G.R. No. L-6313; May 14, 1954
THE ROYAL SHIRT FACTORY, INC., plaintiff-appellee, vs. CO BON TIC, defendant-appellant.

FACTS

The plaintiff, Royal Shirt Factory, Inc., filed an action in the Municipal Court of Manila to recover from defendant Co Bon Tic the sum of P1,422, representing the alleged unpaid balance for 350 pairs of “Balleteenas” shoes sold at P7 per pair, plus interest and attorney’s fees. The defendant contended the transaction was a sale on consignment, allowing him to return unsold shoes, while the plaintiff asserted it was an outright sale. The Municipal Court ruled it was a sale on consignment, finding 207 pairs were sold at P8 per pair (total P1,656), with P1,028 paid, excluding a P420 check that was returned and not replaced with cash. It ordered defendant to pay P628 and return 143 unsold pairs. The defendant appealed to the Court of First Instance of Manila, which, after a trial de novo, reversed the Municipal Court. It held the transaction was an outright sale at P7 per pair, concluding that defendant, by failing to return unsold shoes within a stipulated 9-day period and making partial payments, had accepted the sale as absolute. It also found the P420 check was never replaced. The Court of First Instance ordered defendant to pay the full balance of P1,422 with 12% interest and 25% attorney’s fees. Defendant appealed, and the case was certified to the Supreme Court on jurisdictional grounds.

ISSUE

1. Whether the Court of First Instance, in exercising its appellate jurisdiction over an appeal from the Municipal Court, had the authority to review and reverse findings (such as the nature of the sale as a consignment) that were favorable to the appellee (plaintiff) who did not appeal from the Municipal Court’s decision.
2. Whether the transaction between the parties was an outright sale or a sale on consignment.
3. Whether the defendant effectively replaced the dishonored P420 check with cash.
4. Whether the stipulated rates of interest (12%) and attorney’s fees (25%) in the plaintiff’s invoice are binding on the defendant.

RULING

1. On Jurisdiction: The Supreme Court ruled that the Court of First Instance had full jurisdiction to review all issues de novo. Under Rule 40, Section 9 of the Rules of Court, a perfected appeal from a municipal court vacates the judgment, and the case stands for trial de novo in the Court of First Instance as if it had never been tried before. Therefore, the Court of First Instance was not confined to reviewing only the issues appealed by the appellant but could re-examine all aspects of the case, including those decided in favor of the non-appealing party. The contention that the unappealed portion became res judicata was rejected.
2. On the Nature of the Sale: The Supreme Court, after examining the evidence, affirmed the Court of First Instance’s finding that the transaction was an outright sale, not a consignment. While the plaintiff’s unsigned order slip (Exhibit A) was self-serving and not binding, the defendant’s conduct, particularly his annotations on the invoice (Exhibit B), indicated he treated the transaction as an absolute sale. He noted partial payments against the total price of P2,450 (350 pairs at P7) and calculated the remaining balance, without reference to the number of shoes sold or unsold, which would be expected in a consignment. His failure to return unsold shoes within a reasonable time and his indefinite retention of them further supported the conclusion of an outright sale.
3. On the P420 Check: The Supreme Court agreed with the lower courts that the defendant did not replace the dishonored postdated check (No. 790264) for P420 with cash. The preponderance of evidence supported the plaintiff’s denial of receipt of cash replacement.
4. On Interest and Attorney’s Fees: The Supreme Court modified the Court of First Instance’s award. It held that the defendant was not bound by the printed terms on the invoice (Exhibit B) stipulating 12% interest and 25% attorney’s fees, as he did not sign it. His tacit acceptance of the invoice related only to the price and payments. Furthermore, a handwritten clause on the invoice (“as agreed with Mr. Chebat”) could be construed as overriding the printed terms. Consequently, the defendant was ordered to pay only the legal interest of 6% per annum from the date of the filing of the complaint, with no award for attorney’s fees.
DISPOSITIVE PORTION: With the modification on the interest and attorney’s fees, the decision of the Court of First Instance was affirmed. Defendant Co Bon Tic was ordered to pay plaintiff Royal Shirt Factory, Inc., the sum of P1,422 with legal interest of 6% per annum from the date of the filing of the complaint, plus costs.