G.R. No. 75640; April 5, 1990
NATIONAL FOOD AUTHORITY (NFA), petitioner, vs. INTERMEDIATE APPELLATE COURT and SUPERIOR SHIPPING CORPORATION, respondents.

FACTS

On September 6, 1979, Gil Medalla, acting as a commission agent for Superior Shipping Corporation, entered into a contract with the National Food Authority (then NGA) for the hire of the vessel “MV Sea Runner” to transport rice. The contract was executed in Medalla’s name without disclosing his agency for Superior, the vessel’s owner. Upon completion, Superior demanded payment from NFA, which refused, stating its contract was solely with Medalla. NFA subsequently paid Medalla the freightage of P25,974.90.
Superior Shipping then filed a complaint against both Medalla and NFA to recover the payment. The trial court held NFA and Medalla jointly and severally liable. NFA appealed, arguing it had no knowledge of the agency when it contracted with Medalla and was thus not liable to the undisclosed principal.

ISSUE

Whether the National Food Authority is jointly and severally liable with the agent, Gil Medalla, for the freightage payment to the undisclosed principal, Superior Shipping Corporation.

RULING

Yes, the NFA is jointly and severally liable. The Court applied Article 1883 of the Civil Code, which provides the general rule that if an agent acts in his own name, the principal cannot sue the third person, and vice-versa; the agent is directly bound. However, a clear exception exists: “except when the contract involves things belonging to the principal.”
Here, the subject of the contract was the vessel “MV Sea Runner,” which indisputably belonged to the principal, Superior Shipping. Since the contract dealt with property belonging to the principal, the exception under Article 1883 applies. The legal effect is that the agent’s apparent representation yields to the principal’s true representation. Consequently, the contract is deemed to be between the principal and the third person.
Therefore, NFA, as the third party, can be held liable to the principal, Superior Shipping, for the freightage. The payment made to the agent did not extinguish the obligation because the principal retained its right to demand performance directly under the exception. The appellate court’s decision affirming NFA’s joint and several liability was correct.