Go vs. Cordero

A third person who induces a party to a contract to violate it, with knowledge of the existing contract and without legal justification, is liable for damages to the other contracting party under Article 1314 of the Civil Code; where such interference is attended by bad faith, the interferer is solidarily liable with the contracting party for quasi-delict under Article 2194.

Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation, ventured into the business of marketing inter-island passenger vessels and secured an appointment as exclusive distributor in the Philippines of Aluminium Fast Ferries Australia (AFFA), an Australian fast ferry manufacturer whose managing director was Tony Robinson. Allan C. Go operated ACG Express Liner, a single proprietorship in Cebu City engaged in passenger vessel operations, and was represented by his lawyers Felipe Landicho and Vincent Tecson in negotiations for the purchase of AFFA catamaran vessels. Under the exclusive distributorship arrangement, Cordero was entitled to commissions equivalent to 22.43% of the purchase price of each vessel sold through his efforts.

Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation, ventured into the business of marketing inter-island passenger vessels. After contacting various overseas fast ferry manufacturers, he met Tony Robinson, an Australian national and Managing Director of Aluminium Fast Ferries Australia (AFFA). Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines. As exclusive distributor, Cordero offered for sale the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.

After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go — the owner/operator of ACG Express Liner, a single proprietorship in Cebu City — Cordero closed a deal for the purchase of two SEACAT 25 vessels, as evidenced by a Memorandum of Agreement dated August 7, 1997. The parties executed Shipbuilding Contract No. 7825 for one high-speed catamaran at a price of US$1,465,512.00. Per agreement between Robinson and Cordero, the latter was to receive commissions totalling US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel. Cordero made two trips to the AFFA shipyard in Brisbane, Australia, and on one occasion accompanied Go, Go's family, and Landicho to monitor the vessel's construction progress, shouldering all expenses for airfare, food, hotel accommodations, transportation, and entertainment.

Cordero later discovered that Go was dealing directly with Robinson when Dennis Padua of Wartsila Philippines informed him that Go was canvassing for a second catamaran engine and had instructed Padua to fax the quotation to the Park Royal Hotel in Brisbane where Go was staying. Cordero tried to contact Go and Landicho but could not reach them, while Robinson refused to answer his calls. Cordero immediately flew to Brisbane, only to find that Go and Landicho were already there negotiating for the sale of a second SEACAT 25. Despite repeated follow-ups, no explanation was given by Robinson, Go, Landicho, and Tecson, who even made Cordero believe there would be no further sale between AFFA and ACG Express Liner.

On June 24, 1998, Cordero wrote a handwritten letter to Go demanding that they respect his exclusive distributorship, without prejudice to legal action. Cordero's lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations committed by Go in connivance with his lawyers. AFFA's lawyer, Thyne & Macartney, responded by fax asserting that Cordero's appointment was for one transaction only and that the exclusive distributorship offer was being revoked. According to Cordero's testimony, Landicho, acting on behalf of Go, telephoned him on the same day and offered to settle. Landicho and Tecson proposed to convince Go to pay Cordero US$1,500,000.00 on condition they receive a 20% cut, and a meeting was set for June 29, 1998 at the Mactan Island Resort Hotel lobby. Only Landicho and Tecson appeared; Go did not attend. No settlement report was ever made, and Cordero testified that Landicho and Tecson had no intention of settling but were merely buying time as the catamaran vessel was due to arrive from Australia.

Cordero filed a complaint with the Bureau of Customs to prohibit the entry of the SEACAT 25 based on misdeclaration and undervaluation, resulting in an Alert Order issued by Acting BOC Commissioner Nelson Tan when the vessel arrived on July 17, 1998. On August 21, 1998, Cordero instituted Civil Case No. 98-35332 against Robinson, Go, Tecson, and Landicho, seeking joint and solidary liability for unpaid commissions (US$31,522.01 balance from the first vessel and US$328,742.00 for the second vessel), actual, moral, and exemplary damages, attorney's fees, and litigation expenses. Robinson was declared in default for failure to file an answer. Go, Tecson, and Landicho denied any involvement in the termination of Cordero's distributorship, claiming it was Cordero who stopped communicating with Go and that the Wartsila engine inquiry was merely requested by Robinson and misinterpreted by Cordero. They also alleged that the purported second contract superseding the original Shipbuilding Contract No. 7825, stating a lower price of US$1,150,000.00, was presented before the BOC to show the vessel was not undervalued. The trial court found that defendants failed to appear at the pre-trial conference on January 7, 2000 despite due notice and had misled the court by claiming they would go abroad for the holidays when a Hold-Departure Order had been issued against them. Cordero was allowed to present evidence ex parte, and the trial court found that Cordero was properly authorized as AFFA's exclusive distributor, had spent considerable sums in pursuance of the contract, and had received commissions from progress payments made by Go for the first SEACAT 25.

