G.R. No. 74623. August 31, 1987
BISAYA LAND TRANSPORTATION CO., INC., ANTONIO V. CUENCO AND BENJAMIN G. ROA, PETITIONERS, VS. MARCIANO C. SANCHEZ AND THE HON. INTERMEDIATE APPELLATE COURT, RESPONDENTS.
PADILLA J.:
This is a petition for certiorari
to review the decision* of respondent Intermediate Appellate Court,
dated 25 April 1986,
in AC-G.R. no. CV-01300 which affirmed the decision** of the Regional Trial Court, 7th Judicial
Region, Branch XII, Cebu City, dated 14 February 1983, in Civil Case no. R-18830, which was a suit
for Specific Performance with Preliminary Injunction and Damages.
Petitioner Bisaya Land Transportation Company, Inc. (BISTRANCO, for
short) has been engaged in the shipping business, operating several
passenger-cargo vessels, and among the ports of call of these vessels has been Butuan City. As
early as 1954, private respondent Marciano Sanchez
(Sanchez, for short) was an employee of BISTRANCO, specifically, a
quartermaster in one of its vessels. In
1959, he ceased to be an employee as he engaged in stevedoring services in the part of Butuan City and rendered stevedoring services for the
vessels of BISTRANCO.[1]
In May 1975, Sanchez was
appointed by BISTRANCO as shipping agent in Butuan City for the vessel M/V Don Mariano[2]. The
new Butuan City Agent[3] referred to in the letter “Exhibit
“C” was Marciano Sanchez. Later, on 12 March 1976, when BISTRANCO was under receivership,
Sanchez was appointed by its Receiver, Atty. Adolfo V. Amor,
as acting shipping agent, also for M/V Dona Remedios,
in addition to M/V Dona Filomena, in the port of Butuan City “pending the execution of the
formal contract of agency”[4]. When
Sanchez was constituted as acting shipping agent, he received the same
commission as his predecessor, one ONG YUI, who received 10% for all freight
and passenger revenues coming from Butuan City and 5% for all freight going to Butuan[5].
Thereafter, or on 27 July
1976, a formal
Contract of Agency, marked as Exhibit “F”, was executed between BISTRANCO, represented by Receiver Atty. Adolfo V. Amor
and Marciano C. Sanchez, represented by his
authorized representative Exequiel Aranas. On 30 July
1976, after Sanchez
found that Paragraph 16 of the Contract of Agency was quite prejudicial to him,
he executed with BISTRANCO a Supplemental Shipping Agency Contract, marked as
Exhibit “6”, which was duly signed by Receiver Atty. Adolfo V. Amor on behalf of BISTRANCO and Marciano
C. Sanchez himself[6]. But,
both the Contract of Agency and the Supplemental Shipping Agency Contract were
never submitted by Atty. Adolfo Amor to the
receivership court for its approval.
By virtue of the Contract
of Agency and the Supplemental Shipping Agency Contract (hereinafter referred
to as Contracts), Sanchez performed his duties as shipping agent of BISTRANCO,
and he received his corresponding commissions as such shipping agent. Pursuant to the Contracts, Sanchez leased a
parcel of land owned by Jose S. Mondejar which was
used as the wharf and berthing facilities of BISTRANCO[7]. At
an expense of more than P100,000.00, Sanchez constructed the wharf on the land
he leased and the wharf was used to facilitate the loading and unloading of
cargoes of the BISTRANCO vessels at the port of Butuan City from 1976 to December 1979. Sanchez also
constructed a bodega at his wharf for use in connection with the
shipping business of BISTRANCO.
He constructed an office for the agency and, as of December 1979, he had an office force of 13
employees, all paid and maintained by him.
Sanchez operated six (6)
cargo trucks and one (1) jeep for the service of the shipping agency. As shipping agent, Sanchez put up billboards
and other forms of advertisement to enhance the shipping business of BISTRANCO. He established good business relations with
the business community of Butuan City[8]. In
these endeavors, Sanchez succeeded in increasing the volume of the shipping
business of BISTRANCO at the Butuan City port, so much so that his earnings on
freight alone increased from an average of P8,535.00 a month in 1975 to an
average of about P32,000.00 a month in the last seven months of 1979[9].
