G.R. No. 163720 - Lim vs. Saban

Case Summary (G.R. No. 163720)

Formation of the Agency Agreement and Sale Negotiation

On February 8, 1994, Ybanez entered into the Agency Agreement with Saban. Under the arrangement, Ybanez authorized Saban to look for a buyer for the lot and to sell it at P200,000.00. The agreement further provided that Saban was allowed to mark up the price so that the selling price would cover amounts needed for payment of taxes, transfer of title, and other sale-related expenses, as well as Saban’s commission.

Through Saban’s efforts, Ybanez and his wife sold the lot to Lim and the Spouses Lim on March 10, 1994. The Deed of Absolute Sale reflected a price of P200,000.00. However, the transaction as implemented reflected a higher agreed purchasing price inclusive of sale expenses, namely P600,000.00.

Payment Structure and Issuance of the Checks

After the sale, Lim remitted to Saban P113,257.00 for payment of taxes due on the transaction and P50,000.00 as brokers’ commission. In addition, Lim issued four postdated checks in Saban’s favor totaling P236,743.00. The checks were: 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.

Before the checks were honored, Ybanez sent Lim a letter dated June 10, 1994 requesting that she cancel the checks issued in Saban’s favor and extend another partial payment to Ybanez. When the checks were dishonored upon presentment, Saban filed suit.

Saban’s Complaint and the Parties’ Allegations

On August 3, 1994, Saban filed a Complaint for collection of sum of money and damages against Ybanez and Lim with the Regional Trial Court (RTC) of Cebu City, Branch 20. Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600,000.00, which reflected a P400,000.00 mark-up from the price set by Ybanez. He further claimed that the total purchase price was allocated such that P200,000.00 went to Ybanez, P50,000.00 went to the buyers’ agent, and P113,257.00 was given to Saban for taxes and other incidental expenses. Saban also alleged that the remaining P236,743.00 was covered by Lim’s four postdated checks.

Saban asserted that Ybanez told Lim that Saban was not entitled to any commission because Ybanez alleged that Saban concealed the actual selling price and because Saban was not a licensed real estate broker. Saban further alleged that Ybanez and Lim connived to deprive him of his commission by withholding payment of the first three checks and by failing to make good the fourth check, which was dishonored due to a closed account.

In response, Ybanez denied liability and reiterated the same bases. Lim argued that she was not privy to the alleged agreement between Ybanez and Saban, that she issued stop payment orders based on Ybanez’s request that Lim pay Ybanez directly, and that she agreed that the purchase price was only P200,000.00. Ybanez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed the case against him, without objection from the other parties.

RTC Decision: Checks Declared Stale and Lim Absolved

On May 14, 1997, the RTC rendered a decision dismissing Saban’s complaint. The RTC declared the four checks as stale and non-negotiable, and it absolved Lim from liability towards Saban. Saban appealed to the Court of Appeals.

Court of Appeals Decision: Recognition of Commission and Lim’s Liability

On October 27, 2003, the Court of Appeals reversed the RTC. It held that Saban was entitled to his commission totaling P236,743.00. It reasoned that Ybanez’s revocation of the contract of agency with Saban was invalid because the agency was allegedly coupled with an interest, and because Ybanez effected revocation in bad faith to deprive Saban of his commission and to keep the profits for himself. It also found that Ybanez and Lim connived to deprive Saban.

The Court of Appeals declared that Lim was liable to pay Saban the amount corresponding to his commission because she issued the four checks knowing that their total amount corresponded to Saban’s commission as the agent of Ybanez. It further held that Lim acted as an accommodation party when she issued the checks, and thus her liability attached as drawer to a holder for value.

Lim moved for reconsideration, which the Court of Appeals denied on May 6, 2004. Lim then filed the present petition.

Issues Presented for Supreme Court Review

The Court identified two core issues. First, whether Saban was entitled to receive his commission for the sale. Second, assuming entitlement, whether Lim was the proper party liable to pay the sales commission.

Supreme Court’s Ruling on Saban’s Entitlement to Commission

The Supreme Court affirmed the result reached by the Court of Appeals and held that Saban was entitled to his commission. It rejected the idea that the agency was validly revoked. It held that Ybanez’s request that Lim issue stop payment orders for checks payable to Saban occurred only after consummation of the sale on March 10, 1994. At that point, Saban had already performed his obligation as Ybanez’s agent because, through Saban’s efforts, Ybanez executed the Deed of Absolute Sale with Lim and the Spouses Lim.

The Court further reasoned that depriving Saban of his commission after the sale was consummated would amount to a breach of contract, since the Agency Agreement expressly provided that Saban would be entitled to any excess in the purchase price after deducting Ybanez’s P200,000.00 share and the transfer taxes and other incidental expenses. The Court drew support from Macondray & Co. v. Sellner, which recognized a broker’s right to commission even if the principal consummated the sale directly with the buyer. It similarly relied on Infante v. Cunanan, where the Court upheld the broker’s right to commissions despite revocation of authority after finding a buyer and negotiating the sale through the broker’s efforts.

