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G.R. No. 76931 May 29, 1991 ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs.

COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents. G.R. No. 76933 May 29, 1991 AMERICAN AIRLINES, INCORPORATED, petitioner, vs.COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATED, respondents. PADILLA, J.:p This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc." which affirmed, with modification, the decision 2 of the Regional Trial Court of Manila, Branch IV, which dismissed the complaint and granted therein defendant's counterclaim for agent's overriding commission and damages. The antecedent facts are as follows: On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement (hereinafter referred to as the 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: WITNESSETH In consideration of the mutual convenants herein contained, the parties hereto agree as follows: 1. Representation of American by Orient Air Services Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines, including any United States military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for the sale of air passenger transportation. The services to be performed by Orient Air Services shall include: (a) soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff competent and sufficient to do so; (b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the business of American; (c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents and the general public in the assigned territory; (d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with the prior written consent of American) in the assigned territory including if required by American the control of remittances and commissions retained; and (e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory. In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air Services nor its sub-agents will perform services for any other air carrier similar to those to be performed hereunder for American without the prior written consent of American. Subject to periodic instructions and continued consent from American, Orient Air Services may sell air passenger transportation to be performed within the United States by other scheduled air carriers

provided American does not provide substantially equivalent schedules between the points involved. xxx xxx xxx 4. Remittances Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less commissions to which Orient Air Services is entitled hereunder, not less frequently than semi-monthly, on the 15th and last days of each month for sales made during the preceding half month. All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange orders, less applicable commissions to which Orient Air Services is entitled hereunder, are the property of American and shall be held in trust by Orient Air Services until satisfactorily accounted for to American. 5. Commissions American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its sub-agents as follows: (a) Sales agency commission American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air Services or its sub-agents over American's services and any connecting through air transportation, when made on American's ticket stock, equal to the following percentages of the tariff fares and charges: (i) For transportation solely between points within the United States and between such points and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic Conference of America. (ii) For transportation included in a through ticket covering transportation between points other than those described above: 8% or such other rate(s) as may be prescribed by the International Air Transport Association. (b) Overriding commission In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff fares and charges for all sales of transportation over American's service by Orient Air Service or its sub-agents. xxx xxx xxx 10. Default If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement or shall become bankrupt or make any assignment for the benefit of or enter into any agreement or promise with its creditors or go into liquidation, or suffer any of its goods to be taken in execution, or if it ceases to be in business, this Agreement may, at the option of American, be terminated forthwith and American may, without prejudice to any of its rights under this Agreement, take possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to American. 11. IATA and ATC Rules The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air Transport Association and the Air Traffic Conference of America, and such rules or resolutions shall control in the event of any conflict with the provisions hereof. xxx xxx xxx 13. Termination American may terminate the Agreement on two days' notice in the event Orient Air

Services is unable to transfer to the United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable. xxx xxx xxx 3 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 in accordance with Paragraph 13 thereof (Termination). 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 4 averring the aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." 5 In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, 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 occasioned 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 tranportation in the Philippines in accordance with said GSA agreement; plaintiff is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of payment. Further, plaintiff is directed to pay defendant the amount of One Million Five Hundred Thousand (Pl,500,000.00) pesos as and for exemplary damages; and the amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's fees. Costs against plaintiff. 7 On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of the court a quo on their

material points but with some modifications with respect to the monetary awards granted. The dispositive portion of the appellate court's decision is as follows: WHEREFORE, with the following modifications 1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed; 2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per month starting January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed 3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with counterclaim was filed, until full payment; 4) American is ordered to pay Orient exemplary damages of P200,000.00; 5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees. the rest of the appealed decision is affirmed. Costs against American. 8 American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and arguing for its reversal. The appellate court's decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied American Air's motion and with respect to that of Orient Air, ruled thus: Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's award of exemplary damages and attorney's fees, but granted insofar as the rate of exchange is concerned. The decision of January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive part so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on the date of actual payment. 9 Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution 10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the case at bar. The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. It is the stand of American Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows: 5. Commissions a) . . . b) Overriding Commission In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air Services or its sub-agents. (Emphasis supplied) Since Orient Air was allowed to carry only the ticket stocks of American Air, and the

former not having opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales. This is supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks. On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily by Orient Air." 11 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. 12 The various stipulations in the contract must be read together to give effect to all. 13 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 theobscurity. 14 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. 15 We therefore agree with the respondent appellate court's declaration that:

Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the party who drafted it. 16 We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court, on this issue, ruled thus: It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement, Exh. F, which provides for remittances to American less commissions to which Orient is entitled, and from paragraph 5(d) which specifically allows Orient to retain the full amount of its commissions. Since, as stated ante, Orient is entitled to the 3% override. American's premise, therefore, for the cancellation of the Agreement did not exist. . . ." We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding commission based on total flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance with the Agreementthat of retaining from the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air. On the matter of damages, the respondent appellate court modified by reduction the trial court's award of exemplary damages and attorney's fees. This Court sees no error in such modification and, thus, affirms the same. It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court. We refer particularly to the lower court's decision ordering American Air to "reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement." 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. WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the respondent Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against petitioner American Air. SO ORDERED.

[G.R. No. 130148. December 15, 1997] JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents. DECISION REGALADO, J.: In this appeal by certiorari, petitioners assail the judgment of the Court of Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the Regional Trial Court of Malolos, Bulacan which found private respondent Narciso Deganos liable to petitioners for actual damages, but absolved respondent spouses Brigida D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent resolution of the Court of Appeals which denied their motion for reconsideration of its challenged decision. 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. [1] 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. [2] 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. [3] Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount. In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and ultimately, she and her husband, together with Deganos, signed a compromise agreement with petitioners. In that compromise agreement, Deganos obligated himself to pay petitioners, on installment basis, the balance of his account plus interest thereon. However, he failed to comply with his aforestated undertakings. 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.[4] Ernesto Luz was impleaded therein as the spouse of Brigida. Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were charged with estafa[5] in the Regional Trial Court of Malolos, Bulacan, which was docketed as Criminal Case No. 785-M-94. That criminal case appears to be still pending in said trial court. 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; that he neither acted as agent for nor was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items were received by him for the latter. He further claimed that he never delivered any of the items he received from petitioners to Brigida. Brigida, on her part, denied that she had anything to do with the transactions between petitioners and Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her behalf and, for that matter, neither did she actually receive any of the articles in question. After trial, the court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while Brigida D. Luz did have transactions with petitioners in the past, the items involved were already paid for and all that Brigida owed petitioners was the sum of P21,483.00 representing interest on the principal account which she had previously paid for.[6] The trial court also 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. [7] 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. [8] Absent the required memorandum or any written document connecting the respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf, the alleged agreement between petitioners and Brigida D. Luz was unenforceable. Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal interest thereon from June 25, 1990, and attorneys fees. Brigida D. Luz was ordered to pay P21,483.00 representing the interest on her own personal loan. She and her co-defendant spouse were absolved from any other or further liability. [9] As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals which affirmed said judgment. [10] The motion for reconsideration filed by petitioners was subsequently dismissed, [11] hence the present recourse to this Court. The primary issue in the instant petition is whether or not herein respondent spouses are liable to petitioners for the latters claim for money and damages in the sum of P725,463.98, plus interests and attorneys fees, despite the fact that the evidence does not show that they signed any of the subject receipts or authorized Deganos to receive the items of jewelry on their behalf. Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that respondent spouses are not liable to them, as said conclusion of the trial court is contradicted by the finding of fact of the appellate court that (Deganos) acted as agent of his sister (Brigida Luz). [12] In support of this contention, petitioners

quoted several letters sent to them by Brigida D. Luz wherein the latter acknowledged her obligation to petitioners and requested for more time to fulfill the same. They likewise aver that Brigida testified in the trial court that Deganos took some gold articles from petitioners and delivered the same to her. Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters concerned the previous obligations of Brigida to petitioners, and had nothing to do with the money sought to be recovered in the instant case. Such concurrent factual findings are entitled to great weight, hence, petitioners cannot plausibly claim in this appellate review that the letters were in the nature of acknowledgments by Brigida that she was the principal of Deganos in the subject transactions. On the other hand, with regard to the testimony of Brigida admitting delivery of the gold to her, there is no showing whatsoever that her statement referred to the items which are the subject matter of this case. It cannot, therefore, be validly said that she admitted her liability regarding the same. Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent authority as her agent and held him out to the public as such, hence Brigida can not be permitted to deny said authority to innocent third parties who dealt with Deganos under such belief. [13] Petitioners further represent that the Court of Appeals recognized in its decision that Deganos was an agent of Brigida.[14] 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. The Civil Code provides: 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 agent is put upon inquiry and must discover upon his peril the authority of the agent. [16]

The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation between the two respondents where no evidence supports such claim. Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court below, which it affirmed, is null and void as it contradicted its ruling in CA-G.R. SP No. 39445 holding that there is sufficient evidence/proof against Brigida D. Luz and Deganos for estafa in the pending criminal case. They further aver that said appellate court erred in ruling against them in this civil action since the same would result in an inevitable conflict of decisions should the trial court convict the accused in the criminal case. By way of backdrop for this argument of petitioners, herein respondents Brigida D. Luz and Deganos had filed a demurrer to evidence and a motion for reconsideration in the aforestated criminal case, both of which were denied by the trial court. They then filed a petition for certiorari in the Court of Appeals to set aside the denial of their demurrer and motion for reconsideration but, as just stated, their petition therefor was dismissed.[17] Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP No. 39445 with respect to the criminal case is equivalent to a finding that there is sufficient evidence in the estafa case against Brigida D. Luz and Deganos. Hence, as already stated, petitioners theorize that the decision and resolution of the Court of Appeals now being impugned in the case at bar would result in a possible conflict with the prospective decision in the criminal case. Instead of promulgating the present decision and resolution under review, so they suggest, the Court of Appeals should have awaited the decision in the criminal case, so as not to render academic or preempt the same or, worse, create two conflicting rulings. [18] Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving alleged fraudulent acts, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution and shall require only a preponderance of evidence. It is worth noting that this civil case was instituted four years before the criminal case for estafa was filed, and that although there was a move to consolidate both cases, the same was denied by the trial court. Consequently, it was the duty of the two branches of the Regional Trial Court concerned to independently proceed with the civil and criminal cases. It will also be observed that a final judgment rendered in a civil action absolving the defendant from civil liability is no bar to a criminal action. [19] It is clear, therefore, that this civil case may proceed independently of the criminal case [20] especially because while both cases are based on the same facts, the quantum of proof required for holding the parties liable therein differ. Thus, it is improvident of petitioners to claim that the decision and resolution of the Court of Appeals in the present case would be preemptive of the outcome of the criminal case. Their fancied fear of possible conflict between the disposition of this civil case and the outcome of the pending criminal case is illusory.

Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial resolution dated August 18, 1997, as the same was tainted with irregularities and badges of fraud perpetrated by its court officers. [21] They charge that said appellate court, through conspiracy and fraud on the part of its officers, gravely abused its discretion in issuing that resolution denying their motion for reconsideration. They claim that said resolution was drafted by the ponente, then signed and issued by the members of the Eleventh Division of said court within one and a half days from the elevation thereof by the division clerk of court to the office of the ponente. It is the thesis of petitioners that there was undue haste in issuing the resolution as the same was made without waiting for the lapse of the ten-day period for respondents to file their comment and for petitioners to file their reply. It was allegedly impossible for the Court of Appeals to resolve the issue in just one and a half days, especially because its ponente, the late Justice Maximiano C. Asuncion, was then recuperating from surgery and, that, additionally, hundreds of more important cases were pending. [22] These lamentable allegation of irregularities in the Court of Appeals and in the conduct of its officers strikes us as a desperate attempt of petitioners to induce this Court to give credence to their arguments which, as already found by both the trial and intermediate appellate courts, are devoid of factual and legal substance. The regrettably irresponsible attempt to tarnish the image of the intermediate appellate tribunal and its judicial officers through ad hominem imputations could well be contumacious, but we are inclined to let that pass with a strict admonition that petitioners refrain from indulging in such conduct in litigations. On July 9, 1997, the Court of Appeals rendered judgment in this case affirming the trial courts decision. [23] Petitioners moved for reconsideration and the Court of Appeals ordered respondents to file a comment. Respondents filed the same on August 5, 1997 [24] and petitioners filed their reply to said comment on August 15, 1997. [25] The Eleventh Division of said court issued the questioned resolution denying petitioners motion for reconsideration on August 18, 1997.[26] It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners are making a show of calling out for justice because the Court of Appeals issued a resolution disposing of a case sooner than expected of it. They would even deny the exercise of discretion by the appellate court to prioritize its action on cases in line with the procedure it has adopted in disposing thereof and in declogging its dockets. It is definitely not for the parties to determine and dictate when and how a tribunal should act upon those cases since they are not even aware of the status of the dockets and the internal rules and policies for acting thereon. The fact that a resolution was issued by said court within a relatively short period of time after the records of the case were elevated to the office of the ponente cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was issued without considering the reply filed by petitioners. In fact, that brief pleading filed by petitioners does not exhibit any esoteric or ponderous argument which could not be analyzed within an hour. It is a legal presumption, born of wisdom and experience, that official duty has been regularly performed; [27] that the proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have been and will be duly and properly performed. [28] The burden of proving

irregularity in official conduct is on the part of petitioners and they have utterly failed to do so. It is thus reprehensible for them to cast aspersions on a court of law on the bases of conjectures or surmises, especially since one of the petitioners appears to be a member of the Philippine Bar. Lastly, petitioners fault the trial courts holding that whatever contract of agency was established between Brigida D. Luz and Narciso Deganos is unenforceable under the Statute of Frauds as that aspect of this case allegedly is not covered thereby. [29] They proceed on the premise that the Statute of Frauds applies only to executory contracts and not to executed or to partially executed ones. From there, they move on to claim that the contract involved in this case was an executed contract as the items had already been delivered by petitioners to Brigida D. Luz, hence, such delivery resulted in the execution of the contract and removed the same from the coverage of the Statute of Frauds. Petitioners claim is speciously unmeritorious. It should be emphasized that neither the trial court nor the appellate court categorically stated that there was such a contractual relation between these two respondents. The trial court merely said that if there was such an agency existing between them, the same is unenforceable as the contract would fall under the Statute of Frauds which requires the presentation of a note or memorandum thereof in order to be enforceable in court. That was merely a preparatory statement of a principle of law. What was finally proven as a matter of fact is that there was no such contract between Brigida D. Luz and Narciso Deganos, executed or partially executed, and no delivery of any of the items subject of this case was ever made to the former. 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. Puno, Mendoza, and Martinez, JJ., concur.

