An agent is not liable when he acts for and behalf of the principal on matters within the scope of his authority.
A company filed a complaint for sum of money against a solo proprietorship and its sales manager. The sales manager, however, asserted that he was a mere agent of his principal, the solo proprietorship, a fact the company was aware of. As an agent, he was not a real party in interest to the case. The trial court agreed and dropped the sales manager from the list of defendants. As an agent, he could not be held personally liable because he did not go beyond the scope of his authority nor did he participate in the perpetuation of a fraud. The appellate court and the Supreme Court (SC) sustained the trial court’s decision –
[There are] two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal… In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management.
The SC reiterated its stand that when an agent acts within the bounds of his authority, it is the principal that is liable and the agent is completely absolved of any liability. It further clarified that if the agent did in fact, exceed the scope of his authority, the law does not grant that both the principal and agent are liable to the third party. Only the agent becomes liable to the third party it contracted with.
Since the sales agent acted within his authority as an agent and did not incur any liability, he was not a real party in interest and properly removed as a defendant in this case. A real party in interest is one who “stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit”
(Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, 23 April 2007, J. Chico-Nazario).