Case Summary (G.R. No. 25950)
Factual Background
E. Awad & Co. delivered merchandise of the invoice value of P11,140 to Chua Lioc, a merchant doing business as Hang Chuan Co., to be sold on commission. On September 8, 1924, Chua Lioc represented himself as owner and sold the merchandise to FILMA MERCANTILE CO., INC. for P12,155.60. The defendant agreed to pay debts of the seller: P3,480 owed to the Philippine Manufacturing Co. and P2,017.98 owed to the defendant itself, deductions totaling P5,497.98, leaving a balance of P6,657.52 payable to Chua Lioc on or before October 9, 1924. The goods were delivered to the defendant on September 9, 1924, and the defendant immediately offered them for sale.
Events Following the Sale
Three days after delivery, D. J. Awad, the plaintiff's representative in the Philippine Islands, discovered that the goods were being offered for sale by the defendant, obtained authority from Chua Lioc to collect P11,707 from the defendant, and informed the defendant's treasurer. On September 15, 1924, D. J. Awad wrote the defendant asserting that the merchandise belonged to E. Awad & Co. and that the purchase price should be paid to them. The defendant replied on September 18, 1924, stating that it had purchased the blankets and shirts from Chua Lioc in the ordinary course of business, that it owed Chua Lioc P6,657.52 payable October 9, 1924, and that it could not comply with the plaintiff's request and would pay the balance to Chua Lioc unless the plaintiff secured payment through judicial proceedings.
Ancillary Actions and Attachments
On September 18, 1924, the Philippine Trust Company instituted civil case No. 26934 against Chua Lioc for P1,036.36 and obtained a writ of attachment under which the balance due Chua Lioc from the defendant was garnished. On October 7, 1924, E. Awad & Co. instituted civil case No. 27016 against Chua Lioc for P11,140 and also obtained a writ of attachment, under which notice of garnishment was served upon the defendant. The present action was filed on November 26, 1924, by E. Awad & Co. seeking payment of P11,140.
Trial Court Proceedings and Ruling
In its answer the defendant pleaded that it had purchased the merchandise in good faith, without knowledge of the vendor's defective title or the conditions under which Chua Lioc acquired the goods, and that it therefore acquired title to the merchandise. The defendant further averred that the balance of P6,657.52 in its hands had been attached in the two prior actions and that it held the sum subject to the orders of the courts in those cases, but that it was ready to pay the money when the proper tribunal determined ownership. The trial court dismissed the plaintiff's complaint without costs on the ground that the plaintiff was only entitled to recover P6,657.52 and that the defendant had the right to retain that sum subject to the orders of the courts in cases Nos. 26134 and 27016. The plaintiff appealed.
The Parties' Contentions on Appeal
The appellant argued that circumstances showed that the defendant was aware of the consignment character of the transaction between E. Awad & Co. and Chua Lioc and therefore did not purchase in good faith, which would render the defendant liable to the plaintiff for the full invoice value. The appellee maintained that it purchased the goods in the ordinary course of business without notice of any defect in Chua Lioc's title and that Article 246 of the Code of Commerce entitled the purchaser to retain the funds pending disposition by the courts in the attachment actions.
Issue Presented
Whether under the circumstances the defendant acquired title by purchasing from an agent who transacted in his own name, thereby cutting off any right of action by E. Awad & Co. against the defendant for the invoice value, and whether the defendant lawfully retained the balance of P6,657.52 subject to attachment.
Ruling of the Court
The Court affirmed the judgment of the trial court. It held that the law governing sales by agents transacting in their own name is embodied in Article 246 of the Code of Commerce, which provides that when an agent transacts business in his own name it is unnecessary for him to state who is the principal, that he shall be directly liable as if the business were for his own account to the persons with whom he transacts, and that those persons shall have no right of action against the principal. The Court found the appellant's facts insufficient to overcome the presumption of the defendant's good faith, and therefore affirmed the dismissal with costs ag
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Case Syllabus (G.R. No. 25950)
Parties and Procedural Posture
- E. Awad & Co. was the plaintiff and appellant in the action for recovery of the invoice value of merchandise.
- Filma Mercantile Co., Inc. was the defendant and appellee who purchased the merchandise from an agent.
- The plaintiff appealed from a judgment of the court below that dismissed his case without costs.
- The appeal presented the question whether the defendant acquired title in good faith from an agent who acted in his own name.
Key Factual Allegations
- The plaintiff delivered merchandise of the invoice value of P11,140 to Chua Lioc, a merchant doing business as Hang Chuan Co., for sale on commission.
- On September 8, 1924, Chua Lioc represented himself as owner and sold the goods to Filma Mercantile Co., Inc. for P12,155.60.
- Chua Lioc owed the Philippine Manufacturing Co. P3,480 and owed the defendant P2,017.98, which sums were deducted from the purchase price.
- The deductions totaled P5,497.98, leaving a balance of P6,657.52 payable to Chua Lioc on October 9, 1924.
- The merchandise was delivered to the defendant on September 9, 1924, and the defendant immediately offered it for sale.
- D. J. Awad, the plaintiff's representative in the Philippine Islands, on discovering the sale, obtained authorization from Chua Lioc to collect P11,707 from the defendant and gave notice to the defendant's treasurer.
- On September 15, 1924, the plaintiff wrote the defendant claiming ownership and demanding payment, and the defendant replied on September 18, 1924, asserting it bought in the ordinary course of business and that a balance of P6,657.52 was payable to Chua Lioc on October 9, 1924.
Garnishment and Parallel Actions
- On September 18, 1924, the Philippine Trust Company instituted civil case No. 26934 against Chua Lioc and obtained a writ of attachment that garnished the balance due to Chua Lioc from the defendant.
- On October 7, 1924, E. Awad & Co. instituted civil case No. 27016 against Chua Lioc to recover P11,140 and obtained a writ of attachment under which garnishment notice was served upon the defendant.
- The present complaint was filed on November 26, 1924, and sought recovery of P11,140 from the defendant despite the prior actions against Chua Lioc.
Defendant's Plea and Trial Position
- The defendant answered that it purchased the merchandise in good faith without knowledge of the principal or the agent's condition and thereby acquired title.
- The defendant asserted that the balance of P6,657.52 had been attached in the two actions and that it held the funds subject to the orders of the courts in those prior cases.
- The defendant stated willingness and ability to pay the money when the court determined the lawful claimant.
Statutory Framework
- The Court relied on Article 246 of the Code of Commerce as the governing statutory provision for transactions by agents in their own names.
- Article 246 provides that when an agent transacts business in his own name it is not necessary for him to state the principal and that he shall be directly liable as if the business were his own, with the persons contracting having no right of action against the principal.