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LIM v. SABAN

G.R. No. 163720; December 16, 2004

Ponente: J. Tinga

FACTS:

Uner an !genc" !greement, #ba$e% a&t'ori%e (aban to )oo* +or a b&"er o+ t'e

)ot +or To -&nre T'o&an Peo /P200,000.00 an to mar* & t'e e))ing

rice to inc)&e t'e amo&nt neee +or a"ment o+ tae, tran+er o+ tit)e an

ot'er eene incient to t'e a)e, a e)) a (aban commiion +or t'e a)e.

T'ro&g' (aban eort, #ba$e% an 'i i+e ere ab)e to e)) t'e )ot to t'e

etitioner Gene5ie5e im /im an t'e o&e en8amin an o&re im /t'e(o&e im on 9arc' 10, 14. T'e rice o+ t'e )ot a inicate in t'e Dee o+

!bo)&te (a)e i To -&nre T'o&an Peo /P200,000.00. t aear,

'oe5er, t'at t'e 5enee agree to &rc'ae t'e )ot at t'e rice o+ (i -&nre

T'o&an Peo /P600,000.00, inc)&i5e o+ tae an ot'er incienta) eene

o+ t'e a)e.

!+ter t'e a)e, im remitte to (aban t'e amo&nt o+ P113,2eten anot'er artia) a"ment> +or t'e )ot in 'i /#ba$e% +a5or.

!+ter t'e +o&r c'ec* in 'i +a5or ere i'onore &on reentment, (aban ?)e

a com)aint +or co))ection o+ &m o+ mone" an amage againt #ba$e% an im

(aban a))ege t'at #ba$e% to) im t'at 'e /(aban a not entit)e to an"

commiion +or t'e a)e ince 'e concea)e t'e act&a) e))ing rice o+ t'e )ot

+rom #ba$e% an beca&e 'e a not a )icene rea) etate bro*er. #ba$e% aab)e to con5ince im to cance) a)) +o&r c'ec*.

n 'i !ner, #ba$e% c)aime t'at (aban a not entit)e to an" commiion

beca&e 'e concea)e t'e act&a) e))ing rice +rom 'im an beca&e 'e a not

a )icene rea) etate bro*er.

ISSUE:

@'et'er (aban i entit)e to recei5e 'i commiion +rom t'e a)e

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HELD:

#e, (aban i entit)e to recei5e 'i commiion +rom t'e a)e.

T'e (&reme Ao&rt 'e) t'at to eri5e (aban o+ 'i commiion

&be=&ent to t'e a)e 'ic' a con&mmate t'ro&g' 'i eort o&) be abreac' o+ 'i contract o+ agenc" it' #ba$e% 'ic' ere)" tate t'at (aban

o&) be entit)e to an" ece in t'e &rc'ae rice a+ter e&cting t'e

P200,000.00 &e to #ba$e% an t'e tran+er tae an ot'er incienta) eene

o+ t'e a)e.

9oreo5er, t'e Ao&rt 'a a)rea" ecie in ear)ier cae t'at o&) be in

t'e 'eig't o+ in8&tice to ermit t'e rincia) to terminate t'e contract o+ agenc"

to t'e re8&ice o+ t'e bro*er 'en 'e 'a a)rea" reae t'e bene?t o+ t'e

bro*er eort.

SECOND DIVISION

GENEVIEVE LIM, G.R. No. 163720

Petitioner,

Present:

PUNO,J.,

- versus -Chairman,

AUSTRIA-MARTINEZ,

CALLEJO, SR.,

TINGA, and

FLORENCIO SABAN, CHICO-NAZARIO,JJ.

Respondent.

