Romulo Coronel vs CA, Conception Alcaraz (1996)

FACTS

This case is about a sale of land in Roosevelt Avenue, Quezon City by the vendor
Romulo Coronel to the vendees Conception Alcaraz and her daughter Ramona Patricia
Alcaraz with the following conditions:

The Coronel’s will immediately transfer the certificate of title in their name upon
receipt of the downpayment which is ₱50,000.

Upon the transfer in their names of the subject property, the Coronel’s will
execute the deed of absolute sale in favor of Ramona and then Ramona shall
immediately pay the Coronel’s the whole balance of ₱1,190,000.

On January 15, 1985, Conception paid the downpayment of ₱50,000 and then on
February 6, 1985, the property was now registered under the name of Coronel’s. By
Feb. 18, 1985, the Coronel’s sold the property to Catalina B. Mabanag for ₱1,580,000
after she made a ₱300,000 downpayment. This is the reason why the Coronel’s
cancelled and rescind the contract with the Alcaraz by depositing back the ₱50,000 to
Ramona’s bank account.

On Feb. 22, Conception filed a complaint for specific performance against the
Coronel’s. On April, the Coronel’s executed a deed of absolute sale over the subject
property to Catalina after which on June Catalina was issued a new title over the
subject property.

ISSUE

Whether or not the “Receipt of Down payment” embodied a perfected contract of

sale or just a mere contract to sell?

HELD

CONTRACT OF SALE- contracting parties obligates himself to transfer the

ownership and to deliver a determinate thing and the other to pay a price certain in
money or its equivalent.

CONTRACT TO SELL- the prospective seller explicitly reserves the transfer of the
title to the prospective buyer, meaning the seller does not yet agree or consent to
transfer the ownership of the property until the happening of a contingent event like full
payment of price.
 When the “Receipt of Down Payment” document was prepared and signed by
Romulo Coronel, the parties had agreed to a conditional contract of sale the
consummation of the contract is subject only to the successful transfer of the certificate
of Title.

According to Supreme Court, the receipt of down payment document manifests a

clear intent of the Coronel’s to transfer the title to the buyer, but since the title is still in
the name effect the transfer even though the buyers are able and willing to immediately
pay the purchase price. The agreement as well could not have been a contract to sell
because the seller or the Coronel’s made no express reservation of ownership or the
title of the land.

On Feb. 6, 1985, the Contract of Sale between the Coronel’s and the Alcaraz’
became obligatory.
GOMEZ vs CA (2000)

FACTS

On 30 June 1978, the City of Manila passed a resolution which in effect awarded
to 46 applicants, 37 homelots in the former Ampil-Gorospe estate located in Tondo,
Manila. Luisa Gomez, predecessor-in-interest of herein petitioner Vicente Gomez, was
awarded Lot 4, Block 1. Despite the full payment, Luisa still paid in installment an
amount of P8,244.00, in excess of the purchase price, which the City of Manila, through
the CTSC, accepted. Subsequently, in a memorandum dated 07 February 1984, the
Urban Settlements Officer and Member-Executive Secretary of the CTSC directed the
Western Police District, City Hall Detachment, to conduct an investigation regarding
reported violations of the terms and conditions of the award committed by the lot
awardees.

ISSUE

Whether or not the contract was a contract of sale or contract to sell.

HELD

It was a contract to sell, the records would indubitably show that Luisa Gomez,
including her heirs and successors-in-interest, have performed acts that constitute
gross, if not brazen, violation of the aforementioned terms and conditions of the award,
as evidenced by the investigation report. We are of the considered view that the
payment of the purchase price of P3,556.00, constitutes fair and reasonable rental for
the period in which said property was under the control of awardee Luisa Gomez, her
heirs and successors-in-interest. Undeniably, the awardee together with her heirs and
successors-in-interest, have gained benefits, financial or otherwise, for a period of eight
years - from the time of actual award of the lot to the time of cancellation thereof
(1978-1986).
ROMERO vs CA (1995)

FACTS

Petitioner Virgilio Romero a civil engineer together with his foreign partners
wants to put up a Central Warehouse in Metro Manila. Alfonso Flores and his wife
accompanied by a broker, offered a parcel of land measuring 1,952 square meters,
owned by the private respondent Enriqueta Chua vda. De Ongsiong. The two entered
into a “Conditional deed of Sale”. The petitioner paid in advance in the sum of
P50,000.00 for the eviction of squatters. Although successful, private respondent
sought the return of the advance payment she received because she could not get rid
of the squatters.

