G.R. No. 114091, 29 June 1995

FACTS:

Under and by virtue of an Authorization issued by GERMAN A. BACALTOS to RENE ROSEL SAVELLON, the Trip Charter Party was executed “by and between BACALTOS COAL MINES, represented … by its Chief Operating Officer, RENE ROSEL SAVELLON” and private respondent San Miguel Corporation (hereinafter SMC). Thereunder, Savellon claims that Bacaltos Coal Mines is the owner of the vessel M/V Premship II and that for P650,000.00 to be paid within seven days after the execution of the contract, it “lets, demises” the vessel to charterer SMC “for three round trips to Davao.”

As payment of the aforesaid consideration, SMC issued a check payable to “RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES” for which Savellon issued a receipt under the heading of BACALTOS COAL MINES.

The vessel was able to make only one trip. Its demands to comply with the contract having been unheeded, SMC filed against the petitioners and Rene Savellon the complaint for specific performance and damages.

In their Answer, the petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him are only those clearly expressed in the Authorization which do not include the power to enter into any contract with SMC. They further claimed that if it is true that SMC entered into a contract with them, it should have ISSUEd the check in their favor.

RTC ruled in favor of SMC holding petitioners Bacaltos Coal Mines and German A. Bacaltos and their co-defendant Rene R. Savellon jointly and severally liable to private respondent SMC under a Trip Charter Party. RTC ruled that the Authorization given by German Bacaltos to Savellon necessarily included the power to enter into the Trip Charter Party.

CA affirmed RTC’s decision.

ISSUE:

Whether Savellon was duly authorized by the petitioners to enter into the Trip Charter Party under and by virtue of an Authorization given by German Bacaltos.

RULING:

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent’s authority, and his ignorance of that authority will not be any excuse. Person dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of the proof is upon them to establish it.

The person dealing with the agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not be shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true conditions of affairs.

In the instant case, since the agency of Savellon is based on a written document, the Authorization of 1 March 1988, the extent and scope of his powers must be determined on the basis thereof.

There is only one express power granted to Savellon, viz., to use the coal operating contract for any legitimate purpose it may serve. The enumerated “five prerogatives” — to employ the term used by the Court of Appeals — are nothing but the specific prerogatives subsumed under or classified as part or as examples of the power to use the coal operating contract. The clause “but not by the way of limitation” which precedes the enumeration could only refer to or contemplate other prerogatives which must exclusively pertain or relate or be germane to the power to use the coal operating contract. The conclusion then of the Court of Appeals that the Authorization includes the power to enter into the Trip Charter Party because the “five prerogatives” are prefaced by such clause, is seriously flawed. It fails to note that the broadest scope of Savellon’s authority is limited to the use of the coal operating contract and the clause cannot contemplate any other power not included in the enumeration or which are unrelated either to the power to use the coal operating contract or to those already enumerated. In short, while the clause allows some room for flexibility, it can comprehend only additional prerogatives falling within the primary power and within the same class as those enumerated.

Wherefore, decision of CA is REVERSED and SET ASIDE.

*Case digest by Legine S. Ramayla, JD – 4, Andres Bonifacio College, SY 2019 – 2020