THIRD DIVISION
[G.R. No. 206047. June 2, 2014.]
ASAHI MOTORS, OWNED BY RONIE ONG, petitioner, vs. FIRST STANDARD LENDING CORPORATION, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Third Division, issued a Resolution datedJune 2, 2014, which reads as follows:
"G.R. No. 206047 (Asahi Motors, owned by Ronie Ong v. First Standard Lending Corporation). — This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the January 31, 2013 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 02853, which affirmed with modification the December 2, 2008 Decision 2 of the Regional Trial Court, Branch 37, Iloilo City (RTC), in Civil Case No. 04-28094, entitled "First Standard Lending Corporation, Plaintiff, v. Asahi Motors, Owned by Ronie Ong and managed by Eduardo Lao, Jr., and Audie Nalzaro Valdez and Mary Ann Valdez, Defendants."
The Facts:
In August, 2003, Engineer Audie Valdez (Audie) purchased a gray Toyota Hilux Surf with Motor No. 212344425, Chassis No. LN130003270 and Plate No. XGA 711, from Asahi Motors (Asahi).
On November 28, 2003, Audie secured a loan from First Standard Lending Corporation (First Standard) using the said motor vehicle as collateral. When he applied for the loan, the registration papers of the vehicle were still in the name of South Wing Heavy Industries Incorporated. Thus, Eduardo Lao, Jr. (Lao), as manager of Asahi, executed a notarized undertaking wherein he bound himself and Ronie Ong (Ong), the owner of Asahi, to submit to First Standard the Original Certificate of Registration, Official Receipt and Confirmation Letter from Audie within one month from November 28, 2003.
The undertaking also contained a warranty which stated that in case Asahi would fail to deliver the documents within the stipulated period, it should be held solidarily liable with Audit for the amount of the loan. The pertinent portions of the undertaking read:
I undertake to submit the original Certificate of Registration, Official Receipt and Confirmation Letter of Engr. Audie Valdez on or before one (1) month from date.
In case of failure on our company's part to deliver to First Standard Lending Corporation within the required one (1) month from date as herein stated, then, we warrant to be solidarily liable with Engr. Audie Valdez for whatever amount of loan that will be released by First Standard Lending Corporation in favor of Engr. Audie Valdez as mortgagor relative to one (1) unit motor vehicle.
[Emphasis supplied].
Relying on the said undertaking, First Standard released the amount of P250,000.00 out of the original amount of the loan applied for, less the advanced interest.
Thereafter, Valdez defaulted in the payment of his loan, while Asahi failed to deliver the certificate of registration covering the motor vehicle, official receipt and confirmation letter from Valdez within the agreed period. aHSTID
First Standard then sent a demand letter to Asahi for the payment of the outstanding obligation in the amount of P327,606.00 as of March 6, 2004. Despite the demand, no payment was made.
Consequently, on May 7, 2004, First Standard filed a complaint for breach of contract and damages with the RTC against Asahi, Ong, Lao, and Audie and Mary Ann Valdez (Spouses Valdez), praying that Asahi be declared solidarily liable with Spouses Valdez for the payment of P327,606.00 as well as actual damages and attorney's fees.
Asahi, Ong and Lao filed their Answer with counter-claim and cross-claim against Spouses Valdez, alleging that the latter were the sole and principal obligors under a chattel mortgage and promissory note.
In their answer, Spouses Valdez interposed the defense that they already paid the full purchase price of the motor vehicle and that, despite that, Asahi did not deliver to them its original certificate of registration and original official receipt.
In its December 2, 2008 Decision, the RTC ruled against Asahi. The pertinent portion of the decision reads:
WHEREFORE, foregoing premises considered, Judgment is hereby rendered in favor of the plaintiff and against the defendants Asahi Motors owned by Ronie Ong and managed by Edmundo Lao, Jr. solidarily liable with defendants spouses Audie Valdez and Mary Ann Valdez hereby ordering them to pay the plaintiff [First] Standard Lending Corporation:
1. Php327,606.00 with interest at the legal rate of 12% per annum from May 2004 until fully paid;
2. Php20,000.00 as temperate damages;
3. Php30,000 as attorney's fees;
4. Dismissing the counter-claim;
5. Dismissing the cross-claim;
Cost against the defendants;
SO ORDERED. 3
The RTC found that Asahi undertook to be bound solidarily with Spouses Valdez if it failed to deliver the pertinent documents to First Standard within the specified period. It could not escape the liability because it failed to deliver the said documents.
Not in conformity, Asahi interposed an appeal before the CA. On January 31, 2013, the CA promulgated the decision affirming with modification the RTC decision. The decretal portion of the CA decision reads: HAEDIS
WHEREFORE, the appeal is DISMISSED. The Decision dated December 2, 2008 of the Regional Trial Court, Sixth Judicial Region, Branch 37, Iloilo City, in Civil Case No. 04-28094 is AFFIRMED with MODIFICATION in that the award of temperate damages is deleted. Costs against defendant-appellant.
SO ORDERED. 4
The CA was of the view that, as manager, Lao was empowered inter alia to execute such undertaking in connection with Asahi's business of selling motor vehicles. The fact that Asahi, through Lao, had already previous dealings with First Standard was sufficient to give it reason to believe that Lao, as manager, was duly authorized to represent Ong, the owner, for the purpose stated in the undertaking. In fact, records showed that Lao was authorized by Ong to execute acts in the furtherance of the business such as receiving checks in favor of Asahi Motors and entering into contracts of sale with its customers.