ISSUE

May the vendor demand the rescission of a contract of sale of a parcel of land
for a cause traceable to his own failure to evict the squatters?

Is the condition of the contract valid?

HELD

A perfected contract of sale may either be absolute or conditional depending on

whether the agreement is devoid of, or subject to, any condition imposed on the
passing of title of the thing to be conveyed or on the obligation of a party thereto.
When ownership is retained until the fulfillment of a positive condition the breach of the
condition will simply prevent the duty to convey title from acquiring an obligatory force.
If the condition is imposed upon the obligation of a party thereto when ownership is
retained until the fulfillment of a positive condition will simply prevent the duty to
convey title from acquiring an obligatory force. If the condition is imposed on an
obligation of a party which is not complied with the other party may either refuse to
proceed or waive said condition. Where, of course, the condition is imposed upon the
perfection of the contract itself, the failure of such condition would prevent the juridical
relation itself from coming into existence. The right of resolution of a party to an
obligation is predicted on a breach of faith by the other party that violates the
reciprocity between them. It is private respondent who has failed in her obligation
under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to
shoulder the expense of the execution of the judgment in the ejectment case and to
make arrangements with the sherriff to effect such execution.
VELARDE vs CA (2001)

FACTS

The private respondent executed a Deed of Sale with Assumption of Mortgage,

with a balance of P1.8 million, in favor of the petitioners. Pursuant to said agreements,
plaintiffs paid the bank (BPI) for three (3) months until they were advised that the
Application for Assumption of Mortgage was denied. This prompted the plaintiffs not to
make any further payment. Private respondent wrote the petitioners informing the non-
fulfillment of the obligations. Petitioners, thru counsel responded that they are willing to
pay in cash the balance subject to several conditions. Private respondents sent a
notarial notice of cancellation/rescission of the Deed of Sale. Petitioners filed a
complaint which was consequently dismissed by an outgoing judge but was reversed by
the assuming judge in their Motion for Reconsideration. The Court of Appeals reinstated
the decision to dismiss.

ISSUE

Whether or not there is a substantial breach of contract that would entitle its
rescission.

HELD

YES. Article 1191 of the New Civil Code applies. The breach committed did not
merely consist of a slight delay in payment or an irregularity; such breach would not
normally defeat the intention of the parties to the contract. Here, petitioners not only
failed to pay the P1.8 million balance, but they also imposed upon private respondents
new obligations as preconditions to the performance of their own obligation. In effect,
the qualified offer to pay was a repudiation of an existing obligation, which was legally
due and demandable under the contract of sale. Hence, private respondents were left
with the legal option of seeking rescission to protect their own interest.
ACAP vs CA (1995)

FACTS

Acap was a tenant of the lot owned by Cosme Pido. Upon Pido's death, Acap
paid the monthly rental dues to the widow Lauranciana Pido. He died intestate. The
widow and her 3 sons afterward executed a notarized document denominated as
"Declaration of Heirship and waiver of rights" in favor of private respondant De los
Reyes. Acap did not recognize De los Reyes claim of ownership over the land as he
contended that the land still belongs to the heirs of Cosme Pido, and won't pay the rent
demanded by De los Reyes.

ISSUE

Whether or not the subject Declaration of heirship and waiver of rights is

recognized mode of acquiring ownership? Can it be considered a deed of sale?

HELD

In a contract of sale, one of the contracting parties obligates himself to transfer

the ownership of and to deliver a determinate thing, and the other party to pay a price
certain in money or its equivalent. Upon the other hand, a declaration of heirship and
waiver of rights operates as a public instrument when filed with the Registry of Deeds
whereby the intestate heirs adjudicate and divide the estate left by the decedent among
themselves as they see fit. It is in effect an extrajudicial settlement between the heirs
under Rule 74 of the Rules of Court.

