584 SUPREME COURT REPORTS ANNOTATED

Eurotech Industrial Technologies, Inc. vs. Cuizon

G.R. No. 167552. April 23, 2007. *

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN

CUIZON and ERWIN CUIZON, respondents.
Agency; The underlying principle of the contract of agency is to accomplish results by
using the services of others—to do a great variety of things like selling, buying, manufacturing,
and transporting.—In a contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another with the latter’s consent. The
underlying principle of the contract of agency is to accomplish results by using the services
of others—to do a great variety of things like selling, buying, manufacturing, and
transporting. Its purpose is to extend the personality of the principal or the party for whom
another acts and from whom he or she derives the authority to act. It is said that the basis of
agency is representation, that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal. By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence—qui facit per alium facit per se.
Same; Elements.—The elements of the contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a representative and not for himself; (4)
the agent acts within the scope of his authority.
Same; Article 1897 of the Civil Code reinforces the familiar doctrine that an agent, who
acts as such, is not personally liable to the party with whom he contracts; Exceptions.—Article
1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable
to the party with whom he contracts. The same provision, however, presents two instances
when an agent becomes personally liable to a third person. The first is when he expressly
binds himself to the obligation and the second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not give the third party sufficient notice of
his powers. We hold that respondent EDWIN does not fall within any of the exceptions
contained in this provision.
Same; Managers; The position of manager is unique in that it presupposes the grant of
broad powers with which to conduct the business of the principal.—The Deed of Assignment
clearly states that respondent EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is unique in that it presupposes
the grant of broad powers with which to conduct the business of the principal, thus: 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. x x x.
Same; In case of excess of authority by the agent, the law does not say that a third person
can recover from both the principal and the agent.—We likewise take note of the fact that in
this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and
EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which
petitioner anchors its claim against respondent EDWIN “does not hold that in case of excess
of authority, both the agent and the principal are liable to the other contracting party.” To
reiterate, the first part of Article 1897 declares that the principal is liable in cases when the
agent acted within the bounds of his authority. Under this, the agent is completely absolved
of any liability. The second part of the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly binds himself or he exceeds the
limits of his authority without giving notice of his powers to the third person. However, it
must be pointed out that in case of excess of authority by the agent, like what petitioner
claims exists here, the law does not say that a third person can recover from both the principal
and the agent.

Same; Actions; Parties; Words and Phrases; An agent acting within his authority as
such, who did not acquire any right nor incur any liability arising from a Deed, is not a real
property in interest who should be impleaded; A real party in interest is one who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.—
As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows that
he is not a real party in interest who should be impleaded in this case. A real party in interest
is one who “stands to be benefited or injured by the judgment in the suit, or the party entitled
to the avails of the suit.” In this respect, we sustain his exclusion as a defendant in the suit
before the court a quo.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Nilo G. Ahat for petitioner.
Zosa and Quijano Law Offices for respondents.

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision of the Court of
1

Appeals dated 10 August 2004 and its Resolution dated 17 March 2005 in CA-G.R.
2

SP No. 71397 entitled, “Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.

Echavez.” The assailed Decision and Resolution affirmed the Order dated 29 January
3

2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent

EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.
_______________

1 Penned by Associate Justice Vicente L. Yap with Associate Justices Arsenio J. Magpale and Ramon M.

Bato, Jr., concurring; Rollo, pp. 33–36.

2 Id., at pp. 37–39.

3 Id., at pp. 83–84.

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Eurotech Industrial Technologies, Inc. vs. Cuizon
The generative facts of the case are as follows:
 Petitioner is engaged in the business of importation and distribution of various
European industrial equipment for customers here in the Philippines. It has as one
of its customers Impact Systems Sales (“Impact Systems”) which is a sole
proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN
is the sales manager of Impact Systems and was impleaded in the court a quo in said
capacity.
From January to April 1995, petitioner sold to Impact Systems various products
allegedly amounting to ninety-one thousand three hundred thirty-eight (P91,338.00)
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge
pump valued at P250,000.00 with respondents making a down payment of fifty
thousand pesos (P50,000.00). When the sludge pump arrived from the United
4

