Danon v.

Brimo
This action was brought to recover the sum of
P60,000, alleged to be the value of services
rendered to the defendant by the plaintiff as a
broker. The plaintiff alleges that in the month of
August, 1918, the defendant company, through its
manager, Antonio A. Brimo, employed him to look
for a purchaser of its factory known as "Holland
American Oil Co.," for the sum of P1,200,000,
payable in cash; that the defendant promised to
pay the plaintiff, as compensation for his services,
a commission of five per cent on the said sum of
P1,200,000, if the sale was consummated, or if
the plaintiff should find a purchaser ready, able
and willing to buy said factory for the said sum of
P1,200,000; that subsequently the plaintiff found
such a purchaser, but that the defendant refused
to sell the said factory without any justifiable
motive or reason therefor and without having
previously notified the plaintiff of its desistance or
variation in the price and terms of the sale.
To that complaint the defendant interposed a
general denial. Upon the issue thus presented, the
Honorable Simplicio del Rosario, judge, after
hearing and considering the evidence adduced
during the trial of the cause, rendered a judgment
in favor of the plaintiff and against the defendant
for the sum of P60,000, with costs. From that
judgment the defendant appealed to this court.
The proof with regard to the authority of the
plaintiff to sell the factory in question for the
defendant,
on
commission,
is
extremely
unsatisfactory. It consists solely of the testimony
of the plaintiff, on the one hand, and of the
manager of the defendant company, Antonio A.
Brimo, on the other. From a reading of their
testimony we believe that neither of them has
been entirely free from prevarications. However,
after giving due weight to the finding of the trial
court in this regard and after carefully considering
the inherent probability or improbability of the
testimony of each of said witnesses, we believe
we are approximating the truth in finding: (1) That
Antonio A. Brimo, in a conversation with the
plaintiff, Julio Danon, about the middle of August,
1918, informed the latter that he (Brimo) desired
to sell his factory, the Holland American Oil Co.,
for the sum of P1,200,000; (2) that he agreed and
promised to pay to the plaintiff a commission of 5
per cent provided the latter could sell said factory
for that amount; and (3) that no definite period of
time was fixed within which the plaintiff should
effect the sale. It seems that another broker,
Sellner, was also negotiating the sale, or trying to
find a purchaser for the same property and that
the plaintiff was informed of the fact either by

Brimo himself or by someone else; at least, it is

probable that the plaintiff was aware that he was
not alone in the field, and his whole effort was to
forestall his competitor by being the first to find a
purchaser and effect the sale. Such, we believe.
was the contract between the plaintiff and the
defendant, upon which the present action is
based.
The next question to determine is whether the
plaintiff had performed all that was required of
him under that contract to entitle him to recover
the commission agreed upon. The proof in this
regard is no less unsatisfactory. It seems that
immediately after having an interview with Mr.
Brimo, as above stated, the plaintiff went to see
Mr. Mauro Prieto, president of the Santa Ana Oil
Mill, a corporation, and offered to sell to him the
defendant's property at P1,200,000. The said
corporation was at that time in need of such a
factory as the plaintiff was offering for sale, and
Mr. Prieto, its president, instructed the manager,
Samuel E. Kane, to see Mr. Brimo and ascertain
whether he really wanted to sell said factory, and,
if so, to get permission from him to inspect the
premises. Mr. Kane inspected the factory and,
presumably, made a favorable report to Mr. Prieto.
The latter asked for an appointment with Mr.
Brimo to perfect the negotiation. In the meantime
Sellner, the other broker referred to, had found a
purchaser for the same property, who ultimately
bought it for P1,300,000. For that reason Mr.
Prieto, the would be purchaser found by the
plaintiff, never came to see Mr. Brimo to perfect
the proposed negotiation.
Under the proofs in this case, the most that can
be said as to what the plaintiff had accomplished
is, that he had found a person who might have
bought the defendant's factory if the defendant
had not sold it to someone else. The evidence
does not show that the Santa Ana Oil Mill had
definitely decided to buy the property in question
at the fixed price of P1,200,000. The board of
directors of said corporation had not resolved to
purchase said property; and even if its president
could legally make the purchase without previous
formal authorization of the board of directors, yet
said president does not pretend that he had
definitely and formally agreed to buy the factory
in question on behalf of his corporation at the
price stated. On direct examination he testified for
the plaintiff as follows:
Q.
You say that we were going to accept or
that it was beneficial for us; will you say to whom
your refer, when you say "we?"
A.

Our company, the Santa Ana Oil Mill.

Q.
And is that company able to pay the
sum of P1,200,000?
A.

Yes, sir.

Q.
And you accepted it at that price of
P1,200.000?
A.
Surely, because as I already said before,
we were in the difficult position of not being able
to operate our factory, because of the obstacle
placed by the Government.
Q.
And did you inform Mr. Danon of this
acceptance?
A.

I did not explain to Mr. Danon.

P1,200.000 ("con tal que V. me venda la fabrica en

P1,200.000"). It will also be noted that all that the
plaintiff had accomplished by way of performance
of his contract was, that he had found a person
who might have bought the factory in question
had not the defendant sold it to someone else.
(Beaumont vs. Prieto, 41 Phil., 670; 249 U.S., 554.)
Under these circumstances it is difficult to see
how the plaintiff can recover anything in the
premises. The plaintiff's action is not one for
damages for breach of contract; it is an action to
recover "the reasonable value" of services
rendered. this is unmistakable both from the
plaintiff's complaint and his testimony as a
witness during the trial.

On cross-examination the same witness testified:

Q.
What actions did the board of directors
of the Santa Ana Oil Mill take in order to acquire or
to make an offer to Mr. Brimo of the Holland
American Oil Company?
A.
But nothing was effected, because Mr.
Danon stated that the property had been sold
when I was going to deal with him.
Q.
But do you not say that you made an
offer of P1,200,000?
A.
No; it was Mr. Danon who made the offer
and we were sure to put the deal through because
we have bound ourselves.
The plaintiff claims that the reasons why the sale
to the Santa Ana Mill was not consummated was
because Mr. Brimo refused to sell to a Filipino firm
and preferred an American buyer; that upon
learning such attitude of the defendant the
plaintiff endeavored to procure another purchaser
and found a Mr. Leas, who delivered to the plaintiff
a letter addressed to Mr. Brimo, offering to buy the
factory in question at P1,200,000. the offer being
good for twenty-four; that said offer was not
accepted by Brimo because while he was reading
the letter of Leas, Sellner came in, drew Brimo
into another room, and then and there closed the
deal at P1,300,000. The last statement is admitted
by the defendant.
Such are the facts in this case, as nearly accurate
as we can gather them from the conflicting
evidence before us. Under those facts, is the
plaintiff entitled to recover the sum of P60,000,
claimed by him as compensation for his services?
It will be noted that, according to the plaintiff's
own testimony, the defendant agreed and
promised to pay him a commission of 5 per cent
provided he (the plaintiff) could sell the factory at

Q.
And what is the reasonable value of the
services you rendered to Mr. Brimo?
A.
sold.

Five per cent of the price at which it was

Q.
Upon what do you base your
qualification that those services were reasonable?

A.
First, because that is the common rate in
the city, and, secondly, because of the big gain
that he obtained from the sale.
What benefit did the plaintiff, by his "services,"
bestow upon the defendant to entitle him to
recover from the latter the sum of P60,000? It is
perfectly clear and undisputed that his "services"
did not any way contribute towards bringing about
the sale of the factory in question. He was not
"the efficient agent or the procuring cause of the
sale."
The broker must be the efficient agent or the
procuring cause of sale. The means employed by
him and his efforts must result in the sale. He
must find the purchaser, and the sale must
proceed from his efforts acting as broker. (Wylie
vs. Marine National Bank, 61 N. Y., 414; 416;
citing: McClure vs. Paine, 49 N. Y., 561; Lloyd vs.
Mathews, 51 id., 124; Lyon vs. Mitchell, 36 id.,
235; Briggs vs. Rowe, 4 Keyes, 424; Murray vs.
Currie, 7 Carr. and Payne, 584; Wilkinson vs.
Martin, 8 id., 5.)
A leading case on the subject is that of Sibbald vs.
Bethlehem Iron Co. (83 N. Y., 378; 38 Am. Rep.,
441). In the case, after an exhaustive review of
various cases, the Court of Appeals of New York
stated the rule as follows:

In all the cases, under all and varying forms of

expression, the fundamental and correct doctrine,
is, that the duty assumed by the broker is to bring
the minds of the buyer and seller to an agreement
for a sale, and the price and terms on which it is
to be made, and until that is done his right to
commissions does not accrue. (McGavock vs.
Woodlief, 20 How., 221; Barnes vs. Roberts, 5
Bosw., 73; Holly vs. Gosling, 2 E. D., Smith, 262;
Jacobs vs. Kolff, 2 Hilt., 133; Kock vs. Emmerling,
22 How., 72; Corning vs. Calvert, 2 Hilt., 56;
Trundy vs. N.Y. and Hartf. Steamboat Co., 6 Robt.,
312; Van Lien vs. Burns, 1 Hilt., 134.)
xxx

xxx

xxx

It follows, as a necessary deduction from the

established rule, that a broker is never entitled to
commissions for unsuccessful efforts. The risk of a
failure is wholly his. The reward comes only with
his success. That is the plain contract and
contemplation of the parties. The broker may
devote his time and labor, and expend his money
with ever so much of devotion to the interest of
his employer, and yet if he fails, if without
effecting an agreement or accomplishing a
bargain, he abandons the effort, or his authority is
fairly and in good faith terminated, he gains no
right to commissions. He loses the labor and effort
which was staked upon success. And in such event
it matters not that after his failure, and the
termination of his agency, what he has done
proves of use and benefit to the principal. In a
multitude of cases that must necessarily result.
He may have introduced to each other parties who
otherwise would have never met; he may have
created impressions, which under later and more
favorable circumstances naturally lead to and
materially assist in the consummation of a sale;
he may have planted the very seed from which
others reap the harvest; but all that gives him no
claim. It was part of his risk that failing himself,
not successful in fulfilling his obligation, others
might be left to some extent to avail themselves
of the fruit of his labors. As we said in Wylie vs.
Marine National Bank (61 N.Y., 416), in such a case
the principal violates no right of the broker by
selling to the first party who offers the price
asked, and it matters not that sale is to the very
party with whom the broker had been negotiating.
He failed to find or produce a purchaser upon the
terms prescribed in his employment, and the
principal was under no obligation to wait longer
that he might make further efforts. The failure
therefore and its consequences were the risk of
the broker only. This however must be taken with
one important and necessary limitation. If the
efforts of the broker are rendered a failure by the
fault of the employer; if capriciously he changes

his mind after the purchaser, ready and willing,

and consenting to the prescribed terms, is
produced; or if the latter declines to complete the
contract because of some defect of title in the
ownership of the seller, some unremoved
incumbrance, some defect which is the fault of the
latter, then the broker does not lose his
commissions. And that upon the familiar principle
that no one can avail himself of the
nonperformance of a condition precedent, who
has himself occasioned its nonperformance. But
this limitation is not even an exception to the
general rule affecting the broker's right for it goes
on the ground that the broker has done his duty,
that he has brought buyer and seller to an
agreement, but that the contract is not
consummated and fails though the after-fault of
the seller. The cases are uniform in this respect.
(Moses vs. Burling, 31 N.Y., 462; Glentworth vs.
Luther, 21 Barb., 147; Van Lien vs. Burns, 1 Hilt.,
134.)
One other principle applicable to such a contract
as existed in the present case needs to be kept in
view. Where no time for the continuance of the
contract is fixed by its terms either party is at
liberty to terminate it at will, subject only to the
ordinary requirements of good faith. Usually the
broker is entitled to a fair and reasonable
opportunity to perform his obligation, subject of
course to the right of the seller to sell
independently. But having been granted him, the
right of the principal to terminate his authority is
absolute and unrestricted, except only that he
may not do it in bad faith, and as a mere device to
escape the payment of the broker's commissions.
Thus, if in the midst of negotiations instituted by
the broker, and which were plainly and evidently
approaching success, the seller should revoke the
authority of the broker, with the view of
concluding the bargain without his aid, and
avoiding the payment of commission about to be
earned, it might be well said that the due
performance his obligation by the broker was
purposely prevented by the principal. But if the
latter acts in good faith, not seeking to escape the
payment of commissions, but moved fairly by a
view of his own interest, he has the absolute right
before a bargain is made while negotiations
remain unsuccessful, before commissions are
earned, to revoke the broker's authority, and the
latter cannot thereafter claim compensation for a
sale made by the principal, even though it be to a
customer with whom the broker unsuccessfully
negotiated, and even though, to some extent, the
seller might justly be said to have availed himself
of the fruits of the broker's labor. (Ibid. pp. 444,
445 and 446.)

The rule laid down in the foregoing case was

adopted and followed in the cases of Zeimer vs.
Antisell (75 Cal. 509), and Ayres vs. Thomas (116
Cal., 140).
The undertaking to procure a purchaser requires
of the party so undertaking, not simply to name or
introduce a person who may be willing to make
any sort of contract in reference to the property,
but to produce a party capable, and who
ultimately becomes the purchaser. (Kimberly vs.
Henderson and Lupton, 29 Md., 512, 515, citing:
Keener vs. Harrod and Brooke, 2 Md. 63;
McGavock vs. Woodlief, 20 How., 221. See also
Richards, Executor, vs. Jackson, 31 Md., 250.)
The defendant sent a proposal to a broker in these
words: If you send or cause to be sent to me, by
advertisement or otherwise, any party with whom
I may see fit and proper to effect a sale or
exchange of my real estate, above described I will
pay you the sum of $200. The broker found a
person who proposed to purchase the property,
but the sale was not affected. Held: That the
broker was not entitled to compensation. (Walker
vs. Tirrel, 3 Am. Rep., 352.)
It is clear from the foregoing authorities that,
although the present plaintiff could probably have
effected the sale of the defendant's factory had
not the defendant sold it to someone else, he is
not entitled to the commissions agreed upon
because he had no intervention whatever in, and
much sale in question. It must be borne in mind
that no definite period was fixed by the defendant
within which the plaintiff might effect the sale of
its factory. Nor was the plaintiff given by the
defendant the exclusive agency of such sale.
Therefore, the plaintiff cannot complaint of the
defendant's conduct in selling the property
through another agent before the plaintiff's efforts
were crowned with success. "One who has
employed a broker can himself sell the property to
a purchaser whom he has procured, without any
aid from the broker." (Hungerford vs. Hicks, 39
Conn., 259; Wylie vs. Marine National Bank, 61
N.Y., 415, 416.)
For the foregoing reasons the judgment appealed
from is hereby revoked and the defendant is
hereby absolved from all liability under the
plaintiff's complaint, with costs in both instances

against the plaintiff. So ordered.

