Philippine Supreme Court Resolutions > Year 2010 > March 2010 Resolutions > [G.R. No. 166227 : March 10, 2010] FORTUNE CEMENT CORPORATION, PETITIONER, V. TEOFILO MMACVLANGAN, RESPONDENT:

Quoted hereunder, for your information,  is a resolution of this  Court dated 10 March 2010:

G.R. No. 166227:   FORTUNE CEMENT CORPORATION, Petitioner, v. TEOFILO DIMACULANGAN, Respondent.

This is a petition for review^[1] of the Court of Appeals' (CA) Decision^[2]  dated 7 May 2004 and Resolution dated 23 November 2004 in CA-G.R. CV No. 62466. The CA denied the petition to set aside the Decision^[3] dated 29 December 1998 of the Regional Trial Court of Makati City, Branch 58. (RTC).

The trial court and the appellate court established the following facts: Teofilo Dimaculangan (respondent) entered into several contracts of sale with Fortune Cement Corporation (petitioner) through the latter's Vice-President for Marketing, Arturo Averia (Averia). Specifically, respondent bought from petitioner, through Averia, a total of 15,000 bags of cement for an aggregate amount of Pl,428,000, to wit:

1. On 27 November  1991,  respondent  bought  2,000  bags  of cement for the amount of P1 80,000
    
2. On   18  December   1991,  respondent bought 3,000 bags  of cement for the amount of P270,000.
   
3. On 6 February 1992, respondent bought 3,000 bags of cement for the amount of P285;000.
4. On 26 February 1992, respondent bought 2,000 bags of cement for the amount of P198,000.
    
5. On 26 March 1992, respondent bought 5,000 bags of cement for the amount of P495,000.

The sale agreements were entered into by and between respondent and petitioner, through Averia, in petitioner's main office. Respondent, a licensed contractor, bought the 15,000 bags of cement to be used in the construction of horizontal and vertical structures. However, despite full payment made by respondent, petitioner failed to deliver the bags of cement and even refused to honor the sale agreements.

Respondent made repeated demands for the delivery of the bags of cement but said demands remained unheeded by petitioner. Consequently, on 20 July 1993, respondent filed a Complaint for Specific Performance and Damages against petitioner and Averia before the RTC.

Petitioner filed its Answer with Compulsory Counterclaim and Cross-claim, denying liability under the subject sale transactions. It alleged that any liability arising from the sale transactions pertains solely to Averia as the latter transacted with respondent in his personal capacity. Petitioner further alleged that it was respondent's negligence which allowed Averia to perpetrate fraud against both petitioner and respondent.

The summons was not served upon Averia who was no longer holding office in petitioner Fortune. Later, however, an alias summons was served upon Averia. On 24 February 1994, respondent filed a motion to declare Averia in default, and this was granted by the RTC.

On 29 December 1998, the RTC rendered a Decision in favor of respondent. The dispositive portion of the decision reads:

WHEREFORE, finding preponderance of evidence to sustain the instant Complaint, judgment is hereby rendered in favor of plaintiff and against defendants, ordering:

1)    defendants to deliver to plaintiff fifteen thousand (15,000) bags of Fortune cement;

2)    defendants, jointly and severally, to pay plaintiff the following amounts:

a)    Three Hundred Thousand (P300,000.00) Pesos as actual damages;

b)    Two Hundred Thousand (P200,000.00) Pesos as moral damages;

c)    One   Hundred  Thousand   (P100,000.00)   Pesos   as exemplary damages; and

d)    Seventy Thousand (�70,000.00) Pesos as attorney's fees and litigation expenses.

SO ORDERED.^[4]

Petitioner filed a petition for review with the CA.   The CA affirmed the RTC decision, albeit with modification, to wit:

WHEREFORE, except as to reduction of the amounts of moral damages and exemplary damages to P70,000.00 and P40,000.00 respectively, the decision now on appeal is AFFIRMED in all other respects. No pronouncement as to costs.

