Great Asian Sales Center Corporation and Tan Chong Lin vs.

CA, Bancasia Finance and

Investment Corporation
FACTS:
 Great Asian is engaged in the business of buying and selling general merchandise. The
board of directors of Great Asian approved a resolution authorizing Arsenio Lim Piat to
secure a loan from Bancasia. It also authorized Arsenio to sing all papers and documents
or PN necessary to secure the loan. Another resolution was approved authorizing Great
Asian to secure discounting line with Bancasia. It designated Arsenio as the authorized
signatory to sign all instruments, documents and checks necessary to secure the
discounting line.
 Tan Chong Lin signed 2 surety Agreements in favor of Bancasia to guarantee solidarily
the debts of Great Asian to Bancasia.
 Great Asian, through Arsenio, signed 4 deeds of assignment assigning to Bancasia 15
postdated checks. On the first deed of assignment covering 4 checks, 2 were dishonored.
On the 2nd deed of assignment covering 4 checks, 4 were dishonored. On the 3rd deed of
assignment covering 8 checks, 8 were dishonored. And the last deed covering 1 check, it
was also dishonored. Great Asian assigned the postdated checks to Bancasia at discount
rate of less than 24% of the face value of the checks.
 Arsenio endorsed all the 15 dishonored checks by signing his name at the back of the
checks. 8 of the dishonored checks bore the indorsement of Arsenio below the stamped
name of Great Asian while the rest of dishonored checks just bore his signature. The
drawee bank dishonored the 15 check when it was deposited for collection by Bancasia
with either account closed, payment stopped, account under garnishment, and
insufficiency of funds as reasons.
 After the checks were dishonored, Bancasia through its lawyer, sent a amail to Lin
notifying him of the dishonor and demanded payment from him. Neither Great Asian no
Tan Chong Lin paid Bancasia.
 Great Asian field with RTC a petition for insolvency verified under oath by its Secretary
and under the Schedule and Inventory of Liabilities and Creditors, Bancasia was listed as
1 of the creditors of Great Asian.
 Bancasia filed a complaint for collection of sum of money against Great Asian and Tan
Chong Lin. Lin was impleaded because of his Surety Agreements he signed.
 Great Asian denied the allegation claiming it was unfounded, malicious and unlawfully
instituted since there was already a pending insolvency proceedings. It raised that
Arsenio lacked the authority to sign the Deeds of Assignment.
 RTC: ruled in favor of Bancasia finding that the 2 board resolution authorizing Arsenio to
secure a loan and to obtain a discounting line with Bancasia, and the fact that in the
Schedule and Inventory of Liabilities and Creditors, Great Asian admitted liability to
Bancasia. Hence it ordered Great Asian and Tan Chong Lin jointly and severally to pay
Bancasia.
 CA: affirmed in toto the ruling of the RTC.
  Hence this petition.
ISSUE:
1. WON Arsenio had authority to execute the deeds of assignment on behalf of Great Asian
2. WON Great Asian is liable to Bancasia under the Deeds of Assignment for Breach of
Contract pursuant to Civil Code, independent of the NIL.
3. WON Tan Chong Lin is liable to Great Asian under the Surety Agreements.
RULING:
As to the Authority of Arsenio:
YES.
The Corporation Code vests in the board of directors the exercise of the corporate powers
of the corporation, except in those instances here the Code requires the stockholders’ approval
for certain specific acts.
In the ordinary course of business, a corporation can borrow funds or dispose of assets of
the corporation only on authority of the board of directors. The board of directors normally
designates one or more corporate officers to sign loan documents or deeds of assignment for the
corporation.
In this case, the 2 board resolutions clearly authorize Great Asian to secure a loan or
discounting line from Bancasia. The board resolutions also categorically designate Arsenio as the
authorized signatory to sign and deliver all the implementing documents, including checks, for
Great Asian. Hence, with the 2 board resolutions, Arsenio signed the Deeds of Assignment
selling, and endorsing, the 15 checks of Great Asian to Bancasia.
As to whether the Deeds of Assignment are transactions the board authorized Arsenio to
sign under the 2 boards resolution.
YES.
