ISIDRO NANTES, PLAINTIFF AND APPELLANT, VS. DAMIAN MADRIGUERA AND ANACLETO CAINTO, DEFENDANTS AND APPELLEES.

The defendant Damian Madriguera is a merchant engaged in the purchase and sale of abaca
(hemp), having his principal place of business in the municipality of
Faete, Province of Laguna; and, up to the time hereinafter mentioned,
he had been engaged in such business for at least twenty years. On the
10th day of July, 1917, the other defendant herein, Anacleto Cainto,
acting as an agent of the said Madriguera, purchased from the
plaintiff, Isidro Nantes, in the municipality of Lukban, Province of
Tayabas, 1,257 kilos of abaca at the agreed price of
P1,357.56. Of this sum only P70 was paid by Cainto to Nantes at the
time of the sale, leaving a balance of Pl,287.56. The whole transaction
was reduced to writing in the words and figures following:

“Be it known that I, Anacleto Cainto, of age,
of Paete, Laguna, have this day bought from Mr. Isidro Nantes, of
Lukban, for the account of my principal Mr. Damian Madriguera, of
Paete, 1,257 kilos of abaca for the sum of one thousand three
hundred fifty-seven pesos and fifty-six centavos (f»l,357.56), of which
I have only paid the sum of seventy pesos (P70), the balance of
P1,287.56 to be paid to said Isidro Nantes or any other person that may
be designated by him, in Santa Cruz, Laguna, where the abaca is to be sent by him as per our agreement, upon receipt of the abaca
and delivery thereof to my principal, all the transportation expenses
to the amount of P25.81 to be paid by me, and I promise to do all this
immediately after delivery.

“In witness whereof I have hereunto set my hand in the presence of two witnesses at Lukban, this 10th day of July, 1917.

“On behalf of
	“Mr. Damian Madriguera
			(Sgd.)	“ANACLETO CAINTO.
(Sgd.)		“MARCELO RADUVAN,
		“ISABELO DEVESA.

“I have this 16th day of July, 1917, received from Mr. Isabelo Devesa the 1,257 kilos of abaca,
and I promise to pay him the balance of P1,313.37 on Friday, the 20th,
in the municipality of Lukban, as I have to get the money yet from my
said principal, Mr. Damian Madriguera, for whose account I have
purchased the abaca.

“Santa Cruz, Laguna, July 16, 1917.
	(Sgd.)	“A. CAINTO.”

The 1,257 kilos of abaca above-mentioned was duly delivered by the defendant Anacleto Cainto to his codefendant Damian Madriguera.

The present action was instituted by the vendor, Isidro Nantes, on
the 7th day of August, 1917, against Damian Madriguera as principal and
Anacleto Cainto as agent, to recover the said balance of P1,287.56
together with interest and costs. The defendant Madriguera in his
answer denied the relation of principal and agent between him and his
codefendant Cainto, and disclaimed any liability to the plaintiff. The
defendant Cainto, in his answer, admitted all the allegations of the
complaint, but claimed that, inasmuch as in the transaction in question
he had acted as a mere agent of Madriguera, the latter alone, as
principal, was liable to the plaintiff, and prayed that he be absolved
from all liability under the complaint.

During the trial of the cause the plaintiff called the defendant
Anacleto Cainto to the witness stand, and he testified, in substance,
that he was a buyer of abaca for the account of Damian
Madriguera, and had been such a buyer since the month of March, 1917;
that Madriguera furnished him the money with which to pay for the abaca which he purchased; that, when he had no cash on hand, he had instructions from Madriguera to buy abaca on credit, issuing a receipt therefor and promising to pay upon the arrival of Madriguera from Manila where he held the abaca which had been purchased by his agent, Cainto; that he bought the 1,257 kilos of abaca
in question from the plaintiff, Isidro Nantes, for the account of his
principal, Madriguera, and issued the document Exhibit A, hereinabove
quoted; and that he delivered the said abaca to the defendant Madriguera.

Counsel for Madriguera moved to strike out the testimony of the
witness Cainto with reference to the relation of principal and agent
between the former and the latter, upon the ground that it was
incompetent, and the court reserved its ruling.

Plaintiff offered three other witnesses—Pablo Valquiera, Aniceto
Caiud, and Rosendo Bagabaldo—to further prove the relation of principal
and agent existing between the two defendants herein, but the court,
upon objection of counsel for the defendant Madriguera, refused to
allow them to testify upon the ground that their testimony was
incompetent.

