CASE # 44 |A G E N C Y | D i g e s t b y : K e v i n H e r n a n d e z

Del Rosario v. La Badenia (1916)

Ponente: Carson, J.
Plaintiffs-Appellants: Teofila del Rosario de Costa and Bernardo Costa
Defendant-Appellee: La Badenia
Under what topic: VII. Responsibility for acts of substitutes
Synopsis: La Badenia began a selling campaign for its products. Celestino Aragon
was appointed the general agent of the company to some of the provinces in Luzon.
As general agent, he established a depot at Legaspi with Teofila del Rosario de
Costa, who was nominally in charge of the depot, and her husband Bernardino
Costa, who appeared to have been the actual manager. From the arrangement
between Aragon and the Spouses Costa, the business in Legaspi seemed to have
been in the charge of the spouses over which Aragon, as general agent, kept close
supervision. In the final settlement of accounts, Aragon acknowledged that the
Spouses had, in their favor, a balance of P1,795.25, However, La Badenia refused to
pay the balance, saying that they had been improperly allowed a credit which
represented unpaid accounts due the business in Legaspi for some items sold by it.
The lower court ruled that the Spouses Costa were not agents, considering that the
goods sold to the delinquent debtors, whose unpaid accounts form the basis of the
claim, had already been paid by the said spouses. The SC reversed, saying that the
spouses were, in fact, agents, and thus should be paid the balance owed to it by La
Badenia.
Doctrine: An agent may lawfully appoint a substitute if the principal has not
prohibited him from doing such. The principal shall be bound by the acts of the subagent if it is shown that the agent who appointed such subagent did not act in
excess of his authority in doing so.
Facts:
Spouses Del Rosario and Costa seek to recover from La Badenia (Tobacco Co.)
P1,795.25 for services rendered and expenses incurred in the sale of its
products in Legaspi, Albay.

Celestino Aragon is the general agent of La Badenia and is the one in charge
of their campaign in Southern Luzon. He established a central distributing
agency or depot in Legaspi at the residence of Del Rosario (using the lower
portion of their house as a storage facility).

Their relationship extended from Feb. 1, 1911- March 24, 1912. All goods sent
to Legaspi were charged by the head office (which was in Manila) against the
general agent Aragon. The books kept by Aragon showed that the products
were then charged against the plaintiffs. The business at Legaspi appears to
have been that of a distributing agency actively in charge of the plaintiffs
under the supervision of the general agent.

March 24, 1912: Aragon had a settlement with the plaintiffs and
acknowledged over his signature that his books (his record books of the
business) showed a balance in favor of the plaintiffs amounting to P1,795.25.

CASE # 44 |A G E N C Y | D i g e s t b y : K e v i n H e r n a n d e z

La Badenia refused to pay Del Rosario/Costa the amount stating that they
were merely merchants who purchased the goods at fixed wholesale prices
and sold them on their own account and were never employed as agents.

Spouses countered by stating that they were in fact agents who received
commissions on the sales and that they were authorized to extend a
reasonable credit under the supervision of the general agent Aragon.

Lower Court: Ruling was that the specific goods sold to delinquent debtors
whose unpaid accounts form basis of this litigation had already been paid for
by the plaintiffs and that this was conclusive evidence that the plaintiffs were
not acting as agents and that in effect the purpose of the suit was to recover
money already paid for the goods purchased and sold by the plaintiffs.

Issue/s:
WON Teofila and Bernardo are agents of La Badenia and are entitled to the balance
of P1,795.25. YES.
Held-Ratio:

The SC cannot agree with the findings of the lower court.

o

First, it is undisputed that Aragon was the duly appointed general

agent of the area. It is not clear what the precise terms of the
arrangement made by Aragon with the plaintiffs were. The record does
not show what limitations, if any, were placed upon his powers to act
for the corporation. Aragons powers as a selling agent appear to have
been very broad, and there is no evidence in the record to indicate that
he acted beyond his powers in conducting the business at Legaspi as
he did. There can be no doubt that plaintiffs had been authorized by
him to extend credit on behalf of the agency.

Secondly, The head office in Manila was fully informed of plaintiffs

relation with the general agent in extending the sales of its products
and they did not seem to make any distinction between the business
done by Aragon or the plaintiffs - evidenced by 2 letters (presented in
evidence) from La Badenia addressed to the plaintiffs clearly
recognizing them as agents of the company (Letter B states: By the
steamer Cebu we are sending, according to the attached invoice, 3
boxes of small cigars for the agency in your charge.). The active
management and participation of the plaintiffs in the conduct of the
business at Legaspi were fully recognized in these letters wruttenn by
the assistant manager of La Badenia.

Thirdly, looking at the books of Aragon shows that the plaintiffs were
given credit on various items, such as advertising expenses. Aragon
did not consider the plaintiffs as independent merchants operating on
their own account, but rather as agents cooperating with him and
working under his supervision.

CASE # 44 |A G E N C Y | D i g e s t b y : K e v i n H e r n a n d e z

In view of the fact that plaintiffs are only seeking to enforce the payment of a
balance admitted by the general agent of the defendant corporation to be
rightly due them, SC fails to see how it can be reasonably urged that plaintiffs
are attempting to saddle these unpaid claims on the defendant corporation.

Dispositive:
Judgment of the lower court reversed.