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Promulgated:

December 16, 2004

x-------------------------------------------------------------------x

D E C I S I O N

TINGA,J.:

Before the Court is a Petition for Review on Certiorari

assailing theDecision[1]dated October 27, 2003 of the Court of

Appeals, Seventh Division, in CA-G.R. V No. 60392.[2]

The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square

meter lot in Cebu City (the lot), entered into anAgreement and

Authority to Negotiate and Sell(Agency Agreement) with

respondent Florencio Saban (Saban) on February 8, 1994. Under

the Agency Agreement, Ybaez authorized Saban to look for a

buyer of the lot for Two Hundred Thousand Pesos (P200,000.00)

and to mark up the selling price to include the amounts needed
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for payment of taxes, transfer of title and other expenses incident

to the sale, as well as Sabans commission for the sale.[3]

Through Sabans efforts, Ybaez and his wife were able to sell the

lot to the petitioner Genevieve Lim (Lim) and the spouses

Benjamin and Lourdes Lim (the Spouses Lim) on March 10,

1994. The price of the lot as indicated in theDeed of Absolute

Saleis Two Hundred Thousand Pesos (P200,000.00).[4]It

appears, however, that the vendees agreed to purchase the lot at

the price of Six Hundred Thousand Pesos (P600,000.00),

inclusive of taxes and other incidental expenses of the sale. After

the sale, Lim remitted to Saban the amounts of One Hundred

Thirteen Thousand Two Hundred Fifty Seven Pesos (P113,257.00)for payment of taxes due on the transaction as well as Fifty

Thousand Pesos (P50,000.00) as brokers commission.[5]Lim also

issued in the name of Saban four postdated checks in the

aggregate amount of Two Hundred Thirty Six Thousand Seven

Hundred Forty Three Pesos (P236,743.00). These checks were

Bank of the Philippine Islands (BPI) Check No. 1112645 dated

June 12, 1994 for P25,000.00; BPI Check No. 1112647 dated

June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated

June 26, 1994 for P25,000.00; and Equitable PCI Bank Check

No. 021491B dated June 20, 1994 for P168,000.00.
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Subsequently, Ybaez sent a letter dated June 10, 1994 addressed

to Lim. In the letter Ybaez asked Lim to cancel all the checksissued by her in Sabans favor and to extend another partial

payment for the lot in his (Ybaezs) favor.[6]

After the four checks in his favor were dishonored upon

presentment, Saban filed aComplaintfor collection of sum of

money and damages against Ybaez and Lim with the Regional

Trial Court (RTC) of Cebu City on August 3, 1994.[7]The case

was assigned to Branch 20 of the RTC.

In hisComplaint,Saban alleged that Lim and the Spouses Lim

agreed to purchase the lot for P600,000.00,i.e.,with a mark-up

of Four Hundred Thousand Pesos (P400,000.00) from the price

set by Ybaez. Of the total purchase price of P600,000.00,

P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims

agent, and P113,257.00 was given to Saban to cover taxes and

other expenses incidental to the sale. Lim also issued four (4)

postdated checks[8]in favor of Saban for the remaining

P236,743.00.[9]

Saban alleged that Ybaez told Lim that he (Saban) was not

entitled to any commission for the sale since he concealed the
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actual selling price of the lot from Ybaez and because he was not

a licensed real estate broker. Ybaez was able to convince Lim to

cancel all four checks.

Saban further averred that Ybaez and Lim connived to deprive

him of his sales commission by withholding payment of the first

three checks. He also claimed that Lim failed to make good the

fourth check which was dishonored because the account against

which it was drawn was closed.

In hisAnswer, Ybaez claimed that Saban was not entitled to any

commission because he concealed the actual selling price from

him and because he was not a licensed real estate broker.

Lim, for her part, argued that she was not privy to the agreement

between Ybaez and Saban, and that she issued stop payment

orders for the three checks because Ybaez requested her to paythe purchase price directly to him, instead of coursing it through

Saban. She also alleged that she agreed with Ybaez that the

purchase price of the lot was only P200,000.00.

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Ybaez died during the pendency of the case before the RTC. Upon

motion of his counsel, the trial court dismissed the case only

against him without any objection from the other parties.[10]

On May 14, 1997, the RTC rendered itsDecision[11]dismissing

Sabans complaint, declaring the four (4) checks issued by Lim as

stale and non-negotiable, and absolving Lim from any liability

towards Saban.

