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[ GR No. 6584, Oct 16, 1911 ]



20 Phil. 345

[ G. R. No. 6584, October 16, 1911 ]




This is an appeal by the plaintiff from a judgment of the Court of First  Instance of the city  of  Manila, the  Hon. Simplicio  del Rosario  presiding, dismissing the  complaint upon the merits after trial, without costs.

The facts presented to this court are agreed upon by both parties, consisting, in so far as they are material to a  decision of the case, in the following:

"III. That the plaintiff firm for many years past has been and now is  engaged in the business of buying and selling at wholesale hemp,  both for its own account  and  on commission.

"IV. That, it is customary to sell hemp in bales which are made by compressing the loose fiber by means of presses, covering two sides of the bale with matting, and fastening it by means of strips of rattan; that the operation of baling hemp is  designated among merchants  by the word 'prensaje.'

"V.  That in all  sales  of  hemp by the  plaintiff firm, whether for its own account or on commission for others, the price  is quoted to the buyer at so much per picul, no mention being made  of baling; but with the tacit understanding,  unless otherwise expressly agreed, that the hemp will be delivered in  bales and that, according to the custom prevailing among hemp merchants and dealers in the Philippine Islands, a charge, the  amount of which  depends upon  the  then prevailing  rate, is  to be made against the buyer  under the denomination of 'prensaje' That this charge is made in the same manner in all cases, even when the operation  of baling was performed by the plaintiff or by its principal Jong before the contract of sale was made. Two specimens of  the ordinary form of account used in these operations are hereunto appended, marked Exhibits A and B,  respectively, and made a part hereof.

"VI. That the amount of the charge made against  hemp buyers by the plaintiff firm and other sellers of hemp under the denomination of 'prensaje'  during the period involved in this litigation was P1.75 per bale; that the average cost of the rattan  and matting used on each  bale of hemp  is fifteen (15) centavos and that the average total cost of baling hemp is one (1) peso per bale.

"VII. That  insurance companies in the  Philippine Islands, in estimating the insurable value of hemp always add to the quoted price  of same the charge made by the  seller under the  denomination of 'prensaje.'

"VIII. That the average weight of a bale of hemp is two (2) piculs (126.5 kilograms).

"IX. That between the first day of January, 1905, and the 31st day of March, 1910,  the plaintiff firm, in accordance with the  custom  mentioned in paragraph V hereof, collected and received, under the denomination of 'prensaje,' from purchasers of  hemp sold by the said firm for its own account, in addition to the price expressly agreed  upon for the said hemp, sums aggregating P380,124.35; and between  the 1st day  of October, 1908, and the 1st day of March, 1910,  collected for the account of the owners of hemp sold by  the plaintiff firm in Manila on commission, and under the said denomination  of 'prensaje' in addition to the price expressly agreed upon  for  said hemp, sums aggregating P31,080.

"X.  That the plaintiff firm in estimating the amount due it as commissions on sales of  hemp made by it for its principals has always based the said  amount on the total sum collected from the purchasers of the hemp,  including the charge made in each case under the denomination of 'prensaje.'

"XI. That the plaintiff has always paid to the defendant or to his predecessor in the office of the Collector of Internal Revenue the tax collectible under the provisions of section 139 of Act No. 1189 upon the selling price expressly agreed upon for all hemp sold by the plaintiff firm both for its own account and on commission, but has not, until compelled to do so as hereinafter  stated, paid the said tax upon sums received from the purchaser of such hemp under the denomination of 'prensaje.'

"XII. That on the 29th day of April, 1910, the defendant, acting  in his official capacity as Collector  of Internal Revenue of the Philippine Islands, made demand in writing upon the plaintiff firm for the payment within the period of five (5) days of the sum of P1,370.68  as a tax of one-third of  one per cent on the  sums of money  mentioned in Paragraph IX hereof, and which the said defendant claimed to be entitled to receive,  under the provisions of the said section 139 of Act No. 1189, upon the said sums of money so collected from purchasers of hemp under the denomination of 'prensaje.'

"XIII. That on the 4th day of May, 1910, the plaintiff firm paid to the defendant  under  protest the said  sum of P1,370.69, and on the same date appealed to the  defendant as Collector of Internal Revenue, against the ruling by  which the plaintiff firm  was required to. make  said payment,  but  defendant  overruled  said  protest and  adversely decided said appeal, and refused and still refuses to return to plaintiff the said sum  of P1,370.68 or any part thereof.

