Nantes v. Madriguera
REITERATIONFacts
The Antecedents: Anacleto Cainto, acting as an agent for merchant Damian Madriguera, purchased 1,257 kilos of abaca from Isidro Nantes for P1,357.56. Only P70 was paid at the time of sale, leaving a balance of P1,287.56. The transaction was documented in writing, with Cainto promising to pay the balance in Santa Cruz, Laguna, upon receipt of the abaca by his principal, Madriguera. Cainto subsequently delivered the abaca to Madriguera. Procedural History: Nantes filed a collection case against Madriguera (principal) and Cainto (agent) for the unpaid balance. Madriguera denied the agency relationship and disclaimed liability. Cainto admitted the allegations but asserted that Madriguera, as principal, was solely liable. The trial court, relying on Article 247 of the Code of Commerce, ruled that since Madriguera denied the agency, proof of agency was inadmissible, and only Cainto could be sued personally. The court rendered judgment against Cainto and absolved Madriguera. The Appeal: Nantes appealed the decision, contending that the lower court erred in refusing to admit evidence proving the principal-agent relationship between Madriguera and Cainto. The core issue before the Supreme Court was whether a third party could prove the existence of an agency in an action against the principal when the principal denies such agency.
Issue(s)
Whether a third party, in an action against a principal for a contract entered into by an agent in the principal's name, can prove the existence of the agency when the principal denies it. Whether the lower court erred in refusing to admit evidence proving the agency relationship between the defendants.
Ruling
The Supreme Court revoked the judgment of the lower court. It ordered that Isidro Nantes recover from Damian Madriguera the sum of P1,287.56, with legal interest from August 7, 1917, and costs. Anacleto Cainto was absolved from all liability under the complaint.
Ratio Decidendi
On Issue 1: The Supreme Court held that a third party who transacts business with an agent acting in the name of the principal has a right of action against the principal, notwithstanding the principal's denial of the agent's commission or authority. The third party must be permitted to adduce proof of such agency or commission to make that right effective. The Court reasoned that to hold otherwise would open the door to fraud, allowing principals to deny agency and escape liability after authorizing agents to conduct business in their name. The liability of the agent to the third party arises only when the principal denies the agency and the agent fails to prove it, serving as a protection for the third party and the principal against fraudulent agents. On Issue 2: The Supreme Court found that the lower court erred in discarding and refusing to admit proof offered by the plaintiff to show the agency relationship between Madriguera and Cainto. The Court admitted the evidence presented by the plaintiff, including the written contract (Exhibit A), the testimony of Cainto, a telegram (Exhibit B), and the testimony of Isabelo Devesa. These proofs, when considered together, sufficiently established the principal-agent relationship between Madriguera and Cainto, contrary to Madriguera's denial. Therefore, the lower court's exclusion of this evidence was deemed an error.
Main Doctrine
The Supreme Court held that a third party who transacts business with an agent acting in the name of the principal, as contemplated by Article 247 of the Code of Commerce, has a right of action against the principal even if the principal denies the agent's commission or authority. The third party must be permitted to adduce proof of such agency or commission to establish the principal's liability. The agent's liability to the third party arises only when the principal denies the agency and the agent fails to prove it, serving as a safeguard against fraudulent claims by purported agents.