Agency Digest

W. G. PHILPOTTS, petitioner, vs. PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents. G.R. No. L-15568

November 8, 1919

Facts: The petitioner, W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, one of the respondents herein, seeks by this proceeding to obtain a writ of mandamus to compel the respondents to permit the plaintiff, in person or by some authorized agent or attorney, to inspect and examine the records of the business transacted by said company since January 1, 1918 . The first point made has reference to a supposed defect of parties, and it is said that the action can not be maintained jointly against the corporation and its secretary without the addition of the allegation that the latter is the custodian of the business records of the respondent company. By the plain language of sections 515 and 222 of our Code of Civil Procedure, the right of action in such a proceeding as this is given against the corporation; and the respondent corporation in this case was the only absolutely necessary party. Only the corporation was named as defendant, while the complaint, in language almost identical with that in the case at bar, alleged a demand upon and refusal by the corporation. Nevertheless the propriety of naming the secretary of the corporation as a codefendant cannot be questioned, since such official is customarily charged with the custody of all documents, correspondence, and records of a corporation, and he is presumably the person against whom the personal orders of the court would be made effective in case the relief sought should be granted. Certainly there is nothing in the complaint to indicate that the secretary is an improper person to be joined. The petitioner might have named the president of the corporation as a respondent also; and this official might be brought in later, even after judgment rendered, if necessary to the effectuation of the order of the court. Issue: Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a proper agent or attorney of the stockholder as well as by the stockholder in person. Held: Yes. There is no pretense that the respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything relating to the affairs of the company, and the petition prays for a peremptory order commanding the respondents to place the records of all business transactions of the company, during a specified period, at the disposal of the plaintiff or his duly authorized agent or attorney, it being evident that the petitioner desires to exercise said right through an agent or attorney.

The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which reads as follows: "The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, member or stockholder of the corporation at reasonable hours." Now it is our opinion, and we accordingly hold, that the right of inspection can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another; and we find nothing in the statute that would justify us in qualifying the right in the manner suggested by the respondents. The right of inspection to stockholders of corporations are to be liberally construed and that said right may be exercised through any other properly authorized person. "The right may be regarded as personal, in the sense that only a stockholder may enjoy it; but the inspection and examination may be made by another. Otherwise it would be unavailing in many instances." The right of inspection given by law to the stockholder; as for instance, where a corporation, engaged in the business of manufacture, has acquired a formula or process, not generally known, which has proved of utility to it in the manufacture of its products. It is not our intention to declare that the authorities of the corporation, and more particularly the Board of Directors, might not adopt measures for the protection of such process form publicity. There is, however, nothing in the petition which would indicate that the petitioner in this case is seeking to discover anything which

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendantappellee. G.R. No. L-11491

August 23, 1918

Facts: 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 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. The whole question, therefore, reduced 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. Issue: Whether or not the contract is one of agency 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. 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. 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 SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner, vs. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division), respondents. G.R. No. L-8169

January 29, 1957

Facts: This is an action for recovery of sum of money, based on alleged negligence of the defendants. In the afternoon of September 3, 1947, an automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito Sison, to the gasoline and service station at the corner of Marques de Comillas and Isaac Peral Streets, City of Manila, Philippines, owned by the defendant The Shell Company of the Philippine Islands, Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of having said car washed and greased for a consideration of P8.00. Said car was insured against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000. The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two employees, Alfonso M. Adriano, as greaseman and one surnamed de los Reyes, a helper and washer. To perform the job the car was carefully and centrally placed on the platform of the lifter in the gasoline and service station aforementioned before raising up said platform to a height of about 5 feet and then the servicing job was started. After more than one hour of washing and greasing, the job was about to be completed except for an ungreased portion underneath the vehicle which could not be reached by the greasemen. So, the lifter was lowered a