"XIV, Upon the facts above set forth it is contended by the plaintiff that the tax of Pl,370.68 assessed by the defendant  upon  the aggregate  sum of said charges  made against said purchasers of hemp by the plaintiff during the period in question, under the denomination of 'prensaje' as aforesaid, namely, P411,204.35, is illegal upon the ground that the said charge does not constitute a part of the selling price of  the hemp, but is a charge made for the service of baling the hemp, and that the plaintiff firm is therefore entitled to recover of the defendant the said sum of P1,370.68 paid to him under protest, together with all interest thereon at the legal rate since its payment, and the costs of this action. 

"Upon the facts above stated it is  the contention of the defendant that the said charge made under the denomination of 'prensaje'  is  in  truth  and in fact a part of the gross value of the hemp sold and of its actual selling  price, and that therefore the tax imposed by section 139 of Act No. 1189 lawfully accrued on said sums, that the collection thereof was lawfully and properly made and  that therefore the  plaintiff is not  entitled to recover back said sum or any part thereof;  and  that the defendant should have judgment against plaintiff for his costs."

Under these facts we  are of the opinion that the  judgment of the court below was right.  It is one of the stipulations in the statement of facts that it is customary to sell hemp in  bales,  and that the price quoted in  the market for hemp per picul is the price for the hemp baled.  The fact is that among large dealers like the plaintiff in this case it is practically impossible  to handle hemp without its  being baled, and it  is admitted by  the statement  of facts, as well as demonstrated by  the documentary proof introduced in the case, that if the  plaintiff sold a  quantity of  hemp it would be the understanding, without words, that  such hemp would be delivered in bales, and that the purchase price would include the cost  and expense  of  baling.  In other words, it is the fact as stipulated, as well as it would be the fact of necessity,  that in all dealings in hemp in the general market the selling price consists of the value of the hemp loose plus the  cost and expense of putting it into marketable form.   In the sales made by the plaintiff, which are  the basis of the controversy here, there were no services performed  by him for his vendee.  There was agreement  that services should be performed.   Indeed, at the time of such sales it was not  known by the vendee whether the hemp was  then actually baled or not.  All that he knew and  all that  concerned him was that the hemp should be  delivered to him baled.  He did not  ask the plaintiff to perform services for him, nor did the plaintiff agree to do so.  The  contract  was single  and consisted solely in the sale and  purchase  of hemp.  The purchaser contracted for nothing else and the vendor agreed to deliver nothing else.

The word "price" signifies  the sum stipulated  as  the equivalent of the thing sold  and also every incident taken into consideration for  the fixing of  the price, put to the debit of the vendee and agreed to by him. It is quite possible that the plaintiff,  in this  case in connection with the hemp which he sold, had himself already  paid the additional expense of  baling as a part of the  purchase price which he paid and that he himself had received the hemp baled from his vendor.  It is quite possible also that such vendor of the plaintiff may have rect&ved the same hemp from his vendor in baled form,  that he paid the additional cost of baling as a  part  of the purchase price which he paid.  In such case the plaintiff  performed no service  whatever for his vendee, nor did, the plaintiff's  vendor  perform any service for him.

The distinction between a contract of sale and one  for work, labor, and materials is tested by the inquiry whether the thing transferred is one not in existence and which never  would have existed but for the order  of the party desiring to acquire it, or a thing which would have existed and been the subject of sale  to some  other person,  even if the order had not been given.  (Groves vs. Buck, 3 Maule & S., 178; Towers vs. Osborne, 1 Strange, 506; Benjamin on Sales, 90.)   It is clear that in the case at bar the hemp was in existence in baled form  before the agreements of sale were made, or, at least, would  have  been  in existence even if none of the individual sales here in question  had been consummated.  It  would have been baled, nevertheless, for sale to  someone else, since, according to the agreed statement of facts,  it is customary to sell hemp in bales. When a  person stipulates for the  future sale of articles which he  is habitually making, and which at the  time are not made or finished, it is essentially a contract of sale and not a contract for labor.   It is otherwise when the article is made pursuant  to  agreement.   (Lamb vs. Crafts, 12 Met., 353; Smith vs. N.  Y.  C. Ry. Co., 4 Keyes, 180; Benjamin on Sales, 98.)  Where labor is employed on the materials of the seller he can not maintain an action for work and labor.   (Atkinson vs. Bell,  8 Barn, & C, 277; Lee  vs. Griffm, 30 L. J. N. S. Q. B.,  252; Prescott  vs. Locke, 51 N. H.,  94.)   If  the article ordered  by the  purchaser is exactly  such as  the plaintiff makes  and  keeps on hand for sale to anyone, and no change or modification  of it is made at the defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendant's order for it.   (Garbutt  vs. Watson, 5 Barn. & Aid., 613; Gardner vs.  Joy, 9  Met., 177; Lamb vs.  Crafts, 12 Met., 353; Waterman  vs.  Meigs, 4 Cush., 497; Clark  vs. Nichols, 107 Mass., 547;  May vs. Ward, 134  Mass., 127; Abbott vs. Gilchrist,  38  Me., 260; Crocket vs. Scribner, 64 Me., 105; Pitkin vs. Noyes, 48 N. H., 294;  Prescott vs. Locke, 51 N. H., 94; Ellison  vs.  Brigham, 38 Vt,  64.)  It has  been held in Massachusetts that a contract to make is a contract of sale  if the article  ordered is already  substantially in existence at the  time of the order  and merely requires some alteration, modification, or adaptation to the buyer's wishes or purposes.   (Mixer vs. Howarth,  21  Pick., 205.)   It is also held  in that state that a contract for the sale of an article which the  vendor  in  the ordinary course of  his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract for the sale of goods to which the statute of  frauds applies.  But if the goods are to be manufactured especially for the purchaser  and upon his special  order, and not  for  the general  market, the case is not  within the statute.  (Goddard vs.  Binney, 115 Mass., 450.)

