[ G.R. No.
 117660, December 18, 2000 ]
AGRO CONGLOMERATES, INC. AND MARIO SORIANO, PETITIONERS, VS.
THE HON. COURT OF APPEALS AND REGENT SAVINGS AND LOAN BANK,
INC., RESPONDENTS.
DECISION
QUISUMBING, J.:
This is a petition for review challenging the decision [1] dated October 17,
1994 of the Court of Appeals in CA-G.R. No. 32933, which affirmed in
toto the judgment of the Manila Regional Trial Court, Branch 27, in
consolidated Cases Nos. 86-37374, 86-37388, 86-37543.
This petition springs from three complaints for sums of money filed by
respondent bank against herein petitioners. In the decision of the Court of
Appeals, petitioners were ordered to pay respondent bank, as follows:
Wherefore, judgment is hereby rendered in favor of plaintiff and against
defendants, as follows:
1) In Civil Case No. 86-37374, defendants [petitioners, herein] are ordered
jointly and severally, to pay to plaintiff the amount of P78,212.29,
together with interest and service charge thereon, at the rates of 14%
and 3% per annum, respectively, computed from November 10, 1982,
until fully paid, plus stipulated penalty on unpaid principal at the rate of
6% per annum, computed from November 10, 1982, plus 15% as
liquidated damage plus 10% of the total amount due, as attorney's fees,
plus costs;
2) In Civil Case No. 86-37388, defendant is ordered to pay plaintiff the
amount of P632,911.39, together with interest and service charge
thereon at the rate of 14% and 3% per annum, respectively, computed
from January 15, 1983, until fully paid, plus stipulated penalty on unpaid
principal at the rate of 6% per annum, computed from January 15, 1983,
plus liquidated damages equivalent to 15% of the total amount due,
plus attorney's fees equivalent to 10% of the total amount due, plus
costs; and
 
3) In Civil Case No. 86-37543, defendant is ordered to pay plaintiff, on the
first cause of action, the amount of P510,000.00, together with interest
and service charge thereon, at the rates of 14% and 2% per annum,
respectively, computed from March 13, 1983, until fully paid, plus a
penalty of 6% per annum, based on the outstanding principal of the
loan, computed from March 13, 1983, until fully paid; and on the second
cause of action, the amount of P494,936.71, together with interest and
service charge thereon at the rates of 14% and 2%, per annum,
respectively, computed from March 30, 1983, until fully paid, plus a
penalty charge of 6% per annum, based on the unpaid principal,
computed from March 30, 1983, until fully paid, plus (on both causes of
action) an amount equal to 15% of the total amounts due, as liquidated
damages, plus attorney's fees equal to 10% of the total amounts due,
plus costs.[2]
Based on the records, the following are the factual antecedents.
On July 17, 1982, petitioner Agro Conglomerates, Inc. as vendor, sold two
parcels of land to Wonderland Food Industries, Inc. In their Memorandum
of Agreement,[3] the parties covenanted that the purchase price of Five
Million (P5,000,000.00) Pesos would be settled by the vendee, under the
following terms and conditions: (1) One Million (P1,000,000.00) Pesos shall
be paid in cash upon the signing of the agreement; (2) Two Million
1
(P2,000,000.00) Pesos worth of common shares of stock of the Wonderland
Food Industries, Inc.; and (3) The balance of P2,000,000.00 shall be paid in
four equal installments, the first installment falling due, 180 days after the
signing of the agreement and every six months thereafter, with an interest
rate of 18% per annum, to be advanced by the vendee upon the signing of
the agreement.
On July 19, 1982, the vendor, the vendee, and the respondent bank Regent
Savings & Loan Bank (formerly Summa Savings & Loan Association),
executed an Addendum[4]to the previous Memorandum of Agreement. The
new arrangement pertained to the revision of settlement of the initial
payments of P1,000,000.00 and prepaid interest of P360,000.00 (18% of
P2,000,000.00) as follows:
Whereas, the parties have agreed to qualify the stipulated terms for the
payment of the said ONE MILLION THREE HUNDRED SIXTY THOUSAND
(P1,360,000.00) PESOS.
