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.
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.

The plaintiff calls attention to the testimony of Ernesto For the foregoing reasons, we are of opinion that the
Vidal, a former vice-president of the defendant contract by and between the plaintiff and the defendant
corporation and who established and managed the was one of purchase and sale, and that the obligations
latter's business in Iloilo. It appears that this witness, the breach of which is alleged as a cause of action are
prior to the time of his testimony, had serious trouble not imposed upon the defendant, either by agreement
with the defendant, had maintained a civil suit against it, or by law.
and had even accused one of its partners, Guillermo
Parsons, of falsification. He testified that it was he who The judgment appealed from is affirmed, with costs
drafted the contract Exhibit A, and, when questioned as against the appellant. So ordered.
to what was his purpose in contracting with the plaintiff,
replied that it was to be an agent for his beds and to Arellano, C.J., Torres, Johnson, Street and Malcolm,
collect a commission on sales. However, according to JJ., concur.
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