The Deeds of Assignment enabled Great Asian to generate instant cash from its 15
checks which were still not due and demandable then. Clearly the discounting arrangements
entered by Arsenio under the Deeds of Assignment were the very transactions envisioned in the
2 board resolutions of Great Asian to raised funds for its business. Arsenio had all the proper and
necessary authority from the board of directors of Great Asian to sign Deeds of Assignment and
to endorse the 15 postdated checks.
As to the breach of contract by Great Asian
YES
There is one vital suspensive condition on the deeds of assignment. That is in the case the
drawers fail to pay the checks on maturity, Great Asian obligated itself to pay Bancasia the full
face value of the dishonored checks. This conditional obligation of Great Asian arise from its
written contract with Bancasia embodied in the Deeds of Assignment.
By express provision in the Deeds of Assignment, Great Asian unconditionally obligated
itself to pay Bancasia the full value of the dishonored checks. In short, Great Asian sold the
postdated checks on with the recourse basis against itself.
Great Asian and Bancasia agreed on this specific wwith recourse stipulation, despite the
fact that the receivable were NI with the indorsement of Arsenio.
The explicit with recourse stipulation against Great Asian effectively enlarged the
liability of Great Asian beyond the of a mere endorser of a NI. Thus whether or not Bancasia
gives notice of dishonor to Great Asian, Great Asian remains liable to Bancasia because of the
with recourse stipulation which is independent of the warranties of an endorser under NIL.
As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian
under the NIL. However, Bancasia decided to sue Great Asian for breach of contract under the
civil code, a right that Bancasia had under the express with recourse stipulation in the Deeds of
Assignment.
As to the lack of consideration for the Deeds of Assignment:
NO.
The deeds of assignement uniformly provide that the 15 postdated checks were assigned
to Bancasia for valuable consideration. The record is devoid of any showing on the part of Great
Asian rebutting this presumption. Moreover, Great Asian admitted its debt to Bancasia when it
listed Bancasia as one of its creditors.
In summary, Great Asian’s 4 deeds of assignment expressly stipulate the suspensive
condition that in the event the drawers of the checks fail to pay, Great Asian itself will pay
Bancasia. Since the common condition in the contracts transpired, an obligation on the part of
the Great Asian arose from the 4 contracts and that obligation is to pay Bancasia the full value of
the checks.
As to liability of Tan Chong Lin in the Surety Agreements
YES
Under the Surety Agreements, a common condition is present to wit:
Upon failure of the principal to pay at maturity any of the obligations abovementioned,
its successors, administrators or assigns, both the Principal and the Surety shall be considered in
default and the Surety to pay jointly and severally to the Creditor all outstanding obligation of
the Principal.
Indisputably, Tan Chong Lin explicitly and unconditionally bound himself to pay
Bancasia, solidarily with Great Asian, if the drawers fail to pay on due date. As surety, Tan
Chong Lin automatically became liable for the entire obligation to the same extent as Great
Asian.
Tan Chong Lin was clearly on notice that he was holding himself as surety of Great
Asian which was discounting postdated checks issued by its buyers of goods and merchandise.
Moreover, Tan Chong Lin cannot feign ignorance of Great Asian’s business activities or
discounting transaction. Thus, the warranties do not increase or enlarge the risk of Tan Chong
Lin under the Surety Agreement.
The stipulations in the Surety Agreements undeniably mandate the solidary liability of
Tan Chong Lin with Great Asian. Moreover, the stipulations in Surety Agreements are
sufficiently broad, expressly encompassing “all notes, drafts, boe, and other obligations of every
kind which the principal may now or may hereafter owe the creditor. Consequently Tan Chong
Lin must be held solidarily liable with Great Asian for the nonpayment of the 15 dishonored
check.
Associated Bank vs. Sps. Pronstroller
FACTS:
 Sps. Vaca executed a Real Estate Mortgage in favor of AB over a parcel of land and
house constructed thereon. For failure of the Sps. Vaca to pay their obligation, the
property was sold at a public auction with AB as the highest bidder.
 Sps. Vaca commenced an action for the nullification of the REM and foreclosure sale.