WHEREFORE, in consideration of the mutual covenant and agreement of the
parties, they do further covenant and agree as follows:
1. That the VENDEE instead of paying the amount of ONE MILLION
THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS in cash,
hereby authorizes the VENDOR to obtain a loan from Summa
Savings and Loan Association with office address at Valenzuela,
Metro Manila, being represented herein by its President, Mr. Jaime
Cariño and referred to hereafter as Financier; in the amount of ONE
MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00)PESOS,
plus interest thereon at such rate as the VENDEE and the Financier
may agree, which amount shall cover the ONE MILLION
(P1,000,000.00) PESOS cash which was agreed to be paid upon
signing of the Memorandum of Agreement, plus 18% interest on the
balance of two million pesos stipulated upon in Item No. 1(c) of the
2
said agreement; provided however, that said loan shall be made for
and in the name of the VENDOR.
2. The VENDEE also agrees that the full amount of ONE MILLION
THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS be paid
directly to the VENDOR; however, the VENDEE hereby undertakes
to pay the full amount of the said loan to the Financier on such
terms and conditions agreed upon by the Financier and the
VENDOR, it being understood that while the loan will be secured
from and in the name of the VENDOR, the VENDEE will be the one
liable to pay the entire proceeds thereof including interest and
other charges.[5]
This addendum was not notarized.
Consequently, petitioner Mario Soriano signed as maker several promissory
notes,[6] payable to the respondent bank. Thereafter, the bank released the
proceeds of the loan to petitioners. However, petitioners failed to meet
their obligations as they fell due. During that time, the bank was
experiencing financial turmoil and was under the supervision of the Central
Bank. Central Bank examiner and liquidator Cordula de Jesus, endorsed the
subject promissory notes to the bank's counsel for collection. The bank gave
petitioners opportunity to settle their account by extending payment due
dates. Mario Soriano manifested his intention to re-structure the loan, yet
did not show up nor submit his formal written request.
Respondent bank filed three separate complaints before the Regional Trial
Court of Manila for Collection of Sums of money. The corresponding case
histories are illustrated in the table below:
Payment Payment Extension
Date of Loan Amount
Due Date Dates
Civil Case 86-37374 August
 shows the weakness of its stand that Wonderland is answerable to make
12, 1982 Nov. 10, Feb. 8, 1983 May 9, said payments.[7]
P 78,212.29
1982 1983 Aug. 7, 1983
Petitioners appealed to the Court of Appeals. The trial court's decision was
affirmed by the appellate court.
Civil Case 86-37388 July 19,
1982 P May 16, 1983 Aug. 14, Hence, this recourse, wherein petitioners raise the sole issue of:
Jan. 15, 1983
632,911.39 1983
WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
ADDENDUM, SIGNED BY THE PETITIONERS, RESPONDENT BANK AND
WONDERLAND INC., CONSTITUTES A NOVATION OF THE CONTRACT BY
Civil Case 86-
P March 13, June 11, 1983 Sept. 9, SUBSTITUTION OF DEBTOR, WHICH EXEMPTS THE PETITIONERS FROM ANY
37543 September 14, 1982
510,000.00 1983 1983 LIABILITY OVER THE PROMISSORY NOTES.

October 1, 1982
P March 30, June 28, 1983 Sept.
494,936.71 1983 26, 1983
In their answer, petitioners interposed the defense of novation and insisted
there was a valid substitution of debtor. They alleged that the addendum
specifically states that although the promissory notes were in their names,
Wonderland shall be responsible for the payment thereof.
The trial court held that petitioners are liable, to wit:
The evidences, however, disclose that Wonderland did not comply with its
obligation under said `Addendum' (Exh. `S') as the agreement to turn over
the farmland to it, did not materialize (57 tsn, May 29, 1990), and there was,
actually no sale of the land (58 tsn, ibid). Hence, Wonderland is not
answerable. And since the loans obtained under the four promissory notes
(Exhs. `A', `C', `G', and `E') have not been paid, despite opportunities given
by plaintiff to defendants to make payments, it stands to reason that
defendants are liable to pay their obligations thereunder to plaintiff. In fact,
defendants failed to file a third-party complaint against Wonderland, which
3
Revealed by the facts on record, the conflict among the parties started from
a contract of sale of a farmland between petitioners and Wonderland Food
Industries, Inc. As found by the trial court, no such sale materialized.
