Oriental Petroleum and Minerals Corporation vs. Tuscan Realty, Inc.

A broker whose efforts are the procuring cause of a sale — that is, the foundation of the negotiations that subsequently resulted in the sale — is entitled to his commission even if the owner revokes the broker's authority and negotiates directly with the buyer the broker introduced, and even if the sale is ultimately perfected with a third party who acquired that buyer's rights.

Oriental Petroleum and Minerals Corporation owned two condominium units at Corinthian Plaza in Makati City. On August 13, 1996, it gave Tuscan Realty, Inc. a non-exclusive authority to offer these units for sale. The dispute that followed concerned the broker's commission Tuscan Realty claimed following the eventual disposition of the units to a third party.

Oriental Petroleum and Minerals Corporation owned two condominium units at Corinthian Plaza in Makati City. On August 13, 1996, it gave Tuscan Realty, Inc. a non-exclusive authority to offer those units for sale. Pursuant to that authority, Tuscan Realty submitted on August 14, 1996 an initial list of its prospective client-buyers, which included Gateway Holdings Corporation, and updated the list on September 18, 1996, with Gateway appearing on top of both lists.

Oriental Petroleum subsequently advised Tuscan Realty that it would undertake direct negotiation with a certain Gene de los Reyes of Gateway for the sale of the units. That negotiation produced a contract to sell between Oriental Petroleum and Gateway on August 1, 1997.

Nearly two months later, on September 29, 1997, Gateway assigned its rights as buyer of the units to Alonzo Ancheta. In Ancheta's favor, Oriental Petroleum executed a deed of absolute sale on December 10, 1997 for the price of ₱69,595,400.00.

Prompted by that development, Tuscan Realty demanded payment of its broker's commission of ₱2,087,862.00. Oriental Petroleum refused, claiming that Tuscan Realty did nothing to close its deal with Gateway and Ancheta. On June 9, 1999, Tuscan Realty filed a complaint for sum of money with application for preliminary attachment against Oriental Petroleum before the Makati Regional Trial Court.

The trial court dismissed the complaint on November 2, 2005, finding that Tuscan Realty failed to substantiate its allegation that it was responsible for closing the sale of the subject condominium units. On appeal, the Court of Appeals found otherwise, crediting the testimony of Oriental Petroleum's own Executive Vice-President that the company learned of Gateway's interest in the properties from Mr. Capotosto of Tuscan Realty, and finding that the ultimate sale to Ancheta could not have happened without Gateway's indispensable intervention as intermediate buyer.

• Ready, Willing, and Able Buyer: Oriental Petroleum argued that Gateway was not a ready, willing, and able purchaser, that Gateway in fact assigned its right to Ancheta who became the ultimate buyer, and that it was not Tuscan Realty that introduced Ancheta to Oriental Petroleum.
• Non-Participation in the Negotiations: Oriental Petroleum pointed out that Tuscan Realty took no part in its negotiation with Gateway.
• Non-Fulfillment of a Suspensive Condition: Oriental Petroleum maintained that the case was simply one of non-fulfillment of a suspensive condition, the commission being payable only if the properties were sold at a minimum of ₱120,000.00 per square meter and delivery was made within the first week of January 1997.
• Failure to Close the Deal: Oriental Petroleum refused payment on the claim that Tuscan Realty did nothing to close its deal with Gateway and Ancheta.

• Entitlement to Broker's Commission: Whether Tuscan Realty is entitled to a broker's commission for the sale of Oriental Petroleum's condominium units to Ancheta.

• Entitlement to Broker's Commission: Yes. Tuscan Realty was the procuring cause of the sale, its efforts having been the foundation of the negotiations that culminated in the disposition of the units to Ancheta.

