Facts:

In the case of The United States vs. Fortunato Menez, G.R. No. 4561, dated October 9, 1908, the legal conflict arose from a transaction involving five sewing machines owned by Smith, Bell & Co. These machines were situated at their Iloilo branch. The defendant, Fortunato Menez, indicated to the company that he was unable to purchase the machines outright; however, he offered to take the machines on a commission basis to sell them. A witness from Smith, Bell & Co. testified about the nature of the agreement, clarifying that should Menez fail to sell the machines within one month, he was obliged to return them. If successful, he was to pay the company's listed price of P20 each for the machines. This testimony led the court to conclude that no sale had occurred; rather, the machines remained the property of Smith, Bell & Co. while in Menez's possession. Thus, he was responsible for their return or their equivalent value, despite the arbitrary price tagged to th

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Facts:

Background of the Transaction

• Smith, Bell & Co., operating a branch at Iloilo, possessed five sewing machines.
• The machines were offered for sale to Fortunato Menez, the defendant.
• Instead of purchasing them outright, the defendant proposed to sell the machines on commission.

Terms of the Agreement

• According to the testimony of a witness involved in forming the contract, the agreement stipulated that:
• If the defendant was unable to sell the sewing machines within one month, he was obligated to return them.
• If he succeeded in selling the machines, he was to pay the list price of P20 per machine to Smith, Bell & Co.
• The fixed price mentioned in the agreement was intended to set the amount of damages for Smith, Bell & Co. in the event of non-fulfillment of the contract.

Nature of the Contract

• The evidence affirmed that:
• The defendant never purchased the sewing machines.
• The machines remained the property of Smith, Bell & Co. while in the defendant’s possession.
• The arrangement was essentially a commission contract rather than a sale.
• The fixed price clause was comparable to similar contracts, such as deals involving the sale of jewels on commission:
• In these analogous cases, it was held that the property remained with the consignor (seller) until the broker fulfilled his obligation.

Testimonies and Evidence Presented

• Government witnesses testified that:
• The defendant received an order for the sewing machines in his office.
• He personally went to the warehouse and took the machines out, supporting the view that no bona fide sale had occurred.
• The defendant’s alternative narrative—that he had bought the machines and his signature on a receipt constituted acceptance of the sale—was found not credible because:
• The receipt was not signed at the time of receiving the order in the defendant’s office.
• It was delivered later to the carriers, which contradicted the sequence of events established by the Government's testimony.

Implications of the Agreement

• The agreement clearly indicated that Fortunato Menez was to act as an agent under a commission arrangement.
• Failure to return the machines or make proper payment upon successful sale would render him liable.
• The case also drew parallels to established jurisprudence on commission contracts where failure to comply may constitute estafa.

Issue:

Classification of the Transaction

• Whether the contractual arrangement constituted a sale of goods or a commission (consignment) arrangement.
• Whether the fixation of a price in the agreement was intended to suit a sale transaction or merely as a pre-determined measure of damages for non-performance.

Credibility of the Defendant’s Testimonies

• Whether the defendant’s assertion that he had actually purchased the sewing machines could be reconciled with the evidence presented.
• Whether the procedural discrepancies concerning the signing and handling of the receipt affected the veracity of his claim.

Liability and Nature of Breach

• Whether failing to return the sewing machines or pay their stipulated value as per the commission contract was tantamount to a breach leading to criminal liability (i.e., estafa).
• Whether the defendant’s actions in handling the machines and the subsequent sale (of one machine) satisfied or violated the terms of the contractual obligation.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)