G.R. No. L-7144; May 31, 1955
FAR EASTERN EXPORT & IMPORT CO., petitioner, vs. LIM TECK SUAN, respondent.

FACTS

Sometime in November 1948, an agent of the Far Eastern Export & Import Company (Export Company) offered to sell textile to Lim Teck Suan (Suan). On November 17, 1948, they executed a “Buyer’s Order” (Exhibit A) wherein Suan commissioned the Export Company to procure 10,000 yards of specific Ashtone Acetate & Rayon suiting at $1.13 per yard F.A.S. New York, subject to the Export Company’s confirmation. The terms required Suan to open a Confirmed Irrevocable Letter of Credit immediately upon written confirmation in favor of Frenkel International Corporation of New York. Suan established the letter of credit (Exhibit B) through his bank. The textile arrived in Manila on February 11, 1949. Suan complained the goods were of inferior quality, had them surveyed, and, upon the Export Company’s suggestion, deposited them in a warehouse and later sold them, incurring a net loss of P11,476.66. The Export Company’s defense was that it acted merely as a broker for Frenkel International Corporation, that Suan dealt directly with the supplier, and that it had no further involvement after the order was placed.

ISSUE

Whether the transaction between the Far Eastern Export & Import Company and Lim Teck Suan is one of purchase and sale or one of agency/brokerage.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, ruling that the transaction was one of purchase and sale, not agency or brokerage. The Court found the facts substantially similar to the case of Velasco vs. Universal Trading Co., where a similar transaction was held to be a sale. Key similarities included: the local company (Export Company/Universal Trading) acted as agent for a foreign supplier (Frenkel International/A.J. Wilson Company); the buyer (Suan/Velasco) dealt directly with the local company without privity of contract with the foreign supplier; the buyer paid via an irrevocable letter of credit in favor of the supplier; and no commission was paid by the buyer to the local company, indicating its profit was the markup. The Court further noted that the agreement (Exhibit A) itself referred to the items as “sold” and was confirmed by the Export Company. Applying the principle from Gonzalo Puyat & Sons vs. Arco Amusement Company, the Court held that the Export Company, as an agent of the foreign supplier, could not simultaneously act as an agent for the local buyer due to a conflict of interest. The Export Company was therefore held liable as a seller for the damages suffered by Suan.