In Genevieve Lim v. Florencio Saban, the Supreme Court addressed the right of a real estate broker to receive a commission after successfully negotiating a sale. The Court ruled that a seller cannot unjustly deprive a broker of their commission by directly dealing with the buyer and reducing the purchase price to exclude the broker’s share, especially after the broker has fully performed their obligations.

The Broker’s Plight: Can a Seller Cut Them Out After a Successful Negotiation?

This case revolves around an agency agreement where Florencio Saban was authorized by Eduardo Ybañez to find a buyer for a lot in Cebu City. Saban successfully negotiated a sale to Genevieve Lim for P600,000, which included the land cost, taxes, and Saban’s commission. However, Ybañez later requested Lim to cancel the checks issued for Saban’s commission, leading Saban to file a complaint for collection of sum of money and damages. The central legal question is whether Saban is entitled to receive his commission, and if so, whether Lim is liable to pay it, despite not being a party to the original agency agreement.

The Supreme Court affirmed the Court of Appeals’ decision that Saban was indeed entitled to his commission. The Court emphasized that after Saban successfully found a buyer and the sale was completed, Ybañez could not revoke the agency agreement to avoid paying the commission. This principle is rooted in the idea that a principal cannot benefit from an agent’s services and then attempt to deny the agent their due compensation.

The ruling drew on established jurisprudence, citing Macondray & Co. v. Sellner and Infante v. Cunanan, et al., which affirmed a broker’s right to commission even when the seller directly consummated the sale or revoked the agent’s authority after a buyer was found. These precedents underscore the principle of fairness and prevent sellers from unjustly enriching themselves at the expense of their agents. The Court highlighted that Saban had fully performed his obligations by finding a suitable buyer and preparing the Deed of Absolute Sale.

The Court also clarified that while the agency was not one coupled with an interest, Saban’s entitlement to his commission was based on the successful completion of the sale through his efforts. An agency coupled with an interest exists when it is created for the mutual benefit of both the principal and the agent, not merely for the agent’s compensation. Despite this distinction, the critical factor remained that Saban had fulfilled his contractual obligations.

Regarding Lim’s liability, the Court found that although she was not a party to the original agency agreement, her knowledge of the agreed-upon purchase price of P600,000, which included Saban’s commission, made her liable. Her issuance of checks covering Saban’s commission was a tacit acknowledgment of this obligation. The Court thus considered the actions of both Ybañez and Lim, who connived to deprive Saban of his rightful commission by dealing with each other directly and reducing the purchase price, a situation which the Court would not countenance. However, the Supreme Court clarified that Lim could not be considered an accommodation party under the Negotiable Instruments Law, emphasizing that Lim did receive value from the checks she issued and did not issue them to lend credit to someone else.

Ultimately, the Supreme Court concluded that Lim was obligated to pay Saban the balance of P200,000 due to the circumstances of the case and the fact that she had not yet fully paid the purchase price. Furthermore, Saban was also granted the remedy to potentially claim the excess amount received by Ybañez from Ybañez’s estate.

FAQs

What was the key issue in this case?	The key issue was whether a real estate broker was entitled to their commission after successfully negotiating a sale, even if the seller attempted to avoid payment by dealing directly with the buyer.
What did the agency agreement stipulate?	The agreement authorized Saban to find a buyer for Ybañez’s lot at P200,000, with any amount above that belonging to Saban as commission and to cover taxes and other sale-related expenses.
Why did Ybañez ask Lim to cancel the checks?	Ybañez requested the cancellation, claiming Saban was not entitled to a commission because he allegedly concealed the actual selling price and wasn’t a licensed broker.
What was Lim’s defense in the case?	Lim argued she wasn’t privy to the agency agreement and issued stop payment orders because Ybañez requested direct payment to him.
What did the Court of Appeals decide?	The Court of Appeals reversed the trial court, ruling that Saban was entitled to his commission because the agency wasn’t validly revoked and Ybañez acted in bad faith.
Did the Supreme Court agree with the Court of Appeals?	Yes, the Supreme Court agreed that Saban was entitled to his commission but clarified that the agency was not “coupled with interest”.
Was Lim considered an accommodation party?	No, the Supreme Court ruled that Lim was not an accommodation party, as she issued the checks in payment for the land she and the other buyers acquired and thus, received value for it.
What amount was Lim required to pay Saban?	Lim was required to pay Saban P200,000, representing the balance of the agreed purchase price that remained unpaid.

This case clarifies that sellers cannot avoid paying commissions to brokers who have successfully facilitated a sale. The decision emphasizes the importance of honoring agency agreements and ensuring that brokers are fairly compensated for their efforts. The ruling serves as a reminder that principals cannot benefit from the agent’s work and then claim ignorance of the agreement. Further, remedies from the estate of the seller may still be had.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Genevieve Lim v. Florencio Saban, G.R. No. 163720, December 16, 2004