Hahn v. CA
This is a petition for review of the decision 1 of the
Court of Appeals dismissing a complaint for
specific performance which petitioner had filed
against private respondent on the ground that the
Regional Trial Court of Quezon City did not acquire
jurisdiction over private respondent, a nonresident
foreign corporation, and of the appellate court's
order
denying
petitioner's
motion
for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing
business under the name and style "Hahn-Manila."
On the other hand, private respondent Bayerische
Motoren Werke Aktiengesellschaft (BMW) is a
nonresident foreign corporation existing under the
laws of the former Federal Republic of Germany,
with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of
private respondent a "Deed of Assignment with
Special Power of Attorney," which reads in full as
follows:
WHEREAS, the ASSIGNOR is the present
owner and holder of the BMW trademark
and device in the Philippines which
ASSIGNOR uses and has been using on the
products manufactured by ASSIGNEE, and
for which ASSIGNOR is the authorized
exclusive Dealer of the ASSIGNEE in the
Philippines, the same being evidenced by
certificate of registration issued by the
Director of Patents on 12 December 1963
and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to
transfer and consequently record said
transfer of the said BMW trademark and
device in favor of the ASSIGNEE herein
with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing
and in consideration of the stipulations
hereunder stated, the ASSIGNOR hereby
affirms the said assignment and transfer in
favor of the ASSIGNEE under the following
terms and conditions:
1. The ASSIGNEE shall take appropriate
steps against any user other than
ASSIGNOR or infringer of the BMW
trademark in the Philippines; for such

purpose, the ASSIGNOR shall inform the

ASSIGNEE immediately of any such use or
infringement of the said trademark which
comes to his knowledge and upon such
information
the
ASSIGNOR
shall
automatically act as Attorney-In-Fact of the
ASSIGNEE for such case, with full power,
authority and responsibility to prosecute
unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and
for purposes hereof the ASSIGNOR is
hereby
named
and
constituted
as
ASSIGNEE's Attorney-In-Fact, but any such
suit without ASSIGNEE's consent will
exclusively be the responsibility and for the
account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE
shall continue business relations as has
been usual in the past without a formal
contract, and for that purpose, the
dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program
with the only limitation that, for the
present, in view of ASSIGNEE's limited
production, the latter shall not be able to
supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d]
business relations as has been usual in the past
without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and
the president of Columbia Motors Corporation
(CMC), Jose Alvarez, petitioner was informed that
BMW was arranging to grant the exclusive
dealership of BMW cars and products to CMC,
which had expressed interest in acquiring the
same. On February 24, 1993, petitioner received
confirmation of the information from BMW which,
in a letter, expressed dissatisfaction with various
aspects of petitioner's business, mentioning
among other things, decline in sales, deteriorating
services,
and
inadequate
showroom
and
warehouse facilities, and petitioner's alleged
failure to comply with the standards for an
exclusive
BMW
dealer. 2 Nonetheless,
BMW
expressed willingness to continue business
relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it
said, if this was not acceptable to petitioner, BMW
would have no alternative but to terminate
petitioner's exclusive dealership effective June 30,
1993.
Petitioner protested, claiming that the termination
of his exclusive dealership would be a breach of
the Deed of Assignment. 3 Hahn insisted that as
long as the assignment of its trademark and

device subsisted, he remained BMW's exclusive

dealer in the Philippines because the assignment
was made in consideration of the exclusive
dealership. In the same letter petitioner explained
that the decline in sales was due to lower prices
offered for BMW cars in the United States and the
fact that few customers returned for repairs and
servicing because of the durability of BMW parts
and the efficiency of petitioner's service.
Because of Hahn's insistence on the former
business relation, BMW withdrew on March 26,
1993 its offer of a "standard importer contract"
and terminated the exclusive dealer relationship
effective June 30, 1993. 4 At a conference of BMW
Regional Importers held on April 26, 1993 in
Singapore, Hahn was surprised to find Alvarez
among those invited from the Asian region. On
April 29, 1993, BMW proposed that Hahn and CMC
jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May
14, 1993, he filed a complaint for specific
performance and damages against BMW to
compel it to continue the exclusive dealership.
Later he filed an amended complaint to include an
application for temporary restraining order and for
writs of preliminary, mandatory and prohibitory
injunction to enjoin BMW from terminating his
exclusive dealership. Hahn's amended complaint
alleged in pertinent parts:
2. Defendant [BMW] is a foreign
corporation
doing
business
in
the
Philippines with principal offices at Munich,
Germany. It may be served with summons
and other court processes through the
Secretary of the Department of Trade and
Industry of the Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in
favor of defendant BMW a Deed of
Assignment with Special Power of Attorney
covering
the
trademark
and
in
consideration thereof, under its first
whereas
clause,
Plaintiff
was
duly
acknowledged as the "exclusive Dealer of
the Assignee in the Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW &
DEVICE" was first used by the Plaintiff in
the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and
without any monetary contribution from

defendant
BMW,
established
BMW's
goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff has
invested a lot of money and resources in
order to single-handedly compete against
other motorcycle and car companies. . . .
Moreover, Plaintiff has built buildings and
other infrastructures such as service
centers and showrooms to maintain and
promote the car and products of defendant
BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993,
defendant BMW advised Plaintiff that it was
willing to maintain with Plaintiff a
relationship but only "on the basis of a
standard BMW importer contract as
adjusted to reflect the particular situation
in the Philippines" subject to certain
conditions, otherwise, defendant BMW
would
terminate
Plaintiffs
exclusive
dealership and any relationship for cause
effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are
in breach of the assignment agreement
between itself and plaintiff since the
consideration for the assignment of the
BMW trademark is the continuance of the
exclusive dealership agreement. It thus,
follows that the exclusive dealership should
continue for so long as defendant BMW
enjoys the use and ownership of the
trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-9315933 and raffled to Branch 104 of the Quezon
City Regional Trial Court, which on June 14, 1993
issued a temporary restraining order. Summons
and copies of the complaint and amended
complaint were thereafter served on the private
respondent through the Department of Trade and
Industry, pursuant to Rule 14, 14 of the Rules of
Court. The order, summons and copies of the
complaint and amended complaint were later sent
by the DTI to BMW via registered mail on June 15,
1993 5 and received by the latter on June 24,
1993.
On June 17, 1993, without proof of service on
BMW, the hearing on the application for the writ of
preliminary injunction proceeded ex parte, with
petitioner Hahn testifying. On June 30, 1993, the
trial court issued an order granting the writ of

preliminary injunction upon the filing of a bond of

P100,000.00. On July 13, 1993, following the
posting of the required bond, a writ of preliminary
injunction was issued.
On July 1, 1993, BMW moved to dismiss the case,
contending that the trial court did not acquire
jurisdiction over it through the service of
summons on the Department of Trade and
Industry, because it (BMW) was a foreign
corporation and it was not doing business in the
Philippines. It contended that the execution of the
Deed of Assignment was an isolated transaction;
that Hahn was not its agent because the latter
undertook to assemble and sell BMW cars and
products without the participation of BMW and
sold other products; and that Hahn was an
indentor or middleman transacting business in his
own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He
argued that BMW was doing business in the
Philippines through him as its agent, as shown by
the fact that BMW invoices and order forms were
used to document his transactions; that he gave
warranties as exclusive BMW dealer; that BMW
officials periodically inspected standards of
service rendered by him; and that he was
described in service booklets and international
publications of BMW as a "BMW Importer" or
"BMW Trading Company" in the Philippines.
The trial court 6 deferred resolution of the motion
to dismiss until after trial on the merits for the
reason that the grounds advanced by BMW in its
motion did not seem to be indubitable.
Without
seeking
reconsideration
of
the
aforementioned order, BMW filed a petition
for certiorari with the Court of Appeals alleging
that:
I. THE RESPONDENT JUDGE ACTED WITH
UNDUE
HASTE
OR
OTHERWISE
INJUDICIOUSLY IN PROCEEDINGS LEADING
TOWARD THE ISSUANCE OF THE WRIT OF
PRELIMINARY
INJUNCTION,
AND
IN
PRESCRIBING THE TERMS FOR THE
ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY
ERRED IN DEFERRING RESOLUTION OF THE
MOTION TO DISMISS ON THE GROUND OF
LACK OF JURISDICTION, AND THEREBY
FAILING TO IMMEDIATELY DISMISS THE
CASE A QUO.

BMW asked for the immediate issuance of a

temporary restraining order and, after hearing, for
a writ of preliminary injunction, to enjoin the trial
court from proceeding further in Civil Case No. Q93-15933. Private respondent pointed out that,
unless the trial court's order was set aside, it
would be forced to submit to the jurisdiction of the
court by filing its answer or to accept judgment in
default, when the very question was whether the
court had jurisdiction over it.

Consequently, the Court of Appeals dismissed

petitioner's complaint against BMW.

The Court of Appeals enjoined the trial court from

hearing petitioner's complaint. On December 20,
1993, it rendered judgment finding the trial court
guilty of grave abuse of discretion in deferring
resolution of the motion to dismiss. It stated:

Petitioner's appeal is well taken. Rule 14, 14

provides:

Going by the pleadings already filed with

the respondent court before it came out
with its questioned order of July 26, 1993,
we rule and so hold that petitioner's (BMW)
motion to dismiss could be resolved then
and there, and that the respondent judge's
deferment of his action thereon until after
trial on the merit constitutes, to our mind,
grave abuse of discretion.
xxx xxx xxx
. . . [T]here is not much appreciable
disagreement as regards the factual
matters relating to the motion to dismiss.
What truly divide (sic) the parties and to
which they greatly differ is the legal
conclusions they respectively draw from
such facts, (sic) with Hahn maintaining that
on the basis thereof, BMW is doing
business in the Philippines while the latter
asserts that it is not.
Then, after stating that any ruling which the trial
court might make on the motion to dismiss would
anyway be elevated to it on appeal, the Court of
Appeals itself resolved the motion. It ruled that
BMW was not doing business in the country and,
therefore, jurisdiction over it could not be acquired
through service of summons on the DTI pursuant
to Rule 14, 14. 'The court upheld private
respondent's contention that Hahn acted in his
own name and for his own account and
independently of BMW, based on Alfred Hahn's
allegations that he had invested his own money
and resources in establishing BMW's goodwill in
the Philippines and on BMW's claim that Hahn sold
products other than those of BMW. It held that
petitioner was a mere indentor or broker and not
an agent through whom private respondent BMW
transacted
business
in
the
Philippines.

Hence, this appeal. Petitioner contends that the

Court of Appeals erred (1) in finding that the trial
court gravely abused its discretion in deferring
action on the motion to dismiss and (2) in finding
that private respondent BMW is not doing
business in the Philippines and, for this reason,
dismissing petitioner's case.

14.
Service
upon
private
foreign
corporations. If the defendant is a
foreign corporation, or a nonresident joint
stock company or association, doing
business in the Philippines, service may be
made on its resident agent designated in
accordance with law for that purpose, or, if
there be no such agent, on the government
official designated by law to that effect, or
on any of its officers or agents within the
Philippines. (Emphasis added).
What acts are considered "doing business in the
Philippines" are enumerated in 3(d) of the
Foreign Investments Act of 1991 (R.A. No. 7042)
as follows: 7
d) the phrase "doing business" shall
include soliciting orders, service contracts,
opening offices, whether called "liaison"
offices
or
branches; appointing
representatives or distributors domiciled in
the Philippines or who in any calendar year
stay in the country for a period or periods
totalling one hundred eighty (180) days or
more; participating in the management,
supervision or control of any domestic
business, firm, entity or corporation in the
Philippines; and any other act or acts that
imply a continuity of commercial dealings
or arrangements, and contemplate to that
extent the performance of acts or works,
or the exercise of some of the functions
normally incident to, and in progressive
prosecution of, commercial gain or of the
purpose and object of the business
organization: Provided, however, That the
phrase "doing business" shall not be
deemed to include mere investment as a
shareholder by a foreign entity in domestic
corporations
duly
registered
to
do
business, and/or the exercise of rights as
such investor; nor having a nominee
director or officer to represent its interests

in such corporation; nor appointing a

representative or distributor domiciled in
the Philippines which transacts business in
its own name and for its own account.
(Emphasis supplied)
Thus,
the
phrase
includes
"appointing
representatives or distributors in the Philippines"
but not when the representative or distributor
"transacts business in its name and for its own
account." In addition, 1(f)(1) of the Rules and
Regulations implementing (IRR) the Omnibus
Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or
combination of acts, enumerated in Article
44 of the Code. In particular, "doing
business" includes:
(1) . . . A foreign firm which does business
through middlemen acting in their own
names, such as indentors, commercial
brokers or commission merchants, shall not
be deemed doing business in the
Philippines. But such indentors, commercial
brokers or commission merchants shall be
the ones deemed to be doing business in
the Philippines.
The question is whether petitioner Alfred Hahn is
the agent or distributor in the Philippines of
private respondent BMW. If he is, BMW may be
considered doing business in the Philippines and
the trial court acquired jurisdiction over it (BMW)
by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if
Hahn is not the agent of BMW but an independent
dealer, albeit of BMW cars and products, BMW, a
foreign corporation, is not considered doing
business in the Philippines within the meaning of
the Foreign Investments Act of 1991 and the IRR,
and the trial court did not acquire jurisdiction over
it (BMW).
The Court of Appeals held that petitioner Alfred
Hahn acted in his own name and for his own
account and not as agent or distributor in the
Philippines of BMW on the ground that "he alone
had contacts with individuals or entities interested
in acquiring BMW vehicles. Independence
characterizes Hahn's undertakings, for which
reason he is to be considered, under governing
statutes, as doing business." (p. 13) In support of
this conclusion, the appellate court cited the
following
allegations
in
Hahn's
amended
complaint:

8. From the time the trademark "BMW &

DEVICE" was first used by the Plaintiff in
the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and
without any monetary contributions from
defendant
BMW,
established
BMW's
goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff
invested a lot of money and resources in
order to single-handedly compete against
other motorcycle and car companies. . . .
Moreover, Plaintiff has built buildings and
other infrastructures such as service
centers and showrooms to maintain and
promote the car and products of defendant
BMW.
As the above quoted allegations of the amended
complaint show, however, there is nothing to
support the appellate court's finding that Hahn
solicited orders alone and for his own account and
without "interference from, let alone direction of,
BMW." (p. 13) To the contrary, Hahn claimed he
took orders for BMW cars and transmitted them to
BMW. Upon receipt of the orders, BMW fixed the
downpayment and pricing charges, notified Hahn
of the scheduled production month for the orders,
and reconfirmed the orders by signing and
returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW.
Title to cars purchased passed directly to the
buyer and Hahn never paid for the purchase price
of BMW cars sold in the Philippines. Hahn was
credited with a commission equal to 14% of the
purchase price upon the invoicing of a vehicle
order by BMW. Upon confirmation in writing that
the vehicles had been registered in the Philippines
and serviced by him, Hahn received an additional
3% of the full purchase price. Hahn performed
after-sale services, including warranty services, for
which he received reimbursement from BMW. All
orders were on invoices and forms of BMW. 8
These allegations were substantially admitted by
BMW which, in its petition for certiorari before the
Court of Appeals, stated: 9
9.4. As soon as the vehicles are fully
manufactured and full payment of the
purchase prices are made, the vehicles are
shipped to the Philippines. (The payments
may be made by the purchasers or thirdpersons or even by Hahn.) The bills of
lading are made up in the name of the
purchasers, but Hahn-Manila is therein
indicated as the person to be notified.

9.5. It is Hahn who picks up the vehicles

from the Philippine ports, for purposes of
conducting
pre-delivery
inspections.
Thereafter, he delivers the vehicles to the
purchasers.
9.6. As soon as BMW invoices the vehicle
ordered, Hahn is credited with a
commission of fourteen percent (14%) of
the full purchase price thereof, and as soon
as he confirms in writing that the vehicles
have been registered in the Philippines and
have been serviced by him, he will receive
an additional three percent (3%) of the full
purchase prices as commission.
Contrary to the appellate court's conclusion, this
arrangement shows an agency. An agent receives
a commission upon the successful conclusion of a
sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller
together, even if no sale is eventually made.
As to the service centers and showrooms which he
said he had put up at his own expense, Hahn said
that he had to follow BMW specifications as
exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected
the service centers to see to it that BMW
standards were maintained. Indeed, it would seem
from BMW's letter to Hahn that it was for Hahn's
alleged failure to maintain BMW standards that
BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put
up these service centers and showrooms does not
necessarily prove that he is not an agent of BMW.
For as already noted, there are facts in the record
which suggest that BMW exercised control over
Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce
compliance
with
BMW
standards
and
10
specifications. For example, in its letter to Hahn
dated February 23, 1996, BMW stated:
In the last years we have pointed out to
you in several discussions and letters that
we have to tackle the Philippine market
more professionally and that we are
through your present activities not
adequately prepared to cope with the
forthcoming challenges. 11
In effect, BMW was holding Hahn accountable to it
under the 1967 Agreement.
This case fits into the mould of Communications
Materials, Inc. v. Court of Appeals, 12 in which the

