Danon vs. Brimo & Co.

A broker is entitled to a commission only if he is the efficient agent or procuring cause of the sale; unsuccessful efforts, even if they introduce a possible purchaser, do not accrue a right to compensation, and where no fixed period or exclusive agency is given, the principal may sell through another broker before the broker's efforts succeed, absent bad faith.

Julio Danon was a broker, and Antonio A. Brimo & Co., through its manager Antonio A. Brimo, owned the Holland American Oil Co. factory. The parties dealt over the possible sale of that factory, with Danon later seeking a five percent commission for brokerage services. The decision does not set out any statutory or regulatory backdrop beyond the general law governing a broker's right to compensation.

Julio Danon was a broker, and Antonio A. Brimo & Co., through its manager Antonio A. Brimo, owned the factory known as the Holland American Oil Co. About the middle of August 1918, Brimo informed Danon that he desired to sell the factory for P1,200,000. Brimo agreed and promised to pay Danon a commission of five percent provided Danon could sell the factory for that amount. No definite period was fixed within which Danon should effect the sale. Another broker, Sellner, was also negotiating the sale or trying to find a purchaser for the same property, and Danon was aware or had reason to be aware that he was not alone in the field.

Immediately after the interview with Brimo, Danon went to Mauro Prieto, president of the Santa Ana Oil Mill, and offered to sell the defendant's property at P1,200,000. The corporation was then in need of such a factory, and Prieto instructed its manager, Samuel E. Kane, to see Brimo and ascertain whether he really wanted to sell the factory and, if so, to obtain permission to inspect the premises. Kane inspected the factory and presumably made a favorable report to Prieto. Prieto then asked for an appointment with Brimo to perfect the negotiation. In the meantime, Sellner found a purchaser for the same property, who ultimately bought it for P1,300,000. For that reason, Prieto never came to see Brimo to perfect the proposed negotiation.

The evidence did not show that the Santa Ana Oil Mill had definitely decided to buy the property at P1,200,000. Its board of directors had not resolved to purchase the property, and even if its president could legally make the purchase without prior formal authorization, Prieto did not claim that he had definitely and formally agreed to buy the factory on behalf of the corporation at the stated price. On direct examination, Prieto testified that the company was able to pay P1,200,000 and that it accepted the price, but he also said that he did not inform Danon of this acceptance. On cross-examination, he stated that nothing was effected because Danon told him the property had been sold when he was going to deal, and that it was Danon who made the offer and "we were sure to put the deal through because we have bound ourselves."

Danon claimed that the sale to the Santa Ana Oil Mill was not consummated because Brimo refused to sell to a Filipino firm and preferred an American buyer. Upon learning of this attitude, Danon endeavored to procure another purchaser and found a Mr. Leas, who delivered to Danon a letter addressed to Brimo offering to buy the factory at P1,200,000. Brimo did not accept the offer because, while he was reading Leas's letter, Sellner came in, drew Brimo into another room, and then and there closed the deal at P1,300,000. The defendant admitted this last statement.

The trial court rendered judgment in favor of Danon, but the Supreme Court found the proof regarding Danon's authority and performance extremely unsatisfactory and believed that neither Danon nor Brimo had been entirely free from prevarications. Giving due weight to the trial court's findings and assessing the inherent probability of the testimony, the Supreme Court found that Brimo had informed Danon of his desire to sell for P1,200,000, promised a five percent commission if Danon could sell at that amount, and fixed no definite period. The most that Danon accomplished was to find a person who might have bought the factory if the defendant had not sold it to someone else; his services did not contribute to bringing about the sale.

• Plaintiff-Appellee Danon's Claims: Danon alleged that in August 1918 the defendant company, through its manager Antonio A. Brimo, employed him to look for a purchaser of the Holland American Oil Co. factory for P1,200,000, payable in cash; that the defendant promised him a five percent commission on that sum if the sale was consummated or if he found a purchaser ready, able, and willing to buy at that price; that he subsequently found such a purchaser; and that the defendant refused to sell without justifiable motive and without prior notice of desistance or variation in the price and terms.
• Reasonable Value of Services: Danon sought P60,000 as the reasonable value of services rendered, testifying that five percent of the sale price was the common rate in the city and was reasonable because of the large gain obtained by the defendant from the sale.

