GR 150903; (December, 2003) (Digest)
G.R. No. 150903 ; December 8, 2003
VICENTE JOSEFA, petitioner, vs. ZHANDONG TRADING CORPORATION, respondent.
FACTS
Respondent Zhandong Trading Corporation filed a complaint for sum of money against petitioner Vicente Josefa and Tan Y. Ching. Zhandong alleged it sold and delivered hardboards valued at ₱4,558,100.00 to Josefa on various dates in 1996, based on Tan’s referral and assurance of Josefa’s creditworthiness. The sales invoices and delivery receipts were in Zhandong’s name. Josefa, however, remitted all payments to Tan. Tan, in turn, issued checks to Zhandong, but these were dishonored. Tan then issued replacement checks, which also bounced. Zhandong then demanded payment from Josefa.
Josefa denied liability, asserting he transacted solely with Tan, whom he believed owned the merchandise. He claimed he had fully paid Tan and was not privy to any agreement between Tan and Zhandong. The trial court ruled against Josefa, ordering him to pay Zhandong the principal amount with interest, plus attorney’s fees. It also ordered Tan to reimburse Josefa. The Court of Appeals affirmed the decision.
ISSUE
Whether petitioner Vicente Josefa is liable to respondent Zhandong Trading Corporation for the value of the hardboards, despite his claim of having transacted with and fully paid Tan Y. Ching.
RULING
No. The Supreme Court reversed the lower courts and dismissed the complaint against Josefa. The legal logic hinges on the principle of relativity of contracts under Article 1311 of the Civil Code. Contracts are binding only upon the parties and their successors. There was no privity of contract between Josefa and Zhandong. The evidence established that all negotiations were conducted by Tan, who presented himself as the owner/supplier. Josefa dealt exclusively with Tan, made payments to him, and received receipts from him. While the delivery receipts bore Zhandong’s name, Josefa consistently believed he was purchasing from Tan, a long-time supplier. Zhandong’s own actions—accepting checks from Tan and confronting him directly when they bounced—confirmed that Zhandong looked to Tan as the responsible party. Consequently, Zhandong’s cause of action lies solely against Tan, with whom it had a direct transaction. Josefa, being a stranger to that contract, incurred no obligation to Zhandong. His payments to Tan extinguished his liability for the goods received.