little by Alfonso M. Adriano and while doing so, the car for unknown reason accidentally fell and suffered damage to the value of P1, 651.38. The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to Salvador Sison in accordance with the terms of the insurance contract, have filed this action together with said Salvador Sison for the recovery of the total amount of the damage from the defendants on the ground of negligence. The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer and contended further that the accidental fall of the car was caused by unforseen event. The trial the Court dismissed the complaint. The plaintiffs appealed. The Court of Appeals reversed the judgment and sentenced the defendant to pay the amount sought to be recovered, legal interest and costs, as stated at the beginning of this opinion. Issue: Whether or not the acts of De la Fuente as an employee/agent can bind the company Yes. De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him as it pleased; that all the equipments needed to operate the station was owned by the Defendant Company which took charge of their proper care and maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave the fixing of price for gasoline to De la Fuente; on the other hand, the Defendant company had complete control thereof; and that Tiongson, the sales representative of the Defendant Company, had supervision over De la Fuente in the operation of the station, and in the sale of Defendant Company's products therein. . . . To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should there be a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligation stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter. As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable. Moreover, the company undertook to "answer and see to it that the equipments are in good running order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check up of the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that the operator was satisfactory, he (the mechanic) left the

place." The latter was negligent and the company must answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.

ROBERT L. WEADOCK and JAMES T. WALKER, petitioners, vs. MACARIO OFILADA, Sheriff for the City of Manila, and BATANGAS BASE R. SURPLUS COMPANY, respondents. G.R. No. L-2949

June 24, 1949

Facts: Robert L. Weadock and James T. Walker, the petitioners, brought an action in the Court of First Instance of Manila (civil case No. 6877, now pending in the said court) against Arthur H. Merritt and Insular Trades, Inc. to compel defendants to render an accounting of the profits in certain business transactions between them, it being that said profits had been misapplied by defendants to their own use. Acting on plaintiffs' petition, Judge Potenciano Pecson issued a writ of preliminary attachment, plaintiffs put up a bond, duly approved by the

court, in the amount of P150,000, and the sheriff of the City of Manila attached the articles of personal property inventoried in Annex B. On February 15, 1949, W. 0. Merritt, said to be a brother of defendant Arthur H. Merritt, filed for and in behalf of Batangas Base R. Surplus Company, an alleged California partnership not registered in the Philippines, a third party claim for all or most of the attached property. As a result of the filing of this third party claim, the sheriff required plaintiffs to put up a bond in the sum of P551,425, said to be the value of the property attached, with the warning that if they failed to post such bond he, sheriff, would deliver the said property to the third party claimant. Plaintiff's opposed the third party claim. On March 23, 1949, Judge Pecson denied plaintiff's opposition and their motion to prohibit the sheriff from releasing the property. It was at this stage of the case that plaintiffs filed, on May 31, the urgent ex-parte petition. Issue: Whether or not the Batangas Base R. Surplus Company has a claim with the property Held: No. The third party claimant's affidavit, by reason of which he claimed the release of the properties in question and on the strength of which the plaintiffs were required to file a bond, states that "the affiant's right to the possession of said personal property is derived from the fact that the attached properties listed in Appendices A, B, and C have been purchased by the defendant Insular Trades, Inc. with the funds money of the said partnership Batangas Base R. Surplus Company and are therefore of the ownership of the said partnership." The interest which W. O. Meritt claims to have in the attached property does not meet the requirements of section 14 of Rule 59, and should be ignored. He does not allege that Insular Trades, Inc. used Batangas Base R. Surplus Company's funds as the latter's agents or in the latter's name. The allegations are more susceptible of the interpretation that Batangas Base R. Surplus Company is a mere creditor of Insular Trades, Inc. It is not inferable from these allegations that W. O. Meritt's interest, or the interest of the partnership which he claims to present, constitute title to, or a lien on, the attached property and entitles him or his principal to its possession.

GONZALO PUYAT & SONS, INC., petitioner, vs. ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent. G.R. No. L-47538 Facts

June 20, 1941

In the year 1929, the "Teatro Arco", a corporation engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another corporation acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., and order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the defendant sent a cable, Exhibit "3", to the Starr Piano Company, inquiring about the equipment desired and making the said company to quote its price without discount. Sometime the following year another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. This agreement say, that the plaintiff would pay for the equipment the amount of $1,600, which was supposed to be the price quoted by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. About three years later, the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Company. The trial court held that the contract between the petitioner and the respondent was one of outright purchase and sale, and absolved that petitioner from the complaint. The appellate court, however, — by a division of four, with one justice dissenting — held that the relation between petitioner and respondent was that of agent and principal. Issue: Whether or not there was a contract of agency between plaintiff and defendant No. We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchase and sale, and not one of agency, for the reasons now to be stated. The respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. The third paragraph of the respondent's cause of action states:

3. That on or about November 19, 1929, the herein plaintiff (respondent) and defendant (petitioner) entered into an agreement, under and by virtue of which the herein defendant was to secure from the United States, and sell and deliver to the herein plaintiff, certain sound reproducing equipment and machinery, for which the said defendant, under and by virtue of said agreement, was to receive the actual cost price plus ten per cent (10%), and was also to be reimbursed for all out of pocket expenses in connection with the purchase and delivery of such equipment, such as costs of telegrams, freight, and similar expenses. The plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1,700 and $1,600." 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 he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), 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 (article 1729, Civil Code). In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where the respondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist. The respondent could not have secured this discount from the Starr Piano Company and neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of fact, no reason is advanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the respondent. Moreover, the petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers, and the respondent was not even aware of such an arrangement. If the respondent later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. The respondent could not secure equipment and machinery manufactured by

the Starr Piano Company except from the petitioner alone; The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world.

DOMINGO DE LA CRUZ, plaintiff-appellant, vs. NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees. G.R. No. L-7089

August 31, 1954

Facts: The plaintiff, DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to report the commission of disorders within the premises. Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's death. After trial, he was finally acquitted of the charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie corporation and the three members of its board of directors. On the basis of the complaint and the answer filed by defendants wherein they asked for the dismissal of the complaint, as well as the agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was an agent of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency (Arts. 1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed the complaint without costs. De la Cruz appealed directly to this Tribunal for the reason that only questions of law are involved in the appeal. Issue: Whether or not there was principal and agent between the parties. Held: No. We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that of principal and agent because the principle of representation was in no way involved. Plaintiff was not employed to represent the defendant corporation in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task, that of acting

as special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises.

KER & CO., LTD., petitioner, vs. JOSE B. LINGAD, as Acting Commissioner of Internal Revenue, respondent. G.R. No. L-20871

April 30, 1971

Facts: It was shown that petitioner was assessed by the then Commissioner of Internal Revenue Domingo the sum of P20,272.33 as the commercial broker's percentage tax, surcharge, and compromise penalty for the period from July 1, 1949 to December 31, 1953. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. In its answer, the then Commissioner Domingo maintained his stand that petitioner should be taxed in such amount as a commercial broker. In the decision now under review, promulgated on October 19, 1962, the Court of Tax Appeals held petitioner taxable except as to the compromise penalty of P500.00, the amount due from it being fixed at P19,772.33. Such liability arose from a contract of petitioner with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor and the Distributor will receive, accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in the judgment of the Company may be necessary for the successful solicitation and maintenance of business in the territory, and the Distributor agrees that responsibility for the final sole of all goods delivered shall rest with him. All specifications for the goods ordered were subject to acceptance by the Company with petitioner, as Distributor, required to accept such goods shipped as well as to clear the same through customs and to arrange for delivery in its warehouse in Cebu City. Moreover, orders are to be filled in whole or in part from the stocks

carried by the Company's neighboring branches, subsidiaries or other sources of Company's brands. Issue: Whether or not the relationship between the parties is one of broker-principal. Held: Yes. The Court of Tax Appeals was not misled in the language of the decision now on appeal: "That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2); that it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company (Par. 8); that every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company (Par. 12); that on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month (Par. 14); that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss (Par. 15); that upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former (Par. 15); and that upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter (Par. 19). All these circumstances are irreconcilably antagonistic to the idea of an independent merchant."