A contract of sale is a reciprocal transaction. The obligation or promise of
each party is the cause or consideration for the obligation or promise by the
other. The vendee is obliged to pay the price, while the vendor must deliver
actual possession of the land. In the instant case the original plan was that
the initial payments would be paid in cash. Subsequently, the parties (with
the participation of respondent bank) executed an addendum providing
instead, that the petitioners would secure a loan in the name of Agro
Conglomerates Inc. for the total amount of the initial payments, while the
settlement of said loan would be assumed by Wonderland. Thereafter,
petitioner Soriano signed several promissory notes and received the
proceeds in behalf of petitioner-company.
By this time, we note a subsidiary contract of suretyship had taken effect
since petitioners signed the promissory notes as maker and accommodation
party for the benefit of Wonderland. Petitioners became liable as
accommodation party. An accommodation party is a person who has signed
the instrument as maker, acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his name to some other person and
is liable on the instrument to a holder for value, notwithstanding such
holder at the time of taking the instrument knew (the signatory) to be an
accommodation party.[8] He has the right, after paying the holder, to obtain
reimbursement from the party accommodated, since the relation between
them has in effect become one of principal and surety, the accommodation
party being the surety.[9] Suretyship is defined as the relation which exists
where one person has undertaken an obligation and another person is also
under the obligation or other duty to the obligee, who is entitled to but one
performance, and as between the two who are bound, one rather than the
other should perform.[10] The surety's liability to the creditor or promisee of
the principal is said to be direct, primary and absolute; in other words, he is
directly and equally bound with the principal. [11] And the creditor may
proceed against any one of the solidary debtors. [12]
We do not give credence to petitioners' assertion that, as provided by the
addendum, their obligation to pay the promissory notes was novated by
"substitution" of a new debtor, Wonderland. Contrary to petitioners'
contention, the attendant facts herein do not make a case of novation.
Novation is the extinguishment of an obligation by the substitution or
change of the obligation by a subsequent one which extinguishes or
modifies the first, either by changing the object or principal conditions,
or by substituting another in place of the debtor, or by subrogating a third
person in the rights of the creditor. [13] In order that a novation can take
place, the concurrence of the following requisites [14] are indispensable:
1) There must be a previous valid obligation;
2) There must be an agreement of the parties concerned to a new contract;
3) There must be the extinguishment of the old contract; and
4
4) There must be the validity of the new contract.
In the instant case, the first requisite for a valid novation is lacking. There
was no novation by "substitution" of debtor because there was no prior
obligation which was substituted by a new contract. It will be noted that the
promissory notes, which bound the petitioners to pay, were executed after
the addendum. The addendum modified the contract of sale, not the
stipulations in the promissory notes which pertain to the surety contract. At
this instance, Wonderland apparently assured the payment of future debts
to be incurred by the petitioners. Consequently, only a contract of surety
arose. It was wrong for petitioners to presume a novation had taken place.
The well-settled rule is that novation is never presumed, [15] it must be clearly
and unequivocally shown.[16]
As it turned out, the contract of surety between Wonderland and the
petitioners was extinguished by the rescission of the contract of sale of the
farmland. With the rescission, there was confusion or merger in the persons
of the principal obligor and the surety, namely the petitioners herein. The
addendum which was dependent thereon likewise lost its efficacy.
It is true that the basic and fundamental rule in the interpretation of
contract is that, if the terms thereof are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning shall control.
However, in order to judge the intention of the parties, their
contemporaneous and subsequent acts should be considered. [17]
The contract of sale between Wonderland and petitioners did not
materialize. But it was admitted that petitioners received the proceeds of
the promissory notes obtained from respondent bank.
Sec. 22 of the Civil Code provides:
Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him.
