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.

233

VOL. 447, DECEMBER 16, 2004 233

Lim vs. Saban

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 1a Petition for Review on Certiorari

assailing the Decision dated October 27, 2003 of the Court
2
of Appeals, Seventh 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.

234

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
3
to the sale, as well 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 4
Sale is Two Hundred Thousand Pesos
(P200,000.00). 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

_______________

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.

235

VOL. 447, DECEMBER 16, 2004 235

Lim vs. Saban

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 “extend
another6
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 incidental8
to the sale. Lim also issued four (4)
postdated checks
9
in 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.
7 Id., at p. 1.
8 Annexes “B” to “E”, RTC Records, pp. 32-35.
 9 Id., at p. 2.

236

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 case only10against 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.

237

VOL. 447, DECEMBER 16, 2004 237

 Lim vs. Saban

On October12
27, 2003, the appellate court promulgated its
Decision reversing the trial court’s ruling. It held that
Saban was 13entitled 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 14Saban 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 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 15
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 denied16 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.

238

238 SUPREME COURT REPORTS ANNOTATED

Lim vs. Saban

due for taxes and transfer of title, she

17
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 against18
Ybañez and not moving for his 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 connived
19
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-vendees
20
(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 21
of his 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.

_______________

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.

239

VOL. 447, DECEMBER 16, 2004 239

Lim vs. Saban

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 the22 transfer taxes and other 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 though 24
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).

240

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.
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 26
agent is an ordinary
incident of the agency relationship.

_______________

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

241

VOL. 447, DECEMBER 16, 2004 241

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 Three 27
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 28
for payment of taxes and P50,000.00
as his commission, and One Hundred 29
Thirty Thousand
Pesos (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
P400,000.0030
which he said was the full amount 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.

242

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

VOL. 447, DECEMBER 16, 2004 243

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
31
for [Infante] to
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 excess32
from Ybañez’s estate, if 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.

244

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. The accommodation party
may of course 34
seek reimbursement from 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).

245

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])

——o0o——

_______________

35 SeeArts. 1350 and 1458, Civil Code.

246

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