Hence its conclusion: "However, upon analysis of the contract, as a whole, together with the actual conduct of the parties in respect thereto, we have arrived at the conclusion that the relationship between them is one of brokerage or agency." We find ourselves in agreement, notwithstanding the able brief filed on behalf of petitioner by its counsel. As noted at the outset, we cannot heed petitioner's plea for reversal. According to the National Internal Revenue Code, a commercial broker "includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels or other means of transportation, or for the shippers, or consignors or consignees of freight carried by

vessels or other means of transportation. The term includes commission merchants." The controlling decision as to the test to be followed as to who falls within the above definition of a commercial broker is that of Commissioner of Internal Revenue v. Constantino. 17 In the language of Justice J. B. L. Reyes, who penned the opinion: "Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of agency, ... ." An excerpt from Salisbury v. Brooks 19 cited in support of such a view follows: " 'The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made.' " We can categorically affirm that the mere disclaimer in a contract that an entity like petitioner is not "the agent or legal representative for any purpose whatsoever" does not suffice to yield the conclusion that it is an independent merchant if the control over the goods for resale of the goods consigned is pervasive in character. WHEREFORE, the Court of Tax Appeals decision of October 19, 1962 is affirmed. With costs against petitioner.

GUARDEX ENTERPRISES and/or MARCELINA A. ESCANDOR, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and JUMBEE ORBETA, Respondents. G.R. No. 66541

November 20, 1990

Facts: Marcelina A. Escandor is a person engaged, under the name and style of Guardex Enterprises, in the manufacture and sale of fire-fighting equipment and occasionally, the building or fabrication of fire trucks; and Jumbee Orbeta a "freelance" salesman. Orbeta wrote to Escandor inquiring about the amount of commission for the sale of a fire truck. Escandor replied on the same day to advise that it was P15,000.00 per unit. Four days later, Orbeta offered to look after (followup) Escandor’s pending proposal to sell a fire truck to Rubberworld, and asked for P250.00 as representation expenses. Escandor agreed and gave him the money.

When no word was received by Escandor from Orbeta after three days, she herself inquired in writing from Rubberworld about her offer of sale of a fire truck. Having apparently received an encouraging response, Escandor sent Rubberworld a revised price quotation some ten days later. About seven months afterwards, Escandor herself finally concluded a contract with Rubberworld for the latter’s purchase of a fire truck. The transaction was consummated with the delivery of the truck and full payment thereof by Rubberworld. Orbeta suddenly reappeared and asked for his commission for the sale of the fire truck to Rubberworld. Escandor refused, saying that he had had nothing to do with the offer, negotiation and consummation of the sale. Insisting that he was entitled to the commission, Orbeta filed a complaint against Escandor with the Ministry of Labor. The Labor Arbiter agreed with him and rendered judgment in his favor, on August 26, 1982. That judgment was affirmed by the National Labor Relations Commission on December 29, 1983, on appeal taken by Escandor. Hence, this petition for certiorari, to annul those judgments as having been rendered with grave abuse of discretion if not indeed without or in excess of jurisdiction. It is claimed that an implied agency had been created between Escandor and Orbeta on the basis of the following circumstances: 1) The alleged verbal authority given to him to offer a fire truck to Rubberworld; 2) the alleged written authority to sell the truck contained in a letter of Escandor’s dated August 14, 1978; 3) Escandor’s having given Orbeta P250.00 as representation expenses; and 4) Orbeta’s submission of a price quotation to Rubberworld and his having arranged a meeting between Escandor and Rubberworld’s Purchasing Manager.

Issue: Whether or not Orbeta is entitled to the 15,000 commission for the selling of the fire truck Held: No. All that she consented to was for Orbeta to "follow up" that pending offer. In truth, it does not even appear that on the strength of this "arrangement" — vague as it was — Orbeta undertook the promised follow-up at all. He reported nothing of his efforts or their fruits to Escandor. It was Escandor who, in the months that followed her initial meeting with Orbeta, determinedly pushed the Rubberworld deal. Orbeta was simply nowhere to be found. Furthermore, it seems fairly evident that the "representation allowance" of P250 was meant to cover the expenses for the "follow-up" offered by Orbeta — an ambiguous fact which does not of itself suggest the creation of an agency and is not at all inconsistent with the theory of its absence in this case. Even a finding that under these circumstances, an agency had indeed been constituted will not save the day for Orbeta, because nothing in the

