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Nichimen Corporation (Manila Branch) vs. CA, CTA, G.R. No.

139674, March 6, 2002

[G.R. No. 139674. March 6, 2002]


NICHIMEN CORPORATION (MANILA BRANCH), petitioner, vs. THE HON.
COURT OF APPEALS, THE HON. COURT OF TAX APPEALS AND THE
HONORABLE COMMISSIONER OF INTERNAL REVENUE, respondents.
Facts: Petitioner Nichimen Corporation is a resident foreign corporation, organized
and existing under the laws of Japan, authorized to do business in the Philippines. It
maintains a Manila branch in dealing with its Philippine customers.
Petitioner received from the Commissioner of Internal Revenue a demand letter with
an accompanying notice assessing it for deficiency income tax, fixed tax, expanded
withholding tax, and percentage tax in the aggregate amount of P1,092,459.94,
inclusive of increments, for the fiscal year ended 31 March 1987.
(di ko na nilagay yung break down yung mga total na lang)
FY-3-31-87
Deficiency
COLLECTIBLE P34,005.03

Income

Tax

TOTAL

AMOUNT

DUE

AND

FY-3-31-87 Deficiency Fixed Tax (As Importer/Exporter) - TOTAL AMOUNT DUE AND
COLLECTIBLE P 975.00
FY-3-31-87 Deficiency Expanded Withholding Tax - TOTAL AMOUNT DUE AND
COLLECTIBLE P 25,237.90
FY-3-31-87 Deficiency Withholding Tax on Compensation - TOTAL AMOUNT DUE AND
COLLECTIBLE P264,710.91
FY-3-31-87
Deficiency
Percentage
COLLECTIBLE P767,531.10[1]

Tax

TOTAL

AMOUNT

DUE

AND

Petitioner, through its external auditors Sycip, Gorres Velayo & Co. (SGV & Co.),
protested the foregoing assessment in its letter. Respondent Commissioner
withdrew the assessment for fixed tax but sustained the other assessments.[2] On
07 November 1991, petitioner finally agreed to pay in full its deficiency income tax,
expanded withholding tax, and withholding tax on compensation. The payment was
shown per Central Bank Confirmation Receipt No. B24068532 in the total amount of
P313,953.84. Petitioner, however, continued to oppose the assessment for
deficiency percentage tax amounting to P767,531.10.
On 06 November 1991, it filed with the Court of Tax Appeals a petition for review,
alleging materially that the subject assessment was devoid of legal basis. It
submitted:

The assessment for deficiency percentage tax (brokers tax) is based on respondents
allegations that the compensation received by petitioner from its Head Office for
soliciting orders from Philippine customers should be subject to brokers tax. We
most respectfully disagree with this position.
The liaising activities of the Branch is performed for its own Head Office. Hence, it is
not an activity that is rendered for another person, but for itself because NICHIMEN
(Head Office) and NICHIMEN (Manila Branch) are but one, single entity.
A broker is one who acts as a negotiator or middleman to close a deal between one
person and another. A broker is necessarily distinct from the party for which he
renders service. In a transaction involving a broker there are three (3) separate and
distinct entities; the principal, the broker, and the buyer.
In the case at bar only two parties are involved NICHIMEN (Head Office) and the
Philippine customers, the Manila branch being an integral part of the Head
Office. Therefore, there could be no broker/agency transaction in instant
case. Accordingly, the amounts received by the Branch from its Head Office cannot
be considered commission or brokerage fees subject to brokers tax.[4]
Respondent Commissioner maintained that the assessment for deficiency
percentage tax was based on the findings of the Bureau of Internal Revenue which
showed that certain sales entered into between Philippine customers and foreign
manufacturers resulted from the liaising services rendered by petitioner, and
contended that the branch office should thus be considered a commercial broker in
accordance with Revenue Audit Memorandum Order No. 1-86, par. 3, subpar. 3.2., to
wit:
3. Branch Operation and Consequences
3.2. The branch solicits purchase orders from local buyers, relays the information to
its home office, the home office solicits prospective sellers abroad and eventually
received compensation for services rendered.
The Court of Tax Appeals, in its decision of 12 September 1996, sustained the
Commissioner
Issue: WON petitioner should be held liable to the deficiency percentage tax
(brokers tax) or not
Held: the Court of Appeals, in its decision promulgated on 13 August 1999,
sustained the findings of the Court of Tax Appeals. Holding petitioner to be a
commercial broker, the appellate court ratiocinated:
After assiduously evaluating the respective positions of the parties, we have come
to the conclusion that the assailed decision of the CTA is free from any reversible

error. It is essentially based on facts and information disclosed by petitioners own


documents as testified to by tax examiner Myrna Lou Tabije, to wit:
Ms. Myrna Lou Tabije, one of the examiners who investigated the instant tax case,
explained:
Q Now, according to this report, one of your findings is for deficiency brokers tax in
the amount of P718,851.68. Could you explain briefly the basis of this assessment?
A As stated here in the report, the brokers tax assessment here in this report is
based on the compensation, these are share of commission of the branch from the
head office or transactions wherein the branch solicits orders from local customers,
Philippine customers and notify the head office who in turn look for the commodities
that the Philippine branch needs. And another instance wherein the head office
orders the branch to look for local products wherein the branch merely monitors the
shipping to the importer of these local products. And the documents presented
there show that the[y] are merely the agent of the buyer and the seller. The head
office does not have records of sale and purchases of these imports and exports.
Q Now, you recommended a deficiency of P718,000.00 (sic) as brokers tax. How did
you arrive at this amount?
A In this docket, on page 181, this is the computation how we arrived at the
deficiency tax.
Q Where did you base the amount appearing in this computation of yours?
A These are taken from the documents presented to us by the taxpayer. This
amount was also computed here as shown in pages 155 to 158. (pp. 6-8, TSN,
Hearing on March 23, 1995.)[8]
Of particular interest are the Notes to Financial Statements submitted by the
petitioner no less which demonstrate that it had been receiving compensations and
commissions from its home office, the Nichimen Corporation in Japan, over and
above its fixed periodical subsidy. These compensations and commissions, by
petitioners own description, represented income computed at certain percentages
of invoice amounts of import-export transactions in the Philippines of the petitioner
and others, and import-export transactions in the Philippines of certain affiliates of
the Nichimen Corporation (Japan) and other parties. These are clearly indicative of
acts of a commercial broker. Above all, Mr. C. C. Gison of the Tax Division of SGV &
Co., external auditors of the petitioner, let the cat out of the bag, so to speak, when
in his letter of August 3, 1989, cited in the challenged CTA decision, he stated, inter
alia, that the petitioner is not liable for the deficiency fixed tax `as it is only
engaging in business as a broker. The petitioner never bothered to disown or
neutralize this highly damaging admission.

Section 157(t) of the National Internal Revenue Code defines a commercial broker to
include all persons, other than importers, manufacturers, producers, or bona
fide employees, who, for compensation or profit, sell or bring about sales or
purchases of merchandise for other persons, or bring proposed buyers and sellers
together, or negotiate freights or other business for owners of vessels, or other
means of transportation, or for the shippers, or consignors or consignees of freight
carried by vessels or other means of transportation. The term includes commission
merchant.
A broker, in general, is a middleman who acts for others, on a commission,
negotiating contracts relative to property with the custody of which he has no
concern; he is, in more ways than one, an agent of both parties.[10] His task is to
bring the parties together and to get them to come to an agreement.[11] A basic
characteristic of a broker is that he acts not for himself, but for a third person,
regardless of whether the fee paid to him is a fixed amount, regular or not, or
whether the act performed by him can be performed by the principal or not.
[12] Strictly, a commission merchant differs from a broker in that he may buy and
sell in his own name without having to disclose his principal, for which purpose, the
goods are placed in his possession and at his disposal, features that are not true in
the case of a broker.[13] The commission merchant thus maintains a relation not
only with the parties but also with the property subject matter of the transaction.
[14] A dealer buys and sells for his own account.

v. Compensation
a. gratuitous Art. 1875
ART. 1875. Agency is presumed to be for a compensation, unless there is
proof to the contrary. (n)
Agency presumed to be with compensation.
This article changes the rule in the old Civil Code (Art. 1711.) under which an
agency was presumed to be gratuitous. Hence, the agent does not have to prove
that the agency is for compensation. The prima facie presumption that the agency
is for a compensation may be contradicted by contrary evidence.
Necessity of compensation.
The relation of principal and agent can be created although the agent receives no
compensation.
A person who agrees to act as an agent without compensation is a gratuitous agent.
Ordinarily, the promise of a gratuitous agent to perform is not enforceable. He is,
however, bound by his acceptance to carry out the agency. (Art. 1884, par. 1.) The
fact that he is acting without compensation has no effect upon his rights and duties
with reference to the principal and to third parties.

