Litonjua, Jr. v. Eternit Corp 8 June 2006 | Callejo, Sr., J.

Topic: Essential characteristics and requirements of a contract of agency Overview: Statement of the Case: Petition for Review on Certiorati of the CA decision affirming the TC-Pasig and denying petitioners MR Petitioners: Eduardo Litonjua, Jr. and Antonio Litonjua Respondents: Eternit Corporation (now Eterton Multi-resources Corporation; EC for brevity), Eteroutremer, S.A. Corporation (ESAC for brevity) and Far East Bank and Trust Company (Bank for brevity) Statement of Facts: EC is a manufacturer of roofing materials and pipe products in the Philippines and operates on eight parcels of lands in Mandaluyong City with a total of 47,233 sq.m., all covered by various Transfer Certificates under the name of Bank as trustee. 90% of the shares of EC were owned by ESAC, a Belgian company. 1986: ESACs management grew wary of the political situation of the Philippines (Marcos administration) and instructed Michael Adams, a member of ECs Board of Directors, to dispose of the eight parcels of lands. For this, he hired Lauro G. Marquez as realtor/broker. Jack Glanville, an Australian citizen and the General Manager and President of EC, showed Marquez the lands. Sept. 12, 1986: Marquez offered the lands to Eduardo Litonjua, Jr. of the Litonjua & Company, Inc. The offer, made through letter with Marquez claim of authority to sell the property, was for 27M with the terms of the sale subject to negotiation. Eduardo, along with his brother Antonio, looked at the property and offered to buy it for 20M in cash. Marquez communicated the offer to Glanville and Claude Delsaux, Regional Director for Asia of ESAC (both held offices in Belgium). Oct. 28, 1986: Glanville telexed Delsaux about their decision on the offer since Delsaux failed to reply to the previous communication Feb. 12, 1987: Delsaux replied that their final offer, based on Belgian/Swiss decision, was for $1M plus P2.5M to cover all existing obligations prior to liquidation. Eduardo accepted the final offer and said that they would confirm full payment within 90 days after execution and preparation of all documents of sale and government clearances The Litonjua brothers deposited $1M with Security Bank and executed an Escrow Agreement Sometime later, Glanville communicated with Delsaux that he had met with the buyers and asked when the sale would be implemented, upon inquiry of the Litonjua brothers and Marquez. The Litonjua brothers were concerned because they would be incurring expenses in bank commitment fees. Soon after Corazon Aquino assumed office, Glanville told Marquez that the sale would not push through because of the stabilization of the political situation. The Litonjuas demanded payment for damages from EC but EC refused The Litonjuas filed with the RTC-Pasig a complaint for specific performance and damages against herein respondents and amended to include Benito Tan, Ruperto Tan, Stock Ha Tan and Deogracias Eufemio because of their purchase of ESAC stocks and were the controlling stockholders. Respondents answer: o ESACr does not do business in the Philippines so the court has no jurisdiction o The Board and stockholders of EC never approved a resolution to sell the land or to authorize Marquez to do the same o The Oct. 28 telex of Glanville was his own personal making and does not bind EC TC dismissed case: o No valid and binding sale between parties