• Real Party-in-Interest: Petitioner Go argued that Cordero was not the real party-in-interest, contending that documents signed by Robinson indicated that Pamana Marketing Corporation, not Cordero individually, was appointed as AFFA's exclusive distributor, and that the case should be dismissed for lack of cause of action.
• Liability for Breach of Distributorship: Petitioner Go maintained that there was no conclusive proof that he actually purchased a second SEACAT 25 directly from AFFA, and thus there was no violation of the exclusive distributorship agreement, unlike in Yu vs. Court of Appeals.
• Solidary Liability: Petitioner Go contended that the CA gravely abused its discretion in holding him solidarily liable with co-defendants, relying on Articles 1207, 19, and 21 of the Civil Code despite the absence of evidence showing conspiracy to defeat the exclusive distributorship agreement. He argued that the unpaid commission was the sole obligation of AFFA/Robinson, not of a third party like himself.
• Unpaid Commissions and Damages: Petitioner Go argued that the trial and appellate courts erred in holding him liable for unpaid commissions, damages, attorney's fees, and litigation expenses, as he had paid in full the first and only vessel he purchased from AFFA and had not caused the termination of the distributorship agreement.
• Due Process: Petitioner Go asserted that he was effectively deprived of his right to due process by the trial court's denial of his motion for new trial, which was based on the negligence of counsel who was allegedly unaware that the ex parte hearing was being conducted against all defendants and not only against Robinson.
• Commission for Second Vessel: Petitioner Cordero argued that the CA erred in not sustaining the trial court's award of actual damages for his commission on the sale of the second vessel, citing the Memorandum of Agreement dated August 7, 1997, Go's position paper and counter-affidavit before the BOC admitting purchase of a second vessel, and respondents' admission in their pre-trial brief.
• Facilitation of Transaction: Petitioner Cordero maintained that it was his efforts which actually facilitated and set up the transaction for the second vessel, entitling him to commissions.
• Legal Interest Rate: Petitioner Cordero argued that the CA erred in not imposing the proper legal interest rate of 12% from the time of breach of obligation.
• Consequential Damages: Petitioner Cordero contended that the CA erred in not sustaining the original amount of consequential damages awarded by the trial court, given the bad faith and fraudulent conduct of respondents in misappropriating his money.

• Real Party-in-Interest: Whether Cordero has the legal personality to sue respondents for breach of contract, or whether Pamana Marketing Corporation is the real party-in-interest.
• Jurisdiction over Robinson: Whether the trial court acquired jurisdiction over Robinson, a foreign national served by summons by publication.
• Tortious Interference: Whether respondents Go, Landicho, and Tecson may be held liable for damages to Cordero for inducing AFFA/Robinson to breach the exclusive distributorship agreement, even absent conclusive proof of an actual second vessel purchase.
• Solidary Liability: Whether respondents may be held solidarily liable with Robinson for Cordero's unpaid commissions and damages.
• Commission for Second Vessel: Whether Cordero is entitled to commission for the sale of a second vessel.
• Damages and Interest: Whether the amounts of moral and exemplary damages awarded by the CA are proper, and whether the correct legal interest rate was applied.