While the shipping
business of BISTRANCO in Butuan City flourished,
evidently to the mutual benefit of both parties, on 26 December 1979,
co-petitioner Benjamin G. Roa, as Executive
Vice-President of BISTRANCO, wrote Sanchez a letter[10] advising him that, effective 1 January 1980,
BISTRANCO would commence operating its branch office in Butuan
City. Prior to this, on 11
December 1979,
Sanchez was invited to attend a meeting of the Board of Directors of BISTRANCO
wherein he was told by co-petitioner Antonio V. Cuenco
that the Board was to open a branch office in Butuan City and he was asked what would be his
proposals. Sanchez submitted his
proposals in writing, marked as Exhibit “NN”, but these were not
acceptable to BISTRANCO[11].
Realizing that the
letter, marked as Exhibit “FF”, was in effect a repudiation of the
Contracts, Sanchez filed an action for specific performance with
preliminary injunction and damages with the Regional
Trial Court of
Cebu City
on 28 December 1979.
Pursuant to the letter
(Exhibit “FF”), BISTRANCO actually opened and operated a branch
office in Butuan City on 15 January 1980.
BISTRANCO through its new representative contacted the shippers
in Butuan City
and neighboring towns, advising them to transact their business directly with
its new branch office in Butuan
City. Under these circumstances, the business of
Sanchez, as shipping agent of BISTRANCO in Butuan City,
was seriously impaired and undermined.
He could not solicit as many passengers as he used to, because the
passenger tickets issued to him by BISTRANCO were limited. The cargoes solicited by Sanchez were loaded
on a “chance basis” because those that were solicited by the branch
office were given priority.[12]
After due hearing and
their respective memorandum filed, the trial court rendered judgment in favor
of Sanchez, the dispositive portion of which is
quoted hereunder[13]:
“WHEREFORE, judgment is hereby rendered declaring the contracts,
Exhibits “F” and “G”, as valid and binding between the
plaintiff and defendant BISTRANCO up to its expiry date on July 27, 1981, and
ordering the defendant BISTRANCO to pay the plaintiff the total sum of FIVE
HUNDRED EIGHTY EIGHT THOUSAND PESOS (P588,000.00) in concept of unearned
commissions as well as damages, with interest at the legal rate counted from
July 28, 1981 up to the time the amount is fully paid, and the further sum of
P15,000.00 as attorney’s fees, and the costs of this action.
Thereafter, BISTRANCO
appealed to the Court of Appeals which, as heretofore stated, affirmed the
decision of the trial court in toto.
Hence this Petition for Certiorari
brought to this Court, with the petitioners raising the following issues[14]:
I
CAN A COURT
APPOINTED RECEIVER VALIDLY ENTER INTO A CONTRACT WITHOUT COURT APPROVAL?
II
IS THE OPENING BY BISTRANCO OF A BRANCH
OFFICE IN BUTUAN CITY A VIOLATION OF THE CONTRACT OF AGENCY AND SUPPLEMENTAL
SHIPPING AGENCY CONTRACT (EXHIBITS “F” AND “G”) ASSUMING
THEM TO BE VALID?
III
WHAT EFFECT DID THE WORKING AGREEMENTS
(EXHIBITS “S” AND “U”) HAVE ON AFORESAID QUESTIONED CONTRACTS?
IV
IS THE
AWARD FOR UNEARNED COMMISSION AND DAMAGES JUSTIFIED?
The general powers of a court-appointed
receiver are provided in Section 7, Rule 59 of the Rules of Court. Under such rule, the receiver is
“subject to the control of the court in which the action is pending”
and he can “generally do such acts respecting the property as the court
may authorize”. The act of Receiver
Amor in entering into a contract of agency with
Sanchez is not one of the acts specifically allowed in the mentioned rule. While such act of Amor
may be arguably implied from the power of the receiver to “take and keep possession of the property in
controversy”, and that the act of Amor is
covered by the broad phrase that a receiver can “generally do such acts
respecting the property as the court may authorize”, still, it is
necessary that the acts of the receiver have the approval or authorization of the court which appointed him as a receiver. As held in one case[15], a court-appointed receiver cannot validly
enter into a contract without the approval of the court.
What then is the status of
the Contracts which Receiver Amor entered into with
Sanchez, without the approval of the court which appointed him receiver? Even the petitioners noticeably waver as to
the exact status of these Contracts. The
petitioners allege in their Memorandum[16] submitted to this Court that they are void
contracts under Article 1409(1) of the Civil Code, whereas, in their Petition[17], they labelled the
contracts as unenforceable under Article 1403(1) of the Civil
Code.
