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G.R. No.

145817 October 19, 2011

URBAN BANK, INC, Petitioner,


vs.
MAGDALENO M. PEÑA, Respondent.

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G.R. No. 145822

DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners,


vs.
MAGDALENO M. PEÑA, Respondent.

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G.R. No. 162562

MAGDALENO M. PEÑA, Petitioner,


vs.
URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, P. SIERVO
H. DIZON, ERIC L. LEE, BEN T. LIM, JR., CORAZON BEJASA, and ARTURO MANUEL, JR., Respondents.

FACTS

In a telephone conversation, the president of Urban Bank, Teodoro Borlongan, a respondent herein,
agreed to pay Atty Pena for his services 10% of the value of the property then worth PhP240,000,000, or
PhP24,000,000. Costs and other awards additionally amount to PhP4,500,000, for a total award of
PhP28,500,000 according to the trial court. To the Court of Appeals, such an award has no basis, as in
fact, no contract of agency exists between Atty. Peña and Urban Bank. Hence, Atty. Peña should only be
recompensed according to the principle of unjust enrichment, and that he should be awarded the
amount of PhP3,000,000 only for his services and reimbursements of costs.

1
Peña received the bank’s letter dated 19 December 1994, which was signed by respondents Bejasa and
Manuel, and is quoted below:

This is to confirm the engagement of your services as the authorized representative of Urban Bank,
specifically to hold and maintain possession of our abovecaptioned property [Pasay property] and to
protect the same from former tenants, occupants or any other person who are threatening to return to
the said property and/or interfere with your possession of the said property for and in our behalf.

You are likewise authorized to represent Urban Bank in any court action that you may institute to carry
out the aforementioned duties, and to prevent any intruder, squatter or any other person not otherwise
authorized in writing by Urban [B]ank from entering or staying in the premises.

ISSUE

1. What is the legal basis for an award in favor of Peña for the services he rendered to Urban Bank?
Should it be a contract of agency the fee for which was orally agreed on as Peña claims? Should
it be the application of the Civil Code provisions on unjust enrichment? Or is it to be based on
something else or a combination of the legal findings of both the RTC and the CA? How much
should the award be?

RULING

Peña is entitled to payment for compensation for services rendered as agent of Urban Bank, but on the
basis of the principles of unjust enrichment and quantum meruit, and not on the purported oral
contract.

The Court finds that Peña should be paid for services rendered under the agency relationship that
existed between him and Urban Bank based on the civil law principle against unjust enrichment, but the
amount of payment he is entitled to should be made, again, under the principle against unjust
enrichment and on the basis of quantum meruit.

In a contract of agency, agents bind themselves to render some service or to do something in


representation or on behalf of the principal, with the consent or authority of the latter. The basis of the
civil law relationship of agency is representation, the elements of which include the following: (a) the
relationship is established by the parties’ consent, express or implied; (b) the object is the execution of a
juridical act in relation to a third person; (c) agents act as representatives and not for themselves; and (d)
agents act within the scope of their authority.

2
Whether or not an agency has been created is determined by the fact that one is representing and acting
for another. The law makes no presumption of agency; proving its existence, nature and extent is
incumbent upon the person alleging it.

Agency is presumed to be for compensation. But because in this case we find no evidence that Urban
Bank agreed to pay Peña a specific amount or percentage of amount for his services, we turn to the
principle against unjust enrichment and on the basis of quantum meruit.

Since there was no written agreement with respect to the compensation due and owed to Atty. Peña
under the letter dated 19 December 1994, the Court will resort to determining the amount based on the
well-established rules on quantum meruit.

Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as
an agent does so with the expectation of payment according to the agreement and to the services
rendered or results effected. We find that the agency of Peña comprised of services ordinarily performed
by a lawyer who is tasked with the job of ensuring clean possession by the owner of a property. We thus
measure what he is entitled to for the legal services rendered.

