Angeles vs. PNR (Garcia, 2006) Facts: PNR accepted Gaudencios Romualdez ofer to buy on an AS IS, WHERE IS basis PNRs scrap/unserviceable rails located in Lubao, Pampanga for a total amount of P96,000. Romualdez wrote a letter explicitly authorizing Lizette Angeles (deceased; was substituted by the husband) as Romualdez lawful representative in the withdrawal of the scrap materials. The letter also contain that Lizette was given the Original Copy of the Award for the above said purpose. Lizette informed the PNR that the scrap materials was not ready for hauling and requested that the PNR transfer the location. The PNR granted this request and allowed the withdrawal of scrap materials in Tarlac. Later on, however, it suspended the withdrawal for alleged documentary discrepancies and reports of pilferage. The spouses demanded the return of the money they paid but PNR refused on the ground that some scrap materials have already been withdrawn (worth P114,781.80). The spouses fled a suit for specifc performance against PNR. The trial court ruled that the spouses are not real parties in interest. The CA afrmed the decision of the trial court. Issue: WON Lizette was an assignee or a mere agent of Romualdez. (WON the spouses are real party in interest.) AGENT Ratio: Where agency exists, the 3 rd partys liability on a contract is to the principal and not to the agent. An agent, by himself, is not a real party in interest with regard to the contract. The situation is diferent is the agent is the assignee. In such a case the agent may, in his own behalf, sue on a contract made for his principal as an assignee of the contract. The rule requiring every action to be prosecuted in the name of the real party in interest recognizes the assignment of rights of action and also recognizes that when one has a rights assigned to him, he is then a real party in interest and may maintain an action upon such claim or right. The agent may also be called an attorney, proxy, delegate, or representative. The scrutiny of the letter would reveal that Lizette was an agent and not an assignee. Power of Attorney in the absence of statute, no form or method of execution is required. It may be in any form clearly showing on its face the agents authority. It is an instrument in writing by awhich a person, as principal, appoints another as his agent and confers upon him the authority to perform certain special acts on behalf of the principal. The written authorization itself is the power of attorney. Its primary purpose is not to defne the authority of the agent but to evidence the authority of the agent to third parties. Except as may be required by statute, a power of attorney is valid even if it is not notarized. - it is strictly construed and pursued. The agent may not go beyond nor deviate from the power of attorney. JIMENEZ VS. RABOT (STREET, 1918) Facts: Gregorio Jimenez was an assignee of parcels of land located in Damayat Tancaran, Alaminos, Pangasinan. He confded the property to the care of his sister, Nicolasa Jimenez. Sometime in February 1911, he wrote to his sister requesting her to sell one of his parcels of land because he was pressed for money. She sold the parcel of land in contention to Pedro Rabot for P500 but she did not convey the money to her brother. She did not show her authorization to Rabot and she made the sale under her own name. Gerogorio instituted an action against Nicolaca. Rabot, meanwhile, took possession of the property. Issue: WON Nicolasas actuations can bind his brother to the contract of sale. YES Ratio: The Civil Code and the Code of Civil Procedure requires that the authority to alienate land shall be contained in an express mandate and that the authority of the agent must be in writing and subscribed by the party to be charged. There is a substantial compliance with the requirement. The purpose of giving a power of attorney (POA) is to substitute the mind and hand of the agent for the mind and hand of the principal. As a matter of formality, a POA to convey rela property ought to appear in a public instrument. But in as much as it is established doctrine that a private instrument is competent to create, transmit, modify, or extinguish a right in real property, it follows that a POA to convey such property, eventhough in the form of a private document will operate with efect. CITY LITE REALTY VS. CA Written authority to sell piece of land (1874) Facts: FP Holdings (FP) was the owner of Violago property and ofered the said property for sale to the general public through circulation of sales brochure. Respondent Roy (of MetroDrug / MD) sent a sales brochure, location plan, and copy of the TCT to Atty. Mamaril, a licensed real estate broker. The latter then passed the documents to ofcials of CityLite (CL). (Flow: FP >> Roy/MD >> Mamaril >> CL) CL conveyed interest to purchasing of the property, but subsequently agreed to buy the whole with the price stipulated. In a meeting, Roy agreed to sell the property provided that CL submit its acceptance in writing. However, FP refused to execute the deed of sale in favor of CL. The latter caused annotation of adverse claim on the title, then demanded Roy/MD to comply with its commitment. FP tried to amicably settle with CL but failed. CL caused the annotation of notice of lis pendens. RTC QC ruled that CLs adverse claim had factual basis. CL then instituted an action for specifc performance and damages. After 2 nd
