G.R. No. L-5676
LIM TIU, LIM SUNTIAN and LIM KAENG JO, operating under the name of “Lim Juco y Compañia,” plaintiffs-appellants, vs. RUIZ Y REMENTERIA, a concern operating under the name of “La Isla de Cuba,” defendant-appellee.
March 2, 1910

FACTS:
On July 6, 1908, Lim Tiu, Lim Suntian and Lim Kaeng Jo, operating as “Lim Juco y Compañia” (plaintiffs-appellants), filed an action against Ruiz y Rementeria, operating as “La Isla de Cuba” (defendant-appellee), in the Court of First Instance of Manila. The plaintiffs alleged that they sold merchandise worth P1,043.57 to the defendants on various dates in May and June 1908, which remained unpaid.

The defendants filed a general denial. After hearing the evidence, the lower court found that the defendants had purchased the merchandise from Domingo Tim Bun Liu and had already paid Domingo Tim Bun Liu for it. Consequently, the lower court rendered judgment in favor of the defendants and dismissed the complaint.

The plaintiffs appealed, arguing that the lower court erred in finding that the defendants purchased from and paid Domingo Tim Bun Liu, that the plaintiffs never notified defendants of Domingo’s agency, and that the defendants never had notice of Domingo’s relation with the plaintiffs as an agent. They also questioned if payment to Domingo, in something other than cash, was binding on the plaintiffs.

ISSUE:
Can a principal (plaintiffs) demand payment from a third party (defendants) for merchandise sold by an agent (Domingo Tim Bun Liu) who acted in his own name, when the third party believed they were dealing directly with the agent and had already paid the agent in full, even if the payment was in kind?

RULING:
The Supreme Court AFFIRMED the decision of the lower court.

The Court found that a fair preponderance of the evidence showed the defendants, in their dealings with Domingo Tim Bun Liu, believed that they were dealing with him and not with the plaintiffs. There was no proof that Domingo ever notified the defendants that he was acting as the agent of the plaintiffs, nor did the plaintiffs ever notify the defendants that Domingo Tim Bun Liu was acting as their agent in selling the merchandise. The defendants had paid Domingo Tim Bun Liu in full for all the merchandise they purchased from him.

Citing Article 1717 of the Civil Code and Article 246 of the Commercial Code, the Court ruled that when an agent acts in his own name, the principal shall have no action against the persons with whom the agent has contracted, nor the said persons against the principal. Since Domingo Tim Bun Liu acted in his own name and the defendants fully believed they were dealing with him, without any knowledge of his agency, and having paid him in full for the merchandise, they are not liable to the plaintiffs. This principle applies regardless of whether the payment was made in cash or in other merchandise as part of their ongoing exchange.