G.R. No. L-47575; May 9, 1941
GEORGE D. TEMPLETON, plaintiff-appellant, vs. ALFREDO L. YATCO, in his capacity as Collector of Internal Revenue, defendant-appellee.

FACTS

The plaintiff-appellant, George D. Templeton, between October 1933 and February 1935, made several shipments of rice valued at P149,539.70 from the Philippines to Henry Kirchmann, Jr. in the United States. The defendant-appellee, the Collector of Internal Revenue, required Templeton to pay a sales tax of P2,056.94 for these transactions. Templeton initially refused, claiming he acted merely as a broker (corredor mercantil) or as an agent of Kirchmann. However, upon being compelled, he paid P1,000 and posted a bond for P1,056.94 to guarantee the full tax payment. He then filed a case seeking a refund of the P1,000 and the cancellation of the bond.
The proven facts established that Templeton purchased the rice from various sellers in the Philippines under contracts substantially similar to one he executed with Maria S. Hizon. Under these contracts, Templeton guaranteed the seller a net price of P4.30 per sack. The difference between this guaranteed price and the higher CIF (cost, insurance, freight) sale price in the U.S. was to be retained by Templeton to cover a 2% brokerage fee and all handling charges, including remilling, repacking, and shipping. Templeton took possession of the rice upon receipt, stored it in his own rented warehouse, remilled it in his own mill established under his own license, and bore all risks of loss or damage while the rice was in his custody. He also personally paid for repacking, cartage, shipping, fumigation, wharfage, freight, and insurance premiums for the shipments. In a letter to Hizon, Templeton clarified that the seller’s liability terminated upon delivery of the rice to his warehouse, and he assumed all subsequent expenses and operations. Templeton testified that he had no contract with Henry Kirchmann, Jr. to act as his agent in the Philippines.

ISSUE

Whether George D. Templeton acted as a mere broker (corredor mercantil) or as a merchant/comissionista (commission merchant) in the rice transactions, thereby making him liable for the sales tax under the relevant law.

RULING

The Supreme Court ruled against Templeton, affirming the lower court’s decision. Templeton was not a broker but a merchant or commission merchant liable for the sales tax.
The Court held that Templeton’s actions did not fit the legal definition of a “corredor mercantil” under the Revised Administrative Code. A broker is a mere intermediary who negotiates sales or purchases for others without taking possession or control of the goods. In contrast, Templeton’s extensive involvement demonstrated he was acting as a commission merchant or factor. He purchased the rice at his own risk, took physical possession and control, processed it using his own facilities, bore all risks of loss, financed all costs of shipment and insurance, and aimed to profit from the difference between the purchase price and the ultimate selling price. His letter to Hizon conclusively showed the sellers had no further interest in the rice once delivered to him.
The Court cited authorities distinguishing a broker from a factor/commission merchant, noting that a factor has possession or control of the property and broad powers to complete the transaction, which described Templeton’s role. Since he acted as a merchant as defined by the Revised Administrative Code, which includes commission merchants who have their own establishments for storing and selling goods, he was subject to the sales tax under Act No. 3243 . Therefore, his appeal was dismissed, and he was ordered to pay costs.