Lim vs. Saban

A broker who has fully performed his obligations under a contract of agency by finding a buyer and consummating the sale is entitled to his commission, and the principal cannot subsequently deprive him of it through revocation or direct dealing with the buyer. However, an agency is not coupled with an interest when the agent's only interest is in earning his agreed compensation, as such interest is merely an ordinary incident of the agency relationship.

The late Eduardo Ybañez owned a 1,000-square meter lot in Cebu City. On February 8, 1994, Ybañez entered into an Agreement and Authority to Negotiate and Sell with Florencio Saban, authorizing Saban to look for a buyer for the lot at a net price of ₱200,000.00, with any amount over and above that price belonging to Saban as his commission. The agreement also provided that expenses covering the sale and transfer of title would be borne by the agent or the buyer.

Eduardo Ybañez, owner of a 1,000-square meter lot in Cebu City, entered into an Agreement and Authority to Negotiate and Sell with Florencio Saban on February 8, 1994. Under the agreement, Ybañez authorized Saban to look for a buyer for the lot at a net price of ₱200,000.00, with any amount over and above that price belonging to Saban, and with the expenses of the sale and transfer of title to be borne by the agent or the buyer.

Through Saban's efforts, Ybañez and his wife sold the lot to Genevieve Lim and the spouses Benjamin and Lourdes Lim on March 10, 1994. The Deed of Absolute Sale indicated a price of ₱200,000.00, but the vendees actually agreed to purchase the lot at ₱600,000.00, inclusive of taxes and other incidental expenses. After the sale, Lim remitted to Saban ₱113,257.00 for payment of taxes and ₱50,000.00 as broker's commission. Lim also issued four postdated checks in Saban's name totaling ₱236,743.00: BPI Check No. 1112645 dated June 12, 1994 for ₱25,000.00; BPI Check No. 1112647 dated June 19, 1994 for ₱18,743.00; BPI Check No. 1112646 dated June 26, 1994 for ₱25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994 for ₱168,000.00.

Subsequently, Ybañez sent a letter dated June 10, 1994 to Lim asking her to cancel all the checks issued in Saban's favor and to "extend another partial payment" for the lot in his favor. After the four checks were dishonored upon presentment, Saban filed a Complaint for collection of sum of money and damages against Ybañez and Lim with the RTC of Cebu City on August 3, 1994.

Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for ₱600,000.00, with a mark-up of ₱400,000.00 from Ybañez's price. He claimed that Ybañez told Lim that Saban was not entitled to any commission because he concealed the actual selling price and was not a licensed real estate broker, and that Ybañez convinced Lim to cancel all four checks. Saban further averred that Ybañez and Lim connived to deprive him of his commission.

Ybañez, in his Answer, claimed Saban was not entitled to any commission for the same reasons. Lim argued that she was not privy to the agreement between Ybañez and Saban, that she issued stop payment orders because Ybañez requested her to pay him directly, and that she agreed with Ybañez that the purchase price was only ₱200,000.00.

The trial court found that Lim made payments of ₱113,257.00 for taxes, ₱50,000.00 for her broker, and ₱400,000.00 directly to Ybañez, totaling ₱563,257.00. Lim, however, claimed she paid Ybañez only ₱100,000.00 on March 10, 1994, gave Saban ₱113,257.00 for taxes and ₱50,000.00 as commission, and paid ₱130,000.00 on June 28, 1994, totaling ₱393,257.00. Ybañez acknowledged receiving ₱400,000.00 from Lim and her co-vendees, which he said was the full amount for the sale.

• Lack of Privity: Lim argued that she is not liable for Ybañez's debt to Saban under the Agency Agreement because she is not privy thereto.
• Direct Payment to Ybañez: Lim argued that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts due for taxes and transfer of title, she paid the balance of the purchase price directly to Ybañez.
• Dismissal Against Ybañez: Lim contended that Saban has no one but himself to blame for consenting to the dismissal of the case against Ybañez and not moving for his substitution by his heirs.
• Accommodation Party and Conspiracy: Lim assailed the appellate court's findings that she issued the checks as an accommodation party for Ybañez and that she connived with him to deprive Saban of his commission.
• Proportionate Liability: Lim prayed that should she be found liable, she should only be held liable to the extent of one-third (1/3) of the amount, since she had two co-vendees who should share such liability.

