Republic of the Philippines
Manila THIRD DIVISION
G. R. No. L-74027 December 7, 1989SILAHIS MARKETING CORPORATION,
INTERMEDIATE APPELLATE COURT and GREGORIODE LEON, doing business under the name and styleof "MARK INDUSTRIAL SALES",
Jaime V. Villanueva for petitioner.Tinga, Fuentes, Tagle & Malate for private respondent.
Petitioner Silahis Marketing Corporation seeks in thispetition for review on certiorari a reversal of the decisionof the then Intermediate Appellate Court (IAC) in AC-G.R.CV No. 67162 entitled "De Leon, etc. v. Silahis MarketingCorporation", disallowing petitioner's counterclaim forcommission to partially offset the claim against it of private respondent Gregorio de Leon for the purchaseprice of certain merchandise.A review of the record shows that on various dates inOctober, November and December, 1975, Gregorio deLeon (De Leon for short) doing business under the nameand style of Mark Industrial Sales sold and delivered toSilahis Marketing Corporation (Silahis for short) variousitems of merchandise covered by several invoices in theaggregate amount of P 22,213.75 payable within thirty(30) days from date of the covering invoices. Allegedlydue to Silahis' failure to pay its account upon maturitydespite repeated demands, de Leon filed before the thenCourt of First Instance of Manila a complaint for thecollection of the said accounts including accrued interestthereon in the amount of P 661.03 and attorney's fees of P5,000.00 plus costs of litigation. The answer admitted the allegations of the complaintinsofar as the invoices were concerned but presented asaffirmative defenses; [al a debit memo for P 22,200.00 asunrealized profit for a supposed commission that Silahisshould have received from de Leon for the sale of sprockets in the amount of P 111,000.00 made directly toDole Philippines, Incorporated by the latter sometime inAugust 1975 without coursing the same through theformer allegedly in violation of the usual practiceconcerning sale of merchandise to Dole Philippines, Inc.;and [b] Silahis' claim that it is entitled to return thestainless steel screen covered by Exhibits '6-A' and '6-B'which was found defective by its client, BordenInternational, Davao City, and to have the correspondingamount cancelled from its account with de Leon.In a decision dated August 25, 1978,
the lower courtconfirmed the liability of Silahis for the claim of de Leonbut at the same time ordered that it be partially offset bySilahis' counterclaim as contained in the debit memo forunrealized profit and commission. Judge Bienvenido C.Ejercito of said court held: There is no question that the defendantreceived from the plaintiff the itemscontained in Exhs. 'A' to 'F'. The onlyquestion is whether or not the defendantis entitled to set off against the claim of the plaintiff the amount contained in thedebit memo of the defendant, Exh. '1',and whether or not the defendant isentitled to return the steel wire meshwhich was returned to them by BordenPhilippines, as shown by Exhs. '6-A' and'6-B'. The Court believes that thedefendant is properly chargeable for theamounts of the unpaid invoices set forthin the complaint. However, the Court alsobelieves that the plaintiff is also properlychargeable for the debit memo of P22,200.00, Exh. '1'. This is because it wasproven by the defendant from thetestimonies of Isaias Fernando, Jr. and Jose Joel Tamon that contrary to theagreement between plaintiff anddefendant that the latter was to serve theaccount of Dole Philippines in Davao, theplaintiff made a direct sale of sprocketsfor P 111,000.00 which therreby deprivesthe defendant of its correspondingcommission for P 22,200.00 which thedefendant would have otherwise made if the plaintiff had followed its previousarrangement with the defendant.However, as to the counterclaim of thedefendant for a cancellation of theamount of P 6,000.00 for defectivestainless screen wire purchased andintended for Borden International, DavaoCity, the Court believes that it is much toolate now to present said claim becausethe purchase was made and delivered asearly as December 22,1975 and theproposed return to the defendant byBorden was made on April 1, 1976 only. The Court is not ready to award damagesto any of the parties. After deducting theamount of P 22,200.00, which is theunpaid commission of the defendant fromthe principal total amount of the unpaidinvoices of the plaintiff of P 22,213.75, theunpaid balance in favor of the plaintiff is P13.75. The claim for interest andattorney's fees of the plaintiff may beoffset against the interest and attorney'sfees of the defendant.WHEREFORE, judgment is herebyrendered in favor of the plaintiff andagainst the defendant ordering thedefendant to pay to the plaintiff theamount of P 13.75, with interest at 12%per annum from the date of the filing of the action on July 1, 1976 until fully paid,without pronouncement as to costs.SO ORDERED.
De Leon appealed from the said decision insofar as itdirected partial compensation and its failure to awardinterest on his principal claim as well as attomey's fees inhis favor. In a decision dated March 1 7, 1986,
respondent Intermediate Appellate Court
set aside thedecision of the lower court and dismissed hereinpetitioner's (therein defendant- appellee's) counterclaimfor lack of factual or legal basis. The appellate court foundthat there was no agreement, verbal or otherwise, norwas there any contractual obligation between De Leonand Silahis prohibiting any direct sales to Dole Philippines,Inc. by de Leon; nor was there anything in the debit memoobligating de Leon to pay a commission to Silahis for thesale of P 111,000.00 worth of sprockets to DolePhilippines although in the past, the former did supplycertain items to the latter for delivery to Dole Philippines,Incorporated.Hence, in this petition for review on certiorari, the centralissue is whether or not private respondent is liable to thepetitioner for the commission or margin for the direct salewhich the former concluded and consummated with DolePhilippines, Incorporated without coursing the samethrough herein petitioner.We have carefully gone over the record of this caseparticularly the debit memo upon which petitioner'scounterclaim rests and found nothing contained therein toshow that private respondent obligated himself to set-off or compensate petitioner's outstanding accounts with thealleged unrealized commission from the assailed sale of sprockets in the amount of P 111,000.00 to DolePhilippines, Inc.It must be remembered that compensation takes placewhen two persons, in their own right, are creditors anddebtors to each other. Article 1279 of the Civil Codeprovides that: "In order that compensation may be proper,it is necessary:  that each one of the obligors be boundprincipally, and that he be at the same time a principalcreditor of the other;  that both debts consist in a sumof money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latterhas been stated;  that the two debts be due;  thatthey be liquidated and demandable;  that over neitherof them there be any retention or controversy,commenced by third persons and communicated in duetime to the debtor.When all the requisites mentioned in Art. 1279 of the CivilCode are present, compensation takes effect by operationof law, even without the consent or knowledge of the