• Real Party-in-Interest: Yes. Cordero, not Pamana, was the exclusive distributor of AFFA in the Philippines, as shown by the Certification dated June 1, 1997 issued by Robinson; Robinson and AFFA dealt only with Cordero, who alone made decisions in the performance of the distributorship and directly received commission payments.
• Jurisdiction over Robinson: Yes. Robinson voluntarily submitted to the trial court's jurisdiction by filing a Motion for Time to file a responsive pleading, which acknowledged the summons by publication and prayed for affirmative relief, thereby estopping him from contesting jurisdiction.
• Tortious Interference: Yes. Respondents acted in bad faith in bypassing Cordero and inducing Robinson to breach the exclusive distributorship agreement, satisfying all three elements of tortious interference under Article 1314 of the Civil Code, even without conclusive proof of an actual second vessel purchase.
• Solidary Liability: Yes. Obligations arising from tort are by nature always solidary under Article 2194 of the Civil Code; joint tort feasors are jointly and severally liable for the tort they commit.
• Commission for Second Vessel: No. There was no sufficient evidence that respondents actually purchased a second SEACAT 25 directly from AFFA; Cordero is entitled only to the unpaid balance of his commission from the sale of the first vessel.
• Damages and Interest: Partially affirmed. The moral and exemplary damages awarded by the CA were still excessive and reduced to ₱300,000.00 and ₱200,000.00, respectively; the CA's award of ₱50,000.00 attorney's fees and the interest rate modifications were affirmed.

• Real Party-in-Interest: Section 2, Rule 3 of the Rules of Court defines a real party-in-interest as the one to be benefited or injured by the judgment, or the party entitled to the avails of the suit. Although some documents referenced "Pamana Marketing Corporation represented by Mr. Mortimer F. Cordero," Robinson and AFFA dealt only with Cordero, who alone made decisions in the performance of the exclusive distributorship. The stipulated commissions were directly paid by Robinson to Cordero, and Landicho and Tecson were aware of Cordero's authority, as shown by their practice of furnishing him copies of bank transmittals whenever Go remitted payment. Moreover, Go, Landicho, and Tecson never raised Cordero's lack of personality to sue on behalf of Pamana before the trial court, doing so only before the CA. The apparent inconsistency in naming the distributor was thus of no moment.

• Jurisdiction over Robinson: Although Robinson filed a Motion to Dismiss citing lack of personal jurisdiction in a special appearance, he had earlier filed a Motion for Time to file an appropriate responsive pleading beyond the period provided in the summons by publication. That motion did not state it was a conditional appearance to question the regularity of service of summons; rather, it acknowledged the summons by publication and invoked the court's jurisdiction to secure affirmative relief. Having acknowledged the summons and invoked the court's jurisdiction, Robinson voluntarily submitted to the trial court's jurisdiction and was estopped from asserting otherwise.

• Tortious Interference: Article 1314 of the Civil Code provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. The elements of tortious interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of the contract; and (3) interference of the third person without legal justification. The first and second elements were undisputed — respondents were aware of Cordero's exclusive distributorship through Robinson's letters and had initially dealt with and recognized Cordero as such. As to the third element, while authorities debate whether interference motivated solely by financial interest is justified, the Court found that respondents transgressed the bounds of permissible financial interest. They furtively went directly to Robinson after Cordero had worked to close the deal, closely monitored the first vessel's construction, and spent considerable sums for trips to Australia. Most damningly, even as Landicho and Tecson secretly negotiated with Robinson for the second vessel, they continued demanding and receiving their "commission" or "cut" from Cordero's earned commission on the first vessel. The respondents connived not only to exclude Cordero from the second vessel transaction but also to deprive him of the balance of his earned commission. The existence of malice and bad faith, being factual matters, was conclusively established by the concurrent findings of the trial and appellate courts. The absence of conclusive proof of an actual second vessel purchase did not absolve respondents, because their bad faith in bypassing Cordero and completing remaining payments to AFFA without advising him already constituted invasion of his rights under the exclusive distributorship.

• Solidary Liability: Petitioner Go's argument that no law or contract provided for solidary obligation was rejected. Under Article 2194 of the Civil Code, the responsibility of two or more persons liable for a quasi-delict is solidary. Citing Lafarge Cement Philippines, Inc. vs. Continental Cement Corporation and Worcester vs. Ocampo, the Court reaffirmed that obligations arising from tort are by their nature always solidary; joint tort feasors are jointly and severally liable, and each is liable for the whole damages caused by all. The rule that a defendant found guilty of interference with contractual relations cannot be held liable for more than the amount for which the party induced to break the contract can be held liable was applied, limiting respondents' liability to the unpaid commission balance of US$31,522.09.

