G.R. No. L-2246; January 31, 1951
JOVITO R. SALONGA, plaintiff-appellee, vs. WARNER, BARNES AND CO., LTD., defendant-appellant.

FACTS

On August 28, 1946, Westchester Fire Insurance Company of New York insured a case of rayon yardage shipped by Tina J. Gamboa from San Francisco to Manila, consigned to Jovito R. Salonga, with a liability limit of $2,000. The shipment arrived in Manila on September 10, 1946. A marine survey on October 7, 1946, revealed a shortage amounting to P1,723.12. Salonga filed a claim for this amount against the American President Lines, agents of the carrying vessel. When no action was taken, he demanded payment from Warner, Barnes and Co., Ltd., as the agent of the insurance company in the Philippines. After Warner, Barnes refused to pay, Salonga instituted an action against it on April 17, 1947. Meanwhile, the American President Lines settled Salonga’s claim against it for P1,021.25, reducing the claim against the insurance company to P717.82. The Court of First Instance of Manila ruled in favor of Salonga, ordering Warner, Barnes to pay the amount. Warner, Barnes appealed, arguing it was not the proper party to be sued.

ISSUE

Whether Warner, Barnes and Co., Ltd., as an agent of the foreign insurance company, can be held personally liable under the contract of marine insurance and is the real party in interest against whom the suit should be brought.

RULING

No. The Supreme Court reversed the decision of the lower court and dismissed the complaint against Warner, Barnes and Co., Ltd.
The Court held that an agent acting within the scope of its authority for a disclosed principal does not assume personal liability for contracts entered into on behalf of the principal. The contract of marine insurance was executed solely between the Westchester Fire Insurance Company of New York and Tina J. Gamboa. Warner, Barnes was not a party to this contract, did not sign it, and assumed no obligation under it, either as agent or principal. Following the precedent in E. Macias and Co. vs. Warner, Barnes and Co., a cause of action ex-contractu must be founded on a contract with the party to be held liable.
Furthermore, Warner, Barnes was not the real party in interest against whom the suit should be prosecuted, as required by the Rules of Court. The real party in interest was the foreign insurance company, which would be benefited or injured by the judgment. The functions of Warner, Barnes as a settlement and adjustment agent were performed in a representative capacity, and its actions bound its principal, not itself. A judgment for or against an agent does not bind the principal.
The proper remedy for the plaintiff was to bring the action against the foreign insurance company itself, serving process on its agent in the Philippines, Warner, Barnes, pursuant to the rules on service of process for foreign corporations. Consequently, the complaint against the agent was dismissed.