G.R. No. L-39822 - Prats vs. Court of Appeals

Case Summary (G.R. No. L-39822)

Factual Background

Antonio E. Prats alleged that Alfonso Doronila was the registered owner of 300 hectares in Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750, and that Doronila, after unsuccessful direct negotiations with the Social Security System (SSS), on February 14, 1968 gave Prats an exclusive written option and authority to negotiate the sale of the property. Prats pleaded that he published the option, made contacts with prospective buyers including the SSS, arranged meetings, submitted written offers on behalf of a buyer and the SSS, and that as a result of his efforts the SSS ultimately purchased the property, whereupon Doronila received P9,750,000 and deposited the proceeds in his Philippine National Bank account.

The Exclusive Brokerage Agreement

The written instrument executed February 14, 1968 (Exhibit A) set the basic price at P3.00 per square meter, provided for a ten percent commission computed on P2.10 per square meter or on any agreed price, and contained a time provision granting the brokers an exclusive option for sixty days with an automatic extension of not more than fifteen days if negotiations were started; the option also required written offers by prospective buyers to preserve the authority.

Negotiations and Documentary Timeline

The stipulation of facts established an extended course of correspondence and negotiation: Doronila had earlier offered the property to the SSS in July 1967; Prats sent letters and offers to the SSS and other agencies between March and May 1968, including a formal offer dated May 6, 1968 at P6.00 per square meter and a subsequent firm offer dated May 18, 1968 at P4.50 per square meter for a different buyer. The SSS transmitted a telegram on May 17, 1968 stating it was considering purchase, and meetings between Doronila and SSS officials occurred late May and early June 1968. The Social Security Commission passed Resolution No. 636 on June 20, 1968 formalizing a counter-offer at P3.25 per square meter subject to appraisal, and thereafter authorized an appraisal and on July 17, 1968 passed Resolution No. 738 approving purchase at P3.25 per square meter.

Sale, Payment and Post-sale Events

On July 30, 1968 Doronila executed a deed of absolute sale in favor of the SSS for the total price of P9,750,000, and the deed was presented for registration on August 21, 1968; Doronila received the full purchase price in two installments and deposited the proceeds in his Philippine National Bank account. On September 17, 1968 Prats presented a statement of account claiming P1,380,000 as his commission and thereafter instituted Civil Case No. Q-12412 to recover the fee and damages.

Trial Court Proceedings and Judgment

The Court of First Instance rendered judgment on December 12, 1969 in favor of the plaintiff Antonio E. Prats, ordering Alfonso Doronila to pay P1,380,000 with six percent interest from September 23, 1968, awarding moral damages P200,000, exemplary damages P100,000, attorney’s fees P150,000 and litigation expenses, and making permanent the preliminary injunction. The trial court ordered Philippine National Bank to pay P1,380,000 and interest out of the P2,000,000 fixed deposit it held.

Court of Appeals Decision and Rationale

On appeal the Court of Appeals reversed and dismissed the complaint in a decision promulgated September 19, 1974. The Court of Appeals concluded that the exclusive authority in favor of Prats had expired on June 2, 1968 and that no written offer by the SSS or by Prats on the SSS’s behalf had been made within the authorized period to prevent automatic termination. The Court of Appeals further found that Prats was not shown to be the efficient procuring cause of the sale, noting inconsistencies in Prats’s conduct such as his firm offers to other buyers at higher prices and the prior, independent dealings between Doronila and the SSS dating to July 1967. The Court of Appeals also lifted the injunction on the bank deposit and granted Doronila attorney’s fees in the sum of P10,000.

Petition to the Supreme Court and Assigned Errors

Petitioner sought certiorari review of the Court of Appeals decision, assigning errors that the Court of Appeals erred in concluding that petitioner was not the efficient procuring cause, erred in finding noncompliance with the brokerage contract, erred in denying petitioner his commission, and erred in awarding attorney’s fees to Doronila instead of affirming the trial court’s awards of moral and exemplary damages and attorney’s fees to petitioner.