• Commission for Second Vessel: Contrary to Cordero's claims, there was no sufficient evidence that respondents actually purchased a second SEACAT 25 directly from AFFA. The purported second contract stating a lower price of US$1,150,000.00 was only presented before the BOC to show the vessel was not undervalued, and Cordero vehemently denied any modification of the original contract, accusing respondents of resorting to falsified documents. While a Counter-Affidavit filed in the BOC case stated that total remittances included advance payment for another vessel, this was insufficient to conclusively establish an actual second sale. Cordero was therefore entitled only to the unpaid balance of his commission from the first vessel sale.

• Damages and Interest: The Court found the moral and exemplary damages as reduced by the CA (₱500,000.00 and ₱300,000.00, respectively) still excessive. Moral damages, though incapable of pecuniary estimation, must be proportional to and in approximation of the suffering inflicted, and should not be palpably and scandalously excessive. The Court deemed ₱300,000.00 and ₱200,000.00 as moral and exemplary damages, respectively, sufficient and reasonable. Because exemplary damages were awarded and respondents acted in bad faith, attorney's fees of ₱50,000.00 were properly awarded under Article 2208(1). The CA's interest rate modification — 6% per annum from June 24, 1998 until finality, and 12% per annum from finality until satisfaction — was affirmed.

• Tortious Interference with Contractual Relations — Under Article 1314 of the Civil Code, any third person who induces another to violate his contract shall be liable for damages to the other contracting party. The elements are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of the contract; and (3) interference of the third person without legal justification. In this case, all three elements were present: Cordero's exclusive distributorship with AFFA was a valid contract; respondents knew of it through Robinson's letters and had initially recognized Cordero as exclusive distributor; and respondents' interference was without legal justification because they acted in bad faith, bypassing Cordero while continuing to collect "cuts" from his earned commission.

• Justification for Interference Based on Financial Interest — As a general rule, justification for interfering with the business relations of another exists where the actor's motive is to benefit himself, and such justification does not exist where his sole motive is to cause harm. However, where the interferer transgresses the bounds of permissible financial interest — as where he secretly negotiates with the principal while continuing to collect commissions from the distributor he is bypassing — the interference is without legal justification and malice is established. The Court cited Gilchrist vs. Cuddy for the proposition that where there is no malice and the impulse lies in a proper business interest rather than wrongful motives, a party cannot be a malicious interferer, but found that respondents' conduct exceeded permissible bounds.

• Solidary Liability for Quasi-Delict — Under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for a quasi-delict is solidary. Obligations arising from tort are by their nature always solidary; joint tort feasors are jointly and severally liable for the whole amount of damages, and the person injured may sue all or any number less than all. Each tort feasor is liable for the whole damage, and the damages cannot be apportioned among them except among themselves.

• Article 19 as Standard for Exercise of Rights — Article 19 of the Civil Code requires every person, in the exercise of rights and performance of duties, to act with justice, give everyone his due, and observe honesty and good faith. Its elements are: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21. In this case, respondents' failure to act with fairness, honesty, and good faith in securing better terms from AFFA, to the prejudice of Cordero, violated Article 19.

• Voluntary Submission to Jurisdiction — A party who files a motion seeking affirmative relief from the court, such as a motion for additional time to file a responsive pleading, without expressly conditioning the appearance on a challenge to the regularity of service of summons, is deemed to have voluntarily submitted to the court's jurisdiction and is estopped from later contesting jurisdiction over his person.

• "Any third person who induces another to violate his contract shall be liable for damages to the other contracting party." — This is the text of Article 1314 of the Civil Code as quoted in the decision, forming the statutory basis for the tortious interference claim against respondents Go, Landicho, and Tecson.

• "While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such breach." — This passage articulates the distinction between breach of contract (available only against contracting parties) and tortious interference (available against third persons who induce breach), which is the central legal principle applied in this case.

• "Obligations arising from tort are, by their nature, always solidary." — This formulation, quoted from Lafarge Cement Philippines, Inc. vs. Continental Cement Corporation, establishes the doctrinal basis for holding respondents solidarily liable with Robinson for damages arising from their joint tortious conduct.

• "The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with ACG Express Liner to obtain a lower price for the second vessel resulted in AFFA's breach of its contractual obligation to pay in full the commission due to Cordero and unceremonious termination of Cordero's appointment as exclusive distributor." — This sentence summarizes the factual basis for the Court's finding of tortious interference, linking respondents' conduct to the resulting breach by AFFA and injury to Cordero.