However, the circumstance that the agency was for compensation or not, shall be
considered by the court in determining the extent of liability of an agent for fraud or
for negligence. (Art. 1909.)
The principal is liable for the damage to third persons caused by the torts of the
gratuitous agent whose services he accepted.
Liability of principal to pay compensation.
(1) Amount. The principal must pay the agent the compensation agreed upon, or
the reasonable value of the agents services if no compensation was specified. 33
(2) Compliance by agent with his obligations. The liability of the principal to pay
commission presupposes that the agent has complied with his obligation as such to
the principal.
Accordingly, a broker is entitled to the usual commissions whenever he brings to his
principal a party who is able and willing to take the property and enter into a valid
contract upon the terms then named by the principal, although the particulars may
be arranged and the matter negotiated and consummated between the principal
and the purchaser directly. It would be the height of injustice to permit the principal
then to withdraw the authority as against an express provision of the contract, and
reap the benefits of the agents labors, without being liable to him for his
commission. This would be to make the contract an unconscionable one, and would
offer a premium for fraud by enabling one of the parties to take advantage of his
own wrong and secure the labor of the other without remuneration. (Macondray &
Co. vs. Sellner, 33 Phil. 370 [1916]; Lim vs. Saban, 447 SCRA 232 [2004]; Perez de
Tagle vs. Luzon Surety Co., [C.A.] 28 O.G. 1213.) A broker is never entitled to
commission for unsuccessful efforts.
(a) Thus, a broker whose job is to effect a transaction in behalf of the principal is not
entitled to commission even if he finds or first contacts the buyer, shows him the
property involved, interests him in it, negotiates with him or even indirectly
influences him to come to terms, if he did not succeed in bringing about the sale
subsequently made on those terms by the principal to the same person through
another broker. (Quijano vs. Esguerra, [C.A.] 40 O.G. [Sup.
11] 166.)
(b) A broker or agent engaged in the sale of real estate is not limited to bring
vendor and vendee together and arranging the terms and conditions of a sale of
real estate. He must bring about the consummation of the contract of sale as to be
entitled to collect a commission. He is not entitled to compensation for merely
perfecting the contract, unless that right is clearly stipulated in the agreement with
the owner.
As sales of real estate must be in writing, the preparation of the necessary
documents for the transfer of the property sold in the absence of any contrary
agreement, is part of the functions of the broker. If he abandons the transaction
before the execution of such documents, he is not entitled to commission. (Quijano
vs. Soriano, 10 C.A. Rep. 198; J.M. Tuason & Co. vs. Collector of Internal Revenue,
108 Phil. 700 [1960].)
(c) An agent employed to secure a purchaser may sue for commission upon showing
that a purchaser whom he secured bought his principals property, even though the
principal did not know that the agent had referred the purchaser; but he is not
entitled to commission where the principal made a sale at a reduced price to one
whom he believed in good faith to be unconnected with the broker. (Teller, p. 153,
citing 142 A.L.R. 270; Offutt & Oldham vs. Winters, 227 Ky. 56.) Common practice is

for a buyer to inform the seller who referred him. Likewise, 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].)
(3) Procurring cause of the transaction. In many cases, complex negotiations are
involved in which it is difficult to determine whether the agent has been the one
responsible for the sale or purchase or other transaction. The governing rule is that
the agent must prove that he was the guiding cause for the transaction or, as has
been said, the procuring cause thereof, depending upon the facts of the particular
case (Teller, op. cit., p. 153, citing Note, 36 Harv. L. Rev. 875.); otherwise, he is not
entitled to the stipulated brokers commission. (Inland Realty Investment Service,
Inc. vs. Court of Appeals, 273 SCRA 70 [1997].) The term procuring cause in
describing a brokers activity, refers to a cause originating a series of events which,
without break in their continuity, result in the accomplishment of the prime
objective of the employment of the broker producing a purchaser ready, willing
and able to buy on the owners terms.
The brokers efforts must have been the foundation on which the negotiations
resulting in a sale began. In other words, the broker must be instrumental in the
consummation of the sale to be entitled to a commission. (Philippine Health Care
Providers, Inc. vs. Estrada, 542 SCRA 616 [2008].)
(4) Evasion of commission in bad faith. The principal cannot evade the payment
of the commission agreed upon by inducing the agent to sign a deed of cancellation
of the written authority given him after the agent had found a buyer who was able,
ready, and willing to close the deal under the terms prescribed by the principal on
the ground that she was no longer interested in the deal which was a mere
subterfuge, and later selling the property to said buyer. Such act is unfair as would
amount to bad faith, and cannot be sanctioned without according to the agent the
compensation which is due him. The sellers withdrawal in bad faith of the brokers
authority cannot unjustly deprive the broker of his commission as the sellers duly
constituted agent. (Infante vs. Cunanan, 93 Phil. 693 [1953]; Lim vs. Saban, 447
SCRA 232 [2004].)
(5) Compensation contingent on profits. Where the compensation is contingent or
dependent upon the realization of profit, the agent is not entitled to compensation
until the principal realizes the profit, and there is no profit as yet, through the mere
signing of the contract of sale. (Fiege & Brown vs. Smith, Bell & Co., 43 Phil. 118
[1922].)
(6) Reduction by principal of overprice. In a case, the principal agreed to give the
sales agent a commission equivalent to the overprice. The principal accepted a
lower price with the result that the principal was reduced from 2% to 1/2%. It was
held that the principal was liable for only 1/2% overprice as commission in the
absence of bad faith, fraud or fault on his part, which was not imputed to him. He
would be liable for the difference if he accepted the reduced price to prejudice the
agent. (Ramos vs. Court of Appeals, 63 SCRA 331 [1975].)
(7) Commission payable by owner of property sold. In a sale of real property
where a commission is payable to the agent, it is the owner and not the buyer who
must pay. (see Goduco vs. Court of Appeals and M.B. Castro, 10 SCRA 275 [1964].)
(8) Grant of compensation on equitable ground. The general rule is that a broker
or agent is not entitled to any commission until he has successfully done the job
given to him (see Ramos vs. Court of Appeals, supra.), especially where his
authority had already expired. Conversely, where his efforts are unsuccessful or
where there was no effort on his part, he has no right to demand compensation.

