GONZALO PUYAT & SONS v ARCO

AMUSEMENT CO.
20 June 1941 | Laurel, J. | Topic: Agency
distinguished from other contracts
Petitioner: Gonzalo Puyat & Sons, Inc
Respondent: Arco Amusement Company
(formerly known as Teatro Arco)
DOCTRINE: There can be no agency where
the one is the agent of both vendor and
vendee.
FACTS:
(1929) Teatro Arco (name changed in 1930),
corporation duly organized under Philippine
laws was engaged in the business of
operating cinematograph.

C.S. Salmon was the president, A.B. Coulette

was the business manager.

Gonzalo Puyat & Sons, Inc, was acting as

exclusive agents in the Philippines for the
Starr Piano Company of Richmond, Indiana.
Gonzalo dealt in cinematographer equipment
and machinery which prompted Arco to
approach the company thru its president and
acting manager, Gil Puyat, and an employee
named Santos.
Agreement was made between
Salmon and Coulette
representing Arco, and Gil Puyat
representing Gonzalo
Gonzalo to order sound
reproducing equipment from
Starr Piano, to be paid by Arco
Payment to Gonzalo would be
the price of the equipment +
10% commission + all expenses
(freight, insurance, etc)
Gonzalo inquired about the price without
discount to which Starr listed at $ 1,700 fob.
Gonzalo informed the plaintiff of
the price of $1,700, without
showing the cable of inquiry
made to Starr nor its
subsequent reply.
Being agreeable to the price,
Arco formally authorized the
order

Upon delivery to Arco, $1700 + 10%

commission and other expenses was duly
paid.
Another order for sound reproducing
equipment was placed by the plaintiff on the
same terms as the first order.
About three years later, the officials of Arco
discovered that the price quoted was not the
net price but rather the list price. The
defendants had a discount from Starr Piano.
They also thought that the prices were too
much.
They then sought to obtain a
reimbursement from defendant.
Trial Court held that the contract was one of
outright purchase and sale.
Petitioner absolved from
complaint.
CA however, held that the relation was that
of agent and principal.
Petitioner sentenced to pay
overpayments +legal interest.
CA posits that even if the
contract was one of sale,
petitioner was guilty of fraud for
concealing the true price.
ISSUE: W/N the contract between the
petitioner and respondent was that of agency
NO
The relationship between the two parties was
one of purchase and sale.
The letters by which the respondent
accepted the prices for the equipment are
clear in their terms that the prices indicated
are fixed and determinate. Respondent
admitted in its complaint that the petitioner
agreed to sell to it the equipment and
machinery. Whatever unforeseen events
might have taken place unfavorable to the
petitioner such as change in prices not
covered by insurance or failure of the Starr
Piano to properly fill the orders, the
respondent might still legally hold the
petitioner to the prices fixed.
Incompatible if relationship is
agency

 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 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.
10% commission does not make the
petitioner an agent, it is merely an additional
price; such stipulation not incompatible with
the contract of purchase and sale.
Moreover, to hold the petitioner an agent of
the respondent in the purchase is
incompatible with the fact that petitioner is
the exclusive agent of Starr Piano in the
Philippines.
One cannot be the agent of
both vendor and the purchaser

Petitioner as vendor is not bound to

reimburse the respondent as vendee for any
difference between the cost price and the
sales price representing 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.
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 locally.
Respondent could not have secured the
equipment by Starr Piano except through the
petitioner. The price was willingly paid; the
equipment received as represented.
Not every concealment is fraud.
CA decision reversed, petitioner is absolved
from the complaint.