AF Realty & Development, Inc.

vs Dieselman Freight Services

FACTS:
- Respondent Dieselman Freight Services is the owner of a lot with TCT No. 39849;
- Manuel Cruz Jr., a member of Dieselman board of directors issued an Authority to Sell Real
Estate to Cristeta Polintan, authorizing her to look for buyers and negotiate the sale of the
said property;
- Cruz Jr. had no written authority from Dieselman to sell the property;
- Polintan authorized Mimi Noble to sell the same property;
- Noble offered the sale of the lot to petitioners AF Realty. Zenaida Ranullo, vice president of
AF Realty, accepted the offer and issued a check payable to the order of Dieselman;
- Polintan received the check and signed an Acknoledgment Receipt indication that the P300k
represents the partial payment of the property;
- Manuel Cruz Sr., president of Dieselman, acknowledge the receipt of the of the said P300k as
earnest money but required AF Realty to finalize sale at P4,000/sqm.;
- The problem occurred when Mr. Cruz Sr. terminated the offer and demanded the return of
the title. AF Realty then filed a complaint for specific performance because they claimed that
there was already a perfected sale;
- Dieselman alleged that there was no meeting of the minds between the parties in the sale of
the property and it did not authorize any person to enter into such transaction on its behalf;
- AF Realty said that the sale of land by an unauthorized agent was ratified when Dieselman
president accepted the earnest money.
ISSUE: Whether the sale of land by an unauthorized agent may be ratified where there is acceptance
of benefits involved
RULING: No, it cannot be ratified.
LEGAL BASIS:
Art. 1874 When a sale of piece of land is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void;
Art. 1409 The following contracts are inexistent and void from the very beginning: (7) those
expressly prohibited or declared void by law.
APPLICATION TO FACTS: Contracts or acts of a corporation must be made either by the board of
directors or by a corporate agent duly authorized by the board. Absent such valid authorization, the
rule is that the declarations of an individual director relating to the affairs of the corporation are not
binding on the corporation.
In this case, Cruz Jr. had no written authority from the Dieselman board of directors to sell or
negotiate the sale of the land, much less to appoint other persons for the same purpose. Cruz Jr.s lack
of authority precludes him from conferring any authority to Polintan. Neither could Polintan
authorize Noble (Art. 1874). Their acts cannot bind Dieselman in the contract of sale, thus the
supposed contract is void from the beginning and not susceptible of ratification (Art. 1409).