EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v.

CUIZON
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v. CUIZON
G.R. No. 167552; April 23, 2007
Ponente: J. Chico-Nazario

FACTS:

From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to P91,338.00
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with
respondents making a down payment of P50,000.00. When the sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner.
Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner. Impact systems is owed by ERWIN Cuizon.

Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo Power Company the
amount of P365,135.29. Alarmed by this development, petitioner made several demands upon respondents to pay their
obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner's
counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents' total
obligations stood at P295,000.00 excluding interests and attorney's fees. Because of respondents' failure to abide by
said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case.
According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with
petitioner and the latter was very much aware of this fact.

ISSUE:
Whether the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems

HELD:

Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems

The Supreme Court held that 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. 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.

In this case at hand, the parties do not dispute the existence of the agency relationship between respondents ERWIN as
principal and EDWIN as agent.
WILLIAM UY and RODEL ROXAS, petitioners,
vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
G.R. No. 120465. September 9, 1999

Facts:

William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such
authority, they offered to sell the lands, located in Benguet to National Housing Authority (NHA) to be utilized and
developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition
of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a
series of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by
the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and
Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for
development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the
3 parcels of land. The NHA, through Resolution 2394, subsequently offered the amount of P1.225 million to the
landowners as daños perjuicios.

On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and
its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to
be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount
initially offered by NHA to petitioners as damages.

Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one
dismissing the complaint. It held that since there was “sufficient justifiable basis” in cancelling the sale, “it saw no
reason” for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and,
therefore, not the real parties-in-interest in the action before the trial court. Their motion for reconsideration having
been denied, petitioners seek relief from the Supreme Court.

ISSUES:
1. Whether or not there was legal basis for rescinding the sale.
2. Whether or not the respondent CA erred in dimissing the subject complaint, finding that the petitioners failed to join
as indispensable party plaintiff the selling lot-owners.

HELD:

1) Yes. The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated
on breach of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is
given to the injured party. Article 1191 states that “the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.” In the present case, the NHA did not
rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors did not
commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels
of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof the
cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause
arising from the realization that the lands, which were the object of the sale, were not suitable for housing.

Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the
immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting
parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the
particular reason of a contracting party which does not affect the other party. Ordinarily, a party’s motives for entering
into the contract donor affect the contract. However, when the motive predetermines the cause, the motive may be
regarded as the cause.

In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands
not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the
contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. SC held that the
NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in
the negation of the motive/cause thus rendering the contract inexistent. The Supreme Court denied the petition.

2) No. Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name
of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment
or the party entitled to the avails of the suit. “Interest,” within the meaning of the rule, means material interest, an
interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a
mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is
borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be
prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Where the action
is brought by an attorney-in-fact of a landowner in his name, (as in our present action) and not in the name of his
principal, the action was properly dismissed because the rule is that every action must be prosecuted in the name of the
real parties-in-interest (Section 2, Rule 3, Rules of Court).

Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly
damaged by the termination of the contract. Petitioners in this case purportedly brought the action for damages in their
own name and in their own behalf. An action shall be prosecuted in the name of the party who, by the substantive law,
has the right sought to be enforced. Petitioners are not parties to the contract of sale between their principals and NHA.
They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals. The rendering of such service did not make them parties to
the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as
against each other, the real parties-in-interest, either as plaintiff or defendant, in inaction upon that contract must,
generally, either be parties to said contract. Petitioners have not shown that they are assignees of their principals to the
subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have
not established any agreement granting them “the right to receive payment and out of the proceeds to reimburse
themselves for advances and commissions before turning the balance over to the principals.
ONG v. CA
G.R. No. 119858; April 29, 2003
Ponente: J. Carpio

FACTS:

That on or about July 23, 1990, Benito Ong, representing ARMAGRI International Corporation, conspiring and
confederating together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation
represented by its Accountant, DEMETRIO LAZARO, in the following manner, to wit: the said accused received in trust
from said SOLIDBANK Corporation, 10,000 bags of urea valued at P, 2,050,000 specified in a Trust Receipt Agreement
and covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil Corporation.

Under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or
remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold
immediately or upon demand.

However, Ong, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and
still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud,
willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own
personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of
P2,050,000.00 Philippine Currency.
Petitioner contends that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that
nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the
entrustee.

ISSUE:
Whether ARMAGRI Corp. violated the Trust Receipts Law

HELD:
No, ARMGAGRI Corp. did not violate the Trust Receipts Law

The Supreme Court held that the Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or
other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious:
corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls
on the human agent responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was
the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation
of the Trust Receipts Law falls on the human agent responsible for the violation.

Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First,
petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the
signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for
the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts.
FRANCISCO v GSIS

Facts: The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government
Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System
extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her
monthly instalments. The System itself was the buyer of the property in the foreclosure sale. The plaintiff’s father, Atty.
Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter
the System approved the request of Francisco to redeem the land through a telegram. Defendant received the payment
and it did not, however, take over the administration of the compound. The System then sent a letter to Francisco
informing of his indebtedness and the 1 year period of redemption has been expired. And the System argued that the
telegram sent to Francisco saying that the System has approved the request in redeeming the property is incorrect due
to clerical problems.

Issue: WON the System is liable for the acts of its employees regarding the telegram?

Held: Yes. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the
plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andal’s
apparent authority. Hence, even if it were the board secretary who sent the telegram, the corporation could not evade
the binding effect produced by the telegram. Knowledge of facts acquired or possessed by an officer or agent of a
corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not. Yet, notwithstanding this notice, the defendant System
pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges.
This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff,
constitutes in itself a binding ratification of the original agreement.