G.R. No. 144805 June 8, 2006
EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners, vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY, Respondents.

FACTS

Eternit Corporation (EC), through its broker Lauro Marquez, offered for sale its eight parcels of land in Mandaluyong. Petitioners Eduardo and Antonio Litonjua offered to buy the property for P20 million cash. This offer was relayed by EC’s General Manager, Jack Glanville, to Claude Delsaux, the Regional Director for Asia of Eteroutremer S.A. (ESAC), EC’s Belgian parent company. On February 12, 1987, Delsaux sent a telex stating a final counter-offer of US$1,000,000.00 and P2,500,000.00. The Litonjua brothers accepted this counter-proposal, deposited the US$1,000,000.00 in escrow, and prepared for the sale.
Subsequently, due to an improved political climate in the Philippines, ESAC decided not to proceed with the sale. Delsaux informed Marquez of this decision in a letter dated May 22, 1987. The Litonjuas, through counsel, demanded damages for the aborted sale. When their demand was rejected, they filed a complaint for specific performance and damages against EC, ESAC, and others. The Regional Trial Court dismissed the complaint, a decision affirmed by the Court of Appeals.

ISSUE

Whether a perfected contract of sale existed between the petitioners and the respondents, binding the corporate respondents to consummate the sale.

RULING

No. The Supreme Court affirmed the dismissal, holding that no perfected contract of sale existed. The legal logic rests on the principles of agency and corporate authority. For a sale of corporate real property to be binding, the approving authority must be the corporation’s Board of Directors, not its individual officers or agents, unless such officers are specifically authorized. Here, Delsaux and Glanville, who communicated the counter-offer, were not shown to have been granted explicit authority by ESAC’s Board to sell the property. The counter-proposal in the February 12, 1987 telex was merely a step in the negotiations and did not constitute a final, board-approved offer that could ripen into a contract.
Crucially, the Court found that Marquez, the broker, acted only as a middleman or intermediary. He was not an agent of the respondents with express authority to bind them to a sale. An intermediary merely negotiates between parties, while an agent can bind the principal. Since Marquez lacked express authority to finalize a sale, his communications and the subsequent acceptance by the Litonjuas did not create a binding contract. The decision of ESAC’s Committee for Asia not to sell, communicated before any board resolution or formal deed was executed, was a valid exercise of corporate prerogative during the negotiation stage. Thus, respondents could not be compelled to perform or be held liable for damages.