(9) Right of agents companion to compensation. Where there was no


understanding, express or implied, between the principal and his agent that no part
of the compensation to which the latter and as there is no prohibition in law
against the employment of a companion to look for a buyer of the principals land
nor is it against public policy such companion or helper is entitled to
compensation and may, therefore be joined with the agent as party to a case
against the principal for recovery of compensation, even if the principal never dealt,
directly or indirectly with such companion or helper. 35 (L.G. Marquez & Gutierrez Lora
vs.
Varela, 92 Phil. 373 [1952]; see Arts. 1892-1893.)
(10) Termination of agency contract. Where no time for the continuance of the
contract is fixed by its terms, either party is at liberty to terminate it at will, subject
only to the ordinary requirements of good faith. (Danon vs. Brimo & Co., 42 Phil. 133
[1921]; Ramos vs. Court of Appeals, 63 SCRA 331 [1975].)
(11) Validity of exclusive sales agency agreement. An exclusive sales agency
agreement providing that during the continuance of the agreement, the broker is
entitled to the commission irrespective as to whether the property is sold by the
broker, the seller, or a third party without the aid of the broker and that for a period
of three (3) months following its expiration, the broker may still be entitled to the
commission if the property were sold by the seller to a purchaser to whom it was
submitted by you (broker) during the continuance of such agency with notice to me
(seller) has been upheld as not contrary to law, good customs, or public policy. (see
Art. 1306.) Such agreement aims to pin down the seller to his obligation to give
what is due to his broker for his efforts during the life of the agency. It seeks to
prevent bad faith among calculating customers to the prejudice of the broker
particularly when the negotiations have reached that stage where it would be unfair
effected after the expiration of the brokers contract. (F. Calero & Co. vs. Navarette,
[C.A.] 540 O.G. 705, Nov. 14, 1957.)
(12) Sale through another agent. Where, however, no definite period was fixed by
the principal within which the broker might effect the sale of principals property nor
was he given by the principal the exclusive agency on such sale, it was held that the
broker cannot complain of the principals conduct in selling the property through
another agent before the brokers efforts were crowned with success for one who
has employed a broker can himself sell the property to a purchaser whom he has
procured, without any aid from the broker. (Subido vs. Iglesia ni Cristo, [C.A.] No.
9910-R, June 27, 1955.)
b. compensated Sec. 12, Canons of Professional Ethics;
CANONS OF PROFESSIONAL ETHICHS

12. Fixing the amount of the fee


In fixing fees, lawyers should avoid charges which over estimate their advice and
services, as well as those which undervalue them. A client's ability to pay cannot
justify a charge in excess of the value of the service, though his poverty may
require a less charge, or even none at all. The reasonable requests of brother
lawyers, and of their widows and orphans without ample means, should receive
special and kindly consideration.

In determining the amount of the fees, it is proper to consider: ( 1 ) the time and
labor required, the novelty and difficulty of the questions involved and the skill
required to properly conduct the cause; (2) whether the acceptance of employment
in the particular case will preclude the lawyer's appearance for others in cases likely
to arise out of the transaction, and in which there is a reasonable expectation that
otherwise he would be employed in the particular case or antagonisms with other
clients; (3) the customary charges of the bar for similar services; (4) the amount
involved in the controversy and the benefits resulting to the client from the
services; (5) the contingency or the certainty of the compensation; and (6) the
character of the employment, whether casual or for an established and constant
client. Not one of these considerations in itself is controlling. They are mere guides
in ascertaining the real value of the service.
In determining the customary charges of the bar for similar services, it is proper for
a lawyer to consider a schedule of minimum fees adopted by a bar association, but
no lawyer should permit himself to be controlled thereby or to follow it as his sole
guide in determining the amount of his fee.
In fixing fees, it should not be forgotten that the profession is a branch of the
administration of justice and not a mere money-getting trade.ch
- Tan v. Heirs of Antonio Yamson, 684 SCRA 442 [2012]
G.R. No. 163182
October 24, 2012

TOM TAN, ANNIE U. TAN and NATHANIEL TAN, Petitioners, vs. HEIRS OF
ANTONIO F. YAMSON, Respondents.
Facts: This case arose from the Complaint for Collection of Sum of Money and
Damages filed by Antonio F. Yamson (Yamson) against petitioners Tom Tan, Annie
Tan and Nathaniel Tan (petitioners) before the Regional Trial Court, Cebu City,
Branch 58 (RTC).3
Petitioners were owners of seven parcels of land located in Mandaue City. In order to
raise funds to meet their unpaid obligations to a certain Philip Lo, they decided to
sell their properties.4 They issued the Authority to Look for Buyer/Buyers on May 19,
1998 in favor of Yamson to facilitate their search for prospective buyers, the terms
of which are as follows:
I. Description of Lot: (no need to put it here because it talks only about the lot, area,
TCT, and T.D.#, and Total Area. However for you to know the Total Area, here it goes.
= 13,116 sq.m)
II. Price: Two Thousand Pesos (P 2,000.00) per sq.m.
III. Commission: Five Percent (5%)

IV. Expenses: All expenses shall be borne by the seller except transfer tax, re-survey
fee which will for (sic) the buyers account. It is expressly understood that if the
selling price (as stated above) is of (sic) the owner, overpricing by Mr. Antonio F.
Yamson and Co. is allowed, provided Capital Gains Tax & other related fees of the
said overprice shall be borne by Mr. Antonio F. Yamson and Co., Furthermore, in the
event of an overprice, brokers commission is waived.
V. Terms of Payment: Spot Cash
VI. Nature of Authority: Non-exclusive
VII. Period of Authority: Good up to June 30, 1998
VIII. Protection Clause: After Agent reports the name of his buyer to the Seller in
writing, he is entitled to his commission even after the expiration of his authority
provided the sale is consumed (sic) between the same buyer and seller within a
period of one year from date of submission of buyers name to the seller.5
Yamson informed petitioners in writing that he had found an interested buyer. The
letter, the text of which is quoted herein, was signed by petitioner Annie Tan to
acknowledge the registration of Oscar Chua (Chua) as Yamsons buyer:
Dear Miss Annie Tan,
We are pleased to register our buyer Simon Enterprises and or Mr. Simon Chuahe,
Mr. Oscar Chuahe of your properties known as Lot nos. 2309-B-2, 2309-C-2-A, 2309C-1, 2318-B, 2309-C-2-B, 2316, 2309-B-1, situated along Pakna-an St., Mandaue city.
The property has been inspected by the officials of the company and are (sic)
interested to acquire for their corporate expansion in the near future.
Please acknowledge this registration.6
Subsequently, two lots were sold to Kimhee Realty Corporation, represented by
Chua,7 and the relevant parties executed the Deed of Absolute Sale, dated June 22,
1998.8 The remaining five (5) lots became the subject of a Memorandum of
Agreement between Lo and petitioners wherein the parties agreed to transfer the
said properties to Lo as payment for petitioners outstanding obligations.9
Yamson then demanded his commission from petitioners for the sale of the lots to
his registered buyer. Petitioners, however, refused to pay him, arguing that he was
not entitled to his commission because it was petitioners themselves who
introduced Yamson to Chua and that the agreement was for Yamson to sell all seven
lots, which he failed to accomplish.10
The issues can be reduced to a single pivotal question whether Yamson was
entitled to the payment by petitioners of his brokers commission.

Held: The petition is without merit.


As the CA correctly discerned, a plain reading of the Authority to Look for
Buyer/Buyers reveals that nowhere in the said document is it indicated that the sale
of all seven lots was a prerequisite to the payment by petitioners of Yamsons
commission. If petitioners intention was for Yamson to locate a buyer for all their
properties, then they should have had this condition reduced to writing and included
in the Authority to Look for Buyer/Buyers that they executed. Since no such
stipulation appears, then it would be fair to conclude that the petitioners had no
such intention, following Section 9, Rule 130 of the Revised Rules on Evidence which
provides:
Sec. 9. Evidence of written agreements. When the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon
and there can be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement.
A perusal of the cited case of Reyes relied on by petitioners reveals that the sale in
the said case was consummated and the price and the terms agreed upon by the
contracting parties without the (unread text) of the broker, who resorted to trickery
in order to obtain from the seller an authority to look for a buyer. Furthermore, the
seller therein presented the buyer of the property as a witness to refute the
allegations of their broker who was seeking to claim her commission.
In contrast, petitioners purposely engaged Yamson as their broker and knowingly
authorized him to look for a buyer for their properties. More importantly, petitioners
offered no other testimony but their own to broker their allegations. If, as they
already knew of Chua as their witness. Unfortunately, Their sole witness was Annie
Tan, whose testimony was uncorroborated by any other documentary or testimonial
evidence and could only be assessed as self-serving.
On the basis of the foregoing, Yamson is entitled to his commission for the sale of
the two lots.

