DIZON v.

CA (1999)
Topic:

PARTIES:
 Petitioners: Regina P. Dizon, et. al.
 Respondents: CA, Overland Express Lines

FACTS:
 May 23, 1974 – Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with
Option to Buy with petitioners Dizon (lessors) involving a parcel of land situated at cor.
MacArthur Highway, Diliman, QC.
 The terms of the lease was for 1 year commencing from May 16, 1974 to May 15, 1975.
During this period, Overland was granted an Option to Purchase for the amount of P3,000
per sqm. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.
 For failure of Overland to pay the increased rental of P8,000 per month effective June 1976,
Dizon filed an action for ejectment before the Metropolitan Trial Court. The Court rendered
a judgment ordering Overland to vacate the leased premises and to pay the sum pf P624K
representing rentals in arrears and/or damages in the form of reasonable compensation for
the use and occupation of the premises.
 Overland filed a petition praying for the issuance of a restraining order enjoining the
enforcement of said judgment and dismissal of the case for lack of jurisdiction.
 The IAC (now CA) denied the motion for reconsideration. Overland then filed before the RTC
QC an action for Specific Performance and Fixing of Period for Obligation with prayer for the
issuance of a restraining order pending hearing on the prayer for writ of preliminary
injunction and sought to compel the execution of the Deed of Sale pursuant to the Option to
Purchase and the receipt of partial payment.
 The RTC denied the issuance of the writ of preliminary injunction, ruling that the ejectment
case having been affirmed by the IAC and the SC, has become final and executory.
 Overland filed before the RTC a complaint for Annulment of and Relief from Judgment with
Injunction and damages. The RTC dismissed the complaint on the grounds of res judicata.
 The RTC dismissed Overland’s complaint in another civil case (specific performance) and
denied its motion for reconsideration (annulment of the ejectment case).
 On appeal, the CA rendered a decision, concluding that there was a perfected Contract of
Sale between Dizon and Overland on the leased premises and that based on the option to
buy agreement, Overland had acquired the rights of a vendee in a contract of sale. The CA
opined that the payment of Overland of P300K as partial payment for the leased property,
which Dizon accepted (through Alice Dizon) and for which an official receipt had been
issued, was the operative fact that gave rise to the perfected contract of sale, and for failure
of Dizon to deny receipt thereof, Overland can therefore assume that Alice Dizon, acting as
agent of petitioners, was authorized by them to receive the money on their behalf.
 The CA ordered Dizon to execute the Deed of Absolute Sale of the property in question and
ordered Overland to pay P1,700 per month from June 1976 until payment of the balance of
the purchase price, as previously agreed by the parties.
 Dizon elevated the case, questioning the authority of Alice Dizon as their purported agent in
receiving Overland’s partial payment (P300K), pursuant to the Contract of Lease with Option
to Buy.

ISSUES/HELD:
 W/N petitioners Dizon have established a right to evict Overland from the subject premises
for non-payment of rentals.
 o YES. The term of the Contract of Lease with Option to Buy was for a period of 1 year
during which the private respondent was given the option to purchase said property
for P3,000 per sqm. After the expiration, the lease was for P3K per month.
o No definite period beyond the 1 year of lease was agreed by petitioners and private
respondents.

 W/N Overland can enforce its option to purchase after having failed to exercise the option
within the stipulation of 1 year.
o NO. Having failed to exercise the option within the stipulated one year period,
Overland cannot enforce its option to purchase anymore.
o An implied new lease does not ipso facto carry with it any implied revival of
Overland’s option to purchase the leased premises. The provision entitling the
lessee the option to purchase the leased premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the possession of the lessee.

 W/N there was a perfected contract of sale between Dizon and overland.
o NO. Overland argues that it delivered the check of P300K to Alice Dizon who acted
as an agent of the petitioners pursuant to the supposed authority given by
petitioner Fidela Dizon. Thus, petitioners are in estoppel to question the authority of
petitioner Fidela Dizon. Overland argues that the payment of P300K as partial
payment of the purchase price constituted a valid exercise of option to buy.
o Art. 1475—
o In an attempt to resurrect the lapsed option, Overland gave P300K to petitioners
(through Alice Dizon) on the erroneous assumption that the said amount tendered
would constitute a perfected contract of sale pursuant to the contract of lease with
option to buy. There was no valid consent by the petitioners (as co-owners of the
leased premises) on supposed sale entered into by Alice Dizon, as petitioner’s
alleged agent, and private respondent (Overland).
o The basis for agency is representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent. As
provided in Art. 1868, there was no showing that the petitioners consented to the
act of Alice Dizon nor authorized her to act on their behalf with regard to her
transaction with Overland. The most prudent thing Overland should have done was
to ascertain the extent of the authority of Alice Dizon.
o Being negligence in this regard, Overland cannot seek relief on the basis of a
supposed agency.

DOCTRINE:
 “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 with knowledge of
the agent’s authority, and his ignorance of that authority will not be any excuse. Persons
dealing with an assumed agent, whether the assumed agency is general or a special one, are
bound at their peril, if they would hold the principal, to ascertain 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.” (Bacaltos Coal Mines v. CA)

JUDGMENT: Both petitions are GRANTED.