• Assumption of Obligation: Saban maintained that Lim agreed to purchase the lot for ₱600,000.00, which consisted of the ₱200,000.00 to be paid to Ybañez, the ₱50,000.00 due to her broker, the ₱113,257.00 earmarked for taxes, and Saban's commission as broker for Ybañez, and that Lim assumed the obligation to pay him his commission.
• Conspiracy: Saban insisted that Lim and Ybañez connived to unjustly deprive him of his commission from the negotiation of the sale.

• Entitlement to Commission: Whether Saban is entitled to receive his commission from the sale.
• Liability of Lim: Assuming Saban is entitled thereto, whether it is Lim who is liable to pay Saban his sales commission.

• Entitlement to Commission: Yes. Saban is entitled to his commission because he had fully performed his obligation as Ybañez's agent when the sale was consummated through his efforts, and the subsequent attempt to deprive him of his commission constituted a breach of the contract of agency.
• Liability of Lim: Yes. Lim is liable to pay Saban the balance of ₱200,000.00 of the purchase price corresponding to his commission, as she had knowledge of the commission arrangement and connived with Ybañez to deprive Saban of his commission. However, the Court corrected the appellate court's ruling that Lim was liable as an accommodation party on the checks.

• Entitlement to Commission: The Court affirmed the appellate court's finding that the agency was not revoked since Ybañez requested that Lim make stop payment orders only after the consummation of the sale on March 10, 1994. At that time, Saban had already performed his obligation as Ybañez's agent when, through his efforts, Ybañez executed the Deed of Absolute Sale with Lim and the Spouses Lim. To deprive Saban of his commission subsequent to the sale would be a breach of his contract of agency with Ybañez, which expressly states that Saban would be entitled to any excess in the purchase price after deducting the ₱200,000.00 due to Ybañez and the transfer taxes and other incidental expenses. The Court cited Macondray & Co. vs. Sellner and Infante vs. Cunanan in support, holding that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker's efforts.

• Agency Coupled with Interest: The Court disagreed with the appellate court's pronouncement that Saban's agency was one coupled with an interest. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. An agency is deemed coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons. The agent's interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. When an agent's interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agent's interest in obtaining his compensation is an ordinary incident of the agency relationship.

• Liability of Lim: Saban's right to receive compensation arises from the Agency Agreement between him and Ybañez, to which Lim is not a party. However, the record reveals that Lim had knowledge that Ybañez set the price at ₱200,000.00 and that the ₱600,000.00 price agreed upon included the amount for taxes and Saban's commission. Lim's act of issuing the four checks amounting to ₱236,743.00 in Saban's favor belies her claim that she did not agree to purchase the lot at ₱600,000.00. The only logical conclusion is that Lim changed her mind after talking to Ybañez and realizing that Saban's commission was even more than what Ybañez received as his share. The Court found that the appellate court had sufficient basis for concluding that Ybañez and Lim connived to deprive Saban of his commission. Considering that Lim had not yet paid the balance of ₱200,000.00 of the purchase price of ₱600,000.00, it is just and proper for her to pay Saban the balance of ₱200,000.00. Since Ybañez received a total of ₱230,000.00 from Lim, or an excess of ₱30,000.00 from his asking price, Saban may claim such excess from Ybañez's estate, if that remedy is still available.

• Accommodation Party: The appellate court erred in ruling that Lim was liable on the checks as an accommodation party. Under Section 29 of the Negotiable Instruments Law, an accommodation party is one who meets three requisites: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his name to some other person. While Lim signed as drawer of the checks, she did not satisfy the two other requisites. The absence of the second requisite is clear because Lim issued the checks on account of her transaction with Ybañez, which was a sale and therefore a reciprocal contract. She drew the checks in payment of the balance of the purchase price, and the amounts covered by the checks form part of the cause or consideration from Ybañez's end as vendor, while the lot represented the cause or consideration on the side of Lim as vendee. Thus, Lim received value for her signature. Neither is there any indication that Lim issued the checks for the purpose of enabling Ybañez or any other person to obtain credit or raise money, thereby debunking the presence of the third requisite.