G.R. No. 156262 MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and MARY T. BUENAVENTURA, Petitioners, versus HEIRS OF BARTOLOME RAMOS, Respondents. July 14, 2005 DECISION PANGANIBAN, J.: Stripped of nonessentials, the present case involves the collection of a sum of money. Specifically, this case arose from the failure of petitioners to pay respondents predecessor-in-interest. This fact was shown by the non-encashment of checks issued by a third person, but indorsed by herein Petitioner Maria Tuazon in favor of the said predecessor. Under these circumstances, to enable respondents to collect on the indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit is directed, not against the drawer, but against the debtor who indorsed the checks in payment of the obligation. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, challenging the July 31, 2002 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 46535. The decretal portion of the assailed Decision reads: WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED. On the other hand, the affirmed Decision[3] of Branch 34 of the Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as follows: 1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint; 2. The sum of P50,000.00, as attorneys fees; 3. The sum of P20,000.00, as moral damages 4. And to pay the costs of suit. The Facts The facts are narrated by the CA as follows: [Respondents] alleged that between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of respondents]. That of this [quantity,] x x x only 4,437 cavans [have been paid for so far], leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon issued x x x [several] Traders Royal Bank checks. [B]ut when these [checks] were encashed, all of the checks bounced due to insufficiency of funds. [Respondents] advanced that before issuing said checks[,] spouses Tuazon already knew that they had no available fund to support the checks, and they failed to provide for the payment of these despite repeated demands made on them. [Respondents] averred that because spouses Tuazon anticipated that they would be sued, they conspired with the other [defendants] to defraud them as creditors by executing x x x fictitious sales of their properties. They executed x x x simulated

sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x x[,] as well as their residential lot and the house thereon[,] all located at Nueva Ecija, and another simulated deed of sale dated July 12, 1988 of a Stake Toyota registered with the Land Transportation Office of Cabanatuan City on September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses Tuazon, registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential lot located at Nueva Ecija. Another simulated sale of a Toyota Willys was executed on January 25, 1988 in favor of their other son, [copetitioner] Alejandro Tuazon x x x. As a result of the said sales, the titles of these properties issued in the names of spouses Tuazon were cancelled and new ones were issued in favor of the [co-]defendants spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon. Resultantly, by the said ante-dated and simulated sales and the corresponding transfers there was no more property left registered in the names of spouses Tuazon answerable to creditors, to the damage and prejudice of [respondents]. For their part, defendants denied having purchased x x x rice from [Bartolome] Ramos. They alleged that it was Magdalena Ramos, wife of said deceased, who owned and traded the merchandise and Maria Tuazon was merely her agent. They argued that it was Evangeline Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments therefor. In good faith[,] the checks were received [by petitioner] from Evangeline Santos and turned over to Ramos without knowing that these were not funded. And it is for this reason that [petitioners] have been insisting on the inclusion of Evangeline Santos as an indispensable party, and her non-inclusion was a fatal error. Refuting that the sale of several properties were fictitious or simulated, spouses Tuazon contended that these were sold because they were then meeting financial difficulties but the disposals were made for value and in good faith and done before the filing of the instant suit. To dispute the contention of plaintiffs that they were the buyers of the rice, they argued that there was no sales invoice, official receipts or like evidence to prove this. They assert that they were merely agents and should not be held answerable.[5] The corresponding civil and criminal cases were filed by respondents against Spouses Tuazon. Those cases were later consolidated and amended to include Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazon as additional defendants. Having passed away before the pretrial, Bartolome Ramos was substituted by his heirs, herein respondents. Contending that Evangeline Santos was an indispensable party in the case, petitioners moved to file a third-party complaint against her. Allegedly, she was primarily liable to respondents, because she was the one who had purchased the merchandise from their predecessor, as evidenced by the fact that the checks had been drawn in her name. The RTC, however, denied petitioners Motion. Since the trial court acquitted petitioners in all three of the consolidated criminal cases, they appealed only its decision finding them civilly liable to respondents. Ruling of the Court of Appeals Sustaining the RTC, the CA held that petitioners had failed to prove the existence of an agency between respondents and Spouses Tuazon. The appellate court disbelieved petitioners contention that Evangeline Santos should have been impleaded as an indispensable party. Inasmuch as all the checks had been indorsed by Maria Tuazon, who thereby became liable to subsequent holders for the amounts

stated in those checks, there was no need to implead Santos. Hence, this Petition.[6] Issues Petitioners raise the following issues for our consideration: 1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not agents of the respondents. 2. Whether or not the Honorable Court of Appeals erred in rendering judgment against the petitioners despite x x x the failure of the respondents to include in their action Evangeline Santos, an indispensable party to the suit.[7] The Courts Ruling The Petition is unmeritorious. First Issue: Agency Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court of Appeals. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties and this Court.[8] Petitioners have not given us sufficient reasons to deviate from this rule. In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latters consent or authority.[9] The following are the elements of agency: (1) the parties consent, express or implied, to establish the relationship; (2) the object, which is the execution of a juridical act in relation to a third person; (3) the representation, by which the one who acts as an agent does so, not for oneself, but as a representative; (4) the limitation that the agent acts within the scope of his or her authority.[10] As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. [11] This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers themselves; they were not mere agents of respondents in their rice dealership. The question of whether a contract is one of sale or of agency depends on the intention of the parties.[12] The declarations of agents alone are generally insufficient to establish the fact or extent of their authority.[13] The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.[14] In the present case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence. The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the amounts represented by the bounced checks, in a separate civil case that they sought to be consolidated with the current one. If, as they claim, they were mere agents of respondents, petitioners should have brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of

the Rules on Civil Procedure.[15] Their filing a suit against her in their own names negates their claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos. Second Issue: Indispensable Party Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be impleaded as an indispensable party. They insist that respondents Complaint against them is based on the bouncing checks she issued; hence, they point to her as the person primarily liable for the obligation. We hold that respondents cause of action is clearly founded on petitioners failure to pay the purchase price of the rice. The trial court held that Petitioner Maria Tuazon had indorsed the questioned checks in favor of respondents, in accordance with Sections 31 and 63 of the Negotiable Instruments Law.[16] That Santos was the drawer of the checks is thus immaterial to the respondents cause of action. As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be accepted or paid, or both, according to their tenor; and that in case they were dishonored, she would pay the corresponding amount.[17] After an instrument is dishonored by nonpayment, indorsers cease to be merely secondarily liable; they become principal debtors whose liability becomes identical to that of the original obligor. The holder of a negotiable instrument need not even proceed against the maker before suing the indorser.[18] Clearly, Evangeline Santos -- as the drawer of the checks -- is not an indispensable party in an action against Maria Tuazon, the indorser of the checks. Indispensable parties are defined as parties in interest without whom no final determination can be had.[19] The instant case was originally one for the collection of the purchase price of the rice bought by Maria Tuazon from respondents predecessor. In this case, it is clear that there is no privity of contract between respondents and Santos. Hence, a final determination of the rights and interest of the parties may be made without any need to implead her. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED.

Amon Trading Corp. v. Court of Appeals, DECISION CHICO-NAZARIO, J.: This is an appeal by certiorari from the Decision[1] dated 28 November 2002 of the Court of Appeals in CA-G.R. CV No. 60031, reversing the Decision of the Regional Trial Court of Quezon City, Branch 104, and holding petitioners Amon Trading Corporation and Juliana Marketing to be solidarily liable with Lines & Spaces Interiors Center (Lines & Spaces) in refunding private respondent Tri-Realty Development and Construction Corporation (TriRealty) the amount corresponding to the value of undelivered bags of cement. The undisputed facts: Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City. Sometime in February 1992, private respondent had difficulty in purchasing cement needed for its projects. Lines & Spaces, represented by Eleanor Bahia Sanchez, informed private respondent that it could obtain cement to its satisfaction from petitioners, Amon Trading Corporation and its sister company, Juliana Marketing. On the strength of such representation, private respondent proceeded to order from Sanchez Six Thousand Fifty (6,050) bags of cement from petitioner Amon Trading Corporation, and from Juliana Marketing, Six Thousand (6,000) bags at P98.00/bag. Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount of P592,900.00 through Solidbank Managers Check No. 0011565 payable to Amon Trading Corporation, and the amount of P588,000.00 payable to Juliana Marketing, through Solidbank Managers Check No. 0011566. A certain Weng Chua signed the check vouchers for Lines & Spaces while Mrs. Sanchez issued receipts for the two managers checks. Private respondent likewise paid to Lines & Spaces an advance fee for the 12,050 cement bags at the rate of P7.00/bag, or a total of P84,350.00, in consideration of the facilitation of the orders and certainty of delivery of the same to the private respondent. Solidbank Managers Check Nos. 0011565 and 0011566 were paid by Sanchez to petitioners. There were deliveries to private respondent from Amon Trading Corporation and Juliana Marketing of 3,850 bags and 3,000 bags, respectively, during the period from April to June 1992. However, the balance of 2,200 bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, or a total of 5,200 bags, was not delivered. Private respondent, thus, sent petitioners written demands but in reply, petitioners stated that they have already refunded the amount of undelivered bags of cement to Lines and Spaces per written instructions of Eleanor Sanchez. Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, private respondent filed this case for sum of money against petitioners and Lines & Spaces. Petitioners plead in defense lack of right or cause of action, alleging that private respondent had no privity of contract with them as it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that ordered or purchased several bags of cement and paid the price thereof without informing them of any special arrangement nor disclosing to them that Lines & Spaces and respondent corporation are distinct and separate entities. They added that there were purchases or orders made by Lines & Spaces/Tri-Realty which they were about to deliver, but were cancelled by Mrs. Sanchez and the consideration of the cancelled purchases or orders was later reimbursed to Lines & Spaces. The refund was in the form of a check payable to Lines & Spaces. Lines & Spaces denied in its Answer that it is represented by Eleanor B. Sanchez and

pleads in defense lack of cause of action and in the alternative, it raised the defense that it was only an intermediary between the private respondent and petitioners.[2] Soon after, though, counsel for Lines & Spaces moved to withdraw from the case for the reason that its client was beyond contact. On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104, found Lines & Spaces solely liable to private respondent and absolved petitioners of any liability. The dispositive portion of the trial courts Decision reads: Wherefore, judgment is hereby rendered ordering defendant Lines and Spaces Interiors Center as follows: to pay plaintiff on the complaint the amount of P47,950.00 as refund of the fee for the undelivered 5,200 bags of cement at the rate of P7.00 per bag; the amount of P509,600.00 for the refund of the price of the 5,200 undelivered bags of cement at P98.00 per bag; the amount of P2,000,000.00 for compensatory damages; as well as the amount of P639,387.50 as attorneys fees; and to pay Amon Trading and Juliana Marketing, Inc. on the crossclaim the sum of P200,000.00 as attorneys fees.[3] Private Respondent Tri-Realty partially appealed from the trial courts decision absolving Amon Trading Corporation and Juliana Marketing of any liability to Tri-Realty. In the presently assailed Decision, the Court of Appeals reversed the decision of the trial court and held petitioners Amon Trading Corporation and Juliana Marketing to be jointly and severally liable with Lines & Spaces for the undelivered bags of cement. The Court of Appeals disposedWHEREFORE, premises considered, the decision of the court a quo is hereby REVERSED AND SET ASIDE, and another one is entered ordering the following: Defendant-appellee Amon Trading Corporation is held liable jointly and severally with defendant-appellee Lines and Spaces Interiors Center in the amount of P215,600.00 for the refund of the price of 2,200 undelivered bags of cement. Defendant-appellee Juliana Marketing is held liable jointly and severally with defendantappellee Lines and Spaces Interiors Center in the amount of P294,000.00 for the refund of the price of 3,000 undelivered bags of cement. The defendant-appellee Lines and Spaces Interiors Center is held solely in the amount of P47,950.00 as refund of the fee for the 5,200 undelivered bags of cement to the plaintiffappellant Tri-Realty Development and Construction Corporation. The awards of compensatory damages and attorneys fees are DELETED. The cross claim of defendants-appellees Amon Trading Corporation and Juliana Marketing is DISMISSED for lack of merit. No pronouncement as to costs.[4] Pained by the ruling, petitioners elevated the case to this Court via the present petition for review to challenge the Decision and Resolution of the Court of Appeals on the following issues: WHETHER OR NOT THERE WAS A CONTRACT OF AGENCY BETWEEN LINES AND SPACES INTERIOR CENTER AND RESPONDENT; WHETHER OR NOT PETITIONERS AND RESPONDENT HAS PRIVITY OF CONTRACT.[5]

At the focus of scrutiny is the issue of whether or not the Court of Appeals committed reversible error in ruling that petitioners are solidarily liable with Lines & Spaces. The key to unlocking this issue is to determine whether or not Lines & Spaces is the private respondents agent and whether or not there is privity of contract between petitioners and private respondent. We shall consider these issues concurrently as they are interrelated. Petitioners, in their brief, zealously make a case that there was no contract of agency between Lines & Spaces and private respondent.[6] Petitioners strongly assert that they did not have a hint that Lines & Spaces and Tri-Realty are two different and distinct entities inasmuch as Eleanor Sanchez whom they have dealt with just represented herself to be from Lines & Spaces/Tri-Realty when she placed her order for the delivery of the bags of cement. Hence, no privity of contract can be said to exist between petitioners and private respondent.[7] Private respondent, on the other hand, goes over the top in arguing that contrary to their claim of innocence, petitioners had knowledge that Lines & Spaces, as represented by Eleanor Sanchez, was a separate and distinct entity from Tri-Realty.[8] Then, too, private respondent stirs up support for its contention that contrary to petitioners' claim, there was privity of contract between private respondent and petitioners.[9] Primarily, there was no written contract entered into between petitioners and private respondent for the delivery of the bags of cement. As gleaned from the records, and as private respondent itself admitted in its Complaint, private respondent agreed with Eleanor Sanchez of Lines & Spaces for the latter to source the cement needs of the former in consideration of P7.00 per bag of cement. It is worthy to note that the payment in managers checks was made to Eleanor Sanchez of Lines & Spaces and was not directly paid to petitioners. While the managers check issued by respondent company was eventually paid to petitioners for the delivery of the bags of cement, there is obviously nothing from the face of said managers check to hint that private respondent was the one making the payments. There was likewise no intimation from Sanchez that the purchase order placed by her was for private respondents benefit. The meeting of minds, therefore, was between private respondent and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate from the contract of sale between petitioners and Eleanor Sanchez who represented herself to be from Lines & Spaces/Tri-Realty, which, per her representation, was a single account or entity. The records bear out, too, Annex A showing a check voucher payable to Amon Trading Corporation for the 6,050 bags of cement received by a certain Weng Chua for Mrs. Eleanor Sanchez of Lines & Spaces, and Annex B which is a check voucher bearing the name of Juliana Marketing as payee, but was received again by said Weng Chua. Nowhere from the face of the check vouchers is it shown that petitioners or any of their authorized representatives received the payments from respondent company. Also on record are the receipts issued by Lines & Spaces, signed by Eleanor Bahia Sanchez, covering the said managers checks. As Engr. Guido Ganhinhin of respondent Tri-Realty testified, it was Lines & Spaces, not petitioners, which issued to them a receipt for the two (2) managers checks. ThusQ: And what is your proof that Amon and Juliana were paid of the purchases through managers checks? A: Lines & Spaces who represented Amon Trading and Juliana Marketing issued us receipts for the two (2) managers checks we paid to Amon Trading and Juliana Marketing Corporation.