Saban appealed the trial courtsDecisionto the Court of Appeals.

On October 27, 2003, the appellate court promulgated its

Decision[12]reversing the trial courts ruling. It held that Saban

was entitled to his commission amounting to P236,743.00.[13]

The Court of Appeals ruled that Ybaezs revocation of his contract

of agency with Saban was invalid because the agency was

coupled with an interest and Ybaez effected the revocation in bad

faith in order to deprive Saban of his commission and to keep the

profits for himself.[14]
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The appellate court found that Ybaez and Lim connived to deprive

Saban of his commission. It declared that Lim is liable to pay

Saban the amount of the purchase price of the lot corresponding

to his commission because she issued the four checks knowing

that the total amount thereof corresponded to Sabans

commission for the sale, as the agent of Ybaez. The appellate

court further ruled that, in issuing the checks in payment of

Sabans commission, Lim acted as an accommodation party. She

signed the checks as drawer, without receiving value therefor, for

the purpose of lending her name to a third person. As such, she

is liable to pay Saban as the holder for value of the checks.[15]

Lim filed aMotion for Reconsiderationof the appellate courtsDecision, but herMotionwas denied by the Court of Appeals in a

Resolutiondated May 6, 2004.[16]

Not satisfied with the decision of the Court of Appeals, Lim

filed the present petition.

Lim argues 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 Ybaez.[17]

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She further contends that she is not liable for Ybaezs debt

to Saban under the Agency Agreement as she is not privy thereto,and that Saban has no one but himself to blame for consenting to

the dismissal of the case against Ybaez and not moving for his

substitution by his heirs.[18]

Lim also assails the findings of the appellate court that she

issued the checks as an accommodation party for Ybaez and that

she connived with the latter to deprive Saban of his commission.

[19]

Lim prays that should she be found liable to pay Saban the

amount of his commission, she should only be held liable to the

extent of one-third (1/3) of the amount, since she had two co-

vendees (the Spouses Lim) who should share such liability.[20]

In hisComment, Saban maintains that Lim agreed to purchase

the lot for P600,000.00, which consisted of the P200,000.00

which would be paid to Ybaez, the P50,000.00 due to her broker,

the P113,257.00 earmarked for taxes and other expenses

incidental to the sale and Sabans commission as broker for

Ybaez. According to Saban, Lim assumed the obligation to pay

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him his commission. He insists that Lim and Ybaez connived to

unjustly deprive him of his commission from the negotiation of

the sale.[21]

The issues for the Courts resolution are whether Saban is

entitled to receive his commission from the sale; and, assuming

that Saban is entitled thereto, whether it is Lim who is liable to

pay Saban his sales commission.

The Court gives due course to the petition, but agrees with the

result reached by the Court of Appeals.

The Court affirms the appellate courts finding that the agency

was not revoked since Ybaez requested that Lim make stop

payment orders for the checks payable to Saban only after the

consummation of the sale on March 10, 1994. At that time,

Saban had already performed his obligation as Ybaezs agent

when, through his (Sabans) efforts, Ybaez executed theDeed of

Absolute Saleof the lot with Lim and the Spouses Lim.
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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 Ybaez which expressly states that Saban

would be entitled to any excess in the purchase price after

deducting the P200,000.00 due to Ybaez and the transfer taxes

and other incidental expenses of the sale.[22]

InMacondray & Co. v. Sellner,[23]the Court recognized the right

of a broker to his commission for finding a suitable buyer for the

sellers property even though the seller himself consummated the

sale with the buyer.[24]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 brokers efforts.

InInfante v. Cunanan, et al.,[25]the Court upheld the right of the

brokers to their commissions although the seller revoked their

authority to act in his behalf after they had found a buyer for his

properties and negotiated the sale directly with the buyer whom

he met through the brokers efforts. The Court ruled that the

sellers withdrawal in bad faith of the brokers authority cannot

unjustly deprive the brokers of their commissions as the sellers

duly constituted agents.

