04 AF REALTY & DEVELOPMENT INC V DIESELMAN FREIGHT SERVICES CO perfected; Deed of Absolute Sale to MIDAS [no bad faith];
e Sale to MIDAS [no bad faith]; declared DIESELMAN and
JAN 16 2002 | SANDOVAL-GUTIERREZ, J
FACTS
 DIESELMAN is the registered owner of a parcel of commercial lot in Pasig and the
property is covered by a TCT issued by the Registry of Deeds of Rizal
 CRUZ JR, a member of the board of directors of DIESELMAN issued a letter
denominated as “AUTHORITY TO SELL REAL ESTATE” to POLINTAN (real
estate broker of CNP REAL ESTATE BROKERAGE)
o CRUZ JR authorized POLINTAN to look for a buyer/s and negotiate the sale
of the lot at P3000/sqm or a total of P6,282,00 [CRUZ JR has no written
authority from DIESELMAN to sell the lot]
 POLINTAN through a letter authorized MIMI to sell the same lot; MIMI offered for
sale the property to AF REALTY at P2500/sqm
 RANULLO (board member and VP of AF REALTY) accepted the offer and issued
a check for P300,000 payable to DIESELMAN
o POLINTAN received the check and signed an ACKNOWLEDGEMENT
RECEIPT indicating the amount (P300K) represents the partial payment of the
property but refundable within 2 weeks should AF REALTY disapprove
RANULLO’s action [AF REALTY CONFIRMED INTENTION TO BUY]
 RANULLO asked POLINTAN for the board resolution of DIESELMAN authorizing
the sale of the property
o POLINTAN could only give RANULLO the original copy of the TCT, the tax
declaration and tax receipt for the lot, and a photocopy of the Articles of
Incorporation of DIESELMAN
 CRUZ SR (President of DIESELMAN) terminated the offer and demanded
return of the title of lot from AF REALTY
 AF REALTY: Claims there was a perfected contract of sale, filed with RTC Pasig
a complaint for specific performance against DIESELMAN and CRUZ JR
o Prays that DIESELMAN be ordered to execute and deliver a final deed of
sale in favor of AF REALTY
o Prays payment of damages (P1.5M compensatory; P400K attorney’s fees,
P500K exemplary)
 DIESELMAN: Alleges there was no meeting of the minds between the parties in
the sale of the property and that it did not authorize any person to enter into such
transaction on its behalf
 MEANWHILE, DIESELMAN and MIDAS executed a Deed of Absolute Sale of
the same property for P2800/sqm
o MIDAS: delivered P500K as down payment and deposited P5.3M in escrow
account with PCIBank
o MIDAS filed a Motion for Leave to Intervene alleging that it has purchased
the property and took possession thereof hence DIESELMAN cannot be
compelled to sell and convey it to AF REALTY [GRANTED]
RTC: Acts of CRUZ JR bound DIESELMAN in the sale of the lot to AF REALTY; the
perfected contract of sale bars MIDAS’ intervention
 MIDAS acted in bad faith when it initially paid DIESELMAN without seeing the
latter’s title to the property; the notarial report of the sale was not submitted to the
Clerk of Court of QC RTC and balance purportedly deposited in the escrow
account was not established
CA: RTC REVERSED – Since CRUZ JR was not authorized in writing by
DIESELMAN to sell the subject property to AF REALTY, the sale was not
CRUZ JR jointly and severally liable to AF REALTY for moral, exemplary damages
and attorney’s fees [P100K each]
 MR – CA AMENDED – only CRUZ JR is liable to pay damages
ISSUE: WHO BETWEEN AF REALTY AND MIDAS HAS A RIGHT OVER THE LOT?
MIDAS
SEC 23 CORPORATION CODE – the corporate powers of all corporations shall be
exercised by the board of directors
 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 delegation/authorization, the RULE is that the declaration 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
not binding on the corporation
IN CASE AT BAR, CRUZ JR has no written authority from the board of directors of
DIESELMANT to sell or to negotiate the sale of the lot, much less to appoint other
persons for the same purpose
 CRUZ’s lack of authority precludes him from conferring any authority to POLINTAN
and neither could POLINTAN authorize MIMI [collective acts of CRUZ JR,
POLINTAN and MIMI CANNOT bind DIESELMAN in the contract of sale]
ART 1874 CIVIL CODE – “When a sale of piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing; otherwise, the sale shall
be void.”
 Since CRUZ JR, POLINTAN and MIMI were not authorized by DIESELMAN, the
supposed contract of sale with AF REALTY is void – NOT SUSCEPTIBLE OF
RATIFICATION [ART 1409 CIVIL CODE]
The sale to MIDAS was authorized by a board resolution of DIESELMAN = VALID
RE: DAMAGES
RANULLO (of AF REALTY) who accepted the offer admitted in her testimony that a
board resolution from DIESELMAN authorizing the sale is necessary to bind the
latter in the transaction – despite her demand, such written authority was not
presented to her
 NOTWITHSTANDING, she tendered partial payment for the unauthorized
transaction – CRUZ JR should not be held liable for damages and attorney’s
fees
WHEREFORE, CA AFFIRMED WITH MODIFICATION – award of damages and
attorney’s fees deleted
DIESELMAN to return to AF REALTY its partial payment of P300K