NATIONAL POWER CORPORATION, Corporation of 11 Mercer Street,

plaintiff-appellant, vs. NATIONAL New York City, executed in Manila a

MERCHANDISING CORPORATION and contract for the purchase by the NPC
DOMESTIC INSURANCE COMPANY OF from the New York firm of four
THE PHILIPPINES, defendants-appellants. thousand long tons of crude sulfur for
its Maria Cristina Fertilizer Plant in
Doctrine: Iligan City at a total price of (450,716)
An agent who exceeds his authority is personally  On that same date, a performance
liable for damages "porque realmente obra sin bond in the sum of P90,143.20 was
poderes" and the third person who contracts with executed by the Domestic Insurance
the agent in such a case would be defrauded if he Company in favor of the NPC to
would not be allowed to sue the agent. guarantee the seller's obligations
 It was stipulated in the contract of
The rule in Art. 1403 of the Civil Code that a sale that the seller would deliver the
contract entered into by an agent beyond his sulfur at Iligan City within sixty days
authority is unenforceable does not apply where from notice of the establishment in its
the contract is being enforced as to damages favor of a letter of credit for $212,120
against the agent itself for doing what it did and that failure to effect delivery
without authority. would subject the seller and its surety
to the payment of liquidated damages
An agent must disclose the limits of its authority at the rate of two-fifth of one percent
to avoid personal liability for ultra vires contracts. of the full contract price for the first
thirty days of default and fourf ifth of
 This case is about the recovery of one percent for every day thereafter
liquidated damages from a seller's agent until complete delivery is made
that allegedly exceeded its authority in  In a letter dated November 12, 1956,
negotiating the sale. the NPC advised John Z. Sycip, the
 Plaintiff NPC appealed on questions of president of Namerco, of the opening
law from the decision of the Court of on November 8 of a letter of credit
First Instance of Manila dated October for $212,120 in favor of International
10, 1966, ordering defendants National Commodities Corporation which would
Merchandising Corporation and expire on January 31, 1957. Notice of
Domestic Insurance Company of the that letter of credit was received by
Philippines to pay solidarity to the cable by the New York f irm on
National Power Corporation reduced November 15, 1956. Thus, the
liquidated damages in the sum of deadline for the delivery of the sulfur
P72,114.56 plus legal, rate of interest was January 15, 1957.
from the filing of the complaint and the
costs (Civil Case No. 33114).  The New York supplier was not able
 The two defendants appealed from the to deliver the sulfur due to its
same decision allegedly because it is inability to secure shipping space.
contrary to law and the evidence. During the period from January 20 to
26, 1957 there was a shutdown of the
Facts: NPC's fertilizer plant because there was
 On October 17, 1956, the National no sulfur. No fertilizer was produced.
Power Corporation and National  In a letter dated February 27, 1957,
Merchandising Corporation the general manager of the NPC
(Namerco) of 3111 Nagtahan Street, advised Namerco and the Domestic
Manila, as the representative of the Insurance Company that under Article
International Commodities 9 of the contract of sale
 "nonavailability of bottom or vessel"  The lower court rendered separate
was not a fortuitous event that would decisions in the two cases on the same
excuse nonperformance and that the date.
NPC would resort to legal remedies to
enforce its rights. In Civil Case No. 37019, the trial court
 The Government Corporate Counsel in dismissed Wallick's action for damages against
his letter to Sycip dated May 8, 1957 Namerco because the assignment in favor of
rescinded the contract of sale due to Wallick was champertous in character. Wallick
the New York supplier's appealed to this Court. The appeal was
nonperformance of its obligations dismissed because the record on appeal did not
(Exh. G). The same counsel in his disclose that the appeal was perfected on time
letter of June 8, 1957 demanded from (Res. of July 11, 1972 in L-33893).
Namerco the payment of P360,572.80
as liquidated damages. He explained In this Civil Case No. 33114, although the
that time was of the essence of the records on appeal were approved in 1967,
contract. A similar demand was made inexplicably, they were elevated to this Court
upon the surety in 1971. That anomaly initially contributed to
 The liquidated damages were the delay in the adjudication of this case.
computed on the basis of the 115day
period between January 15, 1957, the  Issues:
deadline for the delivery of the sulfur 1. W/N the delivery of the sulfur was
at Iligan City, and May 9, 1957 when conditioned on the availability of
Namerco was notified of the rescission a vessel to carry the shipment (No)
of the contract, or P54,085.92 for the 2. W/N Namerco acted within the
first thirty days and P306,486.88 for scope of its authority as agent in
the remaining eighty-five days. Total: signing the contract of sale. (No)
P360,572.80.