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The pronouncements of the Court in the aforecited cases are

applicable to the present case, especially considering that Saban

had completely performed his obligations under his contract of

agency with Ybaez by finding a suitable buyer to preparing the

Deed of Absolute Salebetween Ybaez and Lim and her co-

vendees. Moreover, the contract of agency very clearly states that

Saban is entitled to the excess of the mark-up of the price of the

lot after deducting Ybaezs share of P200,000.00 and the taxes

and other incidental expenses of the sale.

However, the Court does not agree with the appellate courts

pronouncement that Sabans 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. Stated differently, an agency is deemed as one

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, and it cannot be revoked by the

principal so long as the interest of the agent or of a third person

subsists. In an agency coupled with an interest, the agents

interest must be in the subject matter of the power conferred and

not merely an interest in the exercise of the power because it

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entitles him to compensation. When an agents interest is

confined to earning his agreed compensation, the agency is not

one coupled with an interest, since an agents interest in

obtaining his compensation as such agent is an ordinary incident

of the agency relationship.[26]

Sabans entitlement to his commission having been settled,

the Court must now determine whether Lim is the proper party

against whom Saban should address his claim.

Sabans right to receive compensation for negotiating as broker for

Ybaez arises from the Agency Agreement between them. Lim is

not a party to the contract. However, the record reveals that she

had knowledge of the fact that Ybaez set the price of the lot at

P200,000.00 and that the P600,000.00the price agreed upon by

her and Sabanwas more than the amount set by Ybaez because it

included the amount for payment of taxes and for Sabans

commission as broker for Ybaez.

According to the trial court, Lim made the following payments for

the lot: P113,257.00 for taxes, P50,000.00 for her broker, and

P400.000.00 directly to Ybaez, or a total of Five Hundred Sixty

Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00).

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[27]Lim, on the other hand, claims that on March 10, 1994, the

date of execution of theDeed of Absolute Sale,she paid directly to

Ybaez the amount of One Hundred Thousand Pesos

(P100,000.00) only, and gave to Saban P113,257.00 for payment

of taxes and P50,000.00 as his commission,[28]and One

Hundred Thirty Thousand Pesos (P130,000.00) on June 28,

1994,[29]or a total of Three Hundred Ninety Three Thousand Two

Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part,

acknowledged that Lim and her co-vendees paid him

P400,000.00 which he said was the full amount for the sale of

the lot.[30]It thus appears that he received P100,000.00 on

March 10, 1994, acknowledged receipt (through Saban) of the

P113,257.00 earmarked for taxes and P50,000.00 for

commission, and received the balance of P130,000.00 on June

28, 1994. Thus, a total of P230,000.00 went directly to Ybaez.

Apparently, although the amount actually paid by Lim was

P393,257.00, Ybaez rounded off the amount to P400,000.00 and

waived the difference.

Lims act of issuing the four checks amounting to P236,743.00 in

Sabans favor belies her claim that she and her co-vendees did not

agree to purchase the lot at P600,000.00. If she did not agree

thereto, there would be no reason for her to issue those checks

which is the balance of P600,000.00 less the amounts of

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P200,000.00 (due to Ybaez), P50,000.00 (commission), and the

P113,257.00 (taxes). The only logical conclusion is that Lim

changed her mind about agreeing to purchase the lot at

P600,000.00 after talking to Ybaez and ultimately realizing that

Sabans commission is even more than what Ybaez received as his

share of the purchase price as vendor. Obviously, this change of

mind resulted to the prejudice of Saban whose efforts led to the

completion of the sale between the latter, and Lim and her co-

vendees. This the Court cannot countenance.

The ruling of the Court inInfante v. Cunanan, et al.,cited earlier,

is enlightening for the facts therein are similar to the

circumstances of the present case. In that case, Consejo Infanteasked Jose Cunanan and Juan Mijares to find a buyer for her two

lots and the house built thereon for Thirty Thousand Pesos

(P30,000.00) . She promised to pay them five percent (5%) of the

purchase price plus whatever overprice they may obtain for the

property. Cunanan and Mijares offered the properties to Pio

Noche who in turn expressed willingness to purchase the

properties. Cunanan and Mijares thereafter introduced Noche to

Infante. However, the latter told Cunanan and Mijares that she

was no longer interested in selling the property and asked them

to sign a document stating that their written authority to act as

her agents for the sale of the properties was already cancelled.