Q: I am showing to you check no. 074 issued by Lines & Spaces Interiors Center, what relation has this check to that check you mentioned earlier? A: Official Receipt No. 074 issued by Lines & Spaces Interiors Center was for the P592,900.00 we paid to Amon Trading Corporation for 6,050 bags of cement. Q: Now there appears a signature in that receipt above the printed words authorized signature, whose signature is that? A: The signature of Mrs. Eleanor Bahia Sanchez, the representative of Lines and Spaces. Q: Why do you know that that is her signature? A: She is quite familiar with me and I saw her affix her signature upon issuance of the receipt.[10] (Emphasis supplied.) Without doubt, no vinculum could be said to exist between petitioners and private respondent. There is likewise nothing meaty about the assertion of private respondent that inasmuch as the delivery receipts as well as the purchase order were for the account of Lines & Spaces/Tri-Realty, then petitioners should have been placed on guard that it was private respondent which is the principal of Sanchez. In China Banking Corp. v. Members of the Board of Trustees, Home Development Mutual Fund[11] and the later case of Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles v. Home Development Mutual Fund , [12] the term and/or was held to mean that effect shall be given to both the conjunctive and and the disjunctive or; or that one word or the other may be taken accordingly as one or the other will best effectuate the intended purpose. It was accordingly ordinarily held that in using the term "and/or" the word "and" and the word "or" are to be used interchangeably. By analogy, the words Lines & Spaces/Tri-Realty mean that effect shall be given to both Lines & Spaces and Tri-Realty or that Lines & Spaces and Tri-Realty may be used interchangeably. Hence, petitioners were not remiss when they believed Eleanor Sanchezs representation that Lines & Spaces/Tri-Realty refers to just one entity. There was, therefore, no error attributable to petitioners when they refunded the value of the undelivered bags of cement to Lines & Spaces only. There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case of agency between private respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines & Spaces was an agent for private respondent, but rather a supplier for the latters cement needs. 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. In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc. v. Court of Appeals,[13] the Court decreed 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. Here, the intention of private respondent, as the Executive Officer of respondent

corporation testified on, was merely for Lines & Spaces, through Eleanor Sanchez, to supply them with the needed bags of cement. Q: Do you know the defendant Lines & Spaces in this case? A: Yes, sir. Q: How come you know this defendant? A: Lines & Spaces represented by Eleanor Bahia Sanchez offered to supply us cement when there was scarcity of cement experienced in our projects .[14] (Emphasis supplied) We cannot go along the Court of Appeals disquisition that Amon Trading Corporation and Juliana Marketing should have required a special power of attorney form when they refunded Eleanor B. Sanchez the cost of the undelivered bags of cement. All the quibbling about whether Lines & Spaces acted as agent of private respondent is inane because as illustrated earlier, petitioners took orders from Eleanor Sanchez who, after all, was the one who paid them the managers checks for the purchase of cement. Sanchez represented herself to be from Lines & Spaces/Tri-Realty, purportedly a single entity. Inasmuch as they have never directly dealt with private respondent and there is no paper trail on record to guide them that the private respondent, in fact, is the beneficiary, petitioners had no reason to doubt the request of Eleanor Sanchez later on to refund the value of the undelivered bags of cement to Lines & Spaces. Moreover, the check refund was payable to Lines & Spaces, not to Sanchez, so there was indeed no cause to suspect the scheme. The fact that the deliveries were made at the construction sites of private respondent does not by itself raise suspicion that petitioners were delivering for private respondent. There was no sufficient showing that petitioners knew that the delivery sites were that of private respondent and for another thing, the deliveries were made by petitioners men who have no business nosing around their clients affairs. Parenthetically, Eleanor Sanchez has absconded to the United States of America and the story of what happened to the check refund may be forever locked with her. Lines & Spaces, in its Answer to the Complaint, washed its hands of the apparent ruse perpetuated by Sanchez, but argues that if at all, it was merely an intermediary between petitioners and private respondent. With no other way out, Lines & Spaces was a no-show at the trial proceedings so that eventually, its counsel had to withdraw his appearance because of his clients vanishing act. Left with an empty bag, so to speak, private respondent now puts the blame on petitioners. But this Court finds plausible the stance of petitioners that they had no inkling of the deception that was forthcoming. Indeed, without any contract or any hard evidence to show any privity of contract between it and petitioners, private respondents claim against petitioners lacks legal foothold. Considering the vagaries of the case, private respondent brought the wrong upon itself. As adeptly surmised by the trial court, between petitioners and private respondent, it is the latter who had made possible the wrong that was perpetuated by Eleanor Sanchez against it so it must bear its own loss. It is in this sense that we must apply the equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.[15] First, private respondent was the one who had reposed too much trust on Eleanor Sanchez for the latter to source its cement needs. Second, it failed to employ safety nets to steer clear of the rip-off. For such huge sums of money involved in this case, it is surprising that a corporation such as private respondent would pay its construction materials in advance instead of in credit thus opening a window of opportunity for Eleanor Sanchez or Lines & Spaces to pocket the remaining balance of the amount paid corresponding to the undelivered materials. Private respondent likewise paid in advance the commission of Eleanor Sanchez for the materials that have yet to be delivered so it really had no means of control over her. Finally, there is

no paper trail linking private respondent to petitioners thereby leaving the latter clueless that private respondent was their true client. Private respondent should have, at the very least, required petitioners to sign the check vouchers or to issue receipts for the advance payments so that it could have a hold on petitioners. In this case, it was the representative of Lines & Spaces who signed the check vouchers. For its failure to establish any of these deterrent measures, private respondent incurred the risk of not being able to recoup the value of the materials it had paid good money for. WHEREFORE, the present petition is hereby GRANTED. Accordingly, the Decision and the Resolution dated 28 November 2002 and 10 June 2003, of the Court of Appeals in CAG.R CV No. 60031, are hereby REVERSED and SET ASIDE. The Decision dated 29 January 1998 of the Regional Trial Court of Quezon City, Branch 104, in Civil Case Q-9214235 is hereby REINSTATED. No costs. SO ORDERED.

G.R. No. 149353 June 26, 2006 JOCELYN B. DOLES, Petitioner,vs.MA. AURA TINA ANGELES, Respondent. DECISION AUSTRIA-MARTINEZ, J.: This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision1 dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution 2 dated August 6, 2001 which denied petitioners Motion for Reconsideration. The antecedents of the case follow: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the concept of a personal loan amounting to P405,430.00 representing the principal amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale", 3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Certificate of Title No. 382532,4 and located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan in the sum of P337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the remainder of the 25 years which began on September 3, 1994; that the property was at that time being occupied by a tenant paying a monthly rent of P3,000.00; that upon verification with the NHMFC, respondent learned that petitioner had incurred arrearages amounting to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears, petitioner denied that she incurred them and refused to pay the same; that despite repeated demand, petitioner refused to cooperate with respondent to execute the necessary documents and other formalities required by the NHMFC to effect the transfer of the title over the property; that petitioner collected rent over the property for the month of January 1997 and refused to remit the proceeds to respondent; and that respondent suffered damages as a result and was forced to litigate. Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money from respondent, and averred that from June to September 1995, she referred her friends to respondent whom she knew to be engaged in the business of lending money in exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued personal checks in payment of the loan; that the checks bounced for insufficiency of funds; that despite her efforts to assist respondent to collect from the borrowers, she could no longer locate them; that, because of this, respondent became furious and threatened petitioner that if the accounts were not settled, a criminal case will be filed against her; that she was forced to issue eight checks amounting to P350,000 to answer for the bounced checks of the borrowers she referred; that prior to the issuance of the checks she informed respondent that they were not sufficiently funded but the latter nonetheless deposited the checks and for which reason they were subsequently dishonored; that respondent then threatened to initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid consideration; that she did not appear before a notary public; that the Community Tax Certificate number on the deed was not hers and for which respondent may be prosecuted

for falsification and perjury; and that she suffered damages and lost rental as a result. The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if valid, whether petitioner is obliged to sign and execute the necessary documents to effect the transfer of her rights over the property to the respondent; and third, whether petitioner is liable for damages. On July 29, 1998, the RTC rendered a decision the dispositive portion of which states: WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for insufficiency of evidence. With costs against plaintiff. SO ORDERED. The RTC held that the sale was void for lack of cause or consideration: 5 Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and further admission that the checks issued by these borrowers in payment of the loan obligation negates [sic] the cause or consideration of the contract of sale executed by and between plaintiff and defendant. Moreover, the property is not solely owned by defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No. 382532 (Annex A, Complaint), thus: "Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico Doles on the parcel of land described in this certificate of title by virtue of the special power of attorney to mortgage, executed before the notary public, etc." The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever. (Art. 1352, Civil Code). Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of error: THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE.6 On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads: WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering defendant-appellee to execute all necessary documents to effect transfer of subject property to plaintiff-appellant with the arrearages of the formers loan with the NHMFC, at the latters expense. No costs. SO ORDERED. The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount borrowed from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by a valid consideration, which is the sum of money petitioner owed respondent amounting to P405,430.00, representing both principal and interest. The CA took into account the following circumstances in their entirety: the supposed friends of petitioner never presented themselves to respondent and that all transactions were made by and between petitioner and respondent; 7 that the money borrowed was deposited with the bank account of the petitioner, while payments made for the loan were deposited by the latter to respondents bank account; 8 that petitioner herself admitted in open court that she was "re-lending" the money loaned from respondent to other individuals for profit;9 and that the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. 10

Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent, since the same is considered just or legal if made to enforce ones claim through competent authority under Article 1335 11 of the Civil Code; 12 that with respect to the arrearages of petitioner on her monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed part of the balance of petitioners loan with the NHMFC which respondent agreed to assume; and that the amount of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, as well as the claim for damages and attorneys fees, is denied for insufficiency of evidence. 13 On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent categorically admitted in open court that she acted only as agent or representative of Arsenio Pua, the principal financier and, hence, she had no legal capacity to sue petitioner; and that the CA failed to consider the fact that petitioners father, who coowned the subject property, was not impleaded as a defendant nor was he indebted to the respondent and, hence, she cannot be made to sign the documents to effect the transfer of ownership over the entire property. On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters had already been passed upon. On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner filed the present Petition and raised the following issues: I. WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT. II. WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR. III. WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14 Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower courts, jurisprudence has recognized several exceptions, at least three of which are present in the instant case, namely: when the judgment is based on a misapprehension of facts; when the findings of facts of the courts a quo are conflicting; and when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion. 15 To arrive at a proper judgment, therefore, the Court finds it necessary to re-examine the evidence presented by the contending parties during the trial of the case. The Petition is meritorious. The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration. 1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she is not a party to the loan; and that the Deed of Sale executed between her and the respondent in their own names, which was predicated on that pre-existing debt, is void for lack of consideration. Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money 16 and that this sum indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and produces no effect whatsoever where the same is without cause or consideration. 17 The question that has to be resolved for the moment is whether this debt can be considered as a valid cause or consideration for the sale. To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from respondent to her friends: first, the friends of

petitioner never presented themselves to respondent and that all transactions were made by and between petitioner and respondent;18 second; the money passed through the bank accounts of petitioner and respondent;19 third, petitioner herself admitted that she was "relending" the money loaned to other individuals for profit; 20 and fourth, the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent.21 On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her cross-examination:22 Atty. Diza: q. You also mentioned that you were not the one indebted to the plaintiff? witness: a. Yes, sir. Atty. Diza: q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they are your friends? witness: a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred. Atty. Diza: q. And you have transact[ed] with the plaintiff? witness: a. Yes, sir. Atty. Diza: q. What is that transaction? witness: a. To refer those persons to Aura and to refer again to Arsenio Pua, sir. Atty. Diza: q. Did the plaintiff personally see the transactions with your friends? witness: a. No, sir. Atty. Diza: q. Your friends and the plaintiff did not meet personally? witness: a. Yes, sir. Atty. Diza: q. You are intermediaries? witness: a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the name of Arsenio Pua because the money came from Arsenio Pua. xxxx Atty. Diza: q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you mentioned [a] while ago? witness: a. Yes, she knows the money will go to those persons. Atty. Diza: q. You are re-lending the money? witness: a. Yes, sir. Atty. Diza: q. What profit do you have, do you have commission? witness: a. Yes, sir. Atty. Diza:

q. How much? witness: a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir. Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the real lender. But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her cross examination:23 Atty. Villacorta: q. Who is this Arsenio Pua? witness: a. Principal financier, sir. Atty. Villacorta: q. So the money came from Arsenio Pua? witness: a. Yes, because I am only representing him, sir. Other portions of the testimony of respondent must likewise be considered: 24 Atty. Villacorta: q. So it is not actually your money but the money of Arsenio Pua? witness: a. Yes, sir. Court: q. It is not your money? witness: a. Yes, Your Honor. Atty. Villacorta: q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are you aware of that? witness: a. I am aware of that. Atty. Villacorta: q. More or less she [accommodated] several friends of the defendant? witness: a. Yes, sir, I am aware of that. xxxx Atty. Villacorta: q. And these friends of the defendant borrowed money from you with the assurance of the defendant? witness: a. They go direct to Jocelyn because I dont know them. xxxx Atty. Villacorta: q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you her friends who [are] in need of money issued check[s] to you? There were checks issued to you? witness: a. Yes, there were checks issued. Atty. Villacorta: q. By the friends of the defendant, am I correct? witness: a. Yes, sir. Atty. Villacorta: q. And because of your assistance, the friends of the defendant who are in need of money were able to obtain loan to [sic] Arsenio Pua through your assistance? witness:

a. Yes, sir. Atty. Villacorta: q. So that occasion lasted for more than a year? witness: a. Yes, sir. Atty. Villacorta: q. And some of the checks that were issued by the friends of the defendant bounced, am I correct? witness: a. Yes, sir. Atty. Villacorta: q. And because of that Arsenio Pua got mad with you? witness: a. Yes, sir. Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed principal. She is also estopped to deny that petitioner acted as agent for the alleged debtors, the friends whom she (petitioner) referred. This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation.25 The question of whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention. 26 Agency may even be implied from the words and conduct of the parties and the circumstances of the particular case.27 Though the fact or extent of authority of the agents may not, as a general rule, be established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which he or she is engaged. 28 In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of petitioner. The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers, did not present themselves to [respondent]" as evidence that negates the agency relationshipit is sufficient that petitioner disclosed to respondent that the former was acting in behalf of her principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary that the principal personally encounter the third person with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent. 29 In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are representing someone else, and so both of them are estopped to deny the same. It is evident from the record that petitioner merely refers actual borrowers and then collects and disburses the amounts of the loan upon which she received a commission; and that respondent transacts on behalf of her "principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally know each other, such ignorance does not affect their juridical standing as agents, especially since the very purpose of agency is to extend the personality of the principal through the facility of the agent. With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for profit, it must be stressed that the manner in which the parties designate the relationship is not controlling . If an act done by one person in behalf

of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called.30 The question is to be determined by the fact that one represents and is acting for another, and if relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the relation or not.31 That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment of the loan in the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her name and not directly paid to Pua. With respect to the second point, particularly, the finding of the CA that the disbursements and payments for the loan were made through the bank accounts of petitioner and respondent, suffice it to say that in the normal course of commercial dealings and for reasons of convenience and practical utility it can be reasonably expected that the facilities of the agent, such as a bank account, may be employed, and that a sub-agent be appointed, such as the bank itself, to carry out the task, especially where there is no stipulation to the contrary.32 In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration. 2. A further scrutiny of the record shows, however, that the sale might have been backed up by another consideration that is separate and distinct from the debt: respondent averred in her complaint and testified that the parties had agreed that as a condition for the conveyance of the property the respondent shall assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC. 33 This Court in the recent past has declared that an assumption of a mortgage debt may constitute a valid consideration for a sale.34 Although the record shows that petitioner admitted at the time of trial that she owned the property described in the TCT, 35 the Court must stress that the Transfer Certificate of Title No. 38253236 on its face shows that the owner of the property which admittedly forms the subject matter of the Deed of Absolute Sale refers neither to the petitioner nor to her father, Teodorico Doles, the alleged co-owner. Rather, it states that the property is registered in the name of "Household Development Corporation." Although there is an entry to the effect that the petitioner had been granted a special power of attorney "covering the shares of Teodorico Doles on the parcel of land described in this certificate,"37 it cannot be inferred from this bare notation, nor from any other evidence on the record, that the petitioner or her father held any direct interest on the property in question so as to validly constitute a mortgage thereon 38 and, with more reason, to effect the delivery of the object of the sale at the consummation stage. 39 What is worse, there is a notation that the TCT itself has been "cancelled."40 In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the sale. Moreover, even assuming the mortgage validly exists, the Court notes respondents allegation that the mortgage with the NHMFC was for 25 years which began September 3,

1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25 years had not lapsed, the prayer of respondent to compel petitioner to execute necessary documents to effect the transfer of title is premature. WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED. SO ORDERED.

