G.R. No. 111448 – 424 Phil. 446 – 373 SCRA 385 – Mercantile Law – Corporation Law – Power of the Board – Ultra Vires Acts of Corporate Officers – Agency
Civil Law – Obligations and Contracts – Void Contracts Can Never Be Ratified
In 1988, 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.
Now AF Realty is suing DFS for specific performance. It claims that DFS ratified the contract when it accepted the check and made a counter-offer.
ISSUE: Whether or not the sale made through an agent was ratified.
HELD: No. There was no valid agency created. The Board of Directors of DFS never authorized Cruz, Jr. to sell the land. Hence, the agreement between Cruz, Jr. and Polintan, as well as the subsequent agreement between Polintan and Noble, never bound the corporation. Therefore the sale transacted by Noble purportedly on behalf of Polintan and ultimately purportedly on behalf of DFS is void.
Being a void sale, it cannot be ratified even if Cruz, Sr. accepted the check and made a counter-offer. (Cruz, Sr. returned the check anyway). Under Article 1409 of the Civil Code, void transactions can never be ratified because they were void from the very beginning.