The CA also stated that granting arguendo that Lao exceeded his authority, Ong manifested an implied ratification in his subsequent act of executing a special power of attorney in favor of Lao to represent him in the case before the RTC.
Hence, this petition anchored on the following:
GROUNDS:
I
THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN FINDING THAT AN AGENT CAN BIND THE PRINCIPAL TO SETTLE AN OBLIGATION IN THE ABSENCE OF A WRITTEN POWER OF ATTORNEY OR AUTHORITY TO DO SO.
II
THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN HOLDING THE OWNER OF AN ESTABLISHMENT SOLIDARILY LIABLE TOGETHER WITH THE MANAGER FOR ACTS DONE BY THE LATTER BEYOND THE SCOPE OF HIS WORK.5
Asahi argues that a closer look at the language and wording of the undertaking shows that there were two (2) particular acts that Lao bound himself to do. The first act, which was to submit the documents, was a part of Lao's work being the manager of Asahi. The second act of binding Ong solidarily liable as guarantor or surety to the obligation of Spouses Valdez was not within the scope of his authority. The reason is that Ong did not authorize him to create an obligation in the nature of surety or guaranty. In order for Lao to obligate Ong as guarantor or surety, a special power of attorney was needed, being required by Article 1878 of the Civil Code.
Asahi points out that there is no evidence that Ong had previously authorized Lao to create an obligation, that is, to pay the loan of a customer in case Asahi could deliver the registration papers on time. Although Lao had the implied authority to bind his principal in a contract of sale of motor vehicles, he did not have the authority to bind his principal in paying the loan of a customer who defaulted on his obligation. The implied powers or authority are those connected or related to transactions or business of the principal but not those that have no relation to his business such as creating an obligation by making him a surety or guarantor to a debt.
First Standard argues that the CA correctly ruled that Lao was acting within his authority as manager of Asahi. Asahi can neither deny responsibility arising from the said contract of undertaking, nor deny that such authority was conferred on his manager, after benefitting from the said transaction. Asahi gained from it because it accepted the proceeds of the loan as evidenced by the check received from First Standard. Asahi did not interpose any objection with regard to the act of its manager, Lao, when he executed the undertaking in order to exact the full payment of the motor vehicle purchased from it by Spouses Valdez.
First Standard also argues that although the signature of Ong was not shown in the agreement, he was still bound by the act, warranty, responsibility and obligation of Asahi's manager, Lao, who was acting within the scope of his authority when he entered into such undertaking. The agreement was not primarily to make Ong as guarantor or surety to the principal obligation of Spouses Valdez, but rather, it was an obligation with a penal clause in case of failure by Asahi and its manager, Lao, to comply with the obligation to deliver the required documents.
The Court's Ruling
The Court finds no reversible error in the decision of the CA in essentially sustaining the solidary liability of Asahi wish Spouses Valdez.
Asahi wants to wash its hands by insisting that Lao was not authorized to bind the company solidarily with Spouses Valdez. Granting that what Lao did was not in accordance with the ordinary business of selling cars, the fact is that First Standard would not have granted the loan to Spouses Valdez without such undertaking. It must be emphasized that when Spouses Valdez borrowed from First Standard with the purchased car as collateral, they could not submit the certificate of registration and official receipt to the lending company because they had not yet paid for the car. For First Standard to grant the loan to Spouses Valdez, it required an undertaking from Asahi that it would deliver the necessary documents. Asahi satisfied this requirement when its manager, Lao, executed and delivered the undertaking. Upon delivery of the undertaking, First Standard approved the loan application and released the borrowed amount which was used by Spouses Valdez to pay Asahi for the car. ECcTaS
It would be unfair now to First Standard if the Court would let Asahi off the hook. First Standard granted the loan relying on the undertaking of Asahi. Without it, First Standard would not have approved the loan application of Spouses Valdez. As far as First Standard was concerned, Lao was authorized because Asahi held him before the whole world to have such power.
Regarding the undertaking, Asahi Motors contends that it was not within the authority of Lao to bind the company as guarantor or surety for the obligation of Spouses Valdez because it was not pursuant to the purpose of the business of selling motor vehicles. For said reason, Lao should have been equipped with a special power of attorney as required by Article 1878 (11) of the Civil Code. In the absence of which, the stipulation is unforceable.
In this regard, the Court sees the point of Asahi. Its remedy, however, is to go after Lao if he indeed exceeded his authority. At this juncture, however, the Court is not making any pronouncement because Lao should be given a chance to be heard on the claim of Asahi Motors that he exceeded his authority.
WHEREFORE, the petition is DENIED. (Villarama, Jr., J., designated Acting Member in view of the vacancy in the Third Division, per Special Order No. 1691, dated May 22, 2014)
SO ORDERED."
Very truly yours,
(SGD.) WILFREDO V. LAPITANDeputy Division Clerk of Court
Footnotes
1. Rollo, pp. 30-43, penned by Associate Justice Gabriel T. Ingles, and Associate Justice Edgardo L. De los Santos and Associate Justice Pedro B. Corales, concurring.
2. Id. at 70-81, penned by Judge Jose D. Azarraga.
3. Id. at 80-81.
4. Id. at 58.
5. Id. at 15-16.