Petitioners had no legal or just ground to retain the proceeds of the loan at
the expense of private respondent. Neither could petitioners excuse
themselves and hold Wonderland still liable to pay the loan upon the
rescission of their sales contract. If petitioners sustained damages as a result
of the rescission, they should have impleaded Wonderland and asked
damages. The non-inclusion of a necessary party does not prevent the court
from proceeding in the action, and the judgment rendered therein shall be
without prejudice to the rights of such necessary party. [18] But respondent
appellate court did not err in holding that petitioners are duty-bound under
the law to pay the claims of respondent bank from whom they had obtained
the loan proceeds.
WHEREFORE, the petition is DENIED for lack of merit. The assailed decision
of the Court of Appeals dated October 17, 1994 is AFFIRMED. Costs against
petitioners.
SO ORDERED.
5
[ G.R. No. 163720, December 16, 2004 ]
GENEVIEVE LIM, PETITIONER, VS. FLORENCIO SABAN, RESPONDENT.
DECISION
TINGA, J,:
Before the Court is a Petition for Review on Certiorari assailing
the Decision[1] dated October 27, 2003 of the Court of Appeals, Seventh
Division, in CA-G.R. V No. 60392.[2]
The late Eduardo Ybañez (Ybañez), the owner of a 1,000-square meter lot in
Cebu City (the “lot”), entered into an Agreement and Authority to Negotiate
and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on
February 8, 1994. Under the Agency Agreement, Ybañez authorized Saban
to look for a buyer of the lot for Two Hundred Thousand Pesos
(P200,000.00) and to mark up the selling price to include the amounts
needed for payment of taxes, transfer of title and other expenses incident
to the sale, as well as Saban’s commission for the sale. [3]
Through Saban’s efforts, Ybañez and his wife were able to sell the lot to the
petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim
(the Spouses Lim) on March 10, 1994. The price of the lot as indicated in
the Deed of Absolute Sale is Two Hundred Thousand Pesos (P200,000.00).
[4]
 It appears, however, that the vendees agreed to purchase the lot at the
price of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and
other incidental expenses of the sale. After the sale, Lim remitted to Saban
the amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven
Pesos (P113,257.00) for payment of taxes due on the transaction as well as
Fifty Thousand Pesos (P50,000.00) as broker’s commission. [5] Lim also issued
in the name of Saban four postdated checks in the aggregate amount of
Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos
(P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check
No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647
dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26,
1994 for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June
20, 1994 for P168,000.00.
Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In
the letter Ybañez asked Lim to cancel all the checks issued by her in Saban’s
favor and to “extend another partial payment” for the lot in his (Ybañez’s)
favor.[6]
After the four checks in his favor were dishonored upon presentment,
Saban filed a Complaint for collection of sum of money and damages against
Ybañez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3,
1994.[7] The case was assigned to Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to
purchase the lot for P600,000.00, i.e., with a mark-up of Four Hundred
Thousand Pesos (P400,000.00) from the price set by Ybañez. Of the total
purchase price of P600,000.00, P200,000.00 went to Ybañez, P50,000.00
allegedly went to Lim’s agent, and P113,257.00 was given to Saban to cover
taxes and other expenses incidental to the sale. Lim also issued four (4)
postdated checks[8] in favor of Saban for the remaining P236,743.00. [9]
Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any
commission for the sale since he concealed the actual selling price of the lot
from Ybañez and because he was not a licensed real estate broker. Ybañez
was able to convince Lim to cancel all four checks.
Saban further averred that Ybañez and Lim connived to deprive him of his
sales commission by withholding payment of the first three checks. He also
claimed that Lim failed to make good the fourth check which was
6
dishonored because the account against which it was drawn was closed.
In his Answer, Ybañez claimed that Saban was not entitled to any
commission because he concealed the actual selling price from him and
because he was not a licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between
Ybañez and Saban, and that she issued stop payment orders for the three
checks because Ybañez requested her to pay the purchase price directly to
him, instead of coursing it through Saban. She also alleged that she agreed
with Ybañez that the purchase price of the lot was only P200,000.00.