foreign corporation entered into a "Representative

Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter
was appointed "exclusive representative" in the
Philippines for a stipulated commission. Pursuant
to these contracts, the domestic corporation sold
products exported by the foreign corporation and
put up a service center for the products sold
locally. This Court held that these acts constituted
doing
business
in
the
Philippines.
The
arrangement
showed
that
the
foreign
corporation's purpose was to penetrate the
Philippine market and establish its presence in the
Philippines.
In addition, BMW held out private respondent
Hahn as its exclusive distributor in the Philippines,
even as it announced in the Asian region that
Hahn was the "official BMW agent" in the
Philippines. 13
The Court of Appeals also found that petitioner
Alfred Hahn dealt in other products, and not
exclusively in BMW products, and, on this basis,
ruled that Hahn was not an agent of BMW. (p. 14)
This finding is based entirely on allegations of
BMW in its motion to dismiss filed in the trial court
and in its petition for certiorari before the Court of
Appeals. 14 But this allegation was denied by
Hahn 15 and therefore the Court of Appeals should
not have cited it as if it were the fact.
Indeed this is not the only factual issue raised,
which should have indicated to the Court of
Appeals the necessity of affirming the trial court's
order deferring resolution of BMW's motion to
dismiss. Petitioner alleged that whether or not he
is considered an agent of BMW, the fact is that
BMW did business in the Philippines because it
sold cars directly to Philippine buyers. 16 This was
denied by BMW, which claimed that Hahn was not
its agent and that, while it was true that it had
sold cars to Philippine buyers, this was done
without solicitation on its part. 17
It is not true then that the question whether BMW
is doing business could have been resolved simply
by considering the parties' pleadings. There are
genuine issues of facts which can only be
determined on the basis of evidence duly
presented. BMW cannot short circuit the process
on the plea that to compel it to go to trial would
be to deny its right not to submit to the
jurisdiction of the trial court which precisely it
denies. Rule 16, 3 authorizes courts to defer the
resolution of a motion to dismiss until after the
trial if the ground on which the motion is based
does not appear to be indubitable. Here the record

of the case bristles with factual issues and it is not

at all clear whether some allegations correspond
to the proof.
Anyway, private respondent need not apprehend
that by responding to the summons it would be
waiving its objection to the trial court's
jurisdiction. It is now settled that, for purposes of
having summons served on a foreign corporation
in accordance with Rule 14, 14, it is sufficient
that it be alleged in the complaint that the foreign
corporation is doing business in the Philippines.
The court need not go beyond the allegations of
the complaint in order to determine whether it has
Jurisdiction. 18 A determination that the foreign
corporation is doing business is only tentative and
is made only for the purpose of enabling the local
court to acquire jurisdiction over the foreign
corporation through service of summons pursuant
to Rule 14, 14. Such determination does not
foreclose a contrary finding should evidence later
show that it is not transacting business in the
country. As this Court has explained:
This is not to say, however, that the
petitioner's
right
to
question
the
jurisdiction of the court over its person is
now to be deemed a foreclosed matter. If it
is true, as Signetics claims, that its only
involvement in the Philippines was through
a passive investment in Sigfil, which it
even later disposed of, and that TEAM
Pacific is not its agent, then it cannot really
be said to be doing business in the
Philippines. It is a defense, however, that
requires
the
contravention
of
the
allegations of the complaint, as well as a
full ventilation, in effect, of the main merits
of the case, which should not thus be
within the province of a mere motion to
dismiss. So, also, the issue posed by the
petitioner as to whether a foreign
corporation which has done business in the
country, but which has ceased to do
business at the time of the filing of a
complaint, can still be made to answer for
a cause of action which accrued while it
was doing business, is another matter that
would yet have to await the reception and
admission of evidence. Since these points
have seasonably been raised by the
petitioner, there should be no real cause
for what may understandably be its
apprehension, i.e., that by its participation
during the trial on the merits, it may,
absent an invocation of separate or
independent reliefs of its own, be

considered to have voluntarily submitted

itself to the court's jurisdiction. 19
Far from committing an abuse of discretion, the
trial court properly deferred resolution of the
motion to dismiss and thus avoided prematurely
deciding a question which requires a factual basis,
with the same result if it had denied the motion
and conditionally assumed jurisdiction. It is the
Court of Appeals which, by ruling that BMW is not
doing business on the basis merely of uncertain
allegations in the pleadings, disposed of the whole
case with finality and thereby deprived petitioner
of his right to be heard on his cause of action. Nor
was there justification for nullifying the writ of
preliminary injunction issued by the trial court.
Although the injunction was issued ex parte, the
fact is that BMW was subsequently heard on its
defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals
is REVERSED and the case is REMANDED to the
trial court for further proceedings.
SO ORDERED.

Tan v. Gullas

This is a petition for review seeking to set

aside the decision[1] of the Court of Appeals[2] in
CA-G.R. CV No. 46539, which reversed and set
aside the decision[3] of the Regional Trial Court of
Cebu City, Branch 22 in Civil Case No. CEB-12740.
The records show that private respondents,
Spouses Eduardo R. Gullas and Norma S. Gullas,
were the registered owners of a parcel of land in
the Municipality of Minglanilla, Province of Cebu,
measuring 104,114 sq. m., with Transfer
Certificate of Title No. 31465. [4] On June 29, 1992,
they
executed
a
special
power
of
attorney[5] authorizing petitioners Manuel B. Tan, a
licensed real estate broker,[6] and his associates
Gregg M. Tecson and Alexander Saldaa, to
negotiate for the sale of the land at Five Hundred
Fifty Pesos (P550.00) per square meter, at a
commission of 3% of the gross price. The power of
attorney was non-exclusive and effective for one
month from June 29, 1992.[7]
On the same date, petitioner Tan contacted
Engineer Edsel Ledesma, construction manager of
the Sisters of Mary of Banneaux, Inc. (hereafter,
Sisters of Mary), a religious organization
interested in acquiring a property in the
Minglanilla area.
In the morning of July 1, 1992, petitioner Tan
visited the property with Engineer Ledesma.
Thereafter, the two men accompanied Sisters
Michaela Kim and Azucena Gaviola, representing
the Sisters of Mary, to see private respondent
Eduardo Gullas in his office at the University of
Visayas. The Sisters, who had already seen and
inspected the land, found the same suitable for
their purpose and expressed their desire to buy it.
[8]
However, they requested that the selling price
be reduced to Five Hundred Thirty Pesos (P530.00)
per square meter instead of Five Hundred Fifty
Pesos (P550.00) per square meter. Private
respondent
Eduardo
Gullas
referred
the
prospective buyers to his wife.
It was the first time that the buyers came to
know that private respondent Eduardo Gullas was
the owner of the property. On July 3, 1992, private
respondents agreed to sell the property to the
Sisters of Mary, and subsequently executed a
special power of attorney[9] in favor of Eufemia
Caete, giving her the special authority to sell,
transfer and convey the land at a fixed price of
Two Hundred Pesos (P200.00) per square meter.

Hundred Twenty Two Thousand Eight Hundred

Pesos (P20,822,800.00), or at the rate of Two
Hundred Pesos (P200.00) per square meter. [10] The
buyers subsequently paid the corresponding
taxes.[11] Thereafter, the Register of Deeds of Cebu
Province issued TCT No. 75981 in the name of the
Sisters of Mary of Banneaux, Inc.[12]
Earlier, on July 3, 1992, in the afternoon,
petitioners went to see private respondent
Eduardo Gullas to claim their commission, but the
latter told them that he and his wife have already
agreed to sell the property to the Sisters of Mary.
Private respondents refused to pay the brokers fee
and alleged that another group of agents was
responsible for the sale of land to the Sisters of
Mary.
On August 28, 1992, petitioners filed a
complaint[13] against the defendants for recovery
of their brokers fee in the sum of One Million Six
Hundred Fifty Five Thousand Four Hundred Twelve
and 60/100 Pesos (P1,655,412.60), as well as
moral and exemplary damages and attorneys
fees. They alleged that they were the efficient
procuring cause in bringing about the sale of the
property to the Sisters of Mary, but that their
efforts in consummating the sale were frustrated
by the private respondents who, in evident bad
faith, malice and in order to evade payment of
brokers fee, dealt directly with the buyer whom
petitioners introduced to them. They further
pointed out that the deed of sale was undervalued
obviously to evade payment of the correct amount
of capital gains tax, documentary stamps and
other internal revenue taxes.
In
their
answer,
private
respondents
countered that, contrary to petitioners claim, they
were not the efficient procuring cause in bringing
about the consummation of the sale because
another broker, Roberto Pacana, introduced the
property to the Sisters of Mary ahead of the
petitioners.[14] Private respondents maintained
that when petitioners introduced the buyers to
private respondent Eduardo Gullas, the former
were already decided in buying the property
through Pacana, who had been paid his
commission. Private respondent Eduardo Gullas
admitted that petitioners were in his office on July
3, 1992, but only to ask for the reimbursement of
their cellular phone expenses.
In their reply and answer to counterclaim,
petitioners alleged that although the Sisters of
Mary knew that the subject land was for sale
through various agents, it was petitioners who
introduced them to the owners thereof.
[15]

On July 17, 1992, attorney-in-fact Eufemia

Caete executed a deed of sale in favor of the
Sisters of Mary for the price of Twenty Million Eight

After trial, the lower court rendered judgment

in favor of petitioners, the dispositive portion of
which reads:
WHEREFORE, UPON THE AEGIS OF THE
FOREGOING, judgment is hereby rendered for the
plaintiffs and against the defendants. By virtue
hereof, defendants Eduardo and Norma Gullas are
hereby ordered to pay jointly and severally
plaintiffs Manuel Tan, Gregg Tecson and Alexander
Saldaa;
1) The sum of SIX HUNDRED TWENTY FOUR
THOUSAND AND SIX HUNDRED EIGHTY FOUR
PESOS (P624,684.00) as brokers fee with legal
interest at the rate of 6% per annum from the
date of filing of the complaint; and
2) The sum of FIFTY THOUSAND PESOS
(P50,000.00) as attorneys fees and costs of
litigation.
For lack of merit, defendants counterclaim is
hereby DISMISSED.
IT IS SO ORDERED.[16]
Both parties appealed to the Court of Appeals.
Private respondents argued that the lower court
committed errors of fact and law in holding that it
was petitioners efforts which brought about the
sale of the property and disregarding the previous
negotiations between private respondent Norma
Gullas and the Sisters of Mary and Pacana. They
further alleged that the lower court had no basis
for awarding brokers fee, attorneys fees and the
costs of litigation to petitioners.[17]
Petitioners, for their part, assailed the lower
courts basis of the award of brokers fee given to
them. They contended that their 3% commission
for the sale of the property should be based on
the price of P55,180,420.00, or at P530.00 per
square meter as agreed upon and not on the
alleged actual selling price of P20,822,800.00 or
at P200.00 per square meter, since the actual
purchase price was undervalued for taxation
purposes. They also claimed that the lower court
erred in not awarding moral and exemplary
damages in spite of its finding of bad faith; and
that the amount of P50,000.00 as attorneys fees
awarded to them is insufficient. Finally, petitioners
argued that the legal interest imposed on their
claim should have been pegged at 12% per
annum instead of the 6% fixed by the court. [18]

The Court of Appeals reversed and set aside

the lower courts decision and rendered another
judgment dismissing the complaint.[19]
Hence, this appeal.
Petitioners
resolution:

raise

following

issues

for

I.
THE APPELLATE COURT GROSSLY ERRED IN THEIR
FINDING THAT THE PETITIONERS ARE NOT
ENTITLED TO THE BROKERAGE COMMISSION.
II.
IN DISMISSING THE COMPLAINT, THE APPELLATE
COURT HAS DEPRIVED THE PETITIONERS OF
MORAL AND EXEMPLARY DAMAGES, ATTORNEYS
FEES AND INTEREST IN THE FOREBEARANCE OF
MONEY.
The petition is impressed with merit.
The records show that petitioner Manuel B.
Tan is a licensed real estate broker, and
petitioners Gregg M. Tecson and Alexander Saldaa
are his associates. In Schmid and Oberly v. RJL
Martinez Fishing Corporation,[20] we defined a
broker as one who is engaged, for others, on a
commission, negotiating contracts relative to
property with the custody of which he has no
concern; the negotiator between other parties,
never acting in his own name but in the name of
those who employed him. x x x a broker is one
whose occupation is to bring the parties
together, in matters of trade, commerce or
navigation. (Emphasis supplied)
During the trial, it was established that
petitioners, as brokers, were authorized by private
respondents to negotiate for the sale of their land
within a period of one month reckoned from June
29, 1992. The authority given to petitioners was
non-exclusive,
which
meant
that
private
respondents were not precluded from granting the
same authority to other agents with respect to the
sale of the same property. In fact, private
respondent authorized another agent in the
person of Mr. Bobby Pacana to sell the same
property. There was nothing illegal or amiss in this
arrangement, per
se, considering
the
nonexclusivity of petitioners authority to sell. The
problem arose when it eventually turned out that
these agents were entertaining one and the same
buyer, the Sisters of Mary.

As correctly observed by the trial court, the

argument of the private respondents that Pacana
was the one entitled to the stipulated 3%
commission is untenable, considering that it was
the petitioners who were responsible for the
introduction of the representatives of the Sisters
of Mary to private respondent Eduardo Gullas.
Private respondents, however, maintain that they
were not aware that their respective agents were
negotiating to sell said property to the same
buyer.

Court of Appeals and Bayerische Motoren Werke

Aktiengesellschaft
(BMW)[22] we
ruled
that,
An agent receives a commission upon the
successful conclusion of a sale. On the other hand,
a broker earns his pay merely by bringing the
buyer and the seller together, even if no sale is
eventually made. (Underscoring ours). Clearly,
therefore, petitioners, as brokers, should be
entitled to the commission whether or not the sale
of the property subject matter of the contract was
concluded through their efforts.

Private respondents failed to prove their

contention that Pacana began negotiations with
private respondent Norma Gullas way ahead of
petitioners. They failed to present witnesses to
substantiate this claim. It is curious that Mrs.
Gullas herself was not presented in court to testify
about her dealings with Pacana. Neither was Atty.
Nachura who was supposedly the one actively
negotiating on behalf of the Sisters of Mary, ever
presented in court.

Having ruled that petitioners are entitled to

the brokers commission, we should now resolve
how much commission are petitioners entitled to?

Private respondents contention that Pacana

was the one responsible for the sale of the land is
also unsubstantiated. There was nothing on record
which established the existence of a previous
negotiation among Pacana, Mrs. Gullas and the
Sisters of Mary. The only piece of evidence that
the private respondents were able to present is an
undated and unnotarized Special Power of
Attorney in favor of Pacana. While the lack of a
date and an oath do not necessarily render said
Special Power of Attorney invalid, it should be
borne in mind that the contract involves a
considerable amount of money. Hence, it is
inconsistent with sound business practice that the
authority to sell is contained in an undated and
unnotarized Special Power of Attorney. Petitioners,
on the other hand, were given the written
authority to sell by the private respondents.
The trial courts evaluation of the witnesses is
accorded great respect and finality in the absence
of any indication that it overlooked certain facts or
circumstances of weight and influence, which if
reconsidered, would alter the result of the case.[21]
Indeed, it is readily apparent that private
respondents are trying to evade payment of the
commission which rightfully belong to petitioners
as brokers with respect to the sale. There was no
dispute as to the role that petitioners played in
the transaction. At the very least, petitioners set
the sale in motion. They were not able to
participate in its consummation only because they
were prevented from doing so by the acts of the
private respondents. In the case of Alfred Hahn v.

Following the stipulation in the Special Power

of Attorney, petitioners are entitled to 3%
commission for the sale of the land in
question. Petitioners
maintain
that
their
commission should be based on the price at which
the land was offered for sale, i.e., P530.00 per
square meter. However, the actual purchase price
for which the land was sold was only P200.00 per
square meter. Therefore, equity considerations
dictate that petitioners commission must be
based on this price. To rule otherwise would
constitute unjust enrichment on the part of
petitioners as brokers.
In the matter of attorneys fees and expenses
of litigation, we affirm the amount of P50,000.00
awarded by the trial court to the petitioners.
WHEREFORE, in view of the foregoing, the
petition is GRANTED. The May 29, 2000 decision of
the Court of Appeals is REVERSED and SET
ASIDE. The decision of the Regional Trial Court of
Cebu City, Branch 22, in Civil Case No. CEB-12740
ordering private respondents Eduardo Gullas and
Norma S. Gullas to pay jointly and severally
petitioners Manuel B. Tan, Gregg Tecson and
Alexander Saldaa the sum of Six Hundred TwentyFour Thousand and Six Hundred Eighty-Four Pesos
(P624,684.00) as brokers fee with legal interest at
the rate of 6% per annum from the filing of the
complaint; and the sum of Fifty Thousand Pesos
(P50,000.00) as attorneys fees and costs of
litigation, is REINSTATED.

Phil. Health-Care Providers v. Estrada

This petition for review on certiorari assails the
Decision[1] dated June 16, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 66040 which
affirmed in toto the Decision[2]dated October 8,
1999 of the Regional Trial Court (RTC), Branch 135,
of Makati City in an action for breach of contract
and

damages

filed

by

respondent

Carmela

Estrada, sole proprietor of Cara Health Services,

against

Philippine

Health-Care

Providers,

Inc.

