AF Realty vs Dieselman Freight Service

Facts:
Manuel Cruz, Jr., a board member of Dieselman Freight Services, Co. (DFS) authorized
Cristeta Polintan to sell a 2,094 sq. m. parcel of land owned by DFS. Polintan in turn
authorized Felicisima Noble to sell the same lot. Noble then offered AF Realty &
Development, Co., represented by Zenaida Ranullo, the land at the rate of P2,500.00 per sq.
m. AF Realty accepted the offer and issued a P300,000 check as downpayment.
However, it appeared that DFS did not authorize Cruz, Jr. to sell the said land. Nevertheless,
Manuel Cruz, Sr. (father) and president of DFS, accepted the check but modified the offer. He
increased the selling price to P4,000.00 per sq. m. AF Realty, in its response, did not exactly
agree nor disagree with the counter-offer but only said it is willing to pay the balance (but
was not clear at what rate). Eventually, DFS sold the property to someone else. AF Realty is
sued DFS for specific performance. It claims that DFS ratified the contract when it accepted
the check and made a counter

Issue:

Whether or not the act of DFS president constitute a ratification, in order to bound the
corporation.

Ruling:

No. Section 23 of the Corporation Code expressly provides that the corporate powers
of all corporations shall be exercised by the board of directors. Just as a natural
person may authorize another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its functions to individual officers
or agents appointed by it.i[19] Thus, 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.ii[20] Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but
not in the course of, or connected with, the performance of authorized duties of
such director, are held not binding on the corporation. iii[21]

In the instant case, it is undisputed that respondent Cruz, Jr. has no written authority
from the board of directors of respondent Dieselman to sell or to negotiate the sale
of the lot, much less to appoint other persons for the same purpose. Respondent
Cruz, Jr.s lack of such authority precludes him from conferring any authority to
Polintan involving the subject realty. Necessarily, neither could Polintan authorize
Felicisima Noble. Clearly, the collective acts of respondent Cruz, Jr., Polintan and
Noble cannot bind Dieselman in the purported contract of sale.
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