Central Surety & Insurance Company vs. C. N. Hodges
Central Surety & Insurance Company vs. C. N. Hodges
Central Surety & Insurance Company vs. C. N. Hodges
162
VOL. 38, MARCH 30, 1971 161
Central Surety & Insurance Company vs. C. N. Hodges
162 SUPREME COURT REPORTS ANNOTATED
on January 23, 1954, the Central Surety and Insurance Central Surety & Insurance Company vs. C. N. Hodges
Company—hereinafter referred to as petitioner—through
the manager of its branch office in Iloilo, Mrs. Rosita Mesa, March 15, 1952; (b) that even under her original authority,
executed in favor of Hodges the surety bond Annex B, Mrs. Mesa could not issue surety bonds in excess of
which was good for twelve (12) months from the date P8,000.00 without the approval of petitioner’s main office,
thereof. which was not given to the surety bond in favor of Hodges;
When Layson defaulted in the discharge of his aforesaid and (c) that the present action is barred by the provision in
obligation, Hodges demanded payment from the petitioner, the surety bond to the effect that all claims and actions
which, despite repeated extensions of time granted thereto, thereon should be filed within three (3) months from the
at its request, failed to honor its commitments under the date of its expiration on January 23, 1955. Petitioner,
surety bond. On October 24, 1955, Hodges commenced, moreover, set up a counterclaim for damages.
therefore, the present action, in the Court of First Instance In due course, thereafter, the trial court rendered a
of Iloilo, against Layson and petitioner herein, to recover decision:
from them, jointly and severally, the sums of P17,826.08,
representing the principal and interest due tip to said date,
“a) Condenando a la demandada Central Surety & bond, copy of which was attached to the complaint as
Insurance Co. que pague al demandante la desde la Annex B, is null and void. On this point, the Court of
P8,000.00 con intereses legales a contar desde la Appeals had the following to say:
fecha de la demanda—24 de Octubre de 1955;
“x x x we are of the opinion that said surety bond is valid. In the
“b) Condenando a la misma demandada que pague al
first place, there appears to be no showing that the revocation of
demandante la suma de P600.00 en concepto de
authority was made known to the public in general by publication,
honorarios de abogado; y
nor was Hodges notified of such revocation despite the fact that
“c) Condenando, ademas, a la misma demandada que he was a regular client of the firm. And even if Hodges would
pague las costas del juicio.” have inquired from Mrs. Mesa as to her authority to issue said
bond, we doubt if she would disclose the contents of the letter of
Hodges appealed to the Court of Appeals (CA-G.R. No. L- March 15, 1952 in view of Central Surety’s claim that she was
24684-R) from this decision, insofar as it limited committing irregularities in her remittances to the main office.
petitioner’s liability to P8,000.00. Petitioner, also, appealed Secondly, some surety bonds issued by Mrs. Mesa in favor of
to said Court upon the ground that the trial court had Hodges after her authority had allegedly been curtailed, wore
erred: (a) in holding petitioner liable under a contract honored by the Central Surety despite the fact that these were
entered into by its agent in excess of her authority; (b) in not reported to the main office at the time of their issuance. These
sentencing petitioner to pay Hodges the sum of P8,000.00 accounts were paid on January 31, 1957, to wit: Felicito and
with interest thereon, in addition to attorney’s fees and the Libertad Parra issued on August 16, 1952; Estrella Auayan issued
costs; and (c) in “not awarding” petitioner’s counterclaim. on November 16, 1953; Dominador Jordan issued on August 26,
After appropriate proceedings, the Court of Appeals 1953; and Ladislao Lachica issued on February 28, 1953. (Exhs. F,
rendered the decision above referred to, from which G, H, I and J). By these acts Central Surety ratified Mrs. Mesa’s
petitioner has appealed to this Court, alleging that the unauthorized acts and as such it is new estopped from setting
Court of Appeals has erred: (1) in finding that petitioner forth Mrs. Mesa’s lack of authority to issue surety bonds after
“was liable on a bond issued by an agent whose authority x March 15, 1952. It has been held that although the agent may
x x had already been withdrawn and revoked”; (2) “in have acted beyond the scope of his authority, or may have acted
applying the rule on implied admission by reason of failure without authority at all, the principal may yet subsequently see
to deny under oath the authenticity of a pleaded fit to recognize and adopt the act as his own. Ratification being a
document”; and (3) “in not considering the legal effect of the matter of assent to and approval of the act as done on account of
waiver the person ratifying, any words or acts which show such assent
163
and approval are ordinarily sufficient. (Sta. Catalina vs. Espitero,
CA-G.R. No. 27075-R, April 28, 1964, citing IV Padilla, CIVIL
CODE, 1959 ed., pp. 478-479; Roxas vs. Villanueva CA-G.R. No.