annotation, however, the property was transferred to Viewmaster Construction (VM). Court still rendered decision in favor of CL. CA reversed the TC. Issue: WON there was a perfected contract of sale. NO Reasoning: A1874 CC provides that When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale is void. Petitioner anchors authority of Roy/MD on: a. Testimonies of CLs 3 witnesses and admission of Roy/MD b. Sales brochure stating Roy as contract person c. Guard posted at the property saying MD was authorized agent d. Common knowledge that MD and Roy was authorized agent of FP CC provision is clear. The absence of written authority to sell can be determined from the memorandum issued by FP requesting MDs assistance in fnding buyers for the property. But the fnal evaluation, appraisal, and acceptance of the transaction could only be made by FP. Roy / MD was only a contact person with no authority to conclude a sale of the property. Decision afrmed. COSMIC LUMBER CORP VS. CA Eject squatters, not to sell property Facts: Paz Villamil-Estrada (Paz) was given an SPA by CLC as attorney- in-fact to initiate, institute, and fle any court action for ejectment of third persons and/or squattersto appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation By virtue of this, she fled an action for ejectment against private respondent Isidro Perez and recover possession of a portion of the latters lot. The parties then entered in a Compromise Agreement, in efect conveying a portion of CLCs land to Perez for compensation. The agreement was approved by TC. It was only after 5years and service of summons for revival of judgment that the CLC learned of such agreement. CLC thus sought annulment of the decision of TC. CA dismissed because not one of the grounds for annulment was present. Petitioner argues that the decision of TC was void because the compromise agreement upon which it is based is void, that Paz did not possess the authority to sell nor had a Board Resolution authorizing sale of the property. Issue: WON the sale was void. YES Reasoning: The authority granted to Paz was explicit and exclusionary. Nowhere in the authorization was Paz expressly or impliedly granted any power to sell the subject property nor a portion thereof. Furthermore, the price that respondent bought the property is for a song (80/sqm, when the prevailing market price was 250/sqm). Sale of a piece of land by agent must be in writing otherwise the sale is void. It must give him specifc authority. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. For the principal to confer the right upon an agent to sell real estate, a power of attorney must be so expressed in clear and unmistakable language. The conduct of Paz furthermore constitutes extrinsic or collateral fraud (prevents a party from hearing a trial, or real contest, or presenting his case in court; any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case whereby the defeated party has been prevented from exhibiting fully his side of the case) thus the agreement can be annulled or struck down. Petitioner was deceived and betrayed by its attorney-in-fact. Paz deliberately concealed the compromise agreement. Where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in the controversy, it would be contrary to common sense to presume to presume or expect that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetration of fraued upon his principal for his own exclusive beneft, he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency. Indeed, the basic tenets of agency rest on the highest considerations of justice, equity, and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and act in secret hostility to the interests of his principal. SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC. VS. CA (PANGANIBAN, 1998) (The corporate treasurer, who (together with the husband) owned 99.866 of the companys stocks) sold a parcel of land owned by the corporation without authorization of the board.) Ratio: A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of the corporation is not the property of its stockholders and it could not be validly sold without prior authorization of the board of directors. (Sec. 23 of BP 68 1 [Corporation Code of the Philippines]). It is not binding upon Motorich because it never authorized or ratifed such sale. Powers of a corporation ofcer/agent: powers that were intentionally conferred, powers in the usual course of business, powers which are incidental to the usual course of business/powers implied therefrom. Powers added by custom and usage as usually pertaining to an ofcer/agent. Apparent powers as a corporation has caused persons dealing with the ofcer/agent to believe that it has