G.R. No. 167552; April 23, 2007

Ponente: J. Chico-Nazario

Impact Systems purchased various products amounting to P91,338.00 pesos from Eurotech. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with down payment of P50,000.00.  When the sludge pump arrived, Eurotech refused to deliver the same to Impact Systems without their indebtedness having feen fully settled. Thus, Edwin, sales manager of Impact systems, and Alberto de Jesus, general manager of Eurotech, executed a Deed of Assignment of receivables of Impact Systems from Toledo Power Corp. in favor of Eurotech.

Despite the existence of the Deed of Assignment, Impact Systems proceeded to collect from Toledo Power Company the amount of P365,135.29.  Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result, Impact Systems were able to make partial payments to Eurotech. The latter’s counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996, Impact’s total obligations stood at P295,000.00 excluding interests and attorney’s fees.  Because of respondents’ failure to abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against herein respondents

By way of special and affirmative defenses, Edwin alleged that he is not a real party in interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact.

Whether the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems

Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems

The Supreme Court held that in a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter’s consent. Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal.

In this case, the parties do not dispute the existence of the agency relationship between respondents Erwin as principal and Edwin as agent.

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