De La Salle University - Graduate School of Business

A Case Analysis on

Gozun vs Mercado

GR no. 17812

Submitted by:

Vidar Halvorsen

Submitted to:

Dean Atty. Joe-Santos B. Bisquera

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Table of Contents

1.0 Background of the Case ....................................................................................... 3

2.0 Statement of the Problem ..................................................................................... 6

3.0 Objectives ………………………………………………………..……………………6

4.0 Areas of Consideration ......................................................................................... 7

5.0 Alternative Courses of Action …. …………………………………………………… 7

6.0 Conclusion ...........................................................................................................13

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1.0 BACKGROUND

Mr. Mercasdo, a politician running for office in the province of Pampanga, requested
for samples and prices with a “compadre” of his, Mr. Jesus M Gozun. The claim of
the case is that Mr Mercados wife had vocally given him approval to go ahead and
print the material in question, and as such, a bill totalling 2,177,906 peso ensued. In
adittion to this, a cash advance ( loan )of 253,000peso was given to an employee of
Mr. Mercado, a certain Lillian Soriano. This wass done an early morning of an
important training of poll watchers, where the defendants did not have access to a
bank.

Later on, Mrs Mercado paid the plaintiff a part sum of 1,000,000, pledging to pay the
rest later on. However – in spite of several later demands, and respondents promise
to pay, repayment of the remaining balance did not happen. Because of the 2 parties
being friends ( compadres) the plaintiff waited a full 3 years before through judicial
councel sending a demand letter, in which the defendant did not heed. Therefore,
trial court ensued. In the case filed for the RTC, the defendant claimed all the
materials delivered were represented as donations from his family, friends and
political supporters, and denied any allegations of ever having entered into ay
contract with the plaintiff. Also, the defendant denied the claim of a sum of 253,000
peso, stating that loan had not been authorized, nor received in his organization.

The RTC found in favour of the plaintiff, ordering the defendant to pay the unsettled
balance, plus 12% interest per year, and the attorney’s fee of the plaintiff, amounting
to 50.000 peso.

The Court of appeals however- reversed the rulings of the RTC on basis of “lack of
cause of action”.

Finally, in the supreme Court, they again reversed the finding of the CA, through the
illumination of the use of the provisions of Contracts and Obligations, and the articles
regarding agency.

2.0STATEMENT OF THE PROBLEM.

What are the provisions governing this case, and how do they relate to the issue at
hand.

Do the writer agree or disagree with the rulings of the Supreme Court, and why.

Are there alternative actions that could have been taken, and if so , what are they,.

3.0OBJECTIVES

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.This report will attempt to look at the use of the provisions, and how they affect the
case. Then conclusively make a stance for or against the rulings of the Supreme
Court.

4.0AREAS OF CONSIDERATIONS

The issue of the case lies in the understanding of contracts and agents, and are
governed through the following provisions of the Civil Code:

Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his
powers;

(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year

from the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of

another;

(c) An agreement made in consideration of marriage, other than a

mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at a

price not less than five hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the evidences, or some of
them, of such things in action or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it is a
sufficient memorandum;

(e) An agreement of the leasing for a longer period than one year, or for
the sale of real property or of an interest therein;

(f) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract. 1

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Art. 1317. No one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless
it is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party. (1259a) 

This part of the laws can give the understanding that the defendant could have been
free of the issue, as there was no direct signing of contract nor a specific statement
of legal representation as direct agent thereof. However there are the issue of Ms
Soriano signing with “ On behalf of Mrs Annie Mercado”.

Then article 1873 is listed, in which state:

Art. 1873. If a person specially informs another or states by public advertisement that
he has given a power of attorney to a third person, the latter thereby becomes a duly
authorized agent, in the former case with respect to the person who received the
special information, and in the latter case with regard to any person.

The power shall continue to be in full force until the notice is rescinded in the same
manner in which it was given. (n)

Also, one need to look at the provisions of article2180 with regards to art. 2176.

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible

for damages caused by their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.

5.0 ANALYSIS OF THE CASE

The case here revolves around responsibility of contracts, and when and where a
contract actually has been entered into, through principal or through agency.
The main issue here is then wheter the plaintiff has had – in good faith- believed that

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a meeting of minds has met, in regards of the contract he believe they have entered
into, or of the defendant is correct in their claim this was all a donation.

Mark that the issue on the defendant claiming he did not know the rules regarding
printed advertising material in political settings. As the law stipulate in article 3 of the
Civil Code: “Ignorance of the law excuses no one from compliance therewith.” 2

Now – the fact remains that the defendant did issue a request for samples and
quotations, indicating he needed the business of the plaintiff. By third party ( which is
no legal grounds as such ) he is asked to go ahead and print, and delivers this in the
timeframe indicated by the defendant. The issue on when a contract is entered into
state that a contract is binding when signatures are in place. In that sense, the
plaintiff cannot claim there excited a contract. However- as the defendant has not
denied the quotation from the plaintiff and accepted the deliveries of the printed
materials, it give the plaintiff reasonable grounds to believe an acceptance has been
cleared. This is also enforced when the first bill is paid by the defendant’s wife. In
this one can draw parallels to the issue of employer employee relationship, in where
a quasi-delict is in effect when there is also strong indications of a relationship, giving
the plaintiff no reason to think otherwise is correct.

The 1.000.000 peso was a pay-back issued by the defendant’s wife, who thereby
paid for the account balance.

The case also state “ Despite repeated demands and the respondents promise to
do so” ... which further strengthens the issue of an acceptance of the quote/contract
being in place.

The defendant claims Mrs Soriano did not have authority to obtain cash advances,
listing his campaign manager to be the only authourized to do so. This might be a
fact, but as such, one will still have to revert to article 2180/2175, which state
employers are responsible to the acts and / or negligence of their employees.

While one might not say Mrs Mercado is an employee of Mr. Mercado, it would be
hard to believe Mr. Mercado and / or his administration could not keep record of the
values coming in for his campaign, let alone his lawyers making note of the rules
governing printing of advertising materials.

The case then goes into the issue of agency, where the plaintiff claim Mrs Soriano
acted as an agent on behalf of Mrs Mercado, basing this on the morning when she
collected the 253.000 peso “on behalf of Mrs Annie Mercado”. However – there was
no specification on the signature stating this was on behalf of Mrs Mercado. Thereby
the plaintiff weakens his claim on the defendant.

6.0 ALTERNATIVE COURSES OF ACTION

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There are other course of actions the plaintiffs could have taken in order to have a better case.
Claiming the liability of the employer to his employees is one way. However. This was not mentioned
in therefore the case hangs on the accumulated evidences, which led the SC to rule the way they did.
In that regards, the writer do not find any other course of action to better in terms of fariness equity
and justice.

7.0 CONCLUSION

The SC ruled correctly.

Thou there were no formal contracts written, the actions of the defendant more than
indicated there was , if nothing else, an understanding or meeting of minst, thus
constituting a major requirement of contracts and obligations. The defendant upheld
his end of these obligations, while the defendant did not. There were 2 issues at
hand ; the issue of the payment for the printed materials, and the issue of the “loan”
for the training of the poll watchers.
In both these issues, the defendant or representatives of the same, gave the plaintiff
reasonable reason to believe it was in good faith and within the meetings of minds,
ergo constituting contracts and obligations.

Therefore, The writer concur with the rulings of the Supreme Court.

8.0 BIBLIOGRAPHY

Web library of ChanRobles:¨

http://www.chanrobles.com

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