The determination,
therefore, of whether the questioned contracts are void or merely unenforceable
is important, because of the settled distinction that a void and inexistent
contract can not be ratified and become enforceable, whereas, an unenforceable
contract may still be ratified and, thereafter, enforced.
The petitioners allege that the Contracts are void, citing
Article 1409(1) of the Civil Code which provides that contracts whose cause,
object or purpose is contrary to law, morals, good customs, public order or
public policy, are inexistent and void from the beginning. In the case at bar, the contracts of agency
were entered into for the management and operation of BISTRANCO’s
business in Butuan
City. Said Contracts necessarily imposed
obligations and liabilities on the contracting parties, thereby affecting the
disposition of the assets and business of the company under receivership. But a perusal of the Contracts in question
would show that there is nothing in their cause, object or purpose which
renders them void. The purpose of the
Contracts was to create an agency for BISTRANCO with Marciano
Sanchez as its agent in Butuan
City. Even as to the other provisions of the
Contracts, there is nothing in their cause or object which can be said as
contrary to law, morals, good customs, public order or public policy so as to
render them void.
On the other hand, paragraph 1, Article 1403 of the Civil Code
provides that contracts “entered into in the name of another person by one
who has been given no authority or legal representation, or who has acted
beyond his powers” are unenforceable, unless they are ratified.
In the case at bar, it is undisputed that Atty. Adolfo Amor was entrusted, as receiver, with the administration of
BISTRANCO and its business. But the act
of entering into a contract is one which requires the authorization of the
court which appointed him receiver.
Consequently, the questioned
Contracts can rightfully be classified as unenforceable for having been entered
into by one who had acted beyond his powers, due to Receiver Amor’s failure to secure the court’s approval of said
Contracts.
These unenforceable Contracts were nevertheless deemed ratified
in the case at bar, based upon the facts and circumstances on record which
have led this Court to conclude that BISTRANCO had actually ratified the
questioned Contracts.
Private respondent Sanchez filed his complaint in the lower court
on 28 December 1979. But on 10 January 1980, co-petitioner
Benjamin G. Roa, as Executive Vice-President of
BISTRANCO, still sent Sanchez three (3) separate letters with the following
contents: (1) reducing his passage
commission from 10%, as he used to receive in the previous years, to 7 1/2%
“as stated in the agency contract dated 27 July 1976;”[18];
(2) advising Sanchez that in view of “his failure to post a bond or such
other securities acceptable to the company in the sum of P5,000.00 pursuant
to par. 8 of the Contract
executed by Sanchez the
plaintiff with BISTRANCO on 27
July 1976, we are recalling
all unused passage tickets issued your agency” and reminding him (Sanchez)
also that “pursuant to par. 2 of aforementioned Contract, solicitation
of cargo and passengers shall be undertaken by you strictly in accordance with
the scheduled rules of the Company”[19]; and (3) informing Sanchez that “we
(petitioners) are abiding strictly with the terms of the contracts
executed between Marciano C. Sanchez and Atty. Adolfo
V. Amor in behalf of BISTRANCO, etc. etc.”[20]
The three (3) letters of
Benjamin G. Roa in effect recognized and gave
efficacy to the Contracts in question.
The declaration of Benjamin G. Roa that
BISTRANCO did not have any knowledge about the Contracts before the complaint
was filed on 28 December 1979 is contradicted by his own testimony that, as
early as 14 December 1979, he was already looking for the contract, after he
saw Exhibit “NN”, wherein Sanchez requested the company “to
abide with the terms of the contract which will expire on July 1981”[21].
Besides, the pretended lack of knowledge of Benjamin G. Roa can not be equated with BISTRANCO’s.
It should be noted that Roa started to work for BISTRANCO only on 27 April
1979[22], whereas, the Contracts were executed in
1976.
