G.R. No. 21237 - Barton vs. Leyte Asphalt and Mineral Oil Co., Ltd.

The plaintiff, James D. Barton, a U.S. citizen residing in Manila, brought the suit against the Leyte Asphalt & Mineral Oil Co., Ltd., a corporation organized under Philippine law with its principal office in Cebu.
The action was instituted in the Court of First Instance of Manila for breach of contract, seeking damages amounting to $313,563.30, and for a judicial declaration extending the terms of the sales agency contract.

On April 21, 1920, the defendant’s president, William Anderson, sent a letter (Exhibit 8) to Barton authorizing him to sell the products of the Lucio mine in Australia and New Zealand, initially setting forth conditions and a price scale.
This initial agency was later superseded by a more formal contract (Exhibit A, dated October 1, 1920) approved by the defendant’s board of directors, which:

Appointed Barton as the sole and exclusive sales agent for bituminous limestone and other asphalt products in several territories including Australia, New Zealand, and parts of Asia and the United States.
Established a detailed price schedule and conditions governing order sizes, shipment terms, and potential extension of the agency if certain sales volumes were met.
Included provisions for rebates if sales exceeded prescribed tonnage limits and adjusted the sales commission accordingly.

Following the contract, Barton engaged in further negotiations to secure additional sales, including his request for similar agency rights for Japan.
On November 27, 1920, defendant’s president responded regarding the Japanese agency, indicating willingness to offer the same commission but withholding a regular appointment pending larger sales volumes.
Barton subsequently entered into agreements with subagents:

In San Francisco, with Ludvigsen & McCurdy, for exclusive selling rights on bituminous limestone on a one-year basis (Exhibit E and later correspondence).
In Sydney, with Frank B. Smith, to act as his sales agent, with the arrangement later extended.

On February 5, 1921, and thereafter, orders were communicated through letters (Exhibits G, L, M, W, Y, AA, BB, and II), specifying quantities (ranging from 1,000 to 6,000 tons) and shipment dates tied to the bonus extension provisions in the agency contract.
The plaintiff’s letters sometimes concealed or obscured the true identity of the purchasers, suggesting that the orders might have emanated from his own subagents rather than independent, bona fide purchasers.

In a letter dated March 25, 1921, the defendant required that orders would only be entertained upon actual cash deposits with designated banks in Cebu.
Subsequent communications (Exhibits Y, AA, etc.) indicated efforts by Barton to assure deposits and shipment readiness, although conditions for payment were a recurring point of contention.

In the trial court, after receiving both documentary and oral evidence, the judgment absolved the defendant on several causes of action and awarded damages of $202,500 to Barton on specific causes.
The defendant appealed the judgment, challenging both the evidentiary rulings (admission and exclusion of various exhibits such as Exhibits 2, 7, 8, 9, 10, and 14) and the substantive findings on the validity of the orders.
The appellate proceedings centered on whether the orders—derived from the plaintiff’s subagents and the manner in which they were confirmed—were sufficient to underpin the judgment, particularly in light of agency law and the prohibition against self-dealing.

Whether the orders reflected bona fide sales by independent and solvent purchasers or were essentially orders originated by the plaintiff’s own subagents—constituting self-dealing.
Whether these orders met the contractual standard required for extending the agency agreement and obligating the defendant to make shipments.

Whether the requisite terms of depositing cash with designated banks (as stipulated by the defendant in its correspondence) were adequately fulfilled by the plaintiff.
The impact of the omitted negative word (“unprepared”) in the contract, affecting the interpretation of the defendant’s loading obligations.

The propriety of admitting certain exhibits (such as Exhibit E) and excluding others (Exhibits 2, 7, 8, 9, 10, and especially Exhibit 14, which raised issues regarding attorney-client privilege).
Whether the mode of acquisition of Exhibit 14 and similar documents compromised the integrity of their admissibility, affecting the outcome of the case.