448 - Gozun v.

Mercado, 511 SCRA 305

Title
G.R. No. 167812             December 19, 2006
JESUS M. GOZUN VS. JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO

Topic
Unenforceable contracts
Article 1317

Facts
Respondent Mercado who is running for Gubernatorial position in Pampanga, requested the Petitioner Gozun
owner of JMG Publishing to print for election leaflets, identification cards, stickers and sample ballots.

The petitioner then sent a quotation which was approve by respondent, it was done by 3 printing shops JMB,
Metro angeles printing and St. joseph Printing owned by family of petitioner.

On March 31, 1995 respondent sister in law Lilian Soriano asked for cash advance for 253,000 for allowances of
poll watcher, which was signed and receipt.

Thereafter, the petitioner now sent a statement of account for the respondent to pay with total amount of
2,177,906.

On Aug. 11, 1995 the respondent wife paid initial payment amounting to 1,000,000 pesos. Thereafter, for more
than 3 years despite the demand from the petitioner, respondent failed to heed.

The respondent claiming that there was no evidence to support his claim that Lilian was authorized by respondent
to borrow money on his behalf, and that the election campaign materials was all donation by the petitioner for
they are known to be compadre, and that he did not know that the initial payment of his wife up to the date of the
trial, and that it was considered a payment for a job well done.
The petitioner held his contention that it was a contract between them and that action of his sister in law is on
behalf of the respondent.

The action filed by the petitioner to RTC which was later on rendered decision in favor of the petitioner and order
to pay the remaining balance.

Upon appeal of the respondent to Court of Appeal reversed the decision of RTC Angeles, for lack of cause of action,
applying the Article 1317 of the civil code, as unenforceable contract.

Hence the appeal to the Supreme Court,

Issue

1. The CA erred in dismissing the RTC decision that there is no evidence to prove that Lilian Soriano
respondent’s sister in law received cash advance on his behalf.
2. The CA erred on rendering decision that St. Joseph and Metro Angeles printing shop amounts were not
party interest thus cannot ask payment for the contract.

Ruling

1. Yes, CA erred in dismissing the action that sister in law of respondent did not act on his behalf and she
should be personally liable for the amount of cash advance.

The court ruled that by the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter
 Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him that he had
authorized Lilian to obtain the loan, hence, following Macke v. Camps34 which holds that one who clothes
another with apparent authority as his agent, and holds him out to the public as such, respondent cannot
be permitted to deny the authority.

2. Yes, CA erred.

In Oco v. Limbaring,37 this Court ruled:

The parties to a contract are the real parties in interest in an action upon it, as consistently held by the
Court. Only the contracting parties are bound by the stipulations in the contract; they are the ones who
would benefit from and could violate it. Thus, one who is not a party to a contract, and for whose benefit
it was not expressly made, cannot maintain an action on it. One cannot do so, even if the contract
performed by the contracting parties would incidentally inure to one's benefit

WHEREFORE, the petition is GRANTED