• General Denial: The defendant interposed a general denial to the complaint, contesting Danon's allegations of employment, promised commission, and performance.

• Broker's Commission / Procuring Cause: Whether Julio Danon is entitled to a five percent commission where he found a person who might have bought the factory but no sale was consummated through his efforts and the defendant sold the factory to another purchaser through another broker.
• Effect of No Fixed Period and Non-Exclusive Agency: Whether the defendant could sell the factory through another broker before Danon's efforts succeeded, where no definite period was fixed and no exclusive agency was granted.
• Recovery of Reasonable Value: Whether Danon may recover the reasonable value of his services despite not being the efficient agent or procuring cause of the sale.

• Broker's Commission / Procuring Cause: No. A broker must be the efficient agent or procuring cause of the sale; Danon merely found a person who might have bought, and his services did not contribute to the sale.
• Effect of No Fixed Period and Non-Exclusive Agency: No. Where no definite period is fixed and no exclusive agency is granted, the principal may sell through another broker before the broker's efforts succeed, absent bad faith or a purpose to escape commissions.
• Recovery of Reasonable Value: No. The action was to recover the reasonable value of services, but no benefit was conferred because Danon's efforts did not bring about the sale; the risk of unsuccessful efforts is the broker's.

• Broker's Commission / Procuring Cause: The agreement was that Brimo would pay a five percent commission provided Danon could sell the factory for P1,200,000. Under the governing rule, the broker's duty is to bring the minds of the buyer and seller to an agreement for a sale, and until that is done his right to commissions does not accrue. The broker must be the efficient agent or procuring cause of the sale; the means employed and his efforts must result in the sale; he must find the purchaser, and the sale must proceed from his efforts acting as broker. Here, Danon approached the Santa Ana Oil Mill, but the evidence did not show that the corporation had definitely decided to buy at P1,200,000. Its board had not resolved to purchase, and its president did not claim a definite and formal agreement to buy. The most Danon accomplished was to find a person who might have bought the factory if the defendant had not sold it to someone else. The sale was ultimately closed through Sellner at P1,300,000, and Danon had no intervention in that sale. Because his services did not contribute to bringing about the sale, he was not the efficient agent or procuring cause and could not recover the commission.
• Effect of No Fixed Period and Non-Exclusive Agency: No definite period was fixed within which Danon was to effect the sale, and he was not given the exclusive agency. Where no time for the continuance of the contract is fixed, either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. The principal may sell the property independently or through another broker before the broker's efforts are crowned with success, provided he does not act in bad faith or as a mere device to escape payment of commissions. Here, Sellner found a purchaser and the sale was closed at P1,300,000 while Danon's negotiations with the Santa Ana Oil Mill had not ripened into a definite agreement. No bad faith or purpose to avoid Danon's commission was shown. Thus, Danon could not complain that the defendant sold through another agent before his efforts succeeded.
• Recovery of Reasonable Value: Danon's action was not one for damages for breach of contract; it was an action to recover the reasonable value of services rendered. Recovery on that theory requires that the services conferred a benefit on the defendant. The broker is never entitled to commissions for unsuccessful efforts; the risk of failure is wholly his, and the reward comes only with success. Even if the broker introduces parties who otherwise would not have met, creates impressions, or plants the seed from which another reaps the harvest, he gains no right to compensation if he fails to accomplish the sale. Because Danon's efforts did not contribute to the sale and conferred no benefit on the defendant, he could not recover the reasonable value of his services.