RTC Ruling:
 On November 5, 1957, the NPC sued 1. The documentary evidence belies these
the New York firm, Namerco and the contentions.
Domestic Insurance Company for the  The invitation to bid issued by the
recovery of the stipulated liquidated NPC provides that nonavailability of
damages (Civil Case No. 33114). a steamer to transport the sulfur is not
 The trial court in its order of January a ground for nonpayment of the
17, 1958 dismissed the case as to the liquidated damages in case of
New York firm for lack of nonperformance by the seller.
jurisdiction because it was not doing  Namerco's bid or offer is even more
business in the Philippines. explicit. It provides that it was
 On the other hand, Melvin Wallick, "responsible for the availability of
as the assignee of the New York bottom or vessel" and that it
corporation and after the latter was "guarantees the availability of bottom
dropped as a defendant in Civil Case or vessel to ship the quantity of sulfur
No. 33114, sued Namerco for within the time specified in this bid"
damages in connection with the same  In the contract of sale itself item 15
sulfur transaction (Civil Case No. of the invitation to bid is reproduced
37019). The two cases, both filed in in Article 9 which provides that "it is
the Court of First Instance of Manila, clearly understood that in no event
were consolidated. A joint trial was shall the seller be entitled to an
held. extension of time or be exempt from
the payment of liquidated damages
 herein specified for reason of lack of space. In a cable dated October 16, 1956,
bottom or vessel" or one day before the contract of sale was
 It is true that the New York signed, the New York supplier advised
corporation in its cable to Namerco Namerco that the latter should not sign
dated August 9, 1956 stated that the the contract unless it (Namerco)
sale was subject to availability of a wished to assume sole responsibility
steamer. However, Namerco did not for the shipment.
disclose that cable to the NPC and,  Sycip, Namerco's president, replied in his
contrary to its principal's instruction, it letter to the seller dated also October 16,
agreed that nonavailability of a steamer 1956, that he had no choice but to finalize
was not a justification for nonpayment the contract of sale because the NPC
of the liquidated damages. would forfeit Namerco's bidder's bond in
the sum of P45,100 posted by the
2. Domestic Insurance Company if the
 The trial court rightly concluded contract was not formalized. Three days
that Namerco acted beyond the later, or on October 19, the New York
bounds of its authority because it firm cabled Namerco that the firm did not
violated its principal's cabled consider itself bound by the contract of
instructions (1) that the delivery of sale and that Namerco signed the contract
the sulfur should be "C & F Manila", on its own responsibility.
not "C & F Iligan City"; (2) that the  In its letters dated November 8 and 19,
sale be subject to the availability of a 1956, the New York corporation
steamer and (3) that the seller should informed Namerco that since the latter
be allowed to withdraw right away the acted contrary to the former's cabled
full amount of the letter of credit and instructions, the former disclaimed
not merely eighty percent thereof. responsibility for the contract and that
 The defendants argue that it was the responsibility for the sale rested on
incumbent upon the NPC to inquire Namerco
into the extent of the agent's authority  The letters of the New York firm dated
and, for its failure to do so, it could not November 26 and December 11, 1956
claim any liquidated damages which, were even more revealing. It bluntly
according to the defendants, were told Namerco that the latter was never
provided for merely to make the seller authorized to enter into the contract
more diligent in looking for a steamer to and that it acted contrary to the
transport the sulphur. repeated instructions of the former .
 The NPC counter-argues that  The rule relied upon by the defendants-
Namerco should have advised the NPC appellants that every person dealing
of the limitations on its authority to with an agent is put upon inquiry and
negotiate the sale. must discover upon his peril the
 We agree with the trial court that authority of the agent would apply in
Namerco is liable for damages because this case if the principal is sought to be
under article 1897 of the Civil Code the held liable on the contract entered into
agent who exceeds the limits of his by the agent. That is not so in this case.
authority without giving the party with Here, it is the agent that it sought to be
whom he contracts sufficient notice of held liable on a contract of sale which
his powers is personally liable to such was expressly repudiated by the principal
party. The truth is that even before the because the agent took chances, it
contract of sale was signed Namerco was exceeded its authority, and, in effect, it
already aware that its principal was acted in its own name.
having difficulties in booking shipping
 Manresa says that the agent who principal. For that reason and because
exceeds the limits of his authority is Namerco exceeded the limits of its
personally liable "porque realmente authority, it virtually acted in its own
obra sin poderes" and the third person name and not as agent and it is, therefore,
who contracts with the agent in such a bound by the contract of sale which,
case would be defrauded if he would however, is not enforceable against its
not be allowed to sue the agent principal.
