VICTORIAS MILLING CO., INC. v.

COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION (2000, Quisumbing)1 PARTIES: Petitioner Victorias Milling Co., Inc. | Respondents CA & Consolidated Sugar Corporation FACTS: St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co., Inc., (VMC). In the course of their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M which covers 25,000 bags of sugar. STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M. CSC issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by SLDR No. 1214M. SLDR was sold and indorsed to CSC. CSC was only able to withdraw 2,000 of the 25,000 bags of sugar covered by SLDR No. 1214M. VMC replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already withdrawn all the sugar covered by the cleared checks. CSC demanded the release of the 23,000 bags. Victorias Milling reiterated that all bags had been fully withdrawn. Pre-trial CSC filed a complaint for specific performance. Defendants were Teresita Ng Sy (doing business under the name of St. Therese Merchandising) and Victorias Milling. CSC did not pursue case against Sy and instead used her as a witness. CSC: Fully paid so no reason to refuse delivery VMC: 23,000 bags were withdrawn by STM corresponding to the cleared checks SLDRs, which it had issued, were not documents of title, but mere delivery receipts issued pursuant to a series of transactions entered into between it and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said party's rights and interests. Trial Court TC rendered judgment in favor of CSC. VMC was ordered to deliver 23,000 bags of sugar. CSC: The testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by her covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar bought by her covered by SLDR No. 1213 on the same date, October 16, 1989 (date of the two SLDRs) is duly supported by documentary evidence, inclusive of which are post-dated checks dated October 27, 1989 issued by St. Therese Merchandising in favor of VMC at the time it purchased the 50,000 bags of sugar covered by SLDR No. 1213 and 1214. Said checks appear to have been honored and duly credited to the account of VMC as evidenced by an official receipt
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I just revised Mr. Batocabes earlier digest. Thank you.

issued by VMC in favor of STM. The testimony of Teresita Ng Go is further supported by a computer printout of VMC, showing the quantity and value of the purchases made by STM, the SLDR no. issued to cover the purchase, the official receipt no., and the status of payment. It is clearly indicated in that document that with respect to the sugar covered by SLDR No. 1214, the same has been fully paid as indicated by the word 'cleared' appearing under the column of 'status of payment.' VMC: That the purchase price of the 25,000 bags of sugar purchased by STM covered by SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo Caintic. TC: The testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully paid and is not corroborated by any positive evidence. Court of Appeals VMC appealed. VMC: Dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale. Pursuant to this contract, STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM. CSC: SLDR No. 1214M is a separate transaction. CA first MODIFIED RTC, VMC to deliver 12,586 bags but on MR modified its own judgment, VMC to deliver 23,000 bags. STMs and CSCs specially informing VMC that CSC was authorized by buyer STM to withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf," CSCs withdrawing of 2,000 bags of sugar for STM, and STM's empowering other persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered CSC like the other persons, an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., and precluded it from subsequently claiming and proving being an assignee of SLDR No. 1214M and from suing by itself for its enforcement because it was conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. RELEVANT ISSUES: 1. W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as an assignee. (Note: Issue 1st raised on appeal; so an issue which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process. BUT since CA ruled upon it SC must address it) 2. W/N CA erred in applying the law on compensation to the transaction under SLDR No. 1214M so as to preclude VMC from offsetting its credits on the other SLDRs. 3. W/N CA erred in not ruling that the sale of sugar under SLDR No. 1214M was a conditional sale or a contract to sell and hence freed VMC from further obligations. HELD/RATIO: 1. NO. CA did not err when it held that CSC was not STMs agent. CSC could independently sue VMC. VMC: Relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent: This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) the refined sugar covered by

Shipping List/Delivery Receipt = Refined Sugar (SLDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags." The Civil Code defines a contract of agency as follows: "Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." From Article 1868 it is clear that the basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or 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. Where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its nature and extent. CSC was a buyer of the SLDFR 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. Ultimately, what is decisive is the intention of the parties. That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. 2. NO. CA did not err when it refused to apply Article 1279 of NCC. VMC: Insists that its debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 NCC. However, TC and CA found that the purchase of sugar covered by SLDR No. 1214M was a separate and independent transaction; it was not a serial part of a single transaction or of one account contrary to petitioner's insistence. Evidence shows that VMC had been paid for the sugar purchased under SLDR No. 1214M. VMC clearly had the obligation to deliver said commodity to STM or its assignee. Since said sugar had been fully paid for, VMC and CSC, as assignee of STM, were not mutually creditors and debtors of each other. 3. YES. CA erred in ruling that the transaction was a contract to sell. It is a contract of sale. VMC: The sale of sugar under SLDR No. 1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with the vendor. SLDR No. 1214M contains the following terms and conditions: "It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the buyer/trader personally or through a representative, title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed and buyer/trader assumes full responsibility therefore The terms and conditions clearly show that VMC transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly establish

a contract of sale, not a contract to sell. VMC is now estopped from alleging the contrary. Having transferred title to the sugar in question, VMC is now obliged to deliver it to the purchaser or its assignee. The contract is the law between the contracting parties. Where the terms and conditions so stipulated are not contrary to law, morals, good customs, public policy or public order, the contract is valid and must be upheld. DISPOSITIVE: The instant petition is DENIED for lack of merit. Costs against petitioner. Hannah Camille A. Marquez