G.R. No. 156262 - Tuazon vs. Heirs of Ramos

Case Summary (G.R. No. 156262)

Procedural Posture and Relief Sought

Petitioners filed a Petition for Review under Rule 45 seeking reversal of the CA’s July 31, 2002 decision that affirmed the RTC’s judgment holding petitioners civilly liable. The RTC had rendered judgment ordering spouses Leonilo and Maria Tuazon to pay plaintiffs specified sums (principal, interest, attorney’s fees, moral damages, and costs). Petitioners appealed only the adverse civil liability finding; they previously were acquitted in consolidated criminal proceedings connected to these transactions.

Core Facts as Found by the Courts Below

Respondents alleged that between May 2 and June 5, 1988 the Tuazon spouses purchased 8,326 cavans of rice from Bartolome Ramos; only 4,437 cavans had been paid for, leaving 3,889 cavans unpaid (valued at P1,211,919.00). Payment was allegedly made by several Traders Royal Bank checks that were later dishonored for insufficiency of funds. The courts found that Petitioner Maria Tuazon indorsed the checks in favor of Ramos. Respondents alleged that, anticipating suit, the Tuazons made simulated sales of real properties and vehicles to defeat creditors. Petitioners denied personal purchase liability, contending that they were agents of Magdalena Ramos (or otherwise that Evangeline Santos was the actual buyer and drawer of the checks), sought to implead Santos as an indispensable party, and maintained that transfers of property were for value and in good faith.

Trial Court Findings and Court of Appeals Ruling

The RTC found in favor of plaintiffs/respondents and against the Tuazon defendants, imposing monetary liability and damages. The CA dismissed the petitioners’ appeal and affirmed the RTC. The CA credited findings that petitioners were the buyers of the rice and that Maria Tuazon indorsed the checks, thereby incurring liability as indorser. The CA denied petitioners’ contention that Evangeline Santos was an indispensable party whose absence was fatal to respondents’ claim.

Issues Presented to the Supreme Court

Two principal issues were raised: (1) whether the CA erred in ruling that petitioners were not agents of respondents (i.e., whether an agency relationship existed); and (2) whether the CA erred in rendering judgment against petitioners despite respondents’ failure to include Evangeline Santos, who was alleged to be an indispensable party.

Legal Standard for Agency and Burden of Proof

The Court reiterated the elements and nature of agency under Article 1868 of the New Civil Code: mutual consent (express or implied) by principal and agent; an object consisting of performing a juridical act vis-à-vis third persons; representation such that the agent acts not for himself but on behalf of another; and the limitation that the agent acts within granted authority. Agency is a matter of representation and intent; it cannot be presumed and must be proved by the party asserting it. Declarations by alleged agents are generally insufficient to establish the existence or scope of authority. Factual findings of the trial court, especially when affirmed by the CA, are binding absent sufficient reason to depart.

Application of Agency Law to the Facts

The Court found no reversible error in the factual conclusions of the courts below that the petitioners themselves were the purchasers and not mere agents of the seller. The petitioners failed to prove the existence, nature, or scope of any alleged agency. Critically, petitioners had themselves sued Evangeline Santos in a separate collection action in their own names, which the Court viewed as inconsistent with the asserted status as agents acting on behalf of a principal; if they had been agents, they should have prosecuted any claim against Santos for and in the name of the principal under Section 2, Rule 3 (real party in interest). This conduct undermined their agency defense.

Indorser Liability under the Negotiable Instruments Law and Indispensable Party Analysis

The Court treated the substantive basis of respondents’ action as the petitioners’ failure to pay the purchase price and relied on the Negotiable Instruments Law provisions concerning indorsements. Under Sections 31 and 63, an indorsement is made by signature on the instrument and a person signing in a capacity oth

Case Syllabus (G.R. No. 156262)

Case Caption and Procedural Posture

Reported at 501 Phil. 695; Third Division; G.R. No. 156262; decision rendered July 14, 2005.
Petitioners: Maria Tuazon, Alejandro P. Tuazon, Melecio P. Tuazon, spouses Anastacio and Mary T. Buenaventura.
Respondents: Heirs of Bartolome Ramos (substituted after Bartolome Ramos died before pretrial).
Nature of action: Petition for Review under Rule 45 of the Rules of Court, attacking the Court of Appeals (CA) July 31, 2002 Decision (CA-G.R. CV No. 46535) which affirmed the Regional Trial Court (RTC), Branch 34, Gapan, Nueva Ecija.
Relief sought: Petitioners sought reversal of CA judgment that affirmed RTC finding them civilly liable to respondents for unpaid purchase price of rice and for damages, attorney’s fees and costs.
Supreme Court disposition: Petition denied; assailed Decision affirmed; costs against petitioners. (Final line of the Court’s ruling: "WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED.")