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Subsequently, Infante sold the properties directly to Noche for

Thirty One Thousand Pesos (P31,000.00). The Court upheld the

right of Cunanan and Mijares to their commission, explaining

that

[Infante] had changed her mind even if respondent had found a

buyer who was willing to close the deal, is a matter that would

not give rise to a legal consequence if [Cunanan and Mijares]

agreed to call off the transaction in deference to the request of[Infante]. But the situation varies if one of the parties takes

advantage of the benevolence of the other and acts in a manner

that would promote his own selfish interest. This act is unfair as

would amount to bad faith. This act cannot be sanctioned

without according the party prejudiced the reward which is due

him. This is the situation in which [Cunanan and Mijares] were

placed by [Infante]. [Infante] took advantage of the services

rendered by [Cunanan and Mijares], but believing that she could

evade payment of their commission, she made use of a ruse byinducing them to sign the deed of cancellation.This act of

subversion cannot be sanctioned and cannot serve as basis for

[Infante] to escape payment of the commission agreed upon.[31]

The appellate court therefore had sufficient basis for concluding

that Ybaez and Lim connived to deprive Saban of his commission

by dealing with each other directly and reducing the purchase

price of the lot and leaving nothing to compensate Saban for his

efforts.

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Considering the circumstances surrounding the case, and the

undisputed fact that Lim had not yet paid the balance of

P200,000.00 of the purchase price of P600,000.00, it is just and

proper for her to pay Saban the balance of P200,000.00.

Furthermore, since Ybaez received a total of P230,000.00 from

Lim, or an excess of P30,000.00 from his asking price of

P200,000.00, Saban may claim such excess from Ybaezs estate, if

that remedy is still available,[32]in view of the trial courts

dismissal of Sabans complaint as against Ybaez, with Sabans

express consent, due to the latters demise on November 11,

1994.[33]

The appellate court however erred in ruling that Lim is liable on

the checks because she issued them as an accommodation party.

Section 29 of the 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 accommodation party is liable on the

instrument to a holder for value even though the holder at the

time of taking the instrument knew him or her to be merely an
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accommodation party. The accommodation party may of course

seek reimbursement from the party accommodated.[34]

As gleaned from the text of Section 29 of the Negotiable

Instruments Law, the accommodation party is one who meets all

these three requisites,viz: (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. In the case at bar, while Lim signed as

drawer of the checks she did not satisfy the two other remaining

requisites.

The absence of the second requisite becomes pellucid when

it is noted at the outset that Lim issued the checks in question on

account of her transaction, along with the other purchasers, with

Ybaez which was a sale and, therefore, a reciprocal contract.

Specifically, she drew the checks in payment of the balance of the

purchase price of the lot subject of the transaction. And she had

to pay the agreed purchase price in consideration for the sale of

the lot to her and her co-vendees. In other words, the amounts

covered by the checks form part of the cause or consideration

from Ybaezs end, as vendor, while the lot represented the cause

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or consideration on the side of Lim, as vendee.[35]Ergo, Lim

received value for her signature on the checks.

Neither is there any indication that Lim issued the checks

for the purpose of enabling Ybaez, or any other person for that

matter, to obtain credit or to raise money, thereby totally

debunking the presence of the third requisite of an

accommodation party.

WHEREFORE, in view of the foregoing, the petition is

DISMISSED.

SO ORDERED.

DANTE O. TINGAAssociate Justice

WE CONCUR:

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REYNATO S. PUNO

Chairman

Associate Justice

(On Leave)

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

A T T E S T A T I O N

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I ATTEST THAT THE CONCLUSIONS IN THE ABOVE DECISION WERE

REACHED IN CONSULTATION BEFORE THE CASE WAS ASSIGNED TO THE

WRITER OF THE OPINION OF THE COURTS DIVISION.

