SALES Case Citations 2

8/12/2019 SALES Case Citations 2

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SALES Case Citations

1 Coronel v. Court of Tax Appeals 263 SCRA 15

2 Romero v. Court of Appeals 250 SCRA 223

3 Fule v. Court of Appeals 268 SCRA 698

4 Ong v. Court of Appeals 310 SCRA 1

5 Gaite v. Fonacier 2 SCRA 830

6 ACAP v. Court of Appeals 251 SCRA 30

7 Quijada v. Court of Appeals 299 SCRA 695

8 Celestino & Co. v. Collector 99 Phil 841

9Commissioner of Internal Revenue v. Engineering

Equipment and Supply Co.64 SCRA 590

10 Engineering & Machinery Corp. v. CA 252 SCRA 156

11 Quiroga v. Parsons 38 Phil 501

12 Puyat v. Arco Amusement Co. 72 Phil 402

13 Medina v. Collector 1 SCRA 675

14 Calimlim-Canulla v. Fortun 129 SCRA 675

15 Quiang v. Court of Appeals 291 SCRA 372

16 Rubias v. Batiller 51 SCRA 120

17 Phil. Trust Co. v. Roldan 99 Phil 392

18 Pichel v. Alonzo 111 SCRA 34


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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (forherself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A.ALMONTE, and CATALINA BALAIS MABANAG, petitioners,vs.THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted byGLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J .:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except thelast named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located

along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price ofP1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to asCoronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiffRamona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00Total amount

50,000Down paymentP1,190,000.00Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty ThousandPesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry ofDeeds of Quezon City, in the total amount of P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father, Constancio PCoronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the deed ofabsolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balanceof the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of thedocument aforestated;


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2. The Coronels will cause the transfer in their names of the title of the property registered in thename of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos downpayment;

3. Upon the transfer in their names of the subject property, the Coronels will execute the deed ofabsolute sale in favor of Ramona and the latter will pay the former the whole balance of One MillionOne Hundred Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred

to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00Pesos (Exh. "B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels' fatherwas transferred in their names under TCT No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five HundredEighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand(P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")

For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing

the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against theCoronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh"E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the sameproperty with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favorof Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of Catalina underTCT No. 351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submitthe case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents)proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of theircorresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners)accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their correspondingsubmarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneouslysubmit their respective memoranda, and an additional 15 days within which to submit their corresponding comment

or reply thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarilydetailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down byJudge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to executein favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered byTransfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for QuezonCity, together with all the improvements existing thereon free from all liens and encumbrances, andonce accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipthereof, the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to


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pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cashTransfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name ofintervenor is hereby canceled and declared to be without force and effect. Defendants andintervenor and all other persons claiming under them are hereby ordered to vacate the subjectproperty and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees,as well as the counterclaims of defendants and intervenors are hereby dismissed.

No pronouncement as to costs.

So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but thesame was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision bythe undersigned Presiding Judge should be denied for the following reasons: (1) The instant casebecame submitted for decision as of April 14, 1988 when the parties terminated the presentation o

their respective documentary evidence and when the Presiding Judge at that time was JudgeReynaldo Roura. The fact that they were allowed to file memoranda at some future date did notchange the fact that the hearing of the case was terminated before Judge Roura and therefore thesame should be submitted to him for decision; (2) When the defendants and intervenor did not objectto the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decisionwhen they met for the first time before the undersigned Presiding Judge at the hearing of a pendingincident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiescedthereto and they are now estopped from questioning said authority of Judge Roura after theyreceived the decision in question which happens to be adverse to them; (3) While it is true thatJudge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in alrespects the Presiding Judge with full authority to act on any pending incident submitted before thisCourt during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, hedid not lose his authority to decide or resolve such cases submitted to him for decision or resolutionbecause he continued as Judge of the Regional Trial Court and is of co-equal rank with theundersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge towhom a case is submitted for decision has the authority to decide the case notwithstanding histransfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered inthe instant case, resolution of which now pertains to the undersigned Presiding Judge, after ameticulous examination of the documentary evidence presented by the parties, she is convinced thatthe Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision andRender Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby

DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.


