PRICE STABILIZATION CORPORATION (PRISCO), PLAINTIFF AND APPELLEE, VS. AMPARO FRANCISCO AND JUAN D. FRANCISCO, DEFENDANTS AND APPELLANTS.

This action was commenced in the Justice of the Peace Court of Morong, Rizal,
for the recovery of P1,655.00, alleged balance of the purchase price of goods
sold by the PRRA to the defendants. The action was brought by the PRATRA,
successor to the PRRA. The case having been dismissed by that court, plaintiff
appealed to the Court of First Instance of Rizal where judgment was rendered in
favor of the plaintiff for the sum claimed plus interest and costs. The case was
thereafter appealed by defendants to the Court of Appeals, but that court has
certified it here on the ground that the real issue involved was purely legal.
While the case was still in that court, PRATRA was abolished and substituted by
PRISCO.

From the stipulation of facts and additional evidence presented by the
parties, it appears that in the morning of April 16, 1946, the defendant Amparo
Francisco bought of plaintiff 3,000 yards of textiles described as “Batista
Supremo” for P4,440.00 and 2,000 yards of textiles described as “Batista
Washington” for P2,600.00. The first item was covered by Cash Invoice No. 06043
(Exh. “E”) and the second by Credit Invoice No. 05421 (Exh. “B”). On that same
morning, the purchaser’s husband, the other defendant, Juan D. Francisco,
delivered to Joaquin Lectura, then administrative officer of plaintiff and
second in rank to Dr. J. Salcedo, Jr., its executive officer, a check for
P6,095.00, payable to cash, to cover full payment for the cash invoice for
P4,440.00 and part payment for the credit invoice for P2,600.00, thus leaving an
unpaid balance of P1,655.00 on the credit invoice. This balance was paid by
defendants to plaintiff’s cashier on June 11, 1946.

Lectura cashed the check for P6,095.00 given to him by defendant Juan D.
Francisco, but did not apply all of its proceeds to the payment of defendants’
purchases, but only P4,440.00 thereof, or only the amount sufficient to cover
the cash invoice. The remaining P1,655.00, which should have been applied
against the credit invoice, he either appropriated to his own use or applied to
the payment of invoices corresponding to other purchasers. As a result,
plaintiff refused to give defendants credit for saaid remainder and considered
defendants still indebted in that amount. Hence, the present suit.

The main point at issue is the validity of the payment made by defendants to
Lectura. The trial court held the payment invalid on the theory that Lectura had
no authority to receive payment for purchases from the PRRA. But in our opinion
the facts are such that to permit plaintiff to deny the said authority in this
case would not be in consonance with justice and equity.

Lectura was the chief of the Administrative Division, Office of the
Procurement, Storage and Distribution of the PRRA. He was second in rank to Dr.
Juan S. Salcedo, Jr., Chief Executive Officer of that organization, and was
empowered “to coordinate and supervised” in place and on behalf of Dr. Salcedo
the activities of its various divisions. The defendant Juan D. Francisco
declared that he took Lectura for a responsible official of the PRRA, for before
paying for the goods, he asked Col. Gilhouser, Technical Assistant in the PRRA,
if there was anyone who could attend to them inasmuch as Lectura was out, and
Col. Gilhouser told them to wait for Lectura because he was the one taking care
of the matter. When Francisco delivered the check to Lectura, the latter gave
him the cash and credit invoices already mentioned above, which Francisco
considered as sufficient receipts of payment. The cash invoices (Exh. “E”) has
the word “PAID” stamped on its face; while the credit invoice beaqrs the
following annotation on its face:

“Credit: Verified correct — F. de la Fuente, Representative of the
Auditor.

“Paid by PNB Check No. 879247-B – P1,655.00 balance P945.00 — J.
L.”

This exhibit “B” was presented by plaintiff as its own, and according to a
cash examiner of the General Auditing Office, it “is copy taken from the
Accounting Division of the PRRA.” It also appears that, upon receiving the
invoices from Lectura, defendants went to the warehouse to claim the goods and
presented the invoices to Josefina U. Luna, the assistant cashier assigned to
that warehouse; that Josefina demanded payment for the cash invoices and when
told that they had already made payment to Lectura, she sent a note to the
latter regarding the matter of payment and received a reply to the effect that
she would be paid later and that, in the meantime, she would deliver the goods
to the buyers; that Josefina delivered the goods to the buyers and stamped on
the cash invoice the word “PAID” with the notation “Amount paid to Mr. J.
Lectura as per arrangement — J. Luna, Assistant Cashier.” It may also be
mentioned that Lectura received payment, not only from defendants, but also from
other buyers and that, as a general rule, purchasers of goods at an
establishment do not inquire if the person making sale has the authority to
receive payment. In view of all these circumstances, we think defendants were
justified in believing that Lectura was authorized to receive payment and that
it was under that belief that they gave the check to him. If not actually
invested with specific authority, Lectura should at least be regarded as having
the ostensible authority. Such apparent authority should be enough to bind the
principal to third persons who, in good faith,have dealt with the agent.

It is also a principle of equity that where one of two innocent parties must
suffer for a breach of trust committed by a third person, the one who reposed
the confidence that was breached should bear the loss. As it was plaintiff that
put Lectura in a position of trust and allowed him to act therein under
circumstances which justified the belief that he had authority to receive
payment, the loss due to his defalcation must be borne by plaintiff.

Wherefore, the judgment appealed from is reversed, and the appellants
absolved from the complaint. No costs.

Paras, C.J., Bengzon, Padilla, Jugo, Labrador, Concepcion, and
Reyes, J.B.L., JJ., concur.