• Broker as Efficient Agent or Procuring Cause — A broker is entitled to a commission only if he is the efficient agent or procuring cause of the sale. His efforts must result in the sale; he must find the purchaser, and the sale must proceed from his efforts acting as broker. In this case, Danon merely found a person who might have bought the factory; the sale was closed through another broker, so Danon was not the procuring cause.
• No Commission for Unsuccessful Efforts; Risk of Failure on Broker — A broker is never entitled to commissions for unsuccessful efforts. The risk of failure is wholly his, and the reward comes only with success. Even if his efforts later prove useful to the principal, he gains no right to compensation if he fails to accomplish the sale. Danon's efforts did not contribute to the sale, so no commission accrued.
• Employer-Fault Exception — If the broker's efforts are rendered a failure by the fault of the employer; if the employer capriciously changes his mind after a purchaser ready, willing, and consenting to the prescribed terms is produced; or if the purchaser declines because of a defect of title or unremoved incumbrance attributable to the seller, the broker does not lose his commissions. The exception did not apply because no ready, willing, and consenting purchaser had been produced and no bad faith by the employer was shown.
• Termination Where No Fixed Period; Non-Exclusive Agency — Where no time for the continuance of the contract is fixed, either party may terminate it at will, subject only to the ordinary requirements of good faith. The principal may sell independently or through another broker before the broker's efforts succeed, provided he does not act in bad faith to escape payment of commissions. Because no definite period or exclusive agency was fixed, and because the sale through Sellner was made in good faith before Danon succeeded, the defendant was free to sell through another broker.
• Recovery of Reasonable Value Requires Benefit — An action to recover the reasonable value of services requires that the services conferred a benefit on the defendant. Danon's services did not contribute to the sale and conferred no benefit on the defendant, so recovery of reasonable value was not warranted.

• "The broker must be the efficient agent or the procuring cause of sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker." — This is the Court's central formulation of the broker's entitlement to commission, applied to deny Danon recovery.
• "In all the cases, under all and varying forms of expression, the fundamental and correct doctrine, is, that the duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue." — Quoted from Sibbald vs. Bethlehem Iron Co., this passage states the canonical rule on when a broker's right to commissions accrues.
• "It follows, as a necessary deduction from the established rule, that a broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is wholly his. The reward comes only with his success." — This passage defines the risk allocation for unsuccessful brokerage efforts and supports the denial of Danon's claim.
• "Where no time for the continuance of the contract is fixed by its terms either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith." — This passage supplies the rule governing the absence of a fixed period and supports the defendant's right to sell through another broker before Danon succeeded.

• Beaumont vs. Prieto, 41 Phil., 670; 249 U.S., 554 — Cited by the Court in support of its finding that Danon had merely found a person who might have bought the factory, which is insufficient to entitle a broker to a commission.
• Wylie vs. Marine National Bank, 61 N.Y., 414, 416 — Cited for the rule that the broker must be the efficient agent or procuring cause of sale and that the principal may sell to the first party who offers the price asked without violating the broker's rights.
• Sibbald vs. Bethlehem Iron Co., 83 N.Y., 378; 38 Am. Rep., 441 — Described as a leading case; the Court adopted its formulation that the broker's duty is to bring buyer and seller to agreement and that unsuccessful efforts do not earn commissions, subject to the employer-fault exception and the no-fixed-period rule.
• Zeimer vs. Antisell, 75 Cal. 509 and Ayres vs. Thomas, 116 Cal., 140 — Cited as cases that adopted and followed the rule laid down in Sibbald.
• Kimberly vs. Henderson and Lupton, 29 Md., 512, 515 — Cited for the requirement that an undertaking to procure a purchaser requires producing a party capable and who ultimately becomes the purchaser.
• Walker vs. Tirrel, 3 Am. Rep., 352 — Cited for the holding that a broker who found a person who proposed to purchase but no sale was effected was not entitled to compensation.
• Hungerford vs. Hicks, 39 Conn., 259 — Cited for the rule that one who has employed a broker can himself sell the property to a purchaser he has procured without aid from the broker.

Araullo, Street, Avanceña, and Villamor, JJ., concur.