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 either produce the bills of lading or pay the bond amount. The defendants failed to produce the bills of lading. Consequently, 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 for his liability, the Government and Natividad filed this action against the defendants.

The defendants raised several defenses: (1) the bonds were not executed in accordance with law; (2) Tomas Liao Lamco signed as an agent of a firm, exceeding his authority; (3) Liao Liecco’s agent, Liao Seng Wan, was not authorized 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 to pay the bond amount to the Government, which would then pay the American Express Co. to extinguish Natividad’s liability.

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 decision.

1. Liability of Chua Cho Pack & Co.: The firm is liable. The issue is not payment to the vendor but liability on the bonds it executed to obtain the merchandise. The bonds were duly executed by its agent, and the firm cannot escape liability by claiming its branch manager violated internal instructions.

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, the principal (Liao Liecco) is estopped from denying the agent’s authority. The record showed that during the same period, the agent executed 23 bonds of identical nature without objection from the principal. This established a business practice tacitly tolerated by the principal, who cannot now invoke the technical limits of the power of attorney to avoid liability.

4. Nature of the Action and Liability: The defendants are liable on the bonds. Although the bonds were formally issued in favor of the “Government of the Philippine Islands,” their true purpose and beneficiary, as explained by Section 1316 of the Administrative Code, was to protect the Collector of Customs (Natividad) from liability for delivering goods without bills of lading. The Government is a nominal party to the suit. The judgment correctly directs payment to the Government, which in turn must pay the American Express Co. to satisfy Natividad’s judgment debt, thereby achieving the indemnity purpose of the bonds.