A stipulation on a lawyer’s compensation in a written contract for professional services ordinarily


controls the amount of fees that the contracting lawyer may be allowed to collect, unless the court finds
the amount to be unconscionable. In the absence of a written contract for professional services, the
attorney’s fees are fixed on the basis of quantum meruit, i.e., the reasonable worth of the attorney’s
services. When an agent performs services for a principal at the latter’s request, the law will normally
imply a promise on the part of the principal to pay for the reasonable worth of those services. The intent
of a principal to compensate the agent for services performed on behalf of the former will be inferred
from the principal’s request for the agents.

3
G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,

vs.

EDWIN CUIZON and ERWIN CUIZON, Respondents.

FACTS

The assailed Decision and Resolution affirmed the Order3 dated 29 January 2002 rendered by Judge
Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in
Civil Case No. CEB-19672.

Respondent EDWIN again posits the argument that he is not a real party in interest in this case and it
was proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent of
Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is
alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business
venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was
acting as a representative of Impact Systems in said transaction.

Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo Power
Company the amount of P365,135.29. Alarmed by this development, petitioner made several demands
upon respondents to pay their obligations. As a result, respondents were able to make partial payments
to petitioner. On 7 October 1996, petitioner's counsel sent respondents a final demand letter wherein it
was stated that as of 11 June 1996, respondents' total obligations stood at P295,000.00 excluding
interests and attorney's fees. Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in
interest in this case. According to him, he was acting as mere agent of his principal, which was the
Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact.

ISSUE

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of collecting
the receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of
Assignment signed by EDWIN on behalf of Impact Systems. While said collection did not revoke the
agency relations of respondents, petitioner insists that ERWIN’s action repudiated EDWIN’s power to sign

4
the Deed of Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an agent,
petitioner claims that he should be made personally liable for the obligations of his principal.

RULING

SC disagrees.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to
the party with whom he contracts. The same provision, however, presents two instances when an agent
becomes personally liable to a third person. The first is when he expressly binds himself to the obligation
and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he
does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not
fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of
Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the
grant of broad powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent or manager;
such a position presupposes a degree of confidence reposed and investiture with liberal powers for the
exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to
the business entrusted to his care and management. In the absence of an agreement to the contrary, a
managing agent may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents
ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil
Code upon which petitioner anchors its claim against respondent EDWIN "does not hold that in case of
excess of authority, both the agent and the principal are liable to the other contracting party."39 To
reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted
within the bounds of his authority. Under this, the agent is completely absolved of any liability. The
second part of the said provision presents the situations when the agent himself becomes liable to a
third party when he expressly binds himself or he exceeds the limits of his authority without giving
notice of his powers to the third person. However, it must be pointed out that in case of excess of
authority by the agent, like what petitioner claims exists here, the law does not say that a third person
can recover from both the principal and the agent.40

5
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any
right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in
interest who should be impleaded in this case. A real party in interest is one who "stands to be benefited
or injured by the judgment in the suit, or the party entitled to the avails of the suit."41 In this respect,
we sustain his exclusion as a defendant in the suit before the court a quo.

6
G.R. No. 115838 July 18, 2002

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners,

vs.

COURT OF APPEALS and FRANCISCO ARTIGO, respondents.

CARPIO, J.:

FACTS

On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante
A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the
unpaid balance of his broker's commission from the De Castros.

He was appointed as agent on January 24, 1984. The two lots were finally sold in June 1985. As found by
the trial court, Artigo demanded in April and July of 1985 the payment of his commission by Constante
on the basis of the selling price of P7.05 million but there was no response from Constante.18 After it
became clear that his demands for payment have fallen on deaf ears, Artigo decided to sue on May 29,
1989.

Constante authorized Artigo to act as agent in the sale of two lots in Cubao, Quezon City. The
handwritten authorization letter signed by Constante clearly established a contract of agency between
Constante and Artigo. Thus, Artigo sought prospective buyers and found Times Transit Corporation
("Times Transit" for brevity). Artigo facilitated the negotiations which eventually led to the sale of the
two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the 5% commission on the
purchase price as provided in the contract of agency.

