G.R. No.

L-12579 July 27, 1918
GREGORIO JIMENEZ, plaintiff-appellee, vs.PEDRO
RABOT, NICOLASA JIMENEZ and her husband
EMILIO RODRIGUEZ, defendants. PEDRO RABOT,
appellant.
that he was pressed for money and requested her to
sell one of his parcels of land and send him the money
in order that he might pay his debts. This letter
contains no description of the land to be sold other
than is indicated in the words "one of my parcels of
land" ("uno de mis terrenos").

Antonio Bengson for appellant.Jose Rivera for appellee.
STREET, J.:
This action was instituted by the plaintiff, Gregorio
Jimenez, to recover from the defendant, Pedro Rabot, a
parcel of land situated in the municipality of Alaminos,
in the Province of Pangasinan, and described in the
complaint as follows:
Acting upon this letter Nicolasa approached the
defendant Pedro Rabot, and the latter agreed to buy
the parcel in question for the sum of P500. Two
hundred and fifty peso were paid at once, with the
understanding that a deed of conveyance would be
executed when the balance should be paid. Nicolasa
admits having received this payment of P250 at the
time stated; but there is no evidence that she sent any
of it to her brother.

Approximate area of three hectares; bounded on the
north and west with land of Pedro Reynoso, on the
south with land of Nicolasa Jimenez, and on the east
with land of Calixta Apostol before, at present with
that of Juan Montemayor and Simon del Barrio. It is
situated in Dinmayat Tancaran, barrio of Alos of this
same municipality of Alaminos, Pangasinan.
From a judgment rendered in favor of the plaintiff,
Pedro Rabot has appealed; but his co-defendants,
Nicolasa Jimenez and her husband, who were cited by
the defendant for the purpose of holding her liable
upon her warranty in case of his eviction, have not
appealed.
It is admitted that the parcel of land in question,
together with two other parcels in the same locality
originally belonged of the heirs in the division of the
estate of his father. It is further appears that while
Gregorio was staying at Vigan, in the Province of Ilocos
Sur, during the year 1911, his property in Alaminos
was confided by him to the care of his elder sister
Nicolasa Jimenez. On February 7 of that year he wrote
this sister a letter from Vigan in which he informed her
About one year later Gregorio came down to Alaminos
and demanded that his sister should surrender this
piece of land to him, it being then in her possession.
She refused upon some pretext or other to do so; and
as a result Gregorio, in conjunction with others of his
brothers and sisters, whose properties were also in the
hands of Nicolasa, instituted an action in the Court of
First Instance for the purpose of recovering their land
from her control. This action was decided favorably to
the plaintiffs upon August 12, 1913; and no appeal was
taken from the judgment.
Meanwhile, upon May 31, 1912, Nicolasa Jimenez
executed and delivered to Pedro Rabot a deed
purporting to convey to him the parcel of land which is
the subject of this controversy. The deed recites that
the sale was made in consideration of the sum of
P500, the payment of which is acknowledged. Pedro
Rabot went into possession, and the property was
found in his hands at the time when final judgment
was entered in favor of the plaintiffs in the action
above mentioned. It will thus be seen that Pedro Rabot
acquired possession under the deed from Nicolasa
during the pendency of the litigation appear that he
was at the time cognizant of that circumstance.
In considering the questions presented by this appeal
one or two preliminary observations may be made.
The first is that, as a matter of formality, a power of
attorney to convey real property ought to appear in a
public document, just as any other instrument
intended to transmit or convey an interest in such
property ought to appear in a public document. (Art.
1280, Civil Code.) But inasmuch as it is an established
doctrine that a private document is competent to
create, transmit, modify, or extinguish a right in real
property (Thunga Chui vs. Que Bentec, 2 Phil. Rep.,
561; Couto Soriano vs. Cortes, 8 Phil. Rep., 459), it
follows that a power of attorney to convey such
property, even though in the form of a private
document, will operate with effect. Again, supposing
that the letter contained adequate authority for
Nicolasa to sell the property in question, her action in
conveying the property in her own name, without
showing the capacity in which she acted, was
doubtless irregular. Nevertheless, such deed would in
any event operate to bind her brother, the plaintiff in
its character as a contract (Lyon vs. Pollock, 99 U.S.,
668; 25 L. ed., 265), and supposing that the authority
was sufficient, he could be compelled by a proper
judicial proceeding to execute a document to carry
such contract into effect. (Art. 1279, Civil Code.)
The principal question for consideration therefore in
the end resolves itself into this, whether the authority
conferred on Nicolasa by the letter of February 7,
1911, was sufficient to enable her to bind her brother.
The only provisions of law bearing on this point are
contained in article 1713 of the Civil Code and in
section 335 of the Code of Civil Procedure. Article 1713
of the Civil Code requires that the authority to alienate
land shall be contained in an express mandate; while
subsection 5 of section 335 of the Code of Civil
Procedure says that the authority of the agent must be
in writing and subscribed by the party to be charged.
We are of the opinion that the authority expressed in
the letter is a sufficient compliance with both
requirements.
It has been urged here that in order for the authority
to be sufficient under section 335 of the Code of Civil
Procedure the authorization must contain a particular
description of the property which the agent is to be
permitted to sell. There is no such requirement in
subsection 5 of section 335; and we do not believe
that it would be legitimate to read such a requirement
into it. The purpose in giving a power of attorney is to
substitute the mind and hand of the agent for the mind
and hand of the principal; and if the character and
extent of the power is so far defined as to leave no
doubt as to the limits within which the agent is
authorized to act, and he acts within those limits, the
principal cannot question the validity of his act. It is
not necessary that the particular act to be
accomplished should be predestinated by the
language of the power. The question to be answered
always, after the power has been exercised, is rather
this: Was the act which the agent performed within the
scope of his authority? In the case before us, if the
question is asked whether the act performed by
Nicolasa Jimenez was within the scope of the authority
which had been conferred upon her, the answer must
be obviously in the affirmative.
It should not escape observation that the problem with
which we are here concerned relates to the sufficiency
of the power of attorney under subsection 5 of section
335 of the Code of Civil Procedure and not to the
sufficiency of the note or memorandum of the
contract, or agreement of sale, required by the same
subsection, in connection with the first paragraph of
the same section. It is well-settled in the jurisprudence
of England and the United States that when the owner,
or his agent, comes to make a contract to sell, or a
conveyance to effect a transfer, there must be a
description of the property which is the subject of the
sale or conveyance. This is necessary of course to
define the object of the contract. (Brockway vs. Frost,
40 Minn., 155; Carr vs. Passaic Land etc. Co., 19 N. J.
Eq., 424; Lippincott vs. Bridgewater, 55 N. J. Eq., 208;
Craig vs. Zelian, 137 Cal., 105; 20 Cyc., 271.)
The general rule here applicable is that the description
must be sufficiently definite to identify the land either
from the recitals of the contract or deed or from
external facts referred to in the document, thereby
enabling one to determine the identity of the land and
if the description is uncertain on its face or is shown to
be applicable with equal plausibility to more than one
tract, it is insufficient. The principle embodied in these
decisions is not, in our opinion, applicable to the
present case, which relates to the sufficiency of the
authorization, not to the sufficiency of the contract or
conveyance. It is unquestionable that the deed which
Nicolasa executed contains a proper description of the
property which she purported to convey.
There is ample authority to the effect that a person
may by a general power of attorney an agent to sell
"all" the land possessed by the principal, or all that he
possesses in a particular city, county, or state. (Roper
vs. McFadden, 48 Cal., 346; Rownd vs. Davidson, 113
La., 1047; Carson vs. Ray, 52 N. C., 609; 78 Am. Dec.,
267; 31 Cyc., 1229.) It is also held that where a person
authorizes an agent to sell a farm ("my farm") in a
certain county, this is sufficient, if it be shown that
such party has only one farm in that country. (Marriner
vs. Dennison, 78 Cal., 202.) In Linton vs. Moorhead
(209 Pa. St., 646), the power authorized the agent to
sell or convey "any or all tracts, lots, or parcels" of
land belonging to the plaintiff. It was held that this was
adequate. In Lyon vs. Pollock (99 U.S., 668), the owner
in effect authorized an agent to sell everything he had
in San Antonio Texas. The authority was held
sufficient. In Linan vs. Puno (31 Phil. Rep., 259), the
authority granted was to the effect that the agent
might administer "the interests" possessed by the
principal in the municipality of Tarlac and to that end
he was authorized to purchase, sell, collect, and pay,
etc. It was held that this was a sufficient power.
In the present case the agent was given the power to
sell either of the parcels of land belonging to the
plaintiff. We can see no reason why the performance
of an act within the scope of this authority should not
bind the plaintiff to the same extent as if he had given
the agent authority to sell "any or all" and she had
conveyed only one.
From what have been said it is evident that the lower
court should have absolved the defendant Pedro Rabot
from the complaint. Judgment will accordingly be
reversed, without any express adjudication of costs
this instance. So ordered.
Torres, Johnson, Malcolm, Avanceña and Fisher, JJ.,
concur.
G.R. No. 102784 February 28, 1996
ROSA LIM, petitioner, vs.COURT OF APPEALS and
PEOPLE OF THE PHILIPPINES, respondents.
DECISION
HERMOSISIMA, JR., J.:
This is a petition to review the Decision of the Court of
Appeals in CA-G.R. CR No. 10290, entitled "People v.
Rosa Lim," promulgated on August 30, 1991.
On January 26, 1989, an Information for Estafa was
filed against petitioner Rosa Lim before Branch 92 of
the Regional Trial Court of Quezon City. 1 The
Information reads:
That on or about the 8th day of October 1987, in
Quezon City, Philippines and within the jurisdiction of
this Honorable Court, the said accused with intent to
gain, with unfaithfulness and/or abuse of confidence,
did, then and there, wilfully, unlawfully and feloniously
defraud one VICTORIA SUAREZ, in the following
manner, to wit: on the date and place aforementioned
said accused got and received in trust from said
complainant one (1) ring 3.35 solo worth P169,000.00,
Philippine Currency, with the obligation to sell the
same on commission basis and to turn over the
proceeds of the sale to said complainant or to return
said jewelry if unsold, but the said accused once in
possession thereof and far from complying with her
obligation despite repeated demands therefor,
misapplied, misappropriated and converted the same
to her own personal use and benefit, to the damage
and prejudice of the said offended party in the amount
aforementioned and in such other amount as may be
awarded under the provisions of the Civil Code.
CONTRARY TO LAW.2
After arraignment and trial on the merits, the trial
court rendered judgment, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered:
1. Finding accused Rosa Lim GUILTY beyond
reasonable doubt of the offense of estafa as defined
and penalized under Article 315, paragraph 1(b) of the
Revised Penal Code;
2. Sentencing her to suffer the Indeterminate penalty
of FOUR (4) YEARS and TWO (2) MONTHS of prision
correccional as minimum, to TEN (10) YEARS of prision
mayor as maximum;
3. Ordering her to return to the offended party Mrs.
Victoria Suarez the ring or its value in the amount of
P169,000 without subsidiary imprisonment in case
insolvency; and
4. To pay costs.3
On appeal, the Court of Appeals affirmed the judgment
of conviction with the modification that the penalty
imposed shall be six (6) years, eight (8) months and
twenty-one (21) days to twenty (20) years in
accordance with Article 315, paragraph 1 of the
Revised Penal Code.4
Petitioner filed a motion for reconsideration before the
appellate court on September 20, 1991, but the
motion was denied in a Resolution dated November
11, 1991.
In her final bid to exonerate herself, petitioner filed the
instant petition for review alleging the following
grounds:
I
THE RESPONDENT COURT VIOLATED THE
CONSTITUTION, THE RULES OF COURT AND THE
DECISION OF THIS HONORABLE COURT IN NOT
PASSING UPON THE FIRST AND THIRD ASSIGNED
ERRORS IN PETITIONER'S BRIEF;
II
THE RESPONDENT COURT FAILED TO APPLY THE
PRINCIPLE THAT THE PAROL EVIDENCE RULE WAS
WAIVED WHEN THE PRIVATE PROSECUTOR CROSS-
EXAMINED THE PETITIONER AND AURELIA NADERA
AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY
THE COUNSEL FOR THE PETITIONER AS TO THE TRUE
NATURE OF THE AGREEMENT BETWEEN THE PARTIES
WHEREIN IT WAS DISCLOSED THAT THE TRUE
AGREEMENT OF THE PARTIES WAS A SALE OF
JEWELRIES AND NOT WHAT WAS EMBODIED IN THE
RECEIPT MARKED AS EXHIBIT "A" WHICH WAS RELIED
UPON BY THE RESPONDENT COURT IN AFFIRMING THE
JUDGMENT OF CONVICTION AGAINST HEREIN
PETITIONER; and
 III
THE RESPONDENT COURT FAILED TO APPLY IN THIS
CASE THE PRINCIPLE ENUNCIATED BY THIS
HONORABLE COURT TO THE EFFECT THAT
"ACCUSATION" IS NOT, ACCORDING TO THE
FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT: THE
PROSECUTION MUST OVERTHROW THE PRESUMPTION
OF INNOCENCE WITH PROOF OF GUILT BEYOND
REASONABLE DOUBT. TO MEET THIS STANDARD,
THERE IS NEED FOR THE MOST CAREFUL SCRUTINY OF
THE TESTIMONY OF THE STATE, BOTH ORAL AND
DOCUMENTARY, INDEPENDENTLY OF WHATEVER
DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE
JUDGE BELOW AND THE APPELLATE TRIBUNAL COULD
ARRIVE AT A CONCLUSION THAT THE CRIME HAD BEEN
COMMITTED PRECISELY BY THE PERSON ON TRIAL
UNDER SUCH AN EXACTING TEST SHOULD SENTENCE
THUS REQUIRED THAT EVERY INNOCENCE BE DULY
TAKEN INTO ACCOUNT. THE PROOF AGAINST HIM
MUST SURVIVE THE TEST OF REASON; THE
STRONGEST SUSPICION MUST NOT BE PERMITTED TO
SWAY JUDGMENT. (People v. Austria, 195 SCRA 700)5
Herein the pertinent facts as alleged by the
prosecution.
On or about October 8, 1987, petitioner Rosa Lim who
had come from Cebu received from private respondent
Victoria Suarez the following two pieces of jewelry; one
(1) 3.35 carat diamond ring worth P169,000.00 and
one (1) bracelet worth P170,000.00, to be sold on
commission basis. The agreement was reflected in a
receipt marked as Exhibit "A"6 for the prosecution. The
transaction took place at the Sir Williams Apartelle in
Timog Avenue, Quezon City, where Rosa Lim was
temporarily billeted.
On December 15, 1987, petitioner returned the
bracelet to Vicky Suarez, but failed to return the
diamond ring or to turn over the proceeds thereof if
sold. As a result, private complainant, aside from
making verbal demands, wrote a demand letter7 to
petitioner asking for the return of said ring or the
proceeds of the sale thereof. In response, petitioner,
thru counsel, wrote a letter8 to private respondent's
counsel alleging that Rosa Lim had returned both ring
and bracelet to Vicky Suarez sometime in September,
1987, for which reason, petitioner had no longer any
liability to Mrs. Suarez insofar as the pieces of jewelry
were concerned. Irked, Vicky Suarez filed a complaint
for estafa under Article 315, par l(b) of the Revised
Penal Code for which the petitioner herein stands
convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila
from Cebu sometime in October 1987, together with
one Aurelia Nadera, who introduced petitioner to
private respondent, and that they were lodged at the
Williams Apartelle in Timog, Quezon City. Petitioner
denied that the transaction was for her to sell the two
pieces of jewelry on commission basis. She told Mrs.
Suarez that she would consider buying the pieces of
jewelry far her own use and that she would inform the
private complainant of such decision before she goes
back to Cebu. Thereafter, the petitioner took the
pieces of jewelry and told Mrs. Suarez to prepare the
"necessary paper for me to sign because I was not yet
prepare (d) to buy it."9 After the document was
prepared, petitioner signed it. To prove that she did
not agree to the terms of the receipt regarding the
sale on commission basis, petitioner insists that she
signed the aforesaid document on the upper portion
thereof and not at the bottom where a space is
provided for the signature of the person(s) receiving
the jewelry. 10
On October 12, 1987 before departing for Cebu,
petitioner called up Mrs. Suarez by telephone in order
to inform her that she was no longer interested in the
ring and bracelet. Mrs. Suarez replied that she was
busy at the time and so, she instructed the petitioner
to give the pieces of jewelry to Aurelia Nadera who
would in turn give them back to the private
complainant. The petitioner did as she was told and
gave the two pieces of jewelry to Nadera as evidenced
by a handwritten receipt, dated October 12, 1987. 11
Two issues need to be resolved: First, what was the
real transaction between Rosa Lim and Vicky Suarez a
contract of agency to sell on commission basis as set
out in the receipt or a sale on credit; and, second, was
the subject diamond ring returned to Mrs. Suarez
through Aurelia Nadera?
Petitioner maintains that she cannot be liable for
estafa since she never received the jewelries in trust
or on commission basis from Vicky Suarez. The real
agreement between her and the private respondent
was a sale on credit with Mrs. Suarez as the owner-
seller and petitioner as the buyer, as indicated by the
bet that petitioner did not sign on the blank space
provided for the signature of the person receiving the
jewelry but at the upper portion thereof immediately
below the description of the items taken. 12
The contention is far from meritorious.
The receipt marked as Exhibit "A" which establishes a
contract of agency to sell on commission basis
between Vicky Suarez and Rosa Lim is herein
reproduced in order to come to a proper perspective:
THIS IS TO CERTIFY, that I received from Vicky Suarez
PINATUTUNAYAN KO na aking tinanggap kay
___________ the following jewelries:
ang mga alahas na sumusunod:
DescriptionMga Uri PriceHalaga
l ring 3.35 dolo P 169,000.00
1 bracelet 9;170,000.00
totalKabuuan P 339,000.00
in good condition, to be sold in CASH ONLY within . . .
days from date of signing this receipt na nasa
mabuting kalagayan upang ipagbili ng KALIWAAN
(ALCONTADO) lamang sa loob ng . . . araw mula ng
ating pagkalagdaan:
if I could not sell, I shall return all the jewelry within
the period mentioned above; if I would be able to sell, I
shall immediately deliver and account the whole
proceeds of sale thereof to the owner of the jewelries
at his/her residence; my compensation or commission
shall be the over-price on the value of each jewelry
quoted above. I am prohibited to sell any jewelry on
credit or by installment; deposit, give for safekeeping:
lend, pledge or give as security or guaranty under any
circumstance or manner, any jewelry to other person
or persons.
kung hindi ko maipagbili ay isasauli ko ang lahat ng
alahas sa loob ng taning na panahong nakatala sa
itaas; kung maipagbili ko naman ay dagli kong isusulit
at ibibigay ang buong pinagbilhan sa may-ari ng mga
alahas sa kanyang bahay tahanan; ang aking
gantimpala ay ang mapapahigit na halaga sa
nakatakdang halaga sa itaas ng bawat alahas HINDI ko
ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan
ang alin mang alahas, ilalagak, ipagkakatiwala;
ipahihiram; isasangla o ipananagot kahit sa anong
paraan ang alin mang alahas sa ibang mga tao o tao.
I sign my name this . . . day of . . . 19 . . . at Manila,
NILALAGDAAN ko ang kasunduang ito ngayong ika
_____ ng dito sa Maynila.
___________________Signature of Persons whoreceived jewelries
(Lagdang Tumanggap ng mgaAlahas)
Address: . . . . . . . . . . . .
Rosa Lim's signature indeed appears on the upper
portion of the receipt immediately below the
description of the items taken: We find that this fact
does not have the effect of altering the terms of the
transaction from a contract of agency to sell on
commission basis to a contract of sale. Neither does it
indicate absence or vitiation of consent thereto on the
part of Rosa Lim which would make the contract void
or voidable. The moment she affixed her signature
thereon, petitioner became bound by all the terms
stipulated in the receipt. She, thus, opened herself to
all the legal obligations that may arise from their
breach. This is clear from Article 1356 of the New Civil
Code which provides:
Contracts shall be obligatory in whatever form they
may have been entered into, provided all the essential
requisites for their validity are present. . . .
However, there are some provisions of the law which
require certain formalities for particular contracts. The
first is when the form is required for the validity of the
contract; the second is when it is required to make the
contract effective as against third parties such as
those mentioned in Articles 1357 and 1358; and the
third is when the form is required for the purpose of
proving the existence of the contract, such as those
provided in the Statute of Frauds in article 1403. 13 A
contract of agency to sell on commission basis does
not belong to any of these three categories, hence it is
valid and enforceable in whatever form it may be
entered into.
Furthermore, there is only one type of legal instrument
where the law strictly prescribes the location of the
signature of the parties thereto. This is in the case of
notarial wills found in Article 805 of the Civil Code, to
wit:
Every will, other than a holographic will, must be
subscribed at the end thereof by the testator
himself . . . .
The testator or the person requested by him to write
his name and the instrumental witnesses of the will,
shall also sign, as aforesaid, each and every page
thereof, except the last, on the left margin. . . .
In the case before us, the parties did not execute a
notarial will but a simple contract of agency to sell on
commission basis, thus making the position of
petitioner's signature thereto immaterial.
Petitioner insists, however, that the diamond ring had
been returned to Vicky Suarez through Aurelia Nadera,
thus relieving her of any liability. Rosa Lim testified to
this effect on direct examination by her counsel:
Q: And when she left the jewelries with you, what
did you do thereafter?
A: On October 12, I was bound for Cebu. So I called
up Vicky through telephone and informed her that I am
no longer interested in the bracelet and ring and that I
will just return it.
Q: And what was the reply of Vicky Suarez?
A: She told me that she could not come to the
apartelle since she was very busy. So, she asked me if
 16<
Aurelia was there and when I informed her that Aurelia exposing myself to a high risk.
was there, she instructed me to give the pieces of
jewelry to Aurelia who in turn will give it back to Vicky. The issue as to the return of the ring boils down to one
of credibility. Weight of evidence is not determined
Q: And you gave the two (2) pieces of jewelry to mathematically by the numerical superiority of the
Aurelia Nadera? witnesses testifying to a given fact. It depends upon its
practical effect in inducing belief on the part of the
A: Yes, Your Honor. 14 judge trying the case.17 In the case at bench, both the
trial court and the Court of Appeals gave weight to the
This was supported by Aurelia Nadera in her direct testimony of Vicky Suarez that she did not authorize
examination by petitioner's counsel: Rosa Lim to return the pieces of jewelry to Nadera. The
respondent court, in affirming the trial court, said:
Q: Do you know if Rosa Lim in fact returned the
jewelries? . . . This claim (that the ring had been returned to
Suarez thru Nadera) is disconcerting. It contravenes
A: She gave the jewelries to me. the very terms of Exhibit A. The instruction by the
complaining witness to appellant to deliver the ring to
Q: Why did Rosa Lim give the jewelries to you? Aurelia Nadera is vehemently denied by the
complaining witness, who declared that she did not
authorize and/or instruct appellant to do so. And thus,
A: Rosa Lim called up Vicky Suarez the following
by delivering the ring to Aurelia without the express
morning and told Vicky Suarez that she was going
authority and consent of the complaining witness,
home to Cebu and asked if she could give the jewelries
appellant assumed the right to dispose of the jewelry
to me.
as if it were hers, thereby committing conversion, a
clear breach of trust, punishable under Article 315,
Q: And when did Rosa Lim give to you the
par. 1(b), Revised Penal Code.
jewelries?

