Shoppers Paradise Realty v.

Roque, 419 SCRA 93 (2004) On 23 December 1993, petitioner Shoppers Paradise Realty & Development Corporation, represented by its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, situated at Plaza Novaliches, Quezon City. The contract of lease and the memorandum of agreement, both notarized, were to be annotated within sixty days. The annotations, however, were never made because of the untimely demise of Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the negotiations broke down due to some disagreements. On 15 February 1995, respondent filed a case for annulment of the contract of lease and the memorandum of agreement, with a prayer for the issuance of a preliminary injunction, before the RTC. Efren P. Roque alleged that he had long been the absolute owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had no authority to enter into the assailed agreements with petitioner. The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later. Respondent, while he resided in the United States of America, delegated to his father the mere administration of the property. Respondent came to know of the assailed contracts with petitioner only after retiring to the Philippines upon the death of his father. The trial court dismissed the complaint of respondent claiming: The registration of the Deed of Donation after the execution of the lease contract did not affect the latter unless he had knowledge thereof at the time of the registration which plaintiff had not been able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the officers of the defendant corporation at least once before he caused the registration of the deed of donation in his favor and although the lease itself was not registered, it remains valid considering that no third person is involved. Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not only between the parties themselves but also between their assigns and heirs (Article 1311, Civil Code) and therefore, the lease contract together with the memorandum of agreement would be conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate therein. Moreover, the agreements have been perfected and partially executed by the receipt of his father of the downpayment and deposit totaling to P500,000.00.

The Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third persons, the appellate

court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned.

Issue: WON the agreement should be binding upon Efren Roque

Held: No. it was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent. In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter. Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent Efren not guilty of laches Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercisingdue diligence, could or should have been done earlier; it is negligence or omission to assert a right within areasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined toassert it.Efren learned of the contracts only in February 1994 after the death of his father, and in the same year,during November, he assailed the validity of the agreements. Efren not estopped from repudiating the contracts. The essential elements of estoppel in pais,in relation to the party sought to be estopped, are: 1.A clear conduct amounting to false representation or concealment of material facts or, at least, calculated toconvey the impression that the facts are otherwise than, and inconsistent with, those which the partysubsequently attempts to assert 2.An intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party 3.The knowledge, actual or constructive, by him of the real facts. With respect to the party claiming the estoppel, the conditions he must satisfy are: 1.Lack of knowledge or of the means of knowledge of the truth as to the facts in question

2.Reliance, in good faith, upon the conduct or statements of the party to be estopped 3.Action or inaction based thereon of such character as to change his position or status calculated to causehim injury or prejudice. National Bankv. Tan Ong Sze, 53 Phil. 451 (1929) Facts: The defendant at all the times alleged was the owner of two parcels of land in the City and Province of Iloilo. in Amoy, China, she executed before the United States Vice Consul at that place the power of attorney, in which she made and constituted Tan Bunco as her attorney-infact. The complaint alleges that the defendant received from the plaintiff a loan of P300,000, for which she executed and delivered to the plaintiff her certain promissory note dated May 23, 1922, a copy of which is set out and made a parts of the complaint. That to secure its payment with interests thereon at the rate of 9 per cent per annum, the defendant executed to the plaintiff a mortgage on certain real property in the City and Province of Iloilo, which instrument was duly registered in the registry of deeds of that province, a copy of which is attached to, and made a part of, the complaint, That the mortgage provided that if the terms or conditions, the plaintiff could foreclose it, for which it should receive the further sum of 10 per cent of the amount due and owing for and on account of attorney's fees, expenses and costs. Plaintiff's complaint is founded upon the promissory note, which purports to have been executed in Iloilo on May 23, 1922, by her attorney-in-fact under and by virtue of the power of attorney above described, and the mortgage which purports to have executed to plaintiff to secure the payment of the note. Issue: Whether or not under his power the attorney-in-fact had the authority to execute the promissory note or to execute the mortgage on real property to secure its payment Held: No. A power of attorney, like any other instrument, is to be construed according to the natural import of its language; and the authority which the principal has conferred upon his agent is not to be extended by implication beyond the natural and ordinary significance of the terms in which that authority has been given. The attorney has only such authority as the principal has chosen to confer upon him, and one dealing with him must ascertain at his own risk whether his acts will bind the principal. An instrument empowering an attorney, among other things, 'to buy and sell real estate, and in my name to receive and execute all necessary contracts and conveyances therefor,' does not authorize such attorney to sell and convey lands to which, as the record shows, the principal had acquired title before execution of the power. . . . The attorney may not mortgage the property; nor has he authority to execute an option The effect of this language was to confer a power to sell and transfer the title to the securities absolutely, or if not so sold, to collect them from the estate of Kunz. There is nothing in the language which by any proper construction purports to confer a power to pledge or hypothecate

