G.R. No.

167552             April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,

vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.

FACTS:

Eurotech Industrial Technologies Inc. (Eurotech, for brevity), petitioner, is engaged in

the business of importation and distribution of various European industrial equipment for
customers here in the Philippines. The respondents in this case are full-blood brothers,
Edwin Cuizon (Edwin) who is the sales manager and Erwin Cuizon (Erwin), the
proprietor of the Impact Systems Sales.

Impact Systems is one of the customers of the Eurotech for various products since
1995. It sought to buy from the latter one unit of sludge pump valued at ₱250,000.00
making a down payment of ₱50,000.00. When the sludge pump arrived, Eurotech
demanded full payment from Impact Systems before the item could be delivered to the
latter. Thus, respondent EDWIN and Alberto de Jesus, general manager of Eurotech
executed a Deed of Assignment of receivables in favor of petitioner, that the latter,
being the assignee, would receive from Toledo Power Corporation the amount of
₱365,000.00.

However, Impact Systems, despite the existence of the Deed of Assignment, proceeded
to collect from Toledo Power Company. Alarmed by this development, Eurotech made
several demands upon respondents to pay their obligations. Although Impact Systems
was able to make partial payments, but it failed to pay the full obligation to Eurotech
despite demand letters sent by the latter. Because of respondents’ failure to abide by
said final demand letter, Eurotech instituted a complaint.

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 or not Edwin acted beyond his authority as agent of Impact Systems when he
signed the Deed of Assignment in behalf of the latter, thereby binding himself personally
liable to Eurotech.

RULING

No. Edwin did not act beyond his authority when he signed the Deed of Assignment,
hence he is not personally liable to Eurotech.

Article 1897 of the New Civil Code provides that an agent who acts as such is not
personally liable to the party with whom he contracts except when the agent expressly
binds himself to the obligation or he exceeds his authority. Either of these two, Edwin
does not fall within any of the exceptions.

The powers of an agent are particularly broad in the case of one acting as a general
agent or manager; such a position presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of judgment and discretion in transactions
and concerns which are incidental or appurtenant to the business entrusted to his care
and management. In the absence of an agreement to the contrary, a managing agent
may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management.

Edwin acted well-within his authority when he signed the Deed of Assignment. Such act
was considered reasonably necessary" or was required in order for him to protect the
business of his principal. Had he not acted in the way he did, the business of his
principal would have been adversely affected and he would have violated his fiduciary
relation with his principal, hence it follows that Edwin is not a real party in interest who
should be impleaded in this case.

PRINCIPLE/S ENUNCIATED BY THE SUPREME COURT

1. The Contract of Agency is an extension of the personality of the principal

This is related to Article 1868 which provides that “ By the contract of agency a
person binds himself to render some service or to do something in representation
or on behalf another, with the consent or authority of the latter.

2. The basis of agency is representation

This is related to Article 1868 which provides that “ By the contract of agency a
person binds himself to render some service or to do something in representation
or on behalf another, with the consent or authority of the latter.

3. The principal is liable in cases when the agent acted within the bounds of his
authority, thus, the agent is absolved from any liability.

Article 1897 of the New Civil Code provides that “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 limit of his authority without giving such party
sufficient notice of his powers.

COMMENTS/OBSERVATIONS/REALIZATIONS

An agent, being an extension of the personality of the principal and who acted within
the scope of his authority is not personally liable against the third party. As long as
his acts is within the tenor of acts of administration which the principal is aware of
then, there is no liability to speak of personally against the agent.

Moreover, since the agent is given a wide range of authority such as in this case as
being a general manager where a high degree of confidence is reposed by the
principal to the agent, the latter may enter into any contracts such as the signing of
Deeds of Assignment as he deemed it reasonably necessary in carrying out the
business of his principal, unless there is agreement to the contrary.

In this case also, it seemed that petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. The language of Article
1897 is very clear that agent is absolved from any liability if the latter is acted within
the bounds of his authority, and that the third person cannot recover both from the
agent and the principal even if the agent is acting in excess of his authority.