(WITH RES. SEPTEMBER 30, 1963)

The above-entitled cases are appeals from judgments rendered by the
Court of First Instance of Manila through Judges Gustavo Victoriano and
Conrado M. Vasquez, respectively, of said Court.

In G.R. No. L-18223 plaintiff-appellee filed a complaint alleging
that the defendants-appellants were granted by it credit accommodations
in the form of an overdraft line for an amount not exceeding P80,000,
with interest (paragraph 2, Complaint); that defendants or either of
them drew regularly upon the above credit line and as of February 10,
1960, the total of their drawings and interest due amounted to
P79,943.80 (par 3, id.); that repeated demands were made upon
defendants to pay for the drawings but said demands were ignored (par.
4, id.). In their answer to the complaint the defendants admit having
drawn upon the credit line extended to them as alleged in the
complaint; claim they have not ignored the demands for the payment of
the sums demanded and have instituted actions against the former
officers of defendant corporation who had defrauded the latter; etc,
(par. 4, Answer). By way of special affirmative defenses, they allege
that the former officers and directors of the defendant corporation had
deliberately defrauded and mismanaged the corporation, as a part of
their scheme to wrest control of various corporations owned by Damaso
Perez, from the latter, and as a result of said frauds or
mismanagements the defendants have instituted actions for damages for
breach of trust; and that the amounts drawn on the credit line subject
of the complaint were received and used by the former directors and
officers of the defendant corporations and constitute part of the funds
misapplied by them. Upon motion, Judge Victoriano entered for the
plaintiff a judgment on the pleadings, holding that the “special
affirmative defenses (of the answer) failed to show any allegation
respecting the extent of defendants’ drawings, although they have
admitted having drawn against the credit line, subject of the action,
so that said denial, not being a specific denial in the true sense,
does not controvert the allegation at which it is aimed,” etc. The
Court also further held that the alleged mismanagement and fraud of the
former directors and officials of defendant corporation and the action
now pending in court regarding the same are merely internal affairs of
the corporation which cannot affect or diminish the liability of the
defendant corporation to the plaintiff. The defendants appealed from
the decision to the Court of Appeals, but this Court certified the case
to Us.

In G. R. No. L-18224 the complaint also alleges that the defendants
were given credit accommodation in the form of an overdraft line in an
amount not exceeding P150,000 and drew regularly upon said credit line
amounts which with their interest reach the sum of P133,453.17; that
demands were made for the payment of the drawings but defendants have
failed to pay the amounts demanded. Defendants in their answer admit
the opening of the credit line in their favor and that demands tor the
indebtedness were made upon them, but allege as special defenses that
the directors and officers of the defendant corporation deliberately
defrauded and mismanaged the said corporation in breach of trust in
order to deprive Damaso Perez of his control and majority interest in
the defendant corporation, as a result of which fraud, mismanagement
and breach of trust the defendants suffered tremendous losses; that the
amounts drawn by defendant corporation upon the credit line were
received and used by the former directors and officers and same
constitute part of the funds of the defendant corporation misapplied
and mismanaged by said former officers and directors of said
corporation. Upon the presentation of the answer the plaintiff
presented a motion for judgment on the pleadings which the court
sustained, holding:

“The defendants having admitted the indebtedness in
question, its liability to pay the plaintiff the amount of the said indebtedness is beyond question. The alleged fact that the money
borrowed from the plaintiff was misappropriated or misapplied by some
officers of the defendant corporation is no defense against the
liability of the defendants to the plaintiff. It is,an internal matter
of the defendant corporation in which the plaintiff has no concern or
participation whatsoever. This is specially so with respect to the
defendant Damaso Perez who appears to have executed the agreement,
Annex A, in his own personal capacity and not as an officer of the
defendant Republic Credit Corporation. The allegation that the
defendants have a right to claim indemnity or contribution from the
erring directors and officers of the defendant corporation is a matter
which may be the subject of a separate action, and in which the
plaintiff is not concerned.” (p. 37, Record on Appeal)

Against the above judgment the defendants also have prosecuted this
appeal. The Court of Appeals certified the same to Us in accordance
with law.

In G. R. No. L-18223, the defendants-appellants argue that the
admission made by the defendants in their answer that the amount
demanded was due, is qualified “in the sense that whatever amounts were
drawn from the overdraft line in question were part of those corporate
funds of Philippine Armored Car, Inc., misused and misapplied by Ramon
Racelis, et al., former directors and executive officers of said
corporation.” (p. 13, Appellee’s Brief) In answer to this argument we
call attention to the fact that in the agreement attached to the
complaint Exhibit “A” the obligation of the defendants-appellants to
pay for the amount due under the overdraft line is not in any way
qualified; there is no statement that the responsibility of the
defendants-appellants for the amounts taken on overdraft would cease or
be defeated or reduced upon misappropriation or mismanagement of the
funds of the corporation by the directors and employees thereof. The
special defense is, therefore, a sham defense.