VOL. 38, MARCH 30, 1971 163 18928-R, June 20, 1958). Moreover, the revocation of agency does
Central Surety & Insurance Company vs. C. N. Hodges not prejudice third persons who acted in good faith without
knowledge of the revocation. (Joson vs. Garcia, CA-G.R. No.
29336-R, Nov. 19, 1962).”
contained in the disputed bond and in not disposing of this
case under the light of such waiver.” Indeed, Article 1922 of our Civil Code provides:
The first assignment of error is predicated upon the fact
that prior to January 23, 1954, when the surety bond 164
involved in this case was executed, or on March 15, 1952,
petitioner herein had withdrawn the authority of its branch 164 SUPREME COURT REPORTS ANNOTATED
manager in the City of Iloilo, Mrs. Rosita Mesa, to issue,
inter alia, surety bonds and that, accordingly, the surety Central Surety & Insurance Company vs. C. N. Hodges
“If the agent had general powers, revocation of the agency does VOL. 38, MARCH 30, 1971 165
not prejudice third persons who acted in good faith and without
Central Surety & Insurance Company vs. C. N. Hodges
knowledge of the revocation. Notice of the revocation in a
newspaper of general circulation is a sufficient warning to third
“x x x will not be liable for any claim not discovered and presented
persons.”
to the Company within three (3) months from the expiration of
It is not disputed that petitioner has not caused to be this bond and that the obligee hereby waives his right to file any
published any notice of the revocation of Mrs. Mesa’s court action against the surety after the termination of the period
authority to issue surety bonds on its behalf, of three months above-mentioned.”
notwithstanding the fact that the powers of Mrs. Mesa, as 2
Interpreting an identical provision, this Court has,
its branch manager in Iloilo, were of a general nature, for
however, held “that the three-month period” prescribed
she had exclusive authority, in the City of Iloilo, to
therein “established only a condition precedent,—not a
represent petitioner herein, not with a particular person,
limitation of action,” and that, when a claim has been
but with the public in general, “in all the negotiations,
presented within said period, the action to enforce the
transactions, and business wherein the Company may
claim may be “filed within the statutory time of3
lawfully transact or engage in,” subject only to the
prescription.” This view was clarified in a subsequent case,
restrictions specified in their agreement, copy1 of which was
in the sense that the above-quoted provision was “x x x
attached to petitioner’s answer as Annex 3. Contrary to
merely interpreted to mean that presentation of the claim
petitioner’s claim, Article 1922 applies whenever an agent
within three months was a condition precedent to the filing
has general powers, not merely when the principal has
of a court action. Since the obligee in said case presented
published the same, apart from the fact that the opening of
his claim seasonably although it did not file the action
petitioner’s branch office amounted to a publication of the
within the same period, this Court ruled that the
grant of powers to the manager of said office. Then, again,
stipulation in the bond concerning the limitation being
by honoring several surety bonds issued in its behalf by
ambiguous, the ambiguity should be resolved against the
Mrs. Mesa subsequently to March 15, 1952, petitioner
surety, which drafted the agreement, and that the action
induced the public to believe that she had authority to 4
could be filed within the statutory period of prescription.”
issue such bonds. As a consequence, petitioner is now
In the case at bar, it is not contended that Hodges had
estopped from pleading, particularly against a regular
not presented his claim within three (3) months from
customer thereof, like Hodges, the absence of said
January 23, 1955. In fact, he had repeatedly demanded
authority.
from petitioner herein compliance with its obligations
Let us now take up the third assignment of error and
under the surety bond in question, and, in reply to such
defer, until after the same has been disposed of, the
demands, petitioner asked extensions of time, on January
consideration of the second assignment of error.
29, February 16, March5 15, May 3, June 16, July 1 and 15,
Under the third assignment of error, petitioner
and October 15, 1955. After thus securing extensions of
maintains that, having been instituted on October 24, 1955
time, even beyond three (3) months from January 23, 1955,
—or nine (9) months after the expiration of petitioner’s
petitioner cannot plead the lapse of said period to bar the
surety bond on January 23, 1955—the present action is
present action.
barred by the provision in said bond to the effect that it:
The second assignment of error assails the finding of the
Court of Appeals to the effect that the petitioner it
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1 Tolentino, Vol. 5, Civil Code of the Philippines, 1959 ed., p. 372, citing _______________
3 Valverde 628.
2 Pao Chuan Wei v. Nomorosa, 103 Phil. 57, 61-62.
165 3 Zabaljaurregui v. Luzon Surety Co., L-16251, Aug. 31, 1963.
