In contract disputes, determining the real party in interest is crucial for establishing who has the right to sue or be sued. The Supreme Court, in this case, clarified the distinction between an agent and an assignee in the context of a contract for the sale of scrap rails. The Court held that an agent, unlike an assignee, generally cannot sue or be sued on a contract made for their principal. This distinction significantly impacts who can seek legal remedies for breach of contract.

Representative or Rights Holder? The Core of Contractual Authority

This case revolves around a contract dispute between Laureano T. Angeles, representing his deceased wife Lizette, and the Philippine National Railways (PNR) regarding a sale of scrap rails. The central question is whether Lizette Wijanco-Angeles acted merely as an agent of Gaudencio Romualdez, the original purchaser, or as an assignee with the right to enforce the contract independently. The answer determines whether Angeles, as Lizette’s heir, has the legal standing to sue PNR for specific performance and damages.

The dispute originated when Romualdez purchased scrap rails from PNR and authorized Lizette Wijanco-Angeles to withdraw them. After PNR suspended the withdrawal due to alleged discrepancies and pilferage, the Angeles spouses demanded a refund, which PNR refused. The Supreme Court examined Romualdez’s letter authorizing Lizette, focusing on whether it constituted an agency agreement or an assignment of rights. The Court underscored that the nature of the relationship dictates who is the real party in interest and thus entitled to bring a lawsuit.

The Supreme Court emphasized the fundamental difference between agency and assignment in contract law. In an **agency relationship**, the agent acts on behalf of the principal, and any rights or liabilities arising from the contract accrue to the principal. The Court stated,

Where agency exists, the third party’s (in this case, PNR’s) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally, be a contracting party.

This means that the agent, acting as a representative, cannot typically enforce the contract in their own name. Conversely, an **assignment** involves the transfer of rights from one party (the assignor) to another (the assignee), granting the assignee the right to enforce the contract directly.

The Court scrutinized the language of Romualdez’s letter to determine his intent. The letter stated that Lizette was “authorized…to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.” The Court interpreted this language as indicative of an agency relationship, with Lizette acting as Romualdez’s representative rather than an assignee of his rights. This interpretation was reinforced by the use of the word “authorized” and the phrase “to be my lawful representative.”

The petitioner argued that the second paragraph of Romualdez’s letter, which stated that giving Lizette the original copy of the award would “indicate my waiver of rights, interests and participation in favor of Lizette R. Wijanco” demonstrated an intention to assign rights. The Court, however, rejected this argument, noting that the phrase “For this reason” linked the waiver to Lizette’s role as a representative for withdrawing the rails. This context clarified that Romualdez waived rights only to the extent necessary for Lizette to fulfill her role as his agent.

The Court also cited Article 1374 of the Civil Code, which states, “The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.” This principle of contract interpretation requires courts to consider the entire document to ascertain the parties’ intent, rather than focusing on isolated phrases. The Court noted the significance of considering the parties’ actions in determining their intent, citing Article 1371 of the Civil Code: “To judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.”

The Court found that the subsequent actions of the Angeles spouses supported the finding of an agency relationship. The trial court observed that the Angeles spouses themselves referred to Lizette as the “authorized representative” of San Juanico Enterprises in subsequent letters. Additionally, Lizette signed the withdrawal receipt in a representative capacity, further indicating her role as an agent. The court stated that “One professing to act as agent for another is estopped to deny his agency both as against his asserted principal and third persons interested in the transaction which he engaged in.”

Addressing the petitioner’s argument that the Romualdez letter did not constitute a special power of attorney, the Court clarified that no specific form is required for a valid power of attorney, stating, “In the absence of statute, no form or method of execution is required for a valid power of attorney; it may be in any form clearly showing on its face the agent’s authority.” The Court deemed the letter sufficient to establish Lizette’s authority to act on Romualdez’s behalf in withdrawing the scrap rails.

The Supreme Court reiterated the principle that a power of attorney must be strictly construed and pursued, and that an agent cannot exceed the authority granted. Allowing Lizette the authority to sue, especially in her name, would overstep the bounds of the authority granted in the Romualdez letter. As the Supreme Court affirmed the decisions of the lower courts, it reinforced that the real party in interest, especially in contract law, is a critical aspect of determining legal standing.

FAQs

What was the key issue in this case?	The central issue was whether Lizette Wijanco-Angeles acted as an agent or an assignee of Gaudencio Romualdez in a contract for scrap rails with PNR, determining if her husband had the right to sue PNR.
What is the difference between an agent and an assignee?	An agent acts on behalf of a principal, with rights and liabilities accruing to the principal. An assignee, on the other hand, receives a transfer of rights and can enforce the contract directly.
How did the Court interpret Romualdez’s letter authorizing Lizette?	The Court interpreted Romualdez’s letter as establishing an agency relationship, with Lizette acting as his representative for the limited purpose of withdrawing the scrap rails.
Why was the language of the letter so important?	The specific words used, such as “authorized” and “representative,” indicated Romualdez’s intent to retain his interest in the transaction, limiting Lizette’s role to that of an agent.
What role did the Civil Code play in the Court’s decision?	The Court cited Articles 1371 and 1374 of the Civil Code, emphasizing that contracts should be interpreted by considering the entire document and the parties’ subsequent actions.
Did Lizette’s actions after the letter influence the decision?	Yes, Lizette’s actions, such as signing withdrawal receipts in a representative capacity and referring to herself as Romualdez’s representative, supported the finding of an agency relationship.
What is a power of attorney, and was it relevant here?	A power of attorney is a written instrument authorizing someone to act as an agent. The Court found that the Romualdez letter was sufficient to serve as a power of attorney, granting Lizette the authority to withdraw the rails.
What was the final ruling of the Supreme Court?	The Supreme Court denied the petition, affirming the lower courts’ decisions that Lizette acted as an agent and that her husband, therefore, lacked the standing to sue PNR.

The Supreme Court’s decision highlights the importance of clearly defining the roles and relationships in contractual agreements. Understanding the distinction between agency and assignment is crucial for determining who has the right to enforce a contract and seek legal remedies. This case serves as a reminder to carefully draft contractual documents to accurately reflect the parties’ intentions and avoid potential disputes.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: LAUREANO T. ANGELES vs. PHILIPPINE NATIONAL RAILWAYS (PNR) , G.R. NO. 150128, August 31, 2006