Furthermore, under general rules and principles of law the
mismanagement of the business of a party by his agents does not relieve
said party from the responsibility that he had contracted to third
persons, especially in the case at bar where the written agreement
contains no limitation to defendants-appellants’ liability.

The so-called special defense contained in the answer is, therefore,
no special defense to the liability of the defendants-appellants, nor
the action, and the court’s action or judgment on the pleadings was
properly taken. The argument contained in the brief of the
defendants-appellants that the defendants contemplated a third-party
complaint is of no weight, because a third-party complaint was not
available to the defendants under the facts of the case. A third-party
complaint is, under the Rules, available only if the defendant has a
right to demand contribution, indemnity, subrogation or any other
relief from the supposed third-party defendants in respect to the
plaintiff’s claim. (Sec. 1, Rule 12, Rules of Court) The supposed
parties defendants or alleged officers of the defendants corporation
had nothing to do with the overdraft account of defendant corporation
with the plaintiff-appellee. Consequently, they cannot be made parties
defendants in a third-party complaint. Anyway the filing of a third
party complaint is no hindrance to the issuance of the order of the
court declaring that the defendants answer presented no issue or
defense and that, therefore, plaintiff-appellee was entitled to
judgment.

In G. R. No. L-18224, our ruling in the first case is also
applicable. In this second case, it is also alleged that at the time of
the agreement for credit in current account the defendant corporation
was under the management of Roman Racelis and others who defrauded and
mismanaged the corporation, in breach of trust, etc., etc. Again we
declare that the written agreement for credit in current account, Annex
“A”, contains no limitation about the liability of the
defendants-appellants, nor an express agreement that the responsibility
of the defendants-appellants, should be conditioned upon the lawful
management of the business of the defendant corporation. The same
rulings in the first case are applicable in this second case.

Wherefore, the judgments appealed from are hereby affirmed, with costs against the defendants-appellants.

Padilla, Bautista Angelo, Conception, Reyes, J. B. L., Barrera, Paredes, Dizon, Regala, and Makalintal, JJ., concur.

 

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Sept. 30, 1963

RESOLUTION ON MOTION FOR NEW TRIAL

LABRADOR, J.:

Defendant-appellant Damaso Perez has presented a motion for new
trial on the ground of newly discovered evidence. It is claimed that
movant was not aware of the nature of the power of attorney that Ramon
Racelis used, purportedly signed by him, to secure the loans for the
Republic Armored Car Service Corporation and the Republic Credit
Corporation. In the motion it is claimed that a photostatic copy of the
power of attorney used by Ramon Racelis was presented at the trial.
This phostostatic copy or a copy thereof has not been submitted to us;
for this reason we cannot rule upon his claim and contention that Ramon
Racelis had no authority to bind the movant as surety for the loans
obtained from the appellee Commercial Bank & Trust Company. Not
having before Us the supposed photostatic copy of the power of attorney
used to secure the loans, there is no reason for Us to rule, in
accordance with his contention, that Racelis exceeded his authority in
securing the loans subject of the present actions.

The motion for reconsideration, however, presents a copy of a power
on October 22, 1952. It is not expressly mentioned that this is the
precise power of attorney that Ramon Racelis utilized to secure the
loans the collection of which is sought in these cases. But assuming,
for the sake of argument, that the said power of attorney incorporated
in the motion for reconsideration was the one used to obtain the loans,
We find that the movant’s contention has no merit. In accordance with
the document, Racelis was authorized to negotiate for a loan or various
loans * * * with other banking institution, financing corporation,
insurance companies or investment corporations, in such sum or sums,
aforesaid Attorney-in-fact Mr. Ramon Racelis, may deem proper and
convenient to my interests, * * * and to execute any and all documents
he deems requisite and necessary in order to obtain such loans, always
having in mind my best interest; * * *” We hold that this general power
of attorney to secure loans from any banking institution was
“sufficient authority for Ramon Racelis to obtain the credits subject
of the present suits.

It will be noted furthermore that Racelis, as agent of Damaso Perez,
executed the documents evidencing the loans signing the same “Damaso
Perez by Ramon Racelis,” and in the said contracts Damaso Perez agreed jointly and severally
to be responsible for the loans. As the documents as signed makes Perez
jointly and severally responsible, there is no merit in the contention
that Perez was only being held liable as a guarantor.

Furthermore, the promissory notes evidencing the loans are attached
to the complaint in G. R. Nos. L-18223 and L-18224. If the movant Perez
claims that Racelis had no authority to execute the said promisory
notes, the authenticity of said documents should have been specially
denied under oath in defendant’s answers in the lower court. This was
not done; consequently Perez could not and may not now claim that his
agent did not have authority to execute the loan agreements.

Motion for new trial is denied.

Padilla, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.