The people who were more
in a position to know about the Contracts, like the company officers and
members of the board of directors at the time the Contracts were entered into,
especially Antonio V. Cuenco, were never presented as
witnesses. Aside from this, the company
cannot deny its ratification of the Contracts even before the time of Benjamin G. Roa,
because when Atty. Fulveo Pelaez
succeeded Atty. Adolfo Amor as Receiver, he was
represented by BISTRANCO’s shipping manager as
having taken cognizance of these Contracts and sanctioned the acts of Sanchez
as shipping agent of BISTRANCO in Butuan City. This
is shown by a letter[23], dated 15 February 1977, written by Capt. Federico Reyes[24], the shipping manager of BISTRANCO at that
time. The letter states that “the
Receiver (Atty. Fulveo Pelaez)
maintains that the previous agency contract remains and (sic) basically the
same except that the rates of the agency commission were modified”.
Furthermore, it is clear
that BISTRANCO received material benefits from the contracts of agency of
Sanchez, based upon the monthly statements of income of BISTRANCO, upon which
the commissions of Sanchez were based[25]. A
perusal of the Contracts will also show that there is no single provision
therein that can be said as prejudicial or not beneficial to BISTRANCO. As held in Savings v. Ball-Bearing Chain Co.[26]:
“Not every act within the letter of an order can be
sanctioned, nor everything done without the direction of the court
condemned. The tests to be applied
are: (1) was the act under investigation
within the authority conferred by an order of court? (2) If so, was it performed with reference to
the preservation of the estate, as a man of ordinary sagacity and prudence
would have performed it under like circumstances? (3) If without authority, was it beneficial
to the estate?”
Besides, in our
considered opinion, the doctrine of estoppel precludes
BISTRANCO from repudiating an obligation voluntarily assumed by it, after
having accepted benefits therefrom. To countenance such repudiation would be contrary to equity and would put a premium on fraud or misrepresentation[27], which this Court will not sanction.
Anent the issue of
whether the Memorandum of Agreement and the Working Agreement (Exhibits
“S” and “U”) which were executed by the parties in this
case on 4 February 1977
and 28 May 1979,
respectively, novated the questioned Contracts, the
answer is also in the negative.
BISTRANCO avers that Exhibit “S” substantially altered or
changed the principal terms and conditions of Exhibits “F” and
“G” on material points, such as, reduction of the rate of commission
for freight and passage (from 10%
to 7 1/27%), the manner of liquidation and remittance of collections of the
agent, the mode of payment of the agent’s commissions, and the term of the
Contract which is from a period of 5 years to a term of 1 year renewable yearly
upon mutual consent; and that Exhibit “U”, furthermore, bolstered
this novation theory.
Novation is not equivalent or synonymous to mere alteration,
modification or amendment. Novation is the substitution of a new obligation for an
existing or old one, which is thereby extinguished. Novation takes place when the object or principal condition
of an obligation is changed or altered.[28] Novation is never presumed; it must be explicitly
stated or there must be a manifest incompatibility between the old and the new
obligations in every aspect[29]. The
test of incompatibility between two obligations or contracts, is whether or
not they can stand together, each one having an independent existence. If they cannot, they are incompatible, and
the later obligation novates the first.
In the case at bar, it can be deduced that the Agreements,
Exhibits “S” and “U”, were not meant to novate
the herein questioned contracts. Rather,
the intent of the parties was to suspend some of the provisions of the Contracts
for a period of one (1) year, during which, the provisions of the Agreements
will prevail. As par. 8 of the
Memorandum of Agreement provides:
“It is in this spirit of cooperation with the Receiver to enable
him to pay huge obligations of the company that the agent Marciano
Sanchez has acceded to the request of Messrs. Miguel Cuenco
and Antonio Cuenco to accept the reduction of his
commissions”. It would not be
equitable to Sanchez to say now that the Contracts were extinguished and
substituted by the Agreements. It would
be tantamount to punishing Sanchez for the concessions he extended to
BISTRANCO.
Besides, the changes were not really substantial to bring about a
novation. The
changes pointed out by BISTRANCO between the Contracts and the Agreements do
not go into the essence of the cause or object of the former. Under the Agreements, Sanchez remains the
agent of BISTRANCO in Butuan
City. There is really no clear proof of
incompatibility. In fact, the Contracts
and the Agreements can be reconciled.
The provisions of the Agreements which were more of changes on how to
enforce the agency, prevailed during the period provided in them, but after
their expiration, the conditions under the Contracts were implemented
again. The term of the agency contract
which was for a period of five (5) years still continued, until 27 July 1981.
Considering that the contract of agency and the supplemental
shipping agency contract are valid and binding between BISTRANCO and Sanchez,
the former’s opening of a branch in Butuan City
was, in effect, a violation of the Contracts.