conferred. (Thus, selling is not a part of a treasurers function/powers) The general rule is that actions of corporate ofcers are binding upon the corporation unless the ofcers actions exceeded his authority. The piercing of the corporate veil could not apply because there is no showing that the corporate veil is being used to perpetuate fraud. AF REALTY AND DEVELOPMENT INC. ET AL VS. DIESELMAN FRIEGHT SERVICES (SANDOVAL-GUTTIEREZ, 2002) (Cruz, Jr, a member of the Dieselmans Board of Directors, issued authorization to sell real estate to Broker Polintan. Broker authorized Noble to sell the same lot. Noble sold the lot to AF Realty. Dieselman accepted AF Realtys earnest money worth P300K. Dieselman suddenly terminated the ofer and sold the land to Midas Devt Corp. It is alleging that Polintan has no authority as agent because the Boards did not issue a written authorization to Polintan) Ratio: Sec 23 of the Corporation Code expressly provides that the corporation powers shall be exercised by the board of directors. Polintan has no authority since her authorization came from Cruz, Jr. and not the Board. Also, Art. 1874 provides that when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. 1 Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold ofce for one year and until their successors are elected and qualifed Art 1409 par 7 provides that contracts are inexistent and void ab initio when the laws expressly declared them to be void. These contracts could not be ratifed. Thus, even the acceptance of the beneft of the one posing as an agent will not be able to ratify the sale. Neither can the right to set up the defense of illegality waived. Nemo dat quod non habet. DELOS REYES VS. CA (GONZAGA-REYES, 1999) (A verbal agreement that the petitioners entered into with private respondent Renato Gabriel involving a sale of land registered in the name of Renatos deceased father.) Ratio: Legal consent presupposed capacity. Renato has no capacity to convey the property. He was neither the owner nor an agent of the registered owner. Renatos father already donated the property to another person before he died. Thus, Renato never acquired ownership of the property. The appellees also failed to prove which capacity was Renato acting as when he convey the land to them. Their 3 theories: 1 st : Renato acted as agent; 2 nd : owner; 3 rd : heir; could not co- exist with one another. Renato could not all be an agent, an owner and an heir all at the same time. Because the appellees were not able to establish what actually convinced them to buy the land from Renato, the sale could not be upheld because it cannot be determined with certainty in what capacity Renato acted. **The court ordered restoration of the P90,000 paid by the petitioner. III. OBLIGATION TO DETERMINE EXISTENCE OF AGENCY KEELER ELECTRIC CO. VS. RODRIGUEZ Matthews electric plant, buyer did not deliver the payment after the inspection and installation of a certain Cenar. Facts: Keeler sells Matthews electric plant. AC Montelibano approached Keeler at Manila ofce, claiming that he was from Iloilo and that he could fnd purchases for the Matthews plant. Keeler promised a 10% commission for every sale consummated. Montelibano convinced Rodriguez to buy, and the plant was shipped from Manila to Iloilo and later installed in the buyers premises. Without Keelers knowledge, Rodriquez paid the purchase price to Montelibano (P2,513.55). Keeler fled an action for specifc performance in CFI Manila. Lower court ruled for Rodriguez, stating that the payment to Montelibano discharged the debt of the defendant. According to Keller, at the time of the shipment, the company sent Juan Cenar, one of its employees, with the shipment for the purposes of installing the plant on the defendants premises and to give the statement of account to Rodrizuez totaling P2,563.95. According to Cenar, Rodriquez kept the statement of account while the former made no eforts to collect from the latter because Rodriquez said that he would pay for the plant in Manila. Keeler alleges that Montelibano has no authority from the company to receive or receipt for money, and that his services were confned to the fnding of purchases for the Matthews plant. Rodriquez however alleges that it was Montelibano himself sold and delivered the plant to him, and was the one who ordered the installation of the electric plant. Rodriguez presented a statement and receipt which Montelibano signed. Issue: WON Montelibano had authority to accept payment. NO Held: 1. There is nothing on the receipt which showed that Montelibano was the agent of the plaintif. It was his own personal receipt and his signature. 