There is a marked difference between a sale of hereditary rights and a waiver of

hereditary rights. The first presumes the existence of a contract or deed of sale
between the parties. The second is a mode of extinction of an ownership where there is
an abdication or intentional relinquishment of a known right with knowledge of its
existence in favor of other persons who are co-heirs in the succession. De los Reyes,
being then a stranger to the succession of Cosme Pido, cannot conclusively claim
ownership over the subject lot on the sole basis of the waiver of document which
neither recites the elements of either a sale or donation or any other derivative modes
of acquiring ownership.
QUIJADA vs CA (1995)

FACTS

Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda.
de Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from
the latter the two-hectare parcel of land. Trinidad Quijada together with her sisters
Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother Epapiadito
Corvera executed a conditional deed of donation of the two-hectare parcel of land wit
the condition being that the parcel of land shall be used solely and exclusively as part of
the campus of the proposed provincial high school in Talacogon but Trinidad remained
in possession of the parcel of land despite the donation.

On July 29, 1962, Trinidad sold one (1) hectare of the subject parcel of land to
defendant-appellant Regalado Mondejar. Subsequently, Trinidad verbally sold the
remaining one (1) hectare to defendant-appellant (respondent) Regalado Mondejar
without the benefit of a written deed of sale and evidenced solely by receipts of
payment.

In 1980, the heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry against defendant-appellant (respondent) Regalado
Mondejar, which complaint was dismissed. The proposed provincial high school having
failed to materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a
resolution reverting the two (2) hectares of land donated back to the donors.

ISSUE

Whether or not the donated parcel of land will revert back to the original owner
for not complying the resolutory condition of the construction of the school.

HELD

Yes. In this case, that resolutory condition is the construction of the school. It
has been ruled that when a person donates land to another on the condition that the
latter would build upon the land a school, the condition imposed is not a condition
precedent or a suspensive condition but a resolutory one. Thus, at the time of the sales
made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots
since she had earlier transferred ownership thereof by virtue of the deed of donation.
Only then – when the non-fulfillment of the resolutory condition was brought to the
donor’s knowledge – that ownership of the donated property reverted to the donor as
provided in the automatic reversion clause of the deed of donation.
 In the doctrine of resolutory condition provided under Article 1181, So long as
the resolutory condition subsists and is capable of fulfillment, the donation remains
effective and the donee continues to be the owner subject only to the rights of the
donor or his successors-in-interest under the deed of donation.

The donor may have an inchoate interest in the donated property during the
time that ownership of the land has not reverted to her. Such inchoate interest may be
the subject of contracts including a contract of sale. In this case, however, what the
donor sold was the land itself which she no longer owns. It would have been different if
the donor-seller sold her interests over the property under the deed of donation which
is subject to the possibility of reversion of ownership arising from the non-fulfillment of
the resolutory condition.
FULE vs CA (1998)

FACTS

Petitioner Gregorio Fule, a banker by profession and a jeweler, acquired a 10-

hectare property in Tanay, Rizal. In 1984, he met private respondent Dr. Ninevetch
Cruz who was interested on the said lot. It so happened that at the time, petitioner had
also shown interest in buying a pair of emerald-cut diamond earrings owned by Dr.
Cruz.

Subsequently, an agreement for the barter of the jewelry and the Tanay property
ensued. Petitioner prepare the documents of the deed of absolute sale while Dr. Cruz
attended to the safekeeping of the jewelry. Dr. Cruz got the earrings from her safety
deposit box and handed it to petitioner, who, when asked if those were alright, nodded
and took the earrings. Two hours after, petitioner Fule alleged that the earrings he
received were fake. He filed a complaint to declare the sale of property null and void on
the ground of fraud and deceit on the part of the respondent.

ISSUE

Whether or not the contract of sale should be nullified on the ground of fraud.

HELD

There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them,
he would not have agreed to.

The records, however, are bare of any evidence manifesting that private
respondents employed such insidious words or machinations to entice petitioner into
entering the contract of barter. Neither is there any evidence showing that Dr. Cruz
induced petitioner to sell his Tanay property or that she cajoled him to take the earrings
in exchange for said property. On the contrary, Dr. Cruz did not initially accede to
petitioner’s proposal to buy the said jewelry. It was in fact petitioner who resorted to
machinations to convince Dr. Cruz to exchange her jewelry for the lot. On account of
the petitioner’s work as a banker-jeweler, it can be rightfully assumed that he was an
expert on matters regarding gems. He had the intellectual capacity and the business
acumen as a banker to take precautionary measures to avert such a mistake,
considering the value of both the jewelry and his land; that the finger of suspicion of
switching the genuine jewelry for a fake inevitably points to him.
PUP vs CA (2001)

FACTS

Petitioner National Development Corp., a government owned and controlled

corporation, had in its disposal a 10 hectares property. Sometime in May 1965, private
respondent Firestone Corporation manifested its desire to lease a portion of it for
ceramic manufacturing business. On August 24, 1965, both parties entered into a
contract of lease for a term of 10 years renewable for another 10 years. Prior to the
expiration of the aforementioned contract, Firestone wrote NDC requesting for an
extension of their lease agreement. It was renewed with an express grant to Firestone
of the first option to purchase the leased premise in the event that it was decided "to
dispose and sell the properties including the lot..."