(Maxicare).
The facts, as found by the CA and adopted by
Maxicare in its petition, follow:
[Maxicare] is a domestic corporation
engaged in selling health insurance
plans whose Chairman Dr. Roberto
K. Macasaet, Chief Operating Officer
Virgilio
del
Valle,
and
Sales/Marketing Manager Josephine
Cabrera
were
impleaded
as
defendants-appellants.
On September 15, 1990, [Maxicare]
allegedly engaged the services of
Carmela Estrada who was doing
business under the name of CARA

HEALTH [SERVICES] to promote and

sell the prepaid group practice
health care delivery program called
MAXICARE Plan with the position of
Independent
Account
Executive. [Maxicare]
formally
appointed [Estrada] as its General
Agent, evidenced by a letteragreement
dated February
16,
1991. The
letter
agreement
provided
for
plaintiff-appellees
[Estradas] compensation in the
form of commission, viz.:
Commission
In consideration of
the performance of
your functions and
duties as specified in
this letter-agreement,
[Maxicare] shall pay
you a commission
equivalent to 15 to
18% from individual,
family,
group
accounts; 2.5 to 10%
on tailored fit plans;
and 10% on standard
plans
of
commissionable
amount on corporate
accounts
from
all
membership
dues
collected
and
remitted by you to
[Maxicare].
[Maxicare] alleged that it followed a
franchising system in dealing with
its agents whereby an agent had to
first
secure
permission
from
[Maxicare] to list a prospective
company as client.[Estrada] alleged
that it did apply with [Maxicare] for
the MERALCO account and other
accounts, and in fact, its franchise
to
solicit
corporate
accounts,
MERALCO account included, was
renewed on February 11, 1991.
Plaintiff-appellee
[Estrada]
submitted proposals and made
representations to the officers of
MERALCO regarding the MAXICARE
Plan but when MERALCO decided to
subscribe to the MAXICARE Plan,
[Maxicare] directly negotiated with
MERALCO regarding the terms and
conditions of the agreement and left
plaintiff-appellee [Estrada] out of
the discussions on the terms and
conditions.
On November 28, 1991, MERALCO
eventually
subscribed
to
the
MAXICARE Plan and signed a

Service Agreement directly with

[Maxicare] for medical coverage of
its qualified members, i.e.: 1) the
enrolled dependent/s of regular
MERALCO executives; 2) retired
executives and their dependents
who have opted to enroll and/or
continue
their
MAXICARE
membership up to age 65; and 3)
regular MERALCO female executives
(exclusively
for
maternity
benefits). Its duration was for one
(1)
year
from December
1,
1991 to November 30, 1992. The
contract was renewed twice for a
term of three (3) years each, the
first
started
on December
1,
1992 while the second took effect
on December 1, 1995.
The premium amounts paid by
MERALCO
to
[Maxicare]
were
alleged to be the following:
a) P215,788.00 in December 1991;
b) P3,450,564.00
in
1992;
c) P4,223,710.00
in
1993;
d) P4,782,873.00
in
1994;
e) P5,102,108.00
in
1995;
and P2,394,292.00 in May 1996. As
of May 1996, the total amount of
premium paid by MERALCO to
[Maxicare] was P20,169,335.00.
On March
24,
1992,
plaintiffappellee [Estrada], through counsel,
demanded from [Maxicare] that it
be paid commissions for the
MERALCO account and nine (9)
other accounts. In reply, [Maxicare],
through counsel, denied [Estradas]
claims for commission for the
MERALCO and other accounts
because
[Maxicare]
directly
negotiated with MERALCO and the
other accounts(,) and that no agent
was given the go signal to intervene
in the negotiations for the terms
and conditions and the signing of
the
service
agreement
with
MERALCO and the other accounts so
that if ever [Maxicare] was indebted
to
[Estrada],
it
was
only
for P1,555.00
and P43.l2
as
commissions on the accounts of
Overseas Freighters Co. and Mr.
Enrique Acosta, respectively.
[Estrada] filed a complaint on March
18, 1993 against [Maxicare] and its
officers with the Regional Trial Court
(RTC) of Makati City, docketed as
Civil Case No. 93-935, raffled to
Branch 135.
Defendants-appellants
[Maxicare]
and its officers filed their Answer
with Counterclaim on September

13, 1993 and their Amended

Answer
with
Counterclaim
on
September 28, 1993, alleging that:
plaintiff-appellee [Estrada] had no
cause of action; the cause of action,
if any, should be is against
[Maxicare] only and not against its
officers;
CARA
HEALTHs
appointment as agent under the
February 16, 1991 letter-agreement
to promote the MAXICARE Plan was
for a period of one (1) year only;
said agency was not renewed after
the expiration of the one (1) year
period; [Estrada] did not intervene
in the negotiations of the contract
with MERALCO which was directly
negotiated
by
MERALCO
with
[Maxicare]; and [Estradas] alleged
other clients/accounts were not
accredited
with
[Maxicare] as
required, since the agency contract
on the MAXICARE health plans were
not
renewed. By
way
of
counterclaim,
defendantsappellants
[Maxicare]
and
its
officers
claimed P100,000.00
in
moral damages for each of the
officers of [Maxicare] impleaded as
defendant, P100,000.00
in
exemplary damages, P100,000.00
in attorneys fees, and P10,000.00 in
litigation expenses.[3]

affirmed by the CA, raising the following issues, to

wit:
1. Whether the Court of Appeals
committed serious error in affirming
Estradas
entitlement
to
commissions for the execution of
the service agreement between
Meralco and Maxicare.
2. Corollarily, whether Estrada is
entitled to commissions for the two
(2) consecutive renewals of the
service
agreement
effective
on December
1,
1992[5] and December 1, 1995.[6]

We are in complete accord with the trial and

appellate courts ruling. Estrada is entitled to
commissions for the premiums paid under the
service agreement between Meralco and Maxicare
from 1991 to 1996.
Well-entrenched in jurisprudence is the rule
that factual findings of the trial court, especially
when

affirmed

by

the

appellate

court,

are

accorded the highest degree of respect and are

After trial, the RTC found Maxicare liable for

considered conclusive between the parties. [7] A

breach of contract and ordered it to pay Estrada

review of such findings by this Court is not

actual damages in the amount equivalent to 10%

warranted except upon a showing of highly

of P20,169,335.00, representing her commission

meritorious circumstances, such as: (1) when the

for the total premiums paid by Meralco to

findings of a trial court are grounded entirely on

Maxicare from the year 1991 to 1996, plus legal

speculation, surmises or conjectures; (2) when a

interest computed from the filing of the complaint

lower courts inference from its factual findings is

on March 18, 1993, and attorneys fees in the

manifestly mistaken, absurd or impossible; (3)

amount of P100,000.00.

when there is grave abuse of discretion in the

appreciation of facts; (4) when the findings of the

On appeal, the CA affirmed in toto the RTCs

appellate court go beyond the issues of the case,

decision. In ruling for Estrada, both the trial and

or fail to notice certain relevant facts which, if

appellate

properly

courts

held

that

Estrada

was

the

considered,

will

justify

different

efficient procuring cause in the execution of the

conclusion; (5) when there is a misappreciation of

service agreement between Meralco and Maxicare

facts; (6) when the findings of fact are conclusions

consistent with our ruling in Manotok Brothers,

without mention of the specific evidence on which

Inc. v. Court of Appeals.

[4]

they are based, are premised on the absence of

evidence, or are contradicted by evidence on

Undaunted, Maxicare comes to this Court and

insists on the reversal of the RTC Decision as

record.[8] None of the foregoing exceptions which

would warrant a reversal of the assailed decision

Ruben A. Sapitula on September 5,

1991, to wit:

obtains in this instance.

This is to certify that

Ms. Carmela Estrada
has initiated talks
with
us
since
November 1990 with
regards (sic) to the
HMO requirements of
both our rank and file
employees, managers
and executives, and
that it was favorably
recommended
and
the
same
be
approved
by
the
Meralco Management
Committee.

Maxicare urges us that both the RTC and

CA failed to take into account the stipulations
contained

in

the February

agreement

authorizing

commissions

only

upon

the

19,

1991 letter

payment

satisfaction

of

of
twin

conditions, i.e., collection and contemporaneous

remittance

of

premium

dues

by

Estrada

to

Maxicare. Allegedly, the lower courts disregarded

Estradas admission that the negotiations with
Meralco failed. Thus, the flawed application of the
efficient

procuring

cause

doctrine

enunciated

in Manotok Brothers, Inc. v. Court of Appeals,

[9]

and

the

erroneous

conclusion

upholding

Estradas entitlement to commissions on contracts

completed without her participation.
We are not persuaded.
Contrary to Maxicares assertion, the trial
and the appellate courts carefully considered the
factual backdrop of the case as borne out by the
records. Both courts were one in the conclusion
that Maxicare successfully landed the Meralco
account for the sale of healthcare plans only by
virtue of Estradas involvement and participation in

xxxx
This Court finds that plaintiffappellee [Estradas] efforts were
instrumental in introducing the
Meralco account to [Maxicare] in
regard to the latters Maxicare
health insurance plans. Plaintiffappellee [Estrada] was the efficient
intervening cause in bringing about
the
service
agreement
with
Meralco. As pointed out by the trial
court
in
its October
8,
1999 Decision, to wit:
xxx Had not [Estrada]
introduced Maxicare
Plans to her bosom
friends, Messrs. Lopez
and
Guingona
of
Meralco, PHPI would
still be an anonymity.
xxx[10]

the negotiations. The assailed Decision aptly

states:

Under the foregoing circumstances, we are hard

There is no dispute as to the role
that
plaintiff-appellee
[Estrada]
played in selling [Maxicares] health
insurance plan to Meralco. Plaintiffappellee
[Estradas]
efforts
consisted in being the first to offer
the Maxicare plan to Meralco, using
her connections with some of
Meralco Executives, inviting said
executives to dinner meetings,
making
submissions
and
representations
regarding
the
health plan, sending follow-up
letters, etc.
These efforts were recognized by
Meralco
as
shown
by
the
certification issued by its Manpower
Planning and Research Staff Head

pressed to disturb the findings of the RTC, which

the CA affirmed.
We cannot overemphasize the principle
that in petitions for review on certiorari under
Rules 45 of the Rules of Court, only questions of
law may be put into issue. Questions of fact are
not cognizable by this Court. The finding of
efficient procuring cause by the CA is a question
of fact which we desist from passing upon as it
would entail delving into factual matters on which
such finding was based. To reiterate, the rule is
that factual findings of the trial court, especially

those affirmed by the CA, are conclusive on this

doing so by the acts of Maxicare, its officers, and

Court when supported by the evidence on record.

employees.

[11]

In Tan v. Gullas,[14] we had occasion to

The jettisoning of the petition is inevitable even

define a broker and distinguish it from an agent,

upon a close perusal of the merits of the case.

thus:
[O]ne who is engaged, for others,
on a commission,
negotiating
contracts relative to property with
the custody of which he has no
concern; the negotiator between
the other parties, never acting in his
own name but in the name of those
who employed him. [A] broker is
one whose occupation is to bring
the parties together, in matter of
trade, commerce or navigation.[15]

First. Maxicares contention that Estrada may only

claim commissions from membership dues which
she has collected and remitted to Maxicare as
expressly provided for in the letter-agreement
does not convince us. It is readily apparent that
Maxicare is attempting to evade payment of the
commission which rightfully belongs to Estrada as
the broker who brought the parties together. In
fact,

Maxicares

former

Chairman

Roberto

An agent receives a commission

upon the successful conclusion of a
sale.
On
the
other
hand,
a broker earns his pay merely by
bringing the buyer and the seller
together, even if no sale is
eventually made.[16]

K.

Macasaet testified that Maxicare had been trying

to land the Meralco account for two (2) years prior
to Estradas entry in 1990.[12] Even without that
admission, we note that Meralcos Assistant VicePresident,

Donatila

San

Juan,

in

letter[13] dated January 21, 1992 to then Maxicare

President

Pedro

R.

Sen,

categorically

acknowledged Estradas efforts relative to the sale

of Maxicare health plans to Meralco, thus:
Sometime
in
1989,
Meralco
received a proposal from Philippine
Health-Care
Providers,
Inc.
(Maxicare) through the initiative
and efforts of Ms. Carmela Estrada,
who
introduced
Maxicare
to
Meralco. Prior to this time, we did
not know that Maxicare is a major
health care provider in the country.
We have since negotiated and
signed up with Maxicare to provide
a health maintenance plan for
dependents of Meralco executives,
effective December
1,
1991 to November 30, 1992.

At the very least, Estrada penetrated the Meralco

market, initially closed to Maxicare, and laid the
groundwork for a business relationship. The only
reason Estrada was not able to participate in the
collection and remittance of premium dues to
Maxicare was because she was prevented from

In relation thereto, we have held that the term

procuring cause in describing a brokers activity,
refers to a cause originating a series of events
which, without break in their continuity, result in
the accomplishment of the prime objective of the
employment of the brokerproducing a purchaser
ready, willing and able to buy on the owners
terms.[17] To be regarded as the procuring cause of
a sale as to be entitled to a commission, a brokers
efforts must have been the foundation on which
the
[18]

negotiations

resulting

in

sale

began.

Verily, Estrada was instrumental in the sale of

the Maxicare health plans to Meralco. Without her

intervention,

no

sale

could

have

been

consummated.
Second. Maxicare next contends that Estrada
herself

admitted

that

her

negotiations

with

Meralco failed as shown in Annex F of the

Complaint.

mean not in the

sense in which the
admission is made to
appear. That is the
reason
for
the
modifier such.[21]

The chicanery and disingenuousness of

Maxicares counsel is not lost on this Court. We
observe that this Annex F is, in fact, Maxicares
counsels letter dated April 10, 1992addressed to
Estrada.

The

letter

contains

unilateral

declaration by Maxicare that the efforts initiated

In this case, the letter, although part of

and negotiations undertaken by Estrada failed,

Estradas

such that the service agreement with Meralco was

admission of the statements contained therein,

supposedly directly negotiated by Maxicare. Thus,

especially since the bone of contention relates to

the latter effectively declares that Estrada is not

Estradas entitlement to commissions for the sale

the efficient procuring cause of the sale, and as

of health plans she claims to have brokered. It is

such, is not entitled to commissions.

more than obvious from the entirety of the records

Complaint,

is

not, ipso

facto,

an

that Estrada has unequivocally and consistently

[19]

Our holding in Atillo III v. Court of Appeals,

declared that her involvement as broker is the

ironically the case cited by Maxicare to bolster

proximate cause which consummated the sale

its position that the statement in Annex F

between Meralco and Maxicare.

amounted to an admission, provides a contrary

answer to Maxicares ridiculous contention. We

Moreover, Section 34,[22] Rule 132 of the

intoned therein that in spite of the presence of

Rules of Court requires the purpose for which the

judicial admissions in a partys pleading, the trial

evidence is offered to be specified. Undeniably,

court is still given leeway to consider other

the letter was attached to the Complaint, and

evidence presented.

[20]

We ruled, thus:

As provided for in Section 4 of Rule

129 of the Rules of Court, the
general
rule
that
a
judicial
admission is conclusive upon the
party making it and does not
require proof admits of two
exceptions: 1) when it is shown that
the admission was made through
palpable mistake, and 2) when it is
shown that no such admission was
in fact made. The latter exception
allows
one
to
contradict
an
admission by denying that he made
such an admission.
For instance, if a
party
invokes
an
admission
by
an
adverse party, but
cites the admission
out
of
context,
then the one making
the admission may
show that he made
no such admission, or
that his admission
was taken out of
context.
This
may
interpreted
as

be
to

offered in evidence, to demonstrate Maxicares

bad faith and ill will towards Estrada.[23]
Even a cursory reading of the Complaint
and all the pleadings filed thereafter before the
RTC, CA, and this Court, readily show that Estrada
does

not

concede,

negotiations

at

with

any

Meralco

point,
failed.

that

her

Clearly,

Maxicares assertion that Estrada herself does not

pretend to be the efficient procuring cause in the
execution of the service agreement between
Meralco and Maxicare is baseless and an outright
falsehood.
After muddling the issues and representing
that

Estrada

negotiations

made
with

an

admission

Meralco

failed,

that

her

Maxicares

counsel then proceeds to cite a case which does

not, by any stretch of the imagination, bolster the
flawed contention.

