Garcia y Palicio vs. De Manzano

A novation by substitution of debtor requires the creditor's consent and is not established by the new debtor's mere acknowledgment of the account; a general and complete power of attorney authorizing the sale of real property carries authority to sell a half interest in a small vessel where the sale is necessary to continue the principal's business.

Narciso Lopez Manzano was a merchant in Atimonan, Tayabas, who conducted commercial dealings through general powers of attorney granted to his son, Angel L. Manzano, and his wife, Josefa Samson. He owned a half interest in the steamer San Nicolas, the other half being held by Ocejo, Perez & Co. under a partnership agreement to operate the vessel. Juan Garcia y Palicio acquired the Ocejo, Perez & Co. half interest and later acquired the Manzano half interest through Angel L. Manzano, making the ownership and commercial obligations surrounding the vessel and Manzano's account the backdrop of the litigation. The case called for application of the Civil Code provisions on novation and revocation of agency.

Narciso Lopez Manzano was a merchant in Atimonan, Tayabas, who went to Spain in May 1910 and died there on September 8, 1913. Before leaving, he gave a general power of attorney to his son, Angel L. Manzano, on February 9, 1910, and on March 25 a second general power of attorney to his wife, Josefa Samson. Narciso had various commercial dealings before leaving for Spain.

Narciso owned a half interest in a small steamer, the San Nicolas, while the other half was owned by Ocejo, Perez & Co., with whom there was a partnership agreement to run the steamer for a few years. When that period expired, Ocejo, Perez & Co. refused to continue the contract and demanded that Narciso buy or sell. Because he did not want to sell at the price offered and could not buy, Juan Garcia y Palicio bought the half interest held by Ocejo, Perez & Co. on October 15, 1910. Angel L. Manzano, acting under his power of attorney, sold the other half of the boat to Garcia in July 1911, but because Garcia was a Spaniard and could not register the boat in his name at the Custom House, the boat was registered in the name of Agustin Garcia, a son of the plaintiff, who at that time, July 2d, 1913, was a minor about twenty years old. Agustin Garcia shortly thereafter died, leaving his parents as his heirs at law, and as such heirs the plaintiff's wife was made a party.

On July 23, 1912, Angel L. Manzano, by virtue of the power of attorney from his father, executed a contract, Exhibit A, made part of the complaint, by which Juan Garcia agreed to extend credit to Narciso L. Manzano in the sum of P12,000, and this credit was used by the house of Manzano. To secure it, a mortgage was given in the same document on three parcels of land in Atimonan, with their improvements. The registration of this mortgage was refused by the registrar.

After Narciso's death, the Court of First Instance of Tayabas, on April 18, 1914, named Josefa Samson y San Pedro administratrix of the property of Narciso L. Manzano. Commissioners were duly appointed, notice was published, and no claims having been presented against the estate to the commissioners, they so reported to the court on December 7, 1914. On July 29, 1915, the Court of First Instance ordered the partition of the property among the heirs of Narciso L. Manzano. On May 15, 1915, the plaintiff filed his action in the Court of First Instance of Tayabas to foreclose the so-called mortgage in Exhibit A. Josefa de Manzano filed a pleading stating that the estate had already been divided; that the property mentioned in Exhibit A had been assigned, A and B, to her and her children and C entirely to her; that her son Angel had ceded his share to her; that all the other children were minors and suggesting that she be made guardian ad litem for the minors. In a second motion filed on August 25, 1915, the defendant's attorney stated that the amended complaint had not been presented as stipulated in open court and prayed that instead of the administratrix the heirs of Narciso L. Manzano be considered defendants, giving their names. The plaintiff filed his amended complaint on August 24, making them individually defendants, the minors to be represented by their guardian ad litem, and asking for judgment against each and all of them for P14,087.59, being the amount then due on the open account, and for P2,700 as attorney's fees, all secured by the so-called mortgage; and that in case the judgment was not paid, the mortgaged property be sold to pay the debt.

The defendants, "Josefa de Manzano y otros," filed an answer on September 4, 1915, stating they knew such a mortgage document set up in the complaint existed, but as they were not certain that Exhibit A was an exact copy, they denied the document; they denied its efficacy and legal effect; they denied the jurisdiction of the court to hear and decide the case, and alleged that the action had prescribed. They alleged no facts in their answer. The defendants also filed a counterclaim against Juan Garcia and his wife, Conception Castro, alleging that Narciso L. Manzano was the owner of one-half of the small steamer San Nicolas and Juan Garcia the owner of the half; that Garcia, taking advantage of the youth and inexperience of Angel L. Manzano, falsely and maliciously made him believe that he had authority under the power of attorney from his father to sell the half interest in the San Nicolas, and that he did so. They alleged that Angel L. Manzano had no authority to sell the interest in the steamer, but that since the date of said sale, July, 1912 (1911?), the plaintiff had illegally appropriated all rents and profits of the boat to his own use, which amount to P30,000 per year, after paying for all repairs, etc., and they asked the court to absolve them from the complaint, to declare them the owners of one-half of the steamer San Nicolas, and to order the plaintiffs to render a detailed account of all the profits received from the San Nicolas, and to order one-half of the profits paid to the defendants.