- Urban Bank vs. Pena, et al., 659 SCRA 418 [2011]

G.R. No. 145817

October 19, 2011

URBAN
BANK,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 145822

INC, Petitioner,

DELFIN C. GONZALEZ, JR., BENJAMIN


LEE, Petitioners,
vs.
MAGDALENO M. PEA, Respondent.

L.

DE

LEON,

and

ERIC

L.

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 162562
MAGDALENO
M.
PEA, Petitioner,
vs.
URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR.,
BENJAMIN L. DE LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR.,
CORAZON BEJASA, and ARTURO MANUEL, JR.,Respondents.
These consolidated petitions began as a simple case for payment of services
rendered and for reimbursement of costs. The case spun a web of suits and countersuits because of: (1) the size of the award for agents fee rendered in favor of Atty.
Magdaleno Pea (Pea) PhP24,000,000 rendered by the trial court; (2) the
controversial execution of the full judgment award of PhP28,500,000 (agents fee
plus reimbursement for costs and other damages) pending appeal; and (3) the
finding of solidary liability against Urban Bank, Inc., and several of its corporate
officers and directors together with the concomitant levying and sale in execution of
the personal (even conjugal) properties of those officers and directors; and (4) the
fact that assets with declared conservative values of at least PhP181 Million which,
together with those with undeclared values could reach very much more than such
amount,1 were levied or sold on execution pending appeal to satisfy the PhP28.5
Million award in favor of Atty. Pea. Incidentally, two supersedeas bonds worth
PhP80 Million (2.8 times the amount of the judgment) were filed by Urban Bank and
some of its officers and directors to stay the execution pending appeal.
Facts: Urban Bank, Inc. (both petitioner and respondent in these two consolidated
cases),4 was a domestic Philippine corporation, engaged in the business of
banking.5 The eight individual respondents in G. R. No. 162562 were officers and
members of Urban Banks board of directors, who were sued in their official and
personal capacities.6On the other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr.,
and Eric L. Lee, (hereinafter the de Leon Group), are the petitioners in G. R. No.
145822 and are three of the same bank officers and directors, who had separately
filed the instant Petition before the Court.
Petitioner-respondent Atty. Magdaleno M. Pea (Pea)7 is a lawyer by profession and
was formerly a stockholder, director and corporate secretary of Isabel Sugar
Company, Inc. (ISCI).8
ISCI owned a parcel of land9 located in Pasay City (the Pasay property).10 In 1984,
ISCI leased the Pasay property for a period of 10 years.11 Without its consent12 and

in violation of the lease contract,13 the lessee subleased the land to several
tenants, who in turn put up 23 establishments, mostly beer houses and night clubs,
inside the compound.14 In 1994, a few months before the lease contract was to
expire, ISCI informed the lessee15and his tenants16 that the lease would no longer
be renewed and that it intended to take over the Pasay property17 for the purpose
of selling it.18
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban
Bank executed a Contract to Sell, whereby the latter would pay ISCI the amount of
PhP241,612,000 in installments for the Pasay property.19Both parties agreed that
the final installment of PhP25,000,000 would be released by the bank upon ISCIs
delivery of full and actual possession of the land, free from any tenants.20 In the
meantime, the amount of the final installment would be held by the bank in escrow.
ISCI then instructed Pea, who was its director and corporate secretary, to take over
possession of the Pasay property22 against the tenants upon the expiration of the
lease. ISCIs president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to Pea,
confirming the latters engagement as the corporations agent to handle the
eviction of the tenants from the Pasay property, to wit:23

MEMORANDUM
TO: Atty. Magdaleno M. Pena
Director
FROM: Enrique G. Montilla III
President
DATE: 26 November 1994
You are hereby directed to recover and take possession of the property of the
corporation situated at Roxas Boulevard covered by TCT No. 5382 of the Register of
Deeds for Pasay City immediately upon the expiration of the contract of lease over
the said property on 29 November 1994. For this purpose you are authorized to
engage the services of security guards to protect the property against intruders. You
may also engage the services of a lawyer in case there is a need to go to court to
protect the said property of the corporation. In addition you may take whatever
steps or measures are necessary to ensure our continued possession of the
property.
(sgd.) ENRIQUE G. MONTILLA III
President24

On 29 November 1994, the day the lease contract was to expire,


Bank executed a Deed of Absolute Sale25 over the Pasay property
agreed upon in the Contract to Sell, but subject to the
provision.26 The title to the land was eventually transferred to the
Bank on 05 December 1994.27

ISCI and Urban


for the amount
above escrow
name of Urban

On 30 November 1994, the lessee duly surrendered possession of the Pasay


property to ISCI,28 but the unauthorized sub-tenants refused to leave the
area.29 Pursuant to his authority from ISCI, Pea had the gates of the property
closed to keep the sub-tenants out.30 He also posted security guards at the
property,31 services for which he advanced payments.32 Despite the closure of the
gates and the posting of the guards, the sub-tenants would come back in the
evening, force open the gates, and proceed to carry on with their businesses.33 On
three separate occasions, the sub-tenants tried to break down the gates of the
property, threw stones, and even threatened to return and inflict greater harm on
those guarding it.34
In the meantime, a certain Marilyn G. Ong, as representative of ISCI, faxed a letter
to Urban Bank addressed to respondent Corazon Bejasa, who was then the banks
Senior Vice-President requesting the issuance of a formal authority for
Pea.35 Two days thereafter, Ms. Ong faxed another letter to the bank, this time
addressed to its president, respondent Teodoro Borlongan.36 She repeated therein
the earlier request for authority for Pea, since the tenants were questioning ISCIs
authority to take over the Pasay property.37
In response to the letters of Ms. Ong, petitioner-respondent bank, through individual
respondents Bejasa and Arturo E. Manuel Senior Vice-President and Vice-President,
respectively advised Pea38 that the bank had noted the engagement of his
services by ISCI and stressed that ISCI remained as the lawyers principal.39
To
prevent
the
sub-tenants
from
further
appropriating
the
Pasay
property,40 petitioner-respondent Pea, as director and representative of ISCI, filed
a complaint for injunction41 (the First Injunction Complaint) with the RTC-Pasay
City.42 Acting on ISCIs prayer for preliminary relief, the trial court favorably issued
a temporary restraining order (TRO),43 which was duly implemented.44 At the time
the First Injunction Complaint was filed, a new title to the Pasay property had
already been issued in the name of Urban Bank.45
On 19 December 1994, when "information reached the judge that the Pasay
property had already been transferred by ISCI to Urban Bank, the trial court recalled
the TRO and issued a break-open order for the property. According to Pea, it was
the first time that he was apprised of the sale of the land by ISCI and of the transfer
of its title in favor of the bank."46 It is not clear from the records how such
information reached the judge or what the break-open order was in response to.