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Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' ReplyMemorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersignedponente only on

August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmanceof the trial court's decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is theprecise determination of the legal significance of the document entitled "Receipt of Down Payment" which was

offered in evidence by both parties. There is no dispute as to the fact that said document embodied the bindingcontract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other,pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code ofthe Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, withrespect to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract ofsale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their partinsist that what the document signified was a mere executory contract to sell, subject to certain suspensiveconditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said

contract could not possibly ripen into a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the termsand/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidencemay be available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intentof the parties was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer theownership of and to deliver a determinate thing, and the other to pay therefor a price certain inmoney or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements ofa contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essentiaelement is lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective

buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the propertysubject of the contract to sell until the happening of an event, which for present purposes we shall take as the fulpayment of the purchase price. What the seller agrees or obliges himself to do is to fulfill is promise to sell thesubject property when the entire amount of the purchase price is delivered to him. In other words the full payment ofthe purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to selfrom arising and thus, ownership is retained by the prospective seller without further remedies by the prospectivebuyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract to selwhere the ownership or title is retained by the seller and is not to pass until the full payment of theprice, such payment being a positive suspensive condition and failure of which is not a breach,


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casual or serious, but simply an event that prevented the obligation of the vendor to convey title fromacquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, theprospective seller's obligation to sell the subject property by entering into a contract of sale with the prospectivebuyer becomes demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocallydemandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is bindingupon the promissor if the promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expresslyreserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself tosell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, fulpayment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where theseller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the

happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, theperfection of the contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, suchthat if there had already been previous delivery of the property subject of the sale to the buyer, ownership theretoautomatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase priceownership will not automatically transfer to the buyer although the property may have been previously delivered tohim. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolutesale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the

subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the caseat bench. In a contract to sell, there being no previous sale of the property, a third person buying such propertydespite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instancecannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of theproperty. There is no double sale in such case. Title to the property will transfer to the buyer after registrationbecause there is no defect in the owner-seller's titleper se, but the latter, of course, may be used for damages bythe intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomesabsolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of thesubject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, theseller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, suchsecond buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title,

or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such secondbuyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seekreconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contractentered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinarymeaning unless a technical meaning was intended (Tan vs. Court of Appeals , 212 SCRA 586 [1992]). Thus, whenpetitioners declared in the said "Receipt of Down Payment" that they


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Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty ThousandPesospurchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry ofDeeds of Quezon City, in the total amount of P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and ordinary ideaconveyed is that they sold their property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a cleaintent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the

name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able toimmediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment fromprivate respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that oftheir father, after which, they promised to present said title, now in their names, to the latter and to execute the deedof absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation oownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties fromentering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in theirnames) and not the full payment of the purchase price. Under the established facts and circumstances of the case,the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time,there would have been no reason why an absolute contract of sale could not have been executed and

consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly toprivate respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to selthe subject property, they undertook to have the certificate of title changed to their names and immediatelythereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer withcertain terms and conditions, promised to sell the property to the latter. What may be perceived from the respectiveundertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot theyinherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if thedocuments were then in order. It just happened, however, that the transfer certificate of title was then still in thename of their father. It was more expedient to first effect the change in the certificate of title so as to bear theirnames. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their namesupon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued intheir names, petitioners were committed to immediately execute the deed of absolute sale. Only then will theobligation of the buyer to pay the remainder of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the selleragainst a buyer who intends to buy the property in installment by withholding ownership over the property until thebuyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the one who wereunable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property wasstill in the name of their father. It was the sellers in this case who, as it were, had the impediment which preventedso to speak, the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of DownPayment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditionalcontract of sale, consummation of which is subject only to the successful transfer of the certificate of title from thename of petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4")Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcarazbecame obligatory, the only act required for the consummation thereof being the delivery of the property by meansof the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committedthemselves to do as evidenced by the "Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,


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Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thingwhich is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the provisions of thelaw governing the form of contracts.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss ofthose already acquired, shall depend upon the happening of the event which constitutes thecondition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' nameswas fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale becamemutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already intheir names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolutesale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting toP1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admittedthat:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our

deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt ofthe downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasissupplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only,they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title to the propertyunder their names, there could be no perfected contract of sale. (Emphasis supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly providesthat:

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere hypotheticaarguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of

Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensivecondition that the sellers shall effect the issuance of new certificate title from that of their father's name to theirnames and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides

Art. 1187. The effects of conditional obligation to give, once the condition has been ful filled, shalretroact to the day of the constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of thecondition that has been complied with.


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the rights and obligations of the parties with respect to the perfected contract of sale became mutually dueand demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985.

