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232 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

*
G.R. No. 163720. December 16, 2004.

GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN,

respondent.

Civil Law; Agency; 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 recognized by the Court.—In
Macondray & Co. v. Sellner, 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. 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.
Same; Same; The seller’s withdrawal in bad faith of the broker’s
authority cannot unjustly deprive the brokers of their commission as the
seller’s duly constituted agents.—In Infante v. Cunanan, et al., 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.
Same; Same; Agency Coupled with an Interest; 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.—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

_______________

* SECOND DIVISION.

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is established for the mutual benefit of the principal and of the agent, or for
the interest of the principal and of third persons, and it cannot be revoked by
the principal so long as the interest of the agent or of a third person subsists.
In an agency coupled with an interest, the agent’s interest must be in the
subject matter of the power conferred and not merely an interest in the
exercise of the power because it entitles him to compensation. When an
agent’s interest is confined to earning his agreed compensation, the agency
is not one coupled with an interest, since an agent’s interest in obtaining his
compensation as such agent is an ordinary incident of the agency
relationship.
Commercial Law; Negotiable Instruments Law; Requisites of an
Accommodation Party.—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.

PETITION for review on certiorari of a decision of the Court of

Appeals.

The facts are stated in the opinion of the Court.

     Palermo C. Belciña, Jr. for petitioner.
     Basilio E. Duaban for private respondent.

TINGA, J.:

Before the Court is a Petition for Review on Certiorari assailing the

1
Decision dated October 27, 2003 of the Court of Appeals, Seventh
2
Division, in CA-G.R. V No. 60392.

_______________

1 Penned by Associate Justice Edgardo P. Cruz and concurred in by Associate

Justices Ruben T. Reyes and Noel G. Tijam.
2 Florencio Saban, Plaintiff-Appellant v. Eduardo Ybanez and Genevieve Lim,
Defendants; Genevieve Lim, Defendant-Appellee.

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234 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

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
3
as Saban’s commission for the sale.
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
4
Hundred Thousand Pesos (P200,000.00). It appears, however, that
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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

_______________

3 The agency agreement between Ybañez and Saban provides:

. . . That I[,] Engr. Eduardo Ybañez . . . have agreed and allowed to (sic) Mr. Florencio Saban,
Sr. and his associate to look for a buyer, and further agreed to sell and dispose the above-
mention (sic) lot, at the price of P200.00 per square meters [sic] (equivalent to P200,000.00)
net, and any amount over and above for the stated price resulting from the sale shall belong to
Mr. Florencio Saban, Sr. and his associate. Furthermore it is agreed and covenanted that the
total expenses covering the sale and transfer of the title such as, capital gain (sic) tax,
documentary stamp, transfer tax and other relative expenses, for the said sale shall be borne to
the agent, and or to the buyer, except the payment of realty taxes. (RTC Records, p. 5)

4 RTC Records, p. 6.

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5
(P50,000.00) as broker’s commission. 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 6“extend another partial
payment” for the lot in his (Ybañez’s) favor.
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
7
Trial Court (RTC) of Cebu City on August 3, 1994. 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 8
incidental to the sale. Lim also issued four (4) postdated checks in
9
favor of Saban for the remaining P236,743.00.

_______________

5 Lim on direct examination, TSN, March 3, 1997, p. 8; Rose Villarosa (Lim’s

broker) on direct examination, TSN, October 22, 1996, p. 7.
6 RTC Records, p. 25.

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7 Id., at p. 1.
8 Annexes “B” to “E”, RTC Records, pp. 32-35.
9 Id., at p. 2.

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236 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

Saban alleged that Ybañez told Lim that he (Saban) was not entitled
to any commission for the sale since he concealed the actual selling
price of the lot from Ybañez and because he was not a licensed real
estate broker. Ybañez was able to convince Lim to cancel all four
checks.
Saban further averred that Ybañez and Lim connived to deprive
him of his sales commission by withholding payment of the first
three checks. He also claimed that Lim failed to make good the
fourth check which was dishonored because the account against
which it was drawn was closed.
In his Answer, Ybañez claimed that Saban was not entitled to any
commission because he concealed the actual selling price from him
and because he was not a licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement
between Ybañez and Saban, and that she issued stop payment orders
for the three checks because Ybañez requested her to pay the
purchase price directly to him, instead of coursing it through Saban.
She also alleged that she agreed with Ybañez that the purchase price
of the lot was only P200,000.00.
Ybañez died during the pendency of the case before the RTC.
Upon motion of his counsel, the trial court dismissed the 10
case only
against him without any objection from the other parties.
11
On May 14, 1997, the RTC rendered its Decision 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.

_______________

10 Order dated March 6, 1995, RTC Records, p. 48.

11 Rollo, pp. 29-39.

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12
On October 27, 2003, the appellate court promulgated its Decision
reversing the trial court’s ruling. It held that
13
Saban was entitled to
his commission amounting to P236,743.00.
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
14
Saban of his commission and to keep the
profits for himself.
The appellate court found that Ybañez and Lim connived to
deprive Saban of his commission. It declared that Lim is liable to
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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,15
she is liable to pay Saban as the
holder for value of the checks.
Lim filed a Motion for Reconsideration of the appellate court’s
Decision, but her Motion was 16denied by the Court of Appeals in a
Resolution dated May 6, 2004.
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

_______________

12 Rollo, pp. 22-28.

13 The amount of the purchase price less the P200,000.00 payable to Ybañez and
the incidental expenses of the sale.
14 Rollo, pp. 25-26.
15 Id., at p. 27.
16 Rollo, p. 46.

