SILAHIS MARKETING CORPORATION, PETITIONER, VS. INTERMEDIATE APPELLATE COURT AND GREGORIO DE LEON, DOING BUSINESS UNDER THE NAME AND STYLE OF “MARK INDUSTRIAL SALES”, RESPONDENTS.

Petitioner Silahis Marketing
Corporation seeks in this petition for review on certiorari a reversal
of the decision of the then Intermediate Appellate Court (IAC) in AC-G.R. CV
No. 67162 entitled “De Leon, etc. v. Silahis
Marketing Corporation”, disallowing petitioner’s counterclaim for
commission to partially offset the claim against it of private respondent
Gregorio de Leon for the purchase price of certain merchandise.

A review of the record shows that on various dates in October,
November and December, 1975, Gregorio de Leon (De Leon for short) doing
business under the name and style of Mark Industrial Sales sold and delivered
to Silahis Marketing Corporation (Silahis
for short) various items of merchandise covered by several invoices in the
aggregate amount of P22,213.75 payable within thirty (30) days from date of the
covering invoices.

Allegedly due to Silahis‘ failure to pay its account upon maturity despite
repeated demands, de Leon filed before the then Court of First Instance of
Manila a complaint for the collection of the said accounts including accrued
interest thereon in the amount of P661.03 and attorney’s fees of P5,000.00 plus
costs of litigation.

The answer admitted the
allegations of the complaint insofar as the invoices were concerned but
presented as affirmative defenses:  [a] a
debit memo for P22,200.00 as unrealized profit for a supposed
commission that Silahis should have received from the
de Leon for the sale of sprockets in the amount of P111,000.00 made directly to
Dole Philippines, Incorporated by the latter sometime in August 1975 without
coursing the same through the former allegedly in violation of the usual
practice concerning sale of merchandise to Dole Philippines, Inc.; and [b] Silahis‘ claim that it is entitled to return the stainless
steel screen covered by Exhibits ‘6-A’ and ‘6-B’ which was found defective by
its client, Borden International, Davao City, and to
have the corresponding amount cancelled from its account with de Leon.

In a decision dated August
25, 1978,^[1]
the lower court confirmed the liability of Silahis
for the claim of de Leon but at the same time ordered that it be partially
offset by Silahis‘ counterclaim as contained in the
debit memo for unrealized profit and commission.  Judge Bienvenido C. Ejercito of said court held:

“There is no question that the defendant received from the
plaintiff the items contained in Exhs. ‘A’ to
‘F’.  The only question is whether or not
the defendant is entitled to set
off against the claim of the plaintiff the amount contained in the debit memo
of the defendant, Exh. ‘1’, and whether or not the
defendant is entitled to return the steel wire mesh which was returned to them
by Borden Philippines, as shown by Exhs. ‘6-A’ and
‘6-B’.  The Court believes that the
defendant is properly chargeable for the amounts of the unpaid invoices set
forth in the complaint.  However, the
Court also believes that the plaintiff is also properly chargeable for the
debit memo of P22,200.00, Exh. ‘1’.  This is because it was proven by the
defendant from the testimonies of Isaias Fernando, Jr.
and Jose Joel Tamon that contrary to the agreement
between plaintiff and defendant that the latter was to serve the account of Dole Philippines in Davao,
the plaintiff made a direct sale of sprockets for P111,000.00 which thereby
deprives the defendant of its corresponding commission for P22,200.00 which the
defendant would have otherwise made if the plaintiff had followed its previous
arrangement with the defendant.  However,
as to the counterclaim of the defendant for a cancellation of the amount of
P6,000.00 for defective stainless screen wire purchased and intended for Borden
International, Davao City, the Court believes that it
is much too late now to present said claim because the purchase was made and
delivered as early as December 22, 1975 and the proposed return to the
defendant by Borden was made on April 1, 1976 only.  The Court is not ready to award damages to
any of the parties.  After deducting the
amount of P22,200.00, which is the unpaid commission of the defendant from the
principal total amount of the unpaid invoices of the plaintiff of P22,213.75,
the unpaid balance in favor of the plaintiff is P13.75.  The claim for interest and attorney’s fees of
the plaintiff may be offset
against the interest and attorney’s fees of the defendant.

“WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the defendant to pay to the
plaintiff the amount of P13.75, with interest at 12% per annum from the date of
the filing of the action on July 1,
1976 until fully paid, without pronouncement as to costs.