As of that point in time, reciprocal obligations of both seller and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yetthe absolute owners of the inherited property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligationsto be extent and value of the inheritance of a person are transmitted through his death to another orothers by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coroneare compulsory heirs who were called to succession by operation of law. Thus, at the point their father drewhis last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that anyrights or obligations pertaining thereto became binding and enforceable upon them. It is expressly providedthat rights to the succession are transmitted from the moment of death of the decedent (Article 777, CiviCode; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid isrendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent'sname to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement athat time and they cannot be allowed to now take a posture contrary to that which they took when they entered intothe agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the personmaking it, and cannot be denied or disproved as against the person relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale, petitionerscannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona PAlcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof bygoing to the United States of America, without leaving her address, telephone number, and Special Power of

Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract ofsale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We notethat these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive

pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs(Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence tosubstantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficientevidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegationis not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, wecannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being noexpress stipulation authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])


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Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although theevidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had beendealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not alsoin her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check(Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners everquestioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal checkNeither did they raise any objection as regards payment being effected by a third person. Accordingly, as far aspetitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract ofsale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the fullpurchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence ofRamona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the newtransfer certificate of title in their names and signified their willingness and readiness to execute the deed oabsolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of thepurchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, shecannot be deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be consideredin default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligeejudicially or extrajudicially demands from them the fulfillment of their obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready tocomply in a proper manner with what is incumbent upon him. From the moment one of the partiesfulfill his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double

sale where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall betransferred to the person who may have first taken possession thereof in good faith, if it should bemovable property.

Should if be immovable property, the ownership shall belong to the person acquiring it who in goodfaith first recorded it in Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was firstin the possession; and, in the absence thereof to the person who presents the oldest title, providedthere is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract ofsale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of titlein the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptionsbeing: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there beno inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the propertyahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer tohim to the prejudice of the first buyer.


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In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of theCourt, Justice Jose C. Vitug, explains:

The governing principle isprius tempore,potior jure (first in time, stronger in right). Knowledge bythe first buyer of the second sale cannot defeat the first buyer's rights except when the second buyerfirst registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Converselyknowledge gained by the second buyer of the first sale defeats his rights even if he is first to register,since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R.No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA

656), it has held that it is essential, to merit the protection of Art. 1544, second paragraph, that thesecond realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Courof Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992)(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject propertyonly on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag wassupposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitionerMabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim orprevious sale, for which reason she is buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer ingood faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of anydefect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the saleentered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated onthe transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometimein April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already beenpreviously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming titleto the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the timeof the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that there was a previoussale of the same property to a third party or that another person claims said property in a pervious sale,the registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs.Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courtsbelow.

Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcionher mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion wasalso acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputedbetween mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on thispoint.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

Panganiban, J., took no part.


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Manila

EN BANC

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 and between the plaintiffas party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), asparty of the second part:

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

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsonsunder the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, andshall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make andallowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shallorder 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 sixty days from the date

of their shipment.

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

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

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to payin cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which hemay plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect heshould have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alterationif the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, inthis 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 both contracting parties, MrParsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference toMr. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayangroup.


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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 townsof the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quirogafor his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting partieson 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 the subject matter of thisappeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the

beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; tokeep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by thedozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to orderthe beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes oaction are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of hisbeds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore,reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was apurchaser 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 in question, what wasessential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds whichthe latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. Theprice agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20

to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff'srequest, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed forprompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligationon the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features excludethe legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and doesnot pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if hedoes not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, onreceiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration andregardless as to whether he had or had not sold the beds.

It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchaseand 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 ideaof an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contractitself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that thedefendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remainingclauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and whoestablished and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, hadserious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners,Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned asto what was his purpose 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 thecorporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what

was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A whichhe claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commerciaagency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understoodthat a contract 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 previousnotice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the bedssold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, therewas mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contractconsidered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequentto, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract,when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forthand plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of


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certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind;and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was notconsidered that the defendant 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 so shipped, and thatfor this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said thatthey merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly bythe plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses ofadvertisement of the plaintiff's beds, 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 the contract, the effectof its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions;but if the plaintiff consents to fill them, he waives his right 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 the defendant was one ofpurchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon thedefendant, 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.


Manila

EN BANC

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 certiorarito the Court of Appeals for the purpose of reviewing its AmusemenCompany (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 ofManila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of soundreproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, IndianaU.S.A. The facts of the case as found by the trial court and confirmed by the appellate court, which are admitted by therespondent, are as follows:

In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the Philippine Islands, with itsoffice in Manila, was engaged in the business of operating cinematographs. In 1930, its name was changed toArco Amusement Company. C. S. Salmon was the president, while A. B. Coulette was the business managerAbout the same time, Gonzalo Puyat & Sons, Inc., another corporation doing business in the Philippine Islandswith office in Manila, in addition to its other business, was acting as exclusive agents in the Philippines for theStarr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt incinematographer equipment and machinery, and the Arco Amusement Company desiring to equipt itscinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then presidentand acting manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed betweenthe parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on the other,


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representing the defendant, that the latter would, on behalf of the plaintiff, order sound reproducing equipmentfrom the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of theequipment, a 10 per cent commission, plus all expenses, such as, freight, insurance, banking charges, cablesetc. At the expense of the plaintiff, the defendant sent a cable, Exhibit "3", to the Starr Piano Company, inquiringabout the equipment desired and making the said company to quote its price without discount. A reply wasreceived 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 plaintiffof the price of $1,700. Being agreeable to this price, the plaintiff, by means of Exhibit "1", which is a letter signedby C. S. Salmon dated November 19, 1929, formally authorized the order. The equipment arrived about the endof the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, theprice of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was dulypaid by the plaintiff to the defendant.

