JOSE SORIANO, PLAINTIFF-APPELLANT, VS. COMPANIA GENERAL DE TABACOS DE FILIPINAS, DEFENDANT-APPELLANT.

Soriano versus Compania General de Tabacos de Filipinas

The Case

This is a civil action for the recovery of money, brought by Jose Soriano, a sugar planter of Negros Occidental, against the Compania General de Tabacos de Filipinas, the entity he dealt with in the record as Tabacalera. Soriano sues his crop-loan creditor and sugar agent for the proceeds of export sugar he had delivered under a mortgage and crop-loan arrangement, which sugar, he later discovered, the company had shipped and sold in the United States before the war while telling him it had been destroyed. The company resists on the theory that the sugar was shipped for its own account, and counterclaims for a post-war fertilizer account. The case matters because it fixes the legal consequences of an agent's failure to credit the principal's account on time, and because it shows how the Court treats a creditor who keeps the price of another man's sugar while continuing to charge him compound interest.

Procedural History

Soriano filed his complaint in the Court of First Instance of Manila. After trial on the pleadings and the oral and documentary evidence, that court rendered judgment for Soriano on the principal claim, denied his claim for damages, and granted the company its counterclaim. Both parties appealed from that decision, and the appeals were brought to the Supreme Court, which decided the case in December 1966.

Facts

In September 1937 the company granted Soriano a crop loan to finance the planting, cultivation, harvesting, and milling of sugar cane on his plantations in Negros Occidental. To secure the withdrawals and the interest, Soriano executed a deed of mortgage in the company's favor over the listed properties. The deed allowed renewal by mutual agreement at the end of each crop year. Pursuant to that renewal clause, on or about August 5, 1941, the parties executed a document for the 1941-42 crop year renewing the mortgage and granting Soriano an additional crop loan of 253,000 pesos. As further security, Soriano mortgaged the sugar cane to be planted and harvested that crop year, the sugar to be milled from it, and all centrifugal sugar of 96 degrees or more of polarization produced from any of his plantations, and he bound himself to assign and deliver the corresponding quedans.

During the 1941-42 crop year Soriano produced 65,787.53 piculs of export sugar. The sugar was delivered to the company for sale at the most advantageous prices, with the proceeds to be credited to his account. In August 1941, 16,000 piculs were in fact exported for Soriano's account, but the company credited him with the value only on December 31, 1942. As to the remaining 35,528.01 piculs, the company shipped them to the United States in 1941 and sold them, but kept the proceeds without crediting Soriano. After the liberation the company told Soriano that this sugar had been destroyed during the war and advised him to file a war damage claim, which he did, receiving 130,000 pesos from the War Damage Commission.

Meanwhile the company continued to charge Soriano interest at seven per cent per annum compounded every six months on his crop-loan balance, and during the Japanese occupation Soriano paid as much of the supposed debt as he could by borrowing from associates and selling valuable real and personal properties. In June 1956 Soriano wrote the company informing it of what he had discovered and demanding the proceeds of the sugar. The company then admitted that it had sold the sugar before the war, and after negotiations proposed a price of 6.20 pesos per picul, which Soriano accepted as to price but which did not ripen into a settlement. The company also counterclaimed for 55,518.60 pesos owing on a post-war fertilizer account.

Issues

• Whether or not the company was bound to credit Soriano's account with the proceeds of the 16,000 piculs exported in August 1941 as of the date of shipment, without waiting for further instructions to sell.
• Whether or not the company shipped and sold the remaining 35,528.01 piculs of sugar for its own account and profit, and is therefore liable to Soriano for the proceeds.
• Whether or not Soriano is entitled to interest on those proceeds, and at what rate and from what date.
• Whether or not Soriano is entitled to moral and exemplary damages and attorney's fees.
• Whether or not the company is entitled to recover on its counterclaim for the fertilizer account.

Applicable Provisions

The decision turns on the law of agency and of obligations, and on the stipulations of the crop-loan and mortgage agreement of August 5, 1941, under which the company was authorized to receive Soriano's export sugar in its own name and to sell it for his account. The governing rule of the Civil Code on the agent's duty to account is Article 1891, which provides:

Every agent is bound to render an account of his transactions and to pay to the principal as much as the latter may have received through him, even though the latter may not have ratified the transactions.

This is the provision that makes the company answerable for the proceeds it received through the sugar it shipped and sold for Soriano.

The decision also applies the rule on delay in the performance of obligations, Article 1169 of the Civil Code, which provides:

Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

This bears on the company's failure to credit the 16,000 piculs on the date of shipment, which the Court treats as delay.

Ruling

On the first issue, the Court held that the company's position was untenable. It was admitted that in August 1941, 16,000 piculs were exported for Soriano's account, and that the company first obtained his special permission to export the sugar from its bodega in Iloilo and, armed with that authority, did export it. The Court reasoned that the authority to export includes the authority to sell for the principal's account, so the company needed no further instructions. Having credited Soriano only as of December 31, 1942 instead of August 18, 1941, the company incurred delay, and Soriano is entitled to be credited with the proceeds from the date of shipment.

On the second issue, the Court found that the record bore out the company's own admission. In its answer the company alleged that the sugar referred to was shipped to the United States for its own account and not for Soriano's, and in its special defenses it set out its practice of shipping abroad in its own name and merely crediting a client's account when instructions to sell were received. The Court therefore sustained the finding that the company sold the sugar for its own account and profit, and held it liable to Soriano for the proceeds.

On the third issue, the Court allowed interest on the proceeds at six per cent per annum from June 27, 1956, the date of Soriano's demand, until fully paid, and also six per cent per annum on 99,220 pesos from August 18, 1941 to December 31, 1942, representing the value of the 16,000 piculs at 6.20 pesos per picul, for the period of the company's delay.

On the fourth issue, the trial court denied Soriano's claim for damages, and the Supreme Court did not disturb that denial. On the fifth issue, the Court upheld the company's counterclaim, ordering Soriano to pay 55,518.60 pesos on the fertilizer account.

Doctrine

An agent who receives the property of his principal and sells it is bound to render an account and to pay over what he received, even without the principal's ratification, under Article 1891 of the Civil Code. The authority to export a principal's sugar for his account carries with it the authority to sell it for that account; the agent may not hold the proceeds in suspense and wait for further instructions. Where the agent credits the principal late, he is in delay under Article 1169 of the Civil Code, and the principal is entitled to interest for the period of the delay. And where the agent ships and sells the principal's sugar for the agent's own account and profit, the agent is liable for the proceeds, and the principal's claim is not extinguished by the agent's later claim of automatic compensation.

Disposition

The Supreme Court affirmed the judgment of the trial court: the company was ordered to pay Soriano the proceeds of the sugar with interest, and Soriano was ordered to pay the company on its counterclaim, with costs against the company.

Remember This

The one line to memorize is that the authority to export for the principal's account includes the authority to sell, and the agent who fails to credit the proceeds on time is in delay and owes interest. Examiners use this case to test agency under Article 1891 and the rule on delay and interest in the performance of obligations.