ISSUES

According to petitioners, the Court of Appeals erred in -

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD INDISPENSABLE
PARTIES-IN-INTEREST;

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM HAS
BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT;

7
RULING

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell
the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first
come, first serve basis.

Constante signed the note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed
Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek
the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De
Castros admit that the other co-owners are solidarily liable under the contract of agency,10 citing Article
1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the consequences of the agency.

The solidary liability of the four co-owners, however, militates against the De Castros' theory that the
other co-owners should be impleaded as indispensable parties. A noted commentator explained Article
1915 thus –

"The rule in this article applies even when the appointments were made by the principals in separate
acts, provided that they are for the same transaction. The solidarity arises from the common interest of
the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can
recover from any principal the whole compensation and indemnity owing to him by the others. The
parties, however, may, by express agreement, negate this solidary responsibility. The solidarity does not
disappear by the mere partition effected by the principals after the accomplishment of the agency.

If the undertaking is one in which several are interested, but only some create the agency, only the latter
are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the others. And
if the power granted includes various transactions some of which are common and others are not, only
those interested in each transaction shall be liable for it."

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a
contract of agency, each obligor may be compelled to pay the entire obligation.12 The agent may recover
the whole compensation from any one of the co-principals, as in this case.

8
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This
article reads:

Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected.

9
G.R. No. 76969 June 9, 1997

INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M. DE LOS REYES, petitioners,

vs.

HON. COURT OF APPEALS, GREGORIO ARANETA, INC. and J. ARMANDO EDUQUE, respondents.

FACTS

Ascribing merit to private respondents' defense that, after their authority to sell expired thirty (30) days
from December 2, 1975, or on January 1, 1976, petitioners, a corporation in the real estate business and
brokerages, abandoned the sales transaction and were no longer privy to the consummation and
documentation thereof, the trial court dismissed petitioners' complaint for collection of unpaid broker's
commission.

Gregorio Araneta (respondent) through its Assistant general manager J. Armando Eduque, granted Inland
Realty authority to sell the total holdings of Gregorio Araneta Inc. in Architect’s Bldg. Inc. at a first come
first serve basis. At the time, the property was valued at 98%/9,800 shares of stock at P1,500 per share
for 30 days.

Stanford Microsystems counterproposed to Inland Realty to buy the property at 9,800 shares at P1,000
per share. Total of P9.8M – P4.9M payable in 5 years at 12% per annum interest until fully paid. Araneta
Inc. wrote to Inland Realty that the price offered by Stanford was too low.

Inland’s authroity to sell was extended 3 times, 30 days each – last extension was up to December 2,
1975. On July 8, 1977, Inland finally sold the shares to Stanford at P13.5M. Inland sent a demand letter
to Araneta Inc. for the payment of their 5% broker’s commission – declined by the respondent because
respondent claimed that the authority to sell had long expired. Petitioners were no longer privy to the
consummation of the sale.

Both RTC and CA dismissed Inland’s petition because the authority to sell expired on January 1, 1976 (30
days from Dec. 2, 1975). Inland contends that as a broker it was already entitled to the commission by
merely introducing the seller to the prospective buyer who ultimately purchased the shares.

ISSUE

W/N Inland can claim the 5% broker’s commission

10
RULING

Inland Realty is not the efficient procuring cause of the sale. While they had authority, Inland never
exhibited any substantial acts that proximately, and causatively led to the sale. Inland merely submitted
Stanford’s name as prospective buyer. By selling the property after the authority to sell had expired, it
shows that Inland was non-participative in the crucial “events” that contributed to the consummation of
the sale. They did not participate in the negotiations, drafting of the deed of sale, document processing,
finalization of terms and conditions etc.

Finally, petitioners asseverate that, regardless of whether or not their agency contract and authority to
sell had expired, they are automatically entitled to their broker's commission merely upon securing for
and introducing to private respondent Araneta, Inc. the buyer in the person of Stanford which ultimately
acquired ownership over Araneta, Inc.'s 9,800 shares in Architects'.

Petitioners' asseverations are devoid of merit.

11
G.R. No. L-67889 October 10, 1985

PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,

vs.

INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.