The facts regarding the following phone conversation and correspondences are
highly-controverted. Immediately after talking to respondent Bejasa, Pea got in
touch with Urban Banks president, respondent Borlongan. Pea explained that the
policemen in Pasay City were sympathetic to the tenants and were threatening to
force their way into the premises. He expressed his concern that violence might
erupt between the tenants, the city police, and the security guards posted in the
Pasay property. Respondent Borlongan supposedly assured him that the bank was
going to retain his services, and that the latter should not give up possession of the
subject land. Nevertheless, petitioner-respondent Pea demanded a written letter of
authority from the bank. Respondent Borlongan acceded and instructed him to see
respondent Bejasa for the letter.50
Later that afternoon, Pea received the banks letter dated 19 December 1994,
which was signed by respondents Bejasa and Manuel, and is quoted below:
This is to confirm the engagement of your services as the authorized representative
of Urban Bank, specifically to hold and maintain possession of our abovecaptioned
property [Pasay property] and to protect the same from former tenants, occupants
or any other person who are threatening to return to the said property and/or
interfere with your possession of the said property for and in our behalf.
You are likewise authorized to represent Urban Bank in any court action that you
may institute to carry out the aforementioned duties, and to prevent any intruder,
squatter or any other person not otherwise authorized in writing by Urban [B]ank
from entering or staying in the premises.52 (Emphasis supplied)
It is understood that any attorneys fees, cost of litigation and any other charges or
expenses that may be incurred relative to the exercise by Atty. Pea of his
abovementioned duties shall be for the account of Isabela Sugar Company and any
loss or damage that may be incurred to third parties shall be answerable by Isabela
Sugar Company.53 (Emphasis supplied)
The following narration of subsequent proceedings is uncontroverted.
Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on
behalf of ISCI, on the ground of lack of personality to continue the action, since the
Pasay property, subject of the suit, had already been transferred to Urban
Bank.54 The RTC-Pasay City dismissed the complaint and recalled its earlier breakopen order.55
Thereafter, petitioner-respondent Pea, now in representation of Urban Bank, filed a
separate complaint56 (the Second Injunction Complaint) with the RTC-Makati City,
to enjoin the tenants from entering the Pasay property.57Acting on Urban Banks
preliminary prayer, the RTC-Makati City issued a TRO.58

While the Second Injunction Complaint was pending, Pea made efforts to settle the
issue of possession of the Pasay property with the sub-tenants. During the
negotiations, he was exposed to several civil and criminal cases they filed in
connection with the task he had assumed for Urban Bank, and he received several
threats against his life.59 The sub-tenants eventually agreed to stay off the property
for a total consideration of PhP1,500,000.60Pea advanced the payment for the full
and final settlement of their claims against Urban Bank.61
Pea claims to have borrowed PhP3,000,000 from one of his friends in order to
maintain possession thereof on behalf of Urban Bank.62 According to him, although
his creditor-friend granted him several extensions, he failed to pay his loan when it
became due, and it later on became the subject of a separate collection suit for
payment with interest and attorneys fees.63 This collection suit became the basis
for Atty. Peas request for discretionary execution pending appeal later on.
On 07 February 1995, within the four-month period allegedly agreed upon in the
telephone conversation, Pea formally informed Urban Bank that it could already
take possession of the Pasay property.64 There was however no mention of the
compensation due and owed to him for the services he had rendered.
On 31 March 1995, the bank subsequently took actual possession of the property
and installed its own guards at the premises.65
Pea thereafter made several attempts to contact respondents Borlongan and
Bejasa by telephone, but the bank officers would not take any of his calls. On 24
January 1996, or nearly a year after he turned over possession of the Pasay
property, Pea formally demanded from Urban Bank the payment of the 10%
compensation and attorneys fees allegedly promised to him during his telephone
conversation with Borlongan for securing and maintaining peaceful possession of
the property.66
Issue: 1. What is the legal basis for an award in favor of Pea for the services he
rendered to Urban Bank? Should it be a contract of agency the fee for which was
orally agreed on as Pea claims? Should it be the application of the Civil Code
provisions on unjust enrichment? Or is it to be based on something else or a
combination of the legal findings of both the RTC and the CA? How much should the
award be?
2. Are the officers and directors of Urban Bank liable in their personal capacities for
the amount claimed by Pea?
3. What are the effects of our answers to questions (1) and (2), on the various
results of the execution pending appeal that happened here?
Held:
I

Pea is entitled to payment for compensation for services rendered as agent of


Urban Bank, but on the basis of the principles of unjust enrichment and quantum
meruit, and not on the purported oral contract.
The Court finds that Pea should be paid for services rendered under the agency
relationship that existed between him and Urban Bank based on the civil law
principle against unjust enrichment, but the amount of payment he is entitled to
should be made, again, under the principle against unjust enrichment and on the
basis of quantum meruit.
In a contract of agency, agents bind themselves to render some service or to do
something in representation or on behalf of the principal, with the consent or
authority of the latter.250 The basis of the civil law relationship of agency is
representation, 251 the elements of which include the following: (a) the relationship
is established by the parties consent, express or implied; (b) the object is the
execution of a juridical act in relation to a third person; (c) agents act as
representatives and not for themselves; and (d) agents act within the scope of their
authority.252
Whether or not an agency has been created is determined by the fact that one is
representing and acting for another.253 The law makes no presumption of agency;
proving its existence, nature and extent is incumbent upon the person alleging
it.254
With respect to the status of Atty. Peas relationship with Urban Bank, the trial and
the appellate courts made conflicting findings that shall be reconciled by the Court.
On one end, the appellate court made a definitive ruling that no agency relationship
existed at all between Pea and the bank, despite the services performed by Pea
with respect to the Pasay property purchased by the bank. Although the Court of
Appeals ruled against an award of agents compensation, it still saw fit to award
Pea with Ph3,000,000 for expenses incurred for his efforts in clearing the Pasay
property of tenants.255 On the other extreme, the trial court heavily relied on the
sole telephone conversation between Pea and Urban Banks President to establish
that the principal-agent relationship created between them included an agreement
to pay Pea the huge amount of PhP24,000,000. In its defense, Urban Bank insisted
that Pea was never an agent of the bank, but an agent of ISCI, since the latter, as
seller of the Pasay property committed to transferring it free from tenants.
Meanwhile, Pea argues on the basis of his successful and peaceful ejectment of the
sub-tenants, who previously occupied the Pasay property.
Based on the evidence on records and the proceedings below, the Court concludes
that Urban Bank constituted Atty. Pea as its agent to secure possession of the
Pasay property. This conclusion, however, is not determinative of the basis of the
amount of payment that must be made to him by the bank. The context in which

the agency was created lays the basis for the amount of compensation Atty. Pea is
entitled to.
The transactional history and context of the sale between ISCI and Urban Bank of
the Pasay property, and Atty. Peas participation in the transfer of possession
thereof to Urban Bank provide crucial linkages that establish the nature of the
relationship between the lawyer and the landowner-bank.
ISCI undertook in the Contract to Sell, to physically deliver the property to Urban
Bank, within 60 days from 29 November 1994,256 under conditions of "full and
actual possession and control ..., free from tenants, occupants, squatters or other
structures or from any liens, encumbrances, easements or any other obstruction or
impediment to the free use and occupancy by the buyer of the subject Property or
its exercise of the rights to ownership over the subject Property...."257 To guarantee
this undertaking, ISCI agreed to the escrow provision where PhP25,000,000 (which
is a little over 10% of the value of the Pasay property) would be withheld by Urban
Bank from the total contract price until there is full compliance with this
undertaking.
Apparently to ensure that ISCI is able to deliver the property physically clean to
Urban Bank, it was ISCIs president, Enrique Montilla who directed on 26 November
1994 one of its directors, Pea, to immediately recover and take possession of the
property upon expiration of the contract of lease on 29 November 1994.258 Pea
thus first came into the picture as a director of ISCI who was constituted as its agent
to recover the Pasay property against the lessee as well as the sub-tenants who
were occupying the property in violation of the lease agreement.259 He was able to
obtain possession of the property from the lessee on the following day, but the
unauthorized sub-tenants refused to vacate the property.
It was only on 7 December 1994, that Urban Bank was informed of the services that
Pea was rendering for ISCI. The faxed letter from ISCIs Marilyn Ong reads:
Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company, Inc., to
take charge of inspecting the tenants would like to request an authority similar to
this from the Bank, as new owners. Can you please issue something like this today
as he needs this.260
Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that
reads:
Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as
per attached immediately as the tenants are questioning the authority of the
people there who are helping us to take over possession of the property. (Emphasis
supplied)261