• Entitlement to Broker's Commission: The Court adopted the principle of "procuring cause" that the CA had invoked, defining it as a cause which starts a series of events and results, without break in their continuity, in the accomplishment of a broker's prime objective of producing a purchaser who is ready, willing, and able to buy on the owner's terms — a concept similar to proximate cause in torts. To be regarded as the procuring cause of a sale, a broker's efforts must have been the foundation of the negotiations which subsequently resulted in a sale. Here, it was Tuscan Realty that introduced Gateway to Oriental Petroleum as an interested buyer, a fact confirmed by Oriental Petroleum's own Executive Vice-President, who testified that they learned of Gateway's interest in the properties from Mr. Capotosto of Tuscan Realty. Tuscan Realty submitted an initial list of prospective buyers on August 14, 1996 with contact details and twice updated it, with Gateway always on top of the lists. Oriental Petroleum thus became connected to Gateway on account of Tuscan Realty's effort, and that connection produced the contract to sell involving the two condominium units. Although Gateway turned around and sold the units to Ancheta, the ultimate sale could not have happened without Gateway's indispensable intervention as intermediate buyer; applying the procuring cause principle, Tuscan Realty was entitled to its commission. Oriental Petroleum's objections did not defeat the claim. The contract to sell with Gateway was a valid and binding contract that precluded Oriental Petroleum from peddling the properties to others, and the deed of absolute sale in Ancheta's favor was executed by virtue of Gateway's assignment of its rights, so Ancheta could not be regarded as a direct buyer found independently of Tuscan Realty's referral. That Tuscan Realty took no part in the negotiations was attributable to Oriental Petroleum's own advice that it would henceforth directly negotiate the sale with Gateway; and even assuming that advice amounted to a revocation of the broker's authority to sell, the Court has always recognized the broker's right to his commission where the owner revokes the authority and directly negotiates with the buyer whom he met through the broker's efforts. Finally, the alleged suspensive conditions were unavailing: the delivery deadline was not raised in Oriental Petroleum's Answer, and the sale of the properties for less than the original asking price was an action within Oriental Petroleum's discretion, decided unilaterally without consulting its broker, so Oriental Petroleum was deemed to have waived its own minimum price requirement.

• Procuring Cause — A cause which starts a series of events and results, without break in their continuity, in the accomplishment of a broker's prime objective of producing a purchaser who is ready, willing, and able to buy on the owner's terms; the concept is similar to proximate cause in torts. To be regarded as the procuring cause of a sale, a broker's efforts must have been the foundation of the negotiations which subsequently resulted in a sale. The Court applied the principle to hold Tuscan Realty entitled to its commission, its referral of Gateway having begun the unbroken sequence that produced the contract to sell and, through Gateway's assignment to Ancheta, the ultimate sale.
• Procuring Cause Through an Intermediate Buyer — A broker remains the procuring cause of the ultimate sale even where the buyer he introduced does not himself complete the purchase but serves as the indispensable intermediate buyer through whom the eventual purchaser acquired the property. The Court so held because the ultimate sale to Ancheta could not have happened without Gateway's intervention as intermediate buyer under the contract to sell that Tuscan Realty's referral had produced.
• Broker's Right to Commission Despite Revocation of Authority — Where the owner revokes the broker's authority to sell and directly negotiates with the buyer whom he met through the broker's efforts, the broker retains his right to his commission. The Court applied this rule because Oriental Petroleum advised Tuscan Realty that it would henceforth negotiate directly with Gateway, and even assuming that advice amounted to a revocation of authority, Tuscan Realty's commission was not thereby extinguished.
• Waiver of the Owner's Minimum Price Requirement — An owner who unilaterally sells the property for less than the original asking price, without consulting its broker, is deemed to have waived its own minimum price requirement. The Court applied this to reject Oriental Petroleum's claim that the commission depended on a sale at a minimum of ₱120,000.00 per square meter.

• "The term 'procuring cause' refers to a cause which starts a series of events and results, without break in their continuity, in the accomplishment of a broker's prime objective of producing a purchaser who is ready, willing, and able to buy on the owner's terms." — This is the Court's canonical formulation of the procuring cause doctrine, drawn from Philippine Health-Care Providers, Inc. (Maxicare) vs. Estrada, and supplies the controlling definition for broker's commission cases.
• "To be regarded as the procuring cause of a sale, a broker's efforts must have been the foundation of the negotiations which subsequently resulted in a sale." — This states the operative test for entitlement to a broker's commission and is the ratio on which the award to Tuscan Realty rested.
• "Besides, assuming that the advice amounted to a revocation of Tuscan Realty's authority to sell, the Court has always recognized the broker's right to his commission, although the owner revoked his authority and directly negotiated with the buyer whom he met through the broker's efforts." — This establishes that revocation of the broker's authority does not defeat the commission where the owner deals directly with the buyer the broker introduced.
• "As for the fact that the properties were eventually sold for less than the original asking price, that action was within Oriental Petroleum's discretion. It decided the matter unilaterally without consulting its broker. Consequently, it should be deemed to have waived its own minimum price requirement." — This holds that an owner's unilateral sale below the stated minimum price operates as a waiver of that price condition, foreclosing it as a defense against the broker's claim.

• Philippine Health-Care Providers, Inc. (Maxicare) vs. Estrada, 566 Phil. 603, 613 (2008) — The controlling precedent from which the Court drew its definition of "procuring cause" and the rule that a broker's efforts must have been the foundation of the negotiations which subsequently resulted in a sale; relied upon and applied to sustain the award.
• Infante vs. Cunanan, 93 Phil. 691, 695 (1953) — Cited for the settled rule that the Court has always recognized the broker's right to his commission although the owner revoked his authority and directly negotiated with the buyer whom he met through the broker's efforts.

Velasco, Jr. (Chairperson), Peralta, Mendoza, and Leonen, JJ.