Payawal, Jimenez & Associates for petitioners.

Nelson A. Loyola for private respondent.

FACTS

Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then
Department of Education and Culture, hereinafter called Department, to purchase without public
bidding, one million pesos worth of national flags for the use of public schools throughout the country.
The respondent was able to expedite the approval of the purchase by hand-carrying the different
indorsements from one office to another, so that by the first week of September, 1974, all the legal
requirements had been complied with, except the release of the purchase orders. When Nacianceno was
informed by the Chief of the Budget Division of the Department that the purchase orders could not be
released unless a formal offer to deliver the flags in accordance with the required specifications was first
submitted for approval, she contacted the owners of the United Flag Industry on September 17, 1974.

On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The next day,
on October 17, 1974, the respondent's authority to represent the United Flag Industry was revoked by
petitioner Primitivo Siasat.

According to the findings of the courts below, Siasat, after receiving the payment of P469,980.00 on
October 23, 1974 for the first delivery, tendered the amount of P23,900.00 or five percent (5%) of the
amount received, to the respondent as payment of her commission. The latter allegedly protested. She
refused to accept the said amount insisting on the 30% commission agreed upon. The respondent was
prevailed upon to accept the same, however, because of the assurance of the petitioners that they
would pay the commission in full after they delivered the other half of the order. The respondent states
that she later on learned that petitioner Siasat had already received payment for the second delivery of
7,833 flags. When she confronted the petitioners, they vehemently denied receipt of the payment, at

12
the same time claiming that the respondent had no participation whatsoever with regard to the second
delivery of flags and that the agency had already been revoked.

The respondent originally filed a complaint with the Complaints and Investigation Office in Malacañang
but when nothing came of the complaint, she filed an action in the Court of First Instance of Manila to
recover the following commissions: 25%, as balance on the first delivery and 30%, on the second
delivery.

RULING

Since only one transaction was involved, we deny the petitioners' contention that respondent
Nacianceno is not entitled to the stipulated commission on the second delivery because of the
revocation of the agency effected after the first delivery. The revocation of agency could not prevent the
respondent from earning her commission because as the trial court opined, it came too late, the
contract of sale having been already perfected and partly executed.

In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this Court
held:

We do not mean to question the general doctrine as to the power of a principal to revoke the authority of
his agent at will, in the absence of a contract fixing the duration of the agency (subject, however, to
some well defined exceptions). Our ruling is that at the time fixed by the manager of the plaintiff
company for the termination of the negotiations, the defendant real estate agent had already earned the
commissions agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff
company in declining to execute the contract of sale for some reason personal to itself.

The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and,
thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil. 691).

The appellate courts citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G. 1507) is
correct:

The appellee is entitled to recovery. No citation is necessary to show that the general law of contracts the
equitable principle of estoppel. and the expense of another, uphold payment of compensation for
services rendered.

13
There is merit, however, in the petitioners' contention that the agent's commission on the first delivery
was fully paid. The evidence does not sustain the respondent's claim that the petitioners paid her only
5% and that their right to collect another 25% commission on the first delivery must be upheld.

We find respondent's argument regarding respondent's incapacity to represent them in the transaction
with the Department untenable. There are several kinds of agents. To quote a commentator on the
matter:

An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one authorized to do all
acts for his principal which can lawfully be delegated to an agent. So far as such a condition is possible,
such an agent may be said to have universal authority. (Mec. Sec. 58).

A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular
place, or all acts pertaining to a business of a particular class or series. He has usually authority either
expressly conferred in general terms or in effect made general by the usages, customs or nature of the
business which he is authorized to transact.

An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or
in a particular place, would, for this reason, be ordinarily deemed a general agent. (Mec Sec. ,30).

A special agent is one authorized to do some particular act or to act upon some particular occasion. lie
acts usually in accordance with specific instructions or under limitations necessarily implied from the
nature of the act to be done. (Mec. Sec. 61) (Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969
Edition, p. 204).