Sanchez entered into the agency Contract because of the expected income
and profits for himself. There could be
no other motive from a businessman’s point of view. A provision in the Supplemental Shipping
Agency Contract reads:
“6. That in consideration of the foregoing additional
particular obligations of the AGENT, the COMPANY agrees not to appoint or employ another agent in Butuan City
or in any of the City’s neighboring towns without the written consent of the
AGENT first obtained.” (Exhibit “G”)
The additional particular obligations referred to in Exhibit
“G” were the putting up of an adequate agency office in Butuan City, the employment of canvassers of passengers and
solicitors of cargoes, that the Agent shall provide at least two (2) cargo
trucks and a private docking and berthing facilities for the vessels of the
company, all at the expense of Sanchez.
Aside from this, Sanchez also had to spend for the lease of the wharf and
the construction of the bodega at the wharf.
It may be true that there is no express prohibition for BISTRANCO
to open its branch in Butuan
City. But, the very reason why BISTRANCO agreed not to employ or appoint another agent
in Butuan City was to prevent competition against
Sanchez’ agency, in order that he might recover what he invested and eventually
maximize his profits. The opening by
BISTRANCO of a branch in Butuan City virtually resulted in consequences to
Sanchez worse than if another agent had been appointed. In effect, the opening of a branch office in Butuan City was a violation of the Contracts of
agency. Article 1315 of the Civil Code
provides:
“Contracts are perfected by mere consent, and from that moment
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature,
may be in keeping with good faith, usage and law.”
In the case at bar, good faith required that BISTRANCO refrain
from opening its branch in Butuan
City during the effectivity
of the agency contract with Sanchez, or until 27 July 1981.
Moreover, the opening of the branch office which, in effect, was
a revocation of the contracts of agency is not sanctioned by law because the
agency was the means by which Sanchez could fulfill his obligations under
Exhibits “F” and “G”.
Article 1927 of the Civil Code,
among others, provides: “An agency
cannot be revoked if a bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted”.
As to the issue of whether the award of P588,000.00 to Sanchez
for unearned commissions and damages is justified, the answer is also in the
affirmative, considering that BISTRANCO violated the Contracts of agency and
that Sanchez, before the breach by BISTRANCO of said agency Contracts, was
already earning an average monthly commission of P32,000.00, as shown by the
statements of commissions prepared by BISTRANCO itself.
WHEREFORE, the petition is denied. The decision of the respondent Court is
affirmed.
SO ORDERED.
Yap, (Chairman), Melencio-Herrera,
Paras, and Sarmiento, JJ., concur.
* Penned by Justice Leonor Ines-Luciano with the
concurrence of Justices Ramon Gaviola, Jr. and Ma.
Rosario Quetulio-Losa.
** Written by Judge Francis J. Militante
[1]
Rollo, p. 55
[2]
Exhibit “C”
[3]
Exhibit C-1
[4]
Exhibit “E”
[5]
Rollo, p. 56
[6]
Ibid
[7]
Exhibit “H”
[8]
Rollo, p. 57
[9]
Exhibits “12” to “12-M”
[10]
Exhibit “FF”
[11]
Rollo, p. 57
[12]
Ibid, p. 59
[13]
Decision of the Regional Trial Court, p. 9
[14]
Petition, p. 10
[15]
Pacific Merchandising Corporation v. Consolacion
Insurance and Surety Co.
Inc., et al., L-30204, October 29,
1976, 73 SCRA 564
[16]
Memorandum, p. 11
[17]
Petition, p. 15
[18]
Exhibit “GG”, emphasis supplied
[19]
Exhibit “HH”, emphasis supplied
[20]
Exhibit “II”, emphasis supplied
[21]
T.S.N., p. 15, August 19, 1980
[22]
T.S.N., p. 9, August 20, 1980
[23]
Exhibit “AA”
[24]
T.S.N., p. 18, August 19, 1980
[25]
Exhibits “12”-“12M”
[26]
118 Iowa 698, 703, 92 N.W. 712
[27]
Pangilinan v. Aguilar, No. L-29275, January 31, 1972, 43 SCRA 151.
[28]
Goni v. CA, No. L-27434, September 23, 1986, 144 SCRA 122
[29]
National Power Corporation v. Dayrit, Nos.
L-62845-46, November 25, 1983,
125 SCRA 849