AB on the other hand, filed an petition for the issuance of writ of possession which was
denied by the RTC but obtained a favorable judgment upon appeal. Sps Vaca questioned
the judgment before the SC.
 During the pendency of the aforesaid case, AB advertised the property for sale. Sps.
Pronstroller offered to purchase the property which was made through Atty. Soluta, AB’s
VP, secretary and member of board of directors. AB accepted the offer hence Sps.
Pronstroller paid 10% of the purchase price as down payment.
 AB, through Atty. Soluta, and Sps. Pronstroller executed at Letter-Agreement setting the
terms and condition of the sale which provides that the selling price shall be payable at
10% deposit and the balance to be deposited under escrow agreement and the deposit
should be made within 90 days from the date of the letter-agreement.
 Prior to the 90-day period and in the view of the pending case between AB and Sps. Vaca
involving the property, Sps. Pronstroller requested the balance of the purchase price be
payable only upon service of the final decision affirming AB’s right to possess the
property.
 Soluta referred the proposal to AB ARRMC but deferred action thereon..
 After a month of the request and the payment deadline had lapsed, Sps. Pronstroller and
Soluta, acting for AB, executed another letter-agreement allowing the Sps.Pronstroller to
pay the balance of the purchase upon the receipt of a final order from the SC.
 AB reorganized its management and Atty. Daydaybecame the AVP while Soluta was
relieved from responsibilities. Dayday reviewed AB’s records of outstanding accounts
and discovered that Sps. Pronstroller failed to deposit the balance of the purchase price
and found out that Sps. Pronstroller requested for an extension which was resubmitted but
was disapproved. ARRMC thus referred the matter to the legal department for rescission
or cancellation of contract due to Sps. Pronstroller’s breach.
 Dayday informed the Sps. Pronstroller that their request was disapproved and in the view
of their breach, AB was rescinding their contract and forfeiting their deposit. Sps.
Pronstroller gave to Atty. Dayday the letter-agreement which granted the request for
 extension. Dayday claimed that the letter was mistake and that Soluto was not authorized
to give such extension.
 Sps. Pronstroller offered a new proposal however it was disapproved by AB’s president.
AB stated that they would only accept the proposal if the Spouses agreed to pay a 24.5%
annual interest on the unpaid balance.
 For failure to reach an agreement, Spouses informed the AB that they will be enforcing
the 2nd letter agreement. AB countered that they were not aware of the existence of the 2 nd
agreement and Soluta was not authorized to sign for AB.
 In the Vaca case, SC uphold AB’s right to possess the property.
 Spouses Pronstroller filed a complaint for specific performance and prayed that AB be
ordered to sell the property in accordance to their 2 nd letter agreement. They also
annotated a notice of lis pendens the back portion of the TCT.
 AB contend that their contract had already been rescinded because of the Pronstroller’s
failure to deposit in escrow the balance within the stipulated period.
 During the pendency of the case, AB sold the property to Vaca and a TCT was issued
under their name. Vaca started demolishing the house but was not completed because of a
WPI.
 RTC: resolved in favor of Pronstrollers and found the rescission of the Agreement to Sell
to be null and void.
o Applied the rule of “apparent authority” upholding the validity of the 2nd letter
agreement here the Pronstrollers were given an extention within which the
payment be made. Consequently, Spouses did not incur in delay hence the
rescission without basis and contrary to law.
 CA: affirmed the RTC decision and upheld the authority of Atty. Soluta to represent AB.
o It further ruled that AB had no right to unilaterally rescind the contract and that
AB was estopped from questioning the efficacy of the 2 nd letter-agreement
because of its failure to repudiate the same for a period of 1 year.
 Hence this petition.
ISSUE:
1. WON AB is bound by the 2nd letter agreement signed by Soluta under the doctrine of
apparent authority
2. WON there is a valid rescission of the 2nd letter agreement
3. WON spouses were estopped from enforcing the 2 nd letter agreement because of their
new proposal
4. WON AB is estopped from questioning the validity of the 2 nd letter-agreement because
of its failure to repudiate the same.