2. Payments for fare negated the allegation of defendant that Montelibano was the one who installed the electric plant. (Cenar was the one who travelled) 3. After Cenars return to Manila, Keller wrote a letter to Rodriguez requesting payment, and the latter responded with a telegram (paid to Montelibano 3wks Keeler did not present bill). The telegram was in direct confict with the receipt Montelibano issued, which was an itemized statement of account. As mentioned, there was no evidence that Montelibano was authorized to receive payment for Keeler. A1162 CC: Payment must be made to the person in whose favor the obligation is constituted, or to another authorized to receive it in his name. A1727: The principal shall be liable as to matters with respect to which the agent has exceeded his authority only when he ratifes the same expressly or by implication. Mechem on Agency Sec.743 Fundamental principles: 1. The law indulges no bare presumptions that an agency exists. It must be proved or presumed from facts 2. The agent cannot establish his own authority either by his representations or by assuming to exercise it 3. An authority cannot be established by mere rumor or general reputation 4. Even general authority is not an unlimited one 5. Every authority must fnd its ultimate source in some act or omission of the principal Ratio: Persons dealing with an assumed agency, whether the it be a general or special one, are bound at their peril, if they would hold the principal to ascertain not only the fact of the agency but the nature and extent of the authority and in case either is controverted, the burden of proof is upon them to establish it. Against the agent, the third person has the obligation to determine existence and scope of agency. It is moreover in any case entirely within the power of the person dealing with the agent to satisfy himself that the agent has the authority he assumed to exercise, or to decline to enter into relations with him. The person dealing with the agent must also act with ordinary prudence and reasonable diligence. If, he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. Judgment reversed. YU ENG CHO VS. PAN AMERICAN Tokyo-San Francisco fight was not confrmed yet the plaintifs pushed through with the fight. Business agreement did not push through. Sought for damages against PanAm, TWSI, and independent travel agent who represented herself as agent of TWSI. Facts: Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. He travels from time to time to Malaysia, Taipei, and Hongkong. On July 10, 1976 he bought plane tickets to Fairfeld, New Jersey from defendant Claudia Tagunicar who represented herseld to be an agent of TWSI. The purpose of the trip was to buy 2 lines of infrared heating system processing textured plastic article. Only the Manila-Hongkong-Tokyo passage were conrfrmed. Tokyo-San Francisco was on RQ status, meaning on request. After a few days, plaintifs returned to follow-up and Tagunicar told them that the fight was confrmed all the way. A few days before the fight, plaintifs son called Pan Am ofce to verify the status of the fight, and a personnel confrmed the bookings. They left for HK, then to Tokyo. Upon arrival in Tokyo, they called Pan Am for reconfrmation of fght to SF. The ofcer said that their names were not in the manifest. They cannot stay in Japan for more than 72hrs and NW Airlines was on strike, thus they could not leave for US. They were forced to return to Taipei, then back to Manila. Japan Airlines refunded their fare, but the business deal with Radiant Heat Enterprises was cancelled. Yung Eng Cho expected to realize a proft of 300k-400k. A complaint for damages was fled against Pan Am, TWSI and Canilao, and Tagunicar for the costs of tickets and hotel accommodations. RTC held the defendants solidarily liable. Appellate court modifed the amount of damages and held Tagunicar solely liable, because the latter is an independent travel solicitor and not a duly authorized agent or representative of either Pan Am or TWSI. Issue: WON Tagunicar was an agent of Pan Am or TWSI. NO. Held: (Agency defned, elements, rule in Keeler) II. Tagunicar issued an afdavit to the efect that she is indeed an agent of TWSI, but subsequently she made a court statement that she was independent travel agent. Court gave more weight to the testimony in open court. III. It was shown that plaintif only sued Pan Am to recover money since they did not expect the agent to have something to pay them (according to the Amended Complaint). this Court will not tolerate an abuse of the judicial process by passengers in order to pry on international airlines for damage awards The meritless suit is more glaring when the plaintif did not give a demand letter to Pan Am, TWSI and Canilao. IV. The ticket was not confrmed for good reasons. 