Mendoza v. Paule
REITERATIONFacts
The Antecedents: Engr. Eduardo M. Paule (PAULE), proprietor of E.M. Paule Construction and Trading (EMPCT), issued a Special Power of Attorney (SPA) to Zenaida G. Mendoza (MENDOZA) authorizing her to represent EMPCT in its transactions with the National Irrigation Administration (NIA), participate in bidding, and receive payments. EMPCT, through MENDOZA, was awarded Packages A-10 and B-11 of the NIA-CMIPP project. Manuel de la Cruz (CRUZ) met MENDOZA and subsequently entered into two Job Orders/Agreements with EMPCT, through MENDOZA, for the lease of his heavy equipment. PAULE later revoked the SPA. CRUZ could not be paid for equipment rentals as NIA remitted payments only to EMPCT. CRUZ demanded payment from MENDOZA and/or EMPCT. Procedural History: CRUZ filed a collection case against PAULE, Engr. Alexander Coloma, and NIA. PAULE filed a third-party complaint against MENDOZA, who in turn filed a cross-claim against PAULE for damages due to the "whimsical revocation" of the SPA, which allegedly led to estafa and B.P. Blg. 22 cases against her, financial difficulties, and reputational damage. PAULE later issued a second SPA to MENDOZA with broader powers. At the pre-trial, other parties were declared in default, and CRUZ presented evidence ex parte. The trial court ruled in favor of CRUZ, ordering PAULE to pay actual and moral damages and NIA to withhold payments to EMPCT. PAULE and MENDOZA appealed. The Court of Appeals dismissed CRUZ's complaint, holding that MENDOZA acted beyond her authority in engaging CRUZ's services and that CRUZ knew the limits of her authority. The CA also dismissed MENDOZA's appeal, finding that her cross-claim was not properly resolved and that PAULE's revocation was within his rights under Article 1920 of the Civil Code. The Petition: Both CRUZ and MENDOZA filed consolidated petitions with the Supreme Court, assailing the Court of Appeals' decision. MENDOZA argued that the CA erred in failing to resolve her motion to declare PAULE non-suited and her motion to present evidence ex parte on her cross-claim, and in its application of Article 1920 of the Civil Code. CRUZ argued that the CA's decision conflicted with previous rulings and that MENDOZA acted within her authority in hiring his services, citing a prior case where PAULE was held liable as MENDOZA's principal.
Issue(s)
Whether the Court of Appeals erred in dismissing Manuel de la Cruz's complaint and whether Engr. Eduardo Paule is liable for the obligations incurred by Zenaida G. Mendoza. Whether Zenaida G. Mendoza acted within the scope of her authority when she engaged the services of Manuel de la Cruz and whether Engr. Eduardo Paule's revocation of the Special Power of Attorney was valid and made in good faith. Whether Zenaida G. Mendoza's cross-claim against Engr. Eduardo Paule was properly resolved.
Ruling
The Supreme Court granted the consolidated petitions, reversed and set aside the Court of Appeals' decision, and reinstated the trial court's decision finding Paule liable, with the modification that the trial court is ordered to receive evidence on Mendoza's counterclaim.
Ratio Decidendi
On the dismissal of Manuel de la Cruz's complaint and Engr. Eduardo Paule's liability: The Court held that the Court of Appeals erred in dismissing CRUZ's complaint. Records showed that PAULE and MENDOZA entered into a partnership for the NIA project, with PAULE contributing his contractor's license and expertise, and MENDOZA providing funds and managing suppliers and services. PAULE was present when MENDOZA discussed equipment lease with CRUZ and interposed no objection, indicating his acquiescence. Furthermore, PAULE reinstated MENDOZA as his attorney-in-fact with broader powers even after CRUZ filed his complaint, which contradicted his claim that MENDOZA exceeded her authority. The Court emphasized that PAULE's liability under the SPAs for transactions entered into by MENDOZA with third parties had been settled with finality in a previous case (G.R. No. 173275), and this disposition should apply to CRUZ as well, based on the principle of conclusiveness of judgment on identical issues. On the scope of Zenaida G. Mendoza's authority and the validity of the revocation: The Court found that MENDOZA was acting within the scope of her authority, or at least with apparent authority, when she hired CRUZ's services. The engagement of hauling services was necessary and incidental to the construction of canal structures under the NIA project. PAULE's revocation of the SPAs was deemed to be in evident bad faith. Since MENDOZA was responsible for funding and sourcing labor, materials, and equipment, the SPAs were essential for her to collect payments from NIA, which were necessary to complete the project and settle obligations. An agency cannot be revoked if it is necessary to fulfill an obligation already contracted, or if it is the means of fulfilling a bilateral contract. PAULE's revocation prevented MENDOZA from collecting payments, thereby breaching their partnership agreement and his contractual duty. On Zenaida G. Mendoza's cross-claim against Engr. Eduardo Paule: The Court held that the trial court erred in disregarding and dismissing MENDOZA's cross-claim (properly a counterclaim) against PAULE, and the appellate court erred in sustaining this dismissal. The revocation of the SPAs was done in bad faith, constituting a willful and deliberate breach of PAULE's contractual duty to his partner and to third parties with whom the partnership had contracted. PAULE's actions left MENDOZA to fend for herself and unduly revoked her authority to collect payments necessary for settling obligations. The Court reiterated that when a defendant has interposed a counterclaim, the plaintiff cannot dismiss the action to affect the defendant's right to relief on the counterclaim. The trial court was ordered to receive evidence on MENDOZA's counterclaim, as its exact amount had yet to be determined.
Main Doctrine
A partner, acting as an agent of the partnership, may bind the partnership and the other partners for acts performed within the scope of the agency, especially when the principal has clothed the agent with apparent authority and has not objected to the agent's actions. The revocation of an agency coupled with an interest or necessary to fulfill prior obligations is considered in bad faith and may render the principal liable for damages.