FACTS:

Arco
Amusement
was
engaged
in
the
business
Gonzalo
Puyat
of
operating
&
Sons
Inc
cinematopgraphs.
(GPS)
Philippines
was
for
the
the
exclusive
agent
in
the
Starr
cinematograph
Piano
Company.
with
sound
Desiring
reproducing
to
equip
its
devices,
president,
Arco
GIl
Puyat,
approached
and
an
employee
GPS,
through
named
its
Santos.
between
After
the
some
parties
negotiations,
that
GPS
iton
was
would
agreed
order
Company
reproducing
and
that
equipment
Arco
would
from
Starr
pay
Piano
GPS,
in
addition
commission,
to
the
plus
rice
all
expenses
of
the
equipment,
such
as
freight,
a
10%
insurance,
price
(without
etc.
When
discount)
GPS
inquired
of
the
equipment,
Starr
Piano
the
Being
latter
agreeable
quoted
such
to
at
the
$1,700
price
FOB
(plus
Indiana.
10%
commission
formally
authorized
plus
all
the
other
order.
expenses),
The
following
Arco
sound
year,
both
reproducing
parties
agreed
equipment
for
another
order
the
of
same
Puyat
&
Sons,
Inc.
v.
Arco
Amusement
Co.
FACTS
Arco Amusement was engaged in the business of operating cinematographs.
Gonzalo Puyat & Sons Inc. (GPS) was the exclusive agent in the Philippines
for the Starr Piano Company. 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 Starr Piano Company 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 Starr Piano the price (without discount) of the
equipment, the latter quoted such at $1,700 FOB Indiana. Being agreeable to
the price (plus 10%commission plus all other expenses), 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
plus 10% plus all other expenses. Three 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 list price, and that it had obtained a discount from
Starr Piano. Moreover, Arco alleged that the equipment were overpriced.
Thus, being its agent, GPS had to reimburse the excess amount it received
from Arco.
ISSUE
W/N there was a contract of agency, not of sale
HELD
NO. The letters containing Arco's acceptance of the prices for the equipment
are clear in their terms and admit no other interpretation that the
prices are fixed and determinate. While the letters state that GPS was to receive
a 10% commission, this does not necessarily mean that it is an agent of
Arco, as this provision is only an additional price which it bound itself to
pay, and which stipulation is not incompatible with the contract of sale. It is GPS
that is the exclusive agent of Starr Piano in the Philippines, not the agent of Arco. It
is out of the ordinary for one to be the agent of both the seller and the
buyer. The facts and circumstances show that Arco entered into a contract of
sale with GPS, the exclusive agent of Starr Piano. As such, it is not duty bound to
reveal
the
private arrangement it had with Starr Piano relative to the 25%
discount. Thus, GPS is not bound to reimburse Arco for any difference between the
cost price and the sales price, which represents the profit realized by GPS
out of the transaction.