One does not have to undertake a close scrutiny of the document embodying the agreement between
the petitioners and the respondent to deduce that the 'latter was instituted as a general agent. Indeed, it
can easily be seen by the way general words were employed in the agreement that no restrictions were
intended as to the manner the agency was to be carried out or in the place where it was to be executed.
The power granted to the respondent was so broad that it practically covers the negotiations leading to,
and the execution of, a contract of sale of petitioners' merchandise with any entity or organization.

14
G.R. No. 179382 January 14, 2013

SPOUSES BENJAMIN C. MAMARIL AND SONIA P. MAMARIL, Petitioners,

vs.

THE BOY SCOUT OF THE PHILIPPINES, AIB SECURITY AGENCY, INC., CESARIO PEÑA,* AND VICENTE GADDI,
Respondents.

FACTS

Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Sps. Mamaril) are jeepney operators since 1971.
They would park their six (6) passenger jeepneys every night at the Boy Scout of the Philippines' (BSP)
compound located at 181 Concepcion Street, Malate, Manila for a fee of ₱300.00 per month for each
unit. On May 26, 1995 at 8 o'clock in the evening, all these vehicles were parked inside the BSP
compound. The following morning, however, one of the vehicles with Plate No. DCG 392 was missing and
was never recovered.4 According to the security guards Cesario Peña (Peña) and Vicente Gaddi (Gaddi)
of AIB Security Agency, Inc. (AIB) with whom BSP had contracted5 for its security and protection, a male
person who looked familiar to them took the subject vehicle out of the compound.

On November 20, 1996, Sps. Mamaril filed a complaint6 for damages before the Regional Trial Court
(RTC) of Manila, Branch 39, against BSP, AIB, Peña and Gaddi.

ISSUE

W/N (1) BSP should be held liable for the loss of their vehicle based on the Guard Service Contract and
the parking ticket it issued; and

(2) the CA erred in deleting the RTC awards of damages and attorney's fees.

RULING

The petition lacks merit.

15
Neither will the vicarious liability of an employer under Article 218017 of the Civil Code apply in this
case. It is uncontested that Peña and Gaddi were assigned as security guards by AIB to BSP pursuant to
the Guard Service Contract. Clearly, therefore, no employer-employee relationship existed between BSP
and the security guards assigned in its premises. Consequently, the latter's negligence cannot be
imputed against BSP but should be attributed to AIB, the true employer of Peña and Gaddi.18

In the case of Soliman, Jr. v. Tuazon,19 the Court enunciated thus:

It is settled that where the security agency, as here, recruits, hires and assigns the work of its watchmen
or security guards, the agency is the employer of such guards and watchmen. Liability for illegal or
harmful acts committed by the security guards attaches to the employer agency, and not to the clients or
customers of such agency. As a general rule, a client or customer of a security agency has no hand in
selecting who among the pool of security guards or watchmen employed by the agency shall be assigned
to it; the duty to observe the diligence of a good father of a family in the selection of the guards cannot,
in the ordinary course of events, be demanded from the client whose premises or property are
protected by the security guards. The fact that a client company may give instructions or directions to
the security guards assigned to it, does not, by itself, render the client responsible as an employer of the
security guards concerned and liable for their wrongful acts or omissions. Those instructions or
directions are ordinarily no more than requests commonly envisaged in the contract for services entered
into with the security agency.20

Nor can it be said that a principal-agent relationship existed between BSP and the security guards Peña
and Gaddi as to make the former liable for the latter's complained act. Article 1868 of the Civil Code
states that "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 therefore is representation,21 which element is absent in the instant case. Records show that
BSP merely hired the services of AIB, which, in turn, assigned security guards, solely for the protection of
its properties and premises. Nowhere can it be inferred in the Guard Service Contract that AIB was
appointed as an agent of BSP. Instead, what the parties intended was a pure principal-client relationship
whereby for a consideration, AIB rendered its security services to BSP.

16
G.R. No. L-11491 August 23, 1918

ANDRES QUIROGA, plaintiff-appellant,

vs.

PARSONS HARDWARE CO., defendant-appellee.

Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.

Crossfield & O'Brien for appellee.