Cognizant of the impending expiration of the leased agreement, Firestone

informed NDC through letters and calls that it was renewing its lease. No answer was
given. Firestone's predicament worsened when it learned of NDC's supposed plans to
dispose the subject property in favor of petitioner Polytechnic University of the
Philippines. PUP referred to Memorandum Order No. 214 issued by then President
Aquino ordering the transfer of the whole NDC compound to the National Government.
The order of conveyance would automatically result in the cancellation of NDC's total
obligation in favor of the National Government.

Firestone instituted an action for specific performance to compel NDC to sell the
leased property in its favor.

ISSUE

Whether or not there is a valid sale between NDC and PUP.

HELD

A contract of sale, as defined in the Civil Code, is a contract where one of the
parties obligates himself to transfer the ownership of and to deliver a determinate thing
to the other or others who shall pay therefore a sum certain in money or its equivalent.
It is therefore a general requisite for the existence of a valid and enforceable contract
of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise
of the vendor to sell a determinate thing and the promise of the vendee to receive and
pay for the property so delivered and transferred. The Civil Code provision is, in effect,
a "catch-all" provision which effectively brings within its grasp a whole gamut of
transfers whereby ownership of a thing is ceded for a consideration.
 All three (3) essential elements of a valid sale, without which there can be no
sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP
- consent of the parties, determinate subject matter, and consideration therefor.

Consent to the sale is obvious from the prefatory clauses of Memorandum Order
No. 214 which explicitly states the acquiescence of the parties to the sale of the
property. Furthermore, the cancellation of NDC's liabilities in favor of the National
Government constituted the "consideration" for the sale.
GAITE vs FONACIER (1961)

FACTS

Fonacier, owner of mining claims, constituted Gaite as his attorney-in-fact. Gaite

was authorized to enter into a contract with other persons with respect to the mining
claims.

Gaite then entered into a contract with Larap Iron Mines, a company Gaite solely
owned, to develop the mining claims. Later, Fonacier abruptly decided to revoke Gaite’s
authority as attorney-in-fact.

Afterwards, Gaite sold the developments his company made in the mining claims
areas and the ore already mined for a sum of money to Fonacier. Fonacier secured the
sale with a surety company. Part of the money was paid upon sale while the other part
was payable out of the first loan of credit covering the first shipment of iron ore and the
first amount derived from the local sale of the iron ore.

After the surety expired, Gaite demanded payment of the remainder of the
purchase price but Fonacier refused arguing no sale of iron ore had yet taken place.

ISSUE

WHETHER OR NOT THE SELLING OF THE IRON ORES IS A SUSPENSIVE

CONDITION FOR PAYING GAITE

HELD

The sale isn’t a suspensive condition but is only a suspensive period or term. This
interpretation is supported by

The contract expresses no contingency in the buyer’s obligation to pay. The

contract recognizes the existence of an obligation to pay and only the maturity is
deferred. Gaite never desired or assumed to run the risk of losing his right over the ore
without getting paid for it as shown by his insistence on a surety. Treating the condition
as a suspensive condition would leave payment at the debtor’s discretion because the
ore will be sold only when the debtor wants it to be sold.

In onerous contracts the rules of interpretation favor the greater reciprocity of

interest and because sale is onerous this rule applies. Greater reciprocity is obtained if
the buyer’s obligation to pay is deemed existing compared to such obligation non-
existing until the ore was sold.
Commissioner vs. Ateneo de Manila (1997)

FACTS

The ADMU Institute of Philippine Culture is engaged in social science studies of

Philippine society and culture. It accepts scholarships for its research activities from
international organizations and private foundations. CIR assessed IPC’s tax liability for
unpaid contractor’s tax, claiming that IPC is an independent contractor and therefore,
subject to 3% tax.

ISSUE

W/N IPC is a contractor?