While the Court did not adopt the Court of Appeals’ characterization that Saban’s agency was coupled with an interest, it still held that Saban’s commission was enforceable. The Court clarified the doctrine under Art. 1927 of the Civil Code, stating that an agency is not revocable when the situation falls within those enumerated categories, and that an agency is “coupled with an interest” only when the agent’s interest is in the subject matter of the power conferred, not merely an interest in the agent’s compensation. Because Saban’s entitlement arose from the agreed compensation structure rather than an interest in the subject matter of the power, the Court concluded that the agency was not one coupled with an interest as ruled by the Court of Appeals.

Supreme Court’s Ruling on Lim’s Liability as Proper Payor of Commission

With Saban’s entitlement established, the Court then determined whether Lim was liable. It observed that Saban’s right to compensation arose from the Agency Agreement between Ybanez and Saban, and that Lim was not a party to that contract. Nonetheless, the record showed that Lim knew: first, that Ybanez fixed the lot’s price at P200,000.00; and second, that the P600,000.00 price agreed by Lim and Saban exceeded Ybanez’s set price because it also included the payment for taxes and Saban’s commission.

The Court compared payment accounts. The RTC stated that Lim paid P113,257.00 for taxes, P50,000.00 for Lim’s broker, and P400,000.00 directly to Ybanez, totaling P563,257.00. Lim claimed that on March 10, 1994 she paid Ybanez only P100,000.00, and gave to Saban P113,257.00 for taxes and P50,000.00 as commission, plus an additional P130,000.00 on June 28, 1994, totaling P393,257.00. Ybanez, for his part, acknowledged receipt of P400,000.00 as the full amount for the sale, and thus implied he received P230,000.00 directly from Lim through the acknowledged P100,000.00 on March 10, 1994 and the P130,000.00 on June 28, 1994, while also acknowledging amounts delivered through Saban.

The Court treated the discrepancies as reflecting Ybanez’s rounding off and waiver of any difference. It then considered that Lim’s issuance of the four checks totaling P236,743.00 contradicted her position that she and her co-vendees did not agree to purchase at P600,000.00. If Lim did not agree to that amount, there would have been no reason to issue checks that covered the balance of P600,000.00 after deducting Ybanez’s P200,000.00, the P50,000.00 commission, and the P113,257.00 earmarked for taxes. The Court concluded that Lim had changed her mind after discussion with Ybanez and after appreciating that Saban’s commission was even more than Ybanez’s share. It considered such conduct prejudicial to Saban, whose efforts had already led to completion of the sale.

The Court treated Infante v. Cunanan as particularly instructive, emphasizing that while parties may call off a transaction in good faith before dealing to the other’s prejudice, a party that takes advantage of the other’s services and uses ruses to evade the agreed compensation acts in bad faith. It held that Ybanez and Lim connived in dealing directly and reducing the purchase price in a manner that left nothing to compensate Saban for the completion of his brokerage efforts. Since Lim had not yet paid the balance of P200,000.00 of the purchase price of P600,000.00, the Court held it just that Lim pay Saban such balance. It further explained that because Ybanez received a total of P230,000.00 from Lim, Saban could claim the excess from Ybanez’s estate, assuming the remedy remained available, in light of the dismissal of the complaint as against Ybanez with Saban’s consent following Ybanez’s death.

Negotiable Instruments Law: Correction of the Accommodation Party Ruling

Although the Court affirmed Lim’s liability in substance, it corrected the Court of Appeals’ reasoning that Li

Case Syllabus (G.R. No. 163720)

Parties and Procedural Posture

Genevieve Lim filed a Petition for Review on Certiorari challenging a Decision of the Court of Appeals, Seventh Division in CA-G.R. V No. 60392.
Florencio Saban sued Eduardo Ybanez and Lim before the Regional Trial Court (RTC) of Cebu City, Branch 20, for collection of sum of money and damages.
The RTC dismissed the complaint only as to Ybanez, and it later dismissed the complaint against the remaining defendants by declaring the checks stale and non-negotiable and absolving Lim.
The Court of Appeals reversed and ruled that Saban was entitled to his commission and that Lim was liable to pay.
The Court of Appeals denied Lim’s Motion for Reconsideration.
The Supreme Court dismissed the petition and affirmed the result reached by the Court of Appeals, while correcting its erroneous theory on Lim’s liability as an accommodation party.

