Keeler Electric Co. v. Rodriguez
REITERATIONFacts
The Antecedents: Harry E. Keeler Electric Co., Inc. (plaintiff) is a domestic corporation engaged in the electrical business. A.C. Montelibano approached the plaintiff, claiming to be from Iloilo and able to find purchasers for the "Matthews" electric plant, for which he was promised a 10% commission on consummated sales. Montelibano then interviewed Domingo Rodriguez (defendant), and through his efforts, the plaintiff sold one "Matthews" plant to the defendant. The plant was shipped from Manila to Iloilo and installed on the defendant's premises. Subsequently, the defendant paid the purchase price to Montelibano without the plaintiff's knowledge. Procedural History: The plaintiff commenced an action against the defendant for the unpaid purchase price of P2,513.55. The defendant admitted the plaintiff's corporate existence but denied other material allegations, asserting as an affirmative defense that he had paid the plaintiff the value of the electric plant. The lower court rendered judgment for the defendant. The Petition: The plaintiff appealed, claiming the court erred in holding that payment to Montelibano discharged the debt, in holding the bill was given to Montelibano for collection, and in holding that the plaintiff had represented Montelibano as an agent authorized to collect.
Issue(s)
Whether the payment made by the Defendant to Montelibano discharged the debt owed to the Plaintiff corporation. Whether Montelibano was an agent authorized to receive and receipt for money on behalf of the Plaintiff.
Ruling
The Supreme Court reversed the judgment of the lower court, ruling in favor of the plaintiff. Judgment was entered for the plaintiff against the defendant for the sum of P2,513.55 with legal interest and costs.
Ratio Decidendi
On Issue 1: No, the payment did not discharge the debt because it was not made to the person in whose favor the obligation was constituted. Under Article 1162 of the Civil Code, payment must be made to the creditor or someone expressly authorized to receive it. In this case, the obligation was constituted in favor of Harry E. Keeler Electric Co., Inc., not Montelibano. Applying the ruling in Ormachea Tin-Conco vs. Trillana, the Court held that the burden of proof rests on the debtor to establish that the payment was made to the correct party. Since the Defendant failed to prove that Montelibano was authorized by the company to receive the payment, the payment was made at the Defendant's own risk and did not release him from his liability to the Plaintiff. On Issue 2: No, Montelibano lacked any authority, real or apparent, to collect the purchase price. The Court found that Montelibano was not an electrician, did not install the plant, and was never given a bill by the Plaintiff for collection purposes. In fact, the Plaintiff's actual employee, Cenar, had the official statement of account, which the Defendant requested to keep but promised to pay in Manila. The Court emphasized that an agent cannot establish his own authority through his own representations, and an assumption of authority should be a 'sign of danger' suggesting a duty to verify. Because the Defendant relied solely on Montelibano's own claims of authority, and the receipt signed by Montelibano was a personal signature rather than a corporate one, the Defendant failed to exercise ordinary prudence and reasonable diligence.
Main Doctrine
A party dealing with an assumed agent is bound at their peril to ascertain the nature and extent of the agent's authority. The agent cannot establish their own authority, and the principal is only liable if they expressly or implicitly ratify the agent's actions beyond their authority. Payment made to an agent without actual or apparent authority does not discharge the debt.