Facts
- Eduardo Ybañez (the principal), owner of a lot in Cebu City, engaged respondent Florencio Saban (the agent/broker) as his agent to find a buyer.
- The arrangement was that Ybañez wanted a fixed net amount for the land, and that whatever Saban could obtain above that figure would answer for the taxes, the transfer expenses, and Saban's commission.
- Saban found petitioner Genevieve Lim (the third person/buyer) and her co-buyers. The sale was concluded at a price of ₱600,000, and the Deed of Absolute Sale was executed.
- Consistently with the arrangement, Lim issued four postdated checks payable to Saban, representing the amount above Ybañez's net, out of which Saban's commission was to come. (The checks being drawn in the broker's own name, the buyer knew from the outset that this slice of the price she owed was earmarked for his commission.)
- Ybañez then wrote to Lim asking her to cancel the checks and to make no further payment to Saban, alleging that Saban had inflated the price and was not entitled to any commission.
- Lim complied, stopping payment on the checks.
- Saban sued Lim and Ybañez to collect.
- Regional Trial Court — complaint dismissed. The Regional Trial Court dismissed his complaint.
- Court of Appeals — reversed. The Court of Appeals reversed and ordered Lim to pay Saban the amount of the checks.
Issue
- Whether Saban is entitled to his commission notwithstanding Ybañez's attempt to revoke the agency and repudiate the arrangement.
- Whether Lim, the buyer, may be held liable to pay Saban directly.
Ruling
- Yes. Saban had already performed and earned his commission; the agency was coupled with an interest and could not be revoked so as to defeat it.
- Yes. Lim is liable to pay Saban the amount of the cancelled checks.
Ratio
1. Saban Had Fully Performed
- The Court began with the simple fact that Saban had done what he was engaged to do: he found the buyer, negotiated, and the sale was consummated.
- A broker's right to compensation vests once he is the procuring cause of the sale.
- Ybañez's later dissatisfaction — expressed only after he had received the benefit — could not undo a right already earned.
2. The Agency Was Coupled with an Interest
- Saban's compensation was not a sum payable out of Ybañez's general funds.
- It was to be taken from the excess of the purchase price itself.
- His interest attached to the subject matter of the transaction, not merely to the fruits of his labour in the abstract.
- An agency in which the agent has such a stake is coupled with an interest and cannot be revoked at the principal's pleasure to the agent's prejudice.
- Article 1927 and the settled jurisprudence recognise that where an agency is created for the mutual benefit of principal and agent, or serves as the means of satisfying an obligation already contracted, revocation at will is not permitted.
3. Ybañez's Revocation Was Ineffective and in Bad Faith
- Ybañez sought to revoke after the sale had been perfected and the checks issued — that is, after the agency had accomplished its object.
- A principal may not revoke an agency in order to appropriate the fruits of the agent's work and escape the compensation he agreed to.
- Even in an ordinary agency, revocation in bad faith renders the principal liable in damages.
4. Lim's Liability
- Lim knew of the arrangement — she had issued the checks to Saban precisely because his commission was to be paid from the excess.
- She then stopped payment at Ybañez's request, knowing that the money was Saban's due.
- Having acted on that knowledge, she cannot retain the amount.
- She must pay it to the person for whom it was intended.
- The Court also noted that Ybañez received his agreed net amount in full, so Lim's payment to Saban imposes no double burden.
Doctrine
- Agency coupled with an interest. Where the agent's compensation is to be drawn from the proceeds of the very transaction he was engaged to accomplish, his interest is in the subject matter, and the agency is irrevocable to his prejudice.
- Earned commission cannot be revoked away. A principal may not terminate the agency after the agent has procured the sale in order to avoid paying the commission; such a revocation is in bad faith and gives rise to liability.
- Third-person liability. A buyer who knows the broker's commission is payable out of a portion of the price, and who withholds that portion at the seller's instance, may be ordered to pay the broker directly.