Schmid and Oberly Inc. v. RJL Martinez Fishing Corporation

G.R. No. 75198, 18 October 1988

FACTS:

RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its business, it needed electrical generators for the operation of its business. Schmid and Oberly sells electrical generators with the brand of “Nagata”, a Japanese product. D. Nagata Co. Ltd. of Japan was Schmid’s supplier. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 brand new generators. Through an irrevocable line of credit, Nagata shipped to the Schmid the generators and RJL paid the amount of the purchase price. (First sale = 3 generators; Second sale = 12 generators). Later, the generators were found to be factory defective. RJL informed the Schmid that it shall return the 12 generators. 3 were returned. Schmid replaced the 3 generators subject of the first sale with generators of a different brand. As to the second sale, 3 were shipped to Japan and the remaining 9 were not replaced. RJL sued the defendant on the warranty, asking for rescission of the contract and that Schmid be ordered to accept the generators and be ordered to pay back the purchase money as well as be liable for damages. Schmid opposes such liability averring that it was merely the indentor in the sale between Nagata Co., the exporter and RJL Martinez, the importer. As mere indentor, it avers that is not liable for the seller’s implied warranty against hidden defects, Schmid not having personally assumed any such warranty.

ISSUE:

Whether Schmid is liable for the warranty even if it is merely an indentor?

RULING:

YES, under its contractual obligations it may be liable. But in this case, Schmid did not warrant the products.

An indentor is a middlemen in the same class as commercial brokers and commission merchants. A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties. There are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. The chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction.

Even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that twelve (12) generators subject of the second transaction are free from any hidden defects. In other words, SCHMID may be held answerable for some other contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to some extent an agent of both the vendor and the vendee. As such agent, therefore, he may expressly obligate himself to undertake the obligations of his principal (Art. 1897).

Notably, nowhere in the Quotation is it stated therein that SCHMID did bind itself to answer for the defects of the things sold. Balagtas testified initially that the warranty was in the receipts covering the sale. Nowhere is it stated in the invoice that SCHMID warranted the generators against defects. He again changed his mind and asserted that the warranty was given verbally. Hence, RJL has failed to prove that SCHMID had given a warranty on the 12 generators subject of the second transaction.

*Case digest by Rezeile S. Morandarte, JD – 4, Andres Bonifacio College, SY 2019 – 2020

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