Plaintiff also offered Exhibits A and B in evidence, but they were
likewise rejected by the court upon objection of counsel for the
defendant Madriguera.

“In its decision the lower court held that the
plaintiff, at the time of filing his complaint, had no cause of action
against the defendant Madriguera because the latter in his answer
denied that the defendant Cainto had acted as his agent in the purchase
of the abaca in question from the plaintiff; and, for that
reason; the court held, proof was inadmissible which tended to
establish the liability of Madriguera to the plaintiff, Nantes,
inasmuch as at the time of the presentation of the complaint no
obligation had arisen on the part of the former to pay the balance of
the price of abaca which the latter sold to Cainto. The lower
court, construing article 247 of the Code of Commerce, held that under
that article only when the commission is known and admitted can the
third person hold the principal liable upon a contract executed by his
agent; that when the commission is denied the third person can only sue
the agent personally; and that in the present case he only person who
could prove the commission or agency was Cainto, and not Nantes. For
the reasons stated, the lower court rendered a judgment against the
defendant Anacleto Cainto and in favor of the plaintiff for the sum of
P1,287.56, with interest thereon at the legal rate from the 7th day of
August, 1917, and to pay the costs. The defendant Damian Madriguera was
absolved from all liability under the complaint, without prejudice to
the action which the defendant Cainto might institute against him. From
that judgment the plaintiff appealed to this court.

Appellant contends that the lower court committed an error in
discarding and in refusing to admit any and all proof adduced and
offered by him to she v the relation of principal and agent between the
defendants Madriguera and Cainto.

It will be seen that
the only question presented is one of law, to wit: When an agent
contracts in the name and for the account of his principal, can the
person with whom he has so contracted prove the existence of the
agency, in an action brought by him against the principal, in case the
latter should deny the same?

Article 247 of the Code of Commerce provides:

“ART. 247. If the agent transacts business in the
name of the principal, he must state that fact; and if the contract is
in writing, he must state it therein or in the subscribing clause,
giving the name, surname, and domicile of said principal.

“In the case prescribed in the foregoing paragraph, the contract and
the actions arising therefrom shall be effective between the principal
and the persons or person who may have transacted business with the
agent; but the latter shall be liable to the persons with whom he
transacted business during the time he does not prove the commission,
if the principal should deny it, without prejudice to the obligation
and proper actions between the principal and agent.”

Article 246 of the same Code provides:

“ART. 246. When the agent transacts business in
his, own name, it shall not be necessary for him to state who is the
principal and he shall be directly liable, as if the business were for
his own account, to the persons with whom he transacts the same, said
persons not having any right of action against the principal, nor the
latter against the former, the liabilities of the principal and of the
agent to each other always being reserved.”

It will be noted from the foregoing provisions that when the agent
transacts business in his own name, the person with whom he transacts
the same can only sue such agent, he not having any right of action
against the principal; but when the agent transacts business in the
name of the principal, as prescribed by article 247, the person with
whom he transacts the same can only sue the principal, he having a
right of action against the agent only when the principal denies the
agency and the agent does not prove the same. The reason, we think, is
obvious: In the first case, the third person, in contracting with the
agent, has relied exclusively upon his business standing and financial
ability; whereas in the second case, he has relied upon the business
standing and financial ability of the principal in whose name the agent
has contracted.