record tends to prove that he succeeded in carrying out its terms or even as much as attempted to do so. The evidence in fact clearly indicates otherwise. The terms of Escandor’s letter of August 14, 1978 — assuming that it was indeed an "authority to sell," as Orbeta insists — are to the effect that entitlement to the P15,000 commission is contingent on the purchase by a customer of a fire truck, the implicit condition being that the agent would earn the commission if he was instrumental in bringing the sale about. Orbeta certainly had nothing to do with the sale of the fire truck, and is not therefore entitled to any commission at all. Furthermore, even if Orbeta is considered to have been Escandor’s agent for the time he was supposed to "follow up" the offer to sell, such agency would have been deemed revoked upon the resumption of direct negotiations between Escandor and Rubberworld, Orbeta having in the meantime abandoned all efforts (if indeed any were exerted) to secure the deal in Escandor’s behalf. It has of course already been stated at the outset that, given the sole issue raised by the parties concededly from the case’s inception (i.e., whether or not Orbeta is Escandor’s agent as regards the sale of a fire truck to Rubberworld), the competence to resolve the controversy did not pertain to either the Labor Arbiter or the NLRC. The jurisdiction vested in them by the Labor Code extends, generally speaking, only to cases arising from employer-employee relationships. What has all along been at issue here, as advanced by the parties themselves and as is evident from the facts, is the existence of a contract of agency — not employment or lease of services. It is indeed a puzzle how the fundamental differences between the two altogether escaped not only the parties’ counsel in this case but also the tribunals before which it had been brought. Nevertheless, since no one has thought to question their authority even up to this late stage, as in fact all the parties appear to have completely accepted the validity of their exercise of jurisdiction over the case, the Court has opted, as already stated, to render judgment on its merits and end the controversy once and for all. WHEREFORE, the petition for certiorari is GRANTED, and the judgment of the National Labor Relations Commission dated December 29, 1983, and that of the Labor Arbiter dated August 26, 1982, are hereby REVERSED and SET ASIDE and another one rendered dismissing respondent Jumbee Orbeta’s claim for unpaid commissions

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, PETITIONER, VS. COURT OF APPEALS AND AMERICAN AIRLINES INCORPORATED, RESPONDENTS. G.R. NO. 76933

MAY 29, 1991

Facts: On 15 January 1977, American Air an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air, entered into a General Sales Agency Agreement, whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. Pertinent provisions of the agreement are reproduced, to wit: On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement. Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order. In its Answer with counterclaim said that the defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occassioned prejudice to its business interests. Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor, rendering a decision dated 16 July 1984, the dispositive portion of which reads: "WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and against plaintiff dismissing the complaint and holding the termination made by the latter as affecting the GSA agreement illegal and improper and order the plaintiff to reinstate defendant as its general sales agent for passenger transportation in the Philippines. On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision affirmed the findings of the court a quo on their material points Issue: (1) Whether or not Orient Air is entitled to a commission based on the total revenue of American Air. (2) Whether or not the court may compel American Air to reinstate Orient Air to its Agent

Held: (1) Yes. It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the meaning of its provisions. The various stipulations in the contract must be read together to give effect to all. After a careful examination of the records, the Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services. It is immediately observed that the precondition attached to the first type of commission does not obtain for the second type of commissions. The latter type of commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a contract with meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement. An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. To put it differently, when several interpretations of a provision are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the party in whose favor the provision was made and who did not cause the ambiguity. We therefore agree with the respondent appellate court's declaration that: (2) No. By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract whereby "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."[17] (emphasis supplied) In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The Agreement itself between the parties states that "either party may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as general sales agent of American Air.

JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents. G.R. No. 130148.

December 15, 1997

Facts: Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their regular customer. On several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz, received several pieces of gold and jewelry from petitioners amounting to P382,816.00. These items and their prices were indicated in seventeen receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated that they were received for Brigida D. Luz. Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of his unpaid account to petitioners, including interest, reached the sum of P725,463.98. Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount. On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos, Bulacan against Deganos and Brigida D. Luz for recovery of a sum of money and damages, with an application for preliminary attachment. Ernesto Luz was impleaded therein as the spouse of Brigida. During the trial of the civil case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him therefor.