 The defendants also contend that the trial
court erred in holding as enforceable the Other issues/contention
stipulation for liquidated damages  If, as contemplated in articles 1897 and
despite its finding that the contract was 1898, Namerco is bound under the
executed by the agent in excess of its contract of sale, then it follows that it
authority and is, therefore, allegedly is bound by the stipulation for
unenforceable. The defendants cite liquidated damages in that contract.
article 1403 of the Civil Code which  Defendants' contention that
provides that a contract entered into in Namerco's liability should be based on
the name of another person by one who tort or quasi-delict, as held in some
has acted beyond his powers is American cases, like Mendelsohn vs.
unenforceable. Holton, 149 N.E. 38, 42 ALR 1307, is not
 We hold that defendants' contention is welltaken. As correctly argued by the
untenable because article 1403 refers to NPC, it would be unjust and inequitable
the unenforceability of the contract for Namerco to escape liability after it
against the principal. In the instant case, had deceived the NPC.
the contract containing the stipulation for  Another contention of the defendants is
liquidated damages is not being enforced that the Domestic Insurance Company
against its principal but against the agent is not liable to the NPC because its
and its surety. bond was posted, not for Namerco, the
 It is being enforced against the agent agent, but for the New York firm
because article 1897 implies that the which is not liable on the contract of sale.
agent who acts in excess of his authority That contention cannot be sustained
is personally liable to the party with because it was Namerco that actually
whom he contracted. solicited the bond from the Domestic
 And that rule is complemented by article Insurance Company and, as explained
1898 of the Civil Code which provides already, Namerco is being held liable
that "if the agent contracts in the name of under the contract of sale because it
the principal, exceeding the scope of his virtually acted in its own name. It became
authority, and the principal does not the principal in the performance bond. In
ratify the contract, it shall be void if the the last analysis, the Domestic Insurance
party with whom the agent contracted is Company acted as surety for Namerco.
aware of the limits of the powers granted  The rule is that "want of authority of
by the principal". the person who ex-ecutes an obligation
 As priorly discussed, Namerco, as as the agent or representative of the
agent, exceeded the limits of its principal will not, as a general rule,
authority in contracting with the NPC affect the surety's liability thereon,
in the name of its principal. The NPC especially in the absence of fraud, even
was unaware of the limitations on the though the obligation is not binding on
powers granted by the New York firm to the principal"
Namerco  Defendants' other contentions are that
 Namerco never disclosed to the NPC they should be held liable only for
the cabled or written instructions of its nominal damages, that interest should
 not be collected on the amount of
damages and that the damages should be
computed on the basis of a forty-five-day
period and not for a period of one
hundred fifteen days. The contention that
only nominal damages should be
adjudged is contrary to the intention of
the parties (NPC, Namerco and its surety)
because it is clearly provided that
liquidated damages are recoverable for
delay in the delivery of the sulfur and,
with more reason, for nondelivery.
 No proof of pecuniary loss is required
for the recovery of liquidated
damages. The stipulation for liquidated
damages is intended to obviate
controversy on the amount of damages.
There can be no question that the NPC
suffered damages because its production
of fertilizer was disrupted or diminished
by reason of the nondelivery of the
sulfur. The parties foresaw that it
might be difficult to ascertain the exact
amount of damages for nondelivery of
the sulfur. So, they fixed the liquidated
damages to be paid as indemnity to the
NPC
 The court find no sanction or justification
for NPC's claim that it is entitled to the
full payment of the liquidated damages
computed by its official.
 Ruling on the amount of damages.—A
painstaking evaluation of the equities of
the case in the light of the arguments of
the parties as expounded in their five
briefs leads to the conclusion that the
damages due from the defendants should
be further reduced to P45,100 which is
equivalent to their bidder's bond or to
about ten percent of the selling price of
the sulfur.

Dispositive portion:
WHEREFORE, the lower court's judgment is
modified and defendants National Merchandising
Corporation and Domestic Insurance Company of
the Philippines are ordered to pay solidarity to the
National Power Corporation the sum of
P45,100.00 as liquidated damages. No costs. SO
ORDERED.