G.R. No. 158585, 13 December 2005

FACTS:

Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City. Sometime in February 1992, private respondent had difficulty in purchasing cement needed for its projects. Lines & Spaces, represented by Eleanor Bahia Sanchez, informed private respondent that it could obtain cement to its satisfaction from petitioners, Amon Trading Corporation and its sister company, Juliana Marketing. On the strength of such representation, private respondent proceeded to order from Sanchez Six Thousand Fifty bags of cement from petitioner Amon Trading Corporation, and from Juliana Marketing, Six Thousand bags.

Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount of P592,900.00 through Solidbank Manager’s Check payable to Amon Trading Corporation, and the amount of P588,000.00 payable to Juliana Marketing, through Solidbank Manager’s Check. A certain “Weng Chua” signed the check vouchers for Lines & Spaces while Mrs. Sanchez issued receipts for the two manager’s checks. Private respondent likewise paid to Lines & Spaces an advance fee for the 12,050 cement bags.

There were deliveries to private respondent from Amon Trading Corporation and Juliana Marketing of 3,850 bags and 3,000 bags, respectively, during the period from April to June 1992. However, the balance of 2,200 bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, or a total of 5,200 bags, was not delivered. Private respondent, thus, sent petitioners written demands but in reply, petitioners stated that they have already refunded the amount of undelivered bags of cement to Lines and Spaces per written instructions of Eleanor Sanchez. Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, private respondent filed this case for sum of money against petitioners and Lines & Spaces.

Petitioners plead in defense lack of right or cause of action, alleging that private respondent had no privity of contract with them as it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that ordered or purchased several bags of cement and paid the price thereof without informing them of any special arrangement nor disclosing to them that Lines & Spaces and respondent corporation are distinct and separate entities. Lines & Spaces denied in its Answer that it is represented by Eleanor B. Sanchez and pleads in defense lack of cause of action and in the alternative, it raised the defense that it was only an intermediary between the private respondent and petitioners. On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104, found Lines & Spaces solely liable to private respondent and absolved petitioners of any liability.

ISSUES:

1. Whether or not there was a contract of agency between lines and spaces interior center and respondent;
2. Whether or not petitioners and respondent has privity of contract.

RULING:

No. Primarily, there was no written contract entered into between petitioners and private respondent for the delivery of the bags of cement. As gleaned from the records, and as private respondent itself admitted in its Complaint, private respondent agreed with Eleanor Sanchez of Lines & Spaces for the latter to source the cement needs of the former in consideration of P7.00 per bag of cement. It is worthy to note that the payment in manager’s checks was made to Eleanor Sanchez of Lines & Spaces and was not directly paid to petitioners. While the manager’s check issued by respondent company was eventually paid to petitioners for the delivery of the bags of cement, there is obviously nothing from the face of said manager’s check to hint that private respondent was the one making the payments. There was likewise no intimation from Sanchez that the purchase order placed by her was for private respondent’s benefit. The meeting of minds, therefore, was between private respondent and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate from the contract of sale between petitioners and Eleanor Sanchez who represented herself to be from Lines & Spaces/Tri-Realty, which, per her representation, was a single account or entity.

There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case of agency between private respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines & Spaces was an agent for private respondent, but rather a supplier for the latter’s cement needs. The Civil Code defines a contract of agency as follows:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc. v. Court of Appeals, the Court decreed from Article 1868 that the basis of agency is representation.

. . . On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person – the agent – agrees to act under the control or direction of another – the principal. Indeed, the very word “agency” has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.

*Case digest by Stephanie C. Castillo, JD-IV, Andres Bonifacio College, SY: 2019-2020