Ybañez died during the pendency of the case before the RTC. Upon motion
of his counsel, the trial court dismissed the case only against him without
any objection from the other parties.[10]
On May 14, 1997, the RTC rendered its Decision[11] dismissing Saban’s
complaint, declaring the four (4) checks issued by Lim as stale and non-
negotiable, and absolving Lim from any liability towards Saban.
Saban appealed the trial court’s Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated
its Decision[12] reversing the trial court’s ruling. It held that Saban was
entitled to his commission amounting to P236,743.00. [13]
The Court of Appeals ruled that Ybañez’s revocation of his contract of
agency with Saban was invalid because the agency was coupled with an
interest and Ybañez effected the revocation in bad faith in order to deprive
Saban of his commission and to keep the profits for himself. [14]
The appellate court found that Ybañez and Lim connived to deprive Saban
of his commission. It declared that Lim is liable to pay Saban the amount of
the purchase price of the lot corresponding to his commission because she
issued the four checks knowing that the total amount thereof corresponded
to Saban’s commission for the sale, as the agent of Ybañez. The appellate
court further ruled that, in issuing the checks in payment of Saban’s
commission, Lim acted as an accommodation party. She signed the checks
as drawer, without receiving value therefor, for the purpose of lending her
name to a third person. As such, she is liable to pay Saban as the holder for
value of the checks.[15]
Lim filed a Motion for Reconsideration of the appellate court’s Decision, but
her Motion was denied by the Court of Appeals in a Resolution dated May 6,
2004.[16]
Not satisfied with the decision of the Court of Appeals, Lim filed the present
petition.
Lim argues that the appellate court ignored the fact that after paying her
agent and remitting to Saban the amounts due for taxes and transfer of
title, she paid the balance of the purchase price directly to Ybañez. [17]
She further contends that she is not liable for Ybañez’s debt to Saban under
the Agency Agreement as she is not privy thereto, and that Saban has no
one but himself to blame for consenting to the dismissal of the case against
Ybañez and not moving for his substitution by his heirs. [18]
Lim also assails the findings of the appellate court that she issued the checks
as an accommodation party for Ybañez and that she connived with the latter
to deprive Saban of his commission.[19]
Lim prays that should she be found liable to pay Saban the amount of his
commission, she should only be held liable to the extent of one-third (1/3)
of the amount, since she had two co-vendees (the Spouses Lim) who should
share such liability.[20]
7
In his Comment, Saban maintains that Lim agreed to purchase the lot for
P600,000.00, which consisted of the P200,000.00 which would be paid to
Ybañez, the P50,000.00 due to her broker, the P113,257.00 earmarked for
taxes and other expenses incidental to the sale and Saban’s commission as
broker for Ybañez. According to Saban, Lim assumed the obligation to pay
him his commission. He insists that Lim and Ybañez connived to unjustly
deprive him of his commission from the negotiation of the sale. [21]
The issues for the Court’s resolution are whether Saban is entitled to receive
his commission from the sale; and, assuming that Saban is entitled thereto,
whether it is Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result
reached by the Court of Appeals.
The Court affirms the appellate court’s finding that the agency was not
revoked since Ybañez requested that Lim make stop payment orders for the
checks payable to Saban only after the consummation of the sale on March
10, 1994. At that time, Saban had already performed his obligation as
Ybañez’s agent when, through his (Saban’s) efforts, Ybañez executed
the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of his contract of
agency with Ybañez which expressly states that Saban would be entitled to
any excess in the purchase price after deducting the P200,000.00 due to
Ybañez and the transfer taxes and other incidental expenses of the sale. [22]
In Macondray & Co. v. Sellner,[23] the Court recognized the right of a broker
to his commission for finding a suitable buyer for the seller’s property even
though the seller himself consummated the sale with the buyer. [24] The
Court held that it would be in the height of injustice to permit the principal
to terminate the contract of agency to the prejudice of the broker when he
had already reaped the benefits of the broker’s efforts.