5. WON the present case is a collateral attack on the new TCT issued in the name of Vaca.
RULING
As to the apparent authority of Soluta thus binding AB
YES
 The general rule is that, in the absence of authority from the BoD, no person, not even
officers, can validly bin a corporation. The power and responsibility to decide whether the
corporation should enter into a contract that will bind the corporation is lodged in the BoD. The
board may validly delegate some of its functions and powers to officers, committees and agents.
The authority of such individuals to bind the corporation is generally derived from law, corporate
by-laws, or authorization from the board, either expressly or impliedly, by habit, custom, or
acquiescence.
The authority of a corporate officer or agent in dealing with 3 rd persons may be actual or
apparent. Apparent authority is derived not merely from practice. Its existence may be
ascertained through:
1. The general manner which the corporation holds out an officer or agent as having the
power to act, or in other words, the apparent authority to act in general with which it
clothes him.
2. The acquiescence in his acts of a particular nature with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers.

Accordingly, the authority to act for and to bind a corporaiton may be presumed from
acts of recognition in other instances, wherein the power was exercised without any objection
from its board or shareholders.
Undoubtedly, AB previously allowed Atty. Solutaa to enter into the 1st agreement without
a board resolution expressly authorizing him; thus it had clothed him with apparent authority to
modify the same via a 2nd letter-agreement. It is not the quantity of similar acts which establishes
the apparent authority, but the vesting of a corporate officer with the power to bind the
corporation.
If a corporation knowingly permits its officer, or any other agent, to perform acts within
the scope of an apparent authority, holding him out to the public as possessing power to do those
acts, the corporation will, as against any person who has dealt in good faith with the corporation
through such agent be estopped from denying authority.
As to the validity of rescission of the 2nd letter-agreement
A contract constitutes laws beteen the parties. Concededly, parties may validly stipute the
unilateral rescission of a contract. In this case, AB may have the right under the 1 st agreement to
unilaterally rescind the contract in case the Pronstroller’s failure to comply with the terms of the
contract. But the execution of the 2nd letter-agreement prevented AB from exercising the right to
rescind. This is because there was no breach of contract as the date of full payment had already
been modified by the 2nd agreement.
As to the enforcement of the 2nd agreement
The 2nd agreement cannot be considered abandoned by Spouses act of making a new offer
which was rejected by AB. Such offer was only made to demonstrate their capacity to purchase
the property. Even if it was a valid new offer, they did so only due to the fraudulent
misrepresentation made the AB that their earlier contracts had been rescinded. Considering
Pronstroller’s capacity to pay, to abandon their right to the contract and to the property, absent
any form of protection is contrary to human nature. The presumption that a person takes ordinary
care of his concerns applies and remains unrebutted. Obviously therefore, respondents made the
new offer without abandoning the previous contract. Since there was never a perfected new
contract, the 2nd agreement was still in effect and there was no abandonment to speak of.
As to the collateral attack on the title of Vaca
Admittedly, during the pendency of the case, Pronstroller timely registered a notice of lis
pendens to warn the whole world that the property was subject of a pending litigation. The filing
of a notice of lis pendens has 2-fold effect:
1. To keep subject matter of litigation within the power of the court until the final judgment
to prevent the defeat of the final judgment by successive alienations
2. To bind a purchaser, bona fide or not, of the land subject of the litigation to the judgment
or decree that the court will promulgate subsequently.
This registration gives the court clear authority to cancel the title of Vaca, since the sale of the
subject property was made after the notice of lis pendens. The notice is not considered a
collateral attack on the title for the indefeasibility of the title shall not be used to defraud another
especially if the latter performs acts to protect his rights such as the timely registration of notice
of lis pendens.
Development Bank of the Philippines vs. Spouses Ong
FACTS:
 DBP foreclosed asset is the subject of this controversy. Spouses Ong addressed a written
offer to petitioner through the branch manager to buy the subject property on a negotiated
sale basis and submitted his last offer. The offer was duly “NOTED” by the DBP branch
manager and issued an official receipt for the deposit made as down payment.
 DPB sent a mail to the Ongs informing the latter that DBP has received an offer from
another buy with a better and more advantageous to the bank. Ongs were given 3 days to
match the same offer. Failing will immediately award the property to the other buyer.