W/N the research project is considered a contract of sale/contract for a piece of

work?

HELD

IPC is not a contractor, it never contracted to sell its research projects for a fee.
The funds received by ADMU are not payments but donations which are tax exempt.
Furthermore, the research activities conducted by IPC are not focused on business but
on social science projects/studies. Regarding sponsored projects, IPC requires that the
topic must be consistent with IPC’s academic agenda, that there was no
proprietary/commercial purpose for research, and that IPC retains ownership/right to
publish results.

Contract of sale requires a transfer of ownership of a determinate thing while a

contract for a piece of work requires execution of a piece of work for the employer. In
the present case, tehre was no sale or contract for a piece of work since there was no
transfer of ownership over research data obtained or results of results of research
projects undertaken by IPC.
INCHAUSTI vs CROMWELL (1911)

FACTS

Inchausti is engaged in the business of buying and selling wholesale hemp on

commission. It is customary to sell hemp in bales which are made by compressing the
loose fiber by means of presses, covering two sides of the bale with matting, and
fastening it by means of strips of rattan; that the operation of bailing hemp is
designated among merchants by the word “prensaje.” In all sales of hemp by Inchausti,
the price is quoted to the buyer at so much per picul, no mention being made of
bailing. It is with the tacit understanding that the hemp will be delivered in bales. The
amount depends under the denomination of “prensaje” or the baled hemp. CIR made
demand in writing upon Inchausti for the payment of the sum of P1,370.68 as a tax of
one third of one per cent on the sums of money mentioned as aggreagate sum
collected as prensaje or the baled hemp. Inchausti paid upon protest, contending that
the collected amount is illegal upon the ground that the said charge does not constitute
a part of the selling price of the hemp, but is a charge made for the service of baling
the hemp.

ISSUE

Whether or not the baled hemp constitutes a contract of sale

HELD

Yes, the baled hemp constitutes a contract of sale. In the case at bar, the baled
form before the agreement of sale were made and would have been in existence even
if none of the individual sales in question had been consummated. The hemp, even if
sold to someone else, will be sold in bales. When a person stipulates for the future sale
of articles which he is habitually making, and which at the time are not made or
finished, it is essentially a contract of sale and not a contract for piece of work. It is
otherwise when the article is made pursuant to agreement. If the article ordered by the
purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone,
and no change or modification of it is made at the defendant’s request, it is a contract
of sale, even though it may be entirely made after, and in consequence of, the
defendant’s order for it.
CELESTINO vs COLLECTOR (1956)

FACTS

Celestino is the owner of Oriental Sash Factory. It paid 7% on the gross sales of
their sales. In 1952, they began to pay only 3% tax. Petitioner claims that it does not
manufacture ready-made doors, sash and windows for the public, but only upon special
orders from the customers, hence, it is not engaged in manufacturing under sec 186,
but only in sales of services covered by sec 191. Having failed to convince BIR,
petitioner went to the Court of Tax Appeal where it also failed. CTA, in its decision,
holds that the “petitioner has chosen for its tradename and has offered itself to the
public as a “Factory”, which means it is out to do business, in its chosen lines on a big
scale. As a general rule, sash factories receive orders for doors and windows of special
design only in particular cases but the bulk of their sales is derived from a ready-made
doors and windows of standard sizes for the average home.

ISSUE

Whether the petitioner company provides special services or is engaged in

manufacturing.

HELD

The Oriental Sash Factory is engaged in manufacturing. The company habitually

makes sash, windows and doors as it has been represented to the public.The fact that
windows and doors are made by it only when customers place their orders, does not
alter the nature of the establishment, for it is obvious that it only accepted such orders
as called for the employment of such material-moulding, frames, panels-as it ordinarily
manufactured or was in a position habitually to manufacture. The Oriental Sash Factory
does nothing more than sell the goods that it mass-produces or habitually makes; sash,
panels, mouldings, frames, cutting them to such sizes and combining them in such
forms as its customers may desire.
Commissioner vs. Engineering Equipment (1975)