We,

therefore,

ADMONISH

Maxicares

counsel, and, in turn, remind every member of the

Bar that the practice of law carries with it
responsibilities which are not to be trifled with.
Maxicares counsel ought to be reacquainted with
Canon

10[24] of

the

Code

of

Professional

Responsibility, specifically, Rule 10.02, to wit:

Rule 10.02 A lawyer shall not
knowingly misquote or misrepresent
the contents of a paper, the
language or the argument of
opposing counsel, or the text of a
decision or authority, or knowingly
cite as law a provision already
rendered inoperative by repeal or
amendment, or assert as a fact that
which has not been proved.

Third. Finally, we likewise affirm the uniform ruling

of the RTC and CA that Estrada is entitled to 10%

Sanchez v. Medicard
This petition for review on certiorari seeks to
reverse the Decision1 of the Court of Appeals
dated February 24, 1999 and its Resolution dated
January 12, 2000 in CA-G.R. CV No. 47681.
The facts, as established by the trial court and
affirmed by the Court of Appeals, follow:

of the total amount of premiums paid[25] by

Meralco to Maxicare as of May 1996. Maxicares
argument that assuming Estrada is entitled to
commissions, such entitlement only covers the
initial year of the service agreement and should
not include the premiums paid for the succeeding
renewals thereof, fails to impress. Considering
that we have sustained the lower courts factual
finding of Estradas close, proximate and causal
connection to the sale of health plans, we are not
wont to disturb Estradas complete entitlement to
commission for the total premiums paid until May
1996 in the amount of P20,169,335.00.
WHEREFORE, premises considered and finding
no reversible error committed by the Court of
Appeals, the petition is hereby DENIED. Costs
against the petitioner.

Sometime in 1987, Medicard Philippines, Inc.

(Medicard), respondent, appointed petitioner as its
special corporate agent. As such agent, Medicard
gave him a commission based on the "cash
brought in."
In September, 1988, through petitioners efforts,
Medicard and United Laboratories Group of
Companies (Unilab) executed a Health Care
Program Contract. Under this contract, Unilab
shall pay Medicard a fixed monthly premium for
the health insurance of its personnel. Unilab paid
Medicard P4,148,005.00
representing
the
premium for one (1) year. Medicard then handed
petitioner 18% of said amount or P746,640.90
representing his commission.
Again, through petitioners initiative, the agency
contract between Medicard and Unilab was
renewed for another year, or from October 1,
1989 to September 30, 1990, incorporating
therein
the
increase
of
premium
from P4,148,005.00 to P7,456,896.00. Medicard
paid petitioner P1,342,241.00 as his commission.
Prior to the expiration of the renewed contract,
Medicard proposed to Unilab, through petitioner,
an increase of the premium for the next year.
Unilab rejected the proposal "for the reason that it
was too high," prompting Dr. Nicanor Montoya
(Medicards president and general manager), also
a respondent, to request petitioner to reduce his
commission, but the latter refused.

In a letter dated October 3, 1990, Unilab, through

Carlos Ejercito, another respondent, confirmed its
decision not to renew the health program contract
with Medicard.
Meanwhile, in order not to prejudice its personnel
by the termination of their health insurance,
Unilab, through respondent Ejercito, negotiated
with Dr. Montoya and other officers of Medicard, to
discuss ways in order to continue the insurance
coverage of those personnel.
Under the new scheme, Unilab shall pay Medicard
only the amount corresponding to the actual
hospitalization expenses incurred by each
personnel plus 15% service fee for using Medicard
facilities, which amount shall not be less
than P780,000.00.
Medicard did not give petitioner any commission
under the new scheme.
In a letter dated March 15, 1991, petitioner
demanded
from
Medicard
payment
of P338,000.00 as his commission plus damages,
but the latter refused to heed his demand.
Thus, petitioner filed with the Regional Trial Court
(RTC), Branch 66, Makati City, a complaint for sum
of money against Medicard, Dr. Nicanor Montoya
and Carlos Ejercito, herein respondents.
After hearing, the RTC rendered its Decision
dismissing
petitioners
complaint
and
respondents counterclaim.
On appeal, the Court of Appeals affirmed the trial
courts assailed Decision. The Appellate Court held
that there is no proof that the execution of the
new contract between the parties under the "cost
plus" system is a strategy to deprive petitioner of
his commission; that Medicard did not commit any
fraudulent act in revoking its agency contract with
Sanchez; that when Unilab rejected Medicards
proposal for an increase of premium, their Health
Care Program Contract on its third year was
effectively revoked; and that where the contract is
ineffectual, then the agent is not entitled to a
commission.
Petitioner filed a motion for reconsideration, but
this was denied by the Court of Appeals on
January 12, 2000.
Hence, the instant petition for review on certiorari.
The basic issue for our resolution is whether the
Court of Appeals erred in holding that the contract

of agency has been revoked by Medicard, hence,

petitioner is not entitled to a commission.
It is dictum that in order for an agent to be
entitled to a commission, he must be the
procuring cause of the sale, which simply means
that the measures employed by him and the
efforts he exerted must result in a sale. 2 In other
words, an agent receives his commission only
upon
the
successful
conclusion
of
a
sale.3 Conversely, it follows that where his efforts
are unsuccessful, or there was no effort on his
part, he is not entitled to a commission.
In Prats vs. Court of Appeals,4 this Court held that
for the purpose of equity, an agent who is not the
efficient procuring cause is nonetheless entitled to
his
commission,
where
said
agent,
notwithstanding the expiration of his authority,
nonetheless, took diligent steps to bring back
together the parties, such that a sale was
finalized
and
consummated
between
them. In Manotok
Borthers
vs.
Court
of
5
Appeals, where the Deed of Sale was only
executed after the agents extended authority had
expired, this Court, applying its ruling in Prats,
held that the agent (in Manotok) is entitled to a
commission since he was the efficient procuring
cause of the sale, notwithstanding that the sale
took place after his authority had lapsed. The
proximate, close, and causal connection between
the agents efforts and the principals sale of his
property can not be ignored.
It may be recalled that through petitioners
efforts, Medicard was able to enter into a one-year
Health Care Program Contract with Unilab. As a
result, Medicard paid petitioner his commission.
Again, through his efforts, the contract was
renewed and once more, he received his
commission. Before the expiration of the renewed
contract, Medicard, through petitioner, proposed
an increase in premium, but Unilab rejected this
proposal. Medicard then requested petitioner to
reduce his commission should the contract be
renewed on its third year, but he was obstinate.
Meantime, on October 3, 1990, Unilab informed
Medicard it was no longer renewing the Health
Care Program contract.
In order not to prejudice its personnel, Unilab,
through respondent Ejercito, negotiated with
respondent Dr. Montoya of Medicard, in order to
find mutually beneficial ways of continuing the
Health Care Program. The negotiations resulted in
a new contract wherein Unilab shall pay Medicard
the hospitalization expenses actually incurred by
each employees, plus a service fee. Under the

"cost plus" system which replaced the premium

scheme, petitioner was not given a commission.
It is clear that since petitioner refused to reduce
his commission, Medicard directly negotiated with
Unilab, thus revoking its agency contract with
petitioner. We hold that such revocation is
authorized by Article 1924 of the Civil Code which
provides:
"Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the
agent, dealing directly with third persons."
Moreover, as found by the lower courts, petitioner
did not render services to Medicard, his principal,
to entitle him to a commission. There is no
indication from the records that he exerted any
effort in order that Unilab and Medicard, after the
expiration of the Health Care Program Contract,
can renew it for the third time. In fact, his refusal
to reduce his commission constrained Medicard to
negotiate directly with Unilab. We find no reason
in law or in equity to rule that he is entitled to a
commission. Obviously, he was not the agent or
the "procuring cause" of the third Health Care
Program Contract between Medicard and Unilab.
WHEREFORE, the petition is DENIED. The
challenged Decision and Resolution of the Court of
Appeals
in
CA-G.R.
CV
No.
47681
are AFFIRMED IN TOTO. Costs against petitioner.
SO ORDERED.

Infante v. Cunanan
This is a petition for review of a decision of the
Court of appeals affirming the judgement of the
court of origin which orders the defendant to pay
the plaintiffs the sum of P2,500 with legal interest

thereon from February 2,1949 and the costs of

action.
Consejo Infante, defendant herein, was the owner
of two parcels of land, together with a house built
thereon, situated in the City of Manila and covered
by Transfer Certificate of Title No. 61786. On or
before November 30, 1948, she contracted the
services of Jose Cunanan and Juan Mijares, plaintiff
herein, to sell the above-mentioned property for a
price of P30,000 subject to the condition that the
purchaser would assume the mortgage existing
thereon in the favor of the Rehabilitation Finance
Corporation. She agreed to pay them a
commission of 5 per cent on the purchase price
plus whatever overprice they may obtain for the
property. Plaintiffs found one Pio S. Noche who
was willing to buy the property under the terms
agreed upon with defendant, but when they
introduced him to defendant, the latter informed
them that she was no longer interested in selling
the property and succeeded in making them sign
a document stating therein that the written
authority she had given them was already cancelled. However, on December 20, 1948,
defendant dealt directly with Pio S. Noche selling
to him the property for P31,000. Upon learning
this transaction, plaintiffs demanded from
defendant the payment of their commission, but
she refused and so they brought the present
action.
Defendant admitted having contracted the
services of the plaintiffs to sell her property as set
forth in the complaint, but stated that she agreed
to pay them a commission of P1,200 only on
condition that they buy her a property somewhere
in Taft Avenue to where she might transfer after
selling her property. Defendant avers that while
plaintiffs took steps to sell her property as agreed
upon, they sold the property at Taft Avenue to
another party and because of this failure it was
agreed that the authority she had given them be
cancelled.
The lower court found that the preponderance of
evidence was in favor of the plaintiffs and
rendered judgement sentensing the defendant to
pay the plaintiff the sum of P2,500 with legal
interest thereon from February 2,1949 plus the
costs of action. This decision was affirmed in toto
by the Court of Appeals.
There is no dispute that respondents were
authorized by petitioner to sell her property for
the sum of P30,000 with the understanding that
they will be given a commission of 5 percent plus
whatever overprice they may obtain for the
property. Petitioner, however, contends that
authority has already been withdrawn on
November 30, 1948 when, by the voluntary act of
respondents, they executed a document stating
that said authority shall be considered cancelled
and without any effect, so that when petitioner
sold the property to Pio S. Noche on December 20,
1948, she was already free from her commitment

with respondents and, therefore, was not in duty

bound to pay them any commission for the
transaction..
If the facts were as claimed by petitioner, there is
in-deed no doubt that she would have no
obligation to pay respondents the commission
which was promised them under the original
authority because, under the old Civil Code, her
right to withdraw such authority is recognized. A
principal may withdraw the authority given to an
agent at will. (Article 1733.) But this fact is
disputed. Thus, respondents claim that while they
agreed to cancel the written authority given to
them, they did so merely upon the verbal
assurance given by petitioner that, should the
property be sold to their own buyer, Pio S. Noche,
they would be given the commission agreed upon.
True, this verbal assurance does not appear in the
written cancellation, Exhibit 1, and, on the other
hand, it is disputed by petitioner, but respondents
were allowed to present oral evidence to prove it,
and this is now assigned as error in this petition
for review.
The plea that oral evidence should not have been
allowed to prove the alleged verbal assurance is
well taken it appearing that the written authority
given to respondents has been cancelled in a
written statement. The rule on this matter is that
"When the terms of an agreement have been
reduced to writing, it is to be considered as
containing all those terms, and, therefore, there
can be, between parties and their successors in
interest, no evidence of the terms of the
agreement other than the contents of the writing."
(Section 22, Rule 123, Rules of Court.) The only
exceptions to this rule are: "(a)Where a mistake or
imperfection of the writing, or its failure to express
the true intent and agreement of the parties, or
the validity of the agreement is put in issue by the
pleadings"; and "(b) Where there is an intrinsic
ambiguity in the writing." (Ibid.) There is no doubt
that the point raised does not come under any of
the cases excepted, for there is nothing therein
that has been put in issue by respondents in their
complaint. The terms of the document, Exhibit 1,
seem to be clear and they do not contain any
reservation which may in any way run counter to
the clear intention of the parties.
But even disregarding the oral evidence adduced
by respondents in contravention of the parole
evidence rule, we are, however, of the opinion
that there is enough justification for the
conclusion reached by the lower court as well as
by the Court of Appeals to the effect that
respondents are entitled to the commission
originally agreed upon. It is a fact found by the
Court of Appeals that after petitioner had given
the written authority to respondents to sell her
land for the sum of P30,000, respondents found a
buyer in the person of one Pio S. Noche who was
willing to buy the property under the terms agreed
upon, and this matter was immediately brought to
the knowledge of petitioner. But the latter,

perhaps
by
way
of
strategem,
advised
respondents that she was no longer interested in
the deal and was able to prevail upon them to
sign a document agreeing to the cancellation of
the written authority.
That petitioner had changed her mind even if
respondents had found a buyer who was willing to
close the deal, is a matter that would not give rise
to a legal consequence if respondents agree to
call off the transaction in deference to the request
of the petitioner. 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 ac-cording to the party
prejudiced the reward which is due him. This is the
situation in which respondents were placed by
petitioner. Petitioner took advantage of the
services rendered by respondents, 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 Exhibit 1.
This act of subversion cannot be sanctioned and
cannot serve as basis for petitioner to escape
payment of the commission agreed upon.
Wherefore, the decision appealed from is hereby
affirmed, with costs against petitioner.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason,
Monte-mayor, Reyes, and Jugo, JJ., concur.
Separate Opinions
LABRADOR, J., concurring and dissenting:
I concur in the result. I can not agree, however, to
the ruling made in the majority decision that the
petitioners can not introduce evidence of the
circumstances under which the document was
signed, i.e. upon promise by respondent that
should the property be sold to petitioner's buyer
they would nevertheless be entitled to the
commission agreed upon. Such evidence is not
excluded by the parole evidence rule, because it
does not tend to alter or vary the terms of the
document. This document was merely a
withdrawal of the authority granted the petitioner
to sell the property, not an agreement that they
shall not be paid their commission.

taxes due on the transaction as well as Fifty

Thousand

Pesos

commission.

[5]

(P50,000.00)

as

brokers

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

Lim v. Saban

for P168,000.00.
Before the Court is a Petition for Review on
Certiorari assailing the Decision[1] dated October
27, 2003 of the Court of Appeals, Seventh

Subsequently, Ybaez sent a letter dated June 10,

1994 addressed to Lim. In the letter Ybaez asked
Lim to cancel all the checks issued by her in

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

Sabans favor and to extend another partial

The late Eduardo Ybaez (Ybaez), the owner of a

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

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, 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 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 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

After the four checks in his favor were dishonored

upon presentment, Saban filed a Complaint for
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 his Complaint, Saban alleged that Lim and the
Spouses

Lim

agreed

for P600,000.00, i.e., with

to
a

purchase
mark-up

the
of

lot
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 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

order to deprive Saban of his commission and to

keep the profits for himself.[14]

by withholding payment of the first three checks.

The appellate court found that Ybaez and Lim

He also claimed that Lim failed to make good the

connived to deprive Saban of his commission. It

fourth check which was dishonored because the

declared that Lim is liable to pay Saban the

account against which it was drawn was closed.

amount

of

the

purchase

price

of

the

lot

corresponding to his commission because she

In his Answer, 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.

the agreement between Ybaez and Saban, and

that she issued stop payment orders for the three
checks because Ybaez requested her to pay the
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.

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]

its Decision

14,
[11]

1997,

dismissing

the

RTC

Sabans

rendered
complaint,

declaring the four (4) checks issued by Lim as

stale and non-negotiable, and absolving Lim from
any liability towards Saban.

Court of Appeals.
October

promulgated

27,

corresponded

to

Sabans

commission for the sale, as the agent of Ybaez.

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 a Motion for Reconsideration of the
denied

courts Decision,
by

the

but

Court

her Motion was

of

a Resolution dated May 6, 2004.

Appeals

in

[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]

Saban appealed the trial courts Decision to the

On

thereof

appellate

Ybaez died during the pendency of the case

May

amount

The appellate court further ruled that, in issuing

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

On

issued the four checks knowing that the total

She further contends that she is not liable

for Ybaezs debt to Saban under the Agency

2003,

the

appellate

its Decision[12] reversing

the

court
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

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

To deprive Saban of his commission subsequent to

commission.[19]

the sale which was consummated through his

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 onethird (1/3) of the amount, since she had two covendees (the Spouses Lim) who should share such
liability.