1. Persistent calls by Tagunicar to Canilao and Pan Am are indications that petitioners knew their tickets have not been confrmed. Why would one continually try to have ones ticket confrmed if it already had? 2. Tagunicar was not authorized to attach validation stickers (for exclusive use of airline company) 3. Names of petitioners did not appear in passenger manifest 4. Status of Tokyo-SF segment still on request 5. With this Tagunicar stated, Bahala na. Thus petitioners knew that they might be bumped of at Tokyo. Aware of this risk, they still proceeded with the fight. Ratio: Against the agent, the third person has the obligation to determine the existence and scope of agency. He who deals with an agent is bound at his peril, having the burden to ascertain not only the fact of agency but also its nature and the extent of authority granted. Judgment afrmed. IV. AGENCY DISTINGUISHED FROM OTHER CONTRACTS / RELATIONSHIPS SEVILLA VS. CA SHELL VS. FIREMAENS INSURANCE DELA CRUZ V. NORTHERN THEATRICAL ENTERPRISES, INC., ET AL. Keywords: guard sues employer for recovery of expenses incurred in his homicide cases FACTS: Northern Theatrical operated a movie house with Dela Cruz as special guard whose duties were to guard the main entrance of the cine, to maintain the peace and order and to report the commission of disorders within the premises, and as such, he carried a revolver. One afternoon, one Benjamin Martin wanted to crash the gate of the movie house, got infuriated when Dela Cruz denied him entry without a ticket, attacked the Dela Cruz with a bolo. Dela Cruz was cornered and shot Martin, killing the latter. Dela Cruz was charged with homicide, which upon the prosecutors re-investigation was dismissed. Again charged for homicide with the same court, but was fnally acquitted. Dela Cruz demanded from Northern Theatrical reimbursement of his expenses, but was denied. Brought action to recover not only the amounts he had paid his lawyers but also moral damages sufered, due to his worry, his neglect of his interests and his family and in the supervision of the cultivation of his land, P15k. CFI: dismissed. Dela Cruz appealed to SC. ISSUES: W/N an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring expenses, caused by a third party not in the employ of his employer, may recover damages from his employer. HELD: NO. Plaintif wasnt hired to represent defendant in its dealings with third persons; he was an employee hired to perform specifc duty. No law nor jurisprudence directly applicable then; all we have found refer to cases of physical injuries, resulting in loss of body part or any of the senses, or permanent disability, or death, sufered in the line of duty of an employee, and are governed by Employers Liability Act and Workmens Compensation Act. It is to the interest of the employer to render legal assistance to its employee; while it may be regarded as a moral obligation, its not a legal obligation. Another point of view is that the damage sufered was caused rather by improper fling of the criminal charge, possibly at the instance of Martins heirs and by the State through the Fiscal. If despite his innocence, he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of said heirs and the State. Another view is that the shooting was not the proximate cause of the damages sufered but may be regarded as only as a remote cause, because from the shooting to the damages sufered there wasnt that natural and continuous sequence required to fx civil responsibility. NIELSON & CO. V. LEPANTO CONSOLIDATED Keywords: mining operations suspended during the Japanese occupation and resumed a little later after the war, mgt contract unilaterally terminated by Lepanto FACTS: Nielson and Lepanto executed a management contract, wherein Neilson agreed, for 5 yrs, mainly to develop and operate Lepantos mine and mill, and other undertakings necessary or incidental to the principal undertaking, including acting as purchasing agent of supplies and enter into contracts regarding sale of mineral, but only with prior approval of Lepanto. War in Feb. 42, upon order of the US Army, Lepantos installations at Lepantos mines were destroyed to prevent their utilization by the enemy. Neilson could not undertake the work. When the mines were liberated in Aug. 45, the condition of the installations was not the same, the work still could not be undertaken under the same favorable pre- war circumstances, and the installations were reconstructed and operations resumed only on June 48. Lepanto terminated the contract in 45 when it took over and assumed exclusive management of the work, alleging said contract to be one of agency, hence, can be terminated at will by the principal, and Neilson, as the alleged agent, isnt entitled to damages, a theory which was raised for the frst time only on this motion for reconsideration to the SC. ISSUES: 1. W/N SC erred in overlooking A1733 of OCC by which agency was efectively revoked or terminated 2. W/N court erred in holding that Par. II of the contract suspending the period contract 3. W/N Neilsons action for relief against Lepanto has prescribed 4. Assuming Neilson entitled to any relief, W/N court erred in ordering Lepanto to deliver shares of stock with fruits 5. W/N court erred in awarding to Neilson the shares of stock and/or cash HELD: 1. Agency Lease of services One of the parties binds himself to render some service to the other party Based on representation Based on employment Agent is destined to execute juridical acts (creation, modifcation, or extinction of relations with third parties) Contemplates only material (non-juridical) acts NO. A1868, NCC: By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The management contract is a lease of service and not a