15 We shall not disturb this finding of the respondent

A: Before she left for Cebu.
On rebuttal, these testimonies were belied by Vicky
Suarez herself:
Q: It has been testified to here also by both Aurelia
Nadera and Rosa Lim that you gave authorization to
Rosa Lim to turn over the two (2) pieces of jewelries
mentioned in Exhibit "A" to Aurelia Nadera, what can
you say about that?
court. It is well settled that we should not interfere
with the judgment of the trial court in determining the
credibility of witnesses, unless there appears in the
record some fact or circumstance of weight and
influence which has been overlooked or the
significance of which has been misinterpreted. The
reason is that the trial court is in a better position to
determine questions involving credibility having heard
the witnesses and having observed their deportment
and manner of testifying during the trial. 18

A: That is not true sir, because at that time Aurelia Article 315, par. 1(b) of the Revised Penal Code
Nadera is highly indebted to me in the amount of provides:
P140,000.00, so if I gave it to Nadera, I will be
Art. 315. Swindling (estafa). Any person who shall prejudice to the private respondent.
defraud another by any of the means mentioned
hereinbelow shall be punished by: WHEREFORE, the petition is DENIED and the Decision
of the Court of Appeals is hereby AFFIRMED.
xxx xxx xxx
Costs against petitioner.
(b) By misappropriating or converting, to the prejudice
of another, money, goods, or any other personal SO ORDERED.
property received by the offender in trust or on
commission, or for administration, or under any other Padilla, Bellosillo and Kapunan, JJ., concur.Vitug, J.,
obligation involving the duty to make delivery of or to concurs in the result.
return the same, even though such obligation be
totally or partially guaranteed by a bond; or by G.R. No. 114311 November 29, 1996
denying having received such money, goods, or other
property. COSMIC LUMBER CORPORATION, petitioner, vs.
COURT OF APPEAL and ISIDRO PEREZ,
xxx xxx xxx respondents.

