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Petitioner’s argument:
Cites Art. 1897, NCC
o “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.”
CA failed to appreciate the effect of respondent ERWIN’s act of collecting the receivables from the Toledo Power Corp
notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems
While said collection did not revoke the agency relations of respondents, petitioner insists that ERWIN’s action repudiated
EDWIN’s power to sign the Deed of Assignment.
As EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally
liable for the obligations of his principal.
Petitioner directs the attention of this Court to the fact that respondents are bound not only by their principal and agent
relationship but are in fact full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to
defraud petitioner
EDWIN’s argument:
that he is not a real party in interest in this case and it was proper for the trial court to have him dropped as a defendant.
He insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his status as such is known even to
petitioner as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business venture.
Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of
Impact Systems in said transaction.
Issue: Whether or not an agent who acted beyond his authority is personally liable to a third person?
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal,
and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim
against respondent EDWIN “does not hold that in case of excess of authority, both the agent and the principal are liable to the
other contracting party.”
o To reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the
bounds of his authority. Under this, the agent is completely absolved of any liability. The second part of the said
provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself
or he exceeds the limits of his authority without giving notice of his powers to the third person. However, 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.
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any liability
arising from the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real
party in interest is one who “stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit.” In this respect, we sustain his exclusion as a defendant in the suit before the court a quo.
Notes:
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. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence—qui facit
per alium facit per se.
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.
Cervantes vs CA
Facts:
March 27, 1989, private respondent PAL issued to petitioner Cervantes a round trip plane ticket for Manila-Honolulu-Los
Angeles-Honolulu-Manila, which ticket expressly provided an expiry date of one year from issuance
The issuance was in compliance with a Compromise Agreement entered into between the contending parties in two previous
civil cases
On March 23, 1990, Four days before the expiry date of the ticket, petitioner used it
Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return ticket for April 2, 1990
with the PAL office
Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering he would be there on April
2, 1990, petitioner made arrangements with PAL for him to board the flight in San Francisco instead of boarding in Los Angeles
On the day of the flight, when petitioner checked in at the PAL counter in San Francisco, he was not allowed to board.
The PAL personnel concerned marked the following notation on his ticket: “TICKET NOT ACCEPTED DUE EXPIRATION OF
VALIDITY”
Petitioner filed a complaint for damages, for breach of contract of carriage before the RTC of Surigao del Norte
Complaint was dismissed for lack of merit. Petitioner appealed to CA, but CA upheld the dismissal of the case.
CA ruled that:
“The question is: ‘Did these two (2) employees, in effect, extend the validity or lifetime of the ticket in question? The answer is
in the negative. Both had no authority to do so.
Appellant knew this from the very start when he called up the Legal Department of appellee in the Philippines before he left for
the United States of America. He had first hand knowledge that the ticket in question would expire on March 27, 1990 and that
to secure an extension, he would have to file a written request for extension at the PAL’s office in the Philippines”
Petitioner’s contention:
Petitioner theorized that the confirmation by the PAL’s agents in Los Angeles and San Francisco changed the compromise
agreement between the parties.
Issue: Whether or not acts of an agent beyond his power or authority bind the principal?
Ruling: No.
Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless
the latter ratifies the same expressly or impliedly.
Furthermore, when the third person (petitioner) knows that the agent was acting beyond his power or authority, the principal
cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is
not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification
Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL
was necessary, he cannot use what the PAL agents did to his advantage. According to the CA, the said agents acted without
authority when they confirmed the flights of the petitioner.
The admission by Cervantes that he was told by PAL’s legal counsel that he had to submit a letter requesting for an extension
of the validity of subject tickets was tantamount to knowledge on his part that the PAL employees had no authority to extend the
validity of subject tickets and only PAL’s legal counsel was authorized to do so.