contract of agency. Neilsons principal undertaking or operating the mine and mill wasnt executing juridical acts for Lepanto, to create, modify, or extinguish business relations between Lepanto and third persons. Neilson was not an agent as interpreted in the law of agency, but an only an agent only in the sense of performing material acts for an employer, for compensation. Neilsons incidental capacity as purchasing agent of supplies and enter into contracts regarding the sale of mineral, but Neilson couldnt make any purchase or sell minerals without prior approval of Lepanto; hence, these are not considered juridical acts either, but just acting only as an intermediary. Lepanto could not terminate the said contract at will because Paragraph XI of the contract provides that it may only cancel the contract upon 90 days written notice, in the event that Neilson for any reason except acts of God, cease mining operation and development in good faith and in accordance with approved mining practice. Such a factual condition has not been proven by Lepanto as to allow any cancellation by Lepanto. The phrase both parties recognize that this agreement possible only because of the good faith and confdence of each company in Par. XI doesnt qualify the relation to be principal-agent based on trust and confdence, such that it may be terminated by the principal any time that he loses trust and confdence in the agent. Rather, the basis of Neilsons employment is the know-how and technical service that Neilson ofered and Lepanto accepted Lepantos, stated in latters annual report in 86. Lepanto thereby violated the contract by unilaterally terminating the contract, which was renewed so that it still had 2 yrs to go. Indeed, if this were agency, Par. XI shouldntve been inserted because: A1733, NCC: agency is essentially revocable at will of the principal. But Par. XI inserted to provide for the cause of revocation. 2. NO. The management contract was suspended because of the war. The suspension would last not only while the event constituting the force majeure (war) continued to occur but also for as long as its adverse efects had not been eliminated. The period of the contract was extended for a period equivalent to the time when Neilson was unable to perform the work of mining and milling because of the adverse efects of the war. The nature of the contract for management and operation of mines justifes the interpretation of its force majeure clause, that a period equal to the period of suspension due to force majeure should be added to the original term of the contract by way of an extension 3. NO. The claims of Neilson are based on a written document, and as such, the cause of action prescribes in 10 yrs. Inasmuch as there are diferent claims which accrued on diferent dates the prescriptive periods for all the claims are not the same. The right of action of Neilson against Lepanto had not prescribed because of the arbitration clause in the management contract. Neilson had asked for arbitration, and an arbitration committee had been constituted, which, however, failed to bring about any settlement. Lepanto later advised Neilson they werent entertaining any of the latters claims; hence, Neilson fled a complaint afterwards. 4. NO. The original agreement regarding the compensation of Neilson was modifed. Neilson should be awarded the management fees during the whole period of extension, plus 10% of dividends declared during extension, 10% of the depletion reserve set up, and 10% of expended amount out of surplus earnings on capital account. 5. YES. Sec. 16 of the Corporation Law: stock dividends cant be issued to a person not a stockholder in payment of the services rendered. Neilson cant be paid in shares of stock which form part of the stock dividends of Lepanto for services rendered under the contract. The understanding between Lep and Neils was simply to make the cash value of the stock dividends declared to determine the amount of compensation that should be paid to Neilson. QUIROGA V. PARSONS HARDWARE CO. August 23, 1918 Facts A contract was entered into by and between Andres Quiroga (plaintif) and J. Parsons (defendant) for the exclusive sale of Quiroga beds in the Visayan Islands. Plaintif alleges that defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. However, none of the obligations, except for that part of the defendant to order the beds by the dozen and no other manner, are expressly set forth in the contract. But the plaintif alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. Issue Whether Parsons, by reason of the contract, was a purchaser or an agent of Quiroga for the sale of his beds Held The contract by and between the plaintif and the defendant was one of purchase and sale. Ratio In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintif was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. There was the obligation on the part of the plaintif to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. Not a single one of the clauses in the contract necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintifs beds in the Visayan Islands. The testimony of the person who drafted this contract, to the efect that his purpose was to be an agent for the beds and to collect a commission on the sales, is of no importance to prove that the contract was one of agency, inasmuch as the agreements contained in the contract constitute, according to law, covenants of purchase and sale, and not of commercial agency. It must be understood that a contract is what the law defnes it to be, and not what it is called by the contracting parties. GONZALO PUYAT & SONS VS. ARCO AMUSEMENT COMPANY June 20, 1941 Keywords: discounted price of sound reproducing equipment not disclosed; Arco Amusement seeks reimbursement. Facts: - In 1929, Arco Amusement Company (formerly known as Teatro Arco) was engaged in the business of operating cinematographs. - Around 1930, Arco Amusement approached Gonzalo Puyat & Sons, Inc., the exclusive agents in the Phils of the Starr Piano Company (of Richmond, Indiana, USA) to negotiate with them their intent to buy sound reproducing equipment from Starr Piano through Gonzalo Puyat & Sons. - After some negotiations, the parties agreed that Gonzalo Puyat & Sons would order the equipment from Starr Piano and Arco Amusement would pay Gonzalo Puyat, in addition to the price of the equipment, a 10% commission, plus expenses, such as freight, insurance, banking charges, cables etc. - In ordering the equipment, Gonzalo Puyat & Sons was able to get a discounted price from Starr Piano. However, Gonzalo Puyat did not inform Arco Amusement of the discounted price, and still billed them the list price of $ 1,700 plus the 10% commission and the expenses incurred in ordering the equipment. - Arco Amusement paid the bills and then placed another order for a second sound reproducing equipment, which was quoted at $1,600 plus commission and other expenses. Arco paid the amount assessed by Gonzalo Puyat. - 3 years later, Arco Amusement discovered that the price quoted to them by Gonzalo Puyat was not the net price but was rather the list price and that Gonzalo Puyat obtained a discount from Starr Piano. - They sought for reimbursement of what they have paid Gonzalo Puyat by fling a case for reimbursement. - CFI of Manila held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved Gonzalo Puyat from the complaint. - CA reversed the decision of the CFI, holding that the relation between Gonzalo Puyat and Arco Amusement was that of an agent and a principal, and sentenced Gonzalo Puyat to reimburse Arco Amusement of all the alleged overpayments in the total sum of $1,335.52 or Php 2,671.04 Issue: WON the contract between Gonzalo Puyat and Arco Amusement is an Agency to merit Arco Amusement a reimbursement or is an Outright Purchase and Sale Contract that would absolve Gonzalo Puyat of the case. Held: The contract between Gonzalo Puyat and Arco Amusement is an Outright Purchase and Sale Contract Ratio: The contract is the law between the parties and should include all the things they are supposed to have agreed upon. The letters, by which Arco accepted the prices of $1,700 and S1,600 plus the commission and other expenses for the sound reproducing equipment are clear in their terms and admit of no other interpretation than that Arco agreed to purchase from Gonzalo Puyat the equipment in question at the prices indicated which are fxed and determinate. Arco admitted in its complaint fled with the CFI that Gonzalo Puyat agreed to sell to it the frst sound reproducing equipment and machinery. Whatever unforeseen events might have taken place unfavorable to Arco, such as change in prices, mistake in their quotation, or failure of Starr Piano to properly fll the orders as per specifcations, Gonzalo Puyat might still legally hold Arco to the prices fxed. This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided that he acts in accordance with the instructions received from his principal and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part. To hold the petitioner an agent of the respondent in the purchase of the equipment from Starr Piano is incompatible with the fact that the petitioner is the exclusive agent of the same company in the Phils. It is out of the ordinary for one to be the agent of both the vendor and the vendee. It follows that Gonzalo Puyat as a vendor is not bound to reimburse Arco as vendee for any diference between the cost price and the sales price which represents the proft realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middlemen would not exist. LIM V. PEOPLE Keywords: tobacco, estafa, receipt letter Facts: Lourdes Valerio Lim is a businesswoman. She went to the house of Maria Ayroso and proposed to sell Ayrosos tobacco. Ayroso agreed that Lim would sell 615 kilos at P1.30 per kilo and that Lim could receive the over-price from the selling. A document was executed to certify the receipt of the tobacco leaves. Lim brought a jeep to Ayrosos house, then collected the P799.50 worth of tobacco leaves. After sometime, demands for payment has been made persistently by Ayrosos