Firme V Bukal Enterprises

University of the Philippines College of Law
EVB, D2021
Case No. G.R. No. 146608. October 23, 2003

Case Name Firme v Bukal Enterprises and Development Corporation
Ponente CARPIO, J.
SUMMARY
The VP of Bukal Enterprises authorized his friend, Aviles , to negotiate and buy the property of Sps. Constante.
Aviles testifies that the sps agreed however the sps claims they never agreed to selling the property. No
documents signed by the sps were presented. There were also no authorization by the Board of Directors of
Bukal Enterprises. The SC ruled that there are is no perfected COS. The meeting od the minds of the parties were
not shown. Without the authorization of the BOD, Aviles could not validly finalize the sale. The corporate power
to purchase a specific property is exercised by the Board of Directors of the corporation. A corporation can only
exercise its powers and transact its business through its board of directors and through its officers and agents
when authorized by a board resolution or its by-laws.
RELEVANT FACTS
 Sps. Constante and Azucena Firme are the registered owners of a parcel of land (“Property”) IN Fairview
Park, Quezon City.
 Renato De Castro, the vice president of Bukal Enterprises authorized his friend, Teodoro Aviles, a broker, to
negotiate with the Spouses Firme for the purchase of the Property.
 3/25/1995: Bukal Enterprises filed a complaint for specific performance and damages with the trial court,
alleging that the Spouses Firme reneged on their agreement to sell the Property. The complaint asked the
trial court to order the Spouses Firme to execute the deed of sale and to deliver the title to the Property to
Bukal Enterprises upon payment of the agreed purchase price.
 According to Aviles, he met with the Sps.Firme on 23 January 1995 and he presented them with a draft deed
of sale (“First Draft”) dated February 1995. The Spouses Firme rejected this First Draft because of several
objectionable conditions. The Spouses allegedly accepted the Second Draft in view of the deletion of the
objectionable conditions contained in the First Draft. According to Aviles, the Spouses Firme were willing to
sell the Property at P4,000 per square meter. They then agreed that payment would be made at the Far East
Bank and Trust Company. However, the scheduled payment had to be postponed due to problems in the
transfer of funds. The Spouses Firme later informed Aviles that they were no longer interested in selling the
Property.
 De Castro testified that he authorized Aviles to negotiate for Bukal Enterprises the purchase of the Property
owned by the Spouses Firme. The Property was located beside the Dahlia Commercial Complex owned by
Bukal Enterprises. Bukal Enterprises agreed to pay the taxes due and to undertake the relocation of the
squatters on the Property. Bukal Enterprises then relocated the four families squatting on the Property at a
cost of P60,000 per family. After the squatters vacated the Property, Bukal Enterprises fenced the area,
covered it with filling materials, and constructed posts and riprap. Bukal Enterprises spent approximately
P300,000 for these improvements. In a letter dated 7 March 1995, Bukal Enterprises offered to pay the
purchase price of P3,224,000 to the Spouses Firme upon execution of the transfer documents and delivery
of the owner’s duplicate copy of the TCT. The Spouses Firme did not accept this offer but instead sent Bukal
Enterprises a letter demanding that its workers vacate the Property.
 Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles. Aviles offered to buy the
Property at P2,500 per square meter. The Spouses Firme did not accept the offer because they were
reserving the Property for their children. The Spouses Firme repeatedly told Aviles that the Property was not
for sale when Aviles called on 2 and 4 March 1995 regarding the Property. On 6 March 1995, the Spouses
Firme visited their Property and discovered that there was a hollow block fence on one side, concrete posts
on another side and bunkers occupied by workers of a certain Florante De Castro. On 11 March 1995,
Spouses Firme visited the Property again with a surveyor. Dr. Firme talked with Ancheta, one of the squatters,
who told him that the squatters had voluntarily demolished their shanties. The Spouses Firme sent a letter13
EVB, D2021
dated 20 March 1995 to Bukal Enterprises demanding removal of the bunkers and vacation by the occupants
of the Property. On 22 March 1995, the Spouses Firme received a letter14 dated 7 March 1995 from Bukal
Enterprises demanding that they sell the Property.
 TC: was no perfected contract of sale. Bukal Enterprises failed to establish that the Spouses Firme gave their
consent to the sale of the Property. The parties did not go beyond the negotiation stage and there was no
evidence of meeting of the minds. Furthermore, Aviles had no valid authority to bind Bukal Enterprises in
the sale transaction. Under Sections 23 and 36 (No. 7) of the Corporation Code, the corporate power to
purchase a specific property is exercised by the Board of Directors of the corporation. Without an
authorization from the Board of Directors, Aviles could not validly finalize the purchase of the Property
on behalf of Bukal Enterprises.
 CA: lack of a board resolution authorizing Aviles to act on behalf of Bukal Enterprises in the purchase of
the Property was cured by ratification. Bukal Enterprises ratified the purchase when it filed the complaint
for the enforcement of the sale. There was a perfected COS.
ISSUES & RATIO DECIDENDI