G.R. No. L-47538 June 20, 1941 GONZALO PUYAT & SONS, INC., petitioner, vs.ARCO AMUSEMENT COMPANY (formerly known as Teatro Arco), respondent. Feria & Lao for petitioner.J. W. Ferrier and Daniel Me. Gomez for respondent. LAUREL, J.: This is a petition for the issuance of a writ of certiorari to the Court of Appeals for the purpose of reviewing its Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat and Sons. Inc., defendant-appellee." It appears that the respondent herein brought an action against the herein petitioner in the Court of First Instance of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A. The facts of the case as found by the trial court and confirmed by the appellate court, which are admitted by the respondent, are as follows: In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the Philippine Islands, with its office in Manila, was 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 doing business in the Philippine Islands, with office in Manila, in addition to its other business, was 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., thru its then president and acting manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed between the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other, representing the defendant, that the latter would, on behalf of the plaintiff, 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. A reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable to this price, the plaintiff, by means of Exhibit "1", which is a letter signed by C. S. Salmon dated November 19, 1929, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant. Sometime the following year, and after some negotiations between the same parties, plaintiff and defendants, another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2", without date, that is to 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. The equipment under the second order arrived in due time, and the defendant was duly paid the price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges. This amount of $160 does not represent actual out-of-pocket expenses paid by the defendant, but a mere flat charge and rough estimate made by the defendant equivalent to 10 per cent of the price of $1,600 of the equipment. About three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of 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. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-ofpocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action. 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, the petitioner acting as agent of the respondent in the purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from the date of the filing of the complaint until said amount is fully paid, as well as to pay the costs of the suit in both instances. The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the respondent for the overpayments made by the latter. The petitioner now claims that the following errors have been incurred by the appellate court: SPANISH BLAH BLAH 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. In the first place, the contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which can not bind either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhibits 1 and 2, by which 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. (Emphasis ours.) We agree with the trial judge that "whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, 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). While the latters, Exhibits 1 and 2, state that the petitioner was to receive ten per cent (10%) commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil., 501.) 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 respondents contends that it merely agreed to pay the cost price as distinguished from the list price, plus ten per cent (10%) commission and all out-of-pocket expenses incurred by the petitioner. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. It is to be observed that the twenty-five per cent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. 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. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. 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; it willingly paid the price quoted; it received the equipment and machinery as represented; and that was the end of the matter as far as the respondent was concerned. 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. The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is accordingly reversed and the petitioner is absolved from the respondent's complaint in G. R. No. 1023, entitled "Arco Amusement Company (formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo Puyat & Sons, Inc., defendantsappellee," without pronouncement regarding costs. So ordered. Avancea, C.J., Diaz, Moran and Horrilleno, JJ., concur.

G.R. No. L-2870 September 19, 1950 CHUA NGO, plaintiff-appellee, vs.UNIVERSAL TRADING CO., INC., defendantappellant. BENGZON, J.: Chua Ngo delivered, in Manila, to the Universal Trading Company, Inc., a local corporation, the price 300 boxes of Sunkist oranges to be gotten from the United States. The latter ordered the said boxes from Gabuardi Company of San Francisco, and in due course, the goods were shipped from that port to Manila "F. O. B. San Francisco." One hundred eighty boxes were lost in transit, and were never delivered to Chua Ngo. This suit by Chua Ngo is to recover the corresponding price he had paid in advance. Universal Trading Company refused to pay, alleging it merely acted as agent of Chua Ngo in purchasing the oranges. Chua Ngo maintains he bought the oranges from Universal Trading Company, and, therefore, is entitled to the return of the price corresponding to the undelivered fruit. From a judgment for plaintiff, the defendant appealed. It appears that on January 14, 1946, the herein litigants signed the document Exhibit 1, which reads as follows: UNIVERSAL TRADING COMPANY, INC. Far Eastern Division R-236-238 Ayala Building Juan Luna, Manila CONTRACT NO. 632 14 January 1946 Agreement is hereby made between Messrs. Chua Ngo of 753 Folgueras, Manila, and the Universal Trading Company, Inc., Manila, for order as follows and under the following terms: Quantity Merchandise and description Unit Unit price Amount300 Sunkist oranges, wrappedGrade No. 1 .................... .......... ................ .................Navel, 220 to case ............ Case $6.30 $1,890.00300 Onions, AustralianBrowns, 90 lbs. to case Case $6.82 $2,046.00 We are advised by the supplier that the charges to bring these goods to Manila are: Oranges.................................................. Onions ........................................................... $3.06 per case $1.83 per case.

ORDER NO. 707 TO GABUARDI COMPANY OF CALIFORNIA258 Market Street San Francisco, California Please send for our account, subject to conditions on the back of this order, the following merchandise enumerated below: Shipping instructionsVia San Francisco, California Terms: F. O. B. San Francisco Quantity Articles Unit Unit price Total price300 Sunkist oranges wrappedGrade No 1 ............... ............ ..........Navel, 220 to case ...... Case $6.00 $1,800.00. xxx xxx xxx Approved: Universal Trading Company, Inc. (Sgd.) RALPH R. HOLMESSales Manager xxx xxx xxx On January 16 and January 19, 1946, the Universal Trading Co., Inc., wrote Chua Ngo two letters informing him that the contract for oranges (and onions) had been confirmed by the supplier i. e., could be fulfilled and asking for deposit of 65% of the price and certain additional charges. On January 21, 1946, Chua Ngo deposited with the defendant, on account of the Sunkist oranges, the amount of P3,650, and later (March 9, 1946), delivered the additional sum of P2,822.43 to complete the price, as follows: 300 cases of oranges at $9.36.................................. Bank charges ................................................................ Custom charges, etc. .................................................. Delivery charges .......................................................... 3 percent sales tax ................................................... P6,616.00 196.56 270.00 171.00 218.00 P6,253.56 Less deposit R. No. 1062 ................ 3,650.00 P2,822,43 ========= The 300 cases of oranges ordered by the defendant from Gabuardi Company were loaded in good condition on board the S/S Silversandal in the port of San Francisco, together with other oranges (totaling 6,380 cases) for other customers. They were all marked "UTC Manila" and were consigned to defendant. The Silversandal arrived at the port of Manila on March 7, 1946. And out of the 6,380 boxes of oranges, 607 cases were short short landed for causes beyond defendant's control. Consequently, defendant failed to deliver to Chua Ngo 180 cases of the 300 cases contracted for. The total cost of such 180 cases (received by defendant) is admittedly P3,882.60. The above are the main facts according to the stipulation of the parties. Uncontradicted additional evidence was introduced that the mark "UTC Manila" written on all the boxes means "Universal Trading Company, Manila"; that the

Deposit of 40% of the contract price plus the above charges to be payable immediately upon receipt of telegraphic confirmation. Balance payable upon arrival of goods in Manila. If balance is not paid within 48 hours of notification merchandise may be resold by Universal Trading Co., Inc. and the deposit forfeited. NOTE: Onions canceled by supplier.(Initialed) R. E. H. Total amount of order .................................................................................. $3,936 Agreed and accepted: (Sgd.) CHUA NGO Confirmed and approved: (Sgd.) RALPH E. HOLMESSales manager Universal Trading Company, Inc.(See terms of agreement on reverse side.) On the same date, the defendant forwarded and order to Gabuardi Company of San Francisco, U. S. A., which in part says:

defendant paid in its own name to Gabuardi Company the shipment of oranges, and made claims for the lost oranges to the steamship company that insured the shipment company and the insurance company that insured the shipment; and finally, that in the transaction between plaintiff and defendant, the latter received no commission. The crucial question is: Did Universal Trading Company merely agree to buy for and on behalf of Chua Ngo the 300 boxes of oranges, or did it agree to sell and sold the oranges to Chua Ngo? If the first, the judgment m ust be reversed; if the latter, it should be affirmed. In our opinion, the circumstances of record sufficiently indicate a sale. First, no commission was paid. Second, Exhibit 1 says that "if balance is not paid within 48 hours of notification, merchandise may be resold by the Universal Trading Company and the deposit forfeited." "Resold" implies the goods had been sold to Chua Ngo. And forfeiture of the deposit is incompatible with a contract of agency. Third, immediately after executing Exhibit 1 wherein oranges were quoted at $6.30 per box, Universal Trading placed an order for purchase of the same with Gabuardi Company at $6 per box. If Universal Trading Gabuardi Company was agent of Chua Ngo, it could not properly do that. Inasmuch as good faith is to be presumed, we must hold that Universal Trading acted thus because it was not acting as agent of Chua Ngo, but as independent purchaser from Gabuardi Company. Fourth, the defendant charged the plaintiff the sum of P218.87 for 3 percent sales tax, thereby implying that their transaction was a sale. Fifth, if the purchase of the oranges had been made on behalf of Chua Ngo, all claims for losses thereof against the insurance company and against the shipping company should have been assigned to Chua Ngo. Instead, the defendant has been pressing such claims for itself. In our opinion, the arrangement between the parties was this: Chua Ngo purchased from Universal Trading Company, 300 boxes of oranges at $6.30 plus. In turn, the latter purchased from Gabuardi Company at $6 plus, sufficient fruit to comply with its contract with Chua Ngo. Unfortunately, however, part of the orange consignment from San Francisco was lost in transit. Who is to suffer that loss? Naturally, whoever was the owner of the oranges at the time of such loss. It could not be Chua Ngo because the fruit had not been delivered to him. As between Gabuardi and the Universal Trading, inasmuch as the goods had been sold "F. O. B. San Francisco", the loss must be borne by the latter, because under the law, said goods had been delivered to the purchaser at San Francisco on board the vessel Silversandal.1 That is why the Universal has been trying to recover the loss from both the steamship company and the insurer. Now, as Chua Ngo has paid for 300 boxes and has received 120 boxes only, the price of 180 boxes undelivered must be paid back to him. It appears that whereas in the lower court defendant sustained the theory that it acted as agent of plaintiff, in this Court the additional theory is advanced that it acted as agent of Gabuardi Company. This obviously has no merit. As to the contention that defendant incurred no liability because it is admitted that the oranges were lost due to causes beyond the control of the defendant, and the oranges were shipped "F. O. B. San Francisco, the answer is that such contention is based on the assumption which we reject that defendant merely acted as agent of plaintiff in the purchase of the oranges from Gabuardi.

In view of the foregoing, the appealed judgment for plaintiff in the sum of P3,882.60 is affirmed with costs. Moran, C.J., Ozaeta, Paras, Pablo, Tuason, Montemayor and Reyes, JJ., concur.

G.R. No. L-7144 May 31, 1955 FAR EASTERN EXPORT & IMPORT CO., petitioner, vs.LIM TECK SUAN, respondent. MONTEMAYOR, J.: This is a petition for certiorari to review a decision of the Court of Appeals dated September 25, 1953, reversing the decision of the Court of First Instance of Manila, and sentencing the defendant-petitioner Far Eastern Export & Import Co. later referred to as export company, to pay the plaintiff-respondent Lim Teck Suan later to be referred to as Suan, the sum of P11,4476.60, with legal interest from the date of the filing of the complaint and to pay the costs. As to the facts and the issue in the case we are reproducing the findings of the Court of Appeals, which findings are binding on this Tribunal in case of similar appeals: Sometime in November, 1948, Ignacio Delizalde, an agent of the Far Eastern Export & Import Company, went to the store of Lim Teck Suan situated at 267 San Vicente Street, Manila, and offered to sell textile, showing samples thereof, and having arrived at an agreement with Bernardo Lim, the General Manager of Lim Teck Suan, Delizalde returned on November 17 with the buyer's order, Exhibit A, already prepared which reads: FAR EASTERN EXPORT & IMPORT COMPANY 75 Escolta 2nd Floor Brias Roxas Bldg., Manila Ship to LIM TECK SUAN Date Written 11/17/48475 Nueva St., Manila Your No.Our No. 276 I hereby commission you to procure for me the following merchandise, subject to the terms and conditions listed below: ====================================================== Quantity Unit Particulars Amount10,000 yds Ashtone Acetate & Rayon-No. 13472 Width: 41/42 inches; Weight:Approximately 8 oz. per yd; Ten (10)colors, buyers choice, as per attachedsamples, equally assorted; at $1.13per yard F.A.S. New York U. S. $11,500.00Item herein sold are FOB-FAS X C. & FCIF ====================================================== TERMS AND CONDITIONS Acceptance This Buyer's Order is subject to confirmation by the exporter. Shipment Period of Shipment is to be within December. Bank Documents should be for a line of 45 days to allow for presentation and payment against "ON BOARD" bills of lading. Partial shipments permitted. Payment Payment will be by "Confirmed Irrevocable Letter of Credit" to be opened in favor of Frenkel International Corporation, 52 Broadway, New York, 4, N. Y. for the full amount of the above cost of merchandise plus (approximately) for export packing: insurance, freight, documentation, forwarding, etc. which are for the buyers accounts, IMMEDIATELY upon written Confirmation. Our Guarantee In case shipment is not affected, seller agrees to reimburse buyer for all banking expenses. Confirmed Accepted Signed Nov. 17, 1948 Authorized official Confirmed Accepted (Sgd.) Illegible Date Nov. 1948 to be signed by our representative upon confirmation.

