Case Citation: G.R. NO.

140667

Date: August 12, 2004

Petitioners: WOODCHILD HOLDINGS, INC.

Respondents: ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC.

Doctrine:

Subject matter
of controversy:

Antecedent  Through its resolution, the respondent corporation authorized its

Facts: President Roberto B. Roxas to sell one (Lot No. 491-A-3-B-2) of its
two parcels of lands at a price and under such terms and conditions
which he deemed most reasonable and advantageous to the
corporation; and to execute, sign and deliver the pertinent sales
documents and receive the proceeds of the sale for and on behalf of
the company.

 Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy the said Lot
on which it planned to construct its warehouse building, and a portion
of the adjoining lot,(Lot No. 491-A-3-B-1) so that its 45-foot container
van would be able to readily enter or leave the property.

 WHI President Dy offered to buy the Lot. One of the terms

incorporated in Dy's offer is that the SELLER, holds a good and
registrable title to the property, that the subject property already
includes the area on which the right of way traverses from the
main lot (area) towards the exit to the Sumulong Highway.

 Furthermore, in the event that the right of way is insufficient for the
buyer's purposes (example: entry of a 45-foot container), the seller
agrees to sell additional area from his current adjacent property to
allow the buyer to full access and full use of the property.

 Roxas accepted the terms in the contract and a deed of absolute

sale was executed and issued in favour to petitioner.

 Wimbeco Builder's, Inc. (WBI) submitted its quotation to WHI for the
construction of the warehouse building on a portion of the
property. WBI proposed to start the project on October 1, 1991 and to
turn over the building to WHI on February 29, 1992.

 On one hand, Ponderosa Leather Goods Company, Inc. confirmed its

lease agreement with WHI of a portion of the warehouse yet to be
constructed. Ponderosa emphasized the need for the warehouse to
be ready for occupancy before April 1, 1992. WHI accepted the offer.
 However, WBI failed to commence the construction of the warehouse
on the date planned because of the presence of squatters in the
property and suggested a renegotiation of the contract after the
squatters shall have been evicted. Subsequently, the squatters were
evicted from the property.

 WHI and WBI executed a Letter-Contract for the construction of the

warehouse building. The contractor started construction in April 1992
even before the building officials of Antipolo City issued a building
permit. After the warehouse was finished, WHI issued a certificate of
occupancy by the building official.

 In the meantime, WHI complained to Roxas that the vehicles of

RECCI were parked on a portion of the property over which WHI had
been granted a right of way. Dy and Roxas discussed the need of the
WHI to buy a 500-square-meter (Lot No. 491-A-3-B-1) as provided for
in the deed of absolute sale. However, Roxas died soon thereafter.

 WHI wrote to the RECCI, reiterating its verbal requests to purchase a

portion of the said lot as provided for in the deed of absolute sale, and
complained about the latter's failure to eject the squatters within the
three-month period agreed upon in the said deed. Several demand
made, however, there was no response from RECCI.WHI filed a
complaint against the RECCI with the RTC, for specific performance
and damages.

TRIAL COURT’S RULING

 The trial court rendered judgment in favor of WHI. It ruled that

RECCI was estopped from disowning the apparent authority of
Roxas. The court reasoned that to do so would prejudice the WHI
which transacted with Roxas in good faith, believing that he had the
authority to bind the WHI relating to the easement of right of way, as
well as the right to purchase a portion of Lot No. 491-A-3-B-1.
CA RULING

 The RECCI appealed the decision to the CA, which rendered a

decision reversing that of the trial court, and ordering the
dismissal of the complaint. The CA ruled that, under the resolution
of the Board of Directors of the RECCI, Roxas was merely authorized
to sell but not to grant right of way in favor of the WHI over a portion
of Lot No. 491-A-3-B-1, or to grant an option to the petitioner to buy a
portion thereof.