sister, Salud Bantug, but even if the camarin was empty (meaning, theres no more tobacco), Lim did not pay. Lim wrote a letter explaining her delinquencies: that she was having a hard time collecting, and eventually paid P240 in three instalments. Due to the inability of Lim to pay for the balance, Ayroso then fled a complaint for estafa, which Lim was convicted for and such conviction was afrmed by the Court of Appeals. Issue: Was the receipt a contract of agency to sell or a contract of sale of the subject tobacco between petitioner and complainant? (The latter would preclude the criminal liability of Lim) Ruling: Lim was acting as Ayrosos agent. Lims theory was backed up by the fact that she did not receive commissions, therefore, it was not a contract of agency and ultimately, she should not be held criminally liable. The Supreme Court denied this, afrming the explanation of the Court of Appeals stating that since Lim was a businesswoman and she took the eforts of collecting the tobacco from Ayrosos house, it is more likely she was acting as an agent, rather than doing a favour for a friend, because if it were a favour, then it would be Ayroso who would have dropped of the leaves to Lims house. There was no transfer of ownership and the agreement clearly considered Lim as an agent with the obligation to return the tobacco if the same was not sold. PACIFIC COMMERCIAL V. YATCO Keywords: sugar, commission merchant, broker, tax Facts: Pacifc Commercial engaged in business as a merchant and sold for Victoria Milling Co. refned sugar for the total value of P1,126,135.96 and received a commission of P29,534.29. Such transactions were made in either of two ways: 1. Ex-ship: Pacifc looks for buyers of the sugar, receives the bill of lading, and hands over the bill of lading to the buyer and collects the price. The buyer collects the sugar from the point of delivery. In this case, Pacifc acts as a broker for Victoria and the buyer. 2. Ex-warehouse: Sugar is deposited frst in Pacifcs warehouse before delivery to the potential buyer is done. Here, Pacifc acts as a commission merchant. Victoria Milling paid P16,994.90 to the Collector of Internal Revenue as merchant sales tax in its capacity as manufacturer and owner of the sugar sold. Notwithstanding such payment, Pacifc was also made to pay the same tax. Pacifc then went to the CFI to address the issue on double taxation. The CFI decided that defendant (I assume Yatco is the CIR) return the taxes paid under the frst type of transaction (ex-ship) ONLY, but the taxes imposed on Pacifc for the transactions ex- warehouse were valid. Issue: Was there double taxation in: (1) transactions ex-warehouse (subsequently, was that a transaction involving a commission merchant)? (2) transactions ex-ship (subsequently, was that a transaction involving a broker)? Ruling: There was only double taxation as to the transactions ex- ship. The majority relied heavily on the doctrine in Gil Hermanos v. Hord where there is no double taxation after a merchant sold for commission Gil Hermanoss abaca and both merchant and Hermano were taxed. This is because what was being taxed for the merchant was the occupation or the industry, not the property sold itself, the property was just the basis on how much tax the transaction should cost. The Court found a parallelism to the facts of the case and applied the case squarely on the transactions ex-warehouse. There is no doubt in their mind that transactions ex-warehouse had Pacifc acting as commission merchants. A commission merchant is one engaged in the purchase or sale for another of personal property, which, for this purpose, is placed in his possession and at his disposal. The relationship of the merchant is not only with the principal, but also to the property that is the subject matter of the transaction. The receipt and depositing in the warehouse of Pacifc attests to this relationship. After taking the sugar until it is sold, Pacifc had the sugar in its possession and at its own risk. However, there should be no tax over the transaction if it was done ex-ship. This was because Pacifc was merely acting as a broker. A broker, unlike a commission merchant, has no relation to the thing he sells or buys. He is merely an intermediary between the buyer and the seller and never acquires possession over the property. The appealed decision was afrmed. Dissent (Moran): Justice Moran points out the inconsistency of doctrine in various jurisprudence and feels that the Court should have decided to clarify such inconsistencies. In Atkins, Kroll & Co v. Posadas, the court held that for a single consignment, the Government is not entitled to collect two taxes, one from the owner of the merchandise and the other from the commission merchant. Moran found that the consignment and the sale are parallel situations and such ruling is a more equitable doctrine for good commerce since according to him, the Government has no right to receive more than one tax for a single transaction or else it will be detrimental to local merchants. KER VS. LINGAD HAHN VS. CA