Siredy Enterprises, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Conrado De Guzman, an architect-contractor, entered into a Deed of Agreement with Hermogenes B. Santos, who represented himself as an agent of petitioner Siredy Enterprises, Inc. (Siredy), a developer of Ysmael Village. The agreement stipulated that De Guzman would construct 80 single and 18 duplex housing units at Ysmael Village for a total contract price of P4,842,000.00. Siredy, through its president Ismael E. Yanga, Sr., had issued an undated Letter of Authority to Santos, authorizing him to negotiate and enter into contracts to build housing units on Siredy's subdivision lots and to sell lots. From October 1978 to April 1990, De Guzman constructed 26 units, 13 of which were fully paid, but 13 remained unpaid with a total outstanding balance of P412,154.93, as confirmed by Santos. De Guzman's attempts to collect from Siredy, Yanga, and Santos were unsuccessful. Procedural History: The Regional Trial Court (RTC) dismissed the case against Siredy and Yanga, ruling that they were not parties to the Deed of Agreement and had not benefited from it, thus invoking the doctrine of privity of contract. The RTC held Santos solely liable. On appeal, the Court of Appeals (CA) reversed the RTC decision, finding that the Letter of Authority constituted Santos as Siredy's agent with the power to enter into construction contracts, making Siredy liable. The CA ordered Siredy to pay De Guzman the unpaid amount. The Petition: Siredy filed a petition for review with the Supreme Court, assailing the CA's decision, arguing that a valid agency was not constituted, that the CA failed to consider a vital provision in the Deed of Agreement, and that De Guzman violated the contract.
Issue(s)
Whether Hermogenes B. Santos was a duly constituted agent of Siredy with authority to enter into contracts for the construction of residential units and bind Siredy to the Deed of Agreement. Whether Siredy can be held liable under the terms of the Deed of Agreement, assuming it was bound by Santos' acts. Whether the Court of Appeals erred in holding Siredy liable despite its alleged lack of involvement in the construction business and alleged defects in the Letter of Authority; and whether De Guzman violated the Deed of Agreement.
Ruling
The Supreme Court denied the petition for lack of merit and affirmed the decision of the Court of Appeals. Petitioner Siredy Enterprises, Inc. was ordered to pay Conrado de Guzman actual damages in the amount of P412,154.93, with legal interest thereon from the time the case was filed until its full payment.
Ratio Decidendi
On the issue of agency and Santos' authority: The Court held that a valid agency was created between Siredy and Santos. The Letter of Authority executed by Yanga, as president of Siredy, clearly and unequivocally constituted Santos as an agent authorized to negotiate and enter into contracts to build housing units on Siredy's subdivision lots. The Court emphasized that the basis of agency is representation, and the agent's acts within the scope of authority have the same legal effect as if done by the principal. The Court found that the Deed of Agreement was entered into by De Guzman based on the authority granted to Santos by Siredy through the Letter of Authority. Petitioner's contention that its business was only the sale of lots was debunked by its Articles of Incorporation, which allowed it to erect buildings and houses. The Court reiterated the principle that for third persons, an act is deemed within the scope of an agent's authority if it is within the terms of the power of attorney as written, even if the agent exceeded the limits of authority according to an understanding between the principal and agent, citing Article 1900 of the Civil Code. On Siredy's liability under the Deed of Agreement: The Court found that Siredy was bound by the contract through the representation of its agent, Santos. The Court noted that De Guzman, as a third party, had no knowledge of any specific instructions or agreements between Siredy and Santos beyond what was stated in the written Letter of Authority. The Court also addressed Siredy's belated assertion that the Letter of Authority was defective and needed reformation, stating that such an argument deserved scant consideration as Yanga, being a doctor and businessman, understood the document he signed, and there was no evidence of abrogation or withdrawal of power conferred on Santos. The Court also dismissed Siredy's claim of implied revocation of the Letter of Authority, as De Guzman was the one who instituted the civil case. On the alleged error of the Court of Appeals and the alleged violation of the Deed of Agreement by De Guzman: The Court addressed Siredy's arguments regarding its lack of involvement in the construction business and the alleged defects in the Letter of Authority, essentially reiterating its stance on the validity and binding nature of the agency agreement. The Court also held that the issue of De Guzman's alleged violation of the Deed of Agreement was raised for the first time on appeal and therefore could not be considered. The Court reiterated the rule that a question not raised in the lower courts cannot be allowed to be raised for the first time on appeal without offending basic rules of fair play, justice, and due process. The substance of Siredy's defense before the lower courts was its denial of liability under the Deed of Agreement, not an allegation of De Guzman's violation.
Main Doctrine
A principal is bound by the acts of its agent when the agent acts within the scope of its written authority, even if the agent exceeds the limits of authority according to an understanding between the principal and agent, as far as third persons are concerned. The principal is also bound if the agent's acts are within the terms of the power of attorney as written.