Sometime the following year, and after some negotiations between the same parties, plaintiff and defendantsanother order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same termsas the first order. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2", without date, thatis to say, that the plaintiff would pay for the equipment the amount of $1,600, which was supposed to be the pricequoted by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. The equipmentunder the second order arrived in due time, and the defendant was duly paid the price of $1,600 with its 10 percent 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 defendantequivalent 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 defendanherein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the pricequoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the listprice, and that the defendants had obtained a discount from the Starr Piano Company. Moreover, by readingreviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff wereconvinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather areimbursement, 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 justicedissentingheld that the relation between petitioner and respondent was that of agent and principal, the petitioner actingas agent of the respondent in the purchase of the equipment in question, and sentenced the petitioner to pay therespondent alleged overpayments in the total sum of $1,335.52 or P2,671.04, together with legal interest thereon from thedate 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 ofpurchase and sale, the petitioner was guilty of fraud in concealing the true price and hence would still be liable toreimburse the respondent for the overpayments made by the latter.

The petitioner now claims that the following errors have been incurred by the appellate court:

I. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, segun hechos, entre la recurrente y larecurrida existia una relacion implicita de mandataria a mandante en la transaccion de que se trata, en vez de lade vendedora a compradora como ha declarado el Juzgado de Primera Instncia de Manila, presidido entoncespor el hoy Magistrado Honorable Marcelino Montemayor.

II. El Tribunal de Apelaciones incurrio en error de derecho al declarar que, suponiendo que dicha relacion fuerrade vendedora a compradora, la recurrente obtuvo, mediante dolo, el consentimiento de la recurrida en cuanto alprecio de $1,700 y $1,600 de las maquinarias y equipos en cuestion, y condenar a la recurrente ha obtenido de laStarr Piano Company of Richmond, Indiana.

We sustain the theory of the trial court that the contract between the petitioner and the respondent was one of purchaseand 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 havebeen agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader'stalk", which can not bind either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 III., 161;


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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 equipmentsubject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent inquestion at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with theCourt of First Instance of Manila that the petitioner agreed to sellto it the first sound reproducing equipment andmachinery. 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 intoan agreement, under and by virtue of which the herein defendant was to secure from the United States,

and selland deliver to the herein plaintiff, certain sound reproducing equipment and machinery, for which the saiddefendant, 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 suchequipment, 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 ofthe Starr Piano Company to properly fill the orders as per specifications, the plaintiff (respondent) might still legally holdthe defendant (petitioner) to the prices fixed of $1,700 and $1,600." This is incompatible with the pretended relation ofagency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in thedischarge 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 outthe 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 notnecessarily make the petitioner an agent of the respondent, as this provision is only an additional price which therespondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale.(SeeQuiroga 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 fromthe Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusiveagent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and thepurchaser. The facts and circumstances indicated do not point to anything but plain ordinary transaction where therespondent enters into a contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr PianoCompany in the United States.

It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between thecost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the veryessence 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 seeksto draw between the cost price and the list price we consider to be spacious. It is to be observed that the twenty-five percent (25%) discount granted by the Starr piano Company to the petitioner is available only to the latter as the former'sexclusive agent in the Philippines. The respondent could not have secured this discount from the Starr Piano Companyand neither was the petitioner willing to waive that discount in favor of the respondent. As a matter of fact, no reason isadvanced by the respondent why the petitioner should waive the 25 per cent discount granted it by the Starr PianoCompany in exchange for the 10 percent commission offered by the respondent. Moreover, the petitioner was not dutybound 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 haveoffered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discountenjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside fromobtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It wasapparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and therespondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end ofa bad bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of theexcess price, on that ground alone. The respondent could not secure equipment and machinery manufactured by theStarr Piano Company except from the petitioner alone; it willingly paid the price quoted; it received the equipment andmachinery as represented; and that was the end of the matter as far as the respondent was concerned. The fact that thepetitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing theprice agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were


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better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of theintellect of men and women in the business world.

The writ of certiorarishould be, as it is hereby, granted. The decision of the appellate court is accordingly reversed andthe 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., defendants-appellee," withoutpronouncement regarding costs. So ordered.

Avancea, C.J., Diaz, Moran and Horrilleno, JJ.,concur.

SALES Case Citations 2

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