The elements of estafa with abuse of confidence under

this subdivision are as follows. (1) That money, goods,
or other personal property be received by the offender BELLOSILLO, J.:
in trust, or on commission, or for administration, or
under any other obligation involving the duty to make
COSMIC LUMBER CORPORATION through its General
delivery of, or to return, the same; (2) That there be
Manager executed on 28 January 1985 a Special Power
misappropriation or conversion of such money or
of Attorney appointing Paz G. Villamil-Estrada as
property by the offender or denial on his part of such
attorney-in-fact —
receipt; (3) That such misappropriation or conversion
or denial is to the prejudice of another; and (4) That
. . . to initiate, institute and file any court action for the
there is a demand made by the offended party to the
ejectment of third persons and/or squatters of the
offender (Note: The 4th element is not necessary when
entire lot 9127 and 443 and covered by TCT Nos.
there is evidence of misappropriation of the goods by
37648 and 37649, for the said squatters to remove
the defendant) 19
their houses and vacate the premises in order that the
corporation may take material possession of the entire
All the elements of estafa under Article 315, Paragraph
lot, and for this purpose, to appear at the pre-trial
1(b) of the Revised Penal Code, are present in the case
conference and enter into any stipulation of facts
at bench. First, the receipt marked as Exhibit "A"
and/or compromise agreement so far as it shall protect
proves that petitioner Rosa Lim received the pieces of
the rights and interest of the corporation in the
jewelry in trust from Vicky Suarez to be sold on
aforementioned lots. 1
commission basis. Second, petitioner misappropriated
or converted the jewelry to her own use; and, third,
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of
such misappropriation obviously caused damage and
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, docketed
as Civil Case No. D-7750. 2
On 25 November 1985 Villamil-Estrada entered into a
Compromise Agreement with respondent Perez, the
terms of which follow:
1. That as per relocation sketch plan dated June 5,
1985 prepared by Engineer Rodolfo dela Cruz the area
at present occupied by defendant wherein his house is
located is 333 square meters on the easternmost part
of lot 443 and which portion has been occupied by
defendant for several years now;
2. That to buy peace said defendant pays unto the
plaintiff through herein attorney-in-fact the sum of
P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and
possession of the defendant by virtue of this
compromise agreement over said portion of 333
square m. of lot 443 which portion will be located on
the easternmost part as indicated in the sketch as
annex A;
4. Whatever expenses of subdivision, registration, and
other incidental expenses shall be shouldered by the
defendant. 3
On 27 November 1985 the "Compromise Agreement"
was approved by the trial court and judgment was
rendered in accordance therewith. 4
Although the decision became final and executory it
was not executed within the 5-year period from date of
its finality allegedly due to the failure of petitioner to
produce the owner's 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.
Thus on 25 January 1993 respondent filed a complaint
to revive the judgment, docketed as Civil Case No. D-
10459. 5
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 upon
which the trial court based its decision of 26 July 1993
in Civil Case No. D-7750. Forthwith, upon learning of
the fraudulent transaction, petitioner sought
annulment of the decision of the trial court before
respondent Court of Appeals 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 or divest the plaintiff of its
ownership over its real property or any portion thereof;
(b) the authority of the attorney-in-fact was confined to
the institution and filing of an ejectment case against
third persons/squatters on the property of the plaintiff,
and to cause their eviction therefrom; (c) while the
special power of attorney made mention of an
authority to enter into a compromise agreement, such
authority was in connection with, and limited to, the
eviction of third persons/squatters thereat, in order
that "the corporation may take material possession of
the entire lot;" (d) the amount of P26,640.00 alluded to
as alleged consideration of said agreement was never
received by the plaintiff; (e) the private defendant
acted in bad faith in. the execution of said agreement
knowing fully well the want of authority of the
attorney-in-fact to sell, encumber or dispose of the real
property of plaintiff; and, (f) the disposal of a corporate
property indispensably requires a Board Resolution of
its Directors, a fact which is wanting in said Civil Case
No. D-7750, and the General Manager is not the proper
officer to encumber a corporate property. 6
On 29 October 1993 respondent court dismissed the
complaint on the basis of its finding that not one of the
grounds for annulment, namely, lack of jurisdiction,
fraud or illegality was shown to exist. 7 It also denied
the motion for reconsideration filed by petitioner,
discoursing that the alleged nullity of the compromise
judgment on the ground that petitioner's attorney-in-
fact Villamil-Estrada was not authorized to sell the
subject propety may be raised as a defense in the
execution of the compromise judgment as it does not
bind petitioner, but not as a ground for annulment of
judgment because it does not affect the jurisdiction of
the trial court over the action nor does it amount to
extrinsic fraud. 8
Petitioner challenges this verdict. It argues that the
decision of the trial court is void because the
compromise agreement upon which it was based is
void. 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
merely empowered to enter into a compromise
agreement in the recovery suit she was authorized to
file against persons squatting on Lot No. 443, such
authority being expressly confined to the "ejectment
of third persons or squatters of . . . lot . . . (No.)
443 . . . 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 . . ."
We agree with petitioner. The authority granted
Villamil-Estrada under the special power of attorney
was explicit and exclusionary: for her to institute any
action in court to eject all persons found on Lots Nos.
9127 and 443 so that petitioner could take material
possession thereof, and for this purpose, to appear at
the pre-trial and 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. Neither can a conferment of the power to sell
be validly inferred from the specific authority "to enter
into a compromise agreement" because of the explicit
limitation fixed by the grantor that the compromise
entered into shall only be "so far as it shall protect the
rights and interest of the corporation in the
aforementioned lots." In the context of the specific
investiture of powers to Villamil-Estrada, 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.
When the sale of a piece of land or any interest
thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. 9
Thus the authority of an agent to execute a contract
for the sale of real estate must be conferred in writing
and must give him specific authority, either to conduct
the general business of the principal or to execute a
binding contract containing terms and conditions
which are in the contract he did execute. 10 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. 11 The express mandate
required by law to enable an appointee of an agency
(couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a
necessary ingredient of the act mentioned. 12 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. When there is any reasonable doubt that the
language so used conveys such power, no such
construction shall be given the document. 13
It is therefore clear that by selling to respondent Perez
a portion of petitioner's land through a compromise
agreement, Villamil-Estrada acted without or in
obvious authority. The sale ipso jure is consequently
void. So is the compromise agreement. This being the
case, the judgment based thereon is necessarily void.
Antipodal to the opinion expressed by respondent
court in resolving petitioner's motion for
reconsideration, the nullity of the settlement between
Villamil-Estrada and Perez impaired the jurisdiction of
the trial court to render its decision based on the
compromise agreement. In Alviar v. Court of First
Instance of La Union, 14 the Court held —
. . . this court does not hesitate to hold that the
judgment in question is null and void ab initio. It is not
binding upon and cannot be executed against the
petitioners. It is evident that the compromise upon
which the judgment was based was not subscribed by
them . . . Neither could Attorney Ortega bind them
validly in the compromise because he had no special
authority . . .
As the judgment in question is null and void ab initio, it
is evident that the court acquired no jurisdiction to
render it, much less to order the execution thereof . . .
. . . A judgment, which is null and void ab initio,
rendered by a court without jurisdiction to do so, is
without legal efficacy and may properly be impugned
in any proceeding by the party against whom it is
sought to be enforced . . .
15
This ruling was adopted in Jacinto v. Montesa, by Mr.
Justice J. B.L. Reyes, a much-respected authority on
civil law, where the Court declared that a judgment
based on a compromise entered into by an attorney
without specific authority from the client is void. Such
judgment may be impugned and its execution
restrained in any proceeding by the party against
whom it is sought to be enforced. The Court also
observed that a defendant against whom a judgment
based on a compromise is sought to be enforced may
file a petition for certiorari to quash the execution. He
could not move to have the compromise set aside and
then appeal from the order of denial since he was not
a party to the compromise. Thus it would appear that
the obiter of the appellate court that the alleged nullity
of the compromise agreement should be raised as a
defense against its enforcement is not legally feasible.
Petitioner could not be in a position to question the
compromise agreement in the action to revive the
compromise judgment since it was never privy to such
agreement. Villamil-Estrada who signed the
compromise agreement may have been the attorney-
in-fact but she could not legally bind petitioner thereto
as she was not entrusted with a special authority to
sell the land, as required in Art. 1878, par. (5), of the
Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a
party may now petition the Court of Appeals to annul
and set aside judgments of Regional Trial Courts. 16
"Thus, the Intermediate Appellant Court (now Court of
Appeals) shall exercise . . . (2) Exclusive original
jurisdiction over action for annulment of judgments of
the Regional Trial Courts . . ." However, certain
requisites must first be established before a final and
executory judgment can be the subject of an action for
annulment. It must either be void for want of
jurisdiction or for lack of due process of law, or it has
been obtained by fraud. 17
Conformably with law and the above-cited authorities,
the petition to annul the decision of the trial court in
Civil Case No. D-7750 before the Court of Appeals was
proper. Emanating as it did from a void compromise
agreement, the trial court had no jurisdiction to render
a judgment based thereon. 18
It would also appear, and quite contrary to the finding
of the appellate court, that the highly reprehensible
conduct of attorney-in-fact Villamil-Estrada in Civil
Case No. 7750 constituted an extrinsic or collateral
fraud by reason of which the judgment rendered
thereon should have been struck down. Not all the
legal semantics in the world can becloud the
unassailable fact that petitioner was deceived and
betrayed by its attorney-in-fact, Villamil-Estrada
deliberately concealed from petitioner, her principal,
that a compromise agreement had been forged with
the end-result that a portion of petitioner's property
was sold to the deforciant, literally for a song. Thus
completely kept unaware of its agent's artifice,
petitioner was not accorded even a fighting chance to
repudiate the settlement so much so that the
judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of
fraudulent acts within too narrow limits. Fraud may
assume different shapes and be committed in as many
different ways and here lies the danger of attempting
to define fraud. For man in his ingenuity and fertile
imagination will always contrive new schemes to fool
the unwary.
There is extrinsic fraud within the meaning of Sec. 9,
par. (2), of B.P. Blg. 129, where it is one the effect of
which prevents a party from hearing a trial, or real
contest, or from presenting all of his case to the court,
or where it operates upon matters, not pertaining to
the judgment itself, but to the manner in which it was
procured so that there is not a fair submission of the
controversy. In other words, 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. 19 Fraud
is extrinsic where the unsuccessful party has been
prevented from exhibiting fully his case, by fraud or
deception practiced on him by his opponent, as by
keeping him away from court, a false promise of a
compromise; or 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; these and
similar cases which show that there has never been a
real contest in the trial or hearing of the case are
reasons for which a new suit may be sustained to set
aside and annul the former judgment and open the
case for a new and fair hearing. 20
It may be argued that petitioner knew of the
compromise agreement since the principal is
chargeable with and bound by the knowledge of or
notice to his agent received while the agent was acting
as such. But the general rule is intended to protect
those who exercise good faith and not as a shield for
unfair dealing. Hence there is a well-established
exception to the general rule as where the conduct
and dealings of the agent are such as to raise a clear
presumption that he will not communicate to the
principal the facts in controversy. 21 The logical reason
for this exception is that 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. Verily, when an
agent is engaged in the perpetration of a fraud upon
his principal for his own exclusive benefit, he is not
really acting for the principal but is really acting for
himself, entirely outside the scope of his agency. 22
Indeed, the basic tenets of agency rest on the highest
considerations of justice, equity and fair play, and an
agent will not be permitted to pervert his authority to
his own personal advantage, and his act in secret
hostility to the interests of his principal transcends the
power afforded him. 23
WHEREFORE, the petition is GRANTED. The decision
and resolution of respondent Court of Appeals dated
29 October 1993 and 10 March 1994, respectively, as
well as the decision of the Regional Trial Court of
Dagupan City in Civil Case No. D-7750 dated 27
November 1985, are NULLIFIED and SET ASIDE. The
"Compromise Agreement" entered into between
Attorney-in-fact Paz G. Villamil-Estrada and respondent
Isidro Perez is declared VOID. This is without prejudice
to the right of petitioner to pursue its complaint
against private respondent Isidro Perez in Civil Case
No. D-7750 for the recovery of possession of a portion
of Lot No. 443.
SO ORDERED.
Padilla, Vitug and Hermosisima, Jr., JJ., concur.
G.R. No. 129459 September 29, 1998
SAN JUAN STRUCTURAL AND STEEL
FABRICATORS, INC., petitioner, vs.COURT OF
APPEALS, MOTORICH SALES CORPORATION,
NENITA LEE GRUENBERG, ACL DEVELOPMENT
CORP. and JNM REALTY AND DEVELOPMENT
CORP., respondents.
PANGANIBAN, J.:
May corporate treasurer, by herself and without any
authorization from he board of directors, validly sell a
parcel of land owned by the corporation?. May the veil
of corporate fiction be pierced on the mere ground
that almost all of the shares of stock of the corporation
are owned by said treasurer and her husband?
The Case
These questions are answered in the negative by this
Court in resolving the Petition for Review on Certiorari
before us, assailing the March 18, 1997 Decision 1 of
the Court of Appeals 2 in CA GR CV No. 46801 which, in
turn, modified the July 18, 1994 Decision of the
Regional Trial Court of Makati, Metro Manila, Branch 63
3
in Civil Case No. 89-3511. The RTC dismissed both
the Complaint and the Counterclaim filed by the
parties. On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the appealed
decision is AFFIRMED WITH MODIFICATION ordering
defendant-appellee Nenita Lee Gruenberg to REFUND
or return to plaintiff-appellant the downpayment of
P100,000.00 which she received from plaintiff-
appellant. There is no pronouncement as to costs. 4
The petition also challenges the June 10, 1997 CA
Resolution denying reconsideration. 5
The Facts
The facts as found by the Court of Appeals are as
follows:
Plaintiff-appellant San Juan Structural and Steel
Fabricators, Inc.'s amended complaint alleged that on
14 February 1989, plaintiff-appellant entered into an
agreement with defendant-appellee Motorich Sales
Corporation for the transfer to it of a parcel of land
identified as Lot 30, Block 1 of the Acropolis Greens
Subdivision located in the District of Murphy, Quezon
City. Metro Manila, containing an area of Four Hundred
Fourteen (414) square meters, covered by TCT No.
(362909) 2876: that as stipulated in the Agreement of
14 February 1989, plaintiff-appellant paid the
downpayment in the sum of One Hundred Thousand
(P100,000.00) Pesos, the balance to be paid on or
before March 2, 1989; that on March 1, 1989. Mr.
Andres T. Co, president of plaintiff-appellant
corporation, wrote a letter to defendant-appellee
Motorich Sales Corporation requesting for a
computation of the balance to be paid: that said letter
was coursed through defendant-appellee's broker.
Linda Aduca, who wrote the computation of the
balance: that on March 2, 1989, plaintiff-appellant was
ready with the amount corresponding to the balance,
covered by Metrobank Cashier's Check No. 004223,
payable to defendant-appellee Motorich Sales
Corporation; that plaintiff-appellant and defendant-
appellee Motorich Sales Corporation were supposed to
meet in the office of plaintiff-appellant but defendant-
appellee's treasurer, Nenita Lee Gruenberg, did not
appear; that defendant-appellee Motorich Sales
Corporation despite repeated demands and in utter
disregard of its commitments had refused to execute
the Transfer of Rights/Deed of Assignment which is
necessary to transfer the certificate of title; that
defendant ACL Development Corp. is impleaded as a
necessary party since Transfer Certificate of Title No.
(362909) 2876 is still in the name of said defendant;
while defendant JNM Realty & Development Corp. is
likewise impleaded as a necessary party in view of the
fact that it is the transferor of right in favor of
defendant-appellee Motorich Sales Corporation: that
on April 6, 1989, defendant ACL Development
Corporation and Motorich Sales Corporation entered
into a Deed of Absolute Sale whereby the former
transferred to the latter the subject property; that by
reason of said transfer, the Registry of Deeds of
Quezon City issued a new title in the name of Motorich
Sales Corporation, represented by defendant-appellee
Nenita Lee Gruenberg and Reynaldo L. Gruenberg,
under Transfer Certificate of Title No. 3571; that as a
result of defendants-appellees Nenita Lee Gruenberg
and Motorich Sales Corporation's bad faith in refusing
to execute a formal Transfer of Rights/Deed of
Assignment, plaintiff-appellant suffered moral and
nominal damages which may be assessed against
defendants-appellees in the sum of Five Hundred
Thousand (500,000.00) Pesos; that as a result of
defendants-appellees Nenita Lee Gruenberg and
Motorich Sales Corporation's unjustified and
unwarranted failure to execute the required Transfer
of Rights/Deed of Assignment or formal deed of sale in
favor of plaintiff-appellant, defendants-appellees
should be assessed exemplary damages in the sum of
One Hundred Thousand (P100,000.00) Pesos; that by
reason of defendants-appellees' bad faith in refusing to
execute a Transfer of Rights/Deed of Assignment in
favor of plaintiff-appellant, the latter lost the
opportunity to construct a residential building in the
sum of One Hundred Thousand (P100,000.00) Pesos;
and that as a consequence of defendants-appellees
Nenita Lee Gruenberg and Motorich Sales
Corporation's bad faith in refusing to execute a deed of
sale in favor of plaintiff-appellant, it has been
constrained to obtain the services of counsel at an
agreed fee of One Hundred Thousand (P100,000.00)
Pesos plus appearance fee for every appearance in
court hearings.
In its answer, defendants-appellees Motorich Sales
Corporation and Nenita Lee Gruenberg interposed as
affirmative defense that the President and Chairman of
Motorich did not sign the agreement adverted to in
par. 3 of the amended complaint; that Mrs.
Gruenberg's signature on the agreement (ref: par. 3 of
Amended Complaint) is inadequate to bind Motorich.
The other signature, that of Mr. Reynaldo Gruenberg,
President and Chairman of Motorich, is required: that
plaintiff knew this from the very beginning as it was
presented a copy of the Transfer of Rights (Annex B of
amended complaint) at the time the Agreement
(Annex B of amended complaint) was signed; that
plaintiff-appellant itself drafted the Agreement and
insisted that Mrs. Gruenberg accept the P100,000.00
as earnest money; that granting, without admitting,
the enforceability of the agreement, plaintiff-appellant
nonetheless failed to pay in legal tender within the
stipulated period (up to March 2, 1989); that it was the
understanding between Mrs. Gruenberg and plaintiff-
appellant that the Transfer of Rights/Deed of
Assignment will be signed only upon receipt of cash
payment; thus they agreed that if the payment be in
check, they will meet at a bank designated by plaintiff-
appellant where they will encash the check and sign
the Transfer of Rights/Deed. However, plaintiff-
appellant informed Mrs. Gruenberg of the alleged
availability of the check, by phone, only after banking
hours.
On the basis of the evidence, the court a quo rendered
the judgment appealed from[,] dismissing plaintiff-
appellant's complaint, ruling that:
The issue to be resolved is: whether plaintiff had the In the light of the foregoing, the Court hereby renders
right to compel defendants to execute a deed of judgment DISMISSING the complaint at instance for
absolute sale in accordance with the agreement of lack of merit.
February 14, 1989: and if so, whether plaintiff is
entitled to damage. "Defendants" counterclaim is also DISMISSED for lack
of basis. (Decision, pp. 7-8; Rollo, pp. 34-35)
As to the first question, there is no evidence to show
that defendant Nenita Lee Gruenberg was indeed For clarity, the Agreement dated February 14, 1989 is
authorized by defendant corporation. Motorich Sales, reproduced hereunder:
to dispose of that property covered by T.C.T. No.
(362909) 2876. Since the property is clearly owned by AGREEMENT
the corporation. Motorich Sales, then its disposition
should be governed by the requirement laid down in KNOW ALL MEN BY THESE PRESENTS:
Sec. 40. of the Corporation Code of the Philippines, to
wit: This Agreement, made and entered into by and
between:
Sec. 40, Sale or other disposition of assets. Subject to
the provisions of existing laws on illegal combination MOTORICH SALES CORPORATION, a corporation duly
and monopolies, a corporation may by a majority vote organized and existing under and by virtue of
of its board of directors . . . sell, lease, exchange, Philippine Laws, with principal office address at 5510
mortgage, pledge or otherwise dispose of all or South Super Hi-way cor. Balderama St., Pio del Pilar.
substantially all of its property and assets including its Makati, Metro Manila, represented herein by its
goodwill . . . when authorized by the vote of the Treasurer, NENITA LEE GRUENBERG, hereinafter
stockholders representing at least two third (2/3) of referred to as the TRANSFEROR;
the outstanding capital stock . . .
— and —
No such vote was obtained by defendant Nenita Lee
Gruenberg for that proposed sale[;] neither was there
SAN JUAN STRUCTURAL & STEEL FABRICATORS, a
evidence to show that the supposed transaction was
corporation duly organized and existing under and by
ratified by the corporation. Plaintiff should have been
virtue of the laws of the Philippines, with principal
on the look out under these circumstances. More so,
office address at Sumulong Highway, Barrio
plaintiff himself [owns] several corporations (tsn dated
Mambungan, Antipolo, Rizal, represented herein by its
August 16, 1993, p. 3) which makes him
President, ANDRES T. CO, hereinafter referred to as
knowledgeable on corporation matters.
the TRANSFEREE.
Regarding the question of damages, the Court
WITNESSETH, That:
likewise, does not find substantial evidence to hold
defendant Nenita Lee Gruenberg liable considering
WHEREAS, the TRANSFEROR is the owner of a parcel of
that she did not in anyway misrepresent herself to be
land identified as Lot 30 Block 1 of the ACROPOLIS
authorized by the corporation to sell the property to
GREENS SUBDIVISION located at the District of
plaintiff (tsn dated September 27, 1991, p. 8).
Murphy, Quezon City, Metro Manila, containing an area
of FOUR HUNDRED FOURTEEN (414) SQUARE METERS, IN WITNESS WHEREOF, the parties have hereunto set
covered by a TRANSFER OF RIGHTS between JNM their hands this 14th day of February, 1989 at
Realty & Dev. Corp. as the Transferor and Motorich Greenhills, San Juan, Metro Manila, Philippines.
Sales Corp. as the Transferee;
MOTORICH SALES CORPORATION SAN JUAN
NOW, THEREFORE, for and in consideration of the STRUCTURAL & STEEL FABRICATORS
foregoing premises, the parties have agreed as
follows: TRANSFEROR TRANSFEREE