SO ORDERED.^[5]

Petitioner filed a Motion for Reconsideration, but this was denied by the CA in its Resolution dated 23 November 2004.^[6]

On 20 January 2005, petitioner filed the instant petition for review before this Court. Petitioner claims as follows: that the appellate court erred in holding that respondent was a "qualified end-user" allowed to buy 15,000 bags of cement from petitioner; that petitioner may not be held liable for Averia's acts which were beyond the scope of his authority and ultra vires; that it was respondent's negligence which perpetrated the wrongful acts of Averia; that respondent did not suffer any damage or injury from the transactions; and that petitioner is not liable to pay damages.

The petition has no merit.

On the basis of the records of this case, both the trial court and the appellate court found respondent to be a "qualified end-user" entitled to purchase cement from cement manufacturers like petitioner. Petitioner's sales manager and witness, Roy Dacdac, testified that he and Averia were the ones determining the qualifications of the end-users, and they both considered respondent a qualified end-user.^[7]  Another witness of petitioner, Maxima Macasaet, even testified that petitioner did not have specific criteria for determining whether a person is a qualified end-user3 and any person who wanted to buy cement from petitioner was considered qualified.^[8]  Petitioner cannot now escape liability arising from the sale of cement by claiming that respondent is not a qualified buyer or end-user.

Petitioner's allegation that it cannot be held liable for Averia's acts which were beyond the scope of his authority cannot be sustained. Averia was petitioner's Vice President for Marketing and was duly authorized to accept orders and collect payments from customers.^[9]  The transactions between Averia and respondent were completed inside petitioner's main office. As held by this Court in Rural Bank of Milaor (Camarines Sur) v. Ocfemia,^[10]  "[I]f a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through  such agent,  be  estopped from  denying the  agent's  authority."

Moreover, "although an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time."^[11]

We note that initial transactions (i.e., those prior to the transactions subject of this case) between respondent and Averia posed no problem, and the cement ordered and paid for by respondent was duly delivered to him by petitioner. This prompted respondent to continue placing orders for cement with petitioner. Although the receipts issued by Averia for the subsequent orders were allegedly temporary and unofficial, they were issued by Averia, an authorized officer of the petitioner, using petitioner's letterhead, inside petitioner's office, and during the ordinary course of petitioner's business.^[12]

We find the award for damages and attorney's fees proper. Moral damages may be awarded in case of breach of contract where the defendant acted fraudulently or in bad faith.^[13]  In such case, exemplary damages may also be decreed.^[14] Attorney's fees are awarded when a party is compelled to litigate or incur expenses to protect his interest by reason of the unjustified act of the other party.^[15]

WHEREFORE, the petition is DENIED. The Court of Appeals' Decision dated 7 May 2004 and Resolution dated 23 November 2004 in CA-G.R. CV No. 62466 are AFFIRMED.

SO ORDERED. (Del Castillo, J., no part; Corona,J ., designated additional member)

WITNESS the Honorable Antonio T. Carpio, Chairperson, Honorable Renato C. Corona (designated additional member per Raffle dated 2 December 2009), Arturo D. Brion, Roberto A. Abad and Jose P. Perez, Members, Second Division, this 10th day of March, 2010.

Endnotes:

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^[1]  Under Rule 45 of the 1997 Revised Rules of Civil Procedure.

^[2] Penned by Associate Mariano C. Del Castillo (now a member of this Court), with Associate Justices Marina L. Buzon and Magdanga! M. De Leon, concurring.

^[3] Penned by Judge Escolastico U. Cruz, Jr.

^[4] Rollo,pp. 88-89.

^[5] id. at 74.

^[6] Id. at 77.

^[7] Id. at 71, citing TSN dated 27 June 1997, pp. 14-15.

^[8] Id. at 85.

^[9] Id. at 86.

^[10] 381 Phil. 911,926(2000). See also Hydro Resources Contractors    Corporation   v.    National Irrigation Administration, 484 Phil. 581, 592 (2004).

^[11]YaoKa Sin Trading v. Court of Appeals, G.R. No. 53820, 15 June 1992, 209 SCRA 763, 783.

^[12] Rollo, p. 81.

^[13] Article 2220, Civil Code of the Philippines.

^[14] Geraldez v. Court of Appeals, G.R. No. 108253, 23 February 1994, 230 SCRA 320, 337.

^[15]  Producers Bank of the Philippines v. Court of Appeals, All Phil. 646 (2001).