Bien, a senior bank official, asked Flor to look for a buyer of a foreclosed asset of the bank, a mango plantation priced at P2,200,000, located in Batangas.
Domeng, a businessman, was a client of Pacing, a licensed real estate broker. The two met through a previous transaction where Domeng responded to a newspaper ad put up by Pacing for an atis plantation. Domeng expressed that he preferred a land with mango trees instead. Pacing promised to get back to him as soon as she would be able to find a property according to his specifications.
Pacing relayed to her business associates that she had a ready buyer for a mango orchard. Flor then advised her that Bien owned a mango plantation which was up for sale. She told Flor to confer with Bien and to give them a written authority to negotiate the sale of the property.
Bien then issued a Letter of Authority confirming that Pacing, the licensed real estate, and, her associates, Flor and Josie, have been given the authority to negotiate with any prospective buyer for the sale of a mango plantation in the amount of P2 million, and that Bien, for their labor and effort in finding a purchaser thereof, bound himself to a commission of 5 percent of the total purchase price to be agreed upon by the buyer and seller.
Pacing and Flor arranged for an ocular inspection of the property together with Josie which never materialized—the first time was due to inclement weather; the next time, no car was available for the tripping to Batangas. Domeng then called up Pacing and told her that he was on his way to Lipa City to inspect another property, and might as well also take a look at the property Pacing was offering. Since Domeng was in a hurry, Pacing and Flor could no longer accompany him at the time. Thus, he asked Pacing for the exact address of the property and the directions on how to reach the mango plantation. Thereupon, Domeng was instructed to get in touch with Tess, Bien’s daughter and also an officer of the bank, regarding the property.
Two days after the visit, Domeng told Pacing that he already purchased the property and had made a down payment of P1 milliom. The remaining balance was to be paid upon the approval of the incorporation papers of the corporation Domeng was organizing. Domeng was surprised to find out that the trio have not been paid their commission.
A Deed of Sale was eventually executed between the seller and the buyer. Since the sale of the property was consummated, Pacing, Flor and Josie asked from Bien and the bank their commission, or 5 percent of the purchase price. Bien and the bank refused to pay and offered them a measly sum of P5,000 each. Bien and the bank asserted that the trio are not the efficient procuring cause of the sale, and that the letter of authority signed by Bien is not binding against him and the bank.
Bien and the bank insist that the participation of Pacing, Flor and Josie in the transaction was not apparent, if not nil. As far as Bien and the bank are concerned, the brokers did not even look at the property themselves; did not introduce the buyer to the seller; did not hold any conferences with the buyer, nor take part in concluding the sale. For the non-compliance of this obligation “to negotiate,” the brokers were deemed by the sellers not entitled to any commission.
Q: Who is a broker?
A: A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to a property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purposes the agent of both parties. A broker is one whose occupation is to bring parties together, in matters of trade, commerce or navigation.
Q: What does procuring cause mean?
A: It is meant to be the proximate cause. The term “procuring cause,” in describing a broker’s activity, refers to a cause originating a series of events which, without break in their continuity, result in accomplishment of prime objective of the employment of the broker—producing a purchaser ready, willing and able to buy real estate on the owner’s terms.
A broker will be regarded as the “procuring cause” of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun. The broker must be the efficient agent or the procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker.
Q: Are Pacing, Flor and Josie entitled to the commission?
A: Yes, they were instrumental in the sale of the property to Domeng. Without their intervention, no sale could have been consummated. They were the ones who set the sale of the subject land in motion.
Upon being informed by Flor that Bien was selling his mango orchard, Pacing lost no time in informing Domeng that they had found a property according to his specifications. An ocular inspection of the property together with Domeng was immediately planned; unfortunately, it never pushed through for reasons beyond the brokers’ control. Since Domeng was in a hurry to see the property, he asked the brokers the exact address and the directions on how to reach the place.
The brokers thereupon instructed him to look for the daughter of Bien who is also an officer of the bank and the person to talk to regarding the property. The fact that it was Domeng who personally called Pacing and asked for directions prove that it was only through the brokers that Domeng learned about the property for sale.
Q: Are the brokers still entitled to be paid their commission if they did not actually perform any acts of “negotiation” as required in the letter-authority?
A: The letter of authority must be read as a whole and not in its truncated parts. Certainly, it was not the intention of Bien to expect the brokers to do just that (to negotiate) when he issued the letter of authority.
The clear intention is to reward the brokers for procuring a buyer for the property. Before negotiating a sale, a broker must first and foremost bring in a prospective buyer. A broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.
The essential feature of a broker’s conventional employment is merely to procure a purchaser for a property ready, able, and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser.
And it is not a prerequisite to the right to compensation that the broker conduct the negotiations between the parties after they have been brought into contact with each other through his efforts. (Source: Medrano and CA, G.R. No. 150678, February 18, 2005)
Ma. Soledad Deriquito-Mawis is dean, Lyceum of the Philippines University; trustee, Philippine Association of Law Schools; and founder of Mawis Law Office