• Yu vs. Court of Appeals, G.R. No. 86683, January 21, 1993, 217 SCRA 328 — Controlling precedent on protection of exclusive distributorship rights. The Court held that the right to perform an exclusive distributorship agreement and reap profits from such performance are proprietary rights protectable against wrongful interference by strangers to the contract. Applied in this case to support the finding that respondents' bypassing of Cordero invaded his proprietary rights, though distinguished on the ground that no conclusive proof of an actual second purchase was established.

• So Ping Bun vs. Court of Appeals, G.R. No. 120554, September 21, 1999, 314 SCRA 751 — Followed for the formulation of the three elements of tortious interference and the discussion of justification based on financial interest. The Court adopted its framework for analyzing whether interference motivated by economic interest is justified, finding that respondents' conduct exceeded permissible bounds.

• Gilchrist vs. Cuddy — Cited for the principle that where there is no malice in the interference and the impulse lies in a proper business interest rather than wrongful motives, a party cannot be a malicious interferer. The Court used this standard to evaluate respondents' conduct and found that they transgressed the bounds of permissible financial interest.

• Lagon vs. Court of Appeals, G.R. No. 119107, March 18, 2005, 453 SCRA 616 — Followed for the definition of "induce" in tortious interference as situations where a person causes another to choose one course of conduct by persuasion or intimidation, and for the requirement that malice or bad faith must be proven.

• Lafarge Cement Philippines, Inc. vs. Continental Cement Corporation, G.R. No. 155173, November 23, 2004, 443 SCRA 522 — Followed for the doctrine that obligations arising from tort are always solidary and that joint tort feasors are jointly and severally liable.

• Worcester vs. Ocampo (1912) — Cited within Lafarge for the foundational principle that each joint tort feasor is individually and jointly liable for the tort in which he participates, and that joint tort feasors are not liable pro rata but jointly and severally for the whole amount.

• Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587 (1919) — Cited for the rule that a defendant found guilty of interference with contractual relations cannot be held liable for more than the amount for which the party induced to break the contract can be held liable.

• Nikko Hotel Manila Garden vs. Reyes, G.R. No. 154259, February 28, 2005, 452 SCRA 532 — Followed for the elements of Article 19 of the Civil Code: (1) a legal right or duty; (2) exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.

• Article 1314, Civil Code — Provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. Applied as the statutory basis for holding Go, Landicho, and Tecson liable for inducing AFFA/Robinson to breach the exclusive distributorship agreement with Cordero.

• Article 19, Civil Code — Requires every person to act with justice, give everyone his due, and observe honesty and good faith in the exercise of rights and performance of duties. Applied to find that respondents' actuations in bypassing Cordero and withholding his earned commission violated the standards of fair dealing.

• Article 20, Civil Code — Pertains to damages arising from a violation of law. Cited as the basis for an action for damages when Article 19 is violated.

• Article 21, Civil Code — Provides that any person who willfully causes loss or injury to another in a manner contrary to morals, good customs, or public policy shall compensate the latter for the damage. Cited alongside Article 19 as the basis for awarding damages for respondents' bad faith conduct.

• Article 1207, Civil Code — Governs solidary obligations. Cited by the CA in holding respondents solidarily liable, though the Supreme Court primarily relied on Article 2194.

• Article 2194, Civil Code — Provides that the responsibility of two or more persons liable for a quasi-delict is solidary. Applied as the direct basis for holding respondents jointly and severally liable with Robinson for damages arising from their tortious interference.

• Article 2219, Civil Code — Authorizes the recovery of moral damages in cases of bad faith. Applied to sustain the award of moral damages against respondents who acted in bad faith.

• Article 2208(1), Civil Code — Authorizes the award of attorney's fees when exemplary damages are awarded. Applied to sustain the ₱50,000.00 attorney's fees award.

• Section 2, Rule 3, Rules of Court — Defines a real party-in-interest as the party who would be benefited or injured by the judgment, or the party entitled to the avails of the suit. Applied to determine that Cordero, not Pamana, was the real party-in-interest.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Conchita Carpio Morales, Associate Justice Teresita J. Leonardo-De Castro, and Associate Justice Lucas P. Bersamin concurred in the decision. No separate concurring opinions were issued.