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BIENVENIDO R. MEDRANO v. CA

FACTS:

The petitioners in this case are seeking a review of the Decision of the Court of Appeals (CA) which affirmed the Decision of the Regional Trial Court (RTC) of Makati City, Branch 135. The RTC awarded the respondents their 5% broker's commission in Civil Case No. 15664. The pertinent facts are as follows: Bienvenido R. Medrano, Vice-Chairman of Ibaan Rural Bank, asked his cousin-in-law, Estela Flor, to find a buyer for a foreclosed asset of the bank – a 17-hectare mango plantation. Respondent Pacita G. Borbon, a licensed real estate broker, had a previous transaction with a businessman named Dominador Lee and had mentioned to others that she had a ready buyer for a mango orchard. Flor then informed Borbon about Medrano’s mango plantation, and Medrano issued a letter of authority to Borbon and respondent Josefina Antonio to negotiate the sale of the property. Lee and the respondents were not able to conduct an ocular inspection of the property together due to weather and logistical issues. However, Lee eventually purchased the property and made a down payment of P1,000,000.00. A Deed of Sale was then executed between the Ibaan Rural Bank and KGB Farms, Inc., represented by Lee, for the purchase price of P1,200,000.00. The respondents demanded their commission of 5% of the purchase price from the petitioners, who refused to pay and offered a smaller sum. This led the respondents to file an action against the petitioners. The petitioners argued that the letter of authority was not binding on the bank and that the purchase price of the property was not P2,200,000.00 but only P1,200,000.00. Medrano passed away during the course of the case, but no substitution of party was made. The trial court then resolved the case based on the issues of whether the letter of authority is binding on the defendant bank and whether the purchase price was P2,200,000.00.

The case involves a dispute over a broker's commission for the sale of a property. The respondents, brokers, were authorized by the late Bienvenido Medrano to find a purchaser for his property, a 17-hectare mango plantation. The respondents found a buyer, Lee, and a deed of sale was executed for a purchase price of P1,200,000. The respondents claimed a 5% commission based on a letter of authority signed by Medrano. The petitioner Ibaan Rural Bank, which claims ownership of the property, and Medrano's heirs, disputed the validity of the letter of authority and the entitlement of the respondents to commission. The trial court ruled in favor of the respondents, finding the letter of authority valid and binding, and ordered the petitioners to pay the commission. The petitioners appealed the decision, arguing that the letter of authority was not enforceable. The Court of Appeals affirmed the trial court's ruling, stating that the respondents were the procuring cause of the sale and that the letter of authority was valid. The petitioners filed a petition for review before the Supreme Court.

ISSUES:

  1. Whether or not the letter of authority signed by Medrano is binding and enforceable against the Ibaan Rural Bank and Medrano.

  2. Whether or not the respondents are entitled to a commission for the sale of the mango plantation property.

RULING:

  1. The letter of authority is binding and enforceable against both Medrano and the Ibaan Rural Bank. The court found that Medrano signed the letter on behalf of and as the owner of the property, making him estopped from denying liability.

  2. The respondents are entitled to the commission. The respondents were found to be the procuring cause of the sale, as their efforts led to the purchase of the property by Lee. The sale would not have been consummated without their intervention, thus entitling them to the 5% commission.

PRINCIPLES:

  • Procuring Cause Doctrine A broker is entitled to a commission if their efforts are the foundation on which negotiations resulting in a sale are begun without any break in continuity leading to the accomplishment of the sale.

  • Agency Principle A broker acts as a middleman and agent for both parties, and is entitled to compensation upon successfully bringing them together.

  • Contracts and Obligations The letter of authority, as a contract, is binding and enforceable as long as it is free from fraud, irregularity, or illegality.

  • Equity Principle When a broker's efforts are the efficient cause of the sale, it would be unjust not to compensate them pursuant to a valid agreement.

  • Legal Personality A person's actions may bind a separate legal entity if they act within the authority given or represent as acting on behalf of that entity.