Philippine Products Co. v. Primateria Societe Anonyme
REITERATIONFacts
The Antecedents: Plaintiff Philippine Products Company (PPC) entered into an agreement with defendant Primateria Societe Anonyme Pour Le Commerce Exterieur (Primateria Zurich), a foreign juridical entity, for PPC to buy copra in the Philippines for Primateria Zurich's account. This agreement was extended multiple times until 1953. During this period, PPC shipped copra to foreign countries as instructed by Primateria Zurich, through its agents Primateria (Philippines) Inc. (Primateria Philippines), Alexander G. Baylin, and Jose M. Crame. As of May 30, 1955, the total amount due to PPC was P33,009.71. Primateria Zurich had paid P2,000.00 of this amount, leaving a balance of P31,009.71. It was undisputed that Baylin and Primateria Philippines acted as authorized agents of Primateria Zurich, and that Primateria Zurich had no license to transact business in the Philippines. Procedural History: PPC filed an action to recover P33,009.71 plus interest and attorney's fees. Primateria Zurich was declared in default for failure to file an answer. The trial court rendered judgment holding Primateria Zurich liable for P31,009.71 with legal interest and P2,000.00 for attorney's fees, but absolved Primateria Philippines, Alexander G. Baylin, and Jose M. Crame from liability. The Petition: PPC appealed the portion of the judgment absolving the three defendants, arguing that as agents of a foreign corporation transacting business without a license, they should be held personally liable for contracts made on behalf of the corporation.
Issue(s)
Whether Primateria Zurich may be considered a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law. Whether Primateria Zurich transacted business in the Philippines within the meaning of Sections 68 and 69 of the Corporation Law. Whether the agents of Primateria Zurich may be held personally liable on contracts made in its behalf.
Ruling
The Supreme Court affirmed the appealed judgment, holding that the agents of Primateria Zurich were not personally liable. The Court found that the plaintiff had already secured a judgment against the principal, Primateria Zurich, for the entire amount due, and had not appealed this portion of the judgment. Furthermore, the Court found no proof that the agents exceeded the limits of their authority as provided by Article 1897 of the New Civil Code.
Ratio Decidendi
On the issue of agent liability: The Court held that Article 1897 of the New Civil Code governs the personal liability of an agent. This article states that an agent 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 sufficient notice of his powers. In this case, there was no proof that the agents exceeded their authority. The principal, Primateria Zurich, did not raise this issue as a defense against its own liability. Therefore, the agents could not be held personally liable. On the issue of the nature of Primateria Zurich and its business transactions: The Court agreed with the lower court's conclusion that it was not sufficiently proven that Primateria Zurich was a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law, nor that a "societe anonyme" is a corporation. The Corporation Law recognizes a distinction between "societe anonyme" and corporations. Failing such proof, the "societe" could not be deemed to fall within the prescriptions of Section 68 of the Corporation Law. On the plaintiff's recourse against both principal and agents: The Court noted that the plaintiff had already obtained a judgment against the principal, Primateria Zurich, for the entire amount due. Since the plaintiff did not appeal this judgment, it had already secured its claim against the principal. The Court also pointed out that Article 1897 does not hold that both the agent and the principal are liable to the other contracting party in cases of excess of authority. The Court's affirmation of the judgment against the principal rendered the appeal against the agents moot, as the plaintiff had already been awarded the full amount it claimed.
Main Doctrine
A foreign corporation transacting business in the Philippines without the requisite license is not necessarily precluded from being sued, but its agents may not be held personally liable on contracts made in its behalf unless they expressly bind themselves or exceed their authority without sufficient notice to the other party, as provided by Article 1897 of the New Civil Code. The liability of the agent is generally premised on the inability to sue the principal or the principal's non-liability, absent express legislation.