• Broker's Right to Commission — A broker who has found a buyer and caused the consummation of the sale is entitled to his commission, and the principal cannot subsequently deprive him of it by revoking the agency or dealing directly with the buyer. The Court applied this doctrine in finding that Saban had fully performed his obligations under the Agency Agreement and was entitled to his commission, notwithstanding Ybañez's subsequent attempt to have the checks cancelled.

• Agency Coupled with an Interest — Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. The agent's interest must be in the subject matter of the power conferred, not merely an interest in the exercise of the power because it entitles him to compensation. The Court held that Saban's agency was not coupled with an interest because his interest was confined to earning his agreed compensation, which is an ordinary incident of the agency relationship.

• Accommodation Party — Under Section 29 of the Negotiable Instruments Law, an accommodation party is one who meets three requisites: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his name to some other person. The Court applied this test in finding that Lim was not an accommodation party because she received value for her signature on the checks, which were issued in payment of the balance of the purchase price of the lot.

• "To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybañez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the ₱200,000.00 due to Ybañez and the transfer taxes and other incidental expenses of the sale." — This passage states the ratio decidendi for the Court's ruling that Saban was entitled to his commission despite Ybañez's attempt to revoke the agency after the sale was consummated.

• "When an agent's interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agent's interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship." — This passage defines the distinction between an agency coupled with an interest and an ordinary agency where the agent's only interest is his compensation, correcting the appellate court's ruling.

• "Lim's act of issuing the four checks amounting to ₱236,743.00 in Saban's favor belies her claim that she and her co-vendees did not agree to purchase the lot at ₱600,000.00. If she did not agree thereto, there would be no reason for her to issue those checks which is the balance of ₱600,000.00 less the amounts of ₱200,000.00 (due to Ybañez), ₱50,000.00 (commission), and the ₱113,257.00 (taxes)." — This passage supports the Court's finding that Lim had knowledge of the commission arrangement and agreed to purchase the lot at ₱600,000.00, making her liable for the balance corresponding to Saban's commission.

• "Ergo, Lim received value for her signature on the checks." — This passage concludes the Court's analysis that Lim was not an accommodation party under Section 29 of the Negotiable Instruments Law because she received value for her signature, as the checks were issued in payment of the balance of the purchase price of the lot.

• Macondray & Co. vs. Sellner, 33 Phil. 370 (1916) — Cited as controlling precedent recognizing the right of a broker to his commission for finding a suitable buyer for the seller's property even though the seller himself consummated the sale with the buyer. The Court held that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker's efforts.

• Infante vs. Cunanan, 93 Phil. 691 (1953) — Cited as controlling precedent upholding the right of brokers to their commissions although the seller revoked their authority after they had found a buyer and negotiated the sale directly with the buyer. The Court ruled that the seller's withdrawal in bad faith of the brokers' authority cannot unjustly deprive the brokers of their commissions.

• Agro Conglomerates, Inc. vs. Court of Appeals, G.R. No. 117660, December 18, 2000, 348 SCRA 450 — Cited in support of the rule that an accommodation party is liable on the instrument to a holder for value even though the holder knew him or her to be merely an accommodation party, and that the accommodation party may seek reimbursement from the party accommodated.

• Bank of the Philippine Islands vs. Court of Appeals, 383 Phil. 538 (2000) — Cited in support of the same rule regarding the liability of an accommodation party under the Negotiable Instruments Law.

• Article 1927, Civil Code — Provides that an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. The Court applied this provision in determining that Saban's agency was not coupled with an interest.

• Section 29, Negotiable Instruments Law — Defines an accommodation party as a person who has signed the negotiable instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, for the purpose of lending his name to some other person. The Court applied this provision in finding that Lim was not an accommodation party because she received value for her signature.

• Articles 1350 and 1458, Civil Code — Cited in support of the Court's finding that Lim received value for her signature on the checks, as the sale was a reciprocal contract where the amounts covered by the checks formed part of the cause or consideration from Ybañez's end as vendor, while the lot represented the cause or consideration on the side of Lim as vendee.

• Rule 86, Revised Rules of Court — Cited in connection with the Court's statement that Saban may claim the excess of ₱30,000.00 from Ybañez's estate, if that remedy is still available, in view of the trial court's dismissal of Saban's complaint as against Ybañez.

Puno, J. (Chairman), Austria-Martinez, J., and Chico-Nazario, J., concurred. Callejo, Sr., J., was on leave.