SORIAMONT STEAMSHIP AGENCIES, INC., AND PATRICK RONAS, PETITIONERS, VS. SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, DOING BUSINESS UNDER THE STYLE PAPA TRANSPORT SERVICE…

Soriamont Steamship Agencies versus Sprint Transport Services

The Case

Soriamont Steamship Agencies, Incorporated, a domestic corporation acting as receiving agent for line load contractor vessels, and its general manager Patrick Ronas, were sued for a sum of money by Sprint Transport Services, Incorporated, a transport company that had leased chassis units to Soriamont. Sprint claimed that two chassis units withdrawn from its container yard in June 1996 were never returned and that rentals went unpaid, and it sought to hold Soriamont and Ronas solidarily liable. The case matters because it is a compact laboratory on two recurring bar topics: the burden of proving agency when a person deals with an assumed agent, and the conclusiveness of the factual findings of the trial court and the Court of Appeals in a petition for review under Rule 45. It also illustrates how an automatic renewal clause keeps a lease alive, and how the agent's acts bind the principal.

Procedural History

Sprint filed a complaint for sum of money before the Regional Trial Court of Manila, Branch 46. Soriamont and Ronas answered, denying the lease for the period alleged and denying that they were parties in interest, and they in turn filed a third-party complaint against Ricardo Cruz Papa, doing business under the style Papa Transport Service. Because Papa failed to answer, the trial court declared him in default. After trial, the Regional Trial Court rendered judgment in April 2002, holding Soriamont liable to Sprint for the value of the two chassis units, for unpaid rentals, and for attorney's fees, while absolving Ronas and Papa from liability. Soriamont appealed to the Court of Appeals. In June 2006 the Court of Appeals affirmed the trial court with modification, fixing the legal interest on both monetary awards at six percent per annum, to be increased to twelve percent from finality of judgment until full satisfaction. Soriamont's motion for reconsideration was denied in September 2006. Soriamont then filed with the Supreme Court a petition for review on certiorari under Rule 45.

Facts

Soriamont and Sprint entered into an Equipment Lease Agreement in December 1993, under which Sprint leased chassis units to Soriamont at specified daily rates for the transport of container vans. The agreement stated a period running from October 1993 to January 1994, but it carried an automatic renewal clause, and neither party ever terminated it.

In June 1996, two chassis units were withdrawn from Sprint's container yard by Papa Transport Service and Rebson Trucking, on the strength of authorization letters dated 19 June 1996 issued by Ronas on behalf of Soriamont. Sprint verified the authorization by telephone with Soriamont before releasing the units, and outgoing Equipment Interchange Receipts were prepared. The units were never returned. In a letter dated 17 June 1997, Ronas informed Sprint of the loss of the equipment and asked Sprint to refrain from releasing further equipment to Papa Transport Service and Rebson Trucking.

Sprint demanded payment of rentals and the replacement cost of the lost chassis, and sued when Soriamont and Ronas refused. Soriamont insisted that the authorization letter was meant for a shipper, Harman Foods, and that it was Harman Foods that tasked Papa Transport Service to withdraw the units. The trial court and the Court of Appeals both found that Soriamont had authorized the withdrawal, that the lease was still in force by automatic renewal, and that the units were never returned.

Issues

• Whether or not the Court of Appeals erred in limiting itself to the question of agency between Soriamont and Papa Transport Service and in not ruling on Papa's liability to Soriamont under the third-party complaint.
• Whether or not Soriamont, rather than Papa Transport Service, should be held solely liable for the unpaid rentals and the loss of the chassis units.
• Whether or not the Court of Appeals erred in relying on the testimony of Sprint's witness despite an alleged material inconsistency.

Applicable Provisions

Article 1897 of the Civil Code provides:

Article 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.

This governs Soriamont's alternative argument that Papa Transport Service, as agent, should answer for the loss because it acted beyond its authority.

Article 2209 of the Civil Code provides:

Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum.

This supplies the six percent rate imposed on the monetary awards, since the obligation does not involve a loan or forbearance of money.

Ruling

On the first issue, the Court held that Soriamont's assignment of errors raised questions of fact, and that only questions of law may be raised in a petition for review under Rule 45. The Court nevertheless examined the record because Soriamont claimed the findings were contradicted by the evidence, and it found that the preponderance of evidence supported an agency relationship between Soriamont as principal and Papa Transport Service as agent. The Equipment Lease Agreement expressly allowed the lessee to appoint a representative to withdraw and return chassis units, and the authorization letters issued by Soriamont brought the withdrawal within that framework. The Court quoted the lease:

Only persons with a duly accomplished and signed authorization slip shall be entertained by the LESSOR for purposes of withdrawal/return of the chassis.

On the second issue, the Court held that Soriamont remained liable. The lease was not dead; it renewed automatically, and the Court quoted the renewal clause:

There shall be an automatic renewal of the contract subject to the same terms and conditions as stipulated in the original contract unless terminated by either party in accordance with paragraph no. 23 hereof.

Because Papa Transport Service acted within the authority given by Soriamont, its acts bound the principal. As for Article 1897, the burden lay on Soriamont to prove that its agent exceeded its authority, and Soriamont offered no such evidence. The Court also stressed that a person dealing with an assumed agent must ascertain the fact and extent of the agency, and Sprint discharged that burden through the authorization letters and the verifying telephone call. On the third issue, the Court found the testimony of Sprint's witness candid and straightforward, and upheld the factual findings of both lower courts as conclusive. Finally, the Court affirmed the six percent interest, increased to twelve percent from finality until full satisfaction.

Doctrine

First, the findings of fact of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court in a petition for review under Rule 45, which is confined to questions of law. Second, a person dealing with an assumed agent deals at his peril: to hold the principal liable he must ascertain not only the fact of agency but also its nature and extent, and if either is controverted, the burden of proof is on him. Third, where the agent acts within the authority granted by the principal, the acts bind the principal, and the agent is not personally liable under Article 1897 unless he expressly binds himself or exceeds the limits of his authority. Fourth, the principal who alleges that the agent exceeded its authority carries the burden of proving it. Fifth, an automatic renewal clause keeps the contract in force absent termination by either party. Sixth, under Article 2209, the legal interest on a monetary judgment not involving a loan or forbearance is six percent per annum, increased to twelve percent from finality until satisfaction.

Disposition

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, holding Soriamont liable to Sprint for the value of the chassis units, the unpaid rentals, and attorney's fees, with interest at six percent per annum increased to twelve percent from finality until full satisfaction.

Remember This

Memorize this line: he who deals with an assumed agent does so at his peril and must prove both the fact and the extent of the agency, while the principal who claims the agent exceeded its authority bears the burden of proving the excess. Examiners use this case for the Rule 45 rule that factual findings affirmed by both lower courts are conclusive, and for the Article 1897 rule on the agent's personal liability.