Now, in the case contemplated by article 247, when a person sues
the principal on a contract duly entered into by his agent, is the mere
denial by said principal of the existence of the agency sufficient to
defeat the action ? An affirmative answer, in our opinion, is not only
repugnant to the spirit of the law but is fraught with disastrous
consequences. The article in question (art. 247) provides that “the
contract and the actions arising therefrom shall be effective between
the principal and the persons or person who may have transacted
business with the agent; but the latter shall be liable to the persons
with whom he transacted business during the time he does not prove the
commission, if the principal should deny it.” Under this provision, as
we construe it, the mere fact that the agent becomes liable to the
third person upon denial of the agency by his principal and upon his
failure to prove the same, cannot and does not, of itself, wipe out the
liability of said principal to the person with whom the agent has
contracted in the name of the principal. The third person can prosecute
his action against the principal, and if he does not succeed because of
his failure or inability to prove the agency upon which the action is
based, he can turn to the agent himself; or, if he so elects (as he
undoubtedly would if he knew beforehand that he could not prove the
agency), he can sue the agent directly, without the necessity of suing
the principal first. In other words, the denial of the agency by the
principal will save him from liability to a third person on a contract
executed in his (principal’s) name by one who purports to be his agent,
only when such agency or commission is not ultimately proved. For,
if it be satisfactorily proved that he really authorized the supposed
agent to enter into such contract as the one on which the action is
based, and if that contract is valid and legal in every respect, we see
no reason why he (the principal) should not be held liable thereon to
the person with whom his agent has contracted. It follows that such
third person has a right of action against the principal
notwithstanding the latter’s denial of the agency; and he, having a
right of action, certainly has the right to adduce proof of the agency
or commission to make that right effective. The reason for making the
agent liable to the third person in case the supposed principal should
deny the agency is to protect both such third person and the supposed
principal from the imposition of the alleged agent who, without
commission or authority whatever, might contract in the name of said
principal but for his (agent’s) own personal benefit. In such a case
the third person would, of course, be unable to prove the agency or
commission, and his only recourse would be against the pseudo-agent.
But when, as in the case at bar, the third person has reliable,
trustworthy, and competent proof that the principal had really
commissioned or authorized the agent to transact the. business, or
enter into the contract in question, there is certainly no reason,
either in law or in equity, why he should not be allowed to present
such proof and hold the principal liable.

Aside from the foregoing, to hold otherwise, as the lower court
did, would, in our opinion, lead to disastrous consequences, which the
law sedulously guards against. For, if the mere denial of the agency by
the principal is sufficient to bar or defeat the action of the person
with whom the agent duly contracted or transacted business, it requires
no stretch of the imagination to see the door to fraud thrown wide
open. For, then, a person of well-known and sound financial standing
could purposely employ an indigent but otherwise capable
agent, publicly and legally authorizing him to transact enormous
business in his name and for his account, with the intention of denying
later the person or persons with whom said agent has transacted the
person or persons with whom said agent has transacted business. True,
such person has an action against the insolvent agent; but of what use
would it be to attempt to squeeze blood out of a turnip? True, also,
the insolvent agent has an action against the principal; but under what
power on earth can the third person compel him to bring an action
against his principal, especially if the latter should secretly and
fraudulently agree to split the spoil with him? If such were the effect
of article 247 of the Code of Commerce no one would ever transact
business with an agent, relying upon the credit of the principal. Thus,
not only said article but all the other articles of the Code relating
to agency would be rendered practically nugatory.

We are therefore of the opinion that a person who has transacted
business with an agent acting in the name of his principal, as
prescribed by article 247 of the Code of Commerce, has an action
against such principal notwithstanding the latter’s denial of the
agent’s commission or authority, and should be permitted to prove that
commission or authority of the agent to transact the business in
question. It follows that the lower court committed the error assigned
by the appellant herein.

Appellant in his brief asks that the decision of the lower court be
revoked and that the cause be remanded to the court below with
instructions to admit the proofs offered by the plaintiff with regard
to the existence of the commercial commission or agency in question.
Most of the proofs duly offered by the plaintiff but rejected by the
trial court are attached to the record before us. Such proofs consist
of (1) Exhibit A, above quoted; (2) the testimony of Anacleto Cainto,
hereinabove summarized; (3) Exhibit B, a telegram prepared by the
defendant Madriguera, addressed to the plaintiff, Nantes, telling the
latter that the amount in question would be paid to him in Paete,
Laguna; and (4) the testimony of Isabelo Devesa, appearing at pages 24
to 26 of the stenographic notes. These proofs, which should have been
admitted by the lower court and which we hereby admit, fully establish
the relation of principal and agent between Madriguera and Cainto.
There is no proof in the record on behalf of the defendant Madriguera,
which would tend to overcome the proofs presented by the plaintiff,
except the testimony of Madriguera himself, simply denying that the
defendant Cainto was his agent. In view whereof, we see no necessity
for ordering a new trial of this cause. The expense and the delay
incident to such new trial should, in justice to all the parties
concerned, be avoided.

Wherefore, the judgment of the lower court is hereby revoked, and
it is hereby ordered and decreed that the plaintiff Isidro Nantes have
and recover from the defendant Damian Madriguera the sum of P1,287.56,
with interest thereon at the legal rate from the 7th day of August,
1917, until paid, and the costs of both instances. The defendant
Anacleto Cainto is hereby absolved from all liability under the
complaint. So ordered.

Araullo, C. J., Street, Avancena, and Villamor, JJ., concur.