 Ongs matched the offer, and subsequently, there was a conference between Ongs and
DPB which the DBP informed Ongs that the property could not be awarded to them and
the property would be offered in a public bidding.
 Ongs filed with the RTC a complaint for breach of contract and specific performance
against the DBP.
 RTC: dismissed the complaint finding that there was no perfected contract of sale
between the parties hence there was no breach to speak of. However upon MR, RTC
vacated its judgment and set the case for the reception of evidence.
 Ong presented his testimony that he and his wife went to DBP and looked for Roy
Pasalan, a clerk and told Pasalan that they were interested to buy 2 lots. Pasalan went to
talk to Lagrito, the manager. Pasalan returned informing the spouses that the branch
manger agreed to sell the property.
 RTC (new decision): in favor of Spouses Ong.
 CA: affirmed in toto the decision of the RTC
ISSUE: WON there actually was a perfected contract between petitioner and respondents.
RULING:
NO.
Rural Bank of Milaor vs. Ocfemia:
In passing upon the liability of a corporation in cases of this kind it is always well to keep
in mind the situation as it presents itself to the 3 rd party with whom the contract is made.
Naturally he can have little or no information as to what occurs in corporate meetings; and he
must necessarily rely upon the external manifestation of corporate consent. The integrity of
commercial transactions can only be maintained by holding the corporation strictly to the
liability fixed upon it by its agents in accordance with law. It is familiar doctrine that if a
corporation knowingly permits 1 one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing the power to
do those acts, the corporation will, as against any one who has in good faith dealt with the
corporation through such agent, be estopped from denying his authority; and where it is said if
the corporation permits this means the same as if the thing permitted by the directing power on
the corporation.
In this light, the bank is estopped from questioning the authority of the bank manager to
enter into contract of sale.
In this case, there is no approval of any responsible bank officer of DBP. The signature of
Lagrito under the typewritten word NOTED at the bottom of Ong’s offer to purchase cannot be
taken as an approval of the sale. Contrary, the offer to purchase was merely NOTED by the
branch manager and not approved is a clear indication there is not perfected contract of sale.
The representation of Roy Pasalan, that the manager already approved the sale, even if
true, cannot bind the DBP to a contract of sale with respondents, it being obvious that such clerk
is not among the bank officers upon whom such putative authority may be reposed by a 3 rd party.
Thus there is no legal basis to bind DBP into any valid contract given the absolute absence of
any approval or consent by any responsible officer of the Bank.
And since there is no perfected contract, there is no cause of action for specific
performance.
Olongapo City vs. Subic Waters
FACTS:
 PD 198 took effect which authorized the creation of local water districts. Pursuant to PD
198, Olongapo passed a resolution which transferred all its existing water facilities and
assets under Olongapo City Public Utilities Dept. Waterworks Division to the jurisdiction
and ownership of OCWD.
 PD 198, as amended, allows local water districts which have acquired an existing water
system of a LGU to enter into a contract to pay the LGU an amount not exceeding 3% of
the LWDs gross receipt form water sales in any year.
 Olongapo filed a complaint for sum of money and damages against OCWD alleging that
OCWD failed to pay its electricity bills and remit its payment under the contract to pay.
OCWD posed a counterclaim against Olongapo for unpaid water bills.
 In the interim, OCWD enter into a Joint Venture Agreement JVA with Subic Bay
Metropolitan Authority (SBMA), Biwater and DMCI. Pursuant to this JVA Subic Water
was incorporated.
 Subic Waters was granted the franchise to operate and to carry on the business of
providing water and sewerage services in the Subic Bay as well as Olongapo City. Hence
Subic Water took over OCWD’s water operations in Olongapo.
 Olongapo and OCWD entered into a compromise agreement to offset their money claims
and counterclaims. The compromise agreement also contained a provision regarding the
parties’ request that Subic Water be made the co-maker for OCWD’s obligation. Aldip,
chairman of Subic Water, acted as representative and signed the agreement on behalf of
Subic Water.
 The parties submitted the compromise agreement to RTC which was subsequently
approved.