4 Italics ours. a copy of the contract between the parties (Exhibit A) which copy,
5 Exhibits C and C-1 to C-7. by the terms of the complaint, is made a part thereof. The copy is
not set forth in the bill of exceptions and aside from said
166
averment, there is no indication that the copy actually
accompanied the complaint, but an examination of the record of
166 SUPREME COURT REPORTS ANNOTATED the case in the Court of First Instance shows that a translation of
the contract was attached to the complaint and served upon the
Central Surety & Insurance Company vs. C. N. Hodges
defendant. As this translation may be considered a copy and as
the defendant failed to deny its authenticity under oath, it will
liable for the full amount of surety bond—despite the fact perhaps be
that it exceeded the sum of P8,000.00 and hence, required,
for its validity and binding effect as against petitioner
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herein, the express approval and confirmation of its Manila
office, which were not secured—in view of petitioner’s 6 Yu Chuck v. “Kong Li Po,” 46 Phil. 608.
failure to deny under oath the genuineness and due
execution of said bond, copy of which was attached to the 167
complaint. It is true that, pursuant to section 8 of Rule 8 of
the Rules of Court: VOL. 38, MARCH 30, 1971 167
“When an action or defense is founded upon a written instrument, Central Surety & Insurance Company vs. C. N. Hodges
copied in or attached to the corresponding pleading as provided in
the preceding section, the genuineness and due execution of the said that under section 103 of the Code of Civil Procedure the
instrument shall be deemed admitted unless the adverse party, omission to so deny it constitutes an admission of the genuineness
under oath, specifically denies them, and sets forth what he and due execution of the document as well as of the agent’s
claims to be the facts; but this provision does not apply when the authority to bind the defendant. (Merchant vs. International
adverse party does not appear to be a party to the instrument or Banking Corporation, 6 Phil. 314.)
when compliance with an order for an inspection of the original “In ordinary circumstances that would be true. But this case
instrument is refused.” appears to have been tried upon the theory that the rule did not
apply; at least, it was wholly overlooked or disregarded by both
We have however, held that:
parties. The plaintiffs at the beginning of the trial presented a
“x x x where a case has been tried in complete disregard of the number of witnesses to prove the due execution of the document as
rule and the plaintiff having pleaded a document by copy, well as the agent’s authority; no objections were made to the
presents oral evidence to prove the due execution of the document defendant’s evidence in refutation and no exceptions taken; and the
as well as the agent’s authority and no objections are made to the matter is not mentioned in the decision of the trial court.
defendant’s evidence in refutation, the rule will be considered “The object of the rule is ‘to relieve a party of the trouble and
6
waived.” expense of proving in the first instance an alleged fact, the
existence or nonexistence of which is necessarily within the
The reason for such view was explained by this Court as knowledge of the adverse party, and of the necessity (to his
follows: opponent’s case) of establishing which such adverse party is
notified by his opponent’s pleading.’ (Nery Lim-Chingco vs.
“Before entering upon a discussion of the questions raised by the Terariray, 5 Phil., at p. 124.)
assignments of error, we may draw attention to a matter which “The plaintiff may, of course, waive the rule and that is what
has not been mentioned either by counsel or by the court below, he must be considered to have done in the present case by
but which, to prevent misunderstanding, should be briefly introducing evidence as to the execution of the document and
explained: It is averred is the complaint that it is accompanied by
failing to object to the defendant’s evidence in refutation; all this up the question on the court’s own motion, such is net the
evidence is now competent and the case must be decided law. This does not conflict with former decisions; in all
thereupon. x x x. Nothing of what has here been said is in conflict cases where the applicability of the rule has been sustained
with former decisions of this court; it will be found upon the party invoking it has relied upon it in the court below.”
examination that in all cases where the applicability of the rule (Yu Chuck v. Kong Li Po, 46 Phil. 608).
has been sustained the party invoking it has relied
7
on it in the The facts upon which relief by reformation of an
court below and conducted his case accordingly.” instrument in writing is sought must be put in issue by the
pleadings (Ramirez v. Orientalist Co. and Fernandez, 88
In the case at bar, the parties acted in complete disregard Phil. 634, 646.) It has also been held that the defendant-
of or wholly overlooked the rule above-quoted. Hodges had appellant had the right to be timely apprised by the
neither objected to the evidence introduced by petitioner pleadings of the plaintiff’s contention that the writing
herein in order to prove that Mrs. Mesa had no authority to containing the contract of guaranty was imperfected and
issue a surety bond, much less one in excess of P8,000.00, did not show the true agreement, and he should have been
and took no exception to the admission of said evidence. given the opportunity to prove, if he could, that no mistake
Hence, Hodges must be deemed to have waived the benefits had been made, or if one had been made, to produce other
of said rule and petitioner herein cannot be held liable in available defenses. The failure to give him that opportunity
excess of the sum of P8,000.00: is not a mere technical error; it goes to the merits and is a
WHEREFORE, with the modification that petitioner’s reversible error. (Bank of the Philippine Islands v. Laguna
liability to Hodges is limited to said sum of P8,000.00 the Coconut Oil Co., 48 Phil. 5.)
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168