Lim Tiu v. Ruiz Y Rementeria
REITERATIONFacts
The Antecedents: Plaintiffs, operating as "Lim Juco y Compañia," alleged that they sold merchandise to the defendant, "La Isla de Cuba," on May 26, June 5, and June 12, 1908, amounting to P1,043.57, which remained unpaid. The defendants denied the allegations. Procedural History: The Court of First Instance of Manila found that the defendants purchased the merchandise from Domingo Tim Bun Liu and paid him for it. The court concluded that the defendants were not liable for the payment and rendered judgment in favor of the defendants, dismissing the complaint. The Petition: The plaintiffs appealed the decision, assigning several errors to the lower court's findings, particularly concerning the defendants' knowledge of Domingo Tim Bun Liu's agency and the validity of payment made to him.
Issue(s)
Whether the defendants purchased the merchandise directly from the plaintiffs. Whether the defendants had sufficient notice of Domingo Tim Bun Liu's relationship with the plaintiffs to place them on their guard. Whether the payment made by the defendants to Domingo Tim Bun Liu, in something other than cash, was binding on the plaintiffs.
Ruling
The Supreme Court affirmed the decision of the lower court, ruling in favor of the defendants and dismissing the plaintiffs' complaint.
Ratio Decidendi
On the issue of whether the defendants purchased directly from the plaintiffs: The Court found conflicting testimony but leaned towards the lower court's finding that the defendants did not purchase directly from the plaintiffs. The defendants had been dealing with Domingo Tim Bun Liu for months, settling accounts with him, and claimed no knowledge that the merchandise came from the plaintiffs. The fact that accounts were kept with Domingo Tim Bun Liu, not the plaintiffs, supported this contention. The plaintiffs' argument that a bill presented by Domingo in their favor proved knowledge was countered by the defendants' claim that it was merely to show the price charged by the plaintiffs to Domingo. On the issue of whether the defendants had sufficient notice of Domingo Tim Bun Liu's relationship with the plaintiffs: The Court held that the preponderance of evidence showed the defendants believed they were dealing with Domingo Tim Bun Liu personally and not as an agent of the plaintiffs. There was no proof that Domingo notified the defendants of his agency, nor that the plaintiffs notified the defendants that Domingo was acting as their agent. The defendants' belief that they were dealing with Domingo in his own capacity was a crucial factor. On the issue of whether the payment made by the defendants to Domingo Tim Bun Liu was binding on the plaintiffs: The Court ruled that since the defendants acted in good faith, believing they were dealing with Domingo Tim Bun Liu in his own name and had paid him in full, they were not liable to the plaintiffs. This was based on Article 1717 of the Civil Code, which states that when an agent acts in his own name, the principal has no action against the third party, and the third party has no action against the principal. The Court also cited Article 246 of the Commercial Code, which provides similar protection to third parties dealing with an agent acting in their own name.
Main Doctrine
When an agent acts in his own name, the principal shall have no action against the persons with whom the agent has contracted, nor the said persons against the principal, provided the third party acted in good faith and without knowledge of the agency.