[20]

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 him his
commission.
connived

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]
In Macondray

In his Comment, Saban maintains that Lim agreed

to

efforts would be a breach of his contract of

to

He

insists

unjustly

that

Lim

deprive

and

him

Ybaez
of

commission from the negotiation of the sale.

his

[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

&

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.
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 sellers withdrawal
in bad faith of the brokers authority cannot

Saban his sales commission.

unjustly deprive the brokers of their commissions

The Court gives due course to the petition, but

as the sellers duly constituted agents.

agrees with the result reached by the Court of

The pronouncements of the Court in the aforecited

Appeals.

cases

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 the Deed of
Absolute Sale of the lot with Lim and the Spouses
Lim.

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 Sale between
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

directly to Ybaez, or a total of Five Hundred Sixty

be revoked if a bilateral contract depends upon it,

Three Thousand Two Hundred Fifty Seven Pesos

or if it is the means of fulfilling an obligation

(P563,257.00).[27] Lim, on the other hand, claims

already contracted, or if a partner is appointed

that on March 10, 1994, the date of execution of

manager of a partnership in the contract of

the Deed of Absolute Sale, she paid directly to

partnership

Ybaez the amount of One Hundred Thousand

and

his

removal

from

the

management is unjustifiable. Stated differently, an

Pesos

(P100,000.00)

agency is deemed as one coupled with an interest

Saban P113,257.00

only,

for

and

gave

payment

of
[28]

to

taxes

where it is established for the mutual benefit of

and P50,000.00 as his commission,

the principal and of the agent, or for the interest

Hundred Thirty Thousand Pesos (P130,000.00) on

of the principal and of third persons, and it cannot

June 28, 1994,[29] or a total of Three Hundred

be revoked by the principal so long as the interest

Ninety Three Thousand Two Hundred Fifty Seven

of the agent or of a third person subsists. In an

Pesos

agency coupled with an interest, the agents

acknowledged that Lim and her co-vendees paid

interest must be in the subject matter of the

him P400,000.00 which he said was the full

power conferred and not merely an interest in the

amount for the sale of the lot. [30] It thus appears

exercise of the power because it entitles him to

that he received P100,000.00 on March 10, 1994,

compensation.

acknowledged

When

an

agents

interest

is

(P393,257.00).

Ybaez,

receipt

for

(through

his

part,

Saban)

the P113,257.00

agency is not one coupled with an interest, since

and P50,000.00 for commission, and received the

an agents interest in obtaining his compensation

balance of P130,000.00 on June 28, 1994. Thus, a

as such agent is an ordinary incident of the

total

agency relationship.
Sabans
having

been

went

directly

to

taxes

Ybaez.

Apparently, although the amount actually paid by

entitlement
settled,

of P230,000.00

for

of

confined to earning his agreed compensation, the

[26]

earmarked

and One

the

to

his

Court

commission
must

now

Lim was P393,257.00, Ybaez rounded off the

amount to P400,000.00 and waived the difference.

determine whether Lim is the proper party against

Lims act of issuing the four checks amounting

whom Saban should address his claim.

to P236,743.00 in Sabans favor belies her claim

that she and her co-vendees did not agree to

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

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 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 be sanctioned and cannot

serve as basis for [Infante] to
escape payment of the commission
agreed upon.[31]

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

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.

pay them five percent (5%) of the purchase price

Considering the circumstances surrounding the

plus whatever overprice they may obtain for the

case, and the undisputed fact that Lim had not yet

property.

the

paid the balance of P200,000.00 of the purchase

properties to Pio Noche who in turn expressed

price of P600,000.00, it is just and proper for her

willingness to purchase the properties. Cunanan

to pay Saban the balance of P200,000.00.

and

Cunanan

Mijares

and

Mijares

thereafter

offered

introduced

Noche

to

Infante. However, the latter told Cunanan and

Furthermore,

Mijares that she was no longer interested in selling

of P230,000.00

from

Lim,

the property and asked them to sign a document

of P30,000.00

from

his

stating that their written authority to act as her

of P200,000.00, Saban may claim such excess

agents for the sale of the properties was already

from

cancelled.

Ybaezs

since

Ybaez

estate,

if

received

that

or

total

an

excess

asking

price

remedy

is

still

sold

the

available,[32] in view of the trial courts dismissal of

Thirty

One

Sabans complaint as against Ybaez, with Sabans

Thousand Pesos (P31,000.00). The Court upheld

express consent, due to the latters demise on

the

November 11, 1994.[33]

properties
right

Subsequently,
directly
of

to

Cunanan

Infante

Noche
and

for

Mijares

to

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

their

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 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 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.

respondent for allegedly adopting sinister ploy to deprive

petitioner of its constitutional right to due process.

Manotok Bros. v. CA
Antonio C. Ravelo for petitioner.

Acting on said Petition, this Court in a Resolution 2 dated

October 1, 1990 set aside the entry of judgment made on
May 3, 1989 in case G.R. No. 78898; admitted the
amended petition; and issued a temporary restraining
order to restrain the execution of the judgment appealed
from.

Remigio M. Trinidad for private respondent.

SYLLABUS
1. CIVIL LAW; AGENCY; AGENT'S COMMISSION;
WHEN ENTITLED' RULE; APPLICATION IN CASE AT
BAR. In an earlier case, this Court ruled that when
there is a close, proximate and causal connection
between the agent's efforts and labor and the principal's
sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila
ultimately became the purchaser of petitioner's property
mainly through the efforts of private respondent. Without
discounting the fact that when Municipal Ordinance No.
6603 was signed by the City Mayor on May 17, 1968,
private respondent's authority had already expired, it is to
be noted that the ordinance was approved on April 26,
1968 when private respondent's authorization was still in
force. Moreover, the approval by the City Mayor came
only three days after the expiration of private
respondent's authority. It is also worth emphasizing that
from the records, the only party given a written authority
by petitioner to negotiate the sale from July 5, 1966 to
May 14, 1968 was private respondent.
DECISION
CAMPOS, JR., J p:
Petitioner Manotok Brothers., Inc., by way of the instant
Petition docketed as G.R. No. 94753 sought relief from
this Court's Resolution dated May 3, 1989, which reads:
"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador
Saligumba and Court of Appeals). Considering the
manifestation of compliance by counsel for petitioner
dated April 14, 1989 with the resolution of March 13,
1989 which required the petitioner to locate private
respondent and to inform this Court of the present
address of said private respondent, the Court Resolved
to DISMISS this case, as the issues cannot be joined as
private respondent's and counsel's addresses cannot be
furnished by the petitioner to this court." 1
In addition, petitioner prayed for the issuance of a
preliminary injunction to prevent irreparable injury to itself
pending resolution by this Court of its cause. Petitioner
likewise urged this Court to hold in contempt private

The amended petition 3 admitted, by this Court sought

relief from this Court's Resolution abovequoted. In the
alternative, petitioner begged leave of court to re-file its
Petition for Certiorari 4 (G.R. No. 78898) grounded on the
allegation that petitioner was deprived of its opportunity to
be heard.
The facts as found by the appellate court, revealed that
petitioner herein (then defendant-appellant) is the owner
of a certain parcel of land and building which were
formerly leased by the City of Manila and used by the
Claro M. Recto High School, at M.F. Jhocson Street,
Sampaloc Manila.
By means of a letter 5 dated July 5, 1966, petitioner
authorized herein private respondent Salvador Saligumba
to negotiate with the City of Manila the sale of the
aforementioned property for not less than P425,000.00.
In the same writing, petitioner agreed to pay private
respondent a five percent (5%) commission in the event
the sale is finally consummated and paid.
Petitioner, on March 4, 1967, executed another letter 6
extending the authority of private respondent for 120
days. Thereafter, another extension was granted to him
for 120 more days, as evidenced by another letter 7
dated June 26, 1967.
Finally, through another letter 8 dated November 16,
1967, the corporation with Rufino Manotok, its President,
as signatory, authorized private respondent to finalize
and consummate the sale of the property to the City of
Manila for not less than P410,000.00. With this letter
came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on
April 26, 1968, passed Ordinance No. 6603,
appropriating the sum of P410,816.00 for the purchase of
the property which private respondent was authorized to
sell. Said ordinance however, was signed by the City
Mayor only on May 17, 1968, one hundred eighty three
(183) days after the last letter of authorization.
On January 14, 1969, the parties signed the deed of sale
of the subject property. The initial payment of
P200,000.00 having been made, the purchase price was
fully satisfied with a second payment on April 8, 1969 by
a check in the amount of P210,816.00.

Notwithstanding the realization of the sale, private

respondent never received any commission, which
should have amounted to P20,554.50. This was due to
the refusal of petitioner to pay private respondent said
amount as the former does not recognize the latter's role
as agent in the transaction.

Fructuoso Ancheta and Atty. Dominador Bisbal both

testified acknowledging the authority of private
respondent regarding the transaction.

Consequently, on June 29, 1969, private respondent filed

a complaint against petitioner, alleging that he had
successfully negotiated the sale of the property. He
claimed that it was because of his efforts that the
Municipal Board of Manila passed Ordinance No. 6603
which appropriated the sum for the payment of the
property subject of the sale.

Huelgas testified to the effect that after being inducted as

PTA president in August, 1967 he followed up the sale
from the start with Councilor Magsalin until after it was
approved by the Mayor on May 17, 1968. He. also said
that he came to know Rufino Manotok only in August,
1968, at which meeting the latter told him that he would
be given a "gratification" in the amount of P20,000.00 if
the sale was expedited.

Petitioner claimed otherwise. It denied the claim of

private respondent on the following grounds: (1) private
respondent would be entitled to a commission only if the
sale was consummated and the price paid within the
period given in the respective letters of authority; and (2)
private respondent was not the person responsible for the
negotiation and consummation of the sale, instead it was
Filomeno E. Huelgas, the PTA president for 1967-1968 of
the Claro M. Recto High School. As a counterclaim,
petitioner (then defendant-appellant) demanded the sum
of P4,000.00 as attorney's fees and for moral damages.
Thereafter, trial ensued. Private respondent, then plaintiff,
testified as to the efforts undertaken by him to ensure the
consummation of the sale. He recounted that it first
began at a meeting with Rufino Manotok at the office of
Fructuoso Ancheta, principal of C.M. Recto High School.
Atty. Dominador Bisbal, then president of the PTA, was
also present. The meeting was set precisely to ask
private respondent to negotiate the sale of the school lot
and building to the City of Manila. Private respondent
then went to Councilor Mariano Magsalin, the author of
the Ordinance which appropriated the money for the
purchase of said property, to present the project. He also
went to the Assessor's Office for appraisal of the value of
the property. While these transpired and his letters of
authority expired, Rufino Manotok always renewed the
former's authorization until the last was given, which was
to remain in force until May 14, 1968. After securing the
report of the appraisal committee, he went to the City
Mayor's Office, which indorsed the matter to the
Superintendent of City Schools of Manila. The latter office
approved the report and so private respondent went back
to the City Mayor's Office, which thereafter indorsed the
same to the Municipal Board for appropriation.
Subsequently, on April 26, 1968, Ordinance No. 6603
was passed by the Municipal Board for the appropriation
of the sum corresponding to the purchase price.
Petitioner received the full payment of the purchase price,
but private respondent did not receive a single centavo
as commission.

Petitioner presented as its witnesses Filomeno Huelgas

and the petitioner's President, Rufino Manotok.

Rufino Manotok confirmed that he knew Huelgas and that

there was an agreement between the two of them
regarding the "gratification".
On rebuttal, Atty. Bisbal said that Huelgas was present in
the PTA meetings from 1965 to 1967 but he never offered
to help in the acquisition of said property. Moreover, he
testified that Huelgas was aware of the fact that it was
private respondent who was negotiating the sale of the
subject property.
Thereafter, the then Court of First Instance (now,
Regional Trial Court) rendered judgment sentencing
petitioner and/or Rufino Manotok to pay unto private
respondent the sum of P20,540.00 by way of his
commission fees with legal interest thereon from the date
of the filing of the complaint until payment. The lower
court also ordered petitioner to pay private respondent
the amount of P4,000.00 as and for attorney's fees. 9
Petitioner appealed said decision, but to no avail.
Respondent Court of Appeals affirmed the said ruling of
the trial court. 10
Its Motion for Reconsideration having been denied by
respondent appellate court in a Resolution dated June
22, 1987, petitioner seasonably elevated its case on
Petition for Review on Certiorari on August 10, 1987
before this Court, docketed as G.R. No. 78898.
Acting on said Petition, this Court issued a Minute
Resolution 11 dated August 31, 1987 ordering private
respondent to comment on said Petition.
It appearing that the abovementioned Resolution was
returned unserved with the postmaster's notation
"unclaimed", this Court in another Resolution 12 dated
March 13, 1989, required petitioner to locate private
respondent and to inform this Court of the present
address of private respondent within ten (10) days from
notice. As petitioner was unsuccessful in its efforts to
locate private respondent, it opted to manifest that private

respondent's last address was the same as that address

to which this. Court's Resolution was forwarded.
Subsequently, this Court issued a Resolution dated May
3, 1989 dismissing petitioner's case on the ground that
the issues raised in the case at bar cannot be joined.
Thus, the above-entitled case became final and
executory by the entry of judgment on May 3, 1989.
Thereafter, on January 9, 1990 private respondent filed a
Motion to Execute the said judgment before the court of
origin. Upon discovery of said development, petitioner
verified with the court of origin the circumstances by
which private respondent obtained knowledge of the
resolution of this Court. Sensing a fraudulent scheme
employed by private respondent, petitioner then instituted
this instant Petition for Relief, on August 30, 1990. On
September 13, 1990, said petition was amended to
include, in the alternative, its petition to re-file its Petition
for Certiorari (G.R. No. 78898).
The sole issue to be addressed in this petition is whether
or not private respondent is entitled to the five percent
(5%) agent's commission.
It is petitioner's contention that as a broker, private
respondent's job is to bring together the parties to a
transaction. Accordingly, if the broker does not succeed in
bringing the minds of the purchaser and the vendor to an
agreement with respect to the sale, he is not entitled to a
commission.
Private respondent, on the other hand, opposes
petitioner's position maintaining that it was because of his
efforts that a purchase actually materialized between the
parties.
We rule in favor of private respondent.
At first sight, it would seem that private respondent is not
entitled to any commission as he was not successful in
consummating the sale between the parties, for the sole
reason that when the Deed of Sale was finally executed,
his extended authority had already expired. By this alone,
one might be misled to believe that this case squarely
falls within the ambit of the established principle that a
broker or agent is not entitled to any commission until he
has successfully done the job given to him. 13
Going deeper however into the case would reveal that it
is within the coverage of the exception rather than of the
general rule, the exception being that enunciated in the
case of Prats vs. Court of Appeals. 14 In the said case,
this Court ruled in favor of claimant-agent, despite the
expiration of his authority, when a sale was finally
consummated.

