietorship owned by Erwin H. Cuizon; the Complaint showed Erwin as proprietor.
- The Deed of Assignment was dated June 28, 1995; Annex "H" (invoice/down payment) was dated June 30, 1995 — two days later — showing that Impact Systems (the principal) ratified Edwin’s act.
- Petitioner accepted the down payment of P50,000.00, indicating petitioner knew of and accepted the principal’s ratification.
- Given ratification, petitioner could not claim deception by Edwin, nor that Edwin acted in excess of his powers.
- The trial court directed that Edwin be dropped as party defendant because he was not a real party in interest. (Order dated January 29, 2002; records, pp. 95–96)
Court of Appeals Proceedings and Ruling
- Petitioner appealed to the Court of Appeals, which affirmed the trial court’s January 29, 2002 Order. (CA Decision dated August 10, 2004)
- The CA’s dispositive language: WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED. (Rollo, p. 35)
- Petitioner’s motion for reconsideration at the CA was denied in a Resolution promulgated March