Case Summary (G.R. No. 111448)
Authority to Sell
On May 10, 1988, Manuel C. Cruz, Jr., a director of Dieselman, issued a letter to a real estate broker, Cristeta N. Polintan, authorizing her to seek buyers for the property at a price of P3,000.00 per square meter. It is crucial to note that Cruz, Jr. lacked any written authority from Dieselman for this sale. Subsequently, Polintan authorized Felicisima Noble to sell the same property at P2,500.00 per square meter to AF Realty.
Acceptance and Further Actions
Zenaida Ranullo, acting on behalf of AF Realty, accepted the offer and paid a partial amount of P300,000.00, which Polintan acknowledged as an earnest money. However, Polintan was only able to provide limited documentation concerning the property. On August 2, 1988, Cruz, Sr., the president of Dieselman, acknowledged receipt of the earnest money but insisted on a revised price of P4,000.00 per square meter. The deal was ultimately terminated by Cruz, Sr. on August 13, 1988.
Legal Proceedings Initiated
AF Realty filed a complaint for specific performance against Dieselman and Cruz, Jr. in the Regional Trial Court, arguing that a perfected contract existed between the parties. They also sought damages, including compensatory and attorney’s fees. Dieselman contested the existence of a binding agreement, asserting that Cruz, Jr. lacked authorization to engage in the sale.
Deed of Sale to Midas Development
Meanwhile, Dieselman sold the same property to Midas Development Corp. on July 30, 1988, at P2,800.00 per square meter. Midas made a down payment and placed the balance in escrow, claiming possession of the property. To protect its interest, Midas intervened in AF Realty’s lawsuit, asserting that Dieselman could not be compelled to complete the sale to AF Realty.
Trial Court's Decision
The trial court ruled in favor of AF Realty, holding that Cruz, Jr.'s actions were binding on Dieselman despite lacking written authority. It found that Midas acted in bad faith and ruled against their intervention. The court ordered Dieselman to execute and deliver the deed of sale to AF Realty and awarded attorney’s fees.
Appeal to the Court of Appeals
All parties appealed the trial court's decision. AF Realty argued that Dieselman should be held liable for additional damages, while Dieselman and Midas challenged the trial court's finding of a perfected sale. The Court of Appeals reversed the trial court's judgment, concluding that Cruz, Jr. had no authority to sell the property, rendering the sale to AF Realty invalid, while upholding the validity of the sale to Midas.
Court of Appeals' Ratiocination
The Court of Appeals based its ruling on the principle that an agent cannot confer authority that they themselves do not possess (nemo dat quod non habet). The appellate court emphasized that Dieselman did not authorize Cruz, Jr. in writing to sell the property, and therefore, the contract with AF Realty was void. The court also emphasized that Midas acted in good faith and that a notice of lis pendens filed by AF Realty had no bearing on Midas&#
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Case Information
- Citation: 424 Phil. 446
- Division: Third Division
- G.R. No.: 111448
- Date: January 16, 2002
- Petitioners: AF Realty & Development, Inc. and Zenaida R. Ranullo
- Respondents: Dieselman Freight Services, Co., Manuel C. Cruz, Jr., and Midas Development Corporation
Background of the Case
- Dieselman Freight Service Co. is a domestic corporation owning a commercial lot in Pasig City, Metro Manila, covered by Transfer Certificate of Title No. 39849.
- On May 10, 1988, Manuel C. Cruz, Jr., without written authority from Dieselman, issued a letter to real estate broker Cristeta N. Polintan, allowing her to negotiate the sale of the lot.
- Polintan later authorized Felicisima Noble to sell the property to AF Realty at a lower price than initially quoted by Cruz, Jr.
- Zenaida Ranullo of AF Realty accepted the offer and provided a partial payment of P300,000 to Dieselman through Polintan, with a condition of refund if the transaction did not proceed.
Events Leading to Litigation
- AF Realty confirmed its intent to purchase the lot but sought a board resolution from Dieselman authorizing the sale, which was not provided.
- Dieselman's president, Manuel F. Cruz, Sr., later acknowledged receipt of the P300,000 as earnest money but subsequently demanded a higher price and terminated the offer.
- AF Realty filed a complaint for specific performance against Dieselman and Cruz, J