On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed that the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was he alone who was involved in the transaction with the petitioners. After trial, the court below found that it was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for Evelyn Aquino and Brigida D. Luz. Said court was persuaded that Brigida D. Luz was behind Deganos, but because there was no memorandum to this effect, the agreement between the parties was unenforceable under the Statute of Frauds. As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals which affirmed said judgment. Issue: Whether or not Deganos was an agent of the Respondent Spouses Held: No. The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. While the quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that, (Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners x x x. [15] It is clear, therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to the transactions subject of this case. Art. 1868. 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 basis for agency is representation. Here, there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved. Petitioners attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised. Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing with an WHEREFORE, no error having been committed by the Court of Appeals in affirming the judgment of the court a quo, its challenged decision and resolution are hereby AFFIRMED and the instant petition is DENIED, with double costs against petitioners

SO ORDERED.

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT (BMW), respondents. G.R. No. 113074.

January 22, 1997

Facts: Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the former Federal Republic of Germany, with principal office at Munich, Germany. On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney," On February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various aspects of petitioner's

business, mentioning among other things, decline in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW dealer. Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a "standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to terminate petitioner's exclusive dealership effective June 30, 1993. Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment. Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts. Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership. The trial court deferred resolution of the Motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in its motion did not seem to be indubitable. The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss.

Issue: Whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. Held: Yes. Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the down payment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including, warranty services, for which he received reimbursement from

BMW. All orders were on invoices and forms of BMW. These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeal. Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership. The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. For example, in its letter to Hahn dated February 23, 1996, BMW stated: This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, in which the foreign corporation entered into a "Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was appointed "exclusive representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold products exported by the foreign corporation and put up a service center for the products sold locally. This Court held that these acts constituted doing business in the Philippines. The arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market and establish its presence in the Philippines. In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines. The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial court and in its petition for certiorari before the Court of Appeals.[14] But this allegation was denied by Hahn[15] and therefore the Court of Appeals should not have cited it as if it were the fact. WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings. SO ORDERED.

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners, vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents. G.R. No. 122544.

January 28, 1999

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners, vs. COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES, INC., respondents. G.R. No. 124741.

January 28, 1999

Facts: On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to Buy with petitioners (lessors) involving a 1,755.80 square meter parcel of land situated at corner MacArthur Highway and South "H" Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing from May 16, 1974 up to May 15, 1975. During this period, private respondent was granted an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00. For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an action for ejectment on November 10, 1976 before Metropolitan Trial Court of Quezon City, Branch VIII. The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision was rendered dismissing private respondent's complaint in Civil Case No. Q-45541 (specific performance case) and denying its motion for reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion for reconsideration of said decision was likewise denied. On appeal, respondent Court of Appeals rendered a decision upholding the jurisdiction of the City Court of Quezon City in the ejectment case. It also concluded that there was a perfected contract of sale between the parties on the leased premises and that pursuant to the option to buy agreement, private respondent had acquired the rights of a vendee in a contract of sale. It opined that the payment by private respondent of P300,000.00 on June 20, 1975 as partial payment for the leased property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative act that gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in their behalf. Issue: Whether or not Alice Dizon was an authorized agent of the petitioners to receive payment from the respondents. Held: No. In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract of lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners alleged agent, and private respondent. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. As provided in Article 1868 of the New Civil Code, there was no showing that petitioners consented to the act of Alice A. Dizon nor

authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed agency. In Bacaltos Coal Mines vs. Court of Appeals, we explained the rule in dealing with an agent: Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent’s authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency 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 also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV No. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE. However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice A. Dizon on June 20, 1975.

VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents. G.R. No. 117356.

June 19, 2000

Facts: St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M, which gave rise to the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per bag as "per sales order VMC Marketing No. 042 dated October 16, 1989." The transaction it covered was a "direct sale." The SLDR also contains an additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse)." On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags." Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags had been withdrawn. CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags. On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags. Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully withdrawn and hence, there would be no more deliveries of the commodity to STM's account. Petitioner also noted that CSC had represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM On April 27, 1990, CSC filed a complaint for specific performance, the Defendants were Teresita Ng Sy and herein petitioner. The Trial Court rendered a judgment in favor of the plaintiff and against defendant Victorias Milling Company. On appeal the petitioner VMC argued that CSC was an agent of STM and no capacity to sue against MVC. On February 24, 1994, the Court

