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488 Phil. 236


[ G.R. No. 163720, December 16, 2004 ]




Before the Court is a Petition for Review on Certiorari assailing the Decision[1] dated October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392.[2]

The late Eduardo Ybañez (Ybañez), the owner of a 1,000-square meter lot in Cebu City (the “lot”), entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under the Agency Agreement, Ybañez 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 for payment of taxes, transfer of title and other expenses incident to the sale, as well as Saban’s commission for the sale.[3]

Through Saban’s efforts, Ybañez 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 the Deed of Absolute Sale is 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 broker’s 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.

Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim to cancel all the checks issued by her in Saban’s favor and to “extend another partial payment” for the lot in his (Ybañez’s) favor.[6]

After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum of money and damages against Ybañez 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 his Complaint, 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 Ybañez. Of the total purchase price of P600,000.00, P200,000.00 went to Ybañez, P50,000.00 allegedly went to Lim’s 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 Ybañez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual selling price of the lot from Ybañez and because he was not a licensed real estate broker. Ybañez was able to convince Lim to cancel all four checks.

Saban further averred that Ybañez 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 his Answer, Ybañez 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 Ybañez and Saban, and that she issued stop payment orders for the three checks because Ybañez requested her to pay the purchase price directly to him, instead of coursing it through Saban. She also alleged that she agreed with Ybañez that the purchase price of the lot was only P200,000.00.

Ybañez 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 its Decision[11] dismissing Saban’s 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 court’s Decision to the Court of Appeals.

On October 27, 2003, the appellate court promulgated its Decision[12] reversing the trial court’s ruling. It held that Saban was entitled to his commission amounting to P236,743.00.[13]

The Court of Appeals ruled that Ybañez’s revocation of his contract of agency with Saban was invalid because the agency was coupled with an interest and Ybañez effected the revocation in bad faith in order to deprive Saban of his commission and to keep the profits for himself.[14]

The appellate court found that Ybañez 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 Saban’s commission for the sale, as the agent of Ybañez. The appellate court further ruled that, in issuing the checks in payment of Saban’s 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 a Motion for Reconsideration of the appellate court’s Decision, but her Motion was denied by the Court of Appeals in a Resolution dated 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 Ybañez.[17]

She further contends that she is not liable for Ybañez’s 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 Ybañez 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 Ybañez 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 his Comment, 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 Ybañez, the P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to the sale and Saban’s commission as broker for Ybañez. According to Saban, Lim assumed the obligation to pay him his commission. He insists that Lim and Ybañez connived to unjustly deprive him of his commission from the negotiation of the sale.[21]

The issues for the Court’s 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 court’s finding that the agency was not revoked since Ybañez 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 Ybañez’s agent when, through his (Saban’s) efforts, Ybañez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.

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 P200,000.00 due to Ybañez and the transfer taxes and other incidental expenses of the sale.[22]

In Macondray & Co. v. Sellner,[23] the Court recognized 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.[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 broker’s efforts.

In Infante 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 seller’s withdrawal in bad faith of the brokers’ authority cannot unjustly deprive the brokers of their commissions as the seller’s duly constituted agents.

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 Ybañez by finding a suitable buyer to preparing the Deed of Absolute Sale between Ybañez 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 Ybañez’s share of P200,000.00 and the taxes and other incidental expenses of the sale.

However, the Court does not agree 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. 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 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 as such agent is an ordinary incident of the agency relationship.[26]

Saban’s 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.

Saban’s right to receive compensation for negotiating as broker for Ybañez 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 Ybañez set the price of the lot at P200,000.00 and that the P600,000.00—the price agreed upon by her and Saban—was more than the amount set by Ybañez because it included the amount for payment of taxes and for Saban’s commission as broker for Ybañez.

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 Ybañez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00).[27] Lim, on the other hand, claims that on March 10, 1994, the date of execution of the Deed of Absolute Sale, she paid directly to Ybañez 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). Ybañez, 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 Ybañez. Apparently, although the amount actually paid by Lim was P393,257.00, Ybañez rounded off the amount to P400,000.00 and waived the difference.

Lim’s act of issuing the four checks amounting to P236,743.00 in Saban’s 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 P200,000.00 (due to Ybañez), 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 Ybañez and ultimately realizing that Saban’s commission is even more than what Ybañez 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 in Infante 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 Infante asked 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. 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 by inducing 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 Ybañez 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.

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 Ybañez 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 Ybañez’s estate, if that remedy is still available,[32] in view of the trial court’s dismissal of Saban’s complaint as against Ybañez, with Saban’s express consent, due to the latter’s 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 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 Ybañez 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 Ybañez’s end, as vendor, while the lot represented the cause 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 Ybañez, 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.


Puno, Chairman, Austria-Martinez, and Chico-Nazario, JJ., concur.
Callejo, Sr., J., on leave.

[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 Ybañez and Saban provides:
…That I[,] Engr. Eduardo Ybañez … 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 (Lim’s 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.

[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 Ybañez 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.

[20] Id. at 17.

[21] Id. at 114-115.

[22] Supra note 3.

[23] 33 Phil 370 (1916).

[24] Id. at 377.

[25] 93 Phil. 691 (1953).

[26] See I 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 Ybañez in favor of Lim, RTC Records, p. 114.

[30] See Acknowledgement Receipt dated June 28, 1994, Id., and Ybañez’s Affidavit dated June 28, 1994, Id. at 115.

[31] Supra note 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] See Arts. 1350 and 1458, Civil Code.

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