National Food Authority vs. Intermediate Appellate Court

When an agent contracts in his own name involving things belonging to the principal, the contract is considered entered into between the principal and the third person, notwithstanding the agent's apparent representation. The agent's apparent representation yields to the principal's true representation, and the third person who dealt with the agent acquires obligations directly to the principal.

The National Food Authority (NFA), then known as the National Grains Authority (NGA), was a government agency that entered into a contract for the hire of a ship to transport rice. Superior Shipping Corporation was the owner of the vessel "MV Sea Runner." Gil Medalla acted as a commission agent of Superior Shipping Corporation in entering into the contract with NFA. The applicable law was Article 1883 of the Civil Code of the Philippines, which governs the rights and obligations of principals, agents, and third persons when an agent contracts in his own name.

On September 6, 1979, Gil Medalla, acting as commission agent of Superior Shipping Corporation, entered into a contract for hire of the ship "MV Sea Runner" with the National Grains Authority (NGA), now the National Food Authority. Under the contract, Medalla obligated to transport 8,550 sacks of rice belonging to NGA from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, Superior Shipping wrote a letter on October 17, 1979, requesting NGA to allow it to collect the amount stated in its statement of account, which included claims for freightage, demurrage, and stevedoring charges amounting to P93,538.70. On November 5, 1979, Superior Shipping wrote NGA again, specifically requesting that payment for freightage and other charges be made to it and not to Medalla, because Superior Shipping was the owner of the vessel "MV Sea Runner." In reply, NGA informed Superior Shipping on November 16, 1979, that it could not grant the request because the contract to transport the rice was entered into between NGA and Medalla, who did not disclose that he was acting as a mere agent of Superior Shipping. On November 19, 1979, NGA paid Medalla the sum of P25,974.90 for freight services in connection with the shipment of the 8,550 sacks of rice.

On December 4, 1979, Superior Shipping wrote Medalla demanding that he turn over the amount of P27,000.00 paid to him by NFA. Medalla ignored the demand, prompting Superior Shipping to file a complaint. NFA admitted that it entered into a contract with Medalla whereby Superior Shipping's vessel transported the rice, and that it paid Medalla P27,000.00 for freightage. The trial court rendered judgment in favor of Superior Shipping, and NFA appealed to the Intermediate Appellate Court on the sole issue of whether it is jointly and severally liable with Medalla for freightage. The appellate court affirmed the judgment of the lower court.

• Non-application of the exception under Article 1883: Petitioner NFA contended that it is not liable under the exception to the general rule in Article 1883 of the Civil Code since it had no knowledge of the fact of agency between Superior Shipping and Medalla at the time the contract was entered into between NFA and Medalla.
• Undisclosed principal cannot maintain action: Petitioner submitted that an undisclosed principal cannot maintain an action upon a contract made by his agent unless such principal was disclosed in such contract, and that one who deals with an agent acquires no right against the undisclosed principal.

N/A — The decision does not recount the specific arguments raised by the respondent Superior Shipping Corporation beyond the factual assertion that it was the owner of the vessel and that Medalla was its commission agent.

• Liability of NFA under Article 1883: Whether the instant case falls within the exception of the general rule provided for in Article 1883 of the Civil Code of the Philippines, making NFA liable to Superior Shipping Corporation for freightage.

• Liability of NFA under Article 1883: Yes. The case falls within the exception provided in Article 1883 of the Civil Code. When things belonging to the principal are dealt with, the agent's apparent representation yields to the principal's true representation, and the contract must be considered as entered into between the principal and the third person. Since the principal can be obliged to perform its duties under the contract, it can also demand the enforcement of its rights arising from the contract.

• Liability of NFA under Article 1883: The Court found that it is an undisputed fact that Gil Medalla was a commission agent of Superior Shipping Corporation, which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to NFA. Article 1883 of the Civil Code provides that if an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, neither have such persons against the principal, except when the contract involves things belonging to the principal. The Court reasoned that when things belonging to the principal are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. The agent's apparent representation yields to the principal's true representation, and in reality and in effect, the contract must be considered as entered into between the principal and the third person, citing Sy Juco and Viardo vs. Sy Juco, 40 Phil. 634. Corollarily, if the principal can be obliged to perform its duties under the contract, then it can also demand the enforcement of its rights arising from the contract. The Court concluded that NFA's contention "holds no water" and denied the petition.

• Exception to the rule on undisclosed principal under Article 1883 — Under Article 1883 of the Civil Code, when an agent acts in his own name, the general rule is that the principal has no right of action against the persons with whom the agent has contracted, neither have such persons against the principal. However, an exception exists when the contract involves things belonging to the principal. In such case, the agent's apparent representation yields to the principal's true representation, and the contract is considered entered into between the principal and the third person. The Court applied this doctrine to hold NFA liable to Superior Shipping Corporation for freightage, since the contract involved the vessel "MV Sea Runner" belonging to Superior Shipping.

• "Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal." — This is the controlling statutory provision that the Court applied to determine the liability of NFA to Superior Shipping Corporation.
• "Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person." — This passage articulates the Court's reasoning for applying the exception under Article 1883, establishing that the contract is deemed to be between the principal and the third person when the contract involves the principal's property.
• "Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract." — This statement expresses the reciprocal nature of rights and obligations under the contract, supporting the principal's right to enforce the contract against the third person.

• Sy Juco and Viardo vs. Sy Juco, 40 Phil. 634 — Cited as controlling precedent for the proposition that when an agent acts in his own name but the contract involves things belonging to the principal, the contract is considered entered into between the principal and the third person.

• Article 1883, Civil Code of the Philippines — The Court applied this provision to determine the liability of NFA. The provision establishes the general rule that when an agent acts in his own name, the principal has no right of action against the persons with whom the agent contracted, except when the contract involves things belonging to the principal. The Court found that the exception applied because the contract involved the vessel "MV Sea Runner" belonging to Superior Shipping Corporation.

Melencio-Herrera, Padilla, Sarmiento, and Regalado, JJ., concurred.

N/A — No dissenting opinions were noted in the provided text.