1. That the purchase price shall be at FIVE THOUSAND [SGD.] [SGD.]

TWO HUNDRED PESOS (P5,200.00) per square meter;
subject to the following terms: By. NENITA LEE GRUENBERG By: ANDRES T. CO

a. Earnest money amounting to ONE HUNDRED Treasurer President

THOUSAND PESOS (P100,000.00), will be paid upon
the execution of this agreement and shall form part of Signed In the presence of:
the total purchase price;
[SGD.] [SGD.]
b. Balance shall be payable on or before March 2,
1989; ————————————— ——————————— 6

2. That the monthly amortization for the month of In its recourse before the Court of Appeals, petitioner
February 1989 shall be for the account of the insisted:
Transferor; and that the monthly amortization starting
March 21, 1989 shall be for the account of the
1. Appellant is entitled to compel the appellees to
Transferee;
execute a Deed of Absolute Sale in accordance with
the Agreement of February 14, 1989,
The transferor warrants that he [sic] is the lawful
owner of the above-described property and that there 7
2. Plaintiff is entitled to damages.
[are] no existing liens and/or encumbrances of
whatsoever nature;
As stated earlier, the Court of Appeals debunked
petitioner's arguments and affirmed the Decision of
In case of failure by the Transferee to pay the balance
the RTC with the modification that Respondent Nenita
on the date specified on 1, (b), the earnest money
Lee Gruenberg was ordered to refund P100,000 to
shall be forfeited in favor of the Transferor.
petitioner, the amount remitted as "downpayment" or
"earnest money." Hence, this petition before us. 8
That upon full payment of the balance, the
TRANSFEROR agrees to execute a TRANSFER OF
The Issues
RIGHTS/DEED OF ASSIGNMENT in favor of the
TRANSFEREE.
Before this Court, petitioner raises the following issues:
I. Whether or not the doctrine of piercing the veil of
corporate fiction is applicable in the instant case
II. Whether or not the appellate court may consider
matters which the parties failed to raise in the lower
court
III. Whether or not there is a valid and enforceable
contract between the petitioner and the respondent
corporation
IV. Whether or not the Court of Appeals erred in
holding that there is a valid correction/substitution of
answer in the transcript of stenographic note[s].
V. Whether or not respondents are liable for damages
and attorney's fees 9
The Court synthesized the foregoing and will thus
discuss them seriatim as follows:
1. Was there a valid contract of sale between
petitioner and Motorich?
2. May the doctrine of piercing the veil of corporate
fiction be applied to Motorich?
3. Is the alleged alteration of Gruenberg's testimony as
recorded in the transcript of stenographic notes
material to the disposition of this case?
4. Are respondents liable for damages and attorney's
fees?
The Court's Ruling
The petition is devoid of merit.
First Issue: Validity of Agreement
Petitioner San Juan Structural and Steel Fabricators,
Inc. alleges that on February 14, 1989, it entered
through its president, Andres Co, into the disputed
Agreement with Respondent Motorich Sales
Corporation, which was in turn allegedly represented
by its treasurer, Nenita Lee Gruenberg. Petitioner
insists that "[w]hen Gruenberg and Co affixed their
signatures on the contract they both consented to be
bound by the terms thereof." Ergo, petitioner contends
that the contract is binding on the two corporations.
We do not agree.
True, Gruenberg and Co signed on February 14, 1989,
the Agreement, according to which a lot owned by
Motorich Sales Corporation was purportedly sold. Such
contract, however, cannot bind Motorich, because it
never authorized or ratified such sale.
A corporation is a juridical person separate and distinct
from its stockholders or members. Accordingly, the
property of the corporation is not the property of its
stockholders or members and may not be sold by the
stockholders or members without express
authorization from the corporation's board of directors.
10
Section 23 of BP 68, otherwise known as the
Corporation Code of the Philippines, provides;
Sec. 23. The Board of Directors or Trustees. — Unless
otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be
exercised, all business conducted and all property of
such corporations controlled and held by the board of
directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold
office for one (1) year and until their successors are
elected and qualified.
Indubitably, a corporation may act only through its
board of directors or, when authorized either by its
bylaws or by its board resolution, through its officers or
agents in the normal course of business. The general
principles of agency govern the relation between the
corporation and its officers or agents, subject to the
articles of incorporation, bylaws, or relevant provisions
of law. 11 Thus, this Court has held that "a corporate
officer or agent may represent and bind the
corporation in transactions with third persons to the
extent that the authority to do so has been conferred
upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the
usual course of the particular business, are incidental
to, or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has
caused persons dealing with the officer or agent to
believe that it has conferred." 12
Furthermore, the Court has also recognized the rule
that "persons dealing with an assumed agent, whether
the assumed agency be a general or special one
bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also
the nature and extent of authority, and in case either
is controverted, the burden of proof is upon them to
establish it (Harry Keeler v. Rodriguez, 4 Phil. 19)." 13
Unless duly authorized, a treasurer, whose powers are
limited, cannot bind the corporation in a sale of its
assets. 14
In the case at bar, Respondent Motorich categorically
denies that it ever authorized Nenita Gruenberg, its
treasurer, to sell the subject parcel of land. 15
Consequently, petitioner had the burden of proving
that Nenita Gruenberg was in fact authorized to
represent and bind Motorich in the transaction.
Petitioner failed to discharge this burden. Its offer of
evidence before the trial court contained no proof of
such authority. 16 It has not shown any provision of
said respondent's articles of incorporation, bylaws or
board resolution to prove that Nenita Gruenberg
possessed such power.
That Nenita Gruenberg is the treasurer of Motorich
does not free petitioner from the responsibility of
ascertaining the extent of her authority to represent
the corporation. Petitioner cannot assume that she, by
virtue of her position, was authorized to sell the
property of the corporation. Selling is obviously foreign
to a corporate treasurer's function, which generally
has been described as "to receive and keep the funds
of the corporation, and to disburse them in accordance
with the authority given him by the board or the
properly authorized officers." 17
Neither was such real estate sale shown to be a
normal business activity of Motorich. The primary
purpose of Motorich is marketing, distribution, export
and import in relation to a general merchandising
business. 18 Unmistakably, its treasurer is not cloaked
with actual or apparent authority to buy or sell real
property, an activity which falls way beyond the scope
of her general authority.
Art. 1874 and 1878 of the Civil Code of the Philippines
provides:
Art. 1874. 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.
Art. 1878. Special powers of attorney are necessary in
the following case:
xxx xxx xxx
(5) To enter any contract by which the ownership of an
immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
xxx xxx xxx.
Petitioner further contends that Respondent Motorich
has ratified said contract of sale because of its
"acceptance of benefits," as evidenced by the receipt
issued by Respondent Gruenberg. 19 Petitioner is
clutching at straws.
As a general rule, the acts of corporate officers within
the scope of their authority are binding on the
corporation. But when these officers exceed their
authority, their actions "cannot bind the corporation,
unless it has ratified such acts or is estopped from
disclaiming them." 20
In this case, there is a clear absence of proof that
Motorich ever authorized Nenita Gruenberg, or made it
appear to any third person that she had the authority,
to sell its land or to receive the earnest money. Neither
was there any proof that Motorich ratified, expressly or
impliedly, the contract. Petitioner rests its argument
on the receipt which, however, does not prove the fact
of ratification. The document is a hand-written one, not
a corporate receipt, and it bears only Nenita
Gruenberg's signature. Certainly, this document alone
does not prove that her acts were authorized or
ratified by Motorich.
Art. 1318 of the Civil Code lists the requisites of a valid
and perfected contract: "(1) consent of the contracting
parties; (2) object certain which is the subject matter
of the contract; (3) cause of the obligation which is
established." As found by the trial court 21 and affirmed
by the Court of Appeals, 22 there is no evidence that
Gruenberg was authorized to enter into the contract of
sale, or that the said contract was ratified by Motorich.
This factual finding of the two courts is binding on this
Court. 23 As the consent of the seller was not obtained,
no contract to bind the obligor was perfected.
Therefore, there can be no valid contract of sale
between petitioner and Motorich.
Because Motorich had never given a written
authorization to Respondent Gruenberg to sell its
parcel of land, we hold that the February 14, 1989
Agreement entered into by the latter with petitioner is
void under Article 1874 of the Civil Code. Being
inexistent and void from the beginning, said contract
cannot be ratified. 24
Second Issue:Piercing the Corporate Veil Not Justified
Petitioner also argues that the veil of corporate fiction
of Motorich should be pierced, because the latter is a
close corporation. Since "Spouses Reynaldo L.
Gruenberg and Nenita R. Gruenberg owned all or
almost all or 99.866% to be accurate, of the
subscribed capital stock" 25 of Motorich, petitioner
argues that Gruenberg needed no authorization from
the board to enter into the subject contract. 26 It adds
that, being solely owned by the Spouses Gruenberg,
the company can treated as a close corporation which
can be bound by the acts of its principal stockholder
who needs no specific authority. The Court is not
persuaded.
First, petitioner itself concedes having raised the issue
belatedly, 27 not having done so during the trial, but
only when it filed its sur-rejoinder before the Court of
Appeals. 28 Thus, this Court cannot entertain said issue
at this late stage of the proceedings. It is well-settled
the points of law, theories and arguments not brought
to the attention of the trial court need not be, and
ordinarily will not be, considered by a reviewing court,
as they cannot be raised for the first time on appeal. 29
Allowing petitioner to change horses in midstream, as
it were, is to run roughshod over the basic principles of
fair play, justice and due process.
Second, even if the above mentioned argument were
to be addressed at this time, the Court still finds no
reason to uphold it. True, one of the advantages of a
corporate form of business organization is the
limitation of an investor's liability to the amount of the
investment. 30 This feature flows from the legal theory
that a corporate entity is separate and distinct from its
stockholders. However, the statutorily granted
privilege of a corporate veil may be used only for
legitimate purposes. 31 On equitable considerations,
the veil can be disregarded when it is utilized as a
shield to commit fraud, illegality or inequity; defeat
public convenience; confuse legitimate issues; or serve
as a mere alter ego or business conduit of a person or
an instrumentality, agency or adjunct of another
corporation. 32
Thus, the Court has consistently ruled that "[w]hen the
fiction is used as a means of perpetrating a fraud or an
illegal act or as vehicle for the evasion of an existing
obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally
the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from
the members or stockholders who compose it will be
lifted to allow for its consideration merely as an
aggregation of individuals." 33
We stress that the corporate fiction should be set aside
when it becomes a shield against liability for fraud,
illegality or inequity committed on third persons. The
question of piercing the veil of corporate fiction is
essentially, then, a matter of proof. In the present
case, however, the Court finds no reason to pierce the
corporate veil of Respondent Motorich. Petitioner
utterly failed to establish that said corporation was
formed, or that it is operated, for the purpose of
shielding any alleged fraudulent or illegal activities of
its officers or stockholders; or that the said veil was
used to conceal fraud, illegality or inequity at the
expense of third persons like petitioner.
Petitioner claims that Motorich is a close corporation.
We rule that it is not. Section 96 of the Corporation
Code defines a close corporation as follows:
Sec. 96. Definition and Applicability of Title. — A close
corporation, within the meaning of this Code, is one
whose articles of incorporation provide that: (1) All of
the corporation's issued stock of all classes, exclusive
of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding
twenty (20); (2) All of the issued stock of all classes
shall be subject to one or more specified restrictions
on transfer permitted by this Title; and (3) The
corporation shall not list in any stock exchange or
make any public offering of any of its stock of any
class. Notwithstanding the foregoing, a corporation
shall be deemed not a close corporation when at least
two-thirds (2/3) of its voting stock or voting rights is
owned or controlled by another corporation which is
not a close corporation within the meaning of this
Code. . . . .
The articles of incorporation 34 of Motorich Sales
Corporation does not contain any provision stating that
(1) the number of stockholders shall not exceed 20, or
(2) a preemption of shares is restricted in favor of any
stockholder or of the corporation, or (3) listing its
stocks in any stock exchange or making a public
offering of such stocks is prohibited. From its articles,
it is clear that Respondent Motorich is not a close
corporation. 35 Motorich does not become one either,
just because Spouses Reynaldo and Nenita Gruenberg
owned 99.866% of its subscribed capital stock. The
"[m]ere ownership by a single stockholder or by
another corporation of all or capital stock of a
corporation is not of itself sufficient ground for
disregarding the separate corporate personalities." 36
So, too, a narrow distribution of ownership does not,
by itself, make a close corporation.
Petitioner cites Manuel R. Dulay Enterprises, Inc. v.
Court of Appeals 37 wherein the Court ruled that ". . .
petitioner corporation is classified as a close
corporation and, consequently, a board resolution
authorizing the sale or mortgage of the subject
property is not necessary to bind the corporation for
the action of its president." 38 But the factual milieu in
Dulay is not on all fours with the present case. In
Dulay, the sale of real property was contracted by the
president of a close corporation with the knowledge
and acquiescence of its board of directors. 39 In the
present case, Motorich is not a close corporation, as
previously discussed, and the agreement was entered
into by the corporate treasurer without the knowledge
of the board of directors.
The Court is not unaware that there are exceptional
cases where "an action by a director, who singly is the
controlling stockholder, may be considered as a
binding corporate act and a board action as nothing
more than a mere formality." 40 The present case,
however, is not one of them.
As stated by petitioner, Spouses Reynaldo and Nenita
Gruenberg own "almost 99.866%" of Respondent
Motorich. 41 Since Nenita is not the sole controlling
stockholder of Motorich, the aforementioned exception
does not apply. Granting arguendo that the corporate
veil of Motorich is to be disregarded, the subject parcel
of land would then be treated as conjugal property of
Spouses Gruenberg, because the same was acquired
during their marriage. There being no indication that
said spouses, who appear to have been married before
the effectivity of the Family Code, have agreed to a
different property regime, their property relations
would be governed by conjugal partnership of gains. 42
As a consequence, Nenita Gruenberg could not have
effected a sale of the subject lot because "[t]here is no
co-ownership between the spouses in the properties of
the conjugal partnership of gains. Hence, neither
spouse can alienate in favor of another his or interest
in the partnership or in any property belonging to it;
neither spouse can ask for a partition of the properties
before the partnership has been legally dissolved." 43
Assuming further, for the sake of argument, that the
spouses' property regime is the absolute community of
property, the sale would still be invalid. Under this
regime, "alienation of community property must have
the written consent of the other spouse or he authority
of the court without which the disposition or
encumbrance is void." 44 Both requirements are
manifestly absent in the instant case.
Third Issue: Challenged Portion of TSN Immaterial
Petitioner calls our attention to the following excerpt of
the transcript of stenographic notes (TSN):
Q Did you ever represent to Mr. Co that you were
authorized by the corporation to sell the property?
A Yes, sir. 45
Petitioner claims that the answer "Yes" was crossed
out, and, in its place was written a "No" with an initial
scribbled above it. 46 This, however, is insufficient to
prove that Nenita Gruenberg was authorized to
represent Respondent Motorich in the sale of its
immovable property. Said excerpt be understood in
the context of her whole testimony. During her cross-
examination. Respondent Gruenberg testified:
Q So, you signed in your capacity as the treasurer?
[A] Yes, sir.
Q Even then you kn[e]w all along that you [were] not
authorized?
A Yes, sir.
Q You stated on direct examination that you did not
represent that you were authorized to sell the
property?
A Yes, sir.
Q But you also did not say that you were not
authorized to sell the property, you did not tell that to
Mr. Co, is that correct?
A That was not asked of me.
Q Yes, just answer it.
A I just told them that I was the treasurer of the
corporation and it [was] also the president who [was]
also authorized to sign on behalf of the corporation.
Q You did not say that you were not authorized nor did
you say that you were authorized?
A Mr. Co was very interested to purchase the property
and he offered to put up a P100,000.00 earnest money
at that time. That was our first meeting. 47
Clearly then, Nenita Gruenberg did not testify that
Motorich had authorized her to sell its property. On the
other hand, her testimony demonstrates that the
president of Petitioner Corporation, in his great desire
to buy the property, threw caution to the wind by
offering and paying the earnest money without first
verifying Gruenberg's authority to sell the lot.
Fourth Issue:Damages and Attorney's Fees
Finally, petitioner prays for damages and attorney's
fees, alleging that "[i]n an utter display of malice and
bad faith, respondents attempted and succeeded in
impressing on the trial court and [the] Court of Appeals
that Gruenberg did not represent herself as authorized
by Respondent Motorich despite the receipt issued by
the former specifically indicating that she was signing
on behalf of Motorich Sales Corporation. Respondent
Motorich likewise acted in bad faith when it claimed it
did not authorize Respondent Gruenberg and that the
contract [was] not binding, [insofar] as it [was]
concerned, despite receipt and enjoyment of the
proceeds of Gruenberg's act." 48 Assuming that
Respondent Motorich was not a party to the alleged
fraud, petitioner maintains that Respondent Gruenberg
should be held liable because she "acted fraudulently
and in bad faith [in] representing herself as duly
authorized by [R]espondent [C]orporation." 49
As already stated, we sustain the findings of both the
trial and the appellate courts that the foregoing
allegations lack factual bases. Hence, an award of
damages or attorney's fees cannot be justified. The
amount paid as "earnest money" was not proven to
have redounded to the benefit of Respondent
Motorich. Petitioner claims that said amount was
deposited to the account of Respondent Motorich,
because "it was deposited with the account of Aren
Commercial c/o Motorich Sales Corporation." 50
Respondent Gruenberg, however, disputes the
allegations of petitioner. She testified as follows:
Q You voluntarily accepted the P100,000.00, as a
matter of fact, that was encashed, the check was
encashed.
A Yes. sir, the check was paid in my name and I
deposit[ed] it.
Q In your account?
51
A Yes, sir.
In any event, Gruenberg offered to return the amount
to petitioner ". . . since the sale did not push through."
52
Moreover, we note that Andres Co is not a neophyte in
the world of corporate business. He has been the
president of Petitioner Corporation for more than ten
years and has also served as chief executive of two
other corporate entities. 53 Co cannot feign ignorance
of the scope of the authority of a corporate treasurer
such as Gruenberg. Neither can he be oblivious to his
duty to ascertain the scope of Gruenberg's
authorization to enter into a contract to sell a parcel of
land belonging to Motorich.
Indeed, petitioner's claim of fraud and bad faith is
unsubstantiated and fails to persuade the Court.
Indubitably, petitioner appears to be the victim of its
own officer's negligence in entering into a contract
with and paying an unauthorized officer of another
corporation.
As correctly ruled by the Court of Appeals, however,
Nenita Gruenberg should be ordered to return to
petitioner the amount she received as earnest money,
as "no one shall enrich himself at the expense of
another." 54 a principle embodied in Article 2154 of
Civil Code. 55 Although there was no binding relation
between them, petitioner paid Gruenberg on the
mistaken belief that she had the authority to sell the
property of Motorich. 56 Article 2155 of Civil Code
provides that "[p]ayment by reason of a mistake in the
contruction or application of a difficult question of law
may come within the scope of the preceding article."
WHEREFORE, the petition is hereby DENIED and the
assailed Decision is AFFIRMED.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ.,
concur.
Footnotes
G.R. No. 129103 September 3, 1999
CLAUDIO DELOS REYES and LYDIA DELOS REYES,
petitioners, vs.THE HON. COURT OF APPEALS and
DALUYONG GABRIEL, substituted by his heirs,
namely: MARIA LUISA G. ESTEBAN, MARIA RITA
G. BARTOLOME & RENATO GABRIEL, respondents.
GONZAGA-REYES, J.:
In this petition for review on certiorari, petitioners seek
to set aside the Decision 1 of the Court of Appeals 2 in
CA-G.R. CV No. 36955 reversing the consolidated
Decision 3 of the Regional Trial Court, Branch I, Tagum,
Davao del Norte in Civil Case Nos. 2326 and 2327.
This petition was originally filed with the Court on June
16, 1997. In a Resolution (of the Third Division) dated
October 13, 1997, 4 the petition was denied for failure
to show that the respondent Court of Appeals
committed any reversible error. However, the motion
for reconsideration filed by petitioners on November
14, 1997 was granted by the Court in its Resolution
dated December 03, 1997 5 and the petition was
reinstated.
The antecedents are:
1. Private respondent Daluyong Gabriel, (who died on
September 14, 1995 and was substituted herein by his
children RENATO GABRIEL, MARIA LUISA B. ESTEBAN
and MARIA RITA G. BARTOLOME) was the registered
owner under Transfer Certificate of Title No. T-17932
of the Registry of Deeds of Tagum, Davao del Norte of
a 5,010 square meter parcel of land situated in Barrio
Magugpo, Tagum, Davao del Norte, 6 having acquired
the same by hereditary succession sometime in 1974
as one of the children and heirs of the late Maximo
Gabriel.
2. Because Daluyong Gabriel together with his family
was then residing in Mandaluyong, Metro Manila, his
sister Maria Rita Gabriel de Rey acted as administratrix
of the said parcel of land and took charge of collecting
the rentals for those portions which have been leased
to certain tenants/lessees. One of these lessees is
LYDIA DE LOS REYES who by virtue of a Contract of
Lease executed on June 21, 1985 by and between
Maria Rita G. de Rey as lessor and Lydia de los Reyes
as lessee, leased a portion of One Hundred Seventy Six
(176) square meters for a term of one year beginning
June 15, 1985 renewable upon agreement of the
parties at the rental rate of Two Hundred (P200.00)
pesos, per month. 7
3. Sometime in 1985 Daluyong Gabriel sent his son
Renato Gabriel to Tagum reportedly with instructions
to take over from Maria Rita G. de Rey as
administrator of the said parcel of land. Upon
agreement of the parties, the June 21, 1985 Contract
of Lease covering the one hundred seventy-six square
meter portion of land was novated and replaced by a
Contract of Lease executed on September 26, 1985 by
and between RENATO GABRIEL as Lessor and Lydia de
los Reyes as Lessee. 8 The term of the lease was
changed to six (6) years from and after June 15, 1985
or up to June 15, 1991; receipt of the payment in
advance of the total rental amount of Fourteen
Thousand Four Hundred (P14,400.00) Pesos was
acknowledged by Lessor Renato Gabriel.
4. Sometime in November 1987, during the effectivity
of the lease contract, Lydia de los Reyes verbally
agreed to buy two hundred fifty (250) square meters
(including the 176 square meters leased by her), and
thereafter an additional fifty (50) square meters or a
total of three hundred (300) square meters of
Daluyong Gabriel's registered property, at three
hundred pesos (P300.00) per square meter or for a
total amount of P90,000.00. Receipt of the payment of
the purchase price made in several installments by
Lydia de los Reyes was acknowledged by Renato
Gabriel as evidenced by official receipts issued and
signed by him dated November 25, 1987, November
26, 1987, January 8, 1988, February 10, 1988,
February 15, 1988 and February 29, 1988 all bearing
the letter head "Gabriel Building." No deed of sale was
executed covering the transaction. Purchaser Lydia de
los Reyes however proceeded with the construction of
a two-storey commercial building on the said 300
square meter lot after obtaining a building permit from
the Engineer's Office in Tagum.
5. Acting on the information given by his daughter
Maria Luisa Gabriel Esteban upon the latter's return
from a trip to Tagum that spouses Claudio and Lydia
de los Reyes were constructing a two-storey building
on a portion of his land, Daluyong Gabriel, through his
lawyer, sent a letter on August 30, 1989 to the De los
Reyes couple demanding that they cease and desist
from continuing with their construction and to
immediately vacate the premises, asserting that the
construction was unauthorized and that their
occupancy of the subject portion was not covered by
any lease agreement.
6. On September 20, 1989, spouses Claudio and Lydia
de los Reyes through counsel sent their letter reply
explaining that the De los Reyeses are the innocent
party who entered into the lease agreement and
subsequent sale of subject portion of land in good faith
and upon the assurance made by the former
administratrix, Maria Rita G. Rey, her nephew Tony
Rey, Mrs. Fe S. Gabriel and Mr. Daluyong Gabriel
himself that Renato Gabriel is the new administrator
authorized to enter into such agreements involving the
subject property.
7. Dissatisfied with the explanation, Daluyong Gabriel
commenced an action on November 14, 1989 against
spouses Claudio and Lydia de los Reyes for the
recovery of the subject portion of land before the
Regional Trial Court, Branch 1, Tagum, Davao del
Norte docketed as Civil Case No. 2326. In his
complaint Daluyong maintained that his son Renato
was never given the authority to lease nor to sell any
portion of his land as his instruction to him (Renato)
was merely to collect rentals.
8. Spouses Claudio and Lydia delos Reyes countered
that the sale to them of the subject portion of land by
Renato Gabriel was with the consent and knowledge of
Daluyong, his wife Fe and their other children, and
filed before the same trial court a complaint for
specific performance, docketed as Civil Case No. 2329
against Daluyong and his children, namely Renato
Gabriel, Maria Luisa Gabriel Esteban and Maria Rita
Gabriel Bartolome praying that the defendants therein
be ordered to execute the necessary deed of
conveyance and other pertinent documents for the
transfer of the 300 square meter portion they
previously bought from Renato.
9. Civil Case Nos. 2326 and 2327 were heard jointly
and on September 10, 1991 the trial court rendered a
consolidated decision, the dispositive portion 9 of
which reads:
WHEREFORE premises considered, Daluyong Gabriel,
Renato Gabriel, Maria Luisa Esteban and Maria Rita G.
Bartolome are hereby ordered to execute a Deed of
Conveyance and other necessary documents in favor
of Claudio delos Reyes and Lydia delos Reyes over an
area of 300 square meters from TCT No T-17932
comprising of 5,010 square meters located at Tagum,
Davao which portion is presently occupied by Delos
Reyes couple.
SO ORDERED.
10. On appeal by the Gabriels, the Court of Appeals
reversed and set aside the decision of the Regional
Trial Court and rendered a new one "ORDERING
appellee spouses Claudio and Lydia delos Reyes to
immediately vacate the 300 square meter portion of
that land covered by TCT No. T-17932 which they
presently occupy and to turn over possession thereof
to the appellants. . . . ." 10
Not satisfied with the decision of the Court of Appeals,
petitioners came to this Court by way of petition for
review, alleging that:
a. The Court of Appeals gravely abused its discretion in
overlooking facts extant in the record;
b. The Court of Appeals erred in not finding the
document of sale and receipts (exhibits for the herein
Petitioners), as valid and enforceable;
c. The Court of Appeals erred in its apprehension and
appreciation of the undisputed facts for the
Petitioners;
d. The Court of Appeals erred in making speculative
conclusions on the facts of the case;
e. The Court of Appeals erred in reversing the Decision
of the Regional Trial Court based on credible, relevant
and material evidence adduced by the Petitioners in
the lower court. 11
Petitioners aver that respondent Court of Appeals
gravely abused its discretion when it totally
disregarded the oral and documentary evidence
adduced by appellees, and in giving credence to the
oral testimonies of appellants, which are replete with
inconsistencies and contradictions. Petitioners cite
specifically Exhibits "1" to "19" consisting of a contract
of lease involving the subject property and certain
official receipts with the letterhead "Gabriel Building"
showing payments received (by Renato Gabriel) for the
lease and/or sale of portions of subject real property of
Daluyong Gabriel e.g. sale by installment of portion
(700 square meters) of land to spouses Ruben
Carriedo and Abdula Sanducan (Exhs. 13, 14, 15 & 16)
and lease (Exhs. 3-3-BBBB, 5, 6 & 7) and sale (Exhs. 8,
9, 10, 11 & 12) of land made by Renato Gabriel to
petitioners-spouses. In other words, respondent Court
of Appeals "gravely abused its discretion" in the
misapprehension and misappreciation of the facts of
the case and in going beyond the issues involved
contrary to the admissions of both the appellants and
appellees. And since the appellate court's findings of
facts contradict that of the trial court a thorough
review thereof by the Supreme Court is necessary.
In their Comment, private respondents restated their
arguments to support the appellate court's conclusion
that the alleged sale made by Renato Gabriel to the
petitioners in 1987 without authority from Daluyong
Gabriel is not valid and therefore
unenforceable.1âwphi1.nêt
Petitioners submitted their Reply to the Comment
contending that the assailed decision of the Court of
Appeals is "patently fallacious" in that while
petitioners' payment to Renato Gabriel of the amount
of P90,000.00 as purchase price of the three hundred
(300) square meter portion of subject land was neither
denied nor controverted, the appellate court's decision
failed to order private respondent Renato Gabriel to
refund or reimburse petitioners the said amount
together with the value of the improvements and the
two-storey commercial building which petitioners
constructed thereon in violation of Articles 2142, 2143
and 2154 of the Civil Code and the time-honored
principle of substantial justice and equity.
Petitioners allege further that even if Renato Gabriel
was not (yet) the owner of the subject portion of land
when he sold the same to petitioners, after the death
of his parents Daluyong and Fe Gabriel, he, as heir,
inherited and succeeded to the ownership of said
portion of land by operation of law thereby rendering
valid and effective the sale he executed in favor of
petitioners. Petitioners also maintain that on the basis
of the facts proven and admitted during the trial,
Daluyong Gabriel appears to have not only authorized
his son Renato Gabriel to sell the subject portion of
land but also ratified the transaction by his
contemporaneous conduct and actuations shown
during his lifetime.
In their respective memorandum submitted by
petitioners and private respondents, substantially the
same arguments/contentions were raised. Petitioners
maintain that the sale is valid or validated pursuant to
Articles 1433 and 1434 of the Civil Code and identified
the legal issues involved as follows:
1. Whether or not the sale by respondent Renato
Gabriel of the land registered in the name of his
deceased father Daluyong Gabriel, during the lifetime
of the latter, in favor of the herein petitioners, by
operation of law, automatically vests title on the latter
under the principle of estoppel as provided for in Arts.
1433 and 1434 of the New Civil Code;
2. Whether or not the sale by Renato Gabriel of the
land registered in the name of his deceased father
during the lifetime of the latter, to the herein
petitioners is null and void. 12
On the other hand, private respondents contend that
the petition has no legal or factual basis. It is argued
that petitioners changed their theory of the case in
that while in the regional trial court, petitioners claim
that the subject property was sold to them by the late
Daluyong Gabriel through his son Renato Gabriel, in
the instant petition, they claim that it was Renato
Gabriel who sold the property to them and that
although at that time, Renato was not yet the owner of
the property, he is nonetheless obligated to honor the
sale and to convey the property to the petitioners
because after the death of Daluyong Gabriel, Renato
became the owner of the subject property by way of
hereditary succession. According to private
respondents, litigants are barred from changing their
theory, more especially so in the appeal, and that the
only issue to be resolved in the instant petition is
whether or not Renato Gabriel can be compelled to
convey the subject property to petitioners. Private
respondents maintain that Renato Gabriel cannot be
compelled to convey subject property (to petitioners)
because the land never passed on to Renato either
before or after the death of Daluyong Gabriel and that
the whole property is now owned by Ma. Rita G.
Bartolome per Transfer Certificate of Title No. T-68674
entered in the Registry of Deeds of Davao del Norte on
January 10, 1991. 13 In short, Renato Gabriel cannot
convey that which does not belong to him. 14
Essentially, the issue here is whether or not the verbal
agreement which petitioners entered into with private
respondent Renato Gabriel in 1987 involving the sale
of the three hundred (300) square meter portion of
land registered in the name of Renato's late father
Daluyong Gabriel is a valid and enforceable contract of
sale of real property.
By law 15 a contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the
object of the contract and upon the price. It is a
consensual contract which is perfected by mere
consent. 16 Once perfected, the contract is generally
binding in whatever form (i.e. written or oral) it may
have been entered into 17 provided the three (3)
essential requisites for its validity prescribed under
Article 1318 supra, are present. Foremost of these
requisites is the consent and the capacity to give
consent of the parties to the contract. The legal
capacity of the parties is an essential element for the
existence of the contract because it is an
indispensable condition for the existence of consent. 18
There is no effective consent in law without the
capacity to give such consent. In other words, legal
consent presupposes capacity. 19 Thus, there is said to
be no consent, and consequently, no contract when
the agreement is entered into by one in behalf of
another who has never given him authorization
therefor 20 unless he has by law a right to represent
the latter. 21 It has also been held that if the vendor is
not the owner of the property at the time of the sale,
the sale is null and void, 22 because a person can sell
only what he owns or is authorized to sell. 23 One
exception is when a contract entered into in behalf of
another who has not authorized it, subsequently
confirmed or ratified the same in which case, the
transaction becomes valid and binding against him
and he is estopped to question its legality. 24
The trial court held that the oral contract of sale was
valid and enforceable stating that while it is true that
at the time of the sale, Renato Gabriel was not the
owner and that it was Daluyong Gabriel who was the
registered owner of the subject property, Daluyong
Gabriel knew about the transaction and tacitly
authorized his son Renato Gabriel (whom he earlier
designated as administrator of his 5,010 square meter
registered property) to enter into it. The receipt by
Renato Gabriel of the P90,000.00 paid by petitioner
spouses as purchase price of subject portion of land 25
and also of the amount of P14,000.00 paid by
petitioners as advance rental fee for the lease of one
hundred seventy six (176) square meters thereof, in
accordance with the then still existing Contract of
Lease (Exh. 10) entered into by Renato Gabriel as
Lessor and Lydia delos Reyes as lessee on September
26, 1985 which was to expire only on June 15, 1991
was also known not only to Daluyong Gabriel but also
to his late wife Fe Salazar Gabriel and his two other
children, Maria Luisa Gabriel Esteban and Maria Rita
Gabriel Bartolome. And even assuming that Daluyong
Gabriel did not expressly authorize Renato Gabriel to
enter into such contract of sale with petitioners in
1988, he (Daluyong Gabriel) confirmed/ratified the
same by his contemporaneous conduct and actuations
shown during his lifetime. More importantly, the trial
court noted that Daluyong never presented Renato
during the entire proceedings, despite evidence 26
which tends to show that Renato Gabriel was not
missing nor were his whereabouts unknown as
Daluyong wanted to impress the trial court, but had all
the while been staying at the Daluyong Gabriel
residence at 185 I. Lopez St., Mandaluyong City but
was deliberately prevented (by Daluyong) from
testifying or shedding light on the transactions
involved in the two cases then at bar. Hence, the
decision of the trial court ordered Daluyong Gabriel,
Renato Gabriel, Maria Luisa G. Esteban and Maria Rita
G. Bartolome to execute a Deed of Conveyance and
other necessary documents in favor of petitioners
covering subject area of 300 square meters to be
taken from the 5,010 square meters covered by TCT
No. T-17932 under the name of Daluyong Gabriel
which portion is actually occupied by petitioners Delos
Reyes couple.
The Court of Appeals, on the other hand, ruled that the
contract of sale cannot be upheld, mainly because
Renato Gabriel, as vendor, did not have the legal
capacity to enter and to give consent to the
agreement, he, being neither the authorized agent (of
Daluyong Gabriel) nor the owner of the property
subject of the sale. It was pointed out that three
theories were advanced by appellees to prove that the
transaction they had with Renato concerning the sale
of the portion in question was regular, valid and
enforceable. First theory is that Renato acted as the
duly authorized representative or agent of Daluyong.
Second, that the portion in dispute was already given
to Renato as his share, hence, he validly sold the same
to appellees. And third, that the portion being litigated
was part of Renato's inheritance from the estate of her
deceased mother which he validly disposed of to
appellees. These reasons, according to the appellate
court, cannot go together, or even complement each
other, to establish the regularity, validity or
enforceability of the sale made by Renato. It could not
be possible for Renato to have acted in three different
capacities — as agent, owner, and heir — when he
dealt with appellees, as the legal consequences for
each situation would be different. Thus, it was
incumbent upon appellees to explain what actually
convinced them to buy the land from Renato, and
because they failed to do so, no proper basis can be
found to uphold the alleged sale made by Renato as it
cannot be determined with certainty in what capacity
Renato acted. And even assuming that he (Renato)
already succeeded to whatever hereditary right or
participation he may have over the estate of his father,
he is still considered a co-owner with his two sisters of
the subject property and that prior to its partition,
Renato cannot validly sell or alienate a specific or
determinate part of the property owned in common.
Besides, the entire lot covered by TCT No. T-17932
was subsequently donated by Daluyong Gabriel to his
daughter Marie Rita G. Bartolome on October 1, 1990
and is now covered by TCT No. T-68674 in her name. 27
Hence, the appellate court's decision ordered
appellees (petitioners) spouses Claudio and Lydia
delos Reyes to immediately vacate the 300 square
meter portion of that land covered by TCT No. T-17932
which they are occupying and to turn-over possession
thereof to the appellants, private respondents herein.
As a general rule, the findings of fact of the Court of
Appeals are binding upon this Court. 28 When such
findings of fact are the same and confirmatory of those
of the trial court, they are final and conclusive and
may not be reviewed on appeal. 29 In such cases, the
authority of the Supreme Court is confined to
correcting errors of law, if any, that might have been
committed below. 30 In the instant case, it is noted that
the trial court and the Court of Appeals are not at
variance in their factual findings that sometime in
1988, an oral contract of sale was entered into by
Renato Gabriel, (as vendor) with petitioners De los
Reyes couple (as vendees) involving a 300 square
meter portion of a 5,010 square meter parcel of land
located in Barrio Magugpo, Tagum, Davao del Norte
owned and registered under Transfer Certificate of
Title No. T-17932 in the name of Daluyong Gabriel,
father of Renato. Thus, this Court is tasked to review
and determine whether or not respondent Court of
Appeals committed an error of law 31 in its legal
conclusion that at the time the parties entered into
said oral agreement of sale, Renato Gabriel as the
purported vendor, did not have the legal capacity to
enter and/or to give consent to the sale.
We agree with the conclusion of the Court of Appeals
that Renato Gabriel was neither the owner of the
subject property nor a duly designated agent of the
registered owner (Daluyong Gabriel) authorized to sell
subject property in his behalf, and there was also no
sufficient evidence adduced to show that Daluyong
Gabriel subsequently ratified Renato's act. In this
connection it must be pointed out that pursuant to
Article 1874 of the Civil Code, 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. In other words, for want of capacity
(to give consent) on the part of Renato Gabriel, the
oral contract of sale lacks one of the essential
requisites for its validity prescribed under Article 1318,
supra and is therefore null and void ab initio.
Petitioners' contention that although at the time of the
alleged sale, Renato Gabriel was not yet the owner of
the subject portion of land, after the death of Daluyong
Gabriel, he (Renato) became the owner and acquired
title thereto by way of hereditary succession which
title passed by operation of law to petitioners pursuant
to Article 1434 of the Civil Code 32 is not tenable.
Records show that on October 1, 1990 Daluyong
Gabriel donated the entire lot covered by TCT No. T-
17932 to his daughter Maria Rita G. Bartolome and the
property is now covered by TCT No. T-68674 in her
name. This means that when Daluyong Gabriel died on
September 14, 1995, he was no longer the owner of
the subject property. Accordingly, Renato Gabriel
never acquired ownership or title over any portion of
said property as one of the heirs of Daluyong Gabriel.
However, respondent Court of Appeals failed to
consider the undisputed fact pointed out by the trial
court that petitioners had already performed their
obligation under subject oral contract of sale, i.e.
completing their payment of P90,000.00 representing
the purchase price of the 300 square meter portion of
land. As was held in "Nool vs. Court of Appeals" 33 if a
void contract has been performed, the restoration of
what has been given is in order. The relationship
between parties in any contract even if subsequently
voided must always be characterized and punctuated
by good faith and fair dealing. 34 Hence, for the sake of
justice and equity, and in consonance with the salutary
principle of non-enrichment at another's expense, 35
private respondent Renato Gabriel, should be ordered
to refund to petitioners the amount of P90,000.00
which they have paid to and receipt of which was duly
acknowledged by him. It is the policy of the Court to
strive to settle the entire controversy in a single
proceeding leaving no root or branch to bear the seeds
of future litigation especially where the Court is in a
position to resolve the dispute based on the records
before it and where the ends of justice would not likely
be subserved by the remand thereof, to the lower
Court. The Supreme Court is clothed with ample
authority to review matters, even those not raised on
appeal if it finds that their consideration is necessary
in arriving at a just disposition of the case. 36
However, petitioners' claim for the refund to them of
P1,000,000.00 representing the alleged value and cost
of the two-storey commercial building they
constructed on subject portion of land cannot be
favorably considered as no sufficient evidence was
adduced to prove and establish the same.
WHEREFORE, the decision of the Court of Appeals
dated April 30, 1997 in CA-G.R. CV No. 36955 is hereby
AFFIRMED in so far as it declared the oral contract of
sale entered into by Renato Gabriel of portion of the
5,010 square meter parcel of land registered in the
name of Daluyong Gabriel in favor of petitioners, null
and void. Renato Gabriel is hereby ordered to refund
to petitioners the amount of P90,000.00 which was
given in payment for subject land. No pronouncement
as to costs.
SO ORDERED.
Melo, Panganiban and Purisima, JJ., concur.
Vitug, J., Pls. see concurring opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the view expressed in the ponencia written for
the Court by our esteemed colleague, Mme. Justice
Minerva P. Gonzaga-Reyes, that holds the verbal
contract of sale between petitioner spouses Claudio
and Lydia de los Reyes and respondent Renato Gabriel
to be void for lack of authority on the part of the latter
to convey the property subject thereof.
Art. 409, of the Civil Code of the Philippines, has
grouped together contracts which have theretofore
been jurisprudentially considered void ab initio under
the old code. The nullity of these contracts is rather
definitive in nature and cannot thereby be cured by
ratification. 1 There are, however, other juridical
relations which are specifically declared to be void by
law under separate provisions of the code like, such as
here, the sale of a piece of land or any interest therein
made through an agent whose authority is not reduced
in writing 2 or when the agent exceeds the scope of his
authority. 3 In these special instances, it would be
important and prudent to take a minute longer to look
at the law for, at times, the rationale for their being
can justify a divergence from the standard rules
governing void contracts in general. Although, by
statute and jurisprudence 4 denominated void, Article
1874 sales, are, in fact, susceptible to ratification. This
intent of the law can be gleaned from some provisions
of the code. For instance —
Art. 1403. The following contracts are unenforceable,
unless they are ratified:
(1) Those entered into in the name of another person
by one into has been given no authority or legal
representation, or who has acted beyond his powers;
xxx xxx xxx
Art. 1910. The principal must comply with all the
obligations which the agent may have contracted
within the scope of his authority.
As for any obligation wherein the agent has exceeded
his power, the principal is not bound except when he
ratifies it expressly or tacitly.
The susceptibility to ratification could prompt one to
say that the contract should, in essence, be deemed
merely unenforceable. That, too, may not be totally
accurate for outside that feature, other principles of a
void contract could, nevertheless, be apt and relevant.
To exemplify, the rule in evidence to the effect that
the unenforceable character of a contract is lost by a
failure to object at the first opportunity to the
presentation of oral evidence to prove the questioned
transaction would not necessarily be applicable to
contracts specially declared void under Article 1874 of
the Code which sanctions ratification only if done by
an act of affirmation by the principal.
G.R. No. 111448 January 16, 2002
AF REALTY & DEVELOPMENT, INC. and ZENAIDA
R. RANULLO, petitioners, vs.DIESELMAN FREIGHT
SERVICES, CO., MANUEL C. CRUZ, JR. and MIDAS
DEVELOPMENT CORPORATION, respondents.
SANDOVAL-GUTIERREZ, J.:
Petition for review on certiorari assailing the Decision
dated December 10, 1992 and the Resolution
(Amending Decision) dated August 5, 1993 of the
Court of Appeals in CA-G.R. CV No. 30133.
Dieselman Freight Service Co. (Dieselman for brevity)
is a domestic corporation and a registered owner of a
parcel of commercial lot consisting of 2,094 square
meters, located at 104 E. Rodriguez Avenue, Barrio
Ugong, Pasig City, Metro Manila. The property is
covered by Transfer Certificate of Title No. 39849
issued by the Registry of Deeds of the Province of
Rizal.1
On May 10, 1988, Manuel C. Cruz, Jr., a member of the
board of directors of Dieselman, issued a letter
denominated as "Authority To Sell Real Estate"2 to
Cristeta N. Polintan, a real estate broker of the CNP
Real Estate Brokerage. Cruz, Jr. authorized Polintan "to
look for a buyer/buyers and negotiate the sale" of the
lot at P3,000.00 per square meter, or a total of
P6,282,000.00. Cruz, Jr. has no written authority from
Dieselman to sell the lot.
In turn, Cristeta Polintan, through a letter3 dated May
19, 1988, authorized Felicisima ("Mimi") Noble4 to sell
the same lot.
Felicisima Noble then offered for sale the property to
AF Realty & Development, Inc. (AF Realty) at
P2,500.00 per square meter.5 Zenaida Ranullo, board
member and vice-president of AF Realty, accepted the
offer and issued a check in the amount of P300,000.00
payable to the order of Dieselman. Polintan received
the check and signed an "Acknowledgement Receipt"6
indicating that the amount of P300,000.00 represents
the partial payment of the property but refundable
within two weeks should AF Realty disapprove
Ranullo's action on the matter.
On June 29, 1988, AF Realty confirmed its intention to
buy the lot. Hence, Ranullo asked Polintan for the
board resolution of Dieselman authorizing the sale of
the property. However, Polintan could only give
Ranullo the original copy of TCT No. 39849, the tax
declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of
Dieselman.7
On August 2, 1988, Manuel F. Cruz, Sr., president of
Dieselman, acknowledged receipt of the said
P300,000.00 as "earnest money" but required AF
Realty to finalize the sale at P4,000.00 per square
meter.8 AF Realty replied that it has paid an initial
down payment of P300,000.00 and is willing to pay the
balance.9
However, on August 13, 1988, Mr. Cruz, Sr. terminated
the offer and demanded from AF Realty the return of
the title of the lot earlier delivered by Polintan.10
Claiming that there was a perfected contract of sale
between them, AF Realty filed with the Regional Trial
Court, Branch 160, Pasig City a complaint for specific
performance (Civil Case No. 56278) against Dieselman
and Cruz, Jr.. The complaint prays that Dieselman be
ordered to execute and deliver a final deed of sale in
favor of AF Realty.11 In its amended complaint,12 AF
Realty asked for payment of P1,500,000.00 as
compensatory damages; P400,000.00 as attorney's
fees; and P500,000.00 as exemplary damages.
In its answer, Dieselman alleged that there was no
meeting of the minds between the parties in the sale
of the property and that it did not authorize any person
to enter into such transaction on its behalf.
Meanwhile, on July 30, 1988, Dieselman and Midas
Development Corporation (Midas) executed a Deed of
Absolute Sale13 of the same property. The agreed price
was P2,800.00 per square meter. Midas delivered to
Dieselman P500,000.00 as down payment and
deposited the balance of P5,300,000.00 in escrow
account with the PCIBank.
Constrained to protect its interest in the property,
Midas filed on April 3, 1989 a Motion for Leave to
Intervene in Civil Case No. 56278. Midas alleged that it
has purchased the property and took possession
thereof, hence Dieselman cannot be compelled to sell
and convey it to AF Realty. The trial court granted
Midas' motion.
After trial, the lower court rendered the challenged
Decision holding that the acts of Cruz, Jr. bound
Dieselman in the sale of the lot to AF Realty.14
Consequently, the perfected contract of sale between
Dieselman and AF Realty bars Midas' intervention. The
trial court also held that Midas acted in bad faith when
it initially paid Dieselman P500,000.00 even without
seeing the latter's title to the property. Moreover, the
notarial report of the sale was not submitted to the
Clerk of Court of the Quezon City RTC and the balance
of P5,300,000.00 purportedly deposited in escrow by
Midas with a bank was not established.1âwphi1.nêt
The dispositive portion of the trial court's Decision
reads:
"WHEREFORE, foregoing considered, judgment is
hereby rendered ordering defendant to execute and
deliver to plaintiffs the final deed of sale of the
property covered by the Transfer Certificate of Title
No. 39849 of the Registry of Deed of Rizal, Metro
Manila District II, including the improvements thereon,
and ordering defendants to pay plaintiffs attorney's
fees in the amount of P50,000.00 and to pay the costs.
"The counterclaim of defendants is necessarily
dismissed.
"The counterclaim and/or the complaint in intervention
are likewise dismissed
"SO ORDERED."15
Dissatisfied, all the parties appealed to the Court of
Appeals.
AF Realty alleged that the trial court erred in not
holding Dieselman liable for moral, compensatory and
exemplary damages, and in dismissing its
counterclaim against Midas.
Upon the other hand, Dieselman and Midas claimed
that the trial court erred in finding that a contract of
sale between Dieselman and AF Realty was perfected.
Midas further averred that there was no bad faith on
its part when it purchased the lot from Dieselman.
In its Decision dated December 10, 1992, the Court of
Appeals reversed the judgment of the trial court
holding that since Cruz, Jr. was not authorized in
writing by Dieselman to sell the subject property to AF
Realty, the sale was not perfected; and that the Deed
of Absolute Sale between Dieselman and Midas is
valid, there being no bad faith on the part of the latter.
The Court of Appeals then declared Dieselman and
Cruz, Jr. jointly and severally liable to AF Realty for
P100,000.00 as moral damages; P100,000.00 as
exemplary damages; and P100,000.00 as attorney's
fees.16
On August 5, 1993, the Court of Appeals, upon motions
for reconsideration filed by the parties, promulgated
an Amending Decision, the dispositive portion of which
reads:
"WHEREFORE, The Decision promulgated on October
10, 1992, is hereby AMENDED in the sense that only
defendant Mr. Manuel Cruz, Jr. should be made liable
to pay the plaintiffs the damages and attorney's fees
awarded therein, plus the amount of P300,000.00
unless, in the case of the said P300,000.00, the same
is still deposited with the Court which should be
restituted to plaintiffs.
"SO ORDERED."17
AF Realty now comes to this Court via the instant
petition alleging that the Court of Appeals committed
errors of law.
The focal issue for consideration by this Court is who
between petitioner AF Realty and respondent Midas
has a right over the subject lot.
The Court of Appeals, in reversing the judgment of the
trial court, made the following ratiocination:
"From the foregoing scenario, the fact that the board
of directors of Dieselman never authorized, verbally
and in writing, Cruz, Jr. to sell the property in question
or to look for buyers and negotiate the sale of the
subject property is undeniable.
"While Cristeta Polintan was actually authorized by
Cruz, Jr. to look for buyers and negotiate the sale of
the subject property, it should be noted that Cruz, Jr.
could not confer on Polintan any authority which he
himself did not have. Nemo dat quod non habet. In the
same manner, Felicisima Noble could not have
possessed authority broader in scope, being a mere
extension of Polintan's purported authority, for it is a
legal truism in our jurisdiction that a spring cannot rise
higher than its source. Succinctly stated, the alleged
sale of the subject property was effected through
persons who were absolutely without any authority
whatsoever from Dieselman.
"The argument that Dieselman ratified the contract by
accepting the P300,000.00 as partial payment of the
purchase price of the subject property is equally
untenable. The sale of land through an agent without
any written authority is void.
xxx xxx xxx
"On the contrary, anent the sale of the subject
property by Dieselman to intervenor Midas, the
records bear out that Midas purchased the same from
Dieselman on 30 July 1988. The notice of lis pendens
was subsequently annotated on the title of the
property by plaintiffs on 15 August 1988. However,
this subsequent annotation of the notice of lis pendens
certainly operated prospectively and did not retroact
to make the previous sale of the property to Midas a
conveyance in bad faith. A subsequently registered
notice of lis pendens surely is not proof of bad faith. It
must therefore be borne in mind that the 30 July 1988
deed of sale between Midas and Dieselman is a
document duly certified by notary public under his
hand and seal. x x x. Such a deed of sale being public
document acknowledged before a notary public is
admissible as to the date and fact of its execution
without further proof of its due execution and delivery
(Bael vs. Intermediate Appellate Court, 169 SCRA617;
Joson vs. Baltazar, 194 SCRA 114) and to prove the
defects and lack of consent in the execution thereof,
the evidence must be strong and not merely
preponderant x x x."18
We agree with the Court of Appeals.
Section 23 of the Corporation Code expressly provides
that the corporate powers of all corporations shall be
exercised by the board of directors. Just as a natural
person may authorize 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.19 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.20 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.21
In the instant case, it is undisputed that respondent
Cruz, Jr. has no written authority from the board of
directors of respondent Dieselman to sell or to
negotiate the sale of the lot, much less to appoint
other persons for the same purpose. Respondent Cruz,
Jr.'s lack of such authority precludes him from
conferring any authority to Polintan involving the
subject realty. Necessarily, neither could Polintan
authorize Felicisima Noble. Clearly, the collective acts
of respondent Cruz, Jr., Polintan and Noble cannot bind
Dieselman in the purported contract of sale.
Petitioner AF Realty maintains that the sale of land by
an unauthorized agent may be ratified where, as here,
there is acceptance of the benefits involved. In this
case the receipt by respondent Cruz, Jr. from AF Realty
of the P300,000.00 as partial payment of the lot
effectively binds respondent Dieselman.22
We are not persuaded.
Involved in this case is a sale of land through an
agent. Thus, the law on agency under the Civil Code
takes precedence. This is well stressed in Yao Ka Sin
Trading vs. Court of Appeals:23
"Since a corporation, such as the private respondent,
can act only through its officers and agents, all acts
within the powers of said corporation may be
performed by agents of its selection; and, except
so far as limitations or restrictions may be imposed by
special charter, by-law, or statutory provisions, the
same general principles of law which govern the
relation of agency for a natural person govern
the officer or agent of a corporation, of
whatever status or rank, in respect to his power
to act for the corporation; and agents when once
appointed, or members acting in their stead, are
subject to the same rules, liabilities, and
incapacities as are agents of individuals and
private persons." (Emphasis supplied)
Pertinently, Article 1874 of the same Code provides:
"ART. 1874. When a sale of 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." (Emphasis supplied)
Considering that respondent Cruz, Jr., Cristeta Polintan
and Felicisima Ranullo were not authorized by
respondent Dieselman to sell its lot, the supposed
contract is void. Being a void contract, it is not
susceptible of ratification by clear mandate of Article
1409 of the Civil Code, thus:
"ART. 1409. The following contracts are inexistent
and void from the very beginning:
xxx
(7) Those expressly prohibited or declared void by
law.
"These contracts cannot be ratified. Neither can
the right to set up the defense of illegality be waived."
(Emphasis supplied)
Upon the other hand, the validity of the sale of the
subject lot to respondent Midas is unquestionable. As
aptly noted by the Court of Appeals,24 the sale was
authorized by a board resolution of respondent
Dieselman dated May 27, 1988.1âwphi1.nêt
The Court of Appeals awarded attorney's fees and
moral and exemplary damages in favor of petitioner AF
Realty and against respondent Cruz, Jr.. The award was
made by reason of a breach of contract imputable to
respondent Cruz, Jr. for having acted in bad faith. We
are no persuaded. It bears stressing that petitioner
Zenaida Ranullo, board member and vice-president of
petitioner AF Realty who accepted the offer to sell the
property, admitted in her testimony25 that a board
resolution from respondent Dieselman authorizing the
sale is necessary to bind the latter in the transaction;
and that respondent Cruz, Jr. has no such written
authority. In fact, despite demand, such written
authority was not presented to her.26 This
notwithstanding, petitioner Ranullo tendered a partial
payment for the unauthorized transaction. Clearly,
respondent Cruz, Jr. should not be held liable for
damages and attorney's fees.
WHEREFORE, the assailed Decision and Resolution of
the Court of Appeals are hereby AFFIRMED with
MODIFICATION in the sense that the award of
damages and attorney's fees is deleted. Respondent
Dieselman is ordered to return to petitioner AF Realty
its partial payment of P300,000.00. Costs against
petitioners.
SO ORDERED.
Melo, Vitug, Panganiban, and Carpio, JJ., concur.
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.
DECISION
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the
Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 51022, which affirmed the Decision of the Regional
Trial Court (RTC), Pasig City, Branch 165, in Civil Case
No. 54887, as well as the Resolution2 of the CA
denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly
organized and registered under Philippine laws. Since
1950, it had been engaged in the manufacture of
roofing materials and pipe products. Its manufacturing
operations were conducted on eight parcels of land
with a total area of 47,233 square meters. The
properties, located in Mandaluyong City, Metro Manila,
were covered by Transfer Certificates of Title Nos.
451117, 451118, 451119, 451120, 451121, 451122,
451124 and 451125 under the name of Far East Bank
& Trust Company, as trustee. Ninety (90%) percent of
the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation
organized and registered under the laws of Belgium.3
Jack Glanville, an Australian citizen, was the General
Manager and President of EC, while Claude Frederick
Delsaux was the Regional Director for Asia of ESAC.
Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned
about the political situation in the Philippines and
wanted to stop its operations in the country. The
Committee for Asia of ESAC instructed Michael Adams,
a member of EC’s Board of Directors, to dispose of the
eight parcels of land. Adams engaged the services of
realtor/broker Lauro G. Marquez so that the properties
could be offered for sale to prospective buyers.
Glanville later showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the
improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua & Company, Inc. In a Letter dated September
12, 1986, Marquez declared that he was authorized to
sell the properties for P27,000,000.00 and that the
terms of the sale were subject to negotiation.4
Eduardo Litonjua, Jr. responded to the offer. Marquez
showed the property to Eduardo Litonjua, Jr., and his
brother Antonio K. Litonjua. The Litonjua siblings
offered to buy the property for P20,000,000.00 cash.
Marquez apprised Glanville of the Litonjua siblings’
offer and relayed the same to Delsaux in Belgium, but
the latter did not respond. On October 28, 1986,
Glanville telexed Delsaux in Belgium, inquiring on his
position/ counterproposal to the offer of the Litonjua
siblings. It was only on February 12, 1987 that Delsaux
sent a telex to Glanville stating that, based on the
"Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover all
existing obligations prior to final liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of
the telex sent by Delsaux. Litonjua, Jr. accepted the
counterproposal of Delsaux. Marquez conferred with
Glanville, and in a Letter dated February 26, 1987,
confirmed that the Litonjua siblings had accepted the
counter-proposal of Delsaux. He also stated that the
Litonjua siblings would confirm full payment within 90
days after execution and preparation of all documents
of sale, together with the necessary governmental
clearances.6
The Litonjua brothers deposited the amount of
US$1,000,000.00 with the Security Bank & Trust
Company, Ermita Branch, and drafted an Escrow
Agreement to expedite the sale.7
Sometime later, Marquez and the Litonjua brothers
inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville
informed Delsaux that he had met with the buyer,
which had given him the impression that "he is
prepared to press for a satisfactory conclusion to the
sale."8 He also emphasized to Delsaux that the buyers
were concerned because they would incur expenses in
bank commitment fees as a consequence of prolonged
period of inaction.9
Meanwhile, with the assumption of Corazon C. Aquino
as President of the Republic of the Philippines, the
political situation in the Philippines had improved.
Marquez received a telephone call from Glanville,
advising that the sale would no longer proceed.
Glanville followed it up with a Letter dated May 7,
1987, confirming that he had been instructed by his
principal to inform Marquez that "the decision has
been taken at a Board Meeting not to sell the
properties on which Eternit Corporation is situated."10
Delsaux himself later sent a letter dated May 22, 1987,
confirming that the ESAC Regional Office had decided
not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. MarquezL.G. Marquez, Inc.334 Makati Stock
Exchange Bldg.6767 Ayala AvenueMakati, Metro
ManilaPhilippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has
decided not to proceed with the sale of the land which
was proposed to you.
The Committee for Asia of our Group met recently
(meeting every six months) and examined the position
as far as the Philippines are (sic) concerned.
Considering [the] new political situation since the
departure of MR. MARCOS and a certain stabilization in
the Philippines, the Committee has decided not to stop
our operations in Manila. In fact, production has
started again last week, and (sic) to recognize the
participation in the Corporation.
We regret that we could not make a deal with you this
time, but in case the policy would change at a later
state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11
When apprised of this development, the Litonjuas,
through counsel, wrote EC, demanding payment for
damages they had suffered on account of the aborted
sale. EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific
performance and damages against EC (now the
Eterton Multi-Resources Corporation) and the Far East
Bank & Trust Company, and ESAC in the RTC of Pasig
City. An amended complaint was filed, in which
defendant EC was substituted by Eterton Multi-
Resources Corporation; Benito C. Tan, Ruperto V. Tan,
Stock Ha T. Tan and Deogracias G. Eufemio were
impleaded as additional defendants on account of their
purchase of ESAC shares of stocks and were the
controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged
that since Eteroutremer was not doing business in the
Philippines, it cannot be subject to the jurisdiction of
Philippine courts; the Board and stockholders of EC
never approved any resolution to sell subject
properties nor authorized Marquez to sell the same;
and the telex dated October 28, 1986 of Jack Glanville
was his own personal making which did not bind EC.
On July 3, 1995, the trial court rendered judgment in
favor of defendants and dismissed the amended
complaint.12 The fallo of the decision reads:
WHEREFORE, the complaint against Eternit
Corporation now Eterton Multi-Resources Corporation
and Eteroutremer, S.A. is dismissed on the ground that
there is no valid and binding sale between the
plaintiffs and said defendants.
The complaint as against Far East Bank and Trust
Company is likewise dismissed for lack of cause of
action.
The counterclaim of Eternit Corporation now Eterton
Multi-Resources Corporation and Eteroutremer, S.A. is
also dismissed for lack of merit.13
The trial court declared that since the authority of the
agents/realtors was not in writing, the sale is void and
not merely unenforceable, and as such, could not have
been ratified by the principal. In any event, such
ratification cannot be given any retroactive effect.
Plaintiffs could not assume that defendants had agreed
to sell the property without a clear authorization from
the corporation concerned, that is, through resolutions
of the Board of Directors and stockholders. The trial
court also pointed out that the supposed sale involves
substantially all the assets of defendant EC which
would result in the eventual total cessation of its
operation.14
The Litonjuas appealed the decision to the CA, alleging
that "(1) the lower court erred in concluding that the
real estate broker in the instant case needed a written
authority from appellee corporation and/or that said
broker had no such written authority; and (2) the lower
court committed grave error of law in holding that
appellee corporation is not legally bound for specific
performance and/or damages in the absence of an
enabling resolution of the board of directors."15 They
averred that Marquez acted merely as a broker or go-
between and not as agent of the corporation; hence, it
was not necessary for him to be empowered as such
by any written authority. They further claimed that an
agency by estoppel was created when the corporation
clothed Marquez with apparent authority to negotiate
for the sale of the properties. However, since it was a
bilateral contract to buy and sell, it was equivalent to a
perfected contract of sale, which the corporation was
obliged to consummate.
In reply, EC alleged that Marquez had no written
authority from the Board of Directors to bind it; neither
were Glanville and Delsaux authorized by its board of
directors to offer the property for sale. Since the sale
involved substantially all of the corporation’s assets, it
would necessarily need the authority from the
stockholders.
On June 16, 2000, the CA rendered judgment affirming
the decision of the RTC. 16 The Litonjuas filed a motion
for reconsideration, which was also denied by the
appellate court.
The CA ruled that Marquez, who was a real estate
broker, was a special agent within the purview of
Article 1874 of the New Civil Code. Under Section 23 of
the Corporation Code, he needed a special authority
from EC’s board of directors to bind such corporation
to the sale of its properties. Delsaux, who was merely
the representative of ESAC (the majority stockholder of
EC) had no authority to bind the latter. The CA pointed
out that Delsaux was not even a member of the board
of directors of EC. Moreover, the Litonjuas failed to
prove that an agency by estoppel had been created
between the parties.
In the instant petition for review, petitioners aver that
I binding contract to respondent EC; hence, petitioners
THE COURT OF APPEALS ERRED IN HOLDING THAT
THERE WAS NO PERFECTED CONTRACT OF SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF
LAW IN HOLDING THAT MARQUEZ NEEDED A WRITTEN
AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE
SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
GLANVILLE AND DELSAUX HAVE THE NECESSARY
AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT
THE VERY LEAST, WERE KNOWINGLY PERMITTED BY
RESPONDENT ETERNIT TO DO ACTS WITHIN THE
SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD
THEM OUT TO THE PUBLIC AS POSSESSING POWER TO
SELL THE SAID PROPERTIES.17
Petitioners maintain that, based on the facts of the
case, there was a perfected contract of sale of the
parcels of land and the improvements thereon for
"US$1,000,000.00 plus P2,500,000.00 to cover
obligations prior to final liquidation." Petitioners insist
that they had accepted the counter-offer of respondent
EC and that before the counter-offer was withdrawn by
respondents, the acceptance was made known to
them through real estate broker Marquez.
Petitioners assert that there was no need for a written
authority from the Board of Directors of EC for
Marquez to validly act as
broker/middleman/intermediary. As broker, Marquez
was not an ordinary agent because his authority was
of a special and limited character in most respects. His
only job as a broker was to look for a buyer and to
bring together the parties to the transaction. He was
not authorized to sell the properties or to make a
argue, Article 1874 of the New Civil Code does not
apply.
In any event, petitioners aver, what is important and
decisive was that Marquez was able to communicate
both the offer and counter-offer and their acceptance
of respondent EC’s counter-offer, resulting in a
perfected contract of sale.
Petitioners posit that the testimonial and documentary
evidence on record amply shows that Glanville, who
was the President and General Manager of respondent
EC, and Delsaux, who was the Managing Director for
ESAC Asia, had the necessary authority to sell the
subject property or, at least, had been allowed by
respondent EC to hold themselves out in the public as
having the power to sell the subject properties.
Petitioners identified such evidence, thus:
1. The testimony of Marquez that he was chosen by
Glanville as the then President and General Manager of
Eternit, to sell the properties of said corporation to any
interested party, which authority, as hereinabove
discussed, need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the
subject properties spanned SEVERAL MONTHS, from
1986 to 1987;
3. The COUNTER-OFFER made by Eternit through
GLANVILLE to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternit’s
offer to sell the properties as evidenced by the
Petitioners’ ACCEPTANCE of the counter-offer;
5. The fact that Petitioners DEPOSITED the price of
[US]$1,000,000.00 with the Security Bank and that an
ESCROW agreement was drafted over the subject
properties;
6. Glanville’s telex to Delsaux inquiring "WHEN WE
(Respondents) WILL IMPLEMENT ACTION TO BUY AND
SELL";
7. More importantly, Exhibits "G" and "H" of the
Respondents, which evidenced the fact that
Petitioners’ offer was allegedly REJECTED by both
Glanville and Delsaux.18
Petitioners insist that it is incongruous for Glanville and
Delsaux to make a counter-offer to petitioners’ offer
and thereafter reject such offer unless they were
authorized to do so by respondent EC. Petitioners insist
that Delsaux confirmed his authority to sell the
properties in his letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has
decided not to proceed with the sale of the land which
was proposed to you.
The Committee for Asia of our Group met recently
(meeting every six months) and examined the position
as far as the Philippines are (sic) concerned.
Considering the new political situation since the
departure of MR. MARCOS and a certain stabilization in
the Philippines, the Committee has decided not to stop
our operations in Manila[.] [I]n fact production started
again last week, and (sic) to reorganize the
participation in the Corporation.
We regret that we could not make a deal with you this
time, but in case the policy would change at a later
stage we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19
Petitioners further emphasize that they acted in good
faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties
within the scope of an apparent authority. Petitioners
insist that respondents held themselves to the public
as possessing power to sell the subject properties.
By way of comment, respondents aver that the issues
raised by the petitioners are factual, hence, are
proscribed by Rule 45 of the Rules of Court. On the
merits of the petition, respondents EC (now EMC) and
ESAC reiterate their submissions in the CA. They
maintain that Glanville, Delsaux and Marquez had no
authority from the stockholders of respondent EC and
its Board of Directors to offer the properties for sale to
the petitioners, or to any other person or entity for that
matter. They assert that the decision and resolution of
the CA are in accord with law and the evidence on
record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that
respondent EC, through Glanville and Delsaux,
conformed to the written authority of Marquez to sell
the properties. The authority of Glanville and Delsaux
to bind respondent EC is evidenced by the fact that
Glanville and Delsaux negotiated for the sale of 90% of
stocks of respondent EC to Ruperto Tan on June 1,
1997. Given the significance of their positions and
their duties in respondent EC at the time of the
transaction, and the fact that respondent ESAC owns
90% of the shares of stock of respondent EC, a formal
resolution of the Board of Directors would be a mere
ceremonial formality. What is important, petitioners
maintain, is that Marquez was able to communicate
the offer of respondent EC and the petitioners’
acceptance thereof. There was no time that they acted
without the knowledge of respondents. In fact,
respondent EC never repudiated the acts of Glanville,
Marquez and Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of
respondents that the issues raised by petitioner in this
case are factual. Whether or not Marquez, Glanville,
and Delsaux were authorized by respondent EC to act
as its agents relative to the sale of the properties of
respondent EC, and if so, the boundaries of their
authority as agents, is a question of fact. In the
absence of express written terms creating the
relationship of an agency, the existence of an agency
is a fact question.20 Whether an agency by estoppel
was created or whether a person acted within the
bounds of his apparent authority, and whether the
principal is estopped to deny the apparent authority of
its agent are, likewise, questions of fact to be resolved
on the basis of the evidence on record.21 The findings
of the trial court on such issues, as affirmed by the CA,
are conclusive on the Court, absent evidence that the
trial and appellate courts ignored, misconstrued, or
misapplied facts and circumstances of substance
which, if considered, would warrant a modification or
reversal of the outcome of the case.22
It must be stressed that issues of facts may not be
raised in the Court under Rule 45 of the Rules of Court
because the Court is not a trier of facts. It is not to re-
examine and assess the evidence on record, whether
testimonial and documentary. There are, however,
recognized exceptions where the Court may delve into
and resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely
on speculations, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when the Court of Appeals, in
making its findings, went beyond the issues of the
case and the same is contrary to the admissions of
both appellant and appellee; (7) when the findings of
the Court of Appeals are contrary to those of the trial
court; (8) when the findings of fact are conclusions
without citation of specific evidence on which they are
based; (9) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a
different conclusion; and (10) when the findings of fact
of the Court of Appeals are premised on the absence of
evidence and are contradicted by the evidence on
record.23
We have reviewed the records thoroughly and find that
the petitioners failed to establish that the instant case
falls under any of the foregoing exceptions. Indeed,
the assailed decision of the Court of Appeals is
supported by the evidence on record and the law.
It was the duty of the petitioners to prove that
respondent EC had decided to sell its properties and
that it had empowered Adams, Glanville and Delsaux
or Marquez to offer the properties for sale to
prospective buyers and to accept any counter-offer.
Petitioners likewise failed to prove that their counter-
offer had been accepted by respondent EC, through
Glanville and Delsaux. It must be stressed that when
specific performance is sought of a contract made with
an agent, the agency must be established by clear,
certain and specific proof.24
Section 23 of Batas Pambansa Bilang 68, otherwise
known as the Corporation Code of the Philippines,
provides:
SEC. 23. The Board of Directors or Trustees. – Unless
otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be
exercised, all business conducted and all property of
such corporations controlled and held by the board of
directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold
office for one (1) year and until their successors are
elected and qualified.
Indeed, a corporation is a juridical person separate and
distinct from its members or stockholders and is not
affected by the personal rights,
obligations and transactions of the latter.25 It may act
only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through
its officers or agents in the normal course of business.
The general principles of agency govern the relation
between the corporation and its officers or agents,
subject to the articles of incorporation, by-laws, or
relevant provisions of law.26
Under Section 36 of the Corporation Code, a
corporation may sell or convey its real properties,
subject to the limitations prescribed by law and the
Constitution, as follows:
SEC. 36. Corporate powers and capacity. – Every
corporation incorporated under this Code has the
power and capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey,
sell, lease, pledge, mortgage and otherwise deal with
such real and personal property, including securities
and bonds of other corporations, as the transaction of
a lawful business of the corporation may reasonably
and necessarily require, subject to the limitations
prescribed by the law and the Constitution.
The property of a corporation, however, is not the
property of the stockholders or members, and as such,
may not be sold without express authority from the
board of directors.27 Physical acts, like the offering of
the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of
such properties and the execution of the deed of sale
covering such property, can be performed by the
corporation only by officers or agents duly authorized
for the purpose by corporate by-laws or by specific
acts of the board of directors. 28 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 not binding on the corporation.29
While a corporation may appoint agents to negotiate
for the sale of its real properties, the final say will have
to be with the board of directors through its officers
and agents as authorized by a board resolution or by
its by-laws.30 An unauthorized act of an officer of the
corporation is not binding on it unless the latter ratifies
the same expressly or impliedly by its board of
directors. Any sale of real property of a corporation by
a person purporting to be an agent thereof but without
written authority from the corporation is null and void.
The declarations of the agent alone are generally
insufficient to establish the fact or extent of his/her
authority.31
By the contract of agency, a person binds himself to
render some service or to do something in
representation on behalf of another, with the consent
or authority of the latter.32 Consent of both principal
and agent is necessary to create an agency. The
principal must intend that the agent shall act for him;
the agent must intend to accept the authority and act
on it, and the intention of the parties must find
expression either in words or conduct between them.33
An agency may be expressed or implied from the act
of the principal, from his silence or lack of action, or
his failure to repudiate the agency knowing that
another person is acting on his behalf without
authority. Acceptance by the agent may be expressed,
or implied from his acts which carry out the agency, or
from his silence or inaction according to the
circumstances.34 Agency may be oral unless the law
requires a specific form.35 However, to create or
convey real rights over immovable property, a special
power of attorney is necessary.36 Thus, when a sale of
a piece of land or any portion thereof is through an
agent, the authority of the latter shall be in writing,
otherwise, the sale shall be void.37
In this case, the petitioners as plaintiffs below, failed to
adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in its behalf, the eight parcels of
land owned by respondent EC including the
improvements thereon. The bare fact that Delsaux
may have been authorized to sell to Ruperto Tan the
shares of stock of respondent ESAC, on June 1, 1997,
cannot be used as basis for petitioners’ claim that he
had likewise been authorized by respondent EC to sell
the parcels of land.
Moreover, the evidence of petitioners shows that
Adams and Glanville acted on the authority of Delsaux,
who, in turn, acted on the authority of respondent
ESAC, through its Committee for Asia,38 the Board of
Directors of respondent ESAC,39 and the Belgian/Swiss
component of the management of respondent ESAC.40
As such, Adams and Glanville engaged the services of
Marquez to offer to sell the properties to prospective
buyers. Thus, on September 12, 1986, Marquez wrote
the petitioner that he was authorized to offer for sale
the property for P27,000,000.00 and the other terms
of the sale subject to negotiations. When petitioners
offered to purchase the property for P20,000,000.00,
through Marquez, the latter relayed petitioners’ offer
to Glanville; Glanville had to send a telex to Delsaux to
inquire the position of respondent ESAC to petitioners’
offer. However, as admitted by petitioners in their
Memorandum, Delsaux was unable to reply
immediately to the telex of Glanville because Delsaux
had to wait for confirmation from respondent ESAC.41
When Delsaux finally responded to Glanville on
February 12, 1987, he made it clear that, based on the
"Belgian/Swiss decision" the final offer of respondent
ESAC was US$1,000,000.00 plus P2,500,000.00 to
cover all existing obligations prior to final liquidation. 42
The offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire
management or Board of Directors of respondent
ESAC. While it is true that petitioners accepted the
counter-offer of respondent ESAC, respondent EC was
not a party to the transaction between them; hence,
EC was not bound by such acceptance.
While Glanville was the President and General
Manager of respondent EC, and Adams and Delsaux
were members of its Board of Directors, the three
acted for and in behalf of respondent ESAC, and not as
duly authorized agents of respondent EC; a board
resolution evincing the grant of such authority is
needed to bind EC to any agreement regarding the
sale of the subject properties. Such board resolution is
not a mere formality but is a condition sine qua non to
bind respondent EC. Admittedly, respondent ESAC
owned 90% of the shares of stocks of respondent EC;
however, the mere fact that a corporation owns a
majority of the shares of stocks of another, or even all
of such shares of stocks, taken alone, will not justify
their being treated as one corporation.43
It bears stressing that in an agent-principal
relationship, the personality of the principal is
extended through the facility of the agent. In so doing,
the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would
have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in
any way, be compelled by law or by any court.44
The petitioners cannot feign ignorance of the absence
of any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the
properties for sale and to sell the said properties to the
petitioners. A person dealing with a known agent is not
authorized, under any circumstances, blindly to trust
the agents; statements as to the extent of his powers;
such person must not act negligently but must use
reasonable diligence and prudence to ascertain
whether the agent acts within the scope of his
authority.45 The settled rule is that, persons dealing
with an assumed agent are bound at their peril, and if
they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent
of authority, and in case either is controverted, the
burden of proof is upon them to prove it.46 In this case,
the petitioners failed to discharge their burden; hence,
petitioners are not entitled to damages from
respondent EC.
It appears that Marquez acted not only as real estate
broker for the petitioners but also as their agent. As
gleaned from the letter of Marquez to Glanville, on
February 26, 1987, he confirmed, for and in behalf of
the petitioners, that the latter had accepted such offer
to sell the land and the improvements thereon.
However, we agree with the ruling of the appellate
court that Marquez had no authority to bind
respondent EC to sell the subject properties. A real
estate broker is one who negotiates the sale of real
properties. His business, generally speaking, is only to
find a purchaser who is willing to buy the land upon
terms fixed by the owner. He has no authority to bind
the principal by signing a contract of sale. Indeed, an
authority to find a purchaser of real property does not
include an authority to sell.47
Equally barren of merit is petitioners’ contention that
respondent EC is estopped to deny the existence of a
principal-agency relationship between it and Glanville
or Delsaux. For an agency by estoppel to exist, the
following must be established: (1) the principal
manifested a representation of the agent’s authority or
knowlingly allowed the agent to assume such
authority; (2) the third person, in good faith, relied
upon such representation; (3) relying upon such
representation, such third person has changed his
position to his detriment.48 An agency by estoppel,
which is similar to the doctrine of apparent authority,
requires proof of reliance upon the representations,
and that, in turn, needs proof that the representations
predated the action taken in reliance.49 Such proof is
lacking in this case. In their communications to the
petitioners, Glanville and Delsaux positively and
unequivocally declared that they were acting for and in
behalf of respondent ESAC.

Neither may respondent EC be deemed to have ratified

the transactions between the petitioners and
respondent ESAC, through Glanville, Delsaux and
Marquez. The transactions and the various
communications inter se were never submitted to the
Board of Directors of respondent EC for ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is

DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.