 Pursuant to the compromise agreement and in payment of OCWD’s obligation to
Olongapo, Olongapo and OCWD executed a deed of assignment. OCWD assigned all of
tis rights in the JVA in favor of Olongapo. OCWD was judicially dissolved.
  To enforce the compromise agreement, Olongapo filed a motion for issuance of writ of
execution with RTC. RTC granted but did not issue a writ of execution.
 Almost 4 years later, Olongapo, filed a notice of appearance with prayed for the issuance
of writ of execution against OCWD. A certain Atty. Mangohig, claiming to be OCWD’s
former counsel, field a manifestation, alleging that OCWD had already been dissolved
and that Subic water is not the former OCWD.
 Subic filed a manifestation informing the trial court that as borne out by AoI and GIS of
Subic water, OCWD is not Subic Water.
 The RTC granted the motion for execution and directed it issuance against OCWD/Subic
Water. Because of this order, SW field a special appearance with MR and Motion to
Quash the writ of execution.
 RTC: denied SW special appearance, MR, and motion to quash.
 CA: granted the petition for certiorari and its motion to quash, reversing the RTC ruling
because it did not comply with Sec. 6, Rule 3 of ROC.
ISSUE:
WON Subic Water is solidarily liable under the writ of execution since it was identified as
OCWD’s co-maker and successor-in-interest in the compromise agreement.
WON the compromise agreement sign by Aldip signifies SW consent to the agreement.
RULING:
As to the writ of execution binding to SW.
NO.
As a rule, solidary liability is not presumed. In this case, the joint and several liability of
SW and OCWD was nowhere clear in the agreement. The agreement simply and plainly stated
that Olongapo and OCWD were only requesting SW as co-maker in view of its assumption of
OCWD’s water operations. No evidence was presented to show that such request was ever
approved by SW board of directors.
Under these circumstances, Olongapo cannot proceed after SW for OCWD’s unpaid
obligation. The law explicitly stated that solidary liability is not presumed and must be expressly
provided for, Not being a surety, SW is not an insurer of OCWD’s obligations under the
compromise agreement. At best SW was merely a guarantor against whom Olongapo can claim
provided it was first show that:
1. Olongapo had already proceeded after the properties of OCWD
2. Despite this, the obligation under the compromise agreement remains to be not fully
satisfied.
As to the signature of Aldip as SW consent.
NO.
 An officer’s action can only bind the corporation if he had been authorized to do so.
It reveals that the compromise agreement is not accompanied by any document showing that
Aldip is to sign on behalf of SW. ALdip signed the compromise agreement purely in his own
capacity. Moreover, the compromise agreement did not expressly provide that S consented to
become OCWD’s co-maker. This request was not forwarded to Subic Water’s BoD. In effect,
Aldip’s act of signing the Compromise agreement was outside of his authority to undertake.

Litonjua vs. Eternit

FACTS:
 Eternit Coporation (EC) is corporation duly organized and registered under the PH laws
and engaged in the manufacture of roofing material and pipe products. Its manufacturing
operations were conducted on 8 parcels of land. The properties were covered by TCTs
under the name of FEBTC as trustee.
 90% of the shares of stocks of EC were owned by ESAC, a corporation organized and
register under the laws of Belgium. Glanville, an Australian citizen, was the GM and
President of EC while, Delsaux was the Regional Director for Asia of ESAC, which had
their offices in Belgium.
 The management of ESAC grew concerned about the political situation in the PH and
wanted to stop its operations in the country. The committee for Asia of ESAC instructed
Adams, a member of EC’s BoD, to dispose the 8 parcels of land. Adams engaged the
services of Marquez, broker, so that the properties could be offered for sale. Glanville
showed the properties to Marquez.
 Marquez thereafter offered the parcels of land to Litonjua. Marquez declared that he was
authorized to sell the properties and the terms of sale were subject to negotiation.
 Litonjua responded to the offer, to which Marquez showed the property. The Litonjua
siblings offered to by the property.
 Marquez apprised Glanville of the offer and relayed the same to Delsaux in Belgium but
did not respond. Glanville telexed Delsaux inquiring his position to offer of the Litonjua.
