CMS LOGGING, INC., PETITIONER, VS. THE COURT OF APPEALS AND D.R. AGUINALDO CORPORATION, RESPONDENTS.

This is a petition
for review on certiorari from the decision dated July 31, 1975 of the
Court of Appeals in CA-G.R. No. 47763-R
which affirmed in toto
the decision of the Court of First Instance of Manila, Branch VII, in Civil
Case No. 56355 dismissing the complaint filed by petitioner CMS Logging, Inc.,
(CMS, for brevity) against private respondent D.R. Aguinaldo Corporation
(DRACOR, for brevity) and ordering the former to pay the latter attorney’s fees
in the amount of P1,000.00 and the costs.

The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging
business, while private respondent DRACOR is engaged in the business of
exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of agency^[1]
whereby the former appointed the latter as its exclusive export and sales agent
for all logs that the former may produce, for a period of five (5) years. The pertinent portions of the agreement,
which was drawn up by DRACOR,^[2] are
as follows:

“1. – SISON [CMS] hereby appoints DRACOR as his
sole and exclusive export sales agent with full authority, subject to the
conditions and limitations hereinafter set forth, to sell and export under a
firm sales contract acceptable to SISON, all logs produced by SISON for a
period of five (5) years commencing upon the execution of the agreement and
upon the terms and conditions hereinafter provided and DRACOR hereby accepts
such appointment;

x x x

“3. It is expressly agreed that DRACOR shall handle exclusively all
negotiations of all export sales of SISON with the buyers and arrange the
procurement and schedules of the vessel or vessels for the shipment of SISON’s
logs in accordance with SISON’s written requests, but DRACOR shall not in
anyway [sic] be liable or responsible for any delay, default or failure of the
vessel or vessels to comply with the schedules agreed upon;

x x x

“9. It is expressly agreed by the parties hereto
that DRACOR shall receive five (5%) per cent commission of the gross sales of
logs of SISON based on F.O.B. invoice value which commission shall be deducted
from the proceeds of any and/or all moneys received by DRACOR for and in behalf
and for the account of SISION;”

By virtue of the aforesaid agreement, CMS was able to sell
through DRACOR a total of 77,264,672 board feet of logs in Japan, from
September 20, 1957 to April 4, 1962.

About six months prior to the expiration of the agreement, while
on a trip to Tokyo, Japan, CMS’s president, Atty. Carlos Moran Sison, and
general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that
DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent,
representative or liaison officer in selling CMS’s logs in Japan for which
Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer of
the logs. Under this arrangement,
Shinko was able to collect a total of U.S. $77,264.67.^[3]

CMS claimed that this commission paid to Shinko was in violation
of the agreement and that it (CMS) is entitled to this amount as part of the
proceeds of the sale of the logs. CMS
contended that since DRACOR had been paid the 5% commission under the
agreement, it is no longer entitled to the additional commission paid to Shinko
as this tantamount to DRACOR receiving double compensation for the services it
rendered.

After this discovery, CMS sold and shipped logs valued at U.S.
$739,321.13 or P2,883,351.90,^[4]
directly to several firms in Japan without the aid or intervention of DRACOR.

CMS sued DRACOR for the commission received by Shinko and for
moral and exemplary damages, while DRACOR counterclaimed for its commission,
amounting to P144,167.59, from the sales made by CMS of logs to Japanese
firms. In its reply, CMS averred as a
defense to the counterclaim that DRACOR had retained the sum of P101.167.59 as
part of its commission for the sales made by CMS.^[5] Thus,
as its counterclaim to DRACOR’s counterclaim, CMS demanded DRACOR return the
amount it unlawfully retained. DRACOR
later filed an amended counterclaim, alleging that the balance of its commission on the sales made by
CMS was P42,630.82,^[6] thus impliedly admitting that it
retained the amount alleged by CMS.

In dismissing the complaint, the trial court ruled that no
evidence was presented to show that Shinko
received the commission
of U.S. $77,264.67 arising from the sale of CMS’s logs in Japan, though the
trial court stated that “Shinko was able to collect the total amount of
$77,264.67 US Dollars (Exhs. M and M-1).”^[7] The
counterclaim was likewise dismissed, as it was shown that DRACOR had waived its
rights to the balance of its commission in a letter dated February 2, 1963 to
Atty. Carlos Moran Sison, president of CMS.^[8] From
said decision, only CMS appealed to the Court of Appeals.

