G.R. No. L-2020

FACTS:
In December 1898, plaintiffs-appellants Germann & Co. negotiated with Fernando Canon for the sale of machinery for an electric-light plant in Malolos. Canon represented himself as a director of the “Philippine Electric Company.” The machinery was delivered and a plant was established. Plaintiffs, unpaid for part of the price, sued Canon and other defendants-appellees (Luis R. Yangco, et al.) as individuals, contending the company’s organization was illegal, thus making its members individually liable. The trial court found that the contract was made and the machinery was delivered before December 19, 1898the date when some defendants signed articles of association for the purported company. The lower court rendered judgment in favor of all defendants except Canon, against whom it expressly declined to rule.

ISSUE:
1. Whether the defendants other than Fernando Canon are individually liable for the unpaid debt arising from the contract for the electric-light machinery.
2. Whether the trial court erred in not rendering judgment for or against defendant Fernando Canon.

RULING:
1. No, the other defendants are not liable. The Supreme Court affirmed the trial court’s finding that the contract and delivery were completed before the defendants signed the articles of association on December 19, 1898. There was no evidence that any defendant, other than Canon, authorized or ratified the contract with the plaintiffs prior to that date. The mere signing of the articles of association did not create liability for a pre-existing debt contracted by Canon alone, as there was no proof the company or the other defendants subsequently took possession of, used, or ratified the contract for the machinery.
2. Yes, the trial court erred. The Supreme Court held it was the lower court’s duty to adjudicate the claim against Canon, a party to the case. Upon examination of the evidence, Canon was found personally liable for the unpaid balance.

DISPOSITIVE PORTION:
The judgment of the lower court is AFFIRMED as to all defendants except Fernando Canon. The case is REMANDED with instructions to enter judgment in favor of Germann & Co. and against Fernando Canon for the amount claimed. No costs were awarded in the Supreme Court.