Acting through another person

In the contract of agency, one party called the principal authorizes another called the agent to act for and in his behalf in transactions with third persons. The authority of the agent to act emanates from the powers granted to him by the principal, his act being the act of the principal if done within the scope of the authority. "He who acts through another acts himself". This is the principle applied in this case of Mr. Arsenio.

Mr. Arsenio is the President and principal stockholder of SE Incorporated (SEI), the owner and developer of a subdivision in Bulacan. SEI was organized primarily to acquire lands, subdivide and develop them, erect buildings and houses thereon, and sell, lease or otherwise dispose of the said properties to interested buyers.

In carrying out the business, Mr. Arsenio signed an undated letter of authority in favor of Mr. Coronel for himself and in his capacity as president of SEI, principal. The letter clearly and unequivocally constituted Coronel to do and execute, among other things, the act of negotiating and entering into contract or contracts to build housing units at the subdivision in Bulacan.

Pursuant to this letter of authority, Coronel entered into a Deed of Agreement with Mr .de Leon, an architect contractor. The deed expressly stated that Coronel represented SEI which was designated as "principal" while de Leon was designated as the "contractor". Under said deed, SEI contracted de Leon to build eighty 2 bedroom single housing units at the cost of P45,000.00 each, and eighteen 4 bedroom duplex housing units at a cost of P65,000 each.

From October 1978 to April 1990, de Leon constructed 26 residential units at the subdivision. Thirteen of the units were fully paid. But thirteen units with a total contract price of P412,154.93 remained unpaid despite demands made by de Leon, thus forcing the latter to sue SEI, Arsenio and Coronel.

During the trial, Coronel disappeared and his whereabouts remain unknown. SEI and Mr. Arsenio on the other hand maintained that SEI did not enter into any contract with de Leon, nor authorized Coronel to enter into contract with anyone for the construction of housing units at its subdivision. According to Mr. Arsenio, the nature of business and business practices of SEI concerns only the sale of lots, not sell lots with houses already erected thereon.

Were they correct?

No.

A valid agency was created between SEI and Coronel and the authority conferred upon the latter includes the power to enter into a construction contract to build houses such as the Deed of Agreement between Coronel and de Leon. Hence the inescapable conclusion is that SEI is bound by the contract through the representation of its agent Coronel. The basis of agency is representation, that is, the agent acts for and in behalf of the principal on matters within the scope of his authority(Art.1881,Civil Code) and said acts have the same legal effect as if they were personally done by the principal. By this legal fiction of representation, the actual or legal absence of the principal is converted into his legal or juridical presence.

Moreover, assuming that Coronel’s mandate was only to sell subdivision lots as SEI asserts, the latter is still bound to pay de Leon. De Leon is considered a third party to the agency agreement who had no knowledge of the specific instructions or agreements between SEI and its agent. What de Leon saw was only the written letter of authority where Coronel appears to be duly authorized. The scope of the agent’s authority is what appears in the written terms of the power of attorney (Art.1900) While third persons are bound to inquire into the extent or scope of the agent’s authority, they are not required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent outside of the written power of attorney.

So even if SEI or Arsenio is not a party to the Deed of Agreement and has not signed it, they are bound by it. SEI must therefore pay de Leon P412,154.93 with legal interest thereon from the time the case was filed until its full payment (Siredy Enterprises Inc. vs. Court of Appeals, G.R. 129039, September 17,2002).

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