Central Legal Question / Essence of the Case

At core, the case concerns collection of a sum of money arising from alleged failure of petitioners to pay for rice purchased from respondents’ predecessor-in-interest, and whether the drawer of the checks (Evangeline Santos) was an indispensable party or whether petitioners (who indorsed the checks) could be held liable without impleading the check drawer.
The Court framed the matter as a suit directed against the debtor who indorsed checks in payment of an obligation, not necessarily against the drawer of those checks.

Facts as Found by the Courts

Between May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon allegedly purchased a total of 8,326 cavans of rice from Bartolome Ramos (deceased predecessor-in-interest of respondents).
Of the total, 4,437 cavans were alleged to have been paid for, leaving unpaid 3,889 cavans valued at P1,211,919.00.
In purported payment, the spouses Tuazon issued several Traders Royal Bank checks that, when presented for encashment, "bounced" due to insufficiency of funds.
Respondents alleged that prior to issuing the checks spouses Tuazon knew they had no available funds to support the checks and failed to provide payment despite repeated demands.
Respondents further alleged that, anticipating suit, spouses Tuazon conspired with other defendants to defraud creditors by executing fictitious or simulated sales of properties and vehicles to spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon, resulting in cancellation of titles issued in the names of spouses Tuazon and issuance of new titles in the names of the transferees.
Defendants (petitioners) denied purchase of rice from Bartolome Ramos, asserting instead that Magdalena Ramos (wife of the deceased) owned and traded the merchandise and that Maria Tuazon was merely her agent.
Petitioners alleged Evangeline Santos was the actual buyer who issued the checks to Maria Tuazon and contended that Santos was an indispensable party who should have been impleaded.
Petitioners insisted that they received the checks in good faith from Evangeline Santos and turned them over to Ramos without knowledge that they lacked funds.
Petitioners also argued that the purported sales of several properties were for value, in good faith, made before the instant suit, and therefore not simulated or fictitious.
Petitioners filed separate civil action(s) against Evangeline Santos for collection of the amounts represented by the bounced checks and sought consolidation of that action with the present case; the RTC denied their motion to implead Santos.

Procedural History and Related Proceedings

Civil and criminal cases were filed by respondents against spouses Tuazon; the cases were later consolidated and amended to include spouses Anastacio and Mary Buenaventura, with Alejandro and Melecio Tuazon as additional defendants.
Bartolome Ramos died before pretrial; his heirs substituted as plaintiffs/respondents.
Petitioners were acquitted in all three of the consolidated criminal cases; they appealed only the RTC decision finding them civilly liable.
RTC denied petitioners’ Motion to file a third-party complaint against Evangeline Santos.
CA affirmed the RTC decision.
The case was deemed submitted for decision by the Supreme Court: petitioners’ Memorandum received Sept. 8, 2003; respondents’ Memorandum received Sept. 5, 2003.

Trial Court (RTC) Decretal Disposition (as affirmed)

The RTC, Branch 34, Gapan, Nueva Ecija, rendered judgment in favor of plaintiffs (heirs of Bartolome Ramos) and against defendants spouses Leonilo and Maria Tuazon, ordering the defendants:
- To pay the plaintiffs the sum of P1,750,050.00, with interests from the filing of the second amended complaint;
- To pay P50,000.00 as attorney’s fees;
- To pay P20,000.00 as moral damages;
- To pay the costs of suit.
The decretal portion quoted: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as follows: '1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint; 2. The sum of P50,000.00, as attorney's fees; 3. The sum of P20,000.00, as moral damages; 4. And to pay the costs of suit.'"

Court of Appeals Decision and Reasoning

The CA (Seventeenth Division; penned by Division chairman Justice Roberto A. Barrios, concurred in by Justices Bienvenido L. Reyes and Edgardo F. Sundiam) affirmed the RTC judgment on July 31, 2002 (CA-G.R. CV No. 46535).
The CA sustained the RTC’s finding that petitioners failed to prove the existence of an agency relationship between respondents and spouses Tuazon.
The CA disbelieved petitioners’ contention that Evangeline Santos should have been impleaded as an indispensable party.
The CA observed that all the checks in question had been indorsed by Maria Tuazon; by indorsing the checks, Maria Tuazon became liable to subsequent holders for the amounts stated in the checks, an