REYNATO S. PUNO

ASSOCIATE JUSTICE

CHAIRMAN, SECOND DIVISION

C E R T I F I C A T I O N

PURSUANT TO ARTICLE VIII, SECTION 13 OF THE CONSTITUTION, AND

THE DIVISION CHAIRMANS ATTESTATION, IT IS HEREBY CERTIFIED

THAT THE CONCLUSIONS IN THE ABOVE DECISION WERE REACHED IN

CONSULTATION BEFORE THE CASE WAS ASSIGNED TO THE WRITER OF

THE OPINION OF THE COURT.

HILARIO G. DAVIDE, JR.

CHIEF JUSTICE

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[1]Penned by Associate Justice Edgardo P. Cruz and concurred in by

Associate Justices Ruben T. Reyes and Noel G. Tijam.

[2]Florencio Saban, Plaintiff-Appellant v. Eduardo Ybanez and

Genevieve Lim, Defendants; Genevieve Lim, Defendant-Appellee.

[3]The agency agreement between Ybaez and Saban provides:

That I[,] Engr. Eduardo Ybaez have agreed and allowed to

(sic) Mr. Florencio Saban, Sr. and his associate to look for a

buyer, and further agreed to sell and dispose the above-mention(sic) lot, at the price of P200.00 per square meters [sic]

(equivalent to P200,000.00) net, and any amount over and above

for the stated price resulting from the sale shall belong to Mr.

Florencio Saban, Sr. and his associate. Furthermore it is agreed

and covenanted that the total expenses covering the sale and

transfer of the title such as, capital gain (sic) tax, documentary

stamp, transfer tax and other relative expenses, for the said sale

shall be borne to the agent, and or to the buyer, except the

payment of realty taxes. (RTC Records, p. 5)

[4]RTC Records, p. 6.

[5]Lim on direct examination, TSN, March 3, 1997, p. 8; Rose Villarosa

(Lims broker) on direct examination, TSN, October 22, 1996, p. 7.

[6]RTC Records, p. 25.

[7]Id.at 1.

[8]Annexes B to E, RTC Records, pp. 32-35.

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[9]Id.at 2.

[10]Order dated March 6, 1995, RTC Records, p. 48.

[11]Rollo, pp. 29-39.

[12]Rollo, pp. 22-28.

[13]The amount of the purchase price less the P200,000.00 payable to

Ybaez and the incidental expenses of the sale.

[14]Rollo, pp. 25-26.

[15]Id.at 27.

[16]Rollo, p. 46.

[17]Petition,Id.at 17.

[18]Id.at 14 and 16.

[19]Id.at 18.

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[20]Id.at 17.

[21]Id.at 114-115.

[22]Supranote 3.

[23]33 Phil 370 (1916).

[24]Id.at 377.

[25]93 Phil. 691 (1953).

[26]SeeI RESTATEMENT OF THE LAW IN AGENCY 2d 340 (1957).

[27]RTC Decision, Rollo, p. 33.

[28]TSN, March 3, 1997, p. 8.

[29]Id., see also,Acknolwedgement Receipt issued by Ybaez in favor of

Lim, RTC Records, p. 114.

[30]SeeAcknowledgement Receipt dated June 28, 1994,Id.,and Ybaezs

Affidavit dated June 28, 1994,Id.at 115.

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[31]Supranote 25, at pp. 695-96.

[32]Rule 86 (Claims Against Estate), Revised Rules of Court.

[33]Order of the RTC dated March 6, 1995, RTC Records, p. 48.

[34]Agro Conglomerates, Inc. v. Court of Appeals, G.R. No. 117660,

December 18, 2000, 348 SCRA 450; Bank of the Philippine Islands v. Court

of Appeals, 383 Phil. 538 (2000).

[35]SeeArts. 1350 and 1458, Civil Code.

192. lim vs saban

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