Hao v. Galang

 

Hao v. Galang

G.R. No. 247472

October 6, 2021

 

FACTS:

In February 2011, Hao, the petitioner, executed a lease contract with Galang, the respondent, for five years over the latter’s property to establish and set up a diagnostic center. After the incorporation of SUREMED in March 2011, it took possession and occupied the leased premises to operate its business. In 2012, the petitioner was replaced as president of SUREMED. Although the respondent sent a revised lease contract replacing the petitioner as the signing lessee to SUREMED, the latter refused but continued to occupy the property until 2013. In 2014, SUREMED incurred delays in paying the rent, resulting in a series of demands from the respondent. In June 2014, the respondent filed an unlawful detainer suit against the petitioner and SUREMED. The MTC ruled in favor of the respondent, ordering the petitioner to pay the rental in arrears plus attorney’s fees and the cost of the suit. The complaint against SUREMED was dismissed as it no longer occupied the property. On appeal, the RTC upheld the MTC's decision. On appeal to the CA, it upheld the RTC's decision. Hence, this petition.

ISSUE:

Whether or not the petitioner is liable for the rental arrears over SUREMED's use of the property owned by the respondent.

HELD:

No. The petitioner's purpose of entering the contract of lease was not a personal affair but in preparation for establishing a diagnostic center, a fact that is known to the respondent. The respondent is fully aware that the petitioner was only acting to represent a corporation in the process of organization and incorporation. The petitioner’s role as an agent of SUREMED is fortified by the undisputed fact that after SUREMED's organization, the company, without the respondent's dissent, occupied the leased premises. The contract of lease between the parties is clearly a pre-incorporation contract, wherein the "representative of a corporation in the process of incorporation binds oneself to ensure that the corporation, once formed, will ratify the contract entered in its name. The representative becomes personally liable for such contract if the corporation does not ratify it once it comes into existence." Article 1898 and Article 1901 of the Civil Code demonstrate the effects of the principal's ratification or non-ratification of the acts of the agent.