“SO ORDERED.”^[2]

De Leon
appealed from the said decision insofar as it directed partial compensation and
its failure to award interest on his principal claim as well as attorney’s fees
in his favor.  In a decision dated March
17, 1986,^[3]
respondent Intermediate Appellate Court^[4]
set aside the decision of the lower court and dismissed herein petitioner’s
(therein defendant-appellee’s) counterclaim for lack
of factual or legal basis.  The appellate court found that there was no agreement, verbal or otherwise, nor was there any contractual obligation between
De Leon and Silahis prohibiting any direct sales to Dole Philippines, Inc. by de Leon;
nor was there anything in the debit memo obligating de Leon to pay a
commission to Silahis for the sale of P111,000.00
worth of sprockets to Dole Philippines although in the past, the former did
supply certain items to the latter for delivery to Dole Philippines,
Incorporated.

Hence, in this petition for review on certiorari, the
central issue is whether or not private respondent is liable to the petitioner
for the commission or margin for the direct sale which the former concluded and
consummated with Dole Philippines, Incorporated without coursing the same
through herein petitioner.

We have carefully gone over the record of this case particularly
the debit memo upon which petitioner’s counterclaim rests and found nothing
contained therein to show that private respondent obligated himself to set-off
or compensate petitioner’s outstanding
accounts with the alleged unrealized commission from the assailed sale of
sprockets in the amount of P111,000.00 to Dole Philippines, Inc.

It must be remembered
that compensation takes place when two persons, in their own right, are
creditors and debtors to each other. Article 1279 of the Civil Code provides
that: “In order that compensation may be proper, it is
necessary:  [1] that each one of the
obligors be bound principally, and that he be at the same time a principal
creditor of the other; [2] that both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated; [3] that the two debts be due; [4] that
they be liquidated and demandable; [5]
that over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.”

When all the requisites mentioned in Art. 1279 of the Civil Code
are present, compensation takes effect by operation of law, even without the
consent or knowledge of the creditors and debtors.^[5]
Article 1279 requires, among others, that in order that legal compensation
shall take place, “the two debts be due” and “they be liquidated
and demandable.” Compensation is not
proper where the claim of the person asserting the set-off against the other is
not clear nor liquidated; compensation cannot extend to unliquidated,
disputed claim existing from breach
of contract.^[6]

Undoubtedly, petitioner admits the validity of its outstanding
accounts with private respondent in the amount of P22,213.75 as contained in
its answer.  But whether private
respondent is liable to pay the petitioner a 20% margin or commission on the
subject sale to Dole Philippines, Inc. is vigorously
disputed.  This circumstance prevents
legal compensation from taking place.

The Court agrees with respondent appellate court that there is no
evidence on record from which it can be inferred that there was any agreement
between the petitioner and private respondent prohibiting the latter
from selling directly to Dole Philippines, Incorporated.  Definitely, it cannot be asserted
that the debit memo was a contract binding between the parties considering that
the same, as correctly found by the appellate court, was not signed by private
respondent nor was there any mention therein of any commitment by the latter to
pay any commission to the former involving the sale of sprockets to Dole
Philippines, Inc. in the amount of P111,000.00. 
Indeed, such document can be taken as self-serving with no probative
value absent a showing or at the very least an inference, that the party sought
to be bound assented to its contents or showed conformity thereto.

In fact the letter written by private respondent’s lawyer dated
March 5, 1975^[7]
in reply to petitioner’s letter dated February 19, 1976 transmitting its Debit
Memo No. 1695^[8]
further strengthens private respondent’s stand that it never agreed to give
petitioner any commission on the direct sale to Dole Philippines, Inc. by its
company because said letter denied any utilization
of petitioner’s personnel and facilities at its Davao
Branch in the transaction with Dole Philippines, Inc. which would otherwise
lend a basis for petitioner’s
monetary claim.

WHEREFORE, in view of the foregoing, the questioned
decision of respondent appellate court is hereby AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Feliciano, and
Cortes, JJ., concur.

Bidin, J., no part, participated in the appealed decision.

^[1]
Record on Appeal, pp. 11-17.

^[2]
Record on Appeal, pp. 16-17.

^[3]
Rollo, pp. 26-34.

^[4]
Fourth Civil Cases Division, Veloso, J., ponente; Sison, Bidin, Britanico,
Bellosillo, JJ., concurring.

^[5]
Art. 1290, Civil Code.

^[6]
International Corporate Bank, Inc. v. Intermediate Appellate Court, et
al., G.R. No. 69560, June 30, 1988.

^[7]
Exh. ‘G’, Record on Appeal, Exhibit Folder, p. 7.

^[8]
Exh. ‘2’, Record on Appeal, Exhibit Folder, p. 20.