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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.

AVANCEA, J .:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by andbetween the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations thepresent defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS,BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF"QUIROGA" BEDS IN THE VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the VisayanIslands to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter'sestablishment in Iloilo, and shall invoice them at the same price he has fixed for sales, inManila, and, in the invoices, shall make and allowance of a discount of 25 per cent of theinvoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen,whether of the same or of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixtydays from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and thefreight, insurance, and cost of unloading from the vessel at the point where the beds arereceived, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment whenmade shall be considered as a prompt payment, and as such a deduction of 2 per cent shall bemade from the amount of the invoice.

The same discount shall be made on the amount of any invoice which Mr. Parsons may deemconvenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration inprice which he may plan to make in respect to his beds, and agrees that if on the date whensuch alteration takes effect he should have any order pending to be served to Mr. Parsons,such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shallnot be affected by said alteration if the price thereby be increased, for, in this latter case, Mr.Quiroga assumed the obligation to invoice the beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.

ART. 2. In compensation for the expenses of advertisement which, for the benefit of bothcontracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the

obligation to offer and give the preference to Mr. Parsons in case anyone should apply for theexclusive agency for any island not comprised with the Visayan group.

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ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga"beds in all the towns of the Archipelago where there are no exclusive agents, and shallimmediately report such action to Mr. Quiroga for his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by either of thecontracting parties on a previous notice of ninety days to the other party.

Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute thesubject matter of this appeal and both substantially amount to the averment that the defendant violatedthe following obligations: not to sell the beds at higher prices than those of the invoices; to have anopen establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and topay for the advertisement expenses for the same; and to order the beds by the dozen and in no othermanner. As may be seen, with the exception of the obligation on the part of the defendant to order thebeds by the dozen and in no other manner, none of the obligations imputed to the defendant in the twocauses of action are expressly set forth in the contract. But the plaintiff alleged that the defendant washis agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract ofcommercial agency. The whole question, therefore, reduced itself to a determination as to whether thedefendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the

plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract inquestion, what was essential, as constituting its cause and subject matter, is that the plaintiff was tofurnish the defendant with the beds which the latter might order, at the price stipulated, and that thedefendant was to pay the price in the manner stipulated. The price agreed upon was the onedetermined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 percent, according to their class. Payment was to be made at the end of sixty days, or before, at theplaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additionaldiscount was to be allowed for prompt payment. These are precisely the essential features of acontract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds,and, on the part of the defendant, to pay their price. These features exclude the legal conception of anagency or order to sell whereby the mandatory or agent received the thing to sell it, and does not payits 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 andthe defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within theterm fixed, without any other consideration and regardless as to whether he had or had not sold thebeds.

It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiffis one of purchase and sale, in order to show that it was not one made on the basis of a commission onsales, 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'scontention. Not a single one of these clauses necessarily conveys the idea of an agency. Thewords 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, onlyexpresses 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 withthe contract of purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendantcorporation and who established and managed the latter's business in Iloilo. It appears that thiswitness, prior to the time of his testimony, had serious trouble with the defendant, had maintained acivil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. Hetestified that it was he who drafted the contract Exhibit A, and, when questioned as to what was hispurpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect acommission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a

director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has statedthe truth, his statement as to what was his idea in contracting with the plaintiff is of no importance,inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we

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have said, a contract of purchase and sale, and not one of commercial agency. This only means thatErnesto Vidal was mistaken in his classification of the contract. But it must be understood that acontract is what the law defines it to be, and not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that,without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant

received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at themost only shows that, on the part of both of them, there was mutual tolerance in the performance of thecontract in disregard of its terms; and it gives no right to have the contract considered, not as theparties 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 interpretingthe contract, when such interpretation is necessary, but not when, as in the instant case, its essentialagreements are clearly set forth and plainly show that the contract belongs to a certain kind and not toanother. Furthermore, the return made was of certain brass beds, and was not effected in exchange forthe price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requestedthe plaintiff's prior consent with respect to said beds, which shows that it was not considered that thedefendant had a right, by virtue of the contract, to make this return. As regards the shipment of bedswithout previous notice, it is insinuated in the record that these brass beds were precisely the ones soshipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and thereason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because,as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff'sbeds, such sales were to be considered as a result of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by thecontract, the effect of its breach would only entitle the plaintiff to disregard the orders which thedefendant might place under other conditions; but if the plaintiff consents to fill them, he waives hisright and cannot complain for having acted thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and thedefendant was one of purchase and sale, and that the obligations the breach of which is alleged as acause of action are not imposed upon the defendant, either by agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.