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Dizon vs CA and Overland Express LinesJanuary 28, 1999

FACTS:

Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with

petitioners involving a 1,755.80 square meter parcel of land situated at corner MacArthurHighway and South H Street, Diliman, Quezon City. The term of the lease was for 1year commencing from May 16, 1974 up to May 15, 1975. During this period, OverlandExpress Lines was granted an option to purchase for the amount of P3,000.00 per squaremeter. Thereafter, the lease shall be on a per month basis with a monthly rental ofP3,000.00.

For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month

effective June 1976, petitioners filed an action for ejectment against it. The lower courtrendered judgment ordering Overland Express Lines to vacate the leased premises andto pay the sum of P624,000.00 representing rentals in arrears and/or as damages in theform of reasonable compensation for the use and occupation of the premises during theperiod of illegal detainer from June 1976 to November 1982 at the monthly rental ofP8,000.00, less payments made, plus 12% interest per annum from November 18, 1976,the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month startingDecember 1982, until Overland Express Lines fully vacates the premises, and to pay

P20,000.00 as and by way of attorneys fees.

ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to Fidela Dizon, asrepresentative (agent) of petitioners in consideration of the option

HELD: No.

CA opined that the payment by Overland Express Lines of P300,000.00 as partia

payment for the leased property, which petitioners accepted (through Alice A. Dizon) andfor which an official receipt was issued, was the operative act that gave rise to aperfected contract of sale, and that for failure of petitioners to deny receipt thereof,Overland Express Lines can therefore assume that Alice A. Dizon, acting as agent ofpetitioners, was authorized by them to receive the money in their behalf. CA went

further by stating that in fact, what was entered into was a conditional contract of salewherein ownership over the leased property shall not pass to the Overland Express Linesuntil it has fully paid the purchase price. Since Overland Express Lines did not consign tothe court the balance of the purchase price and continued to occupy the subjectpremises, it had the obligation to pay the amount of P1,700.00 in monthly rentals untilfull payment of the purchase price.

In an attempt to resurrect the lapsed option, Overland Express Lines gave P300,000.00

to petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amounttendered would constitute a perfected contract of sale pursuant to the contract of leasewith option to buy. There was no valid consent by the petitioners (as co-owners of theleased premises) on the supposed sale entered into by Alice A. Dizon, as petitionersalleged agent, and Overland Express Lines. The basis for agency is representation and a

person dealing with an agent is put upon inquiry and must discover upon his peril theauthority of the agent. As provided in Article 1868 of the New Civil Code, there was noshowing that petitioners consented to the act of Alice A. Dizon nor authorized her to acton their behalf with regard to her transaction with private respondent. The most prudentthing private respondent should have done was to ascertain the extent of the authorityof Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief onthe basis of a supposed agency.

Every person dealing with an agent is put upon inquiry and must discover upon his peril

the authority of the agent. If he does not make such inquiry, he is chargeable withknowledge of the agents authority, and his ignorance of that authority will not be anyexcuse. Persons dealing with an assumed agency, whether the assumed agency be a

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general or special one, are bound at their peril, if they would hold the principal, toascertain not only the fact of the agency but also the nature and extent of the authority,and in case either is controverted, the burden of proof is upon them to establish it.