KEELER ELECTRIC V RODRIGUEZ

GR NO. 19001
NOV. 11, 1922
JHONS, J.

FACTS: Harry E. Keeler Electric Co., Inc. – a domestic corporation engaged in electric
business – entered into an agreement with A.C. Montelibano wherein for every
consummated sale, either per “Matthews” electric plant sold or per customer found, the
latter is to be paid a 10 percent commission. Motelibano then succeeds in convincing
Domingo Rodriguez to buy one of the “Matthews” electric plant which was considered
sold and was later on shipped from Manila to Iloilo and installed by the plaintiff.
Both the shipping and the installation was done by one of the plaintiff’s employee,
Juan Cenar. After which, Cenar delivered the statement of account to the defendant, and
the latter conferred to process the payment of the plant in Manila. However, without the
knowledge of the plaintiff, Rodriguez instead paid the purchase price to Montelibano. Yet
no part of the payment ever received by plaintiff.
The plaintiff filed an action against the defendant seeking for the payment of P 2,
513.55 for a “Matthews” electric plant sold and delivered on Aug 18, 1920 with interest
from October 20, 1920. The defendant denied all other material allegations and affirmed
that he paid the plaintiff the aforementioned value of the said plant on such date after it
was sold and delivered to him.
The lower court rendered a judgement in favor of the defendant.
ISSUES: 1.) Whether or not Montelibano was authorized to collect or receive payment
2.) Whether or not the payment to Montelibano discharges the defendant from debt
against the plaintiff

RULING: 1.) No, Montelibano had no authorization from the plaintiff to collect or receive
payment, nor did he have authority to provide receipt for money.
The Supreme Court held that Motelibano, in truth and in fact, was only allowed to
find purchasers for the “Matthews” electric plants and would only make a commission
after a consummated sale.
In addition, the receipt provided by the defendant as evidence failed to show or
prove that Montelibano was an agent of or was acting on behalf of the plaintiff. Instead, it
showed that Montelibano had no authority, real or apparent, to receive or receipt for the
money. Neither was there any evidence that the plaintiff ever delivered the statement to
Motelibano, or authorized to deliver it to him.
The Supreme Court cites art. 1162 of the Civil Code;
Payment must be made to the persons in whose favor the obligation is
constituted.
And art. 1727;
The principal shall be liable as to matters with respect to which the agent
has exceeded his authority only when he ratifies the same expressly or by
implication.
Then further elaborates certain fundamental principles whether an assumed
authority exists in such cases;
 (1) that the law indulges in no bare presumptions that an agency exists: it
must be proved or presumed from facts;
(2) that the agent cannot establish his own authority, either by his
representations or by assuming to exercise it;
(3) that an authority cannot be established by mere rumor or general
reputation;
(4) that even a general authority is not an unlimited one; and
(5) that every authority must find its ultimate source in some act or omission
of the principal.

2.) No, the payment to Montelibano does not discharge the defendant of his debt
to the plaintiff.

The Supreme Court quotes Mechem on Agency, to wit: “the person

dealing with the agent must also act with ordinary prudence and reasonable
diligence.” Therefore, the defendant should’ve secured proof of authority from
Montelibano before providing the payment, so that he would “be able to trace the
source of his reliance to some word or act of the principal himself if the latter is to
be held responsible.”
The higher court notes that “if the character assumed by the agent is of
such a suspicious or unreasonable nature, or if the authority which he seeks to
exercise is of such an unusual or improbable character, as would suffice to put an
ordinarily prudent man upon his guard, the party dealing with him may not shut
his eyes to real state of the case, but should either refuse to deal with the agent
at all, or should ascertain from the principal the true condition of affairs. “
In application to the aforementioned rules and principles, the Supreme
Court finds that the plaintiff never authorized Montelibano to receive or receipt for
money in its behalf, and that the defendant had no right to assume by any act or
deed of the plaintiff that Montelibano was authorized to receive the money, and
that the defendant made the payment at his own risk and on the sole
representations of Montelibano that he was authorized to receipt for the money.
The judgment of the lower court is reversed, and one will be entered here in favor
of the plaintiff and against the defendant for the sum of P2,513.55 with interest at
the legal rate from January 10, 1921, with costs in favor of the appellant.