The Court of Appeals, in a 3 to 2 decision,^[9]
affirmed the dismissal of the complaint since “[t]he trial court could not
have made a categorical finding that Shinko collected commissions from the
buyers of Sison’s logs in Japan, and could not have held that Sison is entitled
to recover from Dracor the amount collected by Shinko as commissions,
plaintiff-appellant having failed to prove by competent evidence its
claims.”^[10]

Moreover, the appellate court held:

“There is reason to believe that Shinko Trading Co. Ltd., was
paid by defendant-appellee out of its own commission of 5%, as indicated in the
letter of its president to the president of Sison, dated February 2, 1963
(Exhibit “N”), and in the Agreement between Aguinaldo Development
Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit “9”). Daniel R. Aguinaldo stated in his said
letter:

“‘x x x, I informed you that if you wanted to pay
me for the service, then it would be no more than at the standard rate of 5%
commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar
amount of 2-1/2% for the service which we would render you in the
Philippines.’”^[11]

Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging
(1) that the Court of Appeals erred in not making a complete findings of fact;
(2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by Shinko’s president and director
that it collected a commission of U.S. $1.00 per $1,000 board feet of logs from
the Japanese buyers, is admissible against DRACOR; (3) that the statement of
DRACOR‘s chief legal counsel his
memorandum dated May 31, 1965, Exhibit “K”, is an admission that
Shinko was able to collect the commission in question; (4) that the fact that
Shinko received the questioned commissions is deemed admitted by DRACOR by its silence under Section 23,
Rule 130 of the Rules of Court when it
failed to reply to Atty. Carlos Moran Sison’s letter dated February 6, 1962;
(5) that DRACOR is not entitled to its 5% commission arising from the direct
sales made by CMS to buyers in Japan; and (6) that DRACOR
is guilty of fraud and bad faith in its dealings with CMS.

With regard to CMS’s arguments concerning whether or not Shinko
received the commission in question, We find the same unmeritorious.

To begin with, these arguments question the findings of fact made
by the Court of Appeals, which are final and conclusive and can not be reviewed
on appeal to the Supreme Court.^[12]

Moreover, while it is true that the evidence adduced establishes
the fact that Shinko is DRACOR’s agent or liaison in Japan,^[13]
there is no evidence which established
the fact that Shinko did receive the amount of U.S. $77,264.67 as commission
arising from the sale of CMS’s logs to various Japanese firms.

The fact that Shinko received the commissions in question was not established by the testimony of
Atty. Teodoro R. Dominguez to the effect that Shinko’s president and director
told him that Shinko received a commission of U.S. $1.00 for every 1,000 board
feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd.^[14]
is also hearsay since Mr. Shibata was not presented to testify on his letter.

CMS’s other evidence have little or no probative value at
all. The statements made in the memorandum
of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965,^[15]
the letter dated February 2, 1963 of Daniel R. Aguinaldo,^[16]
president of DRACOR, and the reply-letter dated January 9, 1964^[17]
by DRACOR’s counsel Atty. V. E. Del Rosario to CMS’s demand letter dated
September 25, 1963 can not be categorized as admissions that Shinko did receive
the commissions in question.

The alleged admission made by
Atty. Ciocon, to wit–

“Furthermore, as per our records, our shipment of logs to Toyo
Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which
should enable Shinko to collect a commission of US$67,747.73 only”

can not be considered as such since the
statement was made in the context of questioning CMS’s tally of logs delivered
to various Japanese firms.

Similarly, the statement of Daniel R. Aguinaldo, to wit —

“x x x Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid
Shinko for certain services which Shinko must have satisfac­torily performed
for them in Japan otherwise they would not have paid Shinko”

and that of Atty. V. E. Del Rosario,

“x x x It does not seem proper, therefore, for CMS Logging,
Inc., as principal, to concern itself with, much less question, the right of
Shinko Trading Co., Ltd. with which our client
dealt directly, to whatever benefits it might have derived form the ultimate
consumer/buyer of these logs, Toyo Menka
Kaisha, Ltd. There appears to be no
justification for your client’s contention that these benefits, whether they
can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading,
are to be regarded part of the gross sales”

can not be considered admissions that
Shinko received the questioned commissions since neither statements declared categorically
that Shinko did in fact receive the commissions and that these arose from the
sale of CMS’s logs.

As correctly stated by the appellate court:

“It is a rule that ‘a statement is not competent as an admission
where it does not, under a reasonable construction, appear to admit or
acknowledge the fact which is sought to be proved by it’. An admission or decla­ration to be competent
must have been expressed in definite, certain and unequivocal language (Bank of
the Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64).”^[18]

CMS’s contention that DRACOR had admitted by its silence the allegation that Shinko
received the commissions in question when it failed to respond to Atty. Carlos
Moran Sison’s letter dated February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter
dated March 5, 1963 of F.A. Novenario,^[19]
which stated:

“This is to acknowledge receipt of your letter dated February
6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at present out of the
country.

x x x

“We have no record or knowledge of any such payment of
commission made by Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as stated in your
letter, we knew nothing about it and had nothing to do with it.”