Delsaux replied stating that based on the “Belgian/Swiss decision” the final offer was
“US $ 1,000,000 and P2,500,000 to cover all existing obligations prior to final
liquidation.
 Marquez furnished the copy of the reply of Delsaux which was accepted by Litonjua.
Marquez conferred with Glanville and confirmed the acceptance of Litonjua.
 The Litonjua deposited the amount of US$ 1,000,000 with Security Bank and drafted an
Escrow Agreement.
 Marquez and Litonjua inquired from Glaville when the sale would be implemented.
Glanville informed Delsaux.
 With the assumption of Cory Aquino as president, the political situation in the PH
improved. Marquez received a phone call from Glanville advising that the sale would no
longer proceed and following it up with a letter confirming that he had been instructed by
 his principal to inform Marquez that the decision ahs been taken at the Board Meeting not
to sell the properties.
 After being informed about such, Litonjuas wrote EC demanding payment for damages
on the account of aborted sale. EC rejected the demand.
 Litonjua filed a complaint for specific performance and damages against EC and FEBTC
and ESAC in the RTC.
 EC and ESAC alleged that the stockholders of the EC never approved any resolution to
sell the subject properties nor authorized Marquez to sell.
 RTC rendered a judgment in favor of EC and ESAC on the ground that there was no
valid and binding sale between Litonjua and EC.
o RTC declared that since the authority of the agents was not in writing, the sale is
void and unenforceable and could not have been ratified by the principal.
 CA: affirmed the RTC ruling that Marquez who was a real estate broker was a special
agent. Under Sec. 23 of CC, he needed special authority from EC’s BoD to bind such
corporation to the sale of its properties. Delsaux, who was merely a representative of
ESAC had no authority to bind the latter. Delsaux was not even a member of the BoD of
EC. Additionally, Litonjua failed to prove that an agency by estoppel had been created
between parties.
 HENCE THIS PETITION.
ISSUE:
1. WON Marquez, Glanville, and Delsaux were authorized by EC to act as its agents
relative to the sale of properties.
2. WON an agency by estoppel was created
RULING:
As to the authority of Marquez, Glanville, and Delsaux.
NO.
Litonjua failed to adduce in evidence any resolution of the BoD of EC empowering
Marquez, Glanville, or Delsaux as its agents to sell let alone offer for sale in behalf of EC. The
bare fact that Delsaux may have been authorized to seel to Ruperto Tan the shares of stock of
ESAC cannot be sued as basis for Litonjua’s claim that he had been likewise authorized bu EC to
sell the lands.
While Glanville was the President and GM of EC, and Adams and Delsaux were
members of its BoD, the 3 acted for and in behalf of ESAC and not as duly authorized agents of
EC. A board resolution evencing the grant of such authority is need to bind EC to any agreement
regarding the sale of the subject properties. Such board is not mere formality bu is a condition
sine qua non to bind EC.
The petitioners cannot feign ignorance of the absence of any regular and valid authority of
respondent EC empowering Adams, Glanville or Delsaux to offer the properties for sale and to
sell the said properties to the petitioners. A person dealing with a known agent is not authorized,
under any circumstances, blindly to trust the agents; statements as to the extent of his powers;
such person must not act negligently but must use reasonable diligence and prudence to ascertain
whether the agent acts within the scope of his authority. 45 The settled rule is that, persons dealing
with an assumed agent are bound at their peril, and if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either
is controverted, the burden of proof is upon them to prove it. 46 In this case, the petitioners failed
to discharge their burden; hence, petitioners are not entitled to damages from respondent EC.
As to the agency by estoppel
Equally barren of merit is petitioners’ contention that respondent EC is estopped to deny
the existence of a principal-agency relationship between it and Glanville or Delsaux. For an
agency by estoppel to exist, the following must be established:
(1) the principal manifested a representation of the agent’s authority or knowlingly 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.48 
An agency by estoppel, which is similar to the doctrine of apparent authority, requires
proof of reliance upon the representations, and that, in turn, needs proof that the representations
predated the action taken in reliance.49 Such proof is lacking in this case. In their
communications to the petitioners, Glanville and Delsaux positively and unequivocally declared
that they were acting for and in behalf of respondent ESAC.