FACTS

Engineering Equipment and Supply Company is engaged in the design and

installation of central type air conditioning system, pumping plants and steel
fabrications. Upon a letter from a certain Juan dela Cruz denouncing the company for
tax evasion and fraud in obtaining its dollar allocations, BIR, CB and NBI conducted a
raid and confiscated voluminous documents from the firm. The Commissioner contends
that Engineering is a manufacturer and seller of air conditioning units and parts or
accessories thereof and, therefore, it is subject to the 30% advance sales tax prescribed
by Section 185(m) of the Tax Code, in relation to Section 194 of the same. Engineering
claims that it is not a manufacturer and setter of air-conditioning units and spare parts
or accessories thereof subject to tax under Section 185(m) of the Tax Code, but a
contractor engaged in the design, supply and installation of the central type of air-
conditioning system subject to the 3% tax imposed by Section 191 of the same Code,
which is essentially a tax on the sale of services or labor of a contractor rather than on
the sale of articles subject to the tax referred to in Sections 184, 185 and 186 of the
Code.

ISSUE

Whether or not Engineering is a manufacturer of air conditioning units under

Section 185(m), supra, in relation to Sections 183(b) and 194 of the Code, or a
contractor under Section 191 of the same Code

HELD

The distinction between a contract of sale and one for work, labor and materials
is tested by the inquiry whether the thing transferred is one not in existence and which
never would have existed but for the order of the party desiring to acquire it, or a thing
which would have existed and has been the subject of sale to some other persons even
if the order had not been given. If the article ordered by the purchaser is exactly such
as the plaintiff makes and keeps on hand for sale to anyone, and no change or
modification of it is made at defendant's request, it is a contract of sale, even though it
may be entirely made after, and in consequence of, the defendants order for it.

The word "contractor" has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific job or
piece of work for other persons, using his own means and methods without submitting
himself to control as to the petty details. The true test of a contractor would seem to be
that he renders service in the course of an independent occupation, representing the
will of his employer only as to the result of his work, and not as to the means by which
it is accomplished.

Engineering, in a nutshell, fabricates, assembles, supplies and installs in the

buildings of its various customers the central type air conditioning system; prepares the
plans and specifications therefor which are distinct and different from each other; the
air conditioning units and spare parts or accessories thereof used by petitioner are not
the window type of air conditioner which are manufactured, assembled and produced
locally for sale to the general market; and the imported air conditioning units and spare
parts or accessories thereof are supplied and installed by petitioner upon previous
orders of its customers conformably with their needs and requirements. The facts and
circumstances aforequoted support the theory that Engineering is a contractor rather
than a manufacturer.
QUIROGA vs PARSONS (1918)

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

Is the contract between them one of agency, not of sale?

HELD

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.
Gonzalo Puyat vs. Arco Amusement (1941)

FACTS

Arco Amusement was engaged in the business of operating cinematographs

while Gonzalo Puyat & Sons (GPS) was the exclusive agent in the Philippines for the
Starr Piano Company (SPC). Desiring to equip its cinematograph with sound
reproducing devices, Arco approached GPS, through its president, Gil Puyat, and an
employee named Santos. After some negotiations, it was agreed between the parties
that GPS would order sound reproducing equipment from SPC and that Arco would pay
GPS, in addition to the price of the equipment, a 10% commission, plus all expenses
such as freight, insurance, etc. When GPS inquired SPC the price (without discount) of
the equipment, the latter quoted such at $1,700.00 FOB Indiana. Being agreeable to
the price, Arco formally authorized the order. The following year, both parties agreed
for another order of sound reproducing equipment on the same terms as the first at
$1,600.00 plus 10% plus all other expenses. 3 years later, Arco discovered that the
prices quoted to them by GPS with regard to their first 2 orders mentioned, were not
the net prices but rather the latter has obtained a discount from SPC thus, equipment is
deemed overpriced and GPS had to reimburse the excess amount.

ISSUE

Is there a contract of agency?

HELD

No. The contract between the petitioner and the respondent was one of
purchase and sale. The letters, Exhibits 1 and 2, by which the respondent accepted the
prices of $1,700.00 and $1,600.00, respectively, for the sound reproducing equipment
subject of its contract with petitioner, are clear in their terms and admit no other
interpretation that the respondent in question at the prices indicated which are fixed
and determinate. The respondent admitted in its complaint with the CFI of Manila that
the petitioner agreed to sell to it the first sound reproducing equipment. To hold the
petitioner an agent of the respondent in the purchase of equipment and machinery
from the SPC of Richmond, Indiana, is incompatible with the admitted fact that the
petitioner is the exclusive agent of the same company in the Philippines. It is out of the
ordinary for one to be the agent of both the vendor and the purchaser.