No cause of action against Far East Bank and Trust Company Counter-claim of respondents dismissed as well The authority of the agents/realtors was not made in writing therefore the sale is not merely unenforceable but void. Ratification of this authority may not be applied retroactively. Petitioners could not assume that the defendants gave the agents authority without clear authorization in the form of Board resolutions. o The supposed sale involves all assets of EC which would mean complete cessation of its operations. Litonjuas appealed to the CA, claiming that: o Marquez was not an agent but merely a broker or go-between so he did not need written authority o Agency by estoppels was created when corporation clothed Marquez with apparent authority o It was a bilateral contract to buy and sell which is equivalent to a contract of sale and is binding upon the corporation to consummate ECs answer: Neither Marquez nor Glanville and Desaux were authorized by the Board of Directors had written authority to sell or offer the property for sale. Since the sale involved almost all the properties of EC, naturally it would need the consent of all the stockholders. CA affirmed the RTC and denied petitioners MR: o Marquez being a real estate broker was considered to be a special agent under NCC 1874. Under Sec. 23 of the Corporation Code, he needed a special authority from the Board of Directors to bind the corporation to the sale. o Delsaux was merely a representative of ESAC, the majority stockholder of EC, but was not a part of ECs Board of Directors, so he had no authority to bind EC. o Litonjuas failed to prove agency by estoppels Petitioners brought case to the SC, claiming that: o There was valid offer and acceptance when they accepted the final offer of EC and Marquez made known to them the acceptance before they withdrew the offer o Marquez did not need special authority because he was not tasked to sell the properties but merely to bring both parties to a sale together, as a broker. Therefore, NCC 1874 does not apply. o Glanville and Delsaux were clothed with authority to sell the properties because it would be inconsistent to say they didnt when they made a counter-offer and later on rejected the sale o Petitioners were in good faith because Glanville and Delsaux presented themselves to the public as if they had authority from EC o Glanville and Delsaux have authority because they sold 90% of the stocks of EC to Ruperto Tan in 1997, therefore a Board Resolution is a mere formality since they hold such high positions Respondents reply: o Factual matters so cannot be taken cognizance by the SC under Rule 45 of the Rules of Court o On the matters, they reiterate their stand in the CA o o o

Issues: 1. W/N there was a perfected contract of sale 2. W/N Marquez needed written authority from ESAC 3. W/N Glanville and Delsaux had the necessary or apparent authority from ESAC Held & Rationale: Petition is without merit 1. The issues are factual, therefore not falling within the ambit of Rule 45. In the absence of express written terms of the relationship of agency, the existence of a relationship and the bounds of it is a question of fact. Whether the person acted within his

authority or whether there was apparent authority is also a question of fact. These findings shall not be disturbed unless it is shown that some facts and circumstances were not properly appreciated. 2. Petitioners failed to prove agency. Petitioners failed to prove that EC accepted their counter-offer through Glanville and Delsaux. When the case is for specific performance of a contract, agency must be proven through clear, certain and specific proof. Under Sec. 23 of the Corporation Code, a corporation has a separate and distinct personality from its stockholders and is not affected by transactions of the latter. Under Sec. 36 of the same code, it authorizes the corporation to dispose of their properties. However, these acts such as offering a property for sale and accepting a counter-offer may not be done without the authority of corporate by-laws or specific acts of the board of directors. Absent this authority, the rule is that the declaration of one director conferring such is not binding on the corporation. Any act of an agent of a corporation must be ratified by the Board of Directors, therefore it has to have written authority. Written authority is also necessary because in this case, real rights over immoveable property are conveyed, with which agency is required to be in writing or else the sale is void. Facts also showed that the final offer made by Delsaux was only from the Belgian/Swiss component but not from the management or Board of Directors of ESAC, thus it is not binding upon EC because they were officers of ESAC but not EC. Though it is true that they owned majority of the stocks of EC, the Court held that even if it owned all of the stocks, it does not merge them into one corporation. Thus, they could not act to bind EC without a Board resolution from the Board of Directors of EC itself. A Board resolution is not a mere formality but is a condition sine qua non to the validity of the sale. The Litonjuas had the responsibility to exercise due diligence in confirming the authority of the agent. The rule is that anyone who deals with an assumed does so at his own peril. Marquez had no authority to be an agent. Marquez acted not merely as a broker but also as an agent. He confirmed the offer and acceptance of the Litonjuas to the officers of ESAC. There was no agency by estoppels. The following are the requisites for agency by estoppel: (1) the principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon such representation, such third person has changed his position to his detriment. Proof of reliance on such representation was lacking in this case because in the communications between the Litonjuas and Glanville, Delsaux and Marquez, the latter parties clearly stated that they were acting in the behalf of ESAC only. It cannot be said also that EC ratified the acts of the latter parties. There is no showing that the communications between them were forwarded to ECs Board of Directors for ratification. Judgment: Petition denied for lack of merit. Costs against petitioners.