In Infante v. Cunanan, et al.,[25] the Court upheld the right of the brokers to
their commissions although the seller revoked their authority to act in his
behalf after they had found a buyer for his properties and negotiated the
sale directly with the buyer whom he met through the brokers’ efforts. The
Court ruled that the seller’s withdrawal in bad faith of the brokers’ authority
cannot unjustly deprive the brokers of their commissions as the seller’s duly
constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to
the present case, especially considering that Saban had completely
performed his obligations under his contract of agency with Ybañez by
finding a suitable buyer to preparing the Deed of Absolute Sale between
Ybañez and Lim and her co-vendees. Moreover, the contract of agency very
clearly states that Saban is entitled to the excess of the mark-up of the price
of the lot after deducting Ybañez’s share of P200,000.00 and the taxes and
other incidental expenses of the sale.
However, the Court does not agree with the appellate court’s
pronouncement that Saban’s agency was one coupled with an interest.
Under Article 1927 of the Civil Code, an agency cannot be revoked if a
bilateral contract depends upon it, or if it is the means of fulfilling an
obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the
management is unjustifiable. Stated differently, an agency is deemed as one
coupled with an interest where it is established for the mutual benefit of the
principal and of the agent, or for the interest of the principal and of third
persons, and it cannot be revoked by the principal so long as the interest of
the agent or of a third person subsists. In an agency coupled with an
interest, the agent’s interest must be in the subject matter of the power
conferred and not merely an interest in the exercise of the power because it
8
entitles him to compensation. When an agent’s interest is confined to
earning his agreed compensation, the agency is not one coupled with an
interest, since an agent’s interest in obtaining his compensation as such
agent is an ordinary incident of the agency relationship. [26]
Saban’s entitlement to his commission having been settled, the Court must
now determine whether Lim is the proper party against whom Saban should
address his claim.
Saban’s right to receive compensation for negotiating as broker for Ybañez
arises from the Agency Agreement between them. Lim is not a party to the
contract. However, the record reveals that she had knowledge of the fact
that Ybañez set the price of the lot at P200,000.00 and that the P600,000.00
—the price agreed upon by her and Saban—was more than the amount set
by Ybañez because it included the amount for payment of taxes and for
Saban’s commission as broker for Ybañez.
According to the trial court, Lim made the following payments for the lot:
P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly
to Ybañez, or a total of Five Hundred Sixty Three Thousand Two Hundred
Fifty Seven Pesos (P563,257.00).[27] Lim, on the other hand, claims that on
March 10, 1994, the date of execution of the Deed of Absolute Sale, she paid
directly to Ybañez the amount of One Hundred Thousand Pesos
(P100,000.00) only, and gave to Saban P113,257.00 for payment of taxes
and P50,000.00 as his commission,[28] and One Hundred Thirty Thousand
Pesos (P130,000.00) on June 28, 1994,[29] or a total of Three Hundred Ninety
Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybañez, for
his part, acknowledged that Lim and her co-vendees paid him P400,000.00
which he said was the full amount for the sale of the lot. [30] It thus appears
that he received P100,000.00 on March 10, 1994, acknowledged receipt
(through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for
commission, and received the balance of P130,000.00 on June 28, 1994.
Thus, a total of P230,000.00 went directly to Ybañez. Apparently, although
the amount actually paid by Lim was P393,257.00, Ybañez rounded off the
amount to P400,000.00 and waived the difference.
Lim’s act of issuing the four checks amounting to P236,743.00 in Saban’s
favor belies her claim that she and her co-vendees did not agree to
purchase the lot at P600,000.00. If she did not agree thereto, there would
be no reason for her to issue those checks which is the balance of
P600,000.00 less the amounts of P200,000.00 (due to Ybañez), P50,000.00
(commission), and the P113,257.00 (taxes). The only logical conclusion is
that Lim changed her mind about agreeing to purchase the lot at
P600,000.00 after talking to Ybañez and ultimately realizing that Saban’s
commission is even more than what Ybañez received as his share of the
purchase price as vendor. Obviously, this change of mind resulted to the
prejudice of Saban whose efforts led to the completion of the sale between
the latter, and Lim and her co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is
enlightening for the facts therein are similar to the circumstances of the
present case. In that case, Consejo Infante asked Jose Cunanan and Juan
Mijares to find a buyer for her two lots and the house built thereon for
Thirty Thousand Pesos (P30,000.00) . She promised to pay them five percent
(5%) of the purchase price plus whatever overprice they may obtain for the
property. Cunanan and Mijares offered the properties to Pio Noche who in
turn expressed willingness to purchase the properties. Cunanan and Mijares
thereafter introduced Noche to Infante. However, the latter told Cunanan
and Mijares that she was no longer interested in selling the property and
asked them to sign a document stating that their written authority to act as
her agents for the sale of the properties was already cancelled.