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238 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

due for taxes and transfer of title,

17
she paid the balance of the
purchase price directly to Ybañez.
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
18
substitution by his heirs.
Lim also assails the findings of the appellate court that she issued
the checks as an accommodation party for Ybañez and that she
19
connived with the latter to deprive Saban of his commission.
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-
20
vendees (the Spouses Lim) who should share such liability.
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
21
commission from the negotiation of the sale.
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.

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17 Petition, Id., at p. 17.

18 Id., at pp. 14 and 16.
19 Id., at p. 18.
20 Id., at p. 17.
21 Id., at pp. 114-115.

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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
22
incidental expenses of the sale. 23
In Macondray & Co. v. Sellner, the Court recognized the right
of a broker to his commission for finding a suitable buyer for the
seller’s property even
24
though the seller himself consummated the
sale with the buyer. 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.
25
In Infante v. Cunanan, et al., 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

_______________

22 Supranote 3.
23 33 Phil. 370 (1916).
24 Id., at p. 377.
25 93 Phil. 691 (1953).

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240 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

brokers’ authority cannot unjustly deprive the brokers of their

commissions as the seller’s duly constituted agents.

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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 markup of the price of the lot after
deducting Ybañez’s share of P200,000.00 and the taxes and other
incidental expenses of the sale.
However, the Court does not agree with the appellate court’s
pronouncement that Saban’s agency was one coupled with an
interest. Under Article 1927 of the Civil Code, an agency cannot be
revoked if a bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a partner is
appointed manager of a partnership in the contract of partnership
and his removal from the management is unjustifiable. Stated
differently, an agency is deemed as one coupled with an interest
where it is established for the mutual benefit of the principal and of
the agent, or for the interest of the principal and of third persons, and
it cannot be revoked by the principal so long as the interest of the
agent or of a third person subsists. In an agency coupled with an
interest, the agent’s interest must be in the subject matter of the
power conferred and not merely an interest in the exercise of the
power because it entitles him to compensation. When an agent’s
interest is confined to earning his agreed compensation, the agency
is not one coupled with an interest, since an agent’s interest in
obtaining his compensation as such agent is an ordinary incident of
26
the agency relationship.

_______________

26 See I RESTATEMENT OF THE LAW IN AGENCY 2d 340 (1957).

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Lim vs. Saban

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 27
Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00).
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
28
as his commission, and One Hundred 29
Thirty Thousand Pesos
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29
(P130,000.00) on June 28, 1994, 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
30
for the sale of the lot. 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 bal-

_______________

27 RTC Decision, Rollo, p. 33.

28 TSN, March 3, 1997, p. 8.
29 Id., see also, Acknowledgement Receipt issued by Ybañez in favor of Lim, RTC
Records, p. 114.
30 See Acknowledgement Receipt dated June 28, 1994, Id., and Ybañez’s Affidavit
dated June 28, 1994, Id., at p. 115.

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242 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

ance 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 covendees. 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

243

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Lim vs. Saban

Thousand Pesos (P31,000.00). The Court upheld the right of

Cunanan and Mijares to their commission, explaining that—

. . . [Infante] had changed her mind even if respondent had found a buyer
who was willing to close the deal, is a matter that would not give rise to a
legal consequence if [Cunanan and Mijares] agreed to call off the
transaction in deference to the request of [Infante]. But the situation varies if
one of the parties takes advantage of the benevolence of the other and acts
in a manner that would promote his own selfish interest. This act is unfair as
would amount to bad faith. This act cannot be sanctioned without according
the party prejudiced the reward which is due him. This is the situation in
which [Cunanan and Mijares] were placed by [Infante]. [Infante] took
advantage of the services rendered by [Cunanan and Mijares], but believing
that she could evade payment of their commission, she made use of a ruse
by inducing them to sign the deed of cancellation . . . . This act of
subversion cannot be sanctioned and cannot serve as basis for [Infante] to
31
escape payment of the commission agreed upon.

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
32
that remedy is still available, in view of the trial court’s dismissal
of Saban’s complaint as against Ybañez,

_______________

31 Supranote 25, at pp. 695-96.

32 Rule 86 (Claims Against Estate), Revised Rules of Court.

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244 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

with Saban’s express 33

consent, due to the latter’s demise on
November 11, 1994.
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 in-dorser, 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.

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The accommodation party may of course seek reimbursement from

34
the party accommodated.
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

_______________

33 Order of the RTC dated March 6, 1995, RTC Records, p. 48.

34 Agro Conglomerates, Inc. v. Court of Appeals, G.R. No. 117660, December 18,
2000, 348 SCRA 450; Bank of the Philippine Islands v. Court of Appeals, 383 Phil.
538; 326 SCRA 641 (2000).

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VOL. 447, DECEMBER 16, 2004 245

Lim vs. Saban

of the cause or consideration from Ybañez’s end, as vendor, while

the lot represented
35
the cause or consideration on the side of Lim, as
vendee. Ergo, Lim received value for her signature on the checks.
Neither is there any indication that Lim issued the checks for the
purpose of enabling Ybañez, or any other person for that matter, to
obtain credit or to raise money, thereby totally debunking the
presence of the third requisite of an accommodation party.
WHEREFORE, in view of the foregoing, the petition is
DISMISSED.
SO ORDERED.

          Puno (Chairman), Austria-Martinez and Chico-Nazario,

JJ.,concur.
     Callejo, Sr., J., On Leave.

Petition dismissed.

Note.—Agents working on commission basis will not normally

pass up a commission by not informing their principal of a referred
buyer. (People vs. Castillo, 333 SCRA 506 [2000])

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35 SeeArts. 1350 and 1458, Civil Code.

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