Issue: WON the respondent is bound by the provisions in the deed of absolute
sale (granting to the petitioner beneficial use and a right of way over a portion
of Lot No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the
option to the petitioner to buy a portion thereof), and, if so, whether such
 agreement is enforceable against the respondent? NO

SC Ruling: 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.

o Generally, the acts of the corporate officers within the scope of

their authority are binding on the corporation. However, under
Article 1910 of the New Civil Code, acts done by such officers
beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly, or is
estopped from denying them.

o As for any obligation wherein the agent has exceeded his power,
the principal is not bound except when he ratifies it expressly or
tacitly. Thus, contracts entered into by corporate officers beyond
the scope of authority are unenforceable against the corporation
unless ratified by the corporation

Central to the issue at hand is the Resolution of the Board of Directors of the
respondent, stated that: “the corporation, thru the President, sell to any
interested buyer, property at the Sumulong Highway, at a price and on terms
and conditions which he deems most reasonable and advantageous to the
corporation”

Evidently, Roxas was not specifically authorized under the said

resolution to grant a right of way in favor of the petitioner on a portion
of Lot No. 491-A-3-B-1 or to agree to sell to the petitioner a portion
thereof. The authority of Roxas, under the resolution, to sell Lot No.
491-A-3-B-2 did not include the authority to sell a portion of the
adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights
thereon. Neither may such authority be implied from the authority
granted to Roxas to sell Lot No. 491-A-3-B-2 to the petitioner "on such
terms and conditions which he deems most reasonable and
advantageous."

o Under paragraph 12, Article 1878 of the New Civil Code, a special
power of attorney is required to convey real rights over
immovable property. Article 1358 of the New Civil Code requires that
contracts which have for their object the creation of real rights over
immovable property must appear in a public document. 

The petitioner cannot feign ignorance of the need for Roxas to have
been specifically authorized in writing by the Board of Directors to be
able to validly grant a right of way and agree to sell a portion of Lot No.
491-A-3-B-1. The rule is that if the act of the agent is one which requires
authority in writing, those dealing with him are charged with notice of
 that fact.

o Powers of attorney are generally construed strictly and courts will not
infer or presume broad powers from deeds which do not sufficiently
include property or subject under which the agent is to deal. The
general rule is that the power of attorney must be pursued within
legal strictures, and the agent can neither go beyond it; nor
beside it. The act done must be legally identical with that
authorized to be done.

In sum, then, the consent of the respondent to the assailed provisions in the
deed of absolute sale was not obtained; hence, the assailed provisions are
not binding on it

OTHERS:

o Absent estoppel or ratification, apparent authority cannot remedy the lack of the written
power required under the statement of frauds. In addition, the petitioner's fallacy is its
wrong assumption of the unproved premise that the respondent had full knowledge of all
the terms and conditions contained in the deed of absolute sale when Roxas executed it.

Apparent authority is based on estoppel and can arise from two instances: first, the principal
may knowingly permit the agent to so hold himself out as having such authority, and in this way,
the principal becomes estopped to claim that the agent does not have such authority; second,
the principal may so clothe the agent with the indicia of authority as to lead a reasonably
prudent person to believe that he actually has such authority. 

There can be no apparent authority of an agent without acts or conduct on the part of the
principal and such acts or conduct of the principal must have been known and relied
upon in good faith and as a result of the exercise of reasonable prudence by a third
person as claimant and such must have produced a change of position to its detriment.
The apparent power of an agent is to be determined by the acts of the principal and not by the
acts of the agent

o For the principle of apparent authority to apply, the petitioner was burdened to
prove the following: (a) the acts of the respondent justifying belief in the agency
by the petitioner; (b) knowledge thereof by the respondent which is sought to be
held; and, (c) reliance thereon by the petitioner consistent with ordinary care and
prudence. 

In this case, there is no evidence on record of specific acts made by the respondent showing or
indicating that it had full knowledge of any representations made by Roxas to the petitioner that
the respondent had authorized him to grant to the respondent an option to buy a portion of Lot
No. 491-A-3-B-1 covered by TCT No. 78085, or to create a burden or lien thereon, or that the
respondent allowed him to do so.