**Facts:**
1. **July 1982:** Joseph Bengzon Chua, operating under the business name Tic Hin Chiong, imported 50 metric tons of Dicalcium Phosphate from Chin Gact Co., Ltd. in Taipei, Taiwan. The shipment totaled US$13,000.00, CIF Manila.
2. **July 27, 1982:** First Insurance Co. Ltd. insured the shipment for US$19,500.00 against all risks under Marine Policy No. 1000M82070033219, with Smith, Bell, and Co. stamped as the “Claim Agent.”
3. **September 1, 1982:** The shipment arrived in Manila aboard the vessel S.S. ‘GOLDEN WEALTH.’
4. **September 2, 1982:** The cargo was discharged to Metroport Services Inc. On delivery, some of the cargo was in bad order.
5. **September 27, 1982:** Chua’s broker delivered the cargo to Chua’s warehouse. A cargo surveyor reported that 600 out of 1,250 bags were damaged, with contents partly empty and a shortage of 18,546 kg.
6. **October 16, 1982:** Chua filed a formal statement of claim with Smith, Bell, & Co., Inc. for US$7,359.78.
7. **February 15, 1983:** Smith, Bell, & Co. informed Chua of its principal’s offer of only 50% of the claim, citing a discrepancy in damage reports.
8. **Subsequent Events:** Chua rejected the offer and ultimately sued both Smith, Bell, & Co. and First Insurance Co. Ltd.
**Procedural Posture:**
1. **Trial Court Decision:** Default judgment was entered against First Insurance Co., Ltd (who did not file an answer), and the court ordered both defendants jointly and severally liable for US$7,359.78 plus interest, attorney’s fees, and costs.
2. **Court of Appeals:** Affirmed the trial court decision, emphasizing the need for a speedy resolution of the claimant’s damages.
3. **Supreme Court:** Smith, Bell & Co. filed a petition for certiorari to review the Court of Appeals’ decision.
**Issues:**
1. **Agency and Liability:** Whether Smith, Bell & Co., as a local claim agent of a disclosed foreign principal, can be held personally and solidarily liable under the marine insurance policy.
2. **Privity of Contract:** Whether there was privity of contract between Smith, Bell & Co. and Chua that could establish liability.
3. **Application of the Existing Jurisprudence:** Applicability of precedents like Salonga vs. Warner, Barnes & Co., Ltd. and E. Macias & Co. vs. Warner, Barnes & Co. to the present case.
4. **Real Party-in-Interest:** Whether Smith, Bell & Co. was improperly impleaded as a party to the lawsuit.
**Court’s Decision:**
1. **Agency and Liability:**
– **First Reason – Existing Jurisprudence:**
– The court referenced Salonga vs. Warner, Barnes & Co., Ltd., emphasizing that a claim agent, acting within its authority, is not personally liable for the principal’s obligations unless expressly assuming liability.
– Stamping the name “Claim Agent” on a policy does not equate to participation in the insurance contract.
– **Second Reason – Absence of Solidary Liability:**
– Article 1207 of the Civil Code requires explicit or statutory basis for solidary liability, which was not present in the marine insurance policy or law.
– **Third Reason – Not Real Party-In-Interest:**
– Section 2, Rule 3 of the Rules of Court requires actions to be filed by/against real parties-in-interest. Smith, Bell & Co. was not a party to the contract and thus not liable.
– **Misplaced Equity:**
– The appellate court’s reliance on equity without statutory backing was improper.
**Doctrine:**
1. **Agency and Liability:**
– Agents acting within their authority are not personally liable for the contracts their principals enter into.
2. **Privity of Contract:**
– Contracts are binding only to parties who execute them, extending to their assigns and heirs. This principle is codified in Article 1311 of the Civil Code.
3. **Solidary Liability:**
– Solidary liability requires an explicit provision in the contract or law, as per Article 1207 of the Civil Code.
4. **Real Party-in-Interest:**
– Lawsuits must involve parties who have a substantial interest in the outcome, capable of benefiting or suffering from the decision.
**Class Notes:**
1. **Agency:**
– Agents are not personally liable for acts within their scope of authority unless they expressly assume liability.
2. **Contract Law:**
– Privity of contract is crucial for determining who is bound by contractual obligations.
– Solidary liability must be explicitly stated or required by law.
3. **Litigation:**
– Real party-in-interest rule ensures that only proper parties with actual stakes in the litigation are involved.
**Historical Background:**
– The 1980s saw significant maritime commerce and related legal disputes in the Philippines. This case arose from such commercial activities and involved principles fundamental to agency and insurance law. The decision reinforced long-standing doctrines on the non-liability of agents and the stringent requirements for solidary obligations, reflecting a period where the judiciary emphasized adherence to traditional legal interpretations.
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