City-Lite Realty Corporation vs. Court of Appeals

A sale of land through an agent is void unless the agent's authority is in writing, pursuant to Article 1874 of the Civil Code; where the agent's written instructions expressly limit his role to referring buyers and endorsing formal offers for the owner's final evaluation and acceptance, the agent has no authority to conclude a sale, and any purported contract of sale is null and void.

F.P. Holdings and Realty Corporation (formerly Sparta Holdings, Inc.) was the registered owner of a 71,754-square-meter parcel of land along E. Rodriguez Avenue, Quezon City, known as the "Violago Property" or "San Lorenzo Ruiz Commercial Center," covered by Transfer Certificate of Title No. T-19599. The property was offered for sale to the general public through a sales brochure identifying Meldin Al G. Roy of Metro Drug, Inc. as the contact person. Atty. Gelacio Mamaril, a licensed real estate broker, received the sales brochure and location plan from Roy and relayed them to Antonio Teng and Atty. Victor Villanueva of City-Lite Realty Corporation, which expressed interest in purchasing the front portion of the property.

F.P. Holdings and Realty Corporation owned a 71,754-square-meter parcel of land along E. Rodriguez Avenue, Quezon City, covered by Transfer Certificate of Title No. T-19599, and advertised it for sale through a brochure identifying Meldin Al G. Roy of Metro Drug, Inc. as the contact person, with an asking price of ₱6,250.00 per square meter. On August 22, 1991, Roy sent the sales brochure, location plan, and copy of the title to Atty. Gelacio Mamaril, a licensed real estate broker, who in turn forwarded the documents to Antonio Teng, Executive Vice-President, and Atty. Victor Villanueva, Legal Counsel, of City-Lite Realty Corporation.

On September 19, 1991, after an initial meeting with Roy, City-Lite wrote Metro Drug expressing interest in purchasing one-half of the front lot of the property. Roy informed City-Lite that subdividing the lot would take time and that F.P. Holdings was not receptive to selling only half of the front lot. City-Lite then revised its offer to purchase the entire front lot of 9,192 square meters, subject to a price reduction and installment payment terms. Roy responded with a counter-offer dated September 25, 1991, setting the price at ₱6,250.00 per square meter or a total of ₱57,450,000.00, payable with a ₱15-million downpayment and the balance within six months without interest, and requesting written acceptance by September 26, 1991.

On September 26, 1991, City-Lite's officers and Atty. Mamaril met with Roy at the Manila Mandarin Hotel in Makati. After discussions, the parties reached an agreement, and Roy agreed to sell the property provided City-Lite submitted its written acceptance of the terms in his September 25 letter. That same afternoon, Atty. Mamaril and Antonio Teng sent separate letters dated September 26, 1991, formally accepting the terms and conditions set by Roy. Despite demand, F.P. Holdings refused to execute the deed of sale. City-Lite annotated an adverse claim on the title on September 27, 1991, and followed with a written demand on September 30, 1991, threatening court action.

On October 4, 1991, F.P. Holdings filed a petition for cancellation of the adverse claim before the RTC of Quezon City (LRC Case No. 91-10257), which was raffled to Branch 84. On October 8, 1991, Edwin Fernandez, President of F.P. Holdings, met with City-Lite's officers and offered substitute properties in Caloocan City and Quezon Boulevard, Quezon City, but City-Lite refused because the properties did not suit its business needs. On December 2, 1991, RTC-Br. 84 dismissed F.P. Holdings' petition, finding City-Lite's adverse claim had factual basis. Meanwhile, F.P. Holdings caused the resurvey and segregation of the property, and the Register of Deeds issued separate titles on January 17, 1992, including Transfer Certificate of Title No. T-51671. City-Lite then filed a complaint for specific performance and damages, annotating a notice of lis pendens on the new title. During the pendency of the suit, the property was transferred to Viewmaster Construction Corporation, for which TCT No. T-52398 was issued, though the lis pendens was carried over. City-Lite amended its complaint to implead Viewmaster and the Register of Deeds, and the case was raffled to RTC-Br. 85. The trial court found that a perfected contract of sale existed and ordered F.P. Holdings to execute the deed of sale for ₱55,056,250.00, with ₱800,000.00 in nominal damages and ₱250,000.00 in attorney's fees. The Court of Appeals reversed, holding that no contract of sale was perfected and that Roy lacked authority to sell.