Subsequently, Infante sold the properties directly to Noche for Thirty One
Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan and
Mijares to their commission, explaining that—
9
…[Infante] had changed her mind even if respondent had found a buyer
who was willing to close the deal, is a matter that would not give rise to a
legal consequence if [Cunanan and Mijares] agreed to call off the
transaction in deference to the request of [Infante]. But the situation varies
if one of the parties takes advantage of the benevolence of the other and
acts in a manner that would promote his own selfish interest. This act is
unfair as would amount to bad faith. This act cannot be sanctioned without
according the party prejudiced the reward which is due him. This is the
situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante]
took advantage of the services rendered by [Cunanan and Mijares], but
believing that she could evade payment of their commission, she made use
of a ruse by inducing them to sign the deed of cancellation….This act of
subversion cannot be sanctioned and cannot serve as basis for [Infante] to
escape payment of the commission agreed upon. [31]
The appellate court therefore had sufficient basis for concluding that Ybañez
and Lim connived to deprive Saban of his commission by dealing with each
other directly and reducing the purchase price of the lot and leaving nothing
to compensate Saban for his efforts.
Considering the circumstances surrounding the case, and the undisputed
fact that Lim had not yet paid the balance of P200,000.00 of the purchase
price of P600,000.00, it is just and proper for her to pay Saban the balance
of P200,000.00.
Furthermore, since Ybañez received a total of P230,000.00 from Lim, or an
excess of P30,000.00 from his asking price of P200,000.00, Saban may claim
such excess from Ybañez’s estate, if that remedy is still available, [32] in view
of the trial court’s dismissal of Saban’s complaint as against Ybañez, with
Saban’s express consent, due to the latter’s demise on November 11, 1994.
[33]
The appellate court however erred in ruling that Lim is liable on the checks
because she issued them as an accommodation party. Section 29 of the of an accommodation party.
Negotiable Instruments Law defines an accommodation party as a person
“who has signed the negotiable instrument as maker, drawer, acceptor or WHEREFORE, in view of the foregoing, the petition is DISMISSED.
indorser, without receiving value therefor, for the purpose of lending his
name to some other person.” The accommodation party is liable on the SO ORDERED.
instrument to a holder for value even though the holder at the time of
taking the instrument knew him or her to be merely an accommodation
party. The accommodation party may of course seek reimbursement from
the party accommodated.[34]

As gleaned from the text of Section 29 of the Negotiable Instruments Law,

the accommodation party is one who meets all these three requisites, viz:
(1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he
did not receive value for the signature; and (3) he signed for the purpose of
lending his name to some other person. In the case at bar, while Lim signed
as drawer of the checks she did not satisfy the two other remaining
requisites.

The absence of the second requisite becomes pellucid when it is noted at

the outset that Lim issued the checks in question on account of her
transaction, along with the other purchasers, with Ybañez which was a sale
and, therefore, a reciprocal contract. Specifically, she drew the checks in
payment of the balance of the purchase price of the lot subject of the
transaction. And she had to pay the agreed purchase price in consideration
for the sale of the lot to her and her co-vendees. In other words, the
amounts covered by the checks form part of the cause or consideration
from Ybañez’s end, as vendor, while the lot represented the cause or
consideration on the side of Lim, as vendee. [35] Ergo, Lim received value for
her signature on the checks.

Neither is there any indication that Lim issued the checks for the purpose of
enabling Ybañez, or any other person for that matter, to obtain credit or to
raise money, thereby totally debunking the presence of the third requisite
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