JOSE BORDADOR AND LYDIA BORDADOR, PETITIONERS, VS. BRIGIDA D. LUZ, ERNESTO M. LUZ AND NARCISO DEGANOS, RESPONDENTS.

Bordador versus Luz

The Case

This is a petition for review on certiorari brought by the spouses Jose and Lydia Bordador, who were engaged in the business of buying and selling jewelry, against their former customer Brigida Luz, her husband Ernesto Luz, and Brigida's brother Narciso Deganos. The Bordadors sued to recover the unpaid value of several pieces of gold and jewelry that Deganos had received from them and failed to pay for or return, insisting that Deganos acted as the agent of his sister Brigida and that the Luz spouses should therefore be held solidarily liable with him. The case matters because it is the Court's cleanest teaching on the contract of agency: that agency rests on consent and representation, that a person dealing with a supposed agent must inquire into his authority at his own peril, and that a civil action for damages arising from a fraudulent act may proceed independently of the criminal prosecution.

Procedural History

The Bordadors first filed a complaint in the barangay court against Deganos. In those proceedings Brigida Luz appeared as a witness for her brother, and she and her husband, together with Deganos, signed a compromise agreement in which Deganos bound himself to pay the balance of his account with interest on an installment basis. Deganos failed to comply. The Bordadors then instituted a civil case for recovery of a sum of money and damages, with an application for preliminary attachment, in the Regional Trial Court of Malolos, Bulacan, impleading Deganos and Brigida Luz, with Ernesto Luz joined as Brigida's spouse. After trial, the Regional Trial Court found only Deganos liable, ordering him to pay the principal amount with legal interest and attorney's fees, and absolved the Luz spouses of any further liability except for a small sum of interest on Brigida's own personal loan. The Bordadors appealed to the Court of Appeals, which affirmed the trial court's judgment. Their motion for reconsideration was denied, and the Bordadors came to the Supreme Court by appeal by certiorari.

Facts

From April 1987 to September 1987, Deganos received from the Bordadors several pieces of gold and jewelry worth 382,816 pesos, covered by seventeen receipts. Eleven of the receipts stated that the items were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated that they were received for Brigida Luz. Deganos was supposed to sell the items at a profit, remit the proceeds, and return the unsold pieces. He remitted only 53,207 pesos, and neither paid the balance nor returned any unsold item. By January 1990 his unpaid account, including interest, had reached 725,463 pesos and 98 centavos.

In the barangay proceedings that followed, Brigida Luz appeared as a witness for Deganos, and she and her husband, together with Deganos, signed a compromise agreement obliging Deganos to pay the balance on installments. He again failed to comply. The Bordadors then sued in the Regional Trial Court of Malolos, and four years later Deganos and Brigida Luz were also charged with estafa in a criminal case that remained pending.

At the civil trial, the Bordadors claimed that Deganos acted as Brigida's agent and that she, as principal, and her husband were solidarily liable with him. Deganos admitted an unpaid obligation but insisted he alone dealt with the Bordadors and never acted as Brigida's agent, despite the six receipts naming her. Brigida denied any involvement, saying she never authorized Deganos to receive any jewelry for her and never received any of the articles. The trial court found that it was petitioner Lydia Bordador herself who wrote on the receipts that the items were received for Evelyn Aquino and Brigida Luz, and that Brigida's past transactions with the Bordadors had already been paid, leaving only a small interest on her personal account.

Issues

• Whether or not the respondent Luz spouses are liable to the petitioners for the claim of 725,463 pesos and 98 centavos, plus interest and attorney's fees, despite the absence of evidence that they signed any of the receipts or authorized Deganos to receive the jewelry on their behalf.
• Whether or not the civil case may proceed independently of the pending criminal case for estafa, and whether the civil judgment absolving the Luz spouses would conflict with the criminal case.
• Whether or not the Court of Appeals lost jurisdiction and gravely abused its discretion in issuing its resolution denying the motion for reconsideration with alleged undue haste and irregularity.
• Whether or not the contract of agency between Brigida Luz and Deganos is unenforceable under the Statute of Frauds, and whether the partial execution of the contract removed it from the Statute's coverage.

Applicable Provisions

Article 1868 of the Civil Code defines the contract of agency:

By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

This is the provision the Court uses to test whether Brigida consented to or authorized her brother's acts, and it supplies the rule that agency is founded on representation.

Article 33 of the Civil Code governs the independence of the civil action:

In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.

This provision supports the Court's holding that the civil case could proceed on its own despite the pending estafa case.

Article 1403 of the Civil Code, on unenforceable contracts, was discussed by the trial court in connection with the Statute of Frauds:

The following contracts are unenforceable, unless they are ratified: Those 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.

The Court clarifies that the trial court invoked this only as a preparatory statement of principle, since no agency contract was in fact proven.

Ruling

On the first issue, the Court held that no agency existed between Deganos and Brigida Luz. The basis of agency is representation, and there was no showing that Brigida consented to her brother's acts or authorized him to act on her behalf, much less with respect to the particular transactions involved. The Court stressed that a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent, and that it was grossly negligent of the Bordadors to entrust substantial jewelry to Deganos on at least six occasions without requiring a written authorization from his alleged principal. The concurrent factual findings of the trial court and the Court of Appeals, that Brigida's letters concerned her previous obligations and that her testimony did not refer to the items in this case, were entitled to great weight.

On the second issue, the Court held that the civil case could proceed independently of the criminal case. It noted that the civil case was instituted four years before the estafa charge was filed, and that a final judgment in a civil action absolving the defendant from civil liability is no bar to a criminal action. The fear of a conflict between the two cases was illusory, since the quantum of proof required differs.

On the third issue, the Court rejected the charge of irregularity in the Court of Appeals. The swift issuance of the resolution was not by itself irregular, and it is a legal presumption that official duty has been regularly performed and that judicial proceedings are regular and valid. The burden of proving irregularity was on the petitioners, and they utterly failed to discharge it.

On the fourth issue, the Court held that the Statute of Frauds argument was beside the point. Neither court had categorically stated that an agency contract existed; the trial court merely said that if one existed it would be unenforceable under the Statute of Frauds. What was proven as a matter of fact was that there was no such contract, executed or partially executed, and no delivery of any of the items was ever made to Brigida Luz.

Doctrine

Agency is founded on representation, and it arises only with the consent or authority of the principal. A person who deals with a supposed agent does so at his peril and is charged with the duty of inquiring into the agent's authority. A civil action for damages arising from fraud is entirely separate and distinct from the criminal action and proceeds independently of it, requiring only a preponderance of evidence. The Statute of Frauds applies only where a contract is shown to exist; it cannot be invoked to create a contract that was never proven. Official duty is presumed to have been regularly performed, and the burden of proving irregularity in judicial proceedings lies on the party alleging it.

Disposition

The Supreme Court denied the petition and affirmed the decision and resolution of the Court of Appeals, with double costs against the petitioners.

Remember This

Memorize this line: agency rests on consent and representation, and one who deals with an agent must discover his authority at his own peril. Examiners use this case to test the elements of agency under Article 1868 and the independence of the civil action under Article 33.