Whether there was a perfected contract of sale between the Spouses Firme and Bukal Enterprises- NO
First, the records indubitably show that there was no consent on the part of the Spouses Firme. Dr. Firme was
consistent in his testimony that he and his wife rejected the provisions of the Third Draft presented by Aviles
during their second meeting on 6 February 1995. Aviles showed them only one draft deed of sale (Third Draft)
during their second and last meeting on 6 February 1995. On the other hand, Aviles gave conflicting testimony as
to what transpired during the two meetings with the Spouses Firme. Considering the glaring inconsistencies in
Aviles’ testimony, it was proper for the trial court to give more credence to the testimony of Dr. Firme.
Even after the two meetings with Aviles, the Spouses Firme were firm in their decision not to sell the Property.
Aviles called the Spouses Firme twice after their last meeting. The Spouses Firme informed Aviles that they
were not selling the Property.38 Aviles himself admitted this during his testimony.
Another piece of evidence which supports the contention of the Spouses Firme that they did not consent to the
contract of sale is the fact they never signed any deed of sale. If the Spouses Firme were already agreeable to the
offer of Bukal Enterprises as embodied in the Second Draft, then the Spouses Firme could have simply affixed their
signatures on the deed of sale, but they did not.
In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the Property on behalf of Bukal Enterprises.
There was therefore no concurrence of the offer and the acceptance on the subject matter, consideration and
terms of payment as would result in a perfected contract of sale.
RE: Authority of Aviles to negotiate and buy the property

Second, there was no approval from the Board of Directors of Bukal Enterprises as would finalize any
transaction with the Spouses Firme. Aviles did not have the proper authority to negotiate for Bukal Enterprises.
Aviles testified that his friend, De Castro, had asked him to negotiate with the Spouses Firme to buy the Property.
De Castro, as Bukal Enterprises’ vice president, testified that he authorized Aviles to buy the Property.48 However,
there is no Board Resolution authorizing Aviles to negotiate and purchase the Property on behalf of Bukal
Enterprises. It is the board of directors or trustees which exercises almost all the corporate powers in a corporation.
Under SEC 36 and 23of the corporation code, the power to purchase real property is vested in the board of
directors or trustees. While a corporation may appoint agents to negotiate for the purchase of real property
needed by the corporation, the final say will have to be with the board, whose approval will finalize the transaction.
A corporation can only exercise its powers and transact its business through its board of directors and through
its officers and agents when authorized by a board resolution or its by-laws.
AF Realty & Development, Inc. v. Dieselman Freight Services, Co: Just as a natural person may authorize
EVB, D2021
another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made
either by the board of directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs
of the corporation, but not in the course of or connected with, the performance of authorized duties of such
director, are held not binding on the corporation.
In this case, Aviles, who negotiated the purchase of the Property, is neither an officer of Bukal Enterprises nor a
member of the Board of Directors of Bukal Enterprises. There is no Board Resolution authorizing Aviles to
negotiate and purchase the Property for Bukal Enterprises. There is also no evidence to prove that Bukal
Enterprises approved whatever transaction Aviles made with the Spouses Firme. In fact, the president of Bukal
Enterprises did not sign any of the deeds of sale presented to the Spouses Firme. Even De Castro admitted that
he had never met the Spouses Firme. Considering all these circumstances, it is highly improbable for Aviles to
finalize any contract of sale with the Spouses Firme.
Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises with the trial court, Aviles signed54
the verification and certification of non-forum shopping. The verification and certification of non-forum shopping
was not accompanied by proof that Bukal Enterprises authorized Aviles to file the complaint on behalf of Bukal
Enterprises. The power of a corporation to sue and be sued is exercised by the board of directors. “The physical
acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized
for the purpose by corporate by-laws or by a specific act of the board of directors.”
The purpose of verification is to secure an assurance that the allegations in the pleading are true and correct
and that it is filed in good faith. True, this requirement is procedural and not jurisdictional. However, the trial court
should have ordered the correction of the complaint since Aviles was neither an officer of Bukal Enterprises nor
authorized by its Board of Directors to act on behalf of Bukal Enterprises.
Whether the Statute of Frauds is applicable- NO

The Court of Appeals held that partial performance of the contract of sale takes the oral contract out of the scope
of the Statute of Frauds. This conclusion arose from the appellate court’s erroneous finding that there was a
perfected contract of sale. The records show that there was no perfected contract of sale. There is therefore no
basis for the application of the Statute of Frauds. The application of the Statute of Frauds presupposes the
existence of a perfected contract.
Whether Bukal Enterprises is a builder in good faith- NO

Bukal Enterprises is not a builder in good faith. The Spouses Firme did not accept Aviles’ offer to purchase the
Property. Aviles testified that when he called the Spouses Firme on 2 March 1995, Dr. Firme informed him that
they were no longer interested in selling the Property. On 4 March 1995, Aviles called again and this time Mrs.
Firme told him that they were not selling the Property. Aviles informed De Castro of the refusal of the Spouses
Firme to sell the Property. However, Bukal Enterprises still proceeded in relocating the squatters and constructing
improvements on the Property. No deed of sale has been executed in this case. Despite the refusal of the Spouses
Firme to sell the Property, Bukal Enterprises still proceeded to introduce improvements on the Property. Bukal
Enterprises introduced improvements on the Property without the knowledge and consent of the Spouses Firme.
When the Spouses Firme learned about the unauthorized constructions made by Bukal Enterprises on the
Property, they advised the latter to desist from further acts of trespass on their Property
RULING
WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RENDER a new one:
Declaring that there was no perfected contract of sale;
Ordering Bukal Enterprises to pay the Spouses Firme P30,000 as nominal damages.
SO ORDERED.

Firme V Bukal Enterprises

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University of the Philippines College of Law

Case No. G.R. No. 146608. October 23, 2003

ISSUES & RATIO DECIDENDI

RE: Authority of Aviles to negotiate and buy the property

Whether the Statute of Frauds is applicable- NO

Whether Bukal Enterprises is a builder in good faith- NO

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