In accordance with said Exhibit A, plaintiff established a letter of credit No. 6390 (Exhibit B) in favor of Frenkel International Corporation through the Hongkong and Shanghai Bangking Corporation, attached to the agreed statement of facts. On February 11, 1949, the textile arrived at Manila on board the vessel M. S. Arnold Maersk, covered by bill of lading No. 125 (Exhibit C), Invoice No. 1684-M (Exhibit D) issued by Frenkel International Corporation direct to the plaintiff. The plaintiff complained to the defendant of the inferior quality of the textile received by him and had them examined by Marine Surveyor Del Pan & Company. Said surveyor took swatches of the textile and had the same analyzed by the Institute of Science (Exhibit E-1) and submitted a report or survey under date of April 9, 1949 (Exhibit E). Upon instructions of the defendants plaintiff deposited the goods with the United Warehouse Corporation (Exhibits H, H-1 to H-6. As per suggestion of the Far Eastern Export and Import Company contained in its letter dated June 16, 1949, plaintiff withdrew from the United Bonded Warehouse, Port Area, Manila, the fifteen cases of Ashtone Acetate and Rayon Suiting for the purpose of offering them for sale which netted P11,907.30. Deducting this amount from the sum of P23,686.96 which included the amount paid by plaintiff for said textile and the warehouse expenses, a difference of P11,476.66 is left, representing the net direct loss. The defense set up is that the Far Eastern Export and Import Company only acted as a broker in this transaction; that after placing the order the defendants took no further action and the cargo was taken directly by the buyer Lim Teck Suan, the shipment having been made to him and all the documents were also handled by him directly without any intervention on the part of the defendants; that upon receipt of Lim Teck Suan's complaint the defendants passed it to its principal, Frenkel International Corporation, for comment, and the latter maintained that the merchandise was up to standard called for. The lower court acquitted the defendants from the complaint asking for damages in the sum of P19,500.00 representing the difference in price between the textile ordered and those received, plus profits unrealized and the cost of this suit, and dismissed the counterclaim filed by the defendants without pronouncement as to costs. As already stated, the Court of Appeals reversed the judgment entered by the Court of First Instance of Manila, basing its decision of reversal on the case of Jose Velasco, vs. Universal Trading Co., Inc., 45 Off. Gaz. 4504 where the transaction therein involved was found by the court to be one of purchase and sale and not of brokerage or agency. We have carefully examined the Velasco case and we agree with the Court of Appeals that the facts in that case are very similar to those in the present case. In the case of Velasco, we have the following statement by the court itself which we reproduced below: Prior to November 8, 1945 a salesman or agent of the Universal Trading Co., Inc. informed Jose Velasco, Jr. that his company was in a position to accept and fill in orders for Panamanian Agewood Bourbon Whisky because there were several thousand cases of this article ready for shipment to the company by its principal office in America. Acting upon this offer and representative Velasco went to the Universal Trading Co., Inc., and after a conversation with the latter's official entered into an agreement couched in the following terms: "Agreement is hereby made between Messrs. Jose Velasco, Jr., 340 Echaque, Manila, and the Universal Trading Company, Manila, for order as follows and under

the following terms: Quantity Merchandise and Unit Unit AmountPriceDescription100 Panamanian Agewood BourbonWhisky ..........................Case $17.00 $1,700_______Total amount of order ........... $1,700 Terms of Agreement: "1. That the Universal Trading Company agrees to order the above merchandise from their Los Angeles Office at the price quoted above, C.I.F. Manila, for December shipment; "2. That Messrs. Jose Velasco, Jr., 340 Echaque, Manila, obligates myself/themselves to take the above merchandise when advised of its arrival from the United States and to pay in cash the full amount of the order in the Philippine Currency at the office of the Universal Trading Company; "3. This order may be subject to delay because of uncertain shipping conditions. War risk insurance, transhipping charges, if any, port charges, and any storage that may be incurred due to your not taking delivery of the order upon being notified by us that the order is ready for delivery, and government taxes, are all for your account; "4. The terms of this agreement will be either of the following:"a. To open up irrevocable letter of credit for the value of the order with any of the local banks, or thru bills of lading payable to A. J. Wilson Company, 1263 South North Avenue, Los Angeles, California;"b. To put up a cash deposit equivalent to 50 % of the order; "5. Reasonable substitute, whenever possible, will be shipped in lieu of items called for, if order is not available." Accordingly, Velasco deposited with the defendant the sum of $1,700 which is 50% of the price of the whisky pursuant to agreement made, instead of 'to open up irrevocable letter of credit for the value of the order with any of the local banks, or through bills of lading payable to A. J. Wilson Company.' On November 6, 1945, the same date that the contract or agreement, Exhibit A, was signed an invoice under the name of the Universal Trading Co., Inc. was issued to Velasco for the 100 cases of Panamanian Agewood Bourbon Whisky for the price of $1,700 which invoice manifested that the article was sold to Jose Velasco, Jr. On January 15, 1946 another invoice was issued containing besides the list price of $1,700 or P3,400, a statement of bank charges, customs duties, internal revenue taxes, etc., giving a total amount of P5,690.10 which after deducting the deposit of $1,700, gives a balance of P3,990.01. On January 25, 1946 the Universal Trading Co., Inc. wrote Exhibit 4 to Mr. Velasco advising him that the S. S. Manoeran had docked and that they would appreciate it if he would pay the amount of P3,990.10 direct to them. It turned out, however, that after the ship arrived, what the Universal Trading Co., Inc. tried to deliver to Velasco was not Panamanian Agewood Bourbon Whisky but Panamanian Agewood Blended Whisky. Velasco refused to receive the shipment and in turn filed action against the defendant for the return of his deposit of $ 1,700 with interest. For its defense, defendant contends that it merely acted as agent for Velasco and could not be held responsible for the substitution of Blended Whisky for Bourbon Whisky and that furthermore the Blended Whisky was a reasonable substitute for Bourbon. After due hearing the Court of First Instance of Manila held that the transaction was purchase and sale and ordered the defendant to refund to the plaintiff his deposit of P1,700 with legal interest from the date of the filing of the suit with costs, which decision on appeal was affirmed by this Court. We notice the following similarities. In the present case, the export company acted as agent for Frenkel International Corporation, presumably the supplier of the textile

sold. In the Velasco case, the Universal Trading Co., was acting as agent for A. J. Wilson Company, also the supplier of the whisky sold. In the present case, Suan according to the first part of the agreement is said merely to be commissioning the Export Company to procure for him the merchandise in question, just as in the other case, Velasco was supposed to be ordering the whisky thru the Universal Trading Co. In the present case, the price of the merchandise bought was paid for by Suan by means of an irrevocable letter of credit opened in favor of the supplier, Frenkel International Corporation. In the Velasco case, Velasco was given the choice of either opening a similar irrevocable letter of credit in favor of the supplier A. J. Wilson Company or making a cash deposit. It is true that in the Velasco case, upon the arrival of the whisky and because it did not conform to specifications, Velasco refused to received it; but in the present case although Suan received the merchandise he immediately protested its poor quality and it was deposited in the warehouse and later withdrawn and sold for the best price possible, all at the suggestion of the Export company. The present case is in our opinion a stronger one than that of Velasco for holding the transaction as one of purchase and sale because as may be noticed from the agreement (Exhibit "A"), the same speaks of the items (merchandise) therein involved as sold, and the sale was even confirmed by the Export company. In both cases, the agents Universal Trading Co. and the export company dealt directly with the local merchants Velasco and Suan without expressly indicating or revealing their principals. In both cases there was no privity of contract between the buyers Suan and Velasco and the suppliers Frenkel International Corporation and A. J. Wilson Company, respectively. In both cases no commission or monetary consideration was paid or agreed to be paid by the buyers to the Export company and the Universal Trading Co., proof that there was no agency or brokerage, and that the profit of the latter was undoubtedly the difference between the price listed to the buyers and the net or special price quoted to the sellers, by the suppliers. As already stated, it was held in the Velasco case that the transaction therein entered into was one of purchase and sale, and for the same reasons given there, we agreed with the Court of Appeals that the transaction entered into here is one of purchase and sale. As was held by this Tribunal in the case of Gonzalo Puyat & Sons Incorporated vs. Arco Amusement, 72 Phil., 402, where a foreign company has an agent here selling its goods and merchandise, that same agent could not very well act as agent for local buyers, because the interests of his foreign principal and those of the buyer would be in direct conflict. He could not serve two masters at the same time. In the present case, the Export company being an agent of the Frenkel International Corporation could not, as it claims, have acted as an agent or broker for Suan. Finding no reversible error in the decision appealed from, the same is hereby affirmed, with costs.

G.R. No. L-10517 June 28, 1957 PEARL ISLAND COMMERCIAL CORPORATION, plaintiff-appellee, vs.LIM TAN TONG and MANILA SURETY & FIDELITY CO., INC., defendants-appellants. Diaz and Baizas for appellee.De Santos and Herrera for appellant Manila Surety & Fidelity Co., Inc. MONTEMAYOR, J.: In June, 1951, plaintiff Pearl Island Commercial Corporation, engaged in the manufacture of floor wax under the name of "Bee Wax", in the City of Manila, entered into a contract, Exhibit A, with defendant Lim Tan Tong, wherein the latter, designated as sole distributor of said article in the provinces of Samar, Leyte Cebu Bohol and Negros Oriental and all the provinces in the island of Mindanao, was going to buy the said floor wax for resale in the territory above-mentioned. The plaintiff undertook not to appoint any other distributor within the said territory; to sell to defendant Tong at factory price in Manila, F. O. B. Manila; that Tong could sell the article in his territory at any price he saw that fit; that payment for any floor wax purchased shall he delivered to plaintiff within sixty days from the date of shipment; that (this is important) Tong was to furnish surety bond to cover all shipments of the floor wax that are damaged or unmerchantable, at its expense; and that in case of loss due to fortuitous event or force majeure, the plaintiff was to shoulder the loss, provided the goods were still in transit. On the same day said contract were executed on June 16, 1951, defendant Manila Surety & Fidelity Co., Inc., with Tong as principal, filed the surety bond (Exhibit B), binding itself unto the plaintiff in the sum of P5,000, by reason of the appointment of Tong as exclusive agent for plaintiff for the Visayas-Mindanao provinces, the bond being conditioned on the faithful performance of Tong's duties, in accordance with the agreement. It would appear that for its security, the Surety Company had Ko Su Kuan and Marciano Du execute in its favor an indemnity agreement that they would indemnify said surety company in whatever amount it may pay to the plaintiff by reason of the bond filed by it. On June 18, 1951, plaintiff shipped 299 cases of Bee Wax, valued at P7,107, to Tong, duly received by the latter. Tong failed to remit the value within sixty days, and despite the demand made by plaintiff on him to send that amount, he sent only P770, leaving a balance of P6,337, which he admits to be still with him, but which he refuses to remit to the plaintiff, claiming that the latter owed him a larger amount. To enforce payment of the balance of P6,337, plaintiff filed this present action not only against Tong, but also against the Surety Company, to recover from the latter the amount of its bond of P5,000. The Surety Company in its answer filed a cross-claim against Tong, and with the trial courts permission, filed a third-party complaint against Ko Su Kuan and Marciano Du who, as already stated, had executed an indemnity agreement in its favor. After trial, the lower court, presided by Judge Hermogenes Concepcion, rendered judgment, the dispositive part of which reads as follows: IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiff and against the defendants as follows: (a) The Court orders the defendants Lim Tan Tong and the Manila Surety & Fidelity Co., Inc., to pay jointly and severally the plaintiff Pearl Island Commercial Corporation the sum of P5,000.00 plus legal interest from the date of the filing of this complaint, until it is fully paid; (b) the Court orders the defendant Lim Tan Tong to pay to the plaintiff the sum of P1,337.00 with legal rate of interest from the date of the filing of this complaint until said amount is fully paid; (c) The two defendants shall pay jointly and severally another amount of P500 to the plaintiff as attorney's fees, plus the costs of this suit; (d) The Court orders the cross-defendant Lim Tan Tong and the third-party defendants Ko Su Kuan and Marciano Du to pay jointly and severally to the Manila Surety & Fidelity Co.,

Inc., the sum of P5,000 with legal rate of interest from the date of the filing of this complaint until fully paid, plus P500 as attorney's fees, plus the costs of this suit. The Surety company is appealing said decision. The appeal originally taken to the Court of Appeals was later certified to us as involving only questions of law. Appellant assigns the following errors: I. The trial court erred in holding that the contract between the Pearl Island Commercial Corporation and Lim Tan tong was one of agency so that breach thereof would come within the terms of the surety bond posted by appellant therein. II. The trial court erred in ordering the defendant-appellant herein to pay attorney's fees and other charges stated in the judgement. It is appellant's contention that it cannot be held liable on its bond for the reason that the latter was filed on the theory that the contract between the plaintiff and Tong was one of agency as a result of which, said surety Company guaranteed the faithful performance of tong as agent, but that it turned out that said contract was one of purchase and sale, shown by the very title of said contract (Exhibit A), namely, "Contract of Purchase and Sale", and appellant never undertook to guaranty the faithful performance of Tong as a purchaser. However, a careful examination of the said contract shows that appellant is only partly right, for the reason that the terms of the said contract, while providing for sale of Bee Wax from the plaintiff to Tong and purchase of the same by Tong from the plaintiff, also designates Tong as the sole distributor of the article within a certain territory. Besides, paragraph 4 of the contract entitled "Security", provides that tong was to furnish surety bond to cover all shipments made by the plaintiff to him. Furthermore, appellant must have understood the contract to one, at least partly, of agency because the bond itself (Exhibit B) says the following: WHEREAS, the above bounden principal has been appointed as exclusive agent for Pearl Islands Commercial Corporation of Manila, Philippines, for the Visayas-Mindanao Provinces; . . . Under the circumstances, we are afraid that the Surety Company is not now in a position to deny its liability for the shipment of the 299 cases of Bee Wax duly received by Tong and his failure to pay its value of P7,107, minus P770 or a balance of P6,337, of course, up to the limit of P5,000, the amount of the bond. True, the contract (Exhibit A) is not entirely clear. It is in some respects, even confusing. While it speaks of sale of Bee Wax to Tong and his responsibility for the payment of the value of every shipment so purchased, at the same time it appoints him sole distributor within a certain area, the plaintiff undertaking not to appoint any other agent or distributor within the same area. Anyway, it seems to have been the sole concern and interest of the plaintiff to be sure that it was paid the value of all shipments of Bee Wax to Tong and the Surety Company by its bond, in the final analysis said payment by Tong, either as purchaser or as agent. Whether the article was purchased by Tong or whether it was consigned to him as agent to be sold within his area, the fact is that Tong admits said shipment, admits its value, admits keeping the same (P7,107 minus the P770 he had paid on account), but that he is retaining it for reasons of his own, namely, that plaintiff allegedly owes him a larger amount. Moreover, the Surety Company is adequately protected, especially by the judgment because by its express terms, appellant can recover from Ko Su Kuan and Marciano Du whatever amounts, including attorney's fees it may pay to plaintiff, and said two persons evidently have not appealed from the decision. In view of the foregoing, the decision appealed from is hereby affirmed, with costs.

G.R. No. L-34338 November 21, 1984 LOURDES VALERIO LIM, petitioner, vs.PEOPLE OF THE PHILIPPINES, respondent. RELOVA, J.: Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced "to suffer an imprisonment of four (4) months and one (1) day as minimum to two (2) years and four (4) months as maximum, to indemnify the offended party in the amount of P559.50, with subsidize imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo) From this judgment, appeal was taken to the then Court of Appeals which affirmed the decision of the lower court but modified the penalty imposed by sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day of arresto mayor as minimum to one (1) year and one (1) day of prision correccional as maximum, to indemnify the complainant in the amount of P550.50 without subsidiary imprisonment, and to pay the costs of suit." (p. 24, Rollo) The question involved in this case is whether the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability of petitioner for the crime charged. The findings of facts of the appellate court are as follows: ... The appellant is a businesswoman. On January 10, 1966, the appellant went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. This agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew the document, Exh. A, dated January 10, 1966, which reads: To Whom It May Concern: This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was sold. This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant at that time was bringing a jeep, and the tobacco was loaded in the jeep and brought by the appellant. Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three different times. Demands for the payment of the balance of the value of the tobacco were made upon the appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug further testified that she had gone to the house of the appellant several times, but the appellant often eluded her; and that the "camarin" the appellant was empty. Although the appellant denied that demands for payment were made upon her, it is a fact that on October 19, 1966, she wrote a letter to Salud Bantug which reads as follows: Dear Salud, Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang nasisingil kong pera, magintay ka hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang ako ng marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo ay kahit konte muna ay bibigyan kita. Pupunta lang kami ni Mina sa Maynila ngayon. Salud kung talagang kailangan mo ay bukas ay dadalhan kita ng pera. Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga suki ko ng puesto. Huwag kang mabahala at tiyak na babayaran kita. Patnubayan tayo ng mahal na panginoon Dios. (Exh. B). Ludy

Pursuant to this letter, the appellant sent a money order for P100.00 on October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated April 18, 1967, or a total of P240.00. As no further amount was paid, the complainant filed a complaint against the appellant for estafa. (pp. 14, 15, 16, Rollo) In this petition for review by certiorari, Lourdes Valerio Lim poses the following questions of law, to wit: 1. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing document (Exhibit "A") "fixed a period" and "the obligation was therefore, immediately demandable as soon as the tobacco was sold" (Decision, p. 6) as against the theory of the petitioner that the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended in which case the only action that can be maintained is a petition to ask the court to fix the duration thereof; 2. Whether or not the Honorable Court of Appeals was legally right in holding that "Art. 1197 of the New Civil Code does not apply" as against the alternative theory of the petitioner that the fore. going receipt (Exhibit "A") gives rise to an obligation wherein the duration of the period depends upon the will of the debtor in which case the only action that can be maintained is a petition to ask the court to fix the duration of the period; and 3. Whether or not the honorable Court of Appeals was legally right in holding that the foregoing receipt is a contract of agency to sell as against the theory of the petitioner that it is a contract of sale. (pp. 3-4, Rollo) It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix a period, does not apply. Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid the commission if the goods were sold, the Court of Appeals correctly resolved the matter as follows: ... Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso's tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be given something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso's house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not have been the appellant who would have gone to the house of Ayroso, but it would have been Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant. (p. 19, Rollo) The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco if the same was not sold. ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With costs. SO ORDERED.

VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents. DECISION QUISUMBING, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals dated February 24, 1994, in CA-G.R. CV No. 31717, as well as the respondent court's resolution of September 30, 1994 modifying said decision. Both decision and resolution amended the judgment dated February 13, 1991, of the Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118. The facts of this case as found by both the trial and appellate courts are as follows: 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."[1] The transaction it covered was a "direct sale."[2] The SLDR also contains an additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse)."[3] 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."[4] On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said checks also covered SLDR No. 1213. 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.[5] CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags. On January 31, 1990, petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already dwithdrawn all the sugar covered by the cleared checks.[6] 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, docketed as Civil Case No. 90-1118. Defendants were Teresita Ng Sy (doing business under the name of St. Therese Merchandising) and herein petitioner. Since the former could not be served with summons, the case proceeded only against the latter. During the trial, it was discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who could not be reached through summons.[7] CSC, however, did not bother to pursue its case against her, but instead used her as its witness. CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M. Therefore, the latter had no justification for refusing delivery of the sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by SLDR No. 1214M and sought the award of P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's fees and litigation expenses. Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags.[8] Since STM had already drawn in full all the sugar corresponding to the amount of its cleared checks, it could no longer authorize further delivery of sugar to CSC. Petitioner also contended that it had no privity of contract with CSC. Petitioner explained that the SLDRs, which it had issued, were not documents of title, but mere delivery receipts issued pursuant to a series of transactions entered into between it and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said party's rights and interests. Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's coconspirator to defraud it through a misrepresentation that CSC was an innocent purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to pay it the following sums: P10,000,000.00 as moral damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that cross-defendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and P1,500,000.00 as attorney's fees. Since no settlement was reached at pre-trial, the trial court heard the case on the merits. As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as follows: "WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against defendant Victorias Milling Company: "1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000 bags of refined sugar due under SLDR No. 1214; "2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00 as unrealized profits, the amount of P800,000.00 as exemplary damages and the amount of P1,357,000.00, which is 10% of the acquisition value of the undelivered bags of refined sugar in the amount of P13,570,000.00, as attorney's fees, plus the

costs. "SO ORDERED."[9] It made the following observations: "[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by her covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar bought by her covered by SLDR No. 1213 on the same date, October 16, 1989 (date of the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are post-dated checks dated October 27, 1989 issued by St. Therese Merchandising in favor of Victorias Milling Company at the time it purchased the 50,000 bags of sugar covered by SLDR No. 1213 and 1214. Said checks appear to have been honored and duly credited to the account of Victorias Milling Company because on October 27, 1989 Victorias Milling Company issued official receipt no. 34734 in favor of St. Therese Merchandising for the amount of P31,900,000.00 (Exhibits B and B-1). The testimony of Teresita Ng Go is further supported by Exhibit F, which is a computer printout of defendant Victorias Milling Company showing the quantity and value of the purchases made by St. Therese Merchandising, the SLDR no. issued to cover the purchase, the official reciept no. and the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. 1214 the same has been fully paid as indicated by the word 'cleared' appearing under the column of 'status of payment.' "On the other hand, the claim of defendant Victorias Milling Company that the purchase price of the 25,000 bags of sugar purchased by St. Therese Merchandising covered by SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo Caintic, witness for defendant Victorias Milling Company. The Court notes that the testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully paid and is not corroborated by any positive evidence. There is an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by the buyer in payment of the purchased price were dishonored. However, said witness failed to present in Court any dishonored check or any replacement check. Said witness likewise failed to present any bank record showing that the checks issued by the buyer, Teresita Ng Go, in payment of the purchase price of the sugar covered by SLDR No. 1214 were dishonored."[10] Petitioner appealed the trial courts decision to the Court of Appeals. On appeal, petitioner averred that the dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale. Pursuant to this contract, STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM. SLDR No. 21214M was only one of 22 SLDRs issued to STM and since the latter had already withdrawn its full quota of sugar under the said SLDR, CSC was already precluded from seeking delivery of the 23,000 bags of sugar. Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and independent transactions and that the details of the series of purchases were contained in a single statement with a consolidated summary of cleared check payments and sugar stock withdrawals because this a more convenient system than issuing separate statements for each purchase. The appellate court considered the following issues: (a) Whether or not the transaction between petitioner and STM involving SLDR No. 1214M was a separate,

independent, and single transaction; (b) Whether or not CSC had the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or not CSC as buyer from STM of the rights to 25,000 bags of sugar covered by SLDR No. 1214M could compel petitioner to deliver 23,000 bags allegedly unwithdrawn. On February 24, 1994, the Court of Appeals rendered its decision modifying the trial court's judgment, to wit: "WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders defendant-appellant to: "1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M; " 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the undelivered bags of refined sugar, as attorneys fees; "3) Pay the costs of suit. "SO ORDERED."[11] Both parties then seasonably filed separate motions for reconsideration. In its resolution dated September 30, 1994, the appellate court modified its decision to read: "WHEREFORE, the Court hereby modifies the assailed judgment and orders defendant-appellant to: "(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No. 1214M; "(2) Pay costs of suit. "SO ORDERED."[12] The appellate court explained the rationale for the modification as follows: "There is merit in plaintiff-appellee's position. "Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as 12,586 cannot be made the basis for such a finding. The rule is explicit that courts should consider the evidence only for the purpose for which it was offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford the party against whom the evidence is presented to object thereto if he deems it necessary. Plaintiff-appellee is, therefore, correct in its argument that Exhibit F' which was offered to prove that checks in the total amount of P15,950,000.00 had been cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot be used to prove the proposition that 12,586 bags of sugar remained undelivered. "Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiff-appellee was to the effect that it had withdrawn only 2,000 bags of sugar from SLDR after which it was not allowed to withdraw anymore. Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to defendant-appellant asking the latter to allow it to withdraw the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged that sugar delivery to the STM corresponded only to the value of cleared checks; and that all sugar corresponded to cleared checks had been withdrawn. Defendant-appellant did not rebut plaintiff-appellee's assertions. It did not present evidence to show how many bags of sugar had been withdrawn against SLDR No. 1214M, precisely because of its theory that all sales in question were a series of one single transaction and withdrawal of sugar depended on the clearing of checks paid therefor. "After a second look at the evidence, We see no reason to overturn the findings of the trial court on this point."[13]

Hence, the instant petition, positing the following errors as grounds for review: "1. The Court of Appeals erred in not holding that STM's and private respondent's specially informing petitioner that respondent was authorized by buyer STM to withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf," (emphasis in the original) private respondent's withdrawing 2,000 bags of sugar for STM, and STM's empowering other persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered respondent like the other persons, an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and precluded it from subsequently claiming and proving being an assignee of SLDR No. 1214M and from suing by itself for its enforcement because it was conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil Code). " 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain relevant and undisputed facts which, had they been considered, would have shown that petitioner was not liable, except for 69 bags of sugar, and which would justify review of its conclusion of facts by this Honorable Court. " 3. The Court of Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626 of the Civil Code when it ruled that compensation applied only to credits from one SLDR or contract and not to those from two or more distinct contracts between the same parties; and erred in denying petitioner's right to setoff all its credits arising prior to notice of assignment from other sales or SLDRs against private respondent's claim as assignee under SLDR No. 1214M, so as to extinguish or reduce its liability to 69 bags, because the law on compensation applies precisely to two or more distinct contracts between the same parties (emphasis in the original). "4. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in Exh. F between petitioner and STM, respondent's admission of its balance, and STM's acquiescence thereto by silence for almost one year did not render Exh. `F' an account stated and its balance binding. "5. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the sale of sugar being subject to its availability at the Nawaco warehouse, made the sale conditional and prevented STM or private respondent from acquiring title to the sugar; and the non-availability of sugar freed petitioner from further obligation. "6. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded respondent from seeking judicial reliefs (sic) from petitioner, its only remedy being against its assignor."[14] Simply stated, the issues now to be resolved are: (1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as an assignee. (2)....Whether or not the Court of Appeals erred in applying the law on compensation to the transaction under SLDR No. 1214M so as to preclude petitioner from offsetting its credits on the other SLDRs. (3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR No. 1214M was a conditional sale or a contract to sell and hence freed petitioner from further obligations. (4)....Whether or not the Court of Appeals committed an error of law in not applying the "clean hands doctrine" to preclude CSC from seeking judicial relief. The issues will be discussed in seriatim.

Anent the first issue, we find from the records that petitioner raised this issue for the first time on appeal. It is settled that an issue which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process.[15] Nonetheless, the Court of Appeals opted to address this issue, hence, now a matter for our consideration. Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion of said letter reads: "This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) 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."[16] 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.[17] On the part of the principal, there must be an actual intention to appoint[18] or an intention naturally inferable from his words or actions;[19] and on the part of the agent, there must be an intention to accept the appointment and act on it,[20] and in the absence of such intent, there is generally no agency.[21] 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.[22] The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.[23] 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 (Exhibit I, Records, p. 78). 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 co-plaintiff."[24]

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.[25] 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.[26] 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.[27] 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. On the second issue, proceeding from the theory that the transactions entered into between petitioner and STM are but serial parts of one account, petitioner insists that its debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of the Civil Code.[28] However, the trial court found, and the Court of Appeals concurred, that the purchase of sugar covered by SLDR No. 1214M was a separate and independent transaction; it was not a serial part of a single transaction or of one account contrary to petitioner's insistence. Evidence on record shows, without being rebutted, that petitioner had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had the obligation to deliver said commodity to STM or its assignee. Since said sugar had been fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and debtors of each other. No reversible error could thereby be imputed to respondent appellate court when, it refused to apply Article 1279 of the Civil Code to the present case. Regarding the third issue, petitioner contends that the sale of sugar under SLDR No. 1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions: "It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the buyer/trader personally or through a representative, title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed (stress supplied) and buyer/trader assumes full responsibility therefore"[29] The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped from alleging the contrary. The contract is the law between the contracting parties.[30] And where the terms and conditions so stipulated are not contrary to law, morals, good customs, public policy or public order, the contract is valid and must be upheld.[31] Having transferred title to the sugar in question, petitioner is now obliged to deliver it to the purchaser or its assignee. As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a conspiracy to defraud it of its sugar. This conspiracy is allegedly evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b) CSC's refusal to pursue its case against Teresita Ng Go; and (c) the authority given by the latter to other persons to withdraw sugar against SLDR No.

1214M after she had sold her rights under said SLDR to CSC. Petitioner prays that the doctrine of "clean hands" should be applied to preclude CSC from seeking judicial relief. However, despite careful scrutiny, we find here the records bare of convincing evidence whatsoever to support the petitioner's allegations of fraud. We are now constrained to deem this matter purely speculative, bereft of concrete proof. WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

G.R. No. L-7089 August 31, 1954 DOMINGO DE LA CRUZ, plaintiff-appellant, vs.NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees. MONTEMAYOR, J.: The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was 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. As such guard he carried a revolver. In the afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a ticket, 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. For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte. After a re-investigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court in January 1943. On July 8, 1947, De la Cruz was again accused of the same crime of homicide, in Criminal Case No. 431 of the same Court. 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, to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. 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. 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. The question posed by this appeal is whether an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages against his employer. The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying many laws or provisions of law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it has no other alternative than to dismiss the complaint." The trial court is right. We confess that we are not aware of any law or judicial authority that is directly applicable to the present case, and realizing the importance and far-reaching effect of a ruling on the subject-matter we have searched, though vainly, for judicial authorities and enlightenment. All the laws and principles of law

we have found, as regards master and servants, or employer and employee, refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any one of the senses, or permanent physical disability or even death, suffered in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case involving damages caused to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question which under present legislation we are neither able nor prepared to decide in favor of the employee. In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of employment runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to the interest of the employer to give legal help to and defend its employee in order to show that the latter was not guilty of any crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest of the employer to render legal assistance to its employee. But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded as a normal obligation, it does not at present count with the sanction of manmade laws. If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said employee may not recover the amount he may have paid a lawyer hired by him. Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge of homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed against him, there would have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We say improper filing, judging by the results of the court proceedings, namely, acquittal. In other words, the plaintiff was innocent and blameless. If despite his innocence and despite the absence of any criminal responsibility on his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of the heirs of the deceased and the State, and so theoretically, they are the parties that may be held responsible civilly for damages and if this is so, we fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed plaintiff to perform a special duty or task, which task or duty was performed lawfully and without negligence. Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not flow directly from the performance of his duties but only indirectly because there was an efficient, intervening cause, namely, the filing of the criminal charges. In other words, the shooting to death of the deceased by the plaintiff was not the proximate cause of the damages suffered but may be regarded as only a remote cause, because from the shooting to the damages suffered there was not that natural and continuous sequence required to fix civil responsibility. In view of the foregoing, the judgment of the lower court is affirmed. No costs.