Kingdom, petitioner refused to deliver the same to respondents without their having
fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent
EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:
“1.) That ASSIGNOR has an outstanding receivables from Toledo Power Corporation in the
5

amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment

for the purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE the said receivables from Toledo Power Corporation in the amount of THREE
6

HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the

ASSIGNOR is the lawful recipient;
_______________

4 Annex “H” of the Complaint; Records, p. 18.

5 Referring to Impact Systems Sales.
6 Referring to petitioner Eurotech Industrial Technologies, Inc.

588
588 SUPREME COURT REPORTS ANNOTATED
Eurotech Industrial Technologies, Inc. vs. Cuizon
3.) That the ASSIGNEE does hereby accept this assignment.” 7

Following the execution of the Deed of Assignment, petitioner delivered to

respondents the sludge pump as shown by Invoice No. 12034 dated 30 June 1995. 8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the

Deed of Assignment, proceeded to collect from Toledo Power Company the amount of
P365,135.29 as evidenced by Check Voucher No. 0933 prepared by said power 9

company and an official receipt dated 15 August 1995 issued by Impact

Systems. Alarmed by this development, petitioner made several demands upon
10

respondents to pay their obligations. As a result, respondents were able to make

partial payments to petitioner. On 7 October 1996, petitioner’s counsel sent
respondents a final demand letter wherein it was stated that as of 11 June 1996,
respondents’ total obligations stood at P295,000.00 excluding interests and attorney’s
fees. Because of respondents’ failure to abide by said final demand letter, petitioner
11
instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents before the Regional Trial Court of Cebu City. 12

On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of
writ of preliminary attachment. 13

On 25 June 1997, respondent EDWIN filed his Answer wherein he admitted14

petitioner’s allegations with respect to the sale transactions entered into by Impact
Systems and
_______________

7 Annex “G” of the Complaint; Records, p. 17.

8 Annex “H” of the Complaint; id., at p. 18.
9 Annex “I” of the Complaint; id., at p. 19.

10 Annex “J” of the Complaint; id., at p. 20.

11 Annex “L” of the Complaint; id., at p. 22.

12 The case was raffled off to Branch 8 of the RTC Cebu City.

13 Records, p. 27.

14 Id., at pp. 38–41.

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Eurotech Industrial Technologies, Inc. vs. Cuizon
petitioner between January and April 1995. He, however, disputed the total amount
15

of Impact Systems’ indebtedness to petitioner which, according to him, amounted to

only P220,000.00. 16

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. In support of this argument, petitioner
points to paragraphs 1.2 and 1.3 of petitioner’s Complaint stating—
“1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the
proprietor of a single proprietorship business known as Impact Systems Sales (“Impact
Systems” for brevity), with office located at 46-A del Rosario Street, Cebu City, where he may
be served summons and other processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City.
He is the Sales Manager of Impact Systems and is sued in this action in such capacity.” 17

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default

with Motion for Summary Judgment. The trial court granted petitioner’s motion to
declare respondent ERWIN in default “for his failure to answer within the prescribed
period despite the opportunity granted” but it denied petitioner’s motion for
18

summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the
case on 16 October 2001. However, the conduct of the pre-trial conference was
19

deferred pending the

_______________

15 Id., at p. 38.
16 Ibid.
17 Id., at p. 1.

18 Id., at p. 50.
 19 Id., at p. 61.

590
590 SUPREME COURT REPORTS ANNOTATED
Eurotech Industrial Technologies, Inc. vs. Cuizon
resolution by the trial court of the special and affirmative defenses raised by
respondent EDWIN. 20

After the filing of respondent EDWIN’s Memorandum in support of his special and
21

affirmative defenses and petitioner’s opposition thereto, the trial court rendered its
22

assailed Order dated 29 January 2002 dropping respondent EDWIN as a party

defendant in this case. According to the trial court—
“A study of Annex “G” to the complaint shows that in the Deed of Assignment, defendant
Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact]
Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin
H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager
Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex “H” to the
complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H.
Cuizon, made a down payment of P50,000.00 that Annex “H” is dated June 30, 1995 or two
days after the execution of Annex “G”, thereby showing that [Impact] Systems Sales ratified
the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact]
Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted
the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was deceived by
defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its
agent and plaintiff knew about said ratification. Plaintiff could not say that the subject
contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact] Systems
Sales made a down payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as
party defendant.” 23

_______________

20 Edwin Cuizon’s counsel requested that the Special and Affirmative Defenses in his Answer be treated

as his Motion to Dismiss; Order dated 16 October 2001; id., at p. 78.