In its decision in the abovecited case, this Court said, that

while it was respondent court's (referring to the Court of
Appeals) factual findings that petitioner Prats (claimantagent) was not the efficient procuring cause in bringing
about the sale (prescinding from the fact of expiration of
his exclusive authority), still petitioner was awarded
compensation for his services. And We quote:
"In equity, however, the Court notes that petitioner had
diligently taken steps to bring back together respondent
Doronila and the SSS,.
xxx xxx xxx
The court has noted on the other hand that Doronila
finally sold the property to the Social Security System at
P3.25 per square meter which was the very same price
counter-offered by the Social Security System and
accepted by him in July, 1967 when he alone was dealing
exclusively with the said buyer long before Prats came
into the picture but that on the other hand Prats' efforts
somehow were instrumental in bringing them together
again and finally consummating the transaction at the
same price of P3.25 per square meter, although such
finalization was after the expiration of Prats' extended
exclusive authority.
xxx xxx xxx
Under the circumstances, the Court grants in equity the
sum of One hundred Thousand Pesos (P100,000.00) by
way of compensation for his efforts and assistance in the
transaction, which however was finalized and
consummated after the expiration of his exclusive
authority . . ." 15 (Emphasis supplied.).
From the foregoing, it follows then that private
respondent herein, with more reason, should be paid his
commission, While in Prats vs. Court of Appeals, the
agent was not even the efficient procuring cause in
bringing about the sale, unlike in the case at bar, it was
still held therein that the agent was entitled to
compensation. In the case at bar, private respondent is
the efficient procuring cause for without his efforts, the
municipality would not have anything to pass and the
Mayor would not have anything to approve.
In an earlier case, 16 this Court ruled that when there is a
close, proximate and causal connection between the
agent's efforts and labor and the principal's sale of his
property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila
ultimately became the purchaser of petitioner's property
mainly through the efforts of private respondent. Without
discounting the fact that when Municipal Ordinance No.
6603 was signed by the City Mayor on May 17, 1968,
private respondent's authority had already expired, it is to

be noted that the ordinance was approved on April 26,

1968 when private respondent's authorization was still in
force. Moreover, the approval by the City Mayor came
only three days after the expiration of private
respondent's authority. It is also worth emphasizing that
from the records, the only party given a written authority
by petitioner to negotiate the sale from July 5, 1966 to
May 14, 1968 was private respondent.
Contrary to what petitioner advances, the case of Danon
vs. Brimo, 17 on which it heavily anchors its justification
for the denial of private respondent's claim, does not
apply squarely to the instant petition. Claimant-agent in
said case fully comprehended the possibility that he may
not realize the agent's commission as he was informed
that another agent was also negotiating the sale and
thus, compensation will pertain to the one who finds a
purchaser and eventually effects the sale. Such is not the
case herein. On the contrary, private respondent pursued
with his goal of seeing that the parties reach an
agreement, on the belief that he alone was transacting
the business with the City Government as this was what
petitioner made it to appear.
While it may be true that Filomeno Huelgas followed up
the matter with Councilor Magsalin, the author of
Municipal Ordinance No. 6603 and Mayor Villegas, his
intervention regarding the purchase came only after the
ordinance had already been passed when the buyer
has already agreed to the purchase and to the price for
which said property is to be paid. Without the efforts of
private respondent then, Mayor Villegas would have
nothing to approve in the first place. It was actually
private respondent's labor that had set in motion the
intervention of the third party that produced the sale,
hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no
reversible error committed by respondent Court, the
decision of the Court of Appeals is hereby AFFIRMED.
The temporary restraining order issued by this Court in its
Resolution dated October 1, 1990 is hereby lifted.
SO ORDERED.

In the law on agency, it is elementary that when

the main transaction between the principal parties
does not materialize, the claim for commission of
the duly authorized broker is disallowed. 1 How
about the instance when the sale was eventually
consummated between parties introduced by a
middleman who, in the first place, had no
authority, express or implied, from the seller to
broker the transaction? Should the interloper be
allowed a commission? On these simplified terms
rests the nature of the controversy on which this
case turns.
As stated by the respondent Court of
Appeals, 2 the ambient circumstances of this case
are as follows:
(1) [Petitioner] Uniland Resources is
a private corporation engaged in
real estate brokerage and licensed
as such (p. 2, Rec.), while
[respondent] DBP, as we all know
[sic], is a government corporation
engaged in finance and banking in a
proprietary capacity.
(2) Long before this case arose,
Marinduque
Mining
Corporation
obtained a loan from the DBP and
as security therefor, mortgaged
certain real properties to the latter,
among them two lots located in
Makati, M.M., described as follows:
(a) Corner lot, covered by TCT No. 114138, located
at Pasong Tamo, Makati with an area of 3,330 sq.
mts. on which is constructed a [four]-story
concrete building, etc., which, for brevity, shall be
called the office building lot; and
(b) Lot covered by TCT No. 16279 with 12,355 sq.
mts located at Pasong Tamo, Makati, on which is
constructed a concrete/steel warehouse, etc.,
which, for brevity, shall be called the warehouse
lot.
The aforesaid lots had, however, been previously
mortgaged by Marinduque Mining Corp., to Caltex,
and the mortgage in favor of DBP was entered on
their titles as a second mortgage (Pre-Trial Order,
p. 37, Rec.).

Uniland RSS v. DBP

The account of the Marinduque Mining Corp., with

the DBP was later transferred to the Assets
Privatization Trust (APT) pursuant to Proclamation
No. 50.

(3) For failure of the Marinduque Mining Corp. to

pay its obligations to Caltex, the latter foreclosed
its mortgage on the aforesaid two lots (pp. 37-38,
Rec.). APT on the other hand, to recover its
investment on the Marinduque Account, offered
for sale to the public through DBP its right of
redemption on said two lots by public bidding
(Exhs. "1" and "2").
(4) Considering, however, that Caltex had required
that both lots be redeemed, the bidding guidelines
set by DBP provided that any bid to purchase
either of the two lots would be considered only
should there be two bids or a bid for the two items
which, when combined, would fully cover the sale
of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May 5, 1987
with only one bidder, the Counsel Realty Corp. [an
affiliate of Glaxo, Philippines, the client of
petitioner], which offered a bid only for the
warehouse lot in the amount of P23,900,000.00.
Said bid was thus rejected by DBP.
(6) Seeing, however, that it would make a profit if
it redeemed the two lots and then offer them for
sale, and as its right to redeem said lots from
Caltex would expire on May 8, 1987, DBP retrieved
the account from APT and, on the last day for the
exercise of its right of redemption, May 8, 1987,
redeemed
said
lots
from
Caltex
for
P33,096,321.62 (Exh. "5"), thus acquiring them as
its physical assets.
(7) In preparation for the sale of the two lots in
question, DBP called a pre-bidding conference
wherein a new set of bidding guidelines were
formulated (Exh. "3"). Then, on July 30,1987, the
public bidding for the sale of the two lots was held
and again, there was only one bidder, the Charges
Realty
Corp.
[another
affiliate
of
Glaxo,
Philippines], for only the warehouse lot and for the
amount of P24,070,000.00, which is slightly higher
than the amount previously offered by Counsel
Realty Corp., therefor at the May 5, 1987 bidding
(see Exh. "5," p. 1 00, Rec.). No bid was submitted
for the office building lot (id.).
(8) Notwithstanding that there was no bidder for
the office building lot, the DBP approved the sale
of the warehouse lot to Charges Realty Corp., and
on November 23, 1987, the proper documentation
of the sale was made (Exh. "D"). As for the office
building lot, it was later sold by DBP in a
negotiated sale to the Bank of P.I. as trustee for
the "Perpetual Care Fund of the Manila Memorial
Park"
for
P17,460,000.00,
and
proper
documentation of the sale was made on

November 17, 1987 (Exh. "E" and submarkings).

The DBP admittedly paid the (five percent)
broker's fee on this sale to the DBP Management
Corporation, which acted as broker for said
negotiated sale (p. 15, Appellant DBP's brief).
(9) After the aforesaid sale, [petitioner], through
its President, wrote two letters to [respondent
DBP], the first through its Senior Vice President
(Exh. "C"), and, the second through its Vice
Chairman (Exh. "4" [sic], asking for the payment
of its broker's fee in instrumenting the sale of its
(DBP's) warehouse lot to Charges Realty Corp. The
claim was referred to the Bidding Committee
chaired by Amanda S. Guiam which met on
November 9, 1987, and which, on November 18,
1987, issued a decision denying [petitioner's]
claim (Exh. "5"). Hence, the instant case filed by
[petitioner] to recover from [respondent] DBP the
aforesaid broker's fee.
After trial, the lower court, on October 25, 1988,
rendered judgment
ORDERING [respondent DBP] to pay [petitioner]
the sum of P1,203,500,00 which is the equivalent
of [five percent] broker's fee plus legal interest
thereto (sic) from the filing of the complaint on
February 18, 1988 until fully paid and the sum of
P50,000.00 as and for attorney's fees. Costs
against [respondent DBP]. (p. 122, Rec.). 3
On appeal, the Court of Appeals reversed the
judgment of the lower court 4 and dismissed the
complaint. The motion for reconsideration filed by
petitioner was also subsequently denied. 5
Petitioner is now before this Court alleging that
the petition "RAISES A QUESTION OF LAW IN THE
SENSE THAT THE RESPONDENT COURT OF
APPEALS BASED ITS DECISION ONLY ON THE
CONTROVERSIAL FACTS FAVORABLE TO THE
PRIVATE RESPONDENT DBP, 6 primarily making
capital of the disparity between the factual
conclusions of the trial court and of the appellate
court. Petitioner asserts that the respondent Court
of Appeals disregarded evidence in its favor
consisting of its letters to respondent DBP's higher
officers sent prior to the bidding and sale, wherein
petitioner requested accreditation as a broker and,
in the process of informing that it had offered the
DBP properties for sale, also volunteered the
name of its client, Glaxo, Philippines, as an
interested prospective buyer. 7
The rule is that in petitions for certiorari as a
mode of appeal, only questions of law distinctly
set forth may be raised. 8 Such questions have

been defined as those that do not call for any

examination of the probative value of the
evidence presented by the parties. 9 Petitioner's
singular assignment of error would, however, have
this Court go over the facts of this case because it
necessarily involves the examination of the
evidence and its subsequent reevaluation. Under
the present proceeding, the same, therefore,
cannot be done.
It bears emphasizing that mere disagreement
between the Court of Appeals and the trial court
as to the facts of a case does not of itself warrant
this Court's review of the same. It has been held
that the doctrine that the findings of fact made by
the Court of Appeals, being conclusive in nature,
are binding on this Court, applies even if the Court
of Appeals was in disagreement with the lower
court as to the weight of evidence with a
consequent reversal of its findings of fact, so long
as the findings of the Court of Appeals are borne
out by the record or based on substantial
evidence. 10 while the foregoing doctrine is not
absolute, petitioner has not sufficiently proved
that his case falls under the known exceptions. 11
Be that as it may, the Court has perused the
assailed decision of the Court of Appeals and still
finds the primary assertion of petitioner to be
unfounded. The Court of Appeals has addressed
all the factual contentions of petitioner and chose
not to give credence to petitioner's version.
Moreover, the findings of the Court of Appeals are
consistent with, and sufficiently supported by, the
records of this case.
It is obvious that petitioner was never able to
secure the required accreditation from respondent
DBP to transact business on behalf of the latter.
The letters sent by petitioner to the higher officers
of the DBP and the APT are merely indicative of
petitioner's desire to secure such accreditation. At
best these missives are self-serving; the most that
they prove is that they were sent by petitioner
and received by respondent DBP, which clearly
never agreed to be bound thereto. As declared by
the trial court even when it found in favor of
petitioner, there was no express reply from the
DBP or the APT as to the accreditation sought by
petitioner. 12 From the very beginning, therefore,
petitioner was aware that it had no express
authority from DBP to find buyers of its properties.
In its reply submitted pursuant to the resolution
requiring the same 13 petitioner also invokes
Article 1869 of the new Civil Code 14 in contending
that an implied agency existed. Petitioner argues
that it "should have been stopped, disauthorized

and outrightly prevented from dealing the 12,355

sq. m (with warehouse) [sic] by the DBP from the
inception." 15 On the contrary, these steps were
never necessary. In the course of petitioner's
dealings with the DBP, it was always made clear
to petitioner that only accredited brokers may look
for buyers on behalf of respondent DBP. This is not
a situation wherein a third party was prejudiced by
the refusal of respondent DBP to recognize
petitioner as its broker. The controversy is only
between the DBP and petitioner, to whom it was
emphasized in no uncertain terms that the
arrangement sought did not exist. Article 1869,
therefore, has no room for operation in this case.
Petitioner would also disparage the formality of
accreditation as merely a mechanical act, which
requires not much discretion, as long as a person
or entity looks for a buyer [and] initiate or
promote [sic] the interests of the seller. 16 Being
engaged in business, petitioner should do better
to adopt the opposite attitude and appreciate that
formalities, such as the need for accreditation,
result from the evolution of sound business
practices for the protection and benefit of all
parties concerned. They are designed and
adopted specifically to prevent the occurrence of
situations similar to that obtaining in this case.
More importantly, petitioner's stance goes against
the basic axiom in Civil Law that no one may
contract in the name of another without being
authorized by the latter, unless the former has by
law a right to represent him. 17From this principle,
among others, springs the relationship of agency
which, as with other contracts, is one founded on
mutual consent: the principal agrees to be bound
by the acts of the agent and the latter in turn
consents to render service on behalf or in
representation of the principal. 18
Petitioner,
however,
also
invokes
equity
considerations, and in equity, the Court
recognizes the efforts of petitioner in bringing
together respondent DBP and an interested and
financially-able buyer. While not actively involved
in the actual bidding and transfer of ownership of
the warehouse property, petitioner may be said to
have initiated, albeit without proper authority, the
transaction that eventually took place. The Court
is also aware that respondent DBP was able to
realize a substantial profit from the sale of its two
properties. While purely circumstantial, there is
sufficient reason to believe that the DBP became
more confident to venture and redeem the
properties from the APT due to the presence of a
ready and willing buyer, as communicated and
assured by petitioner.

In Prats v. Court of Appeals, 19 there was a finding

that the petitioner therein as the agent was no
longer the efficient procuring cause in bringing
about the sale proceeding from the fact of
expiration of his exclusive authority. There was
therefore no basis in law to grant the relief sought.
Nevertheless, this Court in equity granted the sum
of P100,000.00, out of the P1,380,000.00 claimed
as commission, by way of compensation for the
efforts and assistance rendered by the agent in
the transaction prior to the expiration of his
authority. These consist in offering the lot for sale
to the eventual buyer, sending follow-up letters,
inviting the buyer to dinner and luncheon
meetings, etc.
Parallel circumstances obtain in the case at bar. It
was petitioner who advised Glaxo, Philippines of
the availability of the warehouse property and
aroused its interest over the same. Through
petitioner, respondent DBP was directly informed
of the existence of an interested buyer.
Petitioner's persistence in communicating with
respondent DBP reinforced the seriousness of the
offer. This piece of information no doubt had a
bearing on the subsequent decisions made by
respondent DBP as regards the disposition of its
properties.
Petitioner claims the amount of P1,203,500.00
awarded by the trial court as commission
computed at five percent of the sale price of the
warehouse
property.
Under
the
foregoing
disquisition and following the precedent, as well
as roughly the proportion, set in Prats, the Court
in equity grants petitioner the sum of One
Hundred Thousand Pesos (Pl00,000.00) for the
role it played in the transaction between
respondent DBP and buyer Glaxo, Philippines. It is
emphasized, however, that the circumstances that
came into play in this case do not meet the
minimum legal standards required for the
existence of an agency relationship and that the
award is based purely on equity considerations.
Accordingly, petitioner's other arguments need
not now be discussed.
WHEREFORE, the decision appealed from is
hereby AFFIRMED, with the MODIFICATION that in
equity respondent DBP is ordered to pay petitioner
the amount of One Hundred Thousand Pesos
(P100,000.00). No pronouncement as to costs.

Thereafter, Teofilo Purisima introduced Oscar de

Leon to Gregorio as a prospective buyer.

Domingo v. Domingo
Petitioner-appellant Vicente M. Domingo, now
deceased and represented by his heirs, Antonina
Raymundo vda. de Domingo, Ricardo, Cesar,
Amelia, Vicente Jr., Salvacion, Irene and Joselito,
all surnamed Domingo, sought the reversal of the
majority decision dated, March 12, 1969 of the
Special Division of Five of the Court of Appeals
affirming the judgment of the trial court, which
sentenced the said Vicente M. Domingo to pay
Gregorio M. Domingo P2,307.50 and the
intervenor Teofilo P. Purisima P2,607.50 with
interest on both amounts from the date of the
filing of the complaint, to pay Gregorio Domingo
P1,000.00 as moral and exemplary damages and
P500.00 as attorney's fees plus costs.
The following facts were found to be established
by the majority of the Special Division of Five of
the Court of Appeals:
In a document Exhibit "A" executed on June 2,
1956, Vicente M. Domingo granted Gregorio
Domingo, a real estate broker, the exclusive
agency to sell his lot No. 883 of Piedad Estate with
an area of about 88,477 square meters at the rate
of P2.00 per square meter (or for P176,954.00)
with a commission of 5% on the total price, if the
property is sold by Vicente or by anyone else
during the 30-day duration of the agency or if the
property is sold by Vicente within three months
from the termination of the agency to apurchaser
to whom it was submitted by Gregorio during the
continuance of the agency with notice to Vicente.
The said agency contract was in triplicate, one
copy was given to Vicente, while the original and
another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the
intervenor Teofilo P. Purisima to look for a buyer,
promising him one-half of the 5% commission.

