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National Power Corporation, plantiff-appellant, vs. National Merchandising Mercer Street New York City (Exh.

et New York City (Exh. C), executed in Manila a contract for


Corporation and Domestic Insurance Company of the Philippines, defendant- the purchase by the NPC from the New York firm of four thousand long
appellants. tons of crude sulfur for its Maria Cristina Fertilizer Plant in Iligan City at a
G.R. Nos. L-33819 and L-33897. October 23, 1982. total price of (450,716 (Exh. E).
 On that same date, a performance bond in the sum of P90,143.20 was
Doctrines: executed by the Domestic Insurance Company in favor of the NPC to
guarantee the seller's obligations (Exh. F).
 Under Article 1897 of the Civil Code the agent who exceeds the limits of  It was stipulated in the contract of sale that the seller would deliver the
his authority without giving the party with whom he contracts sufficient sulfur at Iligan City within sixty days from notice of the establishment in its
notice of his powers is personally liable to such party. favor of a letter of credit for $212,120 and that failure to effect delivery
 The rule that every person dealing with an agent is put upon inquiry and would subject the seller and its surety to the payment of liquidated damages
must discover upon his peril the authority of the agent would apply only in at the rate of two-fifth of one percent of the full contract price for the first
cases where the principal is sought to be held liable on the contract entered thirty days of default and four-fifth of one percent for every day thereafter
into by the agent. until complete delivery is made.
 The contract entered into by an agent who acted beyond his power is  In November 12, 1956, the NPC advised John Z. Sycip, the President of
unenforceable only as against the principal but not against the agent and its Namerco that the letter of credit which would expire on January 15, 1957,
surety. and the same with the deadline for the delivery of the sulfur.
 The liability of an agent who exceeds the limits of his authority is based on  The New York Supplier was not able to deliver the sulfur due to its inability
contract and not on tort or quasi-delict. to secure shipping space.
 Liability of the surety on the obligation contracted by an agent who  The Government Corporate Counsel rescinded the contract of sale due to
exceeded his authority is not affected thereby. the supplier’s non-performance of its obligations, and demanded payment
of liquidated damages from both Namerco and the surety.
 NPC sued for recovery of the stipulated damages.
Facts:  RTC rendered judgment ordering defendants-appellants to pay solidarity to
the NPC reduced liquidated damages with interest.
 Plaintiff National Power Corporation appealed on questions of law from the
decision of the Court of First Instance of Manila dated October 10, 1966, Issue: Whether or not Namerco exceeded its authority as an agent and is liable for
ordering defendants National Merchandising Corporation and Domestic damages.
Insurance Company of the Philippines to pay solidarily to the National
Held:
Power Corporation reduced liquidated damages in the sum of P72,114.66
plus legal, rate of interest from the filing of the complaint and the costs  Yes. The Supreme Court held that Namerco is liable for damages because
(Civil Case No. 33114). the agent who exceeds the limits of his authority without giving the party
 The two defendants appealed from the same decision allegedly because it is with him whom he contracts sufficient notice of his powers is personally
contrary to law and the evidence. As the amount originally involved is liable to such party.
P360,572.80 and defendants' appeal is tied up with plaintiff's appeal on  Namerco, the agent of a New York-based principal, entered into a contract
questions of law, defendants' appeal can be entertained under Republic Act of sale with the National Power Corporation without disclosing to the NPC
No. 2613 which amended section 17 of the Judiciary Law. the limits of its powers and, contrary to its principal's prior cabled
 On October 17, 1956, the National Power Corporation and National instructions that the sale should be subject to availability of a steamer, it
Merchandising Corporation (Namerco) of 3111 Nagtahan Street, Manila, as agreed that non-availability of a steamer was not a justification for
the representative of the International Commodities Corporation of 11
nonpayment of the liquidated damages. Namerco. therefore, is liable for general rule, affect the surety thereon, especially in the absence of fraud,
damages. even though the obligation is not binding on the principal."
 The rule that every person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent would apply only in
cases where the principal is sought to be held liable on the contract entered
into by the agent. The said rule is not applicable in the instant case since it
is the agent, not the principal, that is sought to be held liable on the contract
of sale which was expressly repudiated by the principal because the agent
took chances, it exceeded its authority and, in effect. it acted in its own
name.
 — Article 1403 of the Civil Code which provides that a contract entered
into in the name of another person by one who has acted beyond his powers
is unenforceable, refers to the unenforceability of the contract against the
principal. In the instant case, the contract containing the stipulation for
liquidated damages is not being enforced against its principal but against
the agent and its surety. It being enforced against the agent because Article
1897 implies that the agent who acts in excess of his authority is personally
liable to the party with whom he contracted. And that rule is complimented
by Article 1898 of the Civil Code which provides that "if the agent
contracts, in the name of the principal, exceeding the scope of his authority,
and the principal does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of the powers
granted by the principal." Namerco never disclosed to the NPC the cabled
or written instructions of its principal. For that reason and because
Namerco exceeded the limits of its authority, it virtually acted in its own
name and not as agent and it is, therefore, bound by the contract of sale
which, however, it not enforceable against its principal. If, as contemplated
in Articles 1897 and 1898, Namerco is bound under the contract of sale,
then it follows that it is bound by the stipulation for liquidated damages in
that contract.
 The contention of the defendants that the Domestic Insurance Company is
not liable to the NPC because its bond was posted, not to Namerco, the
agent, but for the New York firm which is not liable on the contract of sale,
cannot be sustained because it was Namerco that actually solicited the bond
from the Domestic Insurance Company and, Namerco is being held liable
under the contract of sale because it virtually acted in its own name. In the
last analysis, the Domestic Insurance Company acted as surety for
Namerco. The rule is that "want of authority of the person who executes an
obligation as the agent or representative of the principal will not, as a