It is clear to our minds  that  in the  case at  bar the baling was performed  for the general market and was not something done by  plaintiff which was a result  of any peculiar  wording of the  particular  contract between him and his vendee.   It is undoubted that the plaintiff prepared his hemp for the general market.   This would be necessary. One who exposes goods for sale in the market  must have them in marketable form.  The hemp in question  would not have been  in that condition if it had not been baled. The  baling, therefore, was nothing peculiar to the contract between  the plaintiff and  his vendee.  It was precisely the same contract that was made by every other seller of hemp, engaged  as was the plaintiff,  and resulted simply  in the transfer of title to goods  already prepared for the general market.  The method of bookkeeping and  form of  the account rendered  is not controlling  as to the nature  of the contract  made.  It is conceded in  the case that  a separate entry and  charge would  have been made for  the  baling even if the plaintiff had  not  been the one who bated the hemp but, instead, had  received it already baled from his vendor.  This indicates of necessity that the mere fact of entering a separate item for the baling of the hemp is formal rather than essential and  in no sefise indicates in this case the real transaction between the parties.  It is indisputable that, if the plaintiff had  bought the hemp in question already baled, and that that was the hemp the  sale of which formed the  subject of this controversy, then the plaintiff would have performed no  service for his vendee and could not,  therefore,  lawfully charge  for the rendition of such service.  It is, nevertheless, admitted that  in spite of that fact he would still have made the double entry in his invoice of sale to such vendee.  This demonstrates the nature of the transaction and discloses, as we  have already said, that the entry  of a separate  charge for baling does  not accurately describe the transaction between the parties.

Section 139 [Act No. 1189] of the Internal Revenue Law  provides that: 

"There shall be paid by each merchant and manufacturer a  tax at the rate of one-third  of one per centum on  the gross value in money of all goods, wares and merchandise sold, bartered or exchanged in the Philippine Islands, and that this  tax  shall be assessed  on the actual selling  price at which every such merchant or manufacturer disposes of his commodities."

The operation of baling undoubtedly augments the  value of the  goods.   We  agree that  there can be no question that, if the value of the hemp were not augmented to  the amount of P1.75 per bale by said operation, the purchaser would not pay that sum.  If one buys a bale of hemp at a  stipulated price of P20, well knowing that there  is an agreement on his part, express or implied, to pay an  additional amount of P1.75 for that bale, he considers  the bale of hemp  worth P21.75.  It is  agreed, as we  have before stated, that hemp is. sold in bales.  Therefore, baling is performed before the sale.  The purchaser of hemp owes  to the seller nothing whatever by reason  of  their contract except the value of the hemp delivered.   That value, that  sum which the purchaser pays to the vendee, is the true selling price of the hemp, and every item which enters into such price is a part of such  selling price.   By force  of the  custom prevailing among  hemp  dealers in the Philippine Islands, a purchaser of hemp in the market, unless he  expressly stipulates that it shall be delivered to him in loose form, obligates himself  to  purchase and pay for baled  hemp.  Whether or not such  agreement is express  or implied, whether it is  actual or tacit,  it has the same force. After such an agreement has once been made by the purchaser, he has no right to insist thereafter that the seller shall furnish him with unbaled hemp.  It is undoubted that the vendees, in the sales referred to  in the case at bar, would have had no right, after having made their contracts, to insist on the delivery of loose hemp with the  purpose in view themselves to perform the  baling and  thus save 75  centavoa  per bale.  It is unquestioned that the  seller, the plaintiff, would have stood upon his original contract of sale, that is, the obligation to deliver baled hemp, and would have forced his vendees to  accept baled hemp, he himself retaining among his own profits those which accrued from the process of baling.

We are of the opinion that the judgment appealed from must be  affirmed, without special finding as to costs, and it is so ordered.

Torres, Mapa, Johnson, and Carson, JJ., .concur.