Ker & Co, Ltd. Lingad

terms
as
the
first
at
$1,600
plus
10%
plus
all
other
Three
expenses.
years
later,
Arco
discovered
that
the
prices
their
first
quoted
2
orders
to
them
mentioned
by
GPS
were
with
regard
not
the
net
prices,
obtained
but
a
rather
discount
from
list
price,
Starr
Piano.
and
that
it
had
Moreover,
were
0verpriced.
Arco
alleged
being
that
its
the
agent,
equipment
GPS
had
received
to
from
reimburse
Arco.
the
excess
amount
it and
ISSUE:
of
sale
W/N
there
was
a
contract
of
agency,
HELD:
acceptance
NO.
of
The
the
letters
prices
for
containing
the
Arco's
are
clear
interpretation
in
their
that
terms
and
prices
admit
are
no
fixed
other
determinate.
was
to
receive
While
a
10%
the
commission,
letters
state
this
that
does
GPS
Arco,
necessarily
as
this
provision
mean
that
is
only
itequipment
is
an
an
additional
agent
of
price
stipulation
which
is
it
not
bound
incompatible
itself
to
pay,
with
and
the
contract
which
of
Starr
sale.
Piano
It
is
in
GPS
the
that
Philippines,
is
the
exclusive
not
the
agent
agent
of
of
Arco.
agent
It
of
is
out
both
of
the
the
ordinary
seller
for
and
one
the
to
be
buyer.
the
The
facts
entered
and
into
circumstances
a
contract
of
sale
show
GPS,
that
the
Arco
exclusive
not
duty
agent
bound
of
Starr
to
reveal
Piano.
As
the
such,
private
it
is
arrangement
the
25%
discount.
it
had
Thus,
with
GPS
Starr
is
Piano
not
bound
relative
to
to
cost
reimburse
price
Arco
and
for
the
any
difference
sales
price,
between
which
represents the profit realized by
transaction.
GPS
out
of
the
FACTS
Ker and Co, Ltd. was assessed by then Commissioner of Internal Revenue Domingo
the sum of P 20,272.33 as the commercial brokers percentage tax surcharge and
compromise penalty. There was a request on the part of Ker for the cancellation of
such assessment which request was turned down. As a result, it filed a petition for
review with the Court of Tax Appeals. The CTA held that Ker is taxable except as to
the compromise penalty of P 500, the amount due from it being fixed at P 19,
772.33.
Such liability arose from a contract of Ker with the United States Rubber
International (USRI). The former being referred to as the distributor and the latter
specifically designated as the company. The contract was to apply to transactions
between the former and Ker, as distributor from July 1, 1948 to continue in force
until terminated by either party giving to the other 60 days notice. The shipments
would cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros
Oriental and Mindanao except the province of Davao, Ker as distributor being
precluded from disposing such products elsewhere than in the above places unless
written consent be obtained from the company. Ker as distributor is required to
exert every effort to have the shipment of the products in the maximum quantity
and to promote in every way the sale thereof.
(Crucial stipulation: The company shall form time to time consign to Ker and Ker will
receive, accept and/or hold upon consignment the products specified under the
terms of this agreement in such quantities as in the judgment of company may be
necessary.
It is further agreed that this agreement does not constitute Ker the agent or legal
representative of the company for any purpose whatsoever.)
ISSUE
W/N the contract between Ker and the USRI is a contract of sale.
HELD
No. By taking the contractual stipulations as a whole and not just the disclaimer, it
would seem that the contract between them is a contract of agency. That the
petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber
International is borne out by the facts that:
1. petitioner can dispose of the products of the Company only to certain persons

or entities and within stipulated limits, unless excepted by the contract or by the
Rubber Company;
2. it merely receives, accepts and/or holds upon consignment the products,
which remain properties of the latter company;
3. every effort shall be made by petitioner to promote in every way the sale of
the products (Par. 3); that sales made by petitioner are subject to approval by
the company;
4. on dates determined by the rubber company, petitioner shall render a detailed
report showing sales during the month;
5. the rubber company shall invoice the sales as of the dates of inventory and
sales report (Par. 14); that the rubber company agrees to keep the consigned
goods fully insured under insurance policies payable to it in case of loss;
6. upon request of the rubber company at any time, petitioner shall render an
inventory of the existing stock which may be checked by an authorized
representative of the former
7. upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber company
until their disposition is provided for by the latter
The National Internal Revenue Code defined Commercial broker as all persons,
other than importer, manufacturers, producers or bona fide employees who, for
compensation or profit, sell or bring about sales or purchase of merchandise for
other persons or being proposed buyers and sellers together and also includes
commission merchants such as Ker in this case.
The mere disclaimer in a contract that an entity like Ker is not the agent or legal
representative for any purpose whatsoever does not suffice to yield the conclusion
that it is an independent merchant if the control over the goods for resale of goods
consigned is pervasive in character.