FACTS

A contract was entered into between Andres Quiroga and J. Parsons, who were both merchants, which
granted the exclusive right to sell his beds in the Visayan Islands to Parsons under the following
conditions: 1) There be a discount of 2.5% as commission for the sale; 2) Parsons shall order the beds by
the dozen, whether of the same or of different styles; 3) Expenses for transportation and shipment shall
be borne by Quiroga; 4) Parsons is bound to pay Quiroga for the beds received within 60 days from the
date of their shipment; 5) If Quiroga should request payment before the invoice falls due, it shall be
considered as prompt payment with 2% deduction; 6) 15-day notice must at least be given by Quiroga
before any alteration in price of beds; and 7) Parsons binds himself to only sell Quiroga beds. Quiroga
alleged that Parsons breached its contract by selling the beds at a higher price, not having an open
establishment in Iloilo, not maintaining a public exhibition, and for not ordering the beds by the dozen.
Only the last imputation was provided for by the contract, the others were not stipulated. Quiroga
argued that since there was a contract of agency between them, such obligations were necessarily
implied.

ISSUE

W/N contract is agency or sale

RULING

17
No. The agreement between Quiroga and Parsons was that of a simple purchase and sale — not an
agency. Quiroga supplied the beds, while Parsons had the obligation to pay their purchase price. These
features exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By
virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds. There was mutual tolerance in the
performance of the contract in disregard of its terms; and it gives no right to have the contract
considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting
parties, subsequent to, and in connection with, the execution of the contract, must be considered for the
purpose of interpreting the contract, when such interpretation is necessary.

It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff
is one of purchase and sale, in order to show that it was not one made on the basis of a commission on
sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides,
examining the clauses of this contract, none of them is found that substantially supports the plaintiff's
contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words
commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself,
than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses
that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With
regard to the remaining clauses, the least that can be said is that they are not incompatible with the
contract of purchase and sale.

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G.R. No. L-8169 January 29, 1957

THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,

vs.

FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO.,
SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division), respondents.

Ross, Selph, Carrascoso & Janda for petitioner.

FACTS/ ISSUE/ RULING

Taking into consideration the fact that the operator owed his position to the company and the latter
could remove him or terminate his services at will; that the service station belonged to the company and
bore its tradename and the operator sold only the products of the company; that the equipment used by
the operator belonged to the company and were just loaned to the operator and the company took
charge of their repair and maintenance; that an employee of the company supervised the operator and
conducted periodic inspection of the company's gasoline and service station; that the price of the
products sold by the operator was fixed by the company and not by the operator; and that the receipt
signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the
operator was an agent of the company and not an independent contractor should not be disturbed.

To determine the nature of a contract courts do not have or are not bound to rely upon the name or title
given it by the contracting parties, should there be a controversy as to what they really had intended to
enter into, but the way the contracting parties do or perform their respective obligation stipulated or
agreed upon may be shown and inquired into, and should such performance conflict with the name or
title given the contract by the parties, the former must prevail over the latter.

It was admitted by the operator of the gasoline and service station that "the car was carefully and
centrally placed on the platform of the lifter . . ." and the Court of Appeals found that —

. . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused therefor, were
the result of the jerking and swaying of the lift when the valve was released, and that the jerking
was due to some accident and unforeseen shortcoming of the mechanism itself, which caused its
faulty or defective operation or functioning,

. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the
normal and ordinary conduct of his business as operator of his co-appellee's service station, and

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that the jerking and swaying of the hydraulic lift which caused the fall of the subject car were
due to its defective condition, resulting in its faulty operation. . . .

As the act of the agent or his employees acting within the scope of his authority is the act of the
principal, the breach of the undertaking by the agent is one for which the principal is answerable.
Moreover, the company undertook to "answer and see to it that the equipments are in good running
order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to
make a thorough check up of the hydraulic lifter and the check up made by its mechanic was "merely
routine" by raising "the lifter once or twice and after observing that the operator was satisfactory, he
(the mechanic) left the place." The latter was negligent and the company must answer for the negligent
act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.

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