7/30/2019 [ G.R. No.

11491, August 23, 1918 ]

38 Phil. 501

[ G.R. No. 11491, August 23, 1918 ]

ANDRES QUIROGA, PLAINTIFF AND APPELLANT, VS. PARSONS

HARDWARE CO., DEFENDANT AND APPELLEE.

DECISION

AVANCEÑA, J.:

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 uncjer 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.

"(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 he 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.
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"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 toA 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. 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
any 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. I 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
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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 Tloilo. 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 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 of 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 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.

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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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