Title
Gozun vs. Mercado
Case
G.R. No. 167812
Decision Date
Dec 19, 2006
Dispute over unpaid campaign materials and cash advance in 1995 Pampanga elections; Supreme Court ruled respondent liable for P924,906 balance.
unpaid campaign materials
authorization
outstanding debts

Case Summary (G.R. No. 167812)

Factual Background

Petitioner owned JMG Publishing House, a printing business in San Fernando, Pampanga. In the 1995 local elections respondent ran for governor of Pampanga. Petitioner submitted draft samples and a price quotation of campaign materials to respondent at respondent's request and began printing after being told by respondent's wife that respondent had approved the quotation. Petitioner printed posters bearing respondent's photograph, leaflets containing the party slate, sample ballots, poll watcher identification cards, and stickers. To satisfy the urgent job order petitioner subcontracted portions of the work to Metro Angeles Printing and to St. Joseph Printing Press, owned by his daughter and mother respectively. Petitioner delivered the campaign materials to respondent's headquarters in San Fernando. On March 31, 1995, respondent's sister-in-law, Lilian Soriano, obtained from petitioner a "cash advance" of P253,000 and signed petitioner's diary receipt acknowledging receipt. Petitioner later sent respondent a Statement of Account for P2,177,906 itemized into amounts for JMG Publishing House, Metro Angeles Printing, St. Joseph Printing Press, and the P253,000 cash advance. On August 11, 1995 respondent's wife paid petitioner P1,000,000 and petitioner issued a receipt. Respondent thereafter failed to pay the balance despite demands.

Trial Court Proceedings

Petitioner filed suit in the Regional Trial Court of Angeles City on November 25, 1998 to collect P1,177,906 plus inflationary adjustment and attorney's fees. Respondent denied entering into any contract with petitioner for printing campaign materials and alleged that the materials were donations from family, friends, and political supporters. Respondent also denied authorizing Lilian to obtain the P253,000 cash advance. At trial petitioner testified regarding the printing, subcontracting, delivery, the diary receipt signed by Lilian, the statement of account, and the P1,000,000 payment by respondent's wife. Respondent testified that petitioner volunteered as an over-all coordinator, that campaign materials presented by his campaign manager were partly donated, that his wife was not authorized to contract, and that he only learned of petitioner's claim upon receipt of the complaint. The trial court found for petitioner and ordered respondent to pay P1,177,906 plus twelve percent interest per annum from filing until paid, and P50,000 as attorney's fees and costs.

Court of Appeals Ruling

The Court of Appeals reversed and dismissed the complaint for lack of cause of action. The appellate court held that petitioner failed to prove that Lilian was authorized by respondent to obtain the P253,000 cash advance because the receipt she signed did not specify in what capacity she received the money. Relying on Art. 1317, the Court of Appeals ruled that contracts entered in the name of another by one without authority are unenforceable. The appellate court further held that petitioner could not recover amounts claimed for Metro Angeles Printing and St. Joseph Printing Press because their owners were not impleaded and petitioner did not show authority to prosecute claims on their behalf. The court concluded that, after deducting the P1,000,000 partial payment by respondent's wife and excluding the P253,000 on the ground of unenforceability, petitioner had no recoverable claim against respondent.

Issues Presented

The principal issues were whether petitioner proved respondent's liability for the P253,000 cash advance and for the amounts owed to the three printing establishments, and whether petitioner was the real party in interest entitled to recover the subcontracted printing costs. Ancillary issues involved the nature and sufficiency of proof required to establish a principal's authority to an agent to borrow money, and the effect of partial payment by respondent's wife.

Parties' Contentions

Petitioner contended that he printed the campaign materials at respondent's request and on respondent's behalf, that Lilian acted with respondent's authority when she obtained the P253,000, and that respondent had clothed Lilian with apparent authority under Art. 1873 and relevant authorities such as Macke v. Camps. Petitioner maintained that he directly contracted with respondent and only subcontracted to fulfill the urgent order, making him the real party in interest to recover the full cost of materials. Respondent asserted he never authorized any loan or contract for campaign materials, that many materials were donations, that his wife lacked authority to enter into contracts for campaign expenses, and that petitioner could not enforce claims on behalf of subcontractors not named as plaintiffs.

Supreme Court's Ruling

The Supreme Court granted the petition, reversed the Court of Appeals Decision and Resolution, and reinstated the trial court Decision with modification. The Court held that petitioner proved by preponderance of evidence that he contracted directly with respondent for the printing and delivered the campaign materials, and that respondent received them and partially paid P1,000,000. The Court reduced the amount payable by respondent to P924,906, representing the total cost of printed materials delivered by petitioner (P1,924,906) less the partial payment of P1,000,000. The Court rejected petitioner’s claim for the P253,000 as enforceable against respondent, but sustained petitioner’s right to recover the costs of the materials produced by JMG Publishing House and the two subcontracted presses.

Legal Basis and Reasoning

The Court applied agency and contract principles under the Civil Code. It recognized the general rule that one may not be bound by contracts made in another's name without authority, citing Art. 1317. The Court reiterated that agency may be oral under Art. 1403, but that a special power of attorney is necessary for an agent to borrow money for another under Art. 1869, unless the act is urgent for preservation of administered things, which did not obtain. The Court agreed with the appellate court that the record did not establish a clear mandate from respondent authorizing Lilian to borrow P253,000 for him; the receipt bore Lilian's name alone and stated the amount was received "in behalf of Mrs. Annie Mercado," thus lacking an express indication of authority from respondent. The Court cited authorities including Lim Pin v. Liao Tian and Strong v. Gutierrez-Repide for the rule that special authority must be clear and, if not written, established by evidence beyond self-serving assertions. Consequently the P253,000 was unenforceable against respon

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