21 Id., at pp. 82–86.

22 Memorandum dated 16 November 2001; id., at pp. 87–91.

23 Id., at pp. 95–96.

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Eurotech Industrial Technologies, Inc. vs. Cuizon
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to
the Court of Appeals which, however, affirmed the 29 January 2002 Order of the
court a quo. The dispositive portion of the now assailed Decision of the Court of
Appeals states:
“WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached
by the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.” 24
Petitioner’s motion for reconsideration was denied by the appellate court in its
Resolution promulgated on 17 March 2005. Hence, the present petition raising, as
sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED
THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS
SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER
ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE
PERPETUATION OF A FRAUD. 25

To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:
“Art. 1897. 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 limits of his authority without
giving such party sufficient notice of his powers.”

Petitioner contends that the Court of Appeals failed to appreciate the effect of
ERWIN’s act of collecting the receivables from the Toledo Power Corporation
notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf
of Impact Systems. While said collection did not revoke the agency relations of
respondents, petitioner insists that ER-
_______________

24 Rollo, p. 35.
25 Id., at p. 17.

592
592 SUPREME COURT REPORTS ANNOTATED
Eurotech Industrial Technologies, Inc. vs. Cuizon
WIN’s action repudiated EDWIN’s power to sign the Deed of Assignment. As EDWIN
did not sufficiently notify it of the extent of his powers as an agent, petitioner claims
that he should be made personally liable for the obligations of his principal. 26

Petitioner also contends that it fell victim to the fraudulent scheme of respondents
who induced it into selling the one unit of sludge pump to Impact Systems and signing
the Deed of Assignment. Petitioner directs the attention of this Court to the fact that
respondents are bound not only by their principal and agent relationship but are in
fact full-blooded brothers whose successive contravening acts bore the obvious signs
of conspiracy to defraud petitioner. 27

In his Comment, respondent EDWIN again posits the argument that he is not a
28

real party in interest in this case and it was proper for the trial court to have him
dropped as a defendant. He insists that he was a mere agent of Impact Systems which
is owned by ERWIN and that his status as such is known even to petitioner as it is
alleged in the Complaint that he is being sued in his capacity as the sales manager
of the said business venture. Likewise, respondent EDWIN points to the Deed of
Assignment which clearly states that he was acting as a representative of Impact
Systems in said transaction.
We do not find merit in the petition.
 In a contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another with the latter’s consent. The 29

underlying principle of the contract of agency is to accomplish results by using the

services of others—to do a great variety of things like selling,
_______________

26 Id., at pp. 21–22.

27 Id., at pp. 25–26.
28 Id., at pp. 98–114.

29 Article 1868 of the Civil Code.

593
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Eurotech Industrial Technologies, Inc. vs. Cuizon
buying, manufacturing, and transporting. Its purpose is to extend the personality of
30

the principal or the party for whom another acts and from whom he or she derives
the authority to act. It is said that the basis of agency is representation, that is, the
31

agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed
by the principal. By this legal fiction, the actual or real absence of the principal is
32

converted into his legal or juridical presence—qui facit per alium facit per se. 33

The elements of the contract of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act
in relation to a third person; (3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority. 34

In this case, the parties do not dispute the existence of the agency relationship
between respondents ERWIN as principal and EDWIN as agent. The only cause of
the present dispute is whether respondent EDWIN exceeded his authority when he
signed the Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted
beyond the authority granted by his principal and he should therefore bear the effect
of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with
_______________

30 Reuschlein and Gregory, Agency and Partnership (1979 edition), p. 1.

31 3 Am Jur 2d, §1.
32 Padilla, Agency Text and Cases, (1986 edition), p. 2.