the securities for any purpose, or to borrow money thereon. The words 'sell and transfer,' as there used, are of no broader signification than the words 'sell and convey,' used with reference to a conveyance of real estate ; and the latter, employed as the operative words in a power to convey land, do not carry authority to mortgage or otherwise dispose of the property. In fact the authorities are overwhelming that the power to sell and convey does not carry with it or imply the power to borrow money or to execute a mortgage on real property. No authority of any court has been cited and none will ever be found holding that a power "to sign, seal, and execute, and as may act and deed, deliver, any lease, any other deed for conveying any real or personal property" or "to sign, seal, and execute, and as my act and deed, deliver, any lease, any other deed for conveying of any real or personal property," or any similar language, standing alone and within itself, carries with it or implies the power to borrow money or to execute a real mortgage to secure the payment of a debt. The trial court also found that by her actions and conduct, the defendant had ratified and approved the acts of her agent in the execution of both the note and the mortgage. Upon that point, we have read and reread the record, and there is no legal evidenced to sustain that finding. In fact there is nothing in the record which shows or tends to show that the defendant ever knew of the execution or the existence of the note or the mortgage, or that she ever had any knowledge of the transaction in question. PNB v. Sta. Maria, 29 SCRA 203 (1969) Fact: Plaintiff bank filed this action on February 10, 1961 against defendant Maximo Sta. Maria and his six brothers and sisters, defendants-appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria, and the Associated Insurance & Surety Co., Inc. as surety, for the collection of certain amounts representing unpaid balances on two agricultural sugar crop loans due allegedly from defendants. The said sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under a special power of attorney, executed in his favor by his six brothers and sisters, defendants-appellants herein, to mortgagea 16-odd hectare parcel of land, jointly owned by all of them In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of attorneyto borrow money and mortgage any real estate owned by her. By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, for the 1952-1953 and 1953-1954 crop years, with plaintiff bank, one in the amount of P15,000.00, of which only the sum of P13,216.11 was actually extended by plaintiff, and the other in the amount of P23,000.00, of which only the sum of P12,427.57 was actually extended by plaintiff. As security for the two loans, Maximo Sta. Maria executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety bonds for the full authorized amounts of the loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. Due to failure to pay said loans, PNB filed a case on collection of money. The trial court rendered judgment in favor of PNB requiring Maximo and his six brothers and sisters together

with the surety, to be liable jointly and severally. Maximo and his surety did not appeal the judgment, however, his six brothers and sisters appeal the decision to the Supreme Court. Issue: Whether or not Maximo and his brothers and sister are liable to PNB? Held: No. Only Maximo and Valerianna are liable. Even before the filing of the present action, this Court in the similar case of De Villa vs. Fabricante had already ruled that where the power of attorney given to the husband by the wife was limited to a grant of authority to mortgage a parcel of land titled in the wife's name, the wife may not be held liable for the payment of the mortgage debt contracted by the husband, as the authority to mortgage does not carry with it the authority to contract obligation. There is a difference between authority to mortgage and authority to contract obligation. Since the power of attorney was not presented as evidence, the trial court was correct in presuming that the power was merely limited to a grant of authority to mortgage unless the contrary is shown. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to borrow money, must answer for said loans and the other defendantsappellants' only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable for the payment of such obligations, as erroneously held by the trial court. Rodriguez v. Pamintuan and De Jesus, 37 Phil 876 (1918) Facts: On the 21st of March, 1903, the defendant, Manuela de Jesus, the owner of the three parcels of land and sugar mill described in the complaint, executed power of attorney in favor of her husband Catalino Pamintuan, authorizing him to borrow money in such amount and upon such terms and conditions as he might deem proper, and to secure payment of the loan by a mortgage on her property. June 1, 1903, the husband executed in favor of Rodriguez ( deceased, leaving the plaintiffs as his testamentary heirs) an notarized instrument purporting on its face to be a deed of sale of the lands stated, for the sum of P5,000 with a reserved right in the vendor to repurchase any time within ten years from the date of the deed, and to continue occupying them under as annual rental of 120 pilones of sugar. September 2, 1914, this action was instituted to recover possession of the land and payment of the annual rental due thereon. The defendant husband admitted the execution of the document purporting to be a deed of sale, but alleged that the real purpose and intent of the parties in the execution of the document was to secure payment of the indebtedness by a mortgage upon the lands mentioned therein, and that the instrument would not be enforced as a deed of sale.