It is clear from the above that ISCI was asking Urban Bank for help to comply with
ISCIs own contractual obligation with the bank under the terms of the sale of the
Pasay property. Urban Bank could have ignored the request, since it was exclusively
the obligation of ISCI, as the seller, to deliver a clean property to Urban Bank
without any help from the latter.
Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble
that it would reap in the process. In an apparent attempt to allow the efforts of ISCI
to secure the property to succeed, it recognized Peas role in helping ISCI, but
stopped short of granting him authority to act on its behalf. In response to the two
written requests of ISCI, Urban Bank sent this letter to Pea on 15 December 1994:
This is to advise you that we have noted the engagement of your services by
Isabela Sugar Company to recover possession of the Roxas Boulevard property
formerly covered by TCT No. 5382, effective November 29, 1994. It is understood
that your services have been contracted by and your principal remains to be the
Isabela Sugar Company, which as seller of the property and under the terms of our
Contract to Sell dated November 29, 1994, has committed to deliver the full and
actual possession of the said property to the buyer, Urban Bank, within the
stipulated period. 262 (Emphasis supplied)
Up to this point, it is unmistakable that Urban Bank was staying clear from making
any contractual commitment to Pea and conveyed its sense that whatever
responsibilities arose in retaining Pea were to be shouldered by ISCI.
In any case, the subsequent actions of Urban Bank resulted in the ratification of
Peas authority as an agent acting on its behalf with respect to the Pasay property.
By ratification, even an unauthorized act of an agent becomes an authorized act of
the principal.266
Both sides readily admit that it was Pea who was responsible for clearing the
property of the tenants and other occupants, and who turned over possession of the
Pasay property to petitioner-respondent bank.267 When the latter received full and
actual possession of the property from him, it did not protest or refute his authority
as an agent to do so. Neither did Urban Bank contest Peas occupation of the
premises, or his installation of security guards at the site, starting from the expiry of
the lease until the property was turned over to the bank, by which time it had
already been vested with ownership thereof. Furthermore, when Pea filed the
Second Injunction Complaint in the RTC-Makati City under the name of petitionerrespondent bank, the latter did not interpose any objection or move to dismiss the
complaint on the basis of his lack of authority to represent its interest as the owner
of the property. When he successfully negotiated with the tenants regarding their
departure from its Pasay property, still no protest was heard from it. After
possession was turned over to the bank, the tenants accepted PhP1,500,000 from

Pea, in "full and final settlement" of their claims against Urban Bank, and not
against ISCI.268
Indeed, the Civil Code expressly acknowledged instances when two or more
principals have granted a power of attorney to an agent for a common
transaction.269 The agency relationship between an agent and two principals may
even be considered extinguished if the object or the purpose of the agency is
accomplished.270 In this case, Peas services as an agent of both ISCI and Urban
Bank were engaged for one shared purpose or transaction, which was to deliver the
property free from unauthorized sub-tenants to the new owner a task that Pea
was able to achieve and is entitled to receive payment for.
Agency is presumed to be for compensation. But because in this case we find no
evidence that Urban Bank agreed to pay Pea a specific amount or percentage of
amount for his services, we turn to the principle against unjust enrichment and on
the basis of quantum meruit.
Since there was no written agreement with respect to the compensation due and
owed to Atty. Pea under the letter dated 19 December 1994, the Court will resort
to determining the amount based on the well-established rules on quantum meruit.
Agency is presumed to be for compensation.273 Unless the contrary intent is
shown, a person who acts as an agent does so with the expectation of payment
according to the agreement and to the services rendered or results effected.274 We
find that the agency of Pea comprised of services ordinarily performed by a lawyer
who is tasked with the job of ensuring clean possession by the owner of a property.
We thus measure what he is entitled to for the legal services rendered.
A stipulation on a lawyers compensation in a written contract for professional
services ordinarily controls the amount of fees that the contracting lawyer may be
allowed to collect, unless the court finds the amount to be unconscionable.275 In
the absence of a written contract for professional services, the attorneys fees are
fixed on the basis of quantum meruit,276 i.e., the reasonable worth of the
attorneys services.277 When an agent performs services for a principal at the
latters request, the law will normally imply a promise on the part of the principal to
pay for the reasonable worth of those services.278 The intent of a principal to
compensate the agent for services performed on behalf of the former will be
inferred from the principals request for the agents.279
In this instance, no extra-ordinary skills employing advanced legal training nor
sophisticated legal maneuvering were required to be employed in ejecting 23 subtenants who have no lease contract with the property owner, and whose only
authority to enter the premises was unlawfully given by a former tenant whose own
tenancy has clearly expired. The 23 sub-tenants operated beer houses and
nightclubs, ordinary retail establishments for which no sophisticated structure
prevented easy entry. After Pea succeeded in locking the gate of the compound,

the sub-tenants would open the padlock and resume their businesses at night.
Indeed, it appears that only security guards, chains and padlocks were needed to
keep them out. It was only the alleged connivance of Pasay City policemen that
Peas ability to retain the possession was rendered insecure. And how much did it
take Pea to enter into a settlement agreement with them and make all these
problems go away? By Peas own account, PhP1,500,000 only. That means that
each tenant received an average of PhP65,217.40 only. Surely, the legal services of
Pea cannot be much more than what the sub-tenants were willing to settle for in
the first place. We therefore award him the equivalent amount of PhP1,500,000 for
the legal and other related services he rendered to eject the illegally staying
tenants of Urban Banks property.
We now come to the reasonableness of the compensation prayed for by the plaintiff
which is 10% of the current market value which defendants claim to be
preposterous and glaringly excessive. Plaintiff [Pea] testified that defendant
Borlongan agreed to such an amount and this has not been denied by Ted
Borlongan. The term "current market value of the property" is hereby interpreted by
the court to mean the current market value of the property at the time the contract
was entered into. To interpret it in accordance with the submission of the plaintiff
that it is the current market value of the property at the time payment is made
would be preposterous. The only evidence on record where the court can determine
the market value of the property at the time the contract of agency was entered
into between plaintiff and defendant is the consideration stated in the sales
agreement between Isabela Sugar Company, Inc. and Urban bank which
is P241,612,000.00. Ten percent of this amount is a reasonable compensation of the
services rendered by the plaintiff considering the "no cure, no pay" arrangement
between the parties and the risks which plaintiff had to undertake.281
In any case, 10% of the purchase price of the Pasay property a staggering
PhP24,161,200 is an unconscionable amount, which we find reason to reduce.
Neither will the Court accede to the settlement offer of Pea to Urban Bank of at
least PhP38,000,000 for alleged legal expenses incurred during the course of the
proceedings,282 an amount that he has not substantiated at any time.
Lawyering is not a business; it is a profession in which duty to public service, not
money, is the primary consideration.283 The principle of quantum meruit applies if
lawyers are employed without a price agreed upon for their services, in which case
they would be entitled to receive what they merit for their services, or as much as
they have earned.284 In fixing a reasonable compensation for the services rendered
by a lawyer on the basis of quantum meruit, one may consider factors such as the
time spent and extent of services rendered; novelty and difficulty of the questions
involved; importance of the subject matter; skill demanded; probability of losing
other employment as a result of acceptance of the proffered case; customary
charges for similar services; amount involved in the controversy and the resulting