The finding of fact made by the trial court, i.e., that
“Shinko was able to collect the total amount of $77,264.67 US
Dollars,” can not be given weight since this was based on the summary
prepared by CMS itself, Exhibits “M” and “M-1”.

Moreover, even if it was shown that Shinko did in fact receive
the commissions in question, CMS is not entitled thereto since these were
apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross
sales of CMS’s logs.

However, We find merit in CMS’s contention that the appellate
court erred in holding that DRACOR was entitled to its commission from the
sales made by CMS to Japanese firms.

The principal may revoke a contract of agency at will, and such
revocation may be express, or implied,^[20] and
may be availed of even if the period fixed in the contract of agency as not yet
expired.^[21]
As the principal has this absolute right to revoke the agency, the agent can
not object thereto; neither may he claim damages arising from such revocation,^[22]
unless it is shown that such was done in order to evade the payment of agent’s
commission.^[23]

In the case at bar, CMS appointed DRACOR as its agent for the
sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted
that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation
of the contract of agency under Article 1924 of the Civil Code, which provides:

“Art. 1924 – The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third
persons.”

In New Manila Lumber
Company, Inc. vs. Republic of the Philippines,^[24] this Court ruled that the act of a
contractor, who, after executing powers of attorney in favor of another
empowering the latter to collect whatever amounts may be due to him from the
Government, and thereafter demanded and collected from the government the money
the collection of which he entrusted to his attorney-in-fact, constituted
revocation of the agency in favor of the attorney-in-fact.

Since the contract of agency was revoked by CMS when its sold its logs to Japanese
firms without the intervention of DRACOR, the latter is no longer entitled to
its commission from the proceeds of such sale and is not entitled to retain
whatever moneys it may have received as its commission for said
transactions. Neither would DRACOR be
entitled to collect damages from CMS, since damages are generally not awarded
to the agent for the revocation of the agency, and the case at bar is not one
falling under the exception mentioned, which is to evade the payment of the
agent’s commission.

Regarding CMS’s contention that the Court of Appeals erred in not
finding that DRACOR had committed acts of fraud and bad faith, We find the same
unmeritorious. Like the contention
involving Shinko and the questioned commissions, the findings of the Court of
Appeals on the matter were based on its appreciation of the evidence, and these
findings are binding on this Court.

In fine, We affirm the ruling of the Court of Appeals that there
is no evidence to support CMS’s con­tention that Shinko earned a separate
commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of
CMS’s logs. However, We reverse the ruling
of the Court of Appeals with regard to DRACOR’s right to retain the amount of
P101,536.77 as part of its commis­sion from the sale of logs by CMS, and hold
that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of
P101,536.77.

WHEREFORE, the decision appealed from is hereby MODIFIED
as stated in the preceding paragraph. Costs de officio.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, and Regalado, JJ., concur.

^[1]
Exhibit “A”.

^[2]
Exhibit “B”.

^[3]
Exhibits “M” and “M-1”.

^[4]
Exhibit “AA-2”.

^[5]
See Record on Appeal, p. 25.

^[6]
Exhibit BB-1”.

^[7]
Records on Appeal, p. 39.

^[8]
Exhibit “N” and “N-1”.

^[9]
Ponente: Justice Luis B. Reyes; Justices Ricardo Cc. Puno and Francisco Tantuico,
Jr., concurring. Justices Roseller
T. Lim and Magno S. Gatmaitan, dissenting. Because of a 2 to 1 vote within the division hearing the case, two
additional members of the Court of Appeals were assigned to sit with the
members of the division.

^[10]
Decision of the Court of Appeals, p. 12.

^[11]
Id. , pp. 13–14.

^[12]
Amigo vs. Teves, 50 O.G. 5799.

^[13]
Exhibits “C”, “C-1”, “C-2”, “E”,
“E-1”, “E-1-A”, to
“E-1-C”. See also T.S.N.,
August 24, 1967, pp. 156?159, and T.S.N., October 12, 1967, pp. 164-169.

^[14]
Exhibit “FF”,
“FF-1” and “FF-2”.

^[15]
Exhibit “K” and
“K-1”.

^[16]
Exhibit “N”.

^[17]
Exhibit “X”.

^[18]
Decision of the Court of Appeals, p. 13.

^[19]
Exhibit “P”.

^[20]
Art. 1920, Civil Code.

^[21]
Barretto vs. Santa Marina, 26 Phil. 440.

^[22]
Padilla, Civil Law, Vol. VI, p. 297.

^[23]
Infante vs. Cunanan, 93 Phil. 691.

^[24]
107 Phil. 824 (1960).