CMS Logging v. CA (1992; Nocon, J.) Petitioner: CMS Logging, Inc. Respondent: CA and D.R. Aguinaldo Corp.

Facts: 1. CMS (a forest concessionaire engaged in the logging business) and DRACOR (engaged in the business of exporting and selling logs and lumber) entered into a contract of agency whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce, for a period of five (5) years. By virtue of this agreement, CMS was able to sell 77M board feet of logs in Japan. 2. Six months before the expiration of the agreement, CMS president Atty. Sison and its general manager and legal counsel Atty. Dominguez discovered while on a trip to Japan that DRACOR had used Shinko Trading Corp. as agent, representative or liaison officer for selling their company s logs and earned a commission of $1/1,000 board feet, such that it was able to get $77k from the arrangement. a. CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. (Basically, CMS claims that DRACOR got the contested amount from the proceeds of the sales over and above the commission they themselves were to receive under the agreement.) b. After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR. 3. CMS sued DRACOR for the commission and for moral and exemplary damages. a. DRACOR s counterclaim: that it was entitled to a P144k commission from the sales made directly by CMS. b. CMS reply: in its defense, said that DRACOR retained as part of its commission P101k as part of its commission from the sale made directly by CMS. i. CMS counterclaim to DRACOR S counterclaim: demanded the return of the amount DRACOR unlawfully retained. c. DRACOR s amended counterclaim: alleged that the balance of its commission on the sales CMS made was P42k (impliedly admitting that it retained the amount alleged in the reply) 4. TC: Complaint DISMISSED. a. Though there was indeed receipt by Shinko of the $77k, there is no evidence that such amount was for the sale of CMS logs. b. Counterclaim also dismissed as it was shown that DRACOR had waived its rights to the balance of its commission in a letter to Atty. Sison. c. CMS appealed. 5. CA: Dismissal AFFIRMED. a. No evidence supporting CMS claims. b. A letter between DRACOR and Shinko shows that the amount paid to the latter was taken from the 5% that DRACOR received from CMS. c. Petition for review on certiorari filed before the SC. Issue: 1. WON Shinko received the commission in question. 2. WON DRACOR is entitled to a commission for the sales made by CMS directly to Japanese firms.

Held/Ratio: 1. NO, it Shinko not receive the commission in question. a. Atty. Dominguez testimony that he heard said news from Shinko s president is hearsay, as well as the letter of one Mr. Shibata b. The alleged admissions made by DRACOR s president and its counsel in other letters cannot be categorized as admissions because they do not state the facts to be proven in definite, certain, and unequivocal language. Sample admissions : i. it is obvious that they paid Shinko for certain services which Shinko must have satisfactorily performed ii. There appears to be no justification for your client's contention that these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales. iii. our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only (here, the numbers pointed to include logs sold to various firms, and not just sales allegedly made by Shinko) c. There was no admission by DRACOR s alleged silence as to the fact of payment made by Toyo Menka directly to Shinko because there was in fact a response to this allegation though a letter from the respondent categorically denying knowledge of any such payment. d. Even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs. 2. NO, DRACOR is not entitled to its commission to the subsequent sales. a. Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. b. In this case, there was an implied revocation when CMS sold its logs directly to Japanese firms. Since the contract of agency had been revoked by the time these sales were effected, the DRACOR is no longer entitled to claim or retain commission in relation to these transactions. c. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission. d. Fraud and bad faith were not adequately proven in the LC, and the SC is bound by its finding. Dispositive: Decision MODIFIED. CA ruling as to the Shinko commission AFFIRMED, but portion as to DRACOR s right to retain subsequent commissions REVERSED.