[G.R. No. 143978. December 3, 2002] MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA, petitioners, vs. EDUARDO R. GULLAS and NORMA S. GULLAS, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review seeking to set aside the decision[1] of the Court of Appeals[2] in CA-G.R. CV No. 46539, which reversed and set aside the decision[3] of the Regional Trial Court of Cebu City, Branch 22 in Civil Case No. CEB-12740. The records show that private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel of land in the Municipality of Minglanilla, Province of Cebu, measuring 104,114 sq. m., with Transfer Certificate of Title No. 31465.[4] On June 29, 1992, they executed a special power of attorney[5] authorizing petitioners Manuel B. Tan, a licensed real estate broker,[6] and his associates Gregg M. Tecson and Alexander Saldaa, to negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per square meter, at a commission of 3% of the gross price. The power of attorney was non-exclusive and effective for one month from June 29, 1992.[7] On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction manager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a property in the Minglanilla area. In the morning of July 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his office at the University of Visayas. The Sisters, who had already seen and inspected the land, found the same suitable for their purpose and expressed their desire to buy it.[8] However, they requested that the selling price be reduced to Five Hundred Thirty Pesos (P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) per square meter. Private respondent Eduardo Gullas referred the prospective buyers to his wife. It was the first time that the buyers came to know that private respondent Eduardo Gullas was the owner of the property. On July 3, 1992, private respondents agreed to sell the property to the Sisters of Mary, and subsequently executed a special power of attorney[9] in favor of Eufemia Caete, giving her the special authority to sell, transfer and convey the land at a fixed price of Two Hundred Pesos (P200.00) per square meter. On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in favor of the Sisters of Mary for the price of Twenty Million Eight Hundred Twenty Two Thousand Eight Hundred Pesos (P20,822,800.00), or at the rate of Two Hundred Pesos (P200.00) per square meter.[10] The buyers subsequently paid the corresponding taxes.[11] Thereafter, the Register of Deeds of Cebu Province issued TCT No. 75981 in the name of the Sisters of Mary of Banneaux, Inc.[12] Earlier, on July 3, 1992, in the afternoon, petitioners went to see private respondent Eduardo Gullas to claim their commission, but the latter told them that he and his wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay the brokers fee and alleged that another group of agents was responsible for the sale of land to the Sisters of Mary.

On August 28, 1992, petitioners filed a complaint[13] against the defendants for recovery of their brokers fee in the sum of One Million Six Hundred Fifty Five Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well as moral and exemplary damages and attorneys fees. They alleged that they were the efficient procuring cause in bringing about the sale of the property to the Sisters of Mary, but that their efforts in consummating the sale were frustrated by the private respondents who, in evident bad faith, malice and in order to evade payment of brokers fee, dealt directly with the buyer whom petitioners introduced to them. They further pointed out that the deed of sale was undervalued obviously to evade payment of the correct amount of capital gains tax, documentary stamps and other internal revenue taxes. In their answer, private respondents countered that, contrary to petitioners claim, they were not the efficient procuring cause in bringing about the consummation of the sale because another broker, Roberto Pacana, introduced the property to the Sisters of Mary ahead of the petitioners.[14] Private respondents maintained that when petitioners introduced the buyers to private respondent Eduardo Gullas, the former were already decided in buying the property through Pacana, who had been paid his commission. Private respondent Eduardo Gullas admitted that petitioners were in his office on July 3, 1992, but only to ask for the reimbursement of their cellular phone expenses. In their reply and answer to counterclaim,[15] petitioners alleged that although the Sisters of Mary knew that the subject land was for sale through various agents, it was petitioners who introduced them to the owners thereof. After trial, the lower court rendered judgment in favor of petitioners, the dispositive portion of which reads: WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is hereby rendered for the plaintiffs and against the defendants. By virtue hereof, defendants Eduardo and Norma Gullas are hereby ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg Tecson and Alexander Saldaa; 1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX HUNDRED EIGHTY FOUR PESOS (P624,684.00) as brokers fee with legal interest at the rate of 6% per annum from the date of filing of the complaint; and 2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees and costs of litigation. For lack of merit, defendants counterclaim is hereby DISMISSED. IT IS SO ORDERED.[16] Both parties appealed to the Court of Appeals. Private respondents argued that the lower court committed errors of fact and law in holding that it was petitioners efforts which brought about the sale of the property and disregarding the previous negotiations between private respondent Norma Gullas and the Sisters of Mary and Pacana. They further alleged that the lower court had no basis for awarding brokers fee, attorneys fees and the costs of litigation to petitioners.[17] Petitioners, for their part, assailed the lower courts basis of the award of brokers fee given to them. They contended that their 3% commission for the sale of the property should be based on the price of P55,180,420.00, or at P530.00 per square meter as agreed upon and not on the alleged actual selling price of P20,822,800.00 or at P200.00 per square meter, since the actual purchase price was undervalued for taxation purposes. They also claimed that the lower court erred in not awarding moral

and exemplary damages in spite of its finding of bad faith; and that the amount of P50,000.00 as attorneys fees awarded to them is insufficient. Finally, petitioners argued that the legal interest imposed on their claim should have been pegged at 12% per annum instead of the 6% fixed by the court.[18] The Court of Appeals reversed and set aside the lower courts decision and rendered another judgment dismissing the complaint.[19] Hence, this appeal. Petitioners raise following issues for resolution: I. THE APPELLATE COURT GROSSLY ERRED IN THEIR FINDING THAT THE PETITIONERS ARE NOT ENTITLED TO THE BROKERAGE COMMISSION. II. IN DISMISSING THE COMPLAINT, THE APPELLATE COURT HAS DEPRIVED THE PETITIONERS OF MORAL AND EXEMPLARY DAMAGES, ATTORNEYS FEES AND INTEREST IN THE FOREBEARANCE OF MONEY. The petition is impressed with merit. The records show that petitioner Manuel B. Tan is a licensed real estate broker, and petitioners Gregg M. Tecson and Alexander Saldaa are his associates. In Schmid and Oberly v. RJL Martinez Fishing Corporation,[20] we defined a broker as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him. x x x a broker is one whose occupation is to bring the parties together, in matters of trade, commerce or navigation. (Emphasis supplied) During the trial, it was established that petitioners, as brokers, were authorized by private respondents to negotiate for the sale of their land within a period of one month reckoned from June 29, 1992. The authority given to petitioners was non-exclusive, which meant that private respondents were not precluded from granting the same authority to other agents with respect to the sale of the same property. In fact, private respondent authorized another agent in the person of Mr. Bobby Pacana to sell the same property. There was nothing illegal or amiss in this arrangement, per se, considering the non-exclusivity of petitioners authority to sell. The problem arose when it eventually turned out that these agents were entertaining one and the same buyer, the Sisters of Mary. As correctly observed by the trial court, the argument of the private respondents that Pacana was the one entitled to the stipulated 3% commission is untenable, considering that it was the petitioners who were responsible for the introduction of the representatives of the Sisters of Mary to private respondent Eduardo Gullas. Private respondents, however, maintain that they were not aware that their respective agents were negotiating to sell said property to the same buyer. Private respondents failed to prove their contention that Pacana began negotiations with private respondent Norma Gullas way ahead of petitioners. They failed to present witnesses to substantiate this claim. It is curious that Mrs. Gullas herself was not presented in court to testify about her dealings with Pacana. Neither was Atty. Nachura who was supposedly the one actively negotiating on behalf of the Sisters of Mary, ever presented in court. Private respondents contention that Pacana was the one responsible for the sale of the land is also unsubstantiated. There was nothing on record which established the existence of a previous negotiation among Pacana, Mrs. Gullas and the Sisters of Mary. The only piece of evidence that the private respondents were able to present is an undated and unnotarized Special Power of Attorney in favor of Pacana. While the lack of a date and an oath do not necessarily render said Special Power of Attorney

invalid, it should be borne in mind that the contract involves a considerable amount of money. Hence, it is inconsistent with sound business practice that the authority to sell is contained in an undated and unnotarized Special Power of Attorney. Petitioners, on the other hand, were given the written authority to sell by the private respondents. The trial courts evaluation of the witnesses is accorded great respect and finality in the absence of any indication that it overlooked certain facts or circumstances of weight and influence, which if reconsidered, would alter the result of the case.[21] Indeed, it is readily apparent that private respondents are trying to evade payment of the commission which rightfully belong to petitioners as brokers with respect to the sale. There was no dispute as to the role that petitioners played in the transaction. At the very least, petitioners set the sale in motion. They were not able to participate in its consummation only because they were prevented from doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW)[22] we ruled that, 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. (Underscoring ours). Clearly, therefore, petitioners, as brokers, should be entitled to the commission whether or not the sale of the property subject matter of the contract was concluded through their efforts. Having ruled that petitioners are entitled to the brokers commission, we should now resolve how much commission are petitioners entitled to? Following the stipulation in the Special Power of Attorney, petitioners are entitled to 3% commission for the sale of the land in question. Petitioners maintain that their commission should be based on the price at which the land was offered for sale, i.e., P530.00 per square meter. However, the actual purchase price for which the land was sold was only P200.00 per square meter. Therefore, equity considerations dictate that petitioners commission must be based on this price. To rule otherwise would constitute unjust enrichment on the part of petitioners as brokers. In the matter of attorneys fees and expenses of litigation, we affirm the amount of P50,000.00 awarded by the trial court to the petitioners. WHEREFORE, in view of the foregoing, the petition is GRANTED. The May 29, 2000 decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Cebu City, Branch 22, in Civil Case No. CEB-12740 ordering private respondents Eduardo Gullas and Norma S. Gullas to pay jointly and severally petitioners Manuel B. Tan, Gregg Tecson and Alexander Saldaa the sum of Six Hundred Twenty-Four Thousand and Six Hundred Eighty-Four Pesos (P624,684.00) as brokers fee with legal interest at the rate of 6% per annum from the filing of the complaint; and the sum of Fifty Thousand Pesos (P50,000.00) as attorneys fees and costs of litigation, is REINSTATED. SO ORDERED.

[G.R. No. 113074. January 22, 1997] ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT (BMW), respondents. DECISION MENDOZA, J.: This is a petition for review of the decision[1] of the Court of Appeals dismissing a complaint for specific performance which petitioner had filed against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for reconsideration. The following are the 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," which reads in full as follows: WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of registration issued by the Director of Patents on 12 December 1963 and is referred to as Trademark No. 10625; WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device in favor of the ASSIGNEE herein with the Philippines Patent Office; NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder stated, the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions: 1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of the BMW trademark in the Philippines, for such purpose, the ASSIGNOR shall inform the ASSIGNEE immediately of any such use or infringement of the said trademark which comes to his knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE, any such infringer of the subject mark and for purposes hereof the ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit without ASSIGNEE's consent will exclusively be the responsibility and for the account of the ASSIGNOR, 2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR. Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." But 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. [2] 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.[3] Hahn insisted that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership. In the same letter petitioner explained that the decline in sales was due to lower prices offered for BMW cars in the United States and the fact that few customers returned for repairs and servicing because of the durability of BMW parts and the efficiency of petitioner's service. 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.[4] 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. Hahn's amended complaint alleged in pertinent parts: 2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . . 5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney covering the trademark and in consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the Philippines" . . . . 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies .... Moreover, Plaintiff has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW. 10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to maintain with Plaintiff a relationship but only "on the basis of a standard BMW importer contract as adjusted to reflect the particular situation in the Philippines" subject to certain conditions, otherwise, defendant BMW would terminate Plaintiff's

exclusive dealership and any relationship for cause effective June 30, 1993. . . . 15. The actuations of defendant BMW are in breach of the assignment agreement between itself and plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff. The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional Trial Court, which on June 14, 1993 issued a temporary restraining order. Summons and copies of the complaint and amended complaint were thereafter served on the private respondent through the Department of Trade and Industry, pursuant to Rule 14, 14 of the Rules of Court. The order, summons and copies of the complaint and amended complaint were later sent by the DTI to BMW via registered mail on June 15, 1993[5] and received by the latter on June 24, 1993. On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte, with petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting the writ of preliminary injunction upon the filing of a bond of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary injunction was issued. On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service of summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing business in the Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; and that Hahn was an indentor or middleman transacting business in his own name and for his own account. Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines. The trial court[6] 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. Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals alleging that: I.THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE THEREOF. II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO. BMW asked for the immediate issuance of a temporary restraining order and, after

hearing, for a writ of preliminary injunction, to enjoin the trial court from proceeding further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the trial court's order was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the very question was whether the court had jurisdiction over it. 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. It stated: Going by the pleadings already filed with the respondent court before it came out with its questioned order of July 26, 1993, we rule and so hold that petitioner's (BMW) motion to dismiss could be resolved then and there, and that the respondent judge's deferment of his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion. . . . [T]here is not much appreciable disagreement as regards the factual matters relating, to the motion to dismiss. What truly divide (sic) the parties and to which they greatly differ is the legal conclusions they respectively draw from such facts, (sic) with Hahn maintaining that on the basis thereof, BMW is doing business in the Philippines while the latter asserts that it is not. Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, Section 14. The court upheld private respondent's contention that Hahn acted in his own name and for his own account and independently of BMW, based on Alfred Hahn's allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products other than those of BMW. It held that petitioner was a mere indentor or broker and not an agent through whom private respondent BMW transacted business in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint against BMW. Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its discretion in deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the Philippines and, for this reason, dismissing petitioner's case. Petitioner's appeal is well taken. Rule 14, 14 provides: 14. Service upon foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis added) What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:[7] d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches, appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any

domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having, a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. (Emphasis supplied) Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor "transacts business in its name and for its own account." In addition, Section 1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226) provided: (f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business" includes: (1).... A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines. The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW). The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or distributor in the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles. Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as doing business." (p. 13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint: 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contributions from defendant BMW; established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies.... Moreover, Plaintiff has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW.

As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding that Hahn solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." (p. 13) To the contrary, 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.[8] These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated:[9] 9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to the Philippines. (The payments may be made by the purchasers or third-persons or even by Hahn.) The bills of lading are made up in the name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified. 9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the purchasers. 9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full purchase price thereof, and as soon as he confirms in writing, that the vehicles have been registered in the Philippines and have been serviced by him, he will receive an additional three percent (3%) of the full purchase prices as commission. 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.[10] For example, in its letter to Hahn dated February 23, 1996, BMW stated: In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more professionally and that we are through your

present activities not adequately prepared to cope with the forthcoming challenges. [11] In effect, BMW was holding Hahn accountable to it under the 1967 Agreement. This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, [12] 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.[13] 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. Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of BMW, the fact is that BMW did business in the Philippines because it sold cars directly to Philippine buyers. [16] This was denied by BMW, which claimed that Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done without solicitation on its part.[17] It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties' pleadings. There are genuine issues of facts which can only be determined on the basis of evidence duly presented. BMW cannot short circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it denies. Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof. Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. It is now settled that. for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not go beyond the allegations of the complaint in order to determine whether it has jurisdiction.[18] A determination that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding should evidence later show that it is not transacting business in the country. As this Court has explained: This is not to say, however, that the petitioner's right to question the jurisdiction of the

court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do business at the time of the filing, of a complaint, can still be made to answer for a cause of action which accrued while it was doing, business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction.[19] Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss. WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings. SO ORDERED.

G.R. No. L-25653 February 28, 1985 COMMISSIONER OF INTERNAL REVENUE, petitioner vs.MANILA MACHINERY & SUPPLY COMPANY and the COURT OF TAX APPEALS, respondents. PLANA, J.: Appeal by the Commissioner of Internal Revenue from the decision of the Court of Tax Appeals in CTA Case No. 1250 ordering the refund to respondent Manila Machinery & Supply Co. of P 21,620.36 allegedly erroneously paid as commercial broker's percentage tax. The following partial stipulation of facts outlines the two different modes of business operation of private respondent (petitioner in the CTA ): (1) as sales representative of certain United States manufacturers and/or suppliers, petitioner's transactions or activities are outlined as follows: (1) Philippine buyer ascertains from petitioner whether or not a certain machinery or equipment it desires to buy is available from the U.S. manufacturers or suppliers represented by the former and, if available, requests for price quotations of desired machinery or equipment; (2) If agreeable, Philippine buyer places purchase order either directly with the United States manufacturer and/or supplier or with petitioner who forwards it to the U.S. manufacturer; (3) Upon notification that the purchase order is accepted, the Philippine buyer opens with a local bank a letter of credit in favor of the United States manufacturer or supplier to cover payment of the goods ordered; (4) United States manufacturer or supplier ships the goods to Philippine buyer and collects from the U.S. correspondent of the local bank where the letter of credit was opened, payment of the goods; (5) United States manufacturer or supplier credits the petitioner for commission. (CTA rec., pp. 70-73.) (2) as distributor of United States manufacturers and/or suppliers, its (petitioner's) transactions or activities are outlined as follows: (1) Philippine buyer ascertains from petitioner whether or not a certain machinery or equipment which the said buyer desires to purchase is available from the U.S. manufacturers or suppliers for whom petitioner acts as distributor and, if available, requests for price quotation of the desired machinery or equipment; (2) Petitioner furnishes the Philippine buyer with price quotation based on price list f.o.b. factory which is furnished petitioner and fixed by the United States manufacturer or supplier; (3) If agreeable, Philippine buyer places the purchase order with the petitioner; (4) Upon notice of the acceptance of the purchase order, the buyer opens with a local bank a letter of credit in favor of the petitioner's agent in San Francisco, California, United States of America to cover the price of the goods ordered; (5) Petitioner prepares the purchase instructions in accordance with the purchase order of the Philippine buyer and forwards the same to its agent in the United States; (6) The said agent procures the goods from the U.S. manufacturer or supplier; (7) United States manufacturer or supplier invoices goods for petitioner's agent in San Francisco, California; (8) Petitioner's agent prepares sales invoice of the petitioner and ships the goods to the Philippine buyer. (CTA rec., pp. 70-73.) It appears that during the tax period in question, respondent taxpayer realized an income of P 630,635.62 from both its activities as sales representative and as

distributor of American manufacturers/suppliers and paid thereon P 37,837.94 as broker's percentage tax on the assumption that the income consisted entirely of commissions. Later however respondent sought a partial refund of P 21,620.36 on the ground that of the total income of P 630,635.62, P 360,339.35 was not broker's commission but simply overprice or profit (plus exchange income on overprice) realized from ordinary sales of machineries and equipment it had purchased from American companies. After the request for refund had been denied by the Bureau of Internal Revenue, the taxpayer appealed to the Court of Tax Appeals from which it obtained as aforesaid a favorable judgment, which is now assailed. The single issue posed in this petition for review is whether the P 360,339.35 earned by respondent taxpayer in its capacity "as distributor" of American machineries and equipment should be considered as commission subject to commercial broker's tax under the Tax Code or profit from sales which is not subject thereto. The merit of respondent's stand is clear on the face of the appealed decision Petitioner (taxpayer) contends that it is not a commercial broker within the definition provided in Section 194(t) of the Revenue Code, which reads: (t) "Commercial broker" includes persons other than importers, manufacturer, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales for 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 skippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants. One of the purposes of petitioner corporation, as stated in its articles of incorporation, is "to make and enter into all kinds of contracts, agreements, and obligation with any persons, corporation or corporations, or other associations for the purchasing, acquiring, selling, or otherwise disposing of goods, wares, and merchandise of all kinds, either as principal or agent, upon commission, consignment, or indent orders." (BIR rec., pp. 43- 48.) Petitioner is, therefore, authorized to act either as principal or agent in the transaction of its business. However, the evidence of record regarding petitioner's transactions which gave rise to the income in question indicates the status of petitioner as an independent dealer and not as a commercial broker. Petitioner's contracts with several U.S. manufacturers indubitably show that it acted as an independent dealer. Pertinent portions of these contracts read: Joy Manufacturing Company l. Subject to the terms and conditions hereinafter set forth, the Company grants to the Distributor the exclusive right to purchase for resale the following listed articles and machines. ..., manufactured or sold by the Company within the territory indicated hereinafter. (Emphasis supplied; Distributor's Contract, CTA rec., p. 78.) Briggs & Straton Corporation Distributor' is an individual or firm under agreement with Briggs & Straton Corporation, whose principal business is the resale of products or commodities at wholesale to Dealers, etc., ... . Distributor shall not act as the agent for the Company under this agreement, nor shall Distributor have any right or power hereunder to act for or to

bind the company in any respect or to pledge its credit ... (Emphasis supplied; Distributor Agreement, CTA rec., p. 83.) The Jeffrey Manufacturing Company The purpose of this agreement is to effect through the Representative a wider sales outlet for the Manufacturer's products. This is to be accomplished by the Representative purchasing certain products, hereinafter listed, and produced by the Manufacturer, for resale, and diligently promoting their sale in the Representative's territory. (Emphasis supplied; Export Representative Agreement, CTA rec., p. 85.) Toledo Scale Corporation II. (a) To sell only to the Distributor Toledo Machines for use in the Distributor's territory, except the following machines. . . . IV. (d) The responsibility of the Company for merchandise ordered. by the Distributor ... shall end with its delivery f. o. b. factory, all risks of fire, loss or damage after the shipment has been delivered f.o.b. factory or while in possession of any transportation company ... , shall be borne by the Distributor. V. (h) ... It is expressly the intention of the parties hereto that the Distributor's status is that of an independent contractor. (Emphasis supplied; Export Distributor's Sales Agreement, CTA rec., pp. 90-93.) Respondent cites the agreement of petitioner with the Toledo Scale Corporation (CTA rec., pp. 90-93.), which authorizes petitioner "to solicit sales of" certain products of the latter corporation, as an indication of brokerage. But respondent merely quoted that portion wherein petitioner is authorized to act as agent or representative but did not mention petitioner's equal authority to act as distributor or independent dealer with respect to the same corporation. A perusal of the records of the case at bar equally yields the conclusion that petitioner, through its agent, M.S. Smith in San Francisco, California, U.S.A. (BIR rec., pp. 49- 50), was the purchaser and owner of the machineries it sent to the Philippine buyers. This conclusion is established by the fact that when petitioner received purchase order from local buyers and there was no stock available, it sent the orders to its agent in California and required the latter "to purchase from ..." the U.S. manufacturers or suppliers the items called for in the purchase orders (See BIR rec., pp. 63, 79, 98, 111 & 124.) Petitioner was in turn paid through the letters of credit opened by the Philippine buyers with local banks in favor of agent M.S. Smith. (See BIR rec., pp- 59-128.) The facts (1) that petitioner shouldered the losses resulting from some of the transactions in questions (See BIR rec., pp. 21-22); (2) that if petitioner had no stock available in the Philippines, it forwarded the purchase order to its agent in California who procured the machineries from U.S. manufacturers (BIR rec., Exh. pp. 53-56); and (3) that the U.S. Manufacturers invoiced the goods to petitioner's agent in California who prepared the sales invoice and shipped the goods to the Philippine buyers (See CTA rec., Stifacts, pp. 70-73) negate agency. In effect, the instant petition controverts the factual findings of the court a quo. It is well settled that in passing upon petitions for review of the decisions of the Court of Tax Appeals, this Court is generally confined to questions of law. The findings of fact of said Court are not to be disturbed unless clearly shown to be unsupported by substantial evidence. (Rules of Court, Rule 44, Section 2. Republic Act 1125,

Sections 18-19.) Substantial evidence has been construed to mean not necessarily preponderant proof as is required in ordinary civil action, but such kind of "relevant evidence as a reasonable man might accept as adequate in support of a conclusion." (De Lamera vs. Court of Agrarian Relations, et al., 17 SCRA 368.) There is no circumstance of record indicating that the findings of the lower court are not supported by substantial evidence. WHEREFORE, the appealed decision is affirmed. SO ORDERED.

G.R. No. L-16893 October 22, 1966 THE COLLECTOR (now COMMISSIONER) OF INTERNAL REVENUE, petitioner, vs.TAN ENG HONG, respondent. REGALA, J.: This is an appeal from the decision of the Court of Tax Appeals in C.T.A. Case No. 436 entitled "Tan Eng Hong, Petitioner, vs. Collector of Internal Revenue, Respondent," absolving Tan Eng Hong from certain tax liabilities as a commercial broker. Sometime in 1952, the Philippine Council For United States Aid (PHILCUSA) called a public bidding for the supply of certain materials which it intended to give as aid to the Philippines. Tan Eng Hong won the bid so that from 1952 to 1955, inclusive, he made deliveries to PHILCUSA of the bidded goods for which he received in payment the total sum of P94,685.71. The Bureau of Internal Revenue determined that the various transactions under the above bid were carried out by Tan Eng Hong as a commercial broker and, accordingly, assessed against the sum received, fixed and percentage taxes and surcharge in the amount of P7,513.94. Taking issue with the Bureau's ruling that he was acting as a commercial broker in supplying the goods under the above bid, Tan Eng Hong went to the Court of Tax Appeals, under C.T.A. Case No. 436, on a petition for review. After due trial and hearing, the said Court rendered judgment with the following dispositive portion WHEREFORE, in view of the foregoing considerations, the decision appealed from is hereby reversed, and the deficiency assessment for fixed and percentage taxes in the total sum of P7,513.94 issued by the respondent Collector of Internal Revenue is hereby cancelled and withdrawn. Without pronouncement as to costs. The sole and principal predicate of the trial court's decision abovementioned was its finding that "petitioner Tan Eng Hong was not a broker but the importer of the goods sold to PHILCUSA." Consequently, the instant appeal refers alone to the correctness or error of the above finding that Tan Eng Hong was not a commercial broker. The Commissioner of Internal Revenue urges that he was so. To resolve the issue, it is necessary to discuss the specific details of the transactions in dispute. Inasmuch as there is no dispute by the parties herein on the trial court's account of it, We deem it best to reproduce the said account hereunder: To start with, PHILCUSA announces that "Sealed bids ... will be received ... and then publicly opened for furnishing commodities for delivery C & W Manila." (Exh. 7, pp. 44-46 BIR rec.; Exh. H, p. 65 CTA rec.) The petitioner, as a qualified bidder, submits his signed proposal together with a proposal bond. He "offers and agrees, if this (his) bid be accepted within 20 calendar days from the date of opening, to furnish any or all of the items of which prices are quoted, at the price set opposite each item and delivered at the point(s) specified . . ." Exh. 7, pp. 44-46, BIR rec.; Exh. H, p. 65 CTA rec.) The quotations of the petitioner is in Philippine currency for the C & F Philippine Port Value. In computing his bid, the total C & F dollar cost is converted to pesos on the basis of P2.00 to $1.00, and his profit in pesos which he personally and solely fixes, is then added thereto in order to arrive at the correct total quotation. If the bid of the petitioner is accepted by PHILCUSA, he receives a letter of award wherein he is required to inform PHILCUSA of the (1) Net C & F dollar cost to his suppliers per item and per each supplier's group; (2) Names and addresses of his

suppliers; and (3) Names of independent inspection firms that will undertake the inspection prior to the shipment of the goods. Hence, it is only after the petitioner has been finally awarded the bid contract that PHILCUSA comes to know of the names of the foreign suppliers of the commodities to be imported and the sole purpose seems to be to secure and facilitate the dollar payment of the imported goods to said suppliers abroad. Then, the petitioner is also requested to submit a performance bond and to apply at the Philippine National Bank for the corresponding letters(s) of credit in favor of his suppliers abroad. (Exh. Z, p. 32 CTA rec.) However, he is not required to secure an import license for the goods imported for PHILCUSA. Accordingly, the petitioner applies for a letter of credit with the Philippine National Bank in his own name and for his own account and in favor of his suppliers abroad. He pays the usual bank charges, but is not required to make payment of pesos into the counterpart fund nor pay the foreign exchange premium as no actual sale of dollars is involved. He is also exempt from the payment of the following: (1) Foreign exchange tax; (2) sales tax; (3) customs duties; (4) municipal taxes; (5) arrastre charges; and (6) delivery charges, except when otherwise provided in the contract. The dollars that are being used in all the PHILCUSA purchases belong to the United States Mutual Security Administration (hereinafter referred to as MSA) and are actually paid for by the Philippine Government by general payments from the special appropriation directly into the counterpart fund. (Par. 14, Exh. F, pp. 55-56 CTA rec.; also Exh. 8, pp. 19-20 BIR rec.) And most probably for this reason, the petitioner authorizes the Philippine National Bank to deliver all documents drawn under this credit to PHILCUSA. (Exh. G, p. 64 CTA rec.) In carrying out a commercial venture under the aforequoted arrangement, did Tan Eng Hong act as a commercial broker? We do not think so. In the case of Kuenzle & Streiff Inc. vs. The Commissioner of Internal Revenue, G.R. No. L-17648, October 31, 1964, this Court held that the essential feature of a broker is the fact that he acts not for himself, but for a third person. As was therein held: Section 194(t) of the Revenue Code defines a commercial broker in the following manner: "(t) "Commercial broker" includes all persons, other than importer, 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 shoppers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants." There does not seem to be any room for doubt that the petitioner falls within the above definition. Under the said section, as well as by the rulings handed down in at least two cases by this Court, the essential feature of a broker is the fact that he acts not for himself, but, for a third person. (Ker & Co., Ltd. v. Collector of Internal Revenue, 70 Phil. 36; Behn, Meyer & Co., Ltd. v. Nolting and Garcia, 35 Phil. 274). In Behn Meyer case. We said: . . . A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name, but in the name

of those who employed him ; he is strictly a middleman and for some purposes the agent of both parties. (Emphasis ours). It seems obvious from the facts of this case that Tan Eng Hong undertook the importation of the goods needed by PHILCUSA for himself and not for PHILCUSA. In effecting the importation of the said goods, he was discharging his own, personal obligation as the winner in the bidding called by PHILCUSA. He imported the commodities not because PILCUSA had asked him to but because he had obligated himself to deliver the same to PHILCUSA when he participated and won in the public bidding called by the said agency. Tan Eng Hong would have been liable in damages to PHILCUSA if he had failed to import the said goods so that when he carried out the importation, he was, first and foremost, serving his own interest and no one else's. Upon the records of this case, it appears that Tan Eng Hong signed and submitted his bids or proposals under his name and the corresponding letters of credit were sent to his business address. The letters of credit, performance bonds, invoices and all other documents relative to the transactions were in his name. The bid contracts were strictly between Tan Eng Hong and PHILCUSA just as the former's contracts with his foreign supplier were strictly between them alone, i.e., Tan Eng Hong and the foreign supplier only. The foreign supplier and PHILCUSA had no privity of contractual relations whatsoever to the end that neither of them could have had any claim against each other for whatever fault or breach Tan Eng Hong might have committed relevant to the transactions in dispute. It would indeed be quite difficult to sustain any assertion that Tan Eng Hong was acting for and in behalf of PHILCUSA or his foreign supplier or both. The broker must be the efficient agent or the procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as a broker. (Reyes v. Mosqueda, G.R. No. L-8669, May 25, 1956; 53 O.G. 2158). This condition may not be said to obtain in the case on hand. Tan Eng Hong did not merely bring PHILCUSA and his foreign supplier to come to an agreement for the sale of certain commodities. It was he himself who contracted with his foreign supplier for the purchase of the said goods. If, for one reason or another PHILCUSA had refused to accept the delivery of the said goods to it by Tan Eng Hong, the foreign supplier could not have compelled PHILCUSA otherwise. Similarly, if somehow the foreign supplier had defaulted in the performance of its obligations to Tan Eng Hong, PHILCUSA could not have had any action or remedy against the said foreign supplier. All these indicate the distinct and independent personality of Tan Eng Hong as an importer and not a commercial broker. WHEREFORE, the decision appealed from is hereby affirmed in full. No pronouncement on costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

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