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7/12/2017 G.R. No. 11491 | Quiroga v. Parsons Hardware Co.

EN BANC

[G.R. No. 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.

SYLLABUS

1. SALES; INTERPRETATION OF CONTRACT. For the


classification of contracts, due regard must be paid to their essential
clauses. In the contract in the instant case, what was essential,
constituting its cause and subject matter, was that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the
stipulated price, and that the defendant was to pay this price in the manner
agreed upon. 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 that of the defendant, to pay their price. These
features exclude the legal conception of an agency or older to sell whereby
the mandatary or agent receives 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, Held: That this contract is one of purchase and sale, and not of
commercial agency.
2. ID., ID. The testimony of the person who drafted this
contract, to the effect 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 defines it to be, and not what it is called by the contracting parties.
3. ID.; ID. The fact that the contracting parties did not perform
the contract in accordance with its terms, only shows mutual tolerance and
gives no right to have the contract considered, not as the parties stipulated
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it, but as they performed it.


4. ID.; ID. Only the acts of the contracting parties, subsequent
to and in connection with, the performance of the contract must be
considered in the interpretation of the contract when such interpretation is
necessary, but not when, as in the instant case its essential agreements
are clearly set forth and plainly show that the contract belongs to a certain
kind and not to another
5. ID.; ID. The defendant obligated itself to order the beds
from the plaintiff by the dozen. Held: That the effect of a breach of this
clause by the defendant would only entitle the plaintiff to disregard the
orders which the defendant might place under other conditions, but if the
plaintiff consents to fill them, he waives his right and cannot complain for
having acted thus at his own free will.

DECISION

AVANCEA, J : p

On January 24, 1911, in this city of Manila, a contract in the following


tenor was entered into by and between the plaintiff, as party of the first
part, and J. Parsons (to whose rights and obligations the present
defendant later subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES
QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED
IN MANILA FOR THE EXCLUSIVE SALE OF QUIROGA BEDS IN
THE VISAYAN 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, and shall invoice
them at the same price he has fixed for sales, in Manila, and, in the
invoices, shall make an allowance of a discount of 25 per cent of the
invoiced prices, as commission on the sales; and Mr. Parsons shall
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 the date of their
shipment.
"(C) The expenses for transportation and shipment shall
be borne by M. Quiroga, and the freight, insurance, and cost of
unloading from the vessel at the point where the beds are received,
shall be paid by Mr. Parsons.
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"(D) If, before an invoice falls due, Mr. Quiroga should


request its payment, said payment when made shall be considered
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 to pay in cash.
"(E) Mr. Quiroga binds himself to give notice at least
fifteen days before hand of any alteration in price which he may plan
to make in respect to his beds, and agrees that if on the date when
such alteration takes effect he should have any order pending to be
served to Mr. Parsons, such order shall enjoy the advantage of the
alteration if the price thereby be lowered, but shall not be affected by
said alteration if the price thereby be increased, for, in this latter
case, Mr. Quiroga assumed the obligation to invoice the beds at the
price at which the order was given.
"(F) Mr. Parsons binds himself not to sell any other kind
except the 'Quiroga' beds.
"ART. 2. In compensation for the expenses of
advertisement which, for the benefit of both contracting parties, Mr.
Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case
anyone should apply for the exclusive agency for any island not
comprised within the Visayan group.
"ART. 3. Mr. Parsons may sell, or establish branches of
his agency for the sale of 'Quiroga' beds in all the towns 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 contracting parties 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 the subject matter of this appeal and both
substantially amount to the averment that the 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. As may be seen, with the exception of the
obligation on the part of the defendant to order the beds by the dozen and
in no other manner, none of the obligations imputed to the defendant in the
two causes of action are expressly set forth in the contract. But the plaintiff
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.

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The whole question, therefore, reduces itself to a determination as to


whether the defendant, by reason of the contract hereinbefore transcribed,
was a purchaser or an agent 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 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. The price agreed upon was the one determined by the plaintiff
for the sale of these beds in Manila, 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 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 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. By virtue of the contract between the plaintiff and
the defendant, the latter, on receiving the beds, was necessarily obliged to
pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and
between the defendant and the plaintiff is one of purchase and sale, in
order to show that it was not one made on the basis of a commission on
sales, as the plaintiff claims it was, for these contracts are incompatible
with each other. But, besides, examining the clauses of this contract, none
of them is found that substantially supports the plaintiff's contention. Not a
single one of these clauses 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 plaintiff's
beds in the Visayan Islands. With regard to the remaining clauses, the
least that can be said is that they are not incompatible with the contract of
purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a
former vice-president of the defendant corporation and who established
and managed the latter's business in Iloilo. It appears that this witness,
prior to the time of his testimony, had serious trouble with the defendant,
had maintained a civil suit against it, and had even accused one of its
partners, Guillermo Parsons, of falsification. He testified that it was he who
drafted the contract Exhibit A, and when questioned as to what was his
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purpose in contracting with the plaintiff, replied that it was to be an agent


for his beds and to collect a commission on sales. However, according to
the defendant's evidence, it was Mariano Lopez Santos, a director of the
corporation, who prepared Exhibit A. But, even supposing that Ernesto
Vidal 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, a contract of purchase and sale, and not one
of commercial agency. This only means that Ernesto Vidal was mistaken in
his classification of the contract. But it must be understood that a contract
is what the law defines it to be, and not what 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 its commission 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. Only the acts of
the contracting parties, subsequent to, and in connection with, the
execution of the contract, must be considered for the purpose interpreting
the contract, when such interpretation is necessary, but not when, as in the
instant case, its essential agreements are clearly set forth and plainly show
that the contract belongs to a certain kind and not to another. Furthermore,
the return made was of certain brass beds, and was not effected in
exchange for the price paid for them, but was for other beds of another
kind; and for the purpose of making this return, the defendant, in its letter
Exhibit L-1, requested the plaintiff's prior consent with respect to said beds,
which shows that it was not considered that the defendant had a right, by
virtue of the contract, to make this return. As regards the shipment of beds
without previous notice, it is insinuated in the record that these brass beds
were precisely the ones so shipped, and that, for this very reason, the
plaintiff agreed to their return. And with respect to the so-called
commissions, we have said that they merely constituted a discount on the
invoice price, and the reason for applying this benefit to the beds sold
directly by the plaintiff to persons in Iloilo was because, as the defendant
obligated itself in the contract to incur the expenses of advertisement of
the plaintiff'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 the contract, the effect of its breach would
only entitle the plaintiff to disregard the orders which the defendant might

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place under other conditions; but if the plaintiff consents to fill them, he
waives his right and cannot complain for having acted thus at his own free
will.
For the foregoing reasons, we are of opinion that the contract by and
between the plaintiff and the defendant was one of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement or by law. The
judgment appealed from is affirmed, with costs against the appellant. So
ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

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