SCHMID & OBERLY, INC. vs.

RJL MARTINEZ
G.R. No. 75198 October 18, 1988

Facts:
RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its
business, it needed electrical generators for the operation of its business. Schmid
and Oberly sells electrical generators with the brand of Nagata, a Japanese
product. D. Nagata Co. Ltd. of Japan was Schmids supplier. Schmid advertised the
12 Nagata generators for sale and RJL purchased 12 brand new generators. Through
an irrevocable line of credit, Nagata shipped to the Schmid the generators and RJL
paid the amount of the purchase price. (First sale = 3 generators; Second sale = 12
generators).
Later, the generators were found to be factory defective. RJL informed the Schmid
that it shall return the 12 generators. 3 were returned. Schmid replaced the 3
generators subject of the first sale with generators of a different brand. As to the
second sale, 3 were shipped to Japan and the remaining 9 were not replaced.
RJL sued the defendant on the warranty, asking for rescission of the contract and
that Schmid be ordered to accept the generators and be ordered to pay back the
purchase money as well as be liable for damages. Schmid opposes such liability
averring that it was merely the indentor in the sale between Nagata Co., the
exporter and RJL Martinez, the importer. As mere indentor, it avers that is not liable
for the sellers implied warranty against hidden defects, Schmid not having
personally assumed any such warranty.

Issue:
1) WON the second transaction between the parties was a sale or an indent
transaction? INDENT TRANSACTION
2) Even is Schmid is merely an indentor, may it still be liable for the warranty? YES,
under its contractual obligations it may be liable. But in this case, Schmid did not
warrant the products.

Held:
An indentor is a middlemen in the same class as commercial brokers and
commission merchants. A broker is generally defined as one who is engaged, for
others, on a commission, negotiating contracts relative to property with the custody
of which he has no concern; the negotiator between other parties, never acting in
his own name but in the name of those who employed him; he is strictly a
middleman and for some purpose the agent of both parties. There are 3 parties to
an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a nonresident manufacturer residing in the country where the goods are to be bought.

The chief feature of a commercial broker and a commercial merchant is that in

effecting a sale, they are merely intermediaries or middle-men, and act in a certain
sense as the agent of both parties to the transaction.
RJL MARTINEZ admitted that the generators were purchased through indent order.
RJL admitted in its demand letter previously sent to SCHMID that 12 of 15
generators were purchased through your company, by indent order and three (3)
by direct purchase. The evidence also show that RJL MARTINEZ paid directly
NAGATA CO, for the generators, and that the latter company itself invoiced the sale
and shipped the generators directly to the former. The only participation of Schmid
was to act as an intermediary or middleman between Nagata and RJL, by procuring
an order from RJL and forwarding the same to Nagata for which the company
received a commission from Nagata.
Sale vs. Indent Transaction:
The essence of the contract of sale is transfer of title or agreement to transfer it for
a price paid or promised. If such transfer puts the transferee in the attitude or
position of an owner and makes him liable to the transferor as a debtor for the
agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is, a sale.
3 evidences pointing to fact that Schmid is merely an indentor:
a. the Quotation and the General Conditions of Sale on the dorsal side thereof do
not necessarily lead to the conclusion that NAGATA CO., was the real seller of the 12
generators.
b. When RJL complained to SCHMID, it immediately asked RJL to send the defective
generators to its shop to determine what was wrong. SCHMID informed NAGATA
about the complaint of RJL. After the generators were found to have factory defects,
SCHMID facilitated the shipment of three (3) generators to Japan and, after their
repair, back to the Philippines.
c. the letter from NAGATA CO. to SCHMID regarding the repair of the generators
indicated that the latter was within the purview of a seller.

2) Even as SCHMID was merely an indentor, there was nothing to prevent it from
voluntarily warranting that twelve (12) generators subject of the second transaction
are free from any hidden defects. In other words, SCHMID may be held answerable
for some other contractual obligation, if indeed it had so bound itself. As stated
above, an indentor is to some extent an agent of both the vendor and the vendee.
As such agent, therefore, he may expressly obligate himself to undertake the
obligations of his principal.
Notably, nowhere in the Quotation is it stated therein that SCHMID did bind itself to
answer for the defects of the things sold. Balagtas testified initially that the
warranty was in the receipts covering the sale. Nowhere is it stated in the invoice
that SCHMID warranted the generators against defects. He again changed his mind

and asserted that the warranty was given verbally. Hence, RJL has failed to prove
that SCHMID had given a warranty on the 12 generators subject of the second
transaction

VICTORIAS MILLING CO. vs CA and CONSOLIDATED SUGAR CO.

[G.R. No. 117356. June 19, 2000]
Facts: St. Therese Merchandising (STM), who regularly bought sugar from Victorias
Milling Co. (VMC), was issued Shipping List/Delivery Receipts (SLDRs) by the latter
as proof of purchases for bags of sugar. Thereafter, STM sold to Consolidated Sugar
Co. (CSC) its rights in one of the SLDRs. CSC communicated to VMC that it had been
authorized by STM to withdraw the sugar covered by SLDR. Enclosed in the letter
were a copy of SLDR and a letter of authority from STM authorizing CSC "to
withdraw for and in our behalf the refined sugar covered by SLDR. CSC surrendered
the SLDR to VMCs warehouse and was allowed to withdraw sugar but after several
bags were released, it was later on refused to allow further withdrawals of sugar.
CSC communicated to VMC to allow it to withdraw sugar because the SLDR had
been sold and endorsed to it by STM. VMC contended that it could not allow any
further withdrawals of sugar against SLDR because STM had already withdrawn
sugar covered by cleared checks. CSC filed complaint against VMC. VMC contended
that it had no privity of contract with CSC, the dealings between it and STM were
part of a series of transactions involving only one account or one general contract of
sale because CSC was an agent of STM. CSC countered that the sugar purchases
involving SLDR were separate and independent transactions.
Issue: Whether or not CSC was an agent of STM.
Held: No. CSC was a buyer of the SLDR form, and not an agent of STM.
CSC was not subject to STM's control. The question of whether a contract is one of
sale or agency depends on the intention of the parties as gathered from the whole
scope and effect of the language employed. That the authorization given to CSC
contained the phrase "for and in our (STM's) behalf" did not establish an agency.
CSC communicated to VMC that the SLDR had been sold and endorsed to it by
STM. The use of the words "sold and endorsed" means that STM and CSC intended a
contract of sale, and not an agency.
The basis of agency is representation. On the part of the principal, there must be
an actual intention to appointor an intention naturally inferable from his words or
actions; and on the part of the agent, there must be an intention to accept the
appointment and act on it, and in the absence of such intent, there is generally no
agency. One factor which most clearly distinguishes agency from other legal
concepts is control; one person - the agent - agrees to act under the control or
direction of another - the principal. Indeed, the very word "agency" has come to
connote control by the principal. The control factor, more than any other, has
caused the courts to put contracts between principal and agent in a separate
category.