Supreme Court’s Review and Findings on Fact and Law

The Supreme Court observed that the stipulation of facts and the record established that the SSS formally accepted the purchase only on June 20, 1968, which was after the expiration of Prats’s exclusive authority. The Court treated the Court of Appeals’ factual findings regarding Prats’s role as final for purposes of the petition and found no bas

Case Syllabus (G.R. No. L-39822)

Parties and Procedural Posture

Antonio E. Prats, doing business under the name of Philippine Real Estate Exchange, petitioner below, filed Civil Case No. Q-12412 in the Court of First Instance of Rizal at Quezon City on September 23, 1968.
Alfonso Doronila and Philippine National Bank were named as respondents in the trial court action to recover brokerage commissions and damages.
The trial court rendered judgment on December 12, 1969 in favor of Antonio E. Prats and ordered payment of P1,380,000 with interest, awards for moral and exemplary damages, attorney's fees, and a permanent injunction against the release of P2,000,000 deposit.
Alfonso Doronila appealed to the Court of Appeals where the case was docketed as CA-G.R. No. 45974-R and where the trial court judgment was reversed and the complaint dismissed by decision dated September 19, 1974.
The petitioner filed a petition for certiorari before the Supreme Court which initially was denied on May 23, 1975 but was given due course upon motion for reconsideration and supplemental petition in the Resolution of August 20, 1975.
The Supreme Court promulgated its decision on January 31, 1978 and resolved the controversy by affirming the Court of Appeals with a specified modification in equity.

Key Factual Allegations

Alfonso Doronila was the registered owner of 300 hectares in Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750.
On February 14, 1968 Doronila executed in favor of Prats an exclusive option and authority to negotiate sale at the basic price of P3.00 per square meter with a ten percent commission computed on P2.10 per square meter and with express provisions for automatic extension of not more than fifteen days if negotiations had been started.
Prats caused the exclusive authority to be published and thereafter pursued negotiations with the Social Security System ("SSS") and other prospective buyers, claiming to have arranged meetings and communications with SSS officials.
The SSS considered and ultimately, by Resolution No. 636 of June 20, 1968 and Resolution No. 738 of July 17, 1968, approved a purchase at P3.25 per square meter for a total price of P9,750,000.00 and a deed of absolute sale was executed on July 30, 1968 with registration of titles on August 21, 1968.
Doronila received the full purchase price and deposited the proceeds in his bank account with Philippine National Bank.
Prats presented a statement of account on September 17, 1968 demanding P1,380,000.00 as brokerage commission pursuant to the February 14, 1968 agreement, which Doronila refused to pay.

Stipulation of Facts

The parties executed a detailed stipulation of facts on January 18, 1969 which the trial court received as part of the record.
The stipulation recited that Doronila had earlier (July 1967) dealt directly with the SSS and had responded to a counter-offer of P3.25 per square meter which he had conditionally accepted in July 1967 subject to cash payment within thirty days.
The stipulation confirmed the February 14, 1968 exclusive authority to Prats, the extension of that authority to May 18, 1968, and circumstances bearing on whether any written offer or negotiations that would prolong the authority were effected prior to its expiration.
The stipulation further admitted the sequence of SSS resolutions, appraisal engagement by Toples & Harding (Far East), Inc., the deed of sale of July 30, 1968, and full payment to Doronila.

Trial Court Ruling

The trial court found for Prats and adjudged P1,380,000.00 due to him with interest at six percent per annum from September 23, 1968 until paid.
The trial court awarded Prats P200,000.00 as moral damages and P100,000.00 as exemplary damages and imposed attorney's fees of P150,000.00 and costs.
The trial court made permanent the preliminary injunction restraining Philippine National Bank from releasing a P2,000,000.00 fixed time deposit and ordered the bank to pay the P1,380,000.00 and interest out of that deposit.

Court of Appeals Ruling

The Court of Appeals reversed the trial court and dismissed the complaint on the ground that