LAUREANO T. ANGELES, PETITIONER, VS. PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES, RESPONDENTS.

Angeles versus Philippine National Railways

The Case

This is a petition for review brought by Laureano T. Angeles against the Philippine National Railways and its corporate secretary, Rodolfo Flores. The action below was one for specific performance and damages, arising from a contract for the sale of scrap and unserviceable rails. The case matters because it draws the line between an agent and an assignee, and it reminds every reviewee that the real party in interest in an action upon a contract is, as a general rule, a contracting party. It also teaches how a single letter may be read as a valid power of attorney, and how that instrument must be strictly construed.

Procedural History

The spouses Angeles commenced suit for specific performance and damages before the Regional Trial Court of Quezon City. The trial court dismissed the complaint for lack of cause of action, holding that the spouses were not the real parties in interest, because Lizette was merely a representative of Romualdez in the withdrawal of the rails and not an assignee of his rights. The petitioner appealed to the Court of Appeals, which dismissed the appeal and affirmed the trial court. The Court of Appeals denied the petitioner's motion for reconsideration. The petitioner then came to the Supreme Court by petition for review under Rule 45.

Facts

On May 5, 1980, the Philippine National Railways informed a certain Gaudencio Romualdez that it had accepted his offer to buy, on an as is, where is basis, its scrap and unserviceable rails located in Del Carmen and Lubao, Pampanga, for the total amount of 96,600 pesos. Romualdez paid the purchase price. He then wrote a letter dated May 26, 1980 to the PNR's Acting Purchasing Agent, informing him that he had authorized the bearer, Lizette R. Wijanco, to be his lawful representative in the withdrawal of the scrap rails awarded to him, and that he had given her the original copy of the award and the official receipt, which would indicate his waiver of rights, interests and participation in her favor. Lizette was the petitioner's now deceased wife.

On that same day, Lizette asked the PNR to transfer the place of withdrawal, because the rails in Pampanga were not ready for hauling. The PNR granted the request and allowed her to withdraw rails in Murcia, Capas and San Miguel, Tarlac instead. The PNR later suspended the withdrawal because of documentary discrepancies and reported pilferages of over 500,000 pesos worth of scrap properties in Tarlac. The spouses Angeles then demanded a refund of 96,000 pesos, which the PNR refused, saying that per a delivery receipt signed by Lizette, 54.658 metric tons of rails had already been withdrawn, worth 114,781.80 pesos, an amount exceeding the claim.

On August 10, 1988, the spouses Angeles sued the PNR and Rodolfo Flores for specific performance and damages, praying that the PNR be directed to deliver 46 metric tons of scrap rails and to pay damages and attorney's fees. Lizette later passed away and was substituted by her heirs, among them the petitioner Laureano T. Angeles.

Issues

• Whether or not Lizette W. Angeles was a mere agent of Romualdez for the withdrawal of the scrap rails, rather than an assignee of his rights.
• Whether or not the spouses Angeles, and later the petitioner as conjugal partner and heir, were the real parties in interest with a cause of action against the PNR.
• Whether or not the Romualdez letter was a valid power of attorney even without the intervention of a notary public.

Applicable Provisions

Article 1374 of the Civil Code provides:

The various stipulations of a contract shall be read and interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.

This provision governs the reading of the Romualdez letter as a whole, so that its doubtful parts are understood in light of the entire instrument.

Article 1371 of the Civil Code provides:

In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

This provision allows the Court to look at the parties' later acts, which confirmed that Lizette acted as an authorized representative.

Ruling

On the first issue, the Court held that Lizette was a mere agent, not an assignee. The letter called her a representative in the withdrawal of the rails. The Court stressed that Romualdez used the active verb authorized rather than assigned, showing an intent to keep and retain his interest in the subject matter. The phrase for this reason, which precedes the second paragraph, shows that the original copy of the award was given to her precisely to enable her to withdraw the rails as Romualdez's authorized representative. Reading the letter as a whole under Article 1374, the rights waived in her favor were those in furtherance of the agency relation.

On the second issue, the Court held that the spouses were not the real parties in interest. Where agency exists, the third party's liability on a contract is to the principal and not to the agent, and the agent cannot sue or be sued on the contract. Since a contract may be violated only by the parties to it, the real party in interest must generally be a contracting party. The exception, where the agent is also constituted as an assignee, does not apply here. If Lizette had no legal standing to sue, there is more reason to hold that her husband, whether as conjugal partner or heir, has none either.

On the third issue, the Court held that the letter was a valid power of attorney. No form or method of execution is required for a valid power of attorney; it may be in any form clearly showing on its face the agent's authority, and it is valid although no notary public intervened in its execution. But a power of attorney must be strictly construed and pursued, granting only the powers specified. All that Lizette was authorized to do was to withdraw the rails; allowing her to sue in her own name would be to read something not written in the letter.

Doctrine

An agent, as a rule, has neither rights nor liabilities against the third party and cannot sue or be sued on the contract; the real party in interest in an action upon a contract is generally a contracting party. The exception arises where the agent is also constituted as an assignee, in which case the agent may sue in his own behalf as assignee of the contract. Whether an agency exists is determined by the fact that one represents and is acting for another, and the agent may be called an attorney, proxy, delegate or representative. A power of attorney requires no particular form and need not be notarized, but it must be strictly construed and pursued. Under Article 1374, the stipulations of a contract are read together, and under Article 1371, the contemporaneous and subsequent acts of the parties are principally considered in judging their intention.

Disposition

The petition was denied and the decision of the Court of Appeals was affirmed, with costs against the petitioner.

Remember This

The single line to memorize: an agent who is not an assignee is not a real party in interest and cannot sue on the contract in his own name. Examiners use this case to test agency versus assignment, the real party in interest rule, and the validity and strict construction of a power of attorney.