The trial court held there was no legal mortgage and gave judgment for the plaintiff against Josefa Samson only, for the amount admitted by her letter to be due, i.e., P12,752.85, and dismissed the claim against the other defendants and also dismissed the counterclaim of the defendants. The plaintiffs did not appeal. All of the defendants presented a motion for a new trial, but only the defendant Josefa de Manzano excepted to the order denying the motion for new trial. The letter relied upon was dated September 10, 1913, two days after Narciso's death, and stated that Josefa found the current account balance of P12,752.852 entirely satisfactory and hoped to remit part of the sum during October.

• Jurisdiction over Individual Defendants: Appellant Josefa de Manzano argued that the trial court exceeded its jurisdiction in deciding a question and granting relief not comprised within the pleadings because the action was against the administratrix of the estate, not against the heirs individually.
• Novation: Appellant argued that the trial court acted without jurisdiction and erred in holding that there was a novation of the debt, thereby making her personally liable.
• Revocation of Agency: On the counterclaim, appellants argued that the power of attorney granted to the wife revoked the one granted to the son under Article 1735 of the Civil Code, and that even if not revoked, the power did not authorize Angel L. Manzano to sell the half interest in the steamer San Nicolas.
• Approval and Undue Influence: Appellants argued that the trial court erred in holding that the sale of the vessel was approved by Narciso L. Manzano and that Angel L. Manzano did not execute the sale under undue influence.

• Jurisdiction over Individual Defendants: Whether the trial court exceeded jurisdiction by deciding the case against the heirs individually despite the original action against the administratrix.
• Novation: Whether the trial court erred in holding that Josefa de Manzano became personally liable by novation.
• Revocation of Agency: Whether the power of attorney granted to Angel L. Manzano was revoked by the later power of attorney to Josefa Samson.
• Authority to Sell Vessel: Whether the power of attorney authorized Angel L. Manzano to sell Narciso's half interest in the steamer San Nicolas.
• Approval and Undue Influence: Whether the trial court erred in holding that the sale was approved by Narciso L. Manzano and that Angel L. Manzano did not act under undue influence.

• Jurisdiction over Individual Defendants: No. The defendants themselves asked to be considered individually, answered as such, and the record shows trial proceeded on the amended complaint; the absence of a formal admission order was not fatal.
• Novation: No. Article 1205 requires the creditor's consent to substitution, and Garcia did not consent; the letter did not make Josefa personally liable.
• Revocation of Agency: No. Article 1735 requires notice to the former agent, and no proof showed the son knew of the later power of attorney.
• Authority to Sell Vessel: Yes. A general and complete power authorizing sale of real property carries authority to sell a half interest in a small boat, especially where necessary to continue the principal's business.
• Approval and Undue Influence: No reversible error. The dismissal of the counterclaim was affirmed, and the last assignment of error was not supported by any reasonable evidence in the record.

• Jurisdiction over Individual Defendants: The original action was against Josefa de Manzano as administratrix. Thereafter, the defendants' attorneys filed pleadings stating the estate had been distributed, naming the heirs, and expressly requesting that the heirs be considered defendants in place of the administratrix; Josefa was appointed guardian ad litem for the minors. The plaintiff then filed an amended complaint naming the heirs individually, and the defendants answered as "Josefa de Manzano y Otros." Although no formal order admitting the amended complaint appears, the defendants' own pleadings supplied the admission; all parties were before the court individually, and the court could render judgment against them individually only if they were individually obligated. When the record shows trial proceeded on the theory of the amended complaint, the Court will not inquire whether an order admitting it was actually entered.
• Novation: The trial court based Josefa's personal liability on her letter of September 10, 1913, written two days after Narciso's death, in which she acknowledged the current account balance of P12,752.852 as satisfactory and hoped to remit part in October. Under Article 1205, novation by substitution of a new debtor may be made without the knowledge of the original debtor but not without the creditor's consent. Garcia did not consent to such substitution: he first sued the administratrix of Narciso's estate and later sued all the heirs, not Josefa alone. The letter was not intended by Josefa to make her personally liable and was not considered by Garcia as making her personally responsible. No novation occurred, and the portion of the judgment holding her personally liable was reversed.
• Revocation of Agency: Article 1735 provides that the appointment of a new agent for the same business produces revocation of the previous agency from the day notice was given to the former agent, excepting the provisions of the next preceding article. The defendants, to establish their counterclaim, had to prove that Angel L. Manzano, the first agent, had notice of the second power of attorney granted to Josefa Samson. No such proof appears in the record. Angel L. Manzano was therefore acting under a valid power of attorney from his father that had not been legally revoked on the date of the sale of the half interest in the steamer to the plaintiff's son, which half interest was legally inherited by the plaintiffs.
• Authority to Sell Vessel: The power of attorney authorized the agent to buy or sell real property, to mortgage the same, to borrow money, and was in fact general and complete. It did not expressly state that the agent could sell the boat. Nevertheless, a power so full and complete as to authorize the sale of real property necessarily carried with it the right to sell a half interest in a small boat. The record further showed that the sale was necessary to obtain money or credit without which it would have been impossible to continue the business conducted in Narciso L. Manzano's name and for his benefit. The authorization was therefore complete enough to carry full authority to sell the one-half interest in the boat then owned by Narciso L. Manzano.
• Approval and Undue Influence: The Court disposed of the last assignment of error by stating that it was not supported by any reasonable evidence in the record. The dismissal of the defendants' counterclaim was affirmed. The text does not separately discuss the approval assignment beyond that affirmance.