Key Factual Allegations

Ybanez, owner of a 1,000-square meter lot in Cebu City, entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with Saban on February 8, 1994.
Under the Agency Agreement, Ybanez authorized Saban to look for a buyer at P200,000.00 and to mark up the selling price to include amounts for taxes, transfer of title, other incidental expenses, and Saban’s commission.
Through Saban’s efforts, Ybanez and his wife sold the lot to Lim and the spouses Benjamin and Lourdes Lim on March 10, 1994.
The Deed of Absolute Sale indicated the price of the lot as P200,000.00.
The parties later treated the agreed purchase price as P600,000.00, inclusive of taxes and other incidental expenses.
After the sale, Lim remitted P113,257.00 to Saban for taxes and incidental expenses and P50,000.00 as broker’s commission.
Lim issued four postdated checks aggregating P236,743.00 payable to Saban, which later dishonored upon presentment.
Ybanez sent Lim a letter dated June 10, 1994 requesting cancellation of the checks in Saban’s favor and extension of another partial payment for the lot in Ybanez’s favor.
Saban filed the RTC complaint on August 3, 1994 after the dishonor.
Ybanez died during the RTC proceedings, and the trial court dismissed the case only against him without objection from the other parties.

Contractual Framework: Agency Agreement

The Agency Agreement provided that Saban was allowed to look for a buyer and Ybanez agreed to sell and dispose the lot at P200.00 per square meter (equivalent to P200,000.00) net.
The Agency Agreement stated that any amount over and above the stated price resulting from the sale would belong to Saban and Ybanez’s associate.
The Agency Agreement allocated as expenses covering the sale and transfer of title certain taxes and charges, borne to the agent and/or the buyer, except for realty taxes.
The Supreme Court treated the contract’s payment and commission framework as the basis for determining whether Saban had a present right to the mark-up/commission and whether Ybanez could revoke the agency after the sale.

Claims and Defenses

Saban’s complaint alleged that Lim and the spouses Lim agreed to purchase the lot for P600,000.00, composed of P200,000.00 to Ybanez, P50,000.00 to Lim’s agent (as pleaded), and P113,257.00 for taxes and incidental expenses, plus the remaining P236,743.00 through four postdated checks.
Saban alleged that Ybanez told Lim that Saban was not entitled to commission because Ybanez concealed the actual selling price and because Saban was not a licensed real estate broker.
Saban claimed that Ybanez and Lim connived to deprive him of his commission by inducing the cancellation of the first three checks.
Saban further alleged that the fourth check was dishonored because the account was closed.
Ybanez’s answer denied liability by asserting that Saban was not entitled to commission due to concealment and the alleged lack of a real estate broker license.
Lim’s answer asserted lack of privity with the Agency Agreement and claimed that she issued stop-payment orders because Ybanez requested direct payment to him instead of through Saban.
Lim also alleged agreement with Ybanez that the lot’s purchase price was only P200,000.00.
On appeal to the Court of Appeals, Saban pressed entitlement to commission, while Lim maintained she was not liable for Ybanez’s debt under the Agency Agreement and attacked the accommodation-party theory.

Issues Before the Supreme Court

The first issue was whether Saban was entitled to receive his commission from the sale.
The second issue, assuming entitlement, was whether Lim was the proper party to pay the sales commission to Saban.
The case also required the Court to address the Court of Appeals’ conclusion that Lim was liable on the basis of her being an accommodation party.
The petition further raised Lim’s proportional-liability argument for sharing liability with her co-vendees, if liability were established.

Court of Appeals Ruling

The Court of Appeals ruled that Saban was entitled to his commission amounting to P236,743.00.
It held that Ybanez’s revocation of the agency was invalid because the agency was allegedly coupled with an interest.
The appellate court found that Ybanez effected revocation in bad faith to deprive Saban of his commission and keep profits for himself.
It ruled that Ybanez and Lim connived to deprive Saban of his commission by dealing directly and adjusting the transaction so as to leave no compensation for Saban’s efforts.
It declared that Lim was liable to pay Saban because she issued the four checks knowing they corresponded to Saban’s commission as agent of Ybanez.
It further ruled that in issuing the checks, Lim acted as an accommodation party, signing as drawer without receiving value.
The Court of Appeals therefore held Lim liable as a holder for value on the checks despite the accommodation-party characterization.

Supreme Court’s Resolution

The Supreme Court held that Saban was entitled to his commission and affirmed the Court of Appeals’ result that Lim must pay.
The Supreme Court rejected the Court of Appeals’ theory that the agency was one coupled with an interest.
The Court upheld the appellate court’s finding of entitlement by grounding it on the fact that the agency was effectively not revocable under the Civil Code timing and the performance already rendered by Saban.
The Court also corrected the legal basis for Lim’s liability by rejecting the conclusion that she was liable as an accommodation party.
The Court concluded that Lim’s act of issuing the checks was inconsistent with her claim that she and her co-vendees did not agree to the P600,000.00 purchase price.
The petition was dismissed, and the Court affirmed the outcome, though it disallowed the accommodation-party rationale.

Agency: Revocation and Commission Right

The Supreme Court ruled that Ybanez’s request for Lim to issue stop-payment orders for checks payable to Saban occurred after the sale w