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.

AVANCEÑA, J.:

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

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.

PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.

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

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

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received,
within a period of 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, and cost 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 be considered as a prompt payment, and as
such a deduction of 2 per cent shall be made from the amount of the invoice.

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

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand
of any alteration in price which he may plan to make in respect to his beds,
and agrees that if on the date when such alteration takes effect he should
have any order pending to be served to Mr. Parsons, such order shall enjoy
the advantage of the alteration if the price thereby be lowered, but shall not
be affected by said alteration if the price thereby be increased, for, in this
latter case, Mr. Quiroga assumed the obligation to invoice the beds at the
price at which the order was given.

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

ART. 2. In compensation for the expenses of advertisement which, for the

benefit of both contracting parties, Mr. Parsons may find himself obliged to
make, Mr. Quiroga assumes the obligation to offer and give the preference
to Mr. Parsons in case anyone should apply for the exclusive agency for any
island not comprised with the Visayan group.

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

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

Of the three causes of action alleged by the plaintiff in his complaint, only
two of them constitute the subject matter of this appeal 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; to keep the beds
on public exhibition, and to pay for the advertisement expenses for the same;
and to order the beds by the dozen and in no other manner. As may be seen,
with the exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his agent for the
sale of his beds 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 a purchaser or an agent of the plaintiff for the
sale of his beds.

In order to classify a contract, due regard must be given to its essential

clauses. In the contract in question, what was essential, as constituting its
cause and subject matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price stipulated, and that
the defendant was to pay the price in the manner stipulated. The price
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's request, or in cash, if the defendant so preferred, and in these last
two cases an additional discount was to be allowed for prompt payment.
These are precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and,
on the part of the defendant, to pay their price. These features exclude the
legal conception of 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.

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

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-
president of the defendant corporation and who established and managed
the latter's business in Iloilo. It appears that this witness, prior to the time of
his testimony, had serious 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 as to what was his purpose in contracting with the
plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it
was Mariano Lopez Santos, a director of the corporation, who prepared
Exhibit A. But, even supposing that Ernesto Vidal has 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 which he
claims to have drafted, constitute, as we have said, a contract of purchase
and sale, and not one of commercial agency. This only means that Ernesto
Vidal was mistaken in his classification of the contract. But it must be
understood that 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 previous notice, it forwarded to the
defendant the beds that it wanted; and that the defendant received its
commission for the beds sold by the plaintiff directly to persons in Iloilo. But
all this, at the most only shows that, on the part of both of them, 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, but not when, as in the instant case, its essential
agreements are clearly set forth and plainly show that the contract belongs
to a certain kind and not to another. Furthermore, the return made was of
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 not considered that the defendant had a right, by virtue of the
contract, to make this return. As regards the shipment of beds without
previous notice, it is insinuated in the record that these brass beds were
precisely the ones so shipped, and that, for this very reason, the plaintiff
agreed to their return. And with respect to the so-called commissions, we
have said that they merely constituted a discount on the invoice price, and
the reason for applying this benefit to the beds sold directly by the plaintiff to
persons in Iloilo was because, as the defendant obligated itself in the
contract to incur the expenses of advertisement of the plaintiff'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 effect of 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 of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are
not imposed upon the defendant, either by agreement or by law.

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

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