Digest set #2 – Aug 18, 2015
1. Spouses Aggabao v. Dionisio Parulan Jr. and Ma. Elena
Parulan
G.R. No. 165803
September 1, 2010
Art. 1877: Agency couched in general terms comprises only acts of
administration
FACTS:
Real estate broker Marta K. Atanacio (Atanacio) offered the
Sps, Aggabao property located at BF Homes, Paraaque City and
registered under Transfer Certificate of Title (TCT) No. 63376 and
TCT No. 63377 in the name of respondents Spouses Maria Elena A.
Parulan (Ma. Elena) and Dionisio Z. Parulan, Jr. (Dionisio), who
have been estranged from one another. Atanacio met with Ma. Elena
at the site of the property. During their meeting, Ma. Elena showed
to them the a few documents, including a copy of the special power
of attorney (SPA) executed by Dionisio authorizing Ma. Elena to sell
the property. Before the meeting ended, they paid P20,000.00 as
earnest money.
Sps. Aggabao went to the Office of the Register of Deeds
and the Assessors Office of Paraaque City to verify the TCTs. They
found on TCT No. 63377 the annotation of an existing mortgage in
favor of the Los Baos Rural Bank, also effected through an SPA
executed by Dionisio in favor of Ma. Elena, coupled with a copy of a
court order authorizing Ma. Elena to mortgage the lot. The Sps.
Aggabao and Atanacio next inquired about the mortgage and the
court order at the Los Baos Rural Bank.
Following their verification, the Aggabaos complied with the
terms of payment (they paid the mortgage with Los Banos Rural
Bank) and paid the final amount of P700,000. Ma. Elena, who
executed a deed of absolute sale in their favor. However, Ma. Elena
claimed that the copy of TCT No. 63377 was in the possession of a
relative who was then in Hongkong, and would be turned over after a
week.
Ma. Elena did not turn over the duplicate owners copy of
TCT No. 63376 as promised. In due time, the Sps. Aggabao learned
that the duplicate owners copy of TCT No. 63376 had been all along
AGENCY AND TRUSTS, PARTNERSHIPS AND JOINT VENTURES - CLV
in the custody of Atty. Jeremy Z. Parulan, who appeared to hold an
SPA executed by his brother Dionisio authorizing him to sell both
lots.
At Atanacios instance, the Sps. Aggabao met with Atty.
Parulan who demanded P800,000.00 in exchange for the duplicate
owners copy of TCT No. 63376. Atty. Parulan declined the Sps.
Aggabao’s counteroffer, and gave them a moratorium to decide.
Hearing nothing more from the Sps. Aggabao, Atty. Parulan decided
to call them, but they informed him that they had already fully paid
to Ma. Elena. Thus, Dionisio, through Atty. Parulan, commenced an
action praying for the declaration of the nullity of the deed of
absolute sale executed by Ma. Elena, and the cancellation of the title
issued to the Sps. Aggabao by virtue thereof.
ISSUES:
1) Which between Article 173 of the Civil Code and Article 124 of
the Family Code should apply to the sale of the conjugal property
executed without the consent of Dionisio?
2) Might the petitioners be considered in good faith at the time of
their purchase of the property?
3) Might the ruling in Veloso v. Court of Appeals be applied in favor
of the petitioners despite the finding of forgery of the SPA?
HELD:
1) Article 124 of the Family Code because the sale was made after
the effectivity of the Family Code. Sps. Aggabao failed to
substantiate their contention that Dionisio, while holding the
administration over the property, had delegated to his brother, Atty.
Parulan, the administration of the property. The power of
administration does not include acts of disposition or encumbrance,
which are acts of strict ownership. As such, an authority to dispose
cannot proceed from an authority to administer, and vice versa, for
the two powers may only be exercised by an agent by following the
provisions on agency of the Civil Code (from Article 1876 to Article
1878). Specifically, the apparent authority of Atty. Parulan, being a
special agency, was limited to the sale of the property in question,
and did not include or extend to the power to administer the property.
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Under Article 124 of the Family Code, the transaction executed sans
the written consent of Dionisio or the proper court order was void;
hence, ratification did not occur, for a void contract could not be
ratified.
2) No. An unquestioning reliance by the petitioners on Ma. Elenas
SPA without first taking precautions to verify its authenticity was not
a prudent buyers move. They should have done everything within
their means and power to ascertain whether the SPA had been
genuine and authentic. If they did not investigate on the relations of
the respondents vis--vis each other, they could have done other things
towards the same end. Neither did they take any immediate action
upon discovering the anomalies of the TCTs.
3) No. Veloso is inapplicable, however, because the contested
property therein was exclusively owned by the petitioner and did not
belong to the conjugal regime. Veloso being upon conjugal property,
Article 124 of the Family Code did not apply. In contrast, the
property involved herein pertained to the conjugal regime, and,
consequently, the lack of the written consent of the husband rendered
the sale void pursuant to Article 124 of the Family Code.
2. Home Insurance Company v. United States Lines Co.
G.R. No. 25593
November 15, 1967
Facts:
- Sometime in 1964, Pioneer Moon arrived in Manila and discharged
to the Bureau of Customs (BOC) 200 hundred cartons of carbonised
adding machine rolls consigned to Burroughs Limited. Upon
delivery of the cargoes to the consignee, several cartons were
damaged. Burroghs claimed Php2605 as damages from BOC, United
States Lines Co. (USL), owner of the vessel, and the Home Insurance
Co. (HIC). Home Insurance Co. paid the claim and demanded
reimbursement from either arrastre operator (BOC) or the carrier
(USL) however both rejected the claim. HIC filed a case for the
recovery of Php2605 with interest plus costs.
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Digest set #2 – Aug 18, 2015
- USL refused to pay on the ground that the damage was incurred
while the cargo was in the possession of its co-defendants. RP and
BOC after denying the allegation alleged non-sustainability and
noncompliance with ACT 3083 which requires money claims to be
filed with the Auditor General.
- On December 7, 1965, the date set for pre-trial, only the counsel
for plaintiff appeared and stated that though he had no written
authority, he had such authority verbally given by the plaintiff.
Case dismissed due to failure of plaintiff to appear at pre-trial.
Issue:
1. WON the court was right in dismissing the case against RP, and
BOC?
2. WON the lower court rightly dismissed the case for failure of
plaintiff to appear personally during the pre-trial conference?
Held:
1. Yes. With regard to RP and BOC, the case must be dismissed on
the ground that, the RP or its agencies, may not be sued for the
performance of arrastre operations as a function necessarily
incidental to the governmental function of taxation.
2. Yes, the lower court was right to dismiss the case for failure
of plaintiff to appear personally during the pre-trial
conference.
Section 2, Rule 20 of the new rules of court says that “a party who
fails to appear at a pre-trial conference may be non-suited or
considered in default.” This shows the purpose of the rule to compel
parties to appear personally before the court to reach, if possible, a
compromise.
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The court reasoned that under the Rules of court, referring to the
mandatory pre-trial conference, the court shall direct the parties
and their attorneys to appear before it for a conference..a party
who fails to appear at a pre-trial conference may be considered
in default.
Furthermore, Section 23, Rule 138, of the Rules of Court states:
“Attorneys have authority to bind their clients in all matters of
ordinary judicial procedure. But they cannot without special
authority, compromise their clients litigation. Counsel for petition
Home Insurance argued that he had verbal authority. The court
however said that even if it is true that the rules of court does not
require special authority to be in writing, it is generally expected
to be in writing, and if not, at least established by evidence other
than the self-serving assertion of counsel himself. The court
therefore did not act erroneously.
3. Dominion Insurance Corp v. Court of Appeals
G.R. No. 129919
February 6, 2002
Art. 1878
Facts: Rodolfo Guevarra (Guevarra) instituted a case for sum of
money against Dominion Insurance Corporation (Dominion) for the
amount advanced by Guevarra in his capacity as manager of
Dominion to satisfy claims filed by Dominion’s clients.
The pre-trial was postponed multiple times, and during one of the
pre-trial conferences, Dominion failed to appear before the court.
Therefore, the court declared Dominion to be in default. Dominion
filed several Motions to Lift Order of Default but these were denied
by the Court.
RTC – Repay Guevarra for the sum advanced and other damages and
fees.
CA- Affirmed the RTC
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Digest set #2 – Aug 18, 2015
Issues:
1. W/N Guevarra acted within his authority as agent for Dominion.
2. W/N Guevarra is entitled to reimbursement of amounts he paid out
of his personal money in settling the claims of several insured.
Held:
1. NO. The basis of agency is representation. For the principal there
must be intent to appoint and on the part of the agent, there must be
intention to accept the appointment and act on it. In absence of the
intent, there is no agency. The SPA would show that Guevarra
intended to enter into a principle-agent relationship. Despite the word
"Special" in the title of the document, the contents reveal that what
was constituted was actually a GENERAL AGENCY. It was
couched in general terms and is limited only to acts of
administration. Article 1878 provides that a SPA is required: (1) to
make such payments as are not usually considered as acts of
administration (15) any other act of dominion. The payment of
claims is not an act of administration; therefore it requires a special
power of attorney. Based on the MMA, Guevarra's authority was
limited to pay the claim of the insured but they payment shall come
from the revolving fund or collection in his possession. Thus,
Guevarra had no authority to pay for the insurance in his own
capacity. Under 1918 of the Civil Code, the principal shall not be
liable for the expenses incurred by the agent in contravention of the
principles instruction.
2. YES. Even if the law on agency prohibits Guevarra from obtaining
reimbursement, his right to recover may be justified by Article 1236
of the Civil Code: “Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without the knowledge
or against the will of the debtor, he can recover only insofar as the
payment has been beneficial to the debtor.” Thus, Guevarra must be
reimbursed but only to the extent that Dominion has benefited
without interest or demand for damages.
IN VIEW WHEREOF, we DENY the petition. However, we
MODIFY the decision of the Court of Appeals the Regional Trial
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Court, Branch 44, San Fernando, Pampanga, Guevarra the amount of
P112,672.11 representing the total amount advanced by the latter in
the payment of the claims of petitioner’s clients. No costs in this
instance. SO ORDERED.
4. Veloso v. CA
G.R. No. 10273; August 21, 1996
Topic: Special Power of Attorney
Doctrine: Where the general power of attorney expressly authorizes
the agent or attorney in fact the power to sell, there is no need to
execute a separate and special power of attorney.
Facts: This is a petition for review on certiorari of a decision of the
CA, which upheld the TCT issued to Aglaloma Escario, married to
Gregorio Escario. The original owner, Francisco Veloso (petitioner
herein) filed an action for annulment of such documents and
reconveyance of property to him. Velsoso originally owned the land
in question with an area of 177 square meters, in Tondo, Manila. The
title was registered in his name (at the time of registration, he was
still single). He was the sole person who had access to the title and
other pertinent documents related to his land. The Deed of Sale for
Veloso was dated October 1, 1957. He married Irma Lazatin on
January 20, 1962. Francisco now alleges that when his wife Irma
went abroad, his copy of the title was missing. He alleges that he was
the absolute owner of the property and he never authorized anybody,
not even his wife, to sell it. He argues that the land can’t even form
part of the conjugal partnership because he bought it before he
married Irma. Irma is his attorney-in-fact. Veloso also denied ever
executing the power of attorney to sell such land, stating that his
signature was falsified. Furthermore, he argues that the general
power of attorney, even if notarized, should be inconsequential
because not just his signature was “forged,” but Atty. Tubig also
denied ever notarizing the general power of attorney.
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The Escarios argued that they are buyers in good faith. Aglaloma
Escario relied on the general power of attorney of Irma Veloso,
which was sufficient in form and substance, and was duly notarized.
Issue: W/N there was a valid sale of the subject property
Held: YES.
1)The assailed power of attorney was valid and regular on its face. It
was notarized and as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it was named a
“general power of attorney,” the contents show that it stated an
authority to sell. (“To buy or sell, hire or lease, mortgage or
otherwise hypothecate lands, tenements…”)
There was no need to execute a separate and special power of
attorney since the general power of attorney had expressly authorized
the agent or attorney in fact to sell the subject property. The special
power of attorney can be included in the general power when such
general power already specifies the act or transaction that would
need a special power. Whether the instrument is called a “general
power of attorney” or a “special power of attorney,” what matters is
the extent of the powers contemplated upon the agent or attorney in
fact. If the power is couched in general terms, then such power can’t
go beyond acts of administration. However, where the power to sell
is specific, it not being merely implied, no doubt arises that the
attorney may execute a valid sale.
2)Veloso wasn’t able to sustain his allegation of forgery. Mere
variance in signatures cannot be considered conclusive proof that the
signature was forged. Forgery cannot be presumed. Furthermore, he
is estopped because he admitted that he was the sole person who had
access to the TCT and other pertinent documents, and yet the fact
remains that the certificate of title and other documents needed for
the transfer of title were in the possession of Irma Veloso. “The
principle of equitable estoppel states that where one or two innocent
persons must suffer a loss, he who by his conduct made the loss
possible must bear it.”
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3)Aglaloma Escario is considered a buyer in good faith. She relied
on the power of attorney presented by Irma Veloso. Being the wife
of the owner and having with her the title of the property, along with
such notarized power of attorney, Escario had no reason NOT to
believe in her authority. The power of attorney, being notarized,
carried with it the presumption of its due execution and validity.
Furthermore, even if we assume that the signature was falsified and
the power of attorney and deed of sale were null and void, it still
cannot revoke the title issued to Aglaloma. “The right of an innocent
purchaser for value must be respected, even if the seller obtained his
title through fraud. The remedy of the person prejudiced is to bring
an action for damages against those who caused or employed the
fraud…”
5. Pineda v. CA
G.R. No. 105562
September 27, 1993.
Doctrine: When an agent has been grated an express power of
attorney, then the agent cannot execute any other act not included in
the SPA.
Facts: Prime Marine Services, Inc. (PMSI), a crewing/manning
outfit, procured a Group Policy from respondent Insular Life
Assurance Co., Ltd. to provide life insurance coverage to its sea
based employees. On 17 February 1986, during the effectivity of the
policy, six covered employees of the PMSI perished at sea when
their vessel, M/V Nemos, a Greek cargo vessel, sunk somewhere in
El Jadida, Morocco. They were survived by complainants (Pineda,
Montenegro, Alarcon, Ayo, Calumbag, Lontok), the beneficiaries
under the policy.
Following the tragic demise of their loved ones,
complainants sought to claim death benefits and for this purpose,
they approached the President and General Manager of PMSI, Capt.
Roberto Nuval. The latter evinced willingness to assist complainants
to recover Overseas Workers Welfare Administration (OWWA)
benefits from the POEA and to work for the increase of their other
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Digest set #2 – Aug 18, 2015
benefits arising from the deaths of their husbands/sons. They were
thus made to execute, with the exception of the spouses Alarcon,
special powers of attorney (SPA) authorizing Capt. Nuval to, among
others, ‘follow up, ask, demand, collect and receive’ for their benefit
indemnities of sums of money due them relative to the sinking of
M/V Nemos. By virtue of these written powers of attorney,
complainants were able to receive their respective death benefits.
Unknown to them, however, the PMSI, in its capacity as employer
and policy holder of the life insurance of its deceased workers, filed
with Insular life formal claims for and in behalf of the beneficiaries,
through its President, Capt. Nuval.
On the basis of the five special powers of attorney, Insular
Life drew against its account six (6) checks, four for P200,000.00
each, one for P50,000.00 and another for P40,000.00 payable to the
order of complainants-appellees. Capt. Nuval, upon receipt of these
checks endorsed and deposited them in his own account. When the
complainants-appellees learned that they were entitled, as
beneficiaries, to the life insurance benefit sunder a group policy, they
sought to recover these benefits from Insular Life but the latter
denied their claim on the ground that their liability was already
extinguished after payment to Nuval.
ISSUES:
1. WON the special power of Atty. granted to Nuval gave him
the authority to claim the insurance benefits.
2. WON Insular Life (as principal) is bound by the misconduct
of the PMCI (agent).
Held:
1.NO, Naval had no authority to claim the benefits. When an
agent has been granted an express power of attorney, then the agent
cannot execute any other act, whether it be an act of administration
or an act of ownership outside the language of the power of attorney.
When the instrument grants to the agent the power to “follow up,
ask, demand, collect and receipt for my benefit indemnities…”,
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which is a special power of attorney, it excluded any intent to grant a
general power of attorney or to constitute a universal agency. The
SPAs were presented to the petitioner in prepared forms and only
had to be filled up with their names, residences, date of execution,
dates of acknowledgement and others. This shows the lack of intent
to grant a general power of attorney. Being special powers of
attorney, they must be strictly construed. A cursory reading of the
questioned powers of attorney would disclose that they do not
contain in clear and unequivocal terms authority to Captain Nuval to
obtain, receive, receipt from respondent company insurance proceed
arising from the death of the seaman-insured.
Insular Life knew that a power of attorney in favor of Capt.
Nuval for the collection and receipt of such proceeds was a deviation
from its practice with respect to group policies. They gave the
proceeds to the policyholder instead of the beneficiaries themselves.
Even the Insular rep admitted that he gave the checks to the
policyholder who was not the designated beneficiary.
Insular Life, through its official, Mr. Urbano, acted
imprudently and negligently by relying without question on the
special power of attorney. It is among the established law that third
persons deal with agents at their peril and are bound to inquire as to
the extent of the power of the agent with whom they contract. Even
granting for the sake of argument that the special powers of attorney
were in due form, Insular Life was grossly negligent in delivering the
checks, drawn in favor of the petitioners, to a party who is not the
agent mentioned in the special power of attorney.
2. YES, Insular Life is bound to petitioners as principal to
PMCI. In Elfstrom vs. New York Life Insurance Company, the
California Supreme Court explicitly ruled that in group insurance
policies, the employer is the agent of the insurer (PMCI is the agent
of Insular Life). The employer is the agent of the insurer in
performing the duties of administering group insurance policies. The
employee has no knowledge of or control over the employer's actions
in handling the policy or its administration. An agency relationship is
based upon consent by one person that another shall actin his behalf
and be subject to his control. The insurer-employer relationship
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Digest set #2 – Aug 18, 2015
meets this agency test with regard to the administration of the policy,
whereas that between the employer and its employees fails to reflect
true agency. The insurer directs the performance of the employer's
administrative acts, and if these duties are not undertaken properly
the insurer is in a position to exercise more constricted control over
the employer's conduct.
Neider vs Continental Assurance Company also held that
the employer owes to the employee the duty of good faith and due
care in attending to the policy, and that the employer should make
clear to the employee anything required of him to keep the policy in
effect, and the time that the obligations are due. In its position as
administrator of the policy, we feel also that the employer should be
considered as the agent of the insurer, and any omission of duty to
the employee in its administration should be attributable to the
insurer.
Therefore, the petition of Pineda et.al is GRANTED
6. Patrimonio v. Gutierrez
G.R. No. 187769
June 4, 2014
Facts:
Petitioner Patrimonio and respondent Gutierrez entered into
a business venture under the name Slam Dunk Corp., a production
outfit that produced mini- concerts and shows related to basketball.
Petitioner was already then a decorated professional basketball
player while Gutierrez was a well- known sports columnist. In the
course of their business, petitioner pre- signed several checks to
answer for expenses of Slam Dunk. Although signed, these checks
had no payee's name, date or amount. The blank checks were
entrusted to Gutierrez with the specific instruction not to fill them
out without previous notification to and approval by the petitioner so
that the latter could verify the validity of the payment and make the
proper arrangements to fund for the account.
In the middle of 2003, without petitioner's knowledge and
consent, Gutierrez went to Marasigan (the petitioner's former
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teammate) to secure a loan in the amount of P200,000 on the excuse
that petitioner needed money for the construction of his house. In
addition to payment of the principal, Gutierrez assured he would be
paid an ineterest of 5% per month from March to May 1994.
Marasigan acceded to Gutierrez' request and gave him the money.
Respondent simultaenously delivered to Marasigan one of the blank
checks the petitioner pre- signed with Pilipinas Bank, Greenhills.
The blank portioned filled out with the words “cash” “Two Hundred
Thousand Pesos Only” and the amount of “P200,000” the upper right
portion of the check corresponding to the date was also filled out
with the words “May 23, 1994” but the petitioner contended that the
same was not written by Gutierrez. Marasigan deposited the check
but it was dishonored because the account was already closed. It was
later revealed the account has been closed since May 28, 1993.
Marasigan sought recovery from Gutierrez, however, it was
unheeded. He then filed a criminal case for violation of B.P. 22
against petitioner. The petitioner then filed a complaint for
Declaration of Nullity of Loan and Recovery of Damages against
Gutierrez and Marasigan. The RTC rules in favor of Marasigan
stating that Marasigan is a holder in due course of a negotiable
instrument. CA ruled affirmed RTC ruling but on different factual
findings stating that check had been stictly filled out by Gutierrez in
accordance with petitioner's authority and the loan may not be
nullified.
Issue:
1. WON the contract of loan granted by Marasigan to petitioner,
through respondent Gutierrez, may be nullified for being void.
2. WON there is basis to hold the petitioner liable for the payment of
P200,000 loan.
3. WON Gutierrez has completely filled out the subject check strictly
under the authority given by the petitioner
4. WON Marasigan is a holder in due course
Held:
1. Yes.
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Art. 1878 par. 7 of the civil code expressly required a
Special Power of Attorney before an agent can loan or borrow
money in behalf of the principal. It does not state that the authority
be in writing, however, such authority must be duly established by
competent and convincing evidence other than the self- serving
assertion of the party claiming that such authority was verbally
given. This article refers to the nature of the authorization and not its
form. A review of the records reveals that Gutierrez did not have any
authority to borrow money in behalf of the petitioner. Records do not
show that the petitioner executed any special power of attorney in
favor of Gutierrez. The authority of entering into a loan can never be
presumed. There was no contract of loan between petitioner and
Marasigan because petitioner never gave his consent. Marasigan
merely relied on the words of Gutierrez without securing a copy of
the SPA to verify the latter's authority and therefor is bound by the
risk accompanying his trust on the mere assurances of Gutierrez.
2 & 4. No.
Sec. 14 under the NIL states that incomplete but delivered
instruments may be enforced by a holder not in due course two
requisites must exist: 1) that the blank must be filled strictly in
accordance with the authority given and 2) it must be filled up within
a reasonable time. If it was proven that the instrument had not been
filled up strictly in accordance with the authority given and within
the reasonable time, the maker can set up a personal defense and
avoid liability. Marasigan is not a holder in due course because
though he did not know the exact fraud defendant was trying to do, it
was sufficient that he noticed there was something wrong with the
instrument because he knew that the petitioner is not a party or privy
to the contract of loan, and correspondingly had no obligation or
liability to him renders him dishonest, hence, in bad faith. Since he
knew that the underlying obligation was not actually for the
petitioner, the rule that a possessor of the instrument is prima facir a
holder in due course is inapllicable.
3. No.
Gutierrez had a prima facie authority to complete the check,
such prima facie authority does not extend to its use (ie. Subsequent
transfer or negotiation) once the check is completely. In other words,
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only the authority to complete the check is presumed. No evidence is
on record that Gutierrez ever secure prior approval from the
petitioner to fill up the blank or use the checks. Respondent was only
authorized to use checks for business purposes and with petitioner's
approval and these were clearly violated.
7. GUTIERREZ HERMANOS v. ENGRACIO ORENSE
G.R. No. L-9188
December 4, 1914
Ratification
FACTS:
Engacio Orense was the registered owner of a parcel of land,
and the masonry house with the nipa roof which stood on it. On
February 14, 1907, Jose Duran, Orense’s nephew, executed before a
notary a public instrument whereby he sold the said property to the
Gutierrez Hermanos company for P1,500. Duran reserved the right to
repurchase it for the same price within a period of four years from
the date of the said instrument.
Orense and Duran retained possession of the property
through a lease agreement executed by the company, which was in
force up until February 14, 1911. After the four-year redemption
period passed, Orense refused to deliver the property to the purchaser
and to pay the rental thereof at the rate of P30 per month for its use
and occupation since February 14, 1911. Orense alleged that he was
the owner of the property and that he had not given any authority to
Duran to sell the property, whether by written power of attorney or
verbally. He claimed he had not done anything that might have made
the company believe that Duran had been authorized to sell.
The company charged Jose Duran with estafa. However,
during trial, Orense, who was being interrogated as a witness, said
that he had consented to Duran’s selling of the property under the
right of redemption to the company. Due to this, the court acquitted
Duran.
Based on Orense’s testimony that he had given his consent to
his nephew’s actions, Gutierrez Hermanos’ counsel filed a complaint
praying for the transfer of the right, title, and interest of Orense over
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the properties to the said company, and to pay to the latter the rental
of the property due from February 14, 1911.
The court ordered Orense to deliver the property and pay the
rentals it owed to the company. Orense moved for a new trial, but
was denied.
ISSUE:
Whether or not Orense should deliver his property for the reason that
he had given consent to the sale.
HELD: YES.
“A contract executed in the name of another by one who has
neither his authorization nor legal representation shall be void, unless
it should be ratified by the person in whose name it was executed
before being revoked by the other contracting party.”
The records of this case show that Orense did give his
consent so that his nephew, Jose Duran, might sell the property to
Gutierrez Hermanos. He also confirmed and ratified the sale by
means of a public instrument executed before a notary. Thus, Orense
had conferred verbal, or at least implied, power of agency upon his
nephew Duran, who accepted it in the same way by selling the said
property. The principal must therefore fulfill all the obligations
contracted by the agent, who acted within the scope of his authority.
In the beginning, the sale was indeed null and void because the
authority given by Orense to Duran was not in writing and signed by
the former, pursuant to Section 335 (5) of the Code of Civil
Procedure. However, by stating under oath to the judge that he had
consented to the sale, he had ratified the same. Even if the consent
was given after the sale was effected, his approval ratified the sale
and produced the effect of an express authorization to make the sale.
The sworn statement made by Orense while testifying as a
witness at the trial of Duran for estafa ratified the sale and, pursuant
to Article 1313 of the Civil Code, remedied all defects which the
contract may have contained from the moment of its execution. Any
right of action for nullification became extinguished by ratification.
The testimony given by Engacio Orense at the trial of Duran for
estafa, where he admitted giving consent, was the reason the latter
8

was acquitted. It would not be just if the testimony that acquitted his
nephew would not now serve to prove the conduct of Engracio
Orense in relation to the firm of Gutierrez Hermanos.
As Orense acknowledged and admitted under oath that he
had consented to Duran's selling the property in litigation to
Gutierrez Hermanos, it is not just nor permissible for him afterward
to deny that admission, to the prejudice of the purchaser. Therefore
the principal is bound to abide by the consequences of his agency as
though it had actually been given in writing.
The judgment appealed from is hereby AFFIRMED.
8. Litonjua v. Fernandez.
GR. No. 148116.
April 14, 2004
Facts: Mrs. Lourdes Alimario and Agapito Fisico who worked as
brokers, offered to sell to the petitioners, Antonio K. Litonjua and
Aurelio K. Litonjua, Jr., 2 parcels of land.
The owners of the properties were represented by Maria Fernandez
and Gregorio Eleosida, respectively. The brokers told the Litonjuas
that they were authorized by respondent Fernandez to offer the
property for sale.
The petitioners Litonjuas and respondent Fernandez agreed that the
petitioners would buy the property for a price certain. They also
agreed that the owners would shoulder the capital gains tax, transfer
tax and the expenses for the documentation of the sale.
The petitioners and respondent Fernandez also agreed to meet to
finalize the sale.
It was also agreed upon that on the date of the meeting,
respondent Fernandez would present a special power of attorney
executed by the owners of the property, authorizing her to sell
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Digest set #2 – Aug 18, 2015
the property for and in their behalf, and to execute a deed of
absolute sale thereon.
However, only Agapito Fisico attended the meeting. He informed the
petitioners that respondent Fernandez was encountering some
problems with the tenants and was trying to work out a settlement
with them.
After a few weeks of waiting, the petitioners wrote respondent
Fernandez, demanding that their transaction be finalized.
When the petitioners received no response from respondent
Fernandez, the petitioners sent her another Letter asking that the
Deed of Absolute Sale covering the property be executed in
accordance with their verbal agreement. The petitioners also
demanded the turnover of the subject properties to them within
fifteen days from receipt of the said letter; otherwise, they would
have no option but to protect their interest through legal means.
Fernandez, however rejected the claims of the petitioner.
The petitioners filed the instant Complaint for specific performance
with damages against respondent Fernandez and the registered
owners of the property.
After trial on the merits, the trial court rendered judgment in favor of
the petitioners .
The appellate court promulgated its decision reversing and setting
aside the judgment of the
trial court and dismissing the petitioners’ complaint, as well as the
respondents’ counterclaim.
Issue/s:
3. W/N THERE WAS A PERFECTED CONTRACT OF SALE
BETWEEN THE PARTIES.
• NONE!
9

4. W/N THE CONTRACT FALLS UNDER THE COVERAGE OF
THE STATUTE OF FRAUDS.
• N/A in light of the first issue settled.
Held:
The Litonjuas assert that there was a perfected contract of sale
between the them, as buyers, and the respondents-owners, through
respondent Fernandez, as sellers. The petitioners contend that the
perfection of the said contract is evidenced by the Letter of
respondent Fernandez.
The petitioners argue that the letter is a sufficient note or
memorandum of the perfected contract, thus, removing it from the
coverage of the statute of frauds. The letter specifically makes
reference to a sale which respondent Fernandez agreed to initially,
but which the latter withdrew because of the emergence of some
people who claimed to be tenants on both parcels of land.
The petitioners’ contention is bereft of merit. In its decision, the
appellate court ruled that the Letter of respondent Fernandez dated
January 16, 1996 is hardly the note or memorandum contemplated
under Article 1403(2)(e) of the New Civil Code.
In this case, we agree with the findings of the appellate court that
there was no perfected contract of sale between the respondents-
owners, as sellers, and the petitioners, as buyers.
There is no documentary evidence on record that the respondents-
owners specifically authorized respondent Fernandez to sell their
properties to another, including the petitioners.
Article 1878 of the New Civil Code provides that a special power
of attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired either:
• gratuitously; or
• for a valuable consideration; or
• to create or convey real rights over immovable property; or
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Digest set #2 – Aug 18, 2015
• for any other act of strict dominion.
Any sale of real property by one purporting to be the agent of
the registered owner without any authority therefor in writing
from the said owner is null and void. The declarations of the
agent alone are generally insufficient to establish the fact or
extent of her authority. In this case, the only evidence adduced
by the petitioners to prove that respondent Fernandez was
authorized by the respondents-owners is the testimony of
petitioner Antonio Litonjua that respondent Fernandez openly
represented herself to be the representative of the respondents-
owner.
IN LIGHT OF ALL THE FOREGOING, the petition is
DENIED. The decision of the appellate courtis AFFIRMED IN
TOTO. Costs against the petitioners.SO ORDERED.
9. ESTATE OF LINO OLAGUER v ONGJOCO
G.R. No. 173312
August 26, 2008
Article 1874: When the sale of a piece of land is made through an
agent, the authority of the latter shall be in writing.
FACTS:
• Note: Jose Olaguer was executed a Special Power of
attorney by both Olivia Olaguer and Eduardo Olaguer
• Jose Olaguer was given a General Power of Attorney by
Eduardo Olaguer and Virgilio Olaguer
The deceased Lino Olaguer inherited Lot No. 76
from his parents and it was among the twelve (12) lots sold
for 25,000 Pesos, by administrators Olivia P. Olaguer
(deceased’s widow) and Eduardo Olaguer to Pastor Bacani
on December 12, 1962.
But, the following day, December 13, 1962 Pastor
Bacani sold back the same 12 lots to Olivia P. Olaguer and
10

Eduardo Olaguer for 25,200 Pesos. 4 were sold back to
Olivia, while 7 was sold back to Eduardo and Lot No. 76
was issued a certificate in the name of Eduardo.
Jose Olaguer (Olivia’s new husband) caused the subdivision
of the said lot. After Lot 76 was subdivided as aforesaid, Jose A.
Olaguer as attorney-in-fact of Olivia P. Olaguer, sold to his son
Virgilio Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G for
3,000 Pesos.
Lots 76-B and 76-C were consolidated and then subdivided
anew and designated as Lot No. 1 and Lot No. 2. On January 15,
1976, Jose A. Olaguer claiming to be the attorney-in-fact of his son
Virgilio Olaguer under a general power of attorney sold Lot No. 1 to
defendant Emiliano M. [Ongjoco] for 10,000 Pesos per the deed of
absolute sale. The alleged general power of attorney however was
not presented or marked nor formally offered in evidence.
On September 7, 1976, Jose A. Olaguer again claiming to be
the attorney-in-fact of Virgilio Olaguer under the same general
power of attorney referred to in the deed of absolute sale of Lot 1,
sold Lot No. 2 to Emiliano M. [Ongjoco] for 10,000 Pesos. And this
set-up went on until the whole of Lot 76 was sold to Ongjoco.
The children of the deceased then filed for the annulment of
the sale, claiming that the sales of the properties were absolutely
simulated or fictitious; while Ongjoco claimed that he was a buyer in
good faith and the plaintiffs had no cause of action against him and
that the sale of property to Pastor Bacani, from whome Ongjoco
derived his title, was judicially approved.
ISSUE: WON Ongjoco was a buyer in good faith
HELD/RATIO: Partly Yes. Partly No.
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Digest set #2 – Aug 18, 2015
According to the provisions of Article 1874 of the Civil
Code on Agency, when the sale of a piece of land or any interest
therein is made through an agent, the authority of the latter shall be
in writing. Absent this requirement, the sale shall be void. Also,
under Article 1878, a special power of attorney is necessary in order
for an agent to enter into a contract by which the ownership of an
immovable property is transmitted or acquired, either gratuitously or
for a valuable consideration.
When Lots Nos. 1 and 2 were sold to respondent Ongjoco
through Jose A. Olaguer, the Transfer Certificates of Title of said
properties were in Virgilios name. Unfortunately for respondent, the
power of attorney that was purportedly issued by Virgilio in favor of
Jose Olaguer with respect to the sale of Lots Nos. 1 and 2 was never
presented to the trial court. Neither was respondent able to explain
the omission. Other than the self-serving statement of respondent, no
evidence was offered at all to prove the alleged written power of
attorney. Thus, there is no written power of attorney to speak of.
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco
was able to present a general power of attorney that was executed by
Virgilio Olaguer. While the law requires a special power of attorney,
the general power of attorney was sufficient in this case, as Jose A.
Olaguer was expressly empowered to sell any of Virgilios properties;
and to sign, execute, acknowledge and deliver any agreement
therefor. Even if a document is designated as a general power of
attorney, the requirement of a special power of attorney is met if
there is a clear mandate from the principal specifically authorizing
the performance of the act. The special power of attorney can be
included in the general power when the act or transaction for which
the special power is required is specified therein.
10. Cosmic Lumber v. CA
G.R. No. 114311
November 29, 1996
Special Power of Attorney
11

FACTS:
COSMIC LUMBER CORPORATION through its General
Manager executed a Special Power of Attorney appointing Paz G.
Villamil-Estrada as attorney-in-fact to:
-initiate, institute and file any court action for the ejectment of
third persons and/or squatters …for the said squatters to remove their
houses and vacate the premises in order that the corporation may
take material possession of the entire lot, and for this purpose, to
appear at the pre-trial conference and enter into any stipulation of
facts and/or compromise agreement so far as it shall protect the
rights and interest of the corporation in the aforementioned lots
Paz G. Villamil-Estrada, by virtue of her power of attorney,
instituted an action for the ejectment of private respondent Isidro
Perez and recover the possession of a portion of Lot No. 443 before
the Regional Trial Court of Dagupan. She entered into a
Compromise Agreement with respondent Perez, where she will be
paid by Perez P26,640.00, computed at P80.00/square meter, for the
ownership and possession of the land. The trial court approved the
said agreement but it was not executed within the 5-year period from
date of its finality allegedly due to the failure of petitioner to produce
the owners duplicate copy of Title No. 37649 needed to segregate
from Lot No. 443, the portion sold by the attorney-in-fact, Paz G.
Villamil-Estrada, to private respondent under the compromise
agreement. Perez then filed a complaint to revive the judgement.
Petitioner asserts that it was only when the summons in Civil
Case No. D-10459 for the revival of judgment was served upon it
that it came to know of the compromise agreement entered into
between Paz G. Villamil-Estrada and respondent Isidro
Perez. Petitioner sought annulment of the decision of the trial court
on the ground that the compromise agreement was void because:
(a) the attorney-in-fact did not have the authority to dispose of,
sell, encumber the land
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Digest set #2 – Aug 18, 2015
(b) the authority of the attorney-in-fact was confined to the
institution and filing of an ejectment case
(c) Villamil-Estrada’s authority was in connection with, and
limited to, the eviction of third persons/squatters thereat,
(d) the amount of P26,640.00 was never received by the
plaintiff
(e) the private defendant acted in bad faith in the execution of
said agreement
(f) the disposal of a corporate property indispensably requires a
Board Resolution of its Directors ; General Manager is not the proper
officer to encumber a corporate property.
ISSUE: Whether or not Paz G. Villamil-Estrada acted within the
terms of the Special power of attorney?
HELD: NO. The authority granted Villamil-Estrada under the
special power of attorney was explicit and exclusionary. Attorney-in-
fact Villamil-Estrada did not possess the authority to sell or was she
armed with a Board Resolution authorizing the sale of its
property. She was only allowed to “enter into any stipulation of facts
and/or compromise agreement but only insofar as this was protective
of the rights and interests of petitioner in the property. Nowhere in
this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion
thereof. ” Alienation by sale of an immovable certainly cannot be
deemed protective of the right of petitioner to physically possess the
same, more so when the land was being sold for a price of P80.00 per
square meter, very much less than its assessed value of P250.00 per
square meter, and considering further that petitioner never received
the proceeds of the sale.
The express mandate required by law to enable an appointee of
an agency in general terms to sell must be one that expressly
12

mentions a sale or that includes a sale as a necessary ingredient of
the act mentioned For the principal to confer the right upon an agent
to sell real estate, a power of attorney must so express the powers of
the agent in clear and unmistakable language.
Villamil-Estrada has shown fraudulent acts to obtain the said
agreement. Extrinsic fraud refers to any fraudulent act of the
prevailing party in the litigation which is committed outside of the
trial of the case, whereby the defeated party has been prevented from
exhibiting fully his side of the case by fraud or deception practiced
on him by his opponent. Fraud is extrinsic where the defendant never
had knowledge of the suit, being kept in ignorance by the acts of the
plaintiff; or where an attorney fraudulently or without authority
connives at his defeat;
Where the agent is committing a fraud, it would be contrary to
common sense to presume or to expect that he would communicate
the facts to the principal. He is not really acting for the principal but
is really acting for himself, entirely outside the scope of his agency.
Petition is GRANTED. The Compromise Agreement entered
into between Attorney-in-fact Paz G. Villamil-Estrada and
respondent Isidro Perez is declared VOID.
11. CITY LITE REALTY CORP V. CA
325 SCRA 385
September 30, 1971
FACTS:
F.P. Holdings was the registered owner of a land situated
along E. Rodriguez Ave., Quezon City, known as the “Violago
Property” or the “San Lorenzo Ruiz Commercial Center.” The
property was offered for sale to the general public through the
circulation of a sales brochure which, as advertised, indicated Meldin
Al G. Roy and Metro Drug Inc. as contact persons.
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Digest set #2 – Aug 18, 2015
Atty. Gelacio Mamaril, a practicing lawyer and licensed real
estate broker wrote to Metro Drug expressing City-Lite’s desire to
buy the entire front lot of the subject property. Thereafter, City-Lite’s
officers and Mamaril met with Roy at the Manila Mandarin Hotel in
Makati to consummate the transaction and later that afternoon,
Mamaril and City-Lite conveyed their formal acceptance of the terms
and conditions set forth by Roy in separate letters.
However, for some reason and despite demand, F.P.
Holdings refused to execute the corresponding deed of sale in favor
of City-Lite. Upon its claim of protecting its interest as vendee, City-
Lite registered an adverse claim to the title of the property with the
Register of Deeds which was annotated in the Memorandum of
Encumbrance of the TCT and City-Lite demanded in writing that
Metro Drug (and Roy) comply with its commitment by executing the
proper deed of conveyance of the property under pain of court action.
As a response, F.P. Holdings filed a petition for the
cancellation of the adverse claim and its President, Edwin Fernandez,
met with City-Lite’s officers and offered other properties located in
Caloocan City and in Quezon City as substitute. City-Lite, however,
refused the offer because it “did not suit its business needs.” With
F.P. Holdings’ petition for the cancellation of the adverse claim,
City-Lite caused the annotation of notices of lis pendens which were
recorded in the title of the property. The property was subsequently
transferred to Viewmaster Construction Corp. however the notice of
lis pendens was carried over and annotated on the new certificate of
title.
City-Lite included Viewmaster as a nominal defendant and
prayed for the cancellation of its title. While the RTC ruled in favor
of City-Lite and ordered F.P. Holdings to execute a deed of sale of
the property in its favor for the total consideration of P55,056,250,
the CA reversed this decision.
13

ISSUE:
1. Whether no contract of sale was perfected between City-Lite and
F.P. Holdings because of (a) lack of a definite agreement on the
matter of paying the purchase price and that (b) respondents Metro
Drug and Roy were not authorized to sell the property to City-Lite,
and that (c) the authority of Roy was only limited to that of a mere
contact person
HELD:
1. Yes.
The Civil Code 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.”
City-Lite anchors the authority of Metro Drug and Roy on (a)
testimonies of 3 of City-Lite’s witnesses and the admissions of Roy
and the lawyer of Metro Drug; (b) the sales brochure specifying Roy
as a contact person; (c) the guard posted at the property saying that
Metro Drug was the authorized agent; and (d) the common
knowledge among brokers that Metro Drug, through Roy, was the
authorized agent of F.P. Holdings to sell the property. However, the
Civil Code requires an authority to sell a piece of land to be in
writing. The absence of such authority can be determined from the
written memorandum issued by F.P. Holdings’ President requesting
Metro Drug’s assistance in finding buyers for the property,
proceeding to hold preliminary negotiations with interested buyers
but endorsing their formal offers to F.P. Holdings for final
evaluation and appraisal. Clearly, Roy and/or Metro Drug was only
a contact person with no authority to conclude a sale of the
property. In fact, a witness of City-Lite even admitted that Roy
and/or Metro Drug was a mere broker whose only job was to bring
the parties together for a possible transaction.
Therefore, the sale is declared null and void and could not have
produced any legal effect as to transfer the property from its lawful
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Digest set #2 – Aug 18, 2015
owner, F.P. Holdings, to any interested party including City-Lite.
12. PAHUD v CA
G.R. No. 160346
August 25, 2009
Special power of attorney
FACTS:
The spouses San Augstin acquired a parcel of land in Los
Banos, Laguna. They died intestate, survived by their 8 children:
respondents Eufemia, Ferdinand, Raul, Isabelita, Milagros, Minerva,
Zenaida, and Virgilio. In 1992, Eufemia, Ferdinand, and Raul
executed a Deed of Absolute Sale of Undivided Shares conveying in
favor of the Pahuds their respective shares from the lot they
inherited. Eufemia also signed the deed on behalf of her 4 other co-
heirs: Isabelita (through special power of attorney), and for Milagros,
Minerva, and Zenaida, but without their apparent written authority.
The deed of sale was not notarized.
The Pahuds made payments to Eugenia and her siblings for
the mortgaged subject property over the following months. When
Eufemia and her co-heirs drafted an extra-judicial settlement of
estate to facilitate the transfer of the title to the Pahuds, Virgilio
refused to sign it. In 1993, Virgilio's co-heirs filed a complaint for
judicial partition of the subject property before the RTC of Calamba,
Laguna. In the proceedings, a Compromise Agreement was signed
with 7 of the co-heirs agreeing to sell their undivided shares to
Virgilio for P700,000. However, the compromise agreement was not
approved by the RTC because Atty. Hilbero, the lawyer for Eugenia
and her 6 co-heirs (excluding Virgilio), refused to sign the agreement
because he knew of the previous sale made to the Pahuds.
In 1994, Eufemia acknowledged having received
P700,000.00 from Virgilio. Sometime that year, Virgilio sold the
entire property to the Belarminos, who immediately constructed a
building on the subject property. The Pahuds immediately confronted
Eufemia who confirmed to them that Virgilio had sold the property
14

to the Belarminos. Aggrieved, the Pahuds filed a complaint in
intervention in the pending case for judicial partition.
The RTC upheld the validity of the sale to the Pahuds,
stating that the Pahuds only had to pay the remaining balance, after
which the sale of the 7/8 portions would be formalized in favor of the
Pahuds, and that the sale to the Belarminos was not a valid sale, as
the Belarminos were in bad faith in buying the portion of the
property already sold to the Pahuds.
The CA reversed the RTC decision, agreeing with the
Belarminos that the sale made by Eufemia for and on behalf of her
other co-heirs to the Pahuds should have been declared void and
inexistent for want of a written authority from her co-heirs. The
Pahuds appealed to the SC.
ISSUE:
1. Whether or not the sale of the subject property by
Eugenia and her co-heirs to the Pahuds was valid and
enforceable.
HELD:
1. YES.
As Art. 1874 of the Civil Code plainly provides: "When
a 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 sale made by Eufemia, Isabelita, and her 2 brothers
to the Pahuds should be valid only with respect to the 4/8
portion of the subject property. The sale with respect to the 3/8
portion, representing the shares of Zenaida, Milagros, and
Minerva, is void because Eufemia could not dispose of the
interest of her co-heirs in the said lot absent any written authority
from the latter, as explicitly required by law, as ruled by the CA.
Still, in their petition, the Pahuds argue that the sale with respect
to the 3/8 portion of the land should have been deemed ratified
when the three co-heirs, namely: Milagros, Minerva, and
Zenaida, executed their respective special power of attorneys
authorizing Eufemia to represent them in the sale of their shares
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Digest set #2 – Aug 18, 2015
in the subject property. While the sale with respect to the 3/8
portion is void by express provision of law and NOT
susceptible to ratification, we nevertheless uphold its validity
on the basis of the common law principle of estoppel.
At the time of the sale to the Pahuds, Eufemia was not armed
with the requisite special power of attorney to dispose of the 3/8
portion of the property. Initially, in their answer to the
complaint in intervention, Eufemia and her other co-heirs
denied having sold their shares to the Pahuds. During the
pre-trial conference, however, they admitted that they had
indeed sold 7/8 of the property to the Pahuds sometime in
1992. Thus, the previous denial was superseded, if not
accordingly amended, by their subsequent admission. Moreover,
in their Comment, the said co-heirs again admitted the sale made
to petitioners.
Milagro, Minerva, and Zenaida could have easily filed a case
for annulment of the sale of their respective shares against
Eufemia and the Pahuds. Instead, they opted to remain silent and
left the task of raising the validity of the sale as an issue to their
co-heir, Virgilio, who is not privy to the said transaction. It is a
basic rule in the law of agency that a principal is subject to
liability for loss caused to another by the latter’s reliance
upon a deceitful representation by an agent in the course of
his employment (1) if the representation is authorized; (2) if
it is within the implied authority of the agent to make for the
principal; or (3) if it is apparently authorized, regardless of
whether the agent was authorized by him or not to make the
representation.
By their continued silence, Zenaida, Milagros and
Minerva have caused the Pahuds to believe that they have
indeed clothed Eufemia with the authority to transact on
their behalf. Clearly, the three co-heirs are now estopped
from impugning the validity of the sale from assailing the
authority of Eufemia to enter into such transaction.
Accordingly, the subsequent sale made by the seven co-heirs
to Virgilio was void because they no longer had any interest over
the subject property which they could alienate at the time of the
15

second transaction. Virgilio, however, could still alienate his 1/8
undivided share to the Belarminos.
The Belarminos purchased the property from Virgilio in bad
faith. The sale to them is not valid.
13. Yoshizaki v. Joy Training Center
G.R. No. 174978
July 31, 2013
FACTS:
Joy Training Center of Aurora, Inc. (Joy Training) is a non-
stock, nonprofit religious educational institution. It was the registered
owner of a parcel of land and the building thereon (real properties)
located in Baler, Aurora.
On November 10, 1998, the spouses Richard and Linda
Johnson sold the real properties, a Wrangler jeep, and other personal
properties in favor of the spouses Sally and Yoshio Yoshizaki. On
the same date, a Deed of Absolute Sale and a Deed of Sale of Motor
Vehicle were executed in favor of the spouses Yoshizaki. The
spouses Johnson were members of Joy Training’s board of trustees at
the time of sale.
On December 8, 1998, Joy Training, represented by its
Acting Chairperson Reuben V. Rubio, filed an action for the
Cancellation of Sales and Damages with prayer for the issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction
against the spouses Yoshizaki and the spouses Johnson before the
Regional Trial Court of Baler, Aurora (RTC).
Joy Training alleged that the spouses Johnson sold its
properties without the requisite authority from the board of directors.
It assailed the validity of a board resolution dated September 1, 1998
which purportedly granted the spouses Johnson the authority to sell
its real properties. It averred that only a minority of the board,
composed of the spouses Johnson and Alexander Abadayan,
authorized the sale through the resolution. It highlighted that the
Articles of Incorporation provides that the board of trustees consists
of seven members.
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On the other hand, the spouses Yoshizaki filed their Answer
with Compulsory Counterclaims on June 23, 1999. They claimed
that Joy Training authorized the spouses Johnson to sell the parcel of
land. They asserted that a majority of the board of trustees approved
the resolution. They maintained that the actual members of the board
of trustees consist of only five members.
ISSUE:
1. Whether or not there is a valid agency to sell. (NO)
2. Whether or not the sale is valid. (NO, Unenforceable)
HELD:
1. NO. No valid agency to sell. The court rules that there is no
contract of agency between Joy Trading and the spouses
Johnson to sell the parcel of land with its improvements.
As a general rule, a contract of agency may be oral.
However, it must be written when the law requires a specific
form. Specifically, Article 1874 of the Civil Code provides
that the contract of agency must be written for the validity of
the sale of a piece of land or any interest therein. Otherwise,
the sale shall be void. A related provision, Article 1878 of
the Civil Code, states that special powers of attorney are
necessary to convey real rights over immovable properties.
The special power of attorney mandated by law must be one
that expressly mentions a sale or that includes a sale as a
necessary ingredient of the authorized act. A special power
of attorney must express the powers of the agent in clear and
unmistakable language for the principal to confer the right
upon an agent to sell real estate. When there is any
reasonable doubt that the language so used conveys such
power, no such construction shall be given the document.
In the present case, Sally presents three pieces of evidence
which allegedly prove that Joy Training specially authorized
16

the spouses Johnson to sell the real properties: (1) TCT No.
T25334, (2) the resolution, (3) and the certification.
The certification states: “… Johnson were given FULL
AUTHORITY for ALL SIGNATORY purposes for the
corporation on ANY and all matters and decisions regarding
the property and ministry here.”
The resolution states: “We have authorized the sale of land
and building owned by spouses Johnson.”
The TCT merely states that Joy Training is represented by
the spouses Johnson. The title does not explicitly confer to
the spouses Johnson the authority to sell the parcel of land
and building.
The resolution which purportedly grants the spouses Johnson
a special power of attorney is negated by the phrase “land
and building owned by spouses Johnson. Quorum is also not
achieved since the basis for determining the board of
trustees’ composition is the trustees as fixed in the articles of
incorporation and not the actual members of the board.
The certification is a mere general power of attorney which
comprises all of Joy Training’s business. Article 1877 of the
Civil Code clearly states that “an agency couched in general
terms comprises only acts of administration, even if the
principal should state that he withholds no power or that the
agent may execute such acts as he may consider appropriate,
or even though the agency should authorize a general and
unlimited management.
2. NO. The Contract of sale is UNENFORCEABLE. At this
point, we reiterate the established principle that persons
dealing with an agent must ascertain not only the fact of
agency, but also the nature and extent of the agent’s
authority. A third person with whom the agent wishes to
AGENCY AND TRUSTS, PARTNERSHIPS AND JOINT VENTURES - CLV
Digest set #2 – Aug 18, 2015
contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as
regards the agency. The basis for agency is representation
and a person dealing with an agent is put upon inquiry and
must discover on his own peril the authority of the agent.
Thus, Sally bought the real properties at her own risk; she
bears the risk of injury occasioned by her transaction with
the spouses Johnson.
WHEREFORE, premises considered, the assailed Decision dated
February 14, 2006 and Resolution dated October 3, 2006 of the
Court of Appeals are hereby AFFIRMED and the petition is hereby
DENIED for lack of merit.
14. Bautista v. Spouses Jalandoni
15. BA Finance Corporation v. CA
G.R. No. 82040
August 27, 1991
FACTS:
• Manuel Cuady and Lilia Cuady obtained a credit of P40,000
from Supercars, Inc. to cover the cose of one Ford Escort
1300. This was evidenced by a promissory note, payable on
monthly installments.
• To secure the obligation, the Cuady spouses executed a
chattel mortgage on the car. Later on, Supercars assigned the
promissory note, together with the chattel mortgage, to BA
Finance Corporation.
• BA Finance, as assignee of the mortgage lien, obtained an
insurance policy over the car when the spouses failed to
obtain one themselves. Under the insurance terms and
conditions, BA Finance was constituted as attorney-in-fact,
and any loss under the policy shall be payable to it.
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• Subsequently, the spouses got into a car accident, and the car
was badly damaged. They asked BA Finance to consider the
same as a total loss, and to claim from the insurer the fact
value of the car insurance policy, and apply the same to the
payment of their debt.
• However, BA Finance insisted that the spouses have their car
repaired at Rea Auto Center instead. The spouses did so but
the repair was botched; not long after, the car broke down
again. The Cuady spouses asked BA Finance to comply with
their prior instruction of getting the proceeds from the
insurance policy. When BA Finance turned them down, the
spouses stopped paying their debt.
• BA Finance sued for the recovery of the remaining balance
of the debt.
Finance is bound by its acceptance to carry out the agency, and is
liable for damages which, through its non-performance, the Cuadys
(the principal) may suffer.
In this case, the Cuadys suffered loss in the form of salvage
value of the car when BA Finance refused and refrained from
proceeding against the insurer for the payment of a clearly valid
insurance claim, despite the undeniable fact that Rea Auto Center,
the auto repair shop chosen by the insurer itself, misrepaired and
rendered the car completely useless.
Wherefore, the petition is denied.

ISSUE:
1. W/N BA Finance has waived its right to collect the unpaid
balance of the Cuady spouses on the promissory note for the
failure of the former to enforce the total loss provision in the
insurance coverage of the motor vehicle subject of the
chattel mortgage.

HELD/RATIO:
1. Yes.
BA Finance was deemed subrogated to the rights and
obligations of Supercars when the latter assigned the promissory
note, together with the chattel mortgage over the car in favor of BA
Finance. Consequently, BA Finance was bound by the terms and
conditions of the chattel mortgage. Under the chattel mortgage, BA
Finance was constituted attorney-in-fact with full power and
authority to file, follow up, prosecute, or settle insurance claims and
to collect from the insurance company the proceeds of the insurance
policy to the extent of its interests, in the event that the car suffers
any damage or loss.
In granting BA Finance these powers, the Cuady spouses
created in the former’s favor an agency. Under Article 1884, BA
AGENCY AND TRUSTS, PARTNERSHIPS AND JOINT VENTURES - CLV 18