Oscar de Leon submitted a written offer which was

very much lower than the price of P2.00 per
square meter (Exhibit "B"). Vicente directed
Gregorio to tell Oscar de Leon to raise his offer.
After several conferences between Gregorio and
Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by
Exhibit "C", to which Vicente agreed by signing
Exhibit "C". Upon demand of Vicente, Oscar de
Leon issued to him a check in the amount of
P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00. Oscar
de Leon confirmed his former offer to pay for the
property at P1.20 per square meter in another
letter, Exhibit "D". Subsequently, Vicente asked
for an additional amount of P1,000.00 as earnest
money, which Oscar de Leon promised to deliver
to him. Thereafter, Exhibit "C" was amended to
the effect that Oscar de Leon will vacate on or
about September 15, 1956 his house and lot at
Denver Street, Quezon City which is part of the
purchase price. It was again amended to the
effect that Oscar will vacate his house and lot on
December 1, 1956, because his wife was on the
family way and Vicente could stay in lot No. 883 of
Piedad Estate until June 1, 1957, in a document
dated June 30, 1956 (the year 1957 therein is a
mere typographical error) and marked Exhibit "D".
Pursuant to his promise to Gregorio, Oscar gave
him as a gift or propina the sum of One Thousand
Pesos (P1,000.00) for succeeding in persuading
Vicente to sell his lot at P1.20 per square meter or
a total in round figure of One Hundred Nine
Thousand Pesos (P109,000.00). This gift of One
Thousand Pesos (P1,000.00) was not disclosed by
Gregorio to Vicente. Neither did Oscar pay Vicente
the additional amount of One Thousand Pesos
(P1,000.00) by way of earnest money. In the deed
of sale was not executed on August 1, 1956 as
stipulated in Exhibit "C" nor on August 15, 1956 as
extended by Vicente, Oscar told Gregorio that he
did not receive his money from his brother in the
United States, for which reason he was giving up
the negotiation including the amount of One
Thousand Pesos (P1,000.00) given as earnest
money to Vicente and the One Thousand Pesos
(P1,000.00) given to Gregorio as propina or gift.
When Oscar did not see him after several weeks,
Gregorio sensed something fishy. So, he went to
Vicente and read a portion of Exhibit "A" marked
habit "A-1" to the effect that Vicente was still
committed to pay him 5% commission, if the sale
is consummated within three months after the
expiration of the 30-day period of the exclusive
agency in his favor from the execution of the

agency contract on June 2, 1956 to a purchaser

brought by Gregorio to Vicente during the said 30day period. Vicente grabbed the original of Exhibit
"A" and tore it to pieces. Gregorio held his peace,
not wanting to antagonize Vicente further,
because he had still duplicate of Exhibit "A". From
his meeting with Vicente, Gregorio proceeded to
the office of the Register of Deeds of Quezon City,
where he discovered Exhibit "G' deed of sale
executed on September 17, 1956 by Amparo Diaz,
wife of Oscar de Leon, over their house and lot No.
40 Denver Street, Cubao, Quezon City, in favor
Vicente as down payment by Oscar de Leon on
the purchase price of Vicente's lot No. 883 of
Piedad Estate. Upon thus learning that Vicente
sold his property to the same buyer, Oscar de
Leon and his wife, he demanded in writting
payment of his commission on the sale price of
One Hundred Nine Thousand Pesos (P109,000.00),
Exhibit "H". He also conferred with Oscar de Leon,
who told him that Vicente went to him and asked
him to eliminate Gregorio in the transaction and
that he would sell his property to him for One
Hundred Four Thousand Pesos (P104,000.0 In
Vicente's reply to Gregorio's letter, Exhibit "H",
Vicente stated that Gregorio is not entitled to the
5% commission because he sold the property not
to Gregorio's buyer, Oscar de Leon, but to another
buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that
Exhibit "A", the exclusive agency contract, is
genuine; that Amparo Diaz, the vendee, being the
wife of Oscar de Leon the sale by Vicente of his
property is practically a sale to Oscar de Leon
since husband and wife have common or identical
interests; that Gregorio and intervenor Teofilo
Purisima were the efficient cause in the
consummation of the sale in favor of the spouses
Oscar de Leon and Amparo Diaz; that Oscar de
Leon paid Gregorio the sum of One Thousand
Pesos (P1,000.00) as "propina" or gift and not as
additional earnest money to be given to the
plaintiff, because Exhibit "66", Vicente's letter
addressed to Oscar de Leon with respect to the
additional earnest money, does not appear to
have been answered by Oscar de Leon and
therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid
an additional earnest money of One Thousand
Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand
Pesos (P1,000.00) paid by Oscar de Leon to
Vicente as earnest money, evidenced by the letter
Exhibit "4"; and that Vicente did not even mention
such additional earnest money in his two replies
Exhibits "I" and "J" to Gregorio's letter of demand
of the 5% commission.

The three issues in this appeal are (1) whether the

failure on the part of Gregorio to disclose to
Vicente the payment to him by Oscar de Leon of
the amount of One Thousand Pesos (P1,000.00) as
gift or "propina" for having persuaded Vicente to
reduce the purchase price from P2.00 to P1.20 per
square meter, so constitutes fraud as to cause a
forfeiture of his commission on the sale price; (2)
whether Vicente or Gregorio should be liable
directly to the intervenor Teofilo Purisima for the
latter's share in the expected commission of
Gregorio by reason of the sale; and (3) whether
the award of legal interest, moral and exemplary
damages, attorney's fees and costs, was proper.
Unfortunately, the majority opinion penned by
Justice Edilberto Soriano and concurred in by
Justice Juan Enriquez did not touch on these issues
which were extensively discussed by Justice
Magno Gatmaitan in his dissenting opinion.
However, Justice Esguerra, in his concurring
opinion, affirmed that it does not constitute
breach of trust or fraud on the part of the broker
and regarded same as merely part of the whole
process of bringing about the meeting of the
minds of the seller and the purchaser and that the
commitment from the prospect buyer that he
would give a reward to Gregorio if he could effect
better terms for him from the seller, independent
of his legitimate commission, is not fraudulent,
because the principal can reject the terms offered
by the prospective buyer if he believes that such
terms are onerous disadvantageous to him. On
the other hand, Justice Gatmaitan, with whom
Justice Antonio Cafizares corner held the view that
such an act on the part of Gregorio was fraudulent
and constituted a breach of trust, which should
deprive him of his right to the commission.
The duties and liabilities of a broker to his
employer are essentially those which an agent
owes to his principal. 1
Consequently, the decisive legal provisions are in
found Articles 1891 and 1909 of the New Civil
Code.
Art. 1891. Every agent is bound to
render
an
account
of
his
transactions and to deliver to the
principal whatever he may have
received by virtue of the agency,
even though it may not be owing to
the principal.
Every stipulation exempting the
agent from the obligation to render
an account shall be void.

xxx xxx xxx

Art. 1909. The agent is responsible
not only for fraud but also for
negligence, which shall be judged
with more less rigor by the courts,
according to whether the agency
was or was not for a compensation.
Article 1891 of the New Civil Code amends Article
17 of the old Spanish Civil Code which provides
that:
Art. 1720. Every agent is bound to
give an account of his transaction
and to pay to the principal whatever
he may have received by virtue of
the agency, even though what he
has received is not due to the
principal.
The modification contained in the first paragraph
Article 1891 consists in changing the phrase "to
pay" to "to deliver", which latter term is more
comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition
designed to stress the highest loyalty that is
required to an agent condemning as void any
stipulation exempting the agent from the duty and
liability imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a
reinstatement of Article 1726 of the old Spanish
Civil Code which reads thus:
Art. 1726. The agent is liable not
only for fraud, but also for
negligence, which shall be judged
with more or less severity by the
courts, according to whether the
agency was gratuitous or for a price
or reward.

The aforecited provisions demand the utmost

good faith, fidelity, honesty, candor and fairness
on the part of the agent, the real estate broker in
this case, to his principal, the vendor. The law
imposes upon the agent the absolute obligation to
make a full disclosure or complete account to his
principal of all his transactions and other material
facts relevant to the agency, so much so that the
law as amended does not countenance any
stipulation exempting the agent from such an
obligation and considers such an exemption as
void. The duty of an agent is likened to that of a
trustee. This is not a technical or arbitrary rule but
a rule founded on the highest and truest principle
of morality as well as of the strictest justice. 2
Hence, an agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same to
his principal, the vendor, is guilty of a breach of
his loyalty to the principal and forfeits his right to
collect the commission from his principal, even if
the principal does not suffer any injury by reason
of such breach of fidelity, or that he obtained
better results or that the agency is a gratuitous
one, or that usage or custom allows it; because
the rule is to prevent the possibility of any wrong,
not to remedy or repair an actual damage. 3 By
taking such profit or bonus or gift or propina from
the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for
hisprincipal, who has a right to treat him, insofar
as his commission is concerned, as if no agency
had existed. The fact that the principal may have
been benefited by the valuable services of the
said agent does not exculpate the agent who has
only himself to blame for such a result by reason
of his treachery or perfidy.
This Court has been consistent in the rigorous
application of Article 1720 of the old Spanish Civil
Code. Thus, for failure to deliver sums of money
paid to him as an insurance agent for the account
of his employer as required by said Article 1720,
said insurance agent was convicted estafa. 4 An
administrator of an estate was likewise under the
same Article 1720 for failure to render an account
of his administration to the heirs unless the heirs
consented thereto or are estopped by having
accepted the correctness of his account previously
rendered. 5
Because of his responsibility under the aforecited
article 1720, an agent is likewise liable for estafa
for failure to deliver to his principal the total
amount collected by him in behalf of his principal
and cannot retain the commission pertaining to
him by subtracting the same from his collections. 6

A lawyer is equally liable unnder said Article 1720

if he fails to deliver to his client all the money and
property received by him for his client despite his
attorney's lien. 7 The duty of a commission agent
to render a full account his operations to his
principal was reiterated in Duhart, etc. vs.
Macias. 8
The American jurisprudence on this score is wellnigh unanimous.
Where a principal has paid an agent
or broker a commission while
ignorant of the fact that the latter
has been unfaithful, the principal
may recover back the commission
paid, since an agent or broker who
has been unfaithful is not entitled to
any compensation.
xxx xxx xxx
In discussing the right of the
principal to recover commissions
retained by an unfaithful agent, the
court in Little vs. Phipps (1911) 208
Mass. 331, 94 NE 260, 34 LRA (NS)
1046, said: "It is well settled that
the agent is bound to exercise the
utmost good faith in his dealings
with his principal. As Lord Cairns
said, this rule "is not a technical or
arbitrary rule. It is a rule founded on
the highest and truest principles, of
morality." Parker
vs.
McKenna (1874)
LR
10,Ch(Eng)
96,118 ... If the agent does not
conduct himself with entire fidelity
towards his principal, but is guilty of
taking a secret profit or commission
in regard the matter in which he is
employed, he loses his right to
compensation on the ground that
he has taken a position wholly
inconsistent with that of agent for
his employer, and which gives his
employer, upon discovering it, the
right to treat him so far as
compensation,
at
least,
is
concerned as if no agency had
existed. This may operate to give to
the principal the benefit of valuable
services rendered by the agent, but
the agent has only himself to blame
for that result."
xxx xxx xxx

The intent with which the agent

took a secret profit has been held
immaterial where the agent has in
fact entered into a relationship
inconsistent with his agency, since
the law condemns the corrupting
tendency
of
the
inconsistent
relationship. Little vs. Phipps (1911)
94 NE 260. 9
As a general rule, it is a breach of
good faith and loyalty to his
principal for an agent, while the
agency exists, so to deal with the
subject matter thereof, or with
information acquired during the
course of the agency, as to make a
profit out of it for himself in excess
of his lawful compensation; and if
he does so he may be held as a
trustee and may be compelled to
account to his principal for all
profits, advantages, rights, or
privileges acquired by him in such
dealings, whether in performance
or in violation of his duties, and be
required to transfer them to his
principal upon being reimbursed for
his expenditures for the same,
unless the principal has consented
to or ratified the transaction
knowing that benefit or profit would
accrue or had accrued, to the
agent,
or
unless
with
such
knowledge he has allowed the
agent so as to change his condition
that he cannot be put in status quo.
The application of this rule is not
affected by the fact that the
principal did not suffer any injury by
reason of the agent's dealings or
that he in fact obtained better
results; nor is it affected by the fact
that there is a usage or custom to
the contrary or that the agency is a
gratuitous
one.
(Emphasis
applied.) 10
In the case at bar, defendant-appellee Gregorio
Domingo as the broker, received a gift
or propina in the amount of One Thousand Pesos
(P1,000.00) from the prospective buyer Oscar de
Leon, without the knowledge and consent of his
principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial
monetary gift corrupted his duty to serve the
interests only of his principal and undermined his
loyalty to his principal, who gave him partial

advance of Three Hundred Pesos (P300.00) on his

commission. As a consequence, instead of
exerting his best to persuade his prospective
buyer to purchase the property on the most
advantageous terms desired by his principal, the
broker,
herein
defendant-appellee
Gregorio
Domingo, succeeded in persuading his principal to
accept the counter-offer of the prospective buyer
to purchase the property at P1.20 per square
meter or One Hundred Nine Thousand Pesos
(P109,000.00) in round figure for the lot of 88,477
square meters, which is very much lower the the
price of P2.00 per square meter or One Hundred
Seventy-Six Thousand Nine Hundred Fifty-Four
Pesos (P176,954.00) for said lot originally offered
by his principal.
The duty embodied in Article 1891 of the New
Civil Code will not apply if the agent or broker
acted only as a middleman with the task of merely
bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms
and conditions of the transaction. Neither would
the rule apply if the agent or broker had informed
the principal of the gift or bonus or profit he
received from the purchaser and his principal did
not object therto. 11 Herein defendant-appellee
Gregorio Domingo was not merely a middleman of
the petitioner-appellant Vicente Domingo and the
buyer Oscar de Leon. He was the broker and
agent of said petitioner-appellant only. And therein
petitioner-appellant was not aware of the gift of
One Thousand Pesos (P1,000.00) received by
Gregorio Domingo from the prospective buyer;
much less did he consent to his agent's accepting
such a gift.
The fact that the buyer appearing in the deed of
sale is Amparo Diaz, the wife of Oscar de Leon,
does not materially alter the situation; because
the transaction, to be valid, must necessarily be
with the consent of the husband Oscar de Leon,
who is the administrator of their conjugal assets
including their house and lot at No. 40 Denver
Street, Cubao, Quezon City, which were given as
part of and constituted the down payment on, the
purchase price of herein petitioner-appellant's lot
No. 883 of Piedad Estate. Hence, both in law and

in fact, it was still Oscar de Leon who was the

buyer.
As a necessary consequence of such breach of
trust, defendant-appellee Gregorio Domingo must
forfeit his right to the commission and must return
the part of the commission he received from his
principal.
Teofilo Purisima, the sub-agent of Gregorio
Domingo, can only recover from Gregorio
Domingo his one-half share of whatever amounts
Gregorio Domingo received by virtue of the
transaction as his sub-agency contract was with
Gregorio Domingo alone and not with Vicente
Domingo, who was not even aware of such subagency. Since Gregorio Domingo received from
Vicente Domingo and Oscar de Leon respectively
the amounts of Three Hundred Pesos (P300.00)
and One Thousand Pesos (P1,000.00) or a total of
One Thousand Three Hundred Pesos (P1,300.00),
one-half of the same, which is Six Hundred Fifty
Pesos (P650.00), should be paid by Gregorio
Domingo to Teofilo Purisima.
Because Gregorio Domingo's clearly unfounded
complaint caused Vicente Domingo mental
anguish and serious anxiety as well as wounded
feelings, petitioner-appellant Vicente Domingo
should be awarded moral damages in the
reasonable amount of One Thousand Pesos
(P1,000.00) attorney's fees in the reasonable
amount of One Thousand Pesos (P1,000.00),
considering that this case has been pending for
the last fifteen (15) years from its filing on
October 3, 1956.
WHEREFORE, the judgment is hereby rendered,
reversing the decision of the Court of Appeals and
directing defendant-appellee Gregorio Domingo:
(1) to pay to the heirs of Vicente Domingo the
sum of One Thousand Pesos (P1,000.00) as moral
damages and One Thousand Pesos (P1,000.00) as
attorney's fees; (2) to pay Teofilo Purisima the
sum of Six Hundred Fifty Pesos (P650.00); and (3)
to pay the costs.