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Quiroga vs Parsons

Quiroga vs Parsons

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Published by: Eye Alburo on Nov 24, 2012
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12/04/2012

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 JIBREYES1SALES
 –
QUIROGA VS PARSONS CASE 4 OF 5 CASES 15 June 2012
Page | 1
Republic of the Philippines
SUPREME COURT
 ManilaEN BANC
G.R. No. L-11491 August 23, 1918
 
ANDRES QUIROGA,
plaintiff-appellant,vs.
PARSONS HARDWARE CO.,
defendant-appellee.
 Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.Crossfield & O'Brien for appellee.
AVANCEÑA,
 J.
:
 On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by andbetween the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendantlater subrogated itself), as party of the second part:CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTHMERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THEVISAYAN ISLANDS.ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J.Parsons under the following conditions:(A)
 
Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, andshall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make andallowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsonsshall order the beds by the dozen, whether of the same or of different styles.(B)
 
Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from thedate of their shipment.(C)
 
The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, andcost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons.(D)
 
If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall beconsidered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient topay in cash.(E)
 
Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price whichhe may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effecthe should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of thealteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby beincreased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price atwhich the order was given.(F)
 
Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
 
 JIBREYES2SALES
 –
QUIROGA VS PARSONS CASE 4 OF 5 CASES 15 June 2012
Page | 2
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contractingparties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give thepreference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised withthe Visayan group.ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all thetowns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr.Quiroga for his approval.ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contractingparties on a previous notice of ninety days to the other party.Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute thesubject matter of this appeal and both substantially amount to the averment that the defendant violated the followingobligations: 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 thesame; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of theobligation on the part of the defendant to order the beds by the dozen and in no other manner, none of theobligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But theplaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations areimplied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as towhether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of theplaintiff for the sale of his beds.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 plaintiff was to furnish the defendant withthe beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in themanner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds inManila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases anadditional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of thedefendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby themandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price heobtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to paytheir price within the term fixed, without any other consideration and regardless as to whether he had or had not soldthe beds.But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that saidobligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to adetermination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or anagent of the plaintiff for the sale of his beds.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 plaintiff was to furnish the defendant withthe beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in themanner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds inManila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an
 
 JIBREYES3SALES
 –
QUIROGA VS PARSONS CASE 4 OF 5 CASES 15 June 2012
Page | 3
additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of thedefendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby themandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price heobtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to paytheir price within the term fixed, without any other consideration and regardless as to whether he had or had not soldthe beds.The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendantcorporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to thetime of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had evenaccused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contractExhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was
to bean agent for his beds and to collect a commission on sales
. However, according to the defendant's evidence, it wasMariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that ErnestoVidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance,inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, acontract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistakenin his classification of the contract. But it must be understood that a contract is what the law defines it to be, and notwhat it is called by the contracting parties.The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that,without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received itscommission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that,on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms;and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Onlythe acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must beconsidered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in theinstant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kindand not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for theprice paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff'sprior consent with respect to said beds, which shows that it was not considered that the defendant had a right, byvirtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated inthe record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreedto their return. And with respect to the so-called commissions, we have said that they merely constituted a discounton the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons inIloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of theplaintiff's beds, such sales were to be considered as a result of that advertisement.In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by thecontract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant mightplace under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain forhaving acted thus at his own free will.For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and thedefendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of actionare not imposed upon the defendant, either by agreement or by law.The judgment appealed from is affirmed, with costs against the appellant. So ordered.

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