33 He who acts through another acts by or for himself; id., at §2.

34 Yu Eng Cho v. Pan American World Airways, Inc., 385 Phil. 453, 465; 328 SCRA 717, 728 (2000).

594
594 SUPREME COURT REPORTS ANNOTATED
Eurotech Industrial Technologies, Inc. vs. Cuizon
whom he contracts. The same provision, however, presents two instances when an
agent becomes personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not give the third party sufficient
notice of his powers. We hold that respondent EDWIN does not fall within any of the
exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as
the sales manager of Impact Systems. As discussed elsewhere, the position of
manager is unique in that it presupposes the grant of broad powers with which to
conduct the business of the principal, thus:
“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. x x x.” 35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-
within his authority when he signed the Deed of Assignment. To recall, petitioner
refused to deliver the one unit of sludge pump unless it received, in full, the payment
for Impact Systems’ indebtedness. We may very well assume that Impact Systems
36

desperately needed the sludge pump for its business since after it paid the amount of
fifty thousand pesos (P50,000.00) as down payment on 3 March 1995, it still 37

persisted in negotiating with petitioner which culminated in the execution of the

Deed of Assignment
_______________

35 3 Am Jur 2d, §91, p. 602.

36 Records, p. 2.
37 Annex “H” of the Complaint; Records, p. 18.

595
VOL. 521, APRIL 23, 2007 595
Eurotech Industrial Technologies, Inc. vs. Cuizon
of its receivables from Toledo Power Company on 28 June 1995. The significant
38

amount of time spent on the negotiation for the sale of the sludge pump underscores
Impact Systems’ perseverance to get hold of the said equipment. There is, therefore,
no doubt in our mind that respondent EDWIN’s participation in the Deed of
Assignment was “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.
We likewise take note of the fact that in this case, petitioner is seeking to recover
both from respondents ERWIN, the principal, and EDWIN, the agent. It is well to
state here that Article 1897 of the New Civil Code upon which petitioner anchors its
claim against respondent EDWIN “does not hold that in case of excess of authority,
both the agent and the principal are liable to the other contracting party.” To 39

reiterate, the first part of Article 1897 declares that the principal is liable in cases
when the agent acted within the bounds of his authority. Under this, the agent is
completely absolved of any liability. The second part of the said provision presents
the situations when the agent himself becomes liable to a third party when he
expressly binds himself or he exceeds the limits of his authority without giving notice
of his powers to the third person. However, it must be pointed out that in case of
excess of authority by the agent, like what petitioner claims exists here, the law does
not say that a third person can recover from both the principal and the agent. 40

_______________

38 Annex “G” of the Complaint; id., at p. 17.

39 Philippine Products Company v. Primateria Societe Anonyme Pour Le Commerce
Exterieur, 122 Phil. 698, 702; 15 SCRA 301, 305 (1965).
40 De Leon and De Leon, Jr., Comments and Cases on Partnership, Agency, and Trusts (1999

edition), p. 512.
596
596 SUPREME COURT REPORTS ANNOTATED
Eurotech Industrial Technologies, Inc. vs. Cuizon
As we declare that respondent EDWIN acted within his authority as an agent, who
did not acquire any right nor incur any liability arising from the Deed of Assignment,
it follows that he is not a real party in interest who should be impleaded in this case.
A real party in interest is one who “stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit.” In this respect, we sustain
41

his exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the
Decision dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of
Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the
Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8,
Cebu City, for the continuation of the proceedings against respondent ERWIN
CUIZON.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez,Callejo, Sr. and Nachura,
JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.—The essence of agency being the representation of another, it is evident
that the obligations contracted are for and on behalf of the principal—a consequence
of this representation is the liability of the principal for the acts of his agent
performed within the limits of his authority that is equivalent to the performance by
the principal himself who should answer therefor. (Tan vs. G.V.T. Engineering
Services, 489 SCRA 93 [2006])
_______________

41 Rule 3, §1 of the Revised Rules of Court.

597
 VOL. 521, APRIL 23, 2007 597
People vs. Guillermo
The general principles of agency govern the relation between the corporation and its
officers or agents—when authorized, their acts bind the corporation, otherwise, their
acts cannot bind it. (Yasuma vs. De Villa, 499 SCRA 466[2006])

——o0o——