of Appeals rendered its modifying the decision of the Trial Court but still held VMC liable to CSC. Issue: Whether or not the defendants are agents of STM Held: No. The Civil Code defines a contract of agency as follows: "Art. 1868. 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." It is clear from Article 1868 that the basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category. The Court of Appeals, in finding that CSC, was not an agent of STM, opined: "This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its nature and extent (Antonio vs. Enriquez [CA], 51 O.G. 3536]. Here, defendant-appellant failed to sufficiently establish the existence of an agency relation between plaintiff-appellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf" should not be eyed as pointing to the existence of an agency relation ...It should be viewed in the context of all the circumstances obtaining. Although it would seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990, plaintiff-appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM. Further, plaintiff-appellee has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by STM to it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee to sue in its own name, without need of joining its imputed principal STM as coplaintiff." In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM. Private respondent CSC was not subject to STM's control. The question of whether a contract is one of sale or

agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of the parties. That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. Hence, on this score, no error was committed by the respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner. WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED. DOMINGA CONDE, petitioner, vs. THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife, NICETAS ALTERA, RAMON CONDE, together with his wife, CATALINA T. CONDE, respondents. G.R. No. L-40242

December 15, 1982

Facts: Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land located in Maghubas Burauen Leyte, (Lot 840), with an approximate area of one (1) hectare, to Casimira Pasagui, married to Pio Altera (hereinafter referred to as the Alteras), for P165.00. The "Pacto de Retro Sale" further provided: On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a document in the Visayan dialect, the English translation of which reads: MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH REPURCHASE WHICH DOCUMENT GOT LOST WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and residents of Burauen Leyte, Philippines, after having been duly sworn to in accordance with law free from threats and intimidation, do hereby depose and say: 5. Because it is about time to repurchase the land, I have allowed the representative of Dominga Conde, Bernardo Conde and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase the same. 6. Now, this very day November 28, 1945, 1 or We have received together with Paciente Cordero who is my son-in-law the amount of ONE HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine Currency of legal tender which was the consideration in that sale with the right of repurchase with respect to the two parcels of land.

The pacto de retro document was eventually found. On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde, who are also private respondents herein. Their relationship to petitioner does not appear from the records. Nor has the document of sale been exhibited. Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January 1969, in the Court of First Instance of Leyte, Branch IX, Tacloban City, a Complaint (Civil Case No. B-110), against Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and declaration of ownership. After trial, the lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate the property in dispute and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. Conde". On appeal, the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of repurchase. Issue: Whether or not there is an implied agency Whether the Right of Repurchase was validly exercise Held: Yes. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to exercise their right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed that their son-in-law had signed. Thus, an implied agency must be held to have been created from their silence or lack of action, or their failure to repudiate the agency. Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was executed, to 1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have incurred in laches. That petitioner merely took advantage of the abandonment of the land by the Alteras due to the separation of said spouses, and that petitioner's possession was in the concept of a tenant, remain bare assertions without proof. Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in 1965, assuming that there was, indeed, such a sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of the Alteras specifically contained the condition that it was subject to the right of repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965 and there was no annotation of any repurchase by petitioner, neither had the title been cleared of that encumbrance. The purchasers were put on notice that

some other person could have a right to or interest in the property. It behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title, and particularly the matter of possession, which, as also admitted by them at the pre-trial, had been with petitioner since 1945. Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged the receipt of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they be "disturbed by other persons". It was executed in the Visayan dialect which he understood. He cannot now be allowed to dispute the same. "... If the contract is plain and unequivocal in its terms he is ordinarily bound thereby. It is the duty of every contracting party to learn and know its contents before he signs and delivers it." There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had no objection to petitioner's right of repurchase. Besides, he would have had no personality to object. To uphold his oral testimony on that point, would be a departure from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended. WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and petitioner is hereby declared the owner of the disputed property. If the original of OCT No. N-534 of the Province of Leyte is still extant at the office of the Register of Deeds, then said official is hereby ordered to cancel the same and, in lieu thereof, issue a new Transfer Certificate of Title in the name of petitioner, Dominga Conde. SO ORDERED.