The defendant, Manuela de Jesus, entered a general denial of all the allegations of the complaint, and on her behalf it was alleged by her attorney ad litem that she was of unsound mind at the time when the various transactions evidenced by these instruments are alleged to have taken place. The trial judge held that the evidence of record conclusively establishes the execution of the power of attorney, and of the instrument purporting to be a deed of sale with the right of repurchase reserved to the vendor, and further that the defendants have repaid neither the principal (P5,000) received by the husband at the time of the execution of the instrument, nor any part of the annual payment of 120 pilones of sugar provided for in the contract, nor its equivalent in money, except only the sum of P300, payment of which is admitted by the plaintiffs. the trial court gave judgment in favor of the plaintiffs for the recovery of the possession of the land in question and for the recovery of 1,440 pilones of sugar which he took to be the total amount due under the contract for the twelve full years which had expired from the date of the contract to the date of the judgment, less 50 pilones of sugar which he found to be equivalent of P300 admittedly paid on account thereof, at the rate of P6 a pilon. Issue: Whether or not there is sale Held: No. The power of attorney from the defendant wife in favor of the defendant husband authorized merely: By means of a mortgage of my real property, to borrow and lend sums in cash, at such interest and for such periods and conditions as he may deem proper, and to collect or to pay the principal and interest thereon when due. This language cannot be construed as sufficient authority to sell the real estate of the wife, and there is nothing in the record which even tends to disclose that she did in fact authorize her husband to sell her lands, or ratified his action in executing a deed of sale therefor. It follows that neither she nor her lands would be bound by the instrument purporting on its face to be a deed of sale of these lands, if that instrument set forth the true nature of the transaction. We are well satisfied, however, upon a review of the whole record, that, acting under and by virtue of the powers conferred upon him by his wife, the husband did in fact borrow P5,000 from Rodriguez, the plaintiffs' predecessor in interest, and that he executed a public instrument purporting to be a deed of sale, with a reserved right of repurchase, by way of security for the repayment of the loan, with the understanding that although title to the land had been conveyed to him he would hold the land merely as security, and would reconvey it upon receipt of payment. The conduct and testimony of both the husband and wife support our ruling as to the true nature of the transaction, and the filing of the amended complaint by the plaintiffs, setting forth this version of the transaction in full detail, greatly strengthens our confidence in its truth and accuracy. The instrument was not recorded in the mortgage registry, and it cannot therefore be given the effect of a legal mortgage, but we are of opinion that the contract which is proved to have been

entered into by the husband acting by authority of, and on behalf of his wife, may be and should be enforced in accordance with the real intent of the parties so far as innocent third persons are not adversely affected thereby; that is to say, that it should be deemed to be a valid instrument, evidencing the loan of the money mentioned therein and binding the property for the payment of the indebtedness, but without prejudice to the right of "third persons," including innocent purchasers for value. Sargasso Construction & Development Corporation/Pick & Shovel, Inc.,/Atlantic Erectors, Inc. (Joint Venture) v. Philippine Ports Authority, 623 SCRA 260 (2010) Facts: Plaintiff Sargasso Construction and Development Corporation, Pick and Shovel, Inc. and Atlantic Erectors, Inc., a joint venture, was awarded the construction of Pier 2 and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union, after a public bidding conducted by the defendant PPA. In a letter dated October 1, 1992 of Mr. Melecio J. Go, Executive Director of the consortium, plaintiff offered to undertake the reclamation between the Timber Pier and Pier 2 of the Port of San Fernando, La Union, as an extra work to its existing construction of R.C. Pier 2 and Rock Causeway for a price of P36,294,857.03. Defendant replied thru its Assistant