• Novation by Substitution of Debtor — Under Article 1205, novation by substituting a new debtor may be made without the knowledge of the original debtor but not without the creditor's consent. The Court applied this rule by holding that Garcia did not consent to substitute Josefa for the estate, as shown by his suits against the administratrix and all the heirs rather than Josefa alone; her letter acknowledging the account did not create personal liability.
• Revocation of Agency by Appointment of New Agent — Under Article 1735, the appointment of a new agent for the same business revokes the previous agency from the day notice is given to the former agent, excepting the provisions of the next preceding article. The Court applied this rule by holding that no proof showed Angel L. Manzano knew of the later power of attorney to Josefa Samson, so the first power of attorney remained valid.
• General Power of Attorney and Authority to Sell — A general and complete power of attorney authorizing the sale of real property carries with it the authority to sell a half interest in a small boat where the sale is necessary to continue the principal's business. The Court applied this rule by upholding the sale of Narciso's half interest in the San Nicolas despite the absence of an express clause mentioning the vessel.
• Amendment of Pleadings and Jurisdiction over Parties — When the record shows that trial proceeded on the theory of an amended complaint and the defendants themselves asked to be treated as individual defendants, the absence of a formal order admitting the amended complaint is not fatal. The Court applied this rule by rejecting the jurisdictional challenge to the judgment against the heirs individually.

• "Novation which consists in the substitution of a new debtor in the place of the original one may be made without the knowledge of the later, but not without the consent of the creditor." — This is the Court's quotation of Article 1205 of the Civil Code, which supplies the controlling rule for rejecting the finding of novation.
• "As much as justice may plead for it, we can see nothing in the letter which would made appellant personally liable." — The passage states the ratio for reversing the personal judgment against Josefa based on her letter acknowledging the account.
• "The appointment of a new agent for the same business produces a revocation of the previous agency from the day on which notice was given to the former agent, excepting the provisions of the next preceding article." — This is the Court's quotation of Article 1735 of the Civil Code, relied upon to hold that the first power of attorney was not shown to have been revoked.
• "The power does not expressly state that the agent may sell the boat, but a power so full and complete authoring the sale of real property, must necessarily carry with it the right to sell a half interest in a small boat." — The passage defines the scope of the general power of attorney and supports the dismissal of the counterclaim.

• Article 1205, Civil Code — Provides that novation consisting in the substitution of a new debtor may be made without the knowledge of the original debtor but not without the consent of the creditor. The Court applied it to hold that no novation occurred because Garcia did not consent to substitute Josefa for the estate.
• Article 1735, Civil Code — Provides that the appointment of a new agent for the same business produces revocation of the previous agency from the day notice was given to the former agent, excepting the provisions of the next preceding article. The Court applied it to hold that the first power of attorney remained valid absent proof that the son knew of the later power of attorney.

Arellano, C.J.; Carson, Street, and Avanceña, JJ., concurred. Johnson, J., took no part.

• Justice Torres — Dissented, opining that Josefa Samson should be obliged to pay one-half of the sum stated in her letter of September 10, 1913, or P6,376.425, with interest at 6 per cent per annum from January 10, 1917, because the conjugal partnership property was directly liable for the debts of the partnership and, after liquidation and partition, she received her share; it would be unjust for her to enrich herself by keeping that amount to the prejudice of the creditor. He would reverse only the part ordering her to pay the other one-half and affirm the dismissal of the counterclaim. Araullo, J., concurred.