G.R. No. 26801 , August 4, 1927
THE GOVERNMENT OF THE PHILIPPINE ISLANDS and JOAQUIN NATIVIDAD, plaintiffs-appellees, vs. CHUA CHO PACK & CO., TOMAS LIAO LAMCO and LIAO LIECO, defendants-appellants.

FACTS

The Collector of Customs of Cebu, Joaquin Natividad, delivered imported merchandise to the commercial partnership Chua Cho Pack & Co. without requiring the surrender of the bills of lading. To secure this delivery, the defendants executed eight bonds in favor of the Government of the Philippine Islands, with Chua Cho Pack & Co. as principal and Tomas Liao Lamco and Liao Liecco as sureties. The condition of the bonds was to produce the bills of lading or pay the bond amount. The defendants failed to produce the bills. The rightful holder of the bills, American Express Co., sued and obtained a judgment against Natividad for the value of the merchandise. To enforce the bonds and indemnify Natividad, the Government and Natividad sued the defendants.

The defendants raised several defenses: (1) the bonds were not executed according to law; (2) Tomas Liao Lamco signed as an agent of a firm, exceeding his authority; (3) Liao Liecco’s agent, Liao Seng Wan, lacked authority to sign such bonds; and (4) the Government had no interest to sue jointly with Natividad. The trial court ruled in favor of the plaintiffs, holding all defendants solidarily liable.

ISSUES:
1. Whether Chua Cho Pack & Co. is liable on the bonds.
2. Whether the bonds were duly executed and the signatures authentic.
3. Whether Liao Seng Wan was authorized to bind Liao Liecco on the bonds.
4. Whether Tomas Liao Lamco signed in his personal capacity.
5. Whether the defendants are liable to the Insular Government.

RULING

The Supreme Court AFFIRMED the trial court’s judgment.

1. Liability of Chua Cho Pack & Co.: The firm is liable. The question is not about paying the vendor but about liability on the bonds executed to obtain the goods without bills of lading. The bonds were duly executed by the firm’s agent, and the conditions were breached.

2. Due Execution of Bonds: The bonds were properly signed, ratified, and acknowledged. The evidence conclusively showed that Tomas Liao Lamco signed in his personal and individual capacity, not as an agent, making him personally liable.

3. Authority of Liao Seng Wan (for Liao Liecco): While the power of attorney (Exhibit C) did not expressly authorize Liao Seng Wan to execute customs bonds like these, the principal, Liao Liecco, is estopped from denying the agent’s authority. The record showed that during the same period, the agent executed 15 other identical bonds for the principal without objection. This established a business practice tacitly sanctioned by the principal, creating apparent authority and estopping him from invoking the limitation in the power of attorney.

4. Nature of Government’s Interest / Proper Plaintiff: The Government of the Philippine Islands is a nominal party. Under Section 1316 of the Administrative Code, such bonds run to the Government “for the benefit of whom it may concern.” In substance, the bonds were executed for the protection and indemnity of the Collector of Customs, Joaquin Natividad. The judgment correctly obliges the defendants to pay the Government, which amount is to be turned over to the American Express Co. to extinguish Natividad’s liability. Therefore, the defendants are ultimately liable to indemnify Natividad.

DOCTRINE:
1. A principal may be estopped from denying an agent’s authority if the agent has habitually exercised such authority with the principal’s knowledge and tacit consent, establishing a course of business practice.
2. Bonds executed under Section 1316 of the Administrative Code, while formally in favor of the Government of the Philippines, are deemed executed for the benefit and indemnity of the Collector of Customs concerned. The Government acts as a nominal obligee, and the real beneficiary is the official protected from liability arising from the delivery of goods without a bill of lading.