• Authority of the Agent: Petitioner argued that Metro Drug and Meldin Al G. Roy were authorized to sell the property, anchoring this authority on the testimonies of petitioner's three witnesses and the admissions of Roy and Metro Drug's lawyer, the sales brochure identifying Roy as contact person, the guard at the property stating that Metro Drug was the authorized agent, and the common knowledge among brokers that Metro Drug through Roy was the authorized agent of F.P. Holdings.
• Perfected Contract of Sale: Petitioner maintained that a contract of sale was perfected between City-Lite and F.P. Holdings, as evidenced by the meeting of the minds on the object and the price, formalized through Roy's counter-offer of September 25, 1991, and City-Lite's written acceptance on September 26, 1991.

• Authority of the Agent: Whether Meldin Al G. Roy and/or Metro Drug, Inc. had the authority to sell the "Violago Property" on behalf of F.P. Holdings such that a contract of sale could be perfected through them.
• Perfection of the Contract of Sale: Whether a contract of sale over the subject property was perfected between City-Lite and F.P. Holdings.

• Authority of the Agent: No. Roy and Metro Drug were merely contact persons or brokers without written authority to sell the land, as required by Article 1874 of the Civil Code; their written instructions from F.P. Holdings' President limited their role to referring buyers and endorsing formal offers for the owner's final evaluation and acceptance.
• Perfection of the Contract of Sale: No. Because the agent lacked written authority to sell, the purported sale was null and void and could not produce any legal effect transferring the property from F.P. Holdings to City-Lite.

• Authority of the Agent: Article 1874 of the Civil Code expressly provides that when the sale of a 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. Petitioner attempted to establish Roy's authority through testimonies, the sales brochure, the guard's statement, and broker common knowledge. However, the controlling written instrument — a memorandum issued by F.P. Holdings' President requesting Metro Drug's assistance — expressly limited Roy's role to finding and referring buyers and endorsing formal offers to F.P. Holdings for final evaluation, appraisal, and acceptance. This meant Roy and Metro Drug were only contact persons with no authority to conclude a sale. A witness for petitioner even admitted that Roy was a mere broker whose job was to bring the parties together. The absence of a written authority to sell rendered the sale void under Article 1874.
• Perfection of the Contract of Sale: Because the agent lacked the written authority required by law to sell the land, any agreement purportedly reached through Roy could not constitute a perfected contract of sale binding upon F.P. Holdings. The sale being null and void, it could not produce any legal effect capable of transferring the subject property from its lawful owner to City-Lite. The appellate court's reversal of the trial court was therefore sustained.

• Article 1874, Civil Code — Written Authority for Sale of Land Through an Agent — When the sale of a piece of land or any interest therein is through an agent, the agent's authority must be in writing; otherwise, the sale is void. The Court applied this provision strictly, finding that Roy and Metro Drug had no written authority to sell the property — only a written memorandum limiting their role to referring buyers and endorsing offers — and declaring the purported sale null and void.
• Distinction Between a Broker and an Agent with Authority to Sell — A broker is a mere intermediary whose function is to bring the parties together for a possible transaction; he does not have the authority to conclude a sale on behalf of the principal. The Court found that Roy's role was limited to that of a broker or contact person, as even petitioner's own witness admitted, and that final evaluation, appraisal, and acceptance of any transaction rested solely with F.P. Holdings.

• "When the sale of a 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." — This is the Court's quotation of Article 1874 of the Civil Code, the controlling provision upon which the entire decision turns, establishing the mandatory requirement of written authority for an agent selling land.
• "This obviously meant that Meldin Al G. Roy and/or Metro Drug was only to assist F.P. HOLDINGS in looking for buyers and referring to them possible prospects whom they were supposed to endorse to F.P. HOLDINGS. But the final evaluation, appraisal and acceptance of the transaction could be made only by F.P. HOLDINGS." — This passage articulates the Court's interpretation of the written memorandum, defining the scope of Roy's authority and explaining why it fell short of the power to sell.
• "Consequently, we hold that for lack of a written authority to sell the 'Violago Property' on the part of Meldin Al G. Roy and/or Metro Drug, the sale should be as it is declared null and void." — This is the dispositive reasoning on the merits, stating the ratio decidendi that the absence of written authority renders the sale void.

• Toyota Shaw Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995, 244 SCRA 320 — Cited by Viewmaster in its motion for reconsideration before the RTC in support of the argument that no perfected contract of sale existed due to lack of definite agreement on the manner of payment; the motion was denied by the trial court, though the appellate court ultimately reversed on both the authority and perfection issues.
• Pacific Commercial Co. vs. Yatco, 68 Phil. 398 — Cited via Paras, Civil Code of the Philippines Annotated, for the proposition that a broker's job is merely to bring the parties together for a possible transaction, supporting the Court's characterization of Roy's role.

• Article 1874, Civil Code of the Philippines — Provides that when the sale of a 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. The Court applied this provision to find that Roy and Metro Drug lacked the requisite written authority to sell the property, rendering the purported sale null and void.

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concurred.