benefits for the client; certainty of compensation; character of employment; and


professional standing of the lawyer.285
Hence, the Court affirms the appellate courts award of PhP3,000,000 to Pea, for
expenses incurred corresponding to the performance of his services. An additional
award of PhP1,500,000 is granted to him for the services he performed as a lawyer
in securing the rights of Urban Bank as owner of the Pasay property.
II
The corporate officers and directors of Urban Bank are not solidarily or personally
liable with their properties for the corporate liability of Urban Bank to Atty. Pea.
The obligation to pay Peas compensation, however, falls solely on Urban Bank.
Absent any proof that individual petitioners as bank officers acted in bad faith or
with gross negligence or assented to a patently unlawful act, they cannot be held
solidarily liable together with the corporation for services performed by the latters
agent to secure possession of the Pasay property. Thus, the trial court had indeed
committed grave abuse of discretion when it issued a ruling against the eight
individual defendant bank directors and officers and its Decision should be
absolutely reversed and set aside.
A corporation, as a juridical entity, may act only through its directors, officers and
employees.286 Obligations incurred as a result of the acts of the directors and
officers as corporate agents are not their personal liabilities but those of the
corporation they represent.287 To hold a director or an officer personally liable for
corporate obligations, two requisites must concur: (1) the complainant must allege
in the complaint that the director or officer assented to patently unlawful acts of the
corporation, or that the officer was guilty of gross negligence or bad faith; and (2)
the complainant must clearly and convincingly prove such unlawful acts, negligence
or bad faith.288 "To hold a director, a trustee or an officer personally liable for the
debts of the corporation and, thus, pierce the veil of corporate fiction, bad faith or
gross negligence by the director, trustee or officer in directing the corporate affairs
must be established clearly and convincingly."289
Pea failed to allege and convincingly show that individual defendant bank directors
and officers assented to patently unlawful acts of the bank, or that they were guilty
of gross negligence or bad faith. Contrary to his claim, the Complaint290 in the
lower court never alleged that individual defendants acquiesced to an unlawful act
or were grossly negligent or acted in bad faith.291 Neither is there any specific
allegation of gross negligence or action in bad faith that is attributable to the
individual defendants in performance of their official duties.
III

Considering the absolute nullification of the trial courts Decision, the proceedings
arising from the execution pending appeal based on the said Decision is likewise
completely vacated.
Since the trial courts main Decision awarding PhP28,500,000 in favor of Pea has
been nullified above, the execution pending appeal attendant thereto, as a result,
no longer has any leg to stand on and is thus completely vacated.
To recall, prior to the filing of Urban Bank of its notice of appeal in the main
case,296 Pea moved on 07 June 1999 for execution pending appeal297 of the
Decision,298 which had awarded him a total of PhP28,500,000 in compensation and
damages.299 In supporting his prayer for discretionary execution, Pea cited no
other reason than the pending separate civil action for collection filed against him
by a creditor, who was demanding payment of a PhP3,000,000 loan.300 According
to him, he had used the proceeds of the loan for securing the banks Pasay
property.301 In opposition to the motion, Urban Bank countered that the collection
case was not a sufficient reason for allowing execution pending appeal.302
WHEREFORE, the Court DENIES Atty. Magdaleno Peas Petition for Review dated 23
April 2004 (G. R. No. 162562) and AFFIRMS WITH MODIFICATION the Court of
Appeals Decision dated 06 November 2003 having correctly found that the
Regional Trial Court of Bago City gravely abused its discretion in awarding
unconscionable damages against Urban Bank, Inc., and its officers. The Decision of
the Regional Trial Court of Bago City dated 28 May 1999 is hence VACATED.
Nevertheless, Urban Bank, Inc., is ORDERED to pay Atty. Pea the amount of
PhP3,000,000 as reimbursement for his expenses and an additional PhP1,500,000
as compensation for his services, with interest at 6% per annum from 28 May 1999,
without prejudice to the right of Urban Bank to invoke payment of this sum under a
right of set-off against the amount of PhP25,000,000 that has been placed in escrow
for the benefit of Isabela Sugar Company, Inc. The Complaint against the eight other
individual petitioners, namely Teodoro Borlongan (+), Delfin C. Gonzales, Jr.,
Benjamin L. de Leon, P. Siervo G. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa,
and Arturo Manuel, Jr., is hereby DISMISSED.
The Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No.
145817) and Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G. R. No.
145822) are hereby GRANTED

- Phil. Health-Care Providers vs. Estrada, 542 SCRA 616 [2008]

G.R. No. 171052

January 28, 2008

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner, vs.


CARMELA ESTRADA/CARA HEALTH SERVICES, respondent.

Facts: [Maxicare] is a domestic corporation engaged in selling health insurance


plans whose Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del
Valle, and Sales/Marketing Manager Josephine Cabrera were impleaded as
defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela
Estrada who was doing business under the name of CARA HEALTH [SERVICES] to
promote and sell the prepaid group practice health care delivery program called
MAXICARE Plan with the position of Independent Account Executive. [Maxicare]
formally appointed [Estrada] as its "General Agent," evidenced by a letteragreement dated February 16, 1991. The letter agreement provided for plaintiffappellees [Estradas] compensation in the form of commission, viz.:
Commission
In consideration of the performance of your functions and duties as specified in this
letter-agreement, [Maxicare] shall pay you a commission equivalent to 15 to 18%
from individual, family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on
standard plans of commissionable amount on corporate accounts from all
membership dues collected and remitted by you to [Maxicare].
[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a
prospective company as client. [Estrada] alleged that it did apply with [Maxicare] for
the MERALCO account and other accounts, and in fact, its franchise to solicit
corporate accounts, MERALCO account included, was renewed on February 11,
1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the
officers of MERALCO regarding the MAXICARE Plan but when MERALCO decided to
subscribe to the MAXICARE Plan, [Maxicare] directly negotiated with MERALCO
regarding the terms and conditions of the agreement and left plaintiff-appellee
[Estrada] out of the discussions on the terms and conditions.
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from
[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other
accounts. In reply, [Maxicare], through counsel, denied [Estradas] claims for
commission for the MERALCO and other accounts because [Maxicare] directly
negotiated with MERALCO and the other accounts(,) and that no agent was given
the go signal to intervene in the negotiations for the terms and conditions and the
signing of the service agreement with MERALCO and the other accounts so that if
ever [Maxicare] was indebted to [Estrada], it was only for P1,555.00 andP43.l2 as
commissions on the accounts of Overseas Freighters Co. and Mr. Enrique Acosta,
respectively.

[Estrada] filed a complaint with the Regional Trial Court (RTC) of Makati City. After
trial, the RTC found Maxicare liable for breach of contract and ordered it to pay
Estrada actual damages in the amount equivalent to 10% of P20,169,335.00,
representing her commission for the total premiums paid by Meralco to Maxicare
from the year 1991 to 1996, plus legal interest computed from the filing of the
complaint on March 18, 1993, and attorneys fees in the amount of P100,000.00. On
appeal, the CA affirmed in toto the RTCs decision. Hence, this petition.
issues, to wit:
1. Whether the Court of Appeals committed serious error in affirming Estradas
entitlement to commissions for the execution of the service agreement between
Meralco and Maxicare.
2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive
renewals of the service agreement effective on December 1, 19925 and December
1, 1995.6
Held: Estrada is entitled to commissions for the premiums paid under the service
agreement between Meralco and Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court,
especially when affirmed by the appellate court, are accorded the highest degree of
respect and are considered conclusive between the parties.7A review of such
findings by this Court is not warranted except upon a showing of highly meritorious
circumstances, such as: (1) when the findings of a trial court are grounded entirely
on speculation, surmises or conjectures; (2) when a lower courts inference from its
factual findings is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion in the appreciation of facts; (4) when the findings of the
appellate court go beyond the issues of the case, or fail to notice certain relevant
facts which, if properly considered, will justify a different conclusion; (5) when there
is a misappreciation of facts; (6) when the findings of fact are conclusions without
mention of the specific evidence on which they are based, are premised on the
absence of evidence, or are contradicted by evidence on record.8 None of the
foregoing exceptions which would warrant a reversal of the assailed decision
obtains in this instance.
There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling
[Maxicares] health insurance plan to Meralco. Plaintiff-appellee [Estradas] efforts
consisted in being the first to offer the Maxicare plan to Meralco, using her
connections with some of Meralco Executives, inviting said executives to dinner
meetings, making submissions and representations regarding the health plan,
sending follow-up letters, etc.

These efforts were recognized by Meralco as shown by the certification issued by its
Manpower Planning and Research Staff Head Ruben A. Sapitula on September 5,
1991, to wit:
"This is to certify that Ms. Carmela Estrada has initiated talks with us since
November 1990 with regards (sic) to the HMO requirements of both our rank and file
employees, managers and executives, and that it was favorably recommended and
the same be approved by the Meralco Management Committee."
xxxx
This Court finds that plaintiff-appellee [Estradas] efforts were instrumental in
introducing the Meralco account to [Maxicare] in regard to the latters Maxicare
health insurance plans. Plaintiff-appellee [Estrada] was the efficient "intervening
cause" in bringing about the service agreement with Meralco. As pointed out by the
trial court in its October 8, 1999 Decision, to wit:
"xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs.
Lopez and Guingona of Meralco, PHPI would still be an anonymity. xxx"10
Under the foregoing circumstances, we are hard pressed to disturb the findings of
the RTC, which the CA affirmed.
In Tan v. Gullas,14 we had occasion to define a broker and distinguish it from an
agent, thus:
[O]ne who is engaged, for others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the negotiator between the
other parties, never acting in his own name but in the name of those who employed
him. [A] broker is one whose occupation is to bring the parties together, in matter of
trade, commerce or navigation.15
An agent receives a commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made.16
In relation thereto, we have held that the term "procuring cause" in describing a
brokers activity, refers to a causeoriginating a series of events which, without break
in their continuity, result in the accomplishment of the prime objective of the
employment of the brokerproducing a purchaser ready, willing and able to buy on
the owners terms.17 To be regarded as the "procuring cause" of a sale as to be
entitled to a commission, a brokers efforts must have been the foundation on which
the negotiations resulting in a sale began.18 Verily, Estrada was instrumental in the
sale of the Maxicare health plans to Meralco. Without her intervention, no sale could
have been consummated.

In this case, the letter, although part of Estradas Complaint, is not, ipso facto, an
admission of the statements contained therein, especially since the bone of
contention relates to Estradas entitlement to commissions for the sale of health
plans she claims to have brokered. It is more than obvious from the entirety of the
records that Estrada has unequivocally and consistently declared that her
involvement as broker is the proximate cause which consummated the sale
between Meralco and Maxicare.
WHEREFORE, premises considered and finding no reversible error committed by the
Court of Appeals, the petition is hereby DENIED. Costs against the petitioner.

- Sanchez vs. Medicard Phils. Inc., et al., 469 SCRA 347 (2005)
[G.R. NO. 141525 September 2, 2005]

CARLOS SANCHEZ, Petitioners, v. MEDICARD PHILIPPINES,


NICANOR MONTOYA and CARLOS EJERCITO, Respondent.

INC.,

DR.

Facts: Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its


special corporate agent. As such agent, Medicard gave him a commission based on
the "cash brought in."
through petitioner's efforts, Medicard and United Laboratories Group of Companies
(Unilab) executed a Health Care Program Contract. Under this contract, Unilab shall
pay Medicard a fixed monthly premium for the health insurance of its personnel.
Unilab paid MedicardP4,148,005.00 representing the premium for one (1) year.
Medicard then handed petitioner 18% of said amount or P746,640.90 representing
his commission.
Again, through petitioner's initiative, the agency contract between Medicard and
Unilab was renewed for another year, or from October 1, 1989 to September 30,
1990, incorporating therein the increase of premium from P4,148,005.00
to P7,456,896.00. Medicard paid petitioner P1,342,241.00 as his commission.
Prior to the expiration of the renewed contract, Medicard proposed to Unilab,
through petitioner, an increase of the premium for the next year. Unilab rejected the
proposal "for the reason that it was too high," prompting Dr. Nicanor Montoya
(Medicard's president and general manager), also a respondent, to request
petitioner to reduce his commission, but the latter refused.
Meanwhile, in order not to prejudice its personnel by the termination of their health
insurance, Unilab, through respondent Ejercito, negotiated with Dr. Montoya and
other officers of Medicard, to discuss ways in order to continue the insurance
coverage of those personnel.

Under the new scheme, Unilab shall pay Medicard only the amount corresponding to
the actual hospitalization expenses incurred by each personnel plus 15% service fee
for using Medicard facilities, which amount shall not be less than P780,000.00.
Medicard did not give petitioner any commission under the new scheme.
petitioner demanded from Medicard payment of P338,000.00 as his commission
plus damages, but the latter refused to heed his demand. Thus, petitioner filed with
the Regional Trial Court (RTC), After hearing, the RTC rendered its Decision
dismissing petitioner's complaint and respondents' counterclaim.
On appeal, the Court of Appeals affirmed the trial court's assailed Decision. The
Appellate Court held that there is no proof that the execution of the new contract
between the parties under the "cost plus" system is a strategy to deprive petitioner
of his commission; that Medicard did not commit any fraudulent act in revoking its
agency contract with Sanchez; that when Unilab rejected Medicard's proposal for an
increase of premium, their Health Care Program Contract on its third year was
effectively revoked; and that where the contract is ineffectual, then the agent is not
entitled to a commission.
Petitioner filed a motion for reconsideration, but this was denied by the Court of
Appeals. Hence, the instant Petition for Review on Certiorari .
Issue: whether the Court of Appeals erred in holding that the contract of agency has
been revoked by Medicard, hence, petitioner is not entitled to a commission.
Held: It is dictum that in order for an agent to be entitled to a commission, he must
be the procuring cause of the sale, which simply means that the measures
employed by him and the efforts he exerted must result in a sale.2 In other words,
an agent receives his commission only upon the successful conclusion of a
sale.3 Conversely, it follows that where his efforts are unsuccessful, or there was no
effort on his part, he is not entitled to a commission.
In Prats v. Court of Appeals,4 this Court held that for the purpose of equity, an agent
who is not the efficient procuring cause is nonetheless entitled to his commission,
where said agent, notwithstanding the expiration of his authority, nonetheless, took
diligent steps to bring back together the parties, such that a sale was finalized and
consummated between them. In Manotok Borthers v. Court of Appeals,5 where the
Deed of Sale was only executed after the agent's extended authority had expired,
this Court, applying its ruling in Prats, held that the agent (in Manotok) is entitled to
a commission since he was the efficient procuring cause of the sale,
notwithstanding that the sale took place after his authority had lapsed. The
proximate, close, and causal connection between the agent's efforts and the
principal's sale of his property can not be ignored.

It is clear that since petitioner refused to reduce his commission, Medicard directly
negotiated with Unilab, thus revoking its agency contract with petitioner. We hold
that such revocation is authorized by Article 1924 of the Civil Code which provides:
"Art. 1924. The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons."
Moreover, as found by the lower courts, petitioner did not render services to
Medicard, his principal, to entitle him to a commission. There is no indication from
the records that he exerted any effort in order that Unilab and Medicard, after the
expiration of the Health Care Program Contract, can renew it for the third time. In
fact, his refusal to reduce his commission constrained Medicard to negotiate directly
with Unilab. We find no reason in law or in equity to rule that he is entitled to a
commission. Obviously, he was not the agent or the "procuring cause" of the third
Health Care Program Contract between Medicard and Unilab.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 47681 are AFFIRMED IN TOTO. Costs against
petitioner. SO ORDERED.