Gonzalo Puyat & Sons v.

Arco Amusement
June 20, 1941|Laurel, J.
Sales Distinguished from Other Contracts

DOCTRINE: The contract is the law between the parties and should include all the things they are supposed to have been agreed upon.
What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which cannot bind either
party.
SUMMARY: Arco Amusement operates 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. The following year, both parties agreed for another order of sound reproducing
equipment. 3 years later, Arco discovered that the equipment were overpriced. SC held that the contract between the petitioner and
the respondent was one of purchase and sale and that to hold the petitioner an agent of the respondent in the purchase of equipment
and machinery from the SPC 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.

FACTS:
1. Arco Amusement Company (Arco) is a business engaged in operating cinematographs. Gonzalo Puyat &
Sons, Inc. (GPS) was acting as exclusive agents in the Philippines for Starr Piano Company of Indiana,
USA, and dealt with cinematographer equipment and company.
o Arco entered into an agreement with GPS wherein:
- GPS will, on behalf of Arco, order sound reproducing equipment from Starr Piano Company;
- Arco will pay GPS, in addition to the price of equipment, a 10% commission plus all expenses.
- Starr Piano quoted the list price of equipment as $1700 without discount to GPS, which then told
Arco about it.
o The two formalized the transaction and Arco Amusement duly paid $1700 to Gonzalo Puyat.
o Subsequently, Arco ordered the same again to Gonzalo Puyat.
- The order stated that GPS would pay for the equipment the amount of $1600 which was supposed
to be the exact price quoted by Starr Piano plus 10% commission and expenses.
- Arco Amusement duly paid $1600 plus 10% commission plus $160 for the expenses.
* The $160 does not represent actual out-of-pocket expenses but a mere flat charge and
rough estimate made by Arco Amusement equivalent to 10% of the $1,600 price.

2. Arco sought to obtain a reduction from GPS rather than a reimbursement due to the following
discoveries:
- the price quoted to them with regard to their previous orders were not the net price but rather
the list price, and GPS had obtained a discount from Starr Piano; and
- by reading reviews and literature on prices of machinery and cinematograph equipment, Arco was
convinced that the prices charged them were much too high.

3. Failing, Arco filed a complaint.

o RTC: Contract between Arco Amusement and Gonzalo Puyat was one of outright purchase and sale.
o CA: Reversed RTC’s ruling; the relation between the two was that of agent and principal, Gonzalo
Puyat acting as agent of Arco Amusement, and sentenced Gonzalo Puyat to pay the alleged
overpayments.

ISSUE: WoN contract of sale or agency – Sale.

RULING:
1. In the first place, the contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should be
regarded merely as “dealer’s” or “trader’s talk”, which cannot bind either party.
 The letters showing that Arco accepted the prices of $1700 and $1600 for the sound reproducing
equipment subject of its contract with the 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.

2. Whatever unforeseen events might have taken place unfavorable to Arco Amusement, such as change in
prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano
Company to properly fill the orders as per specifications, GPS might still legally hold Arco Amusement
to the prices fixed.
 This is incompatible with the pretended relation of agency between the petitioner and the
respondent, because in agency, the agent is exempted from all liability in the discharge of his
commission provided he acts in accordance with the instructions received from his principal (section
254, Code of Commerce), and the principal must indemnify the agent for all damages which the
latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil
Code).

3. The orders which state that the petitioner was to receive 10% commission does not necessarily make
GPS an agent of Arco as this provision is only an additional price which Arco bound itself to pay, and
which stipulation is not incompatible with the contract of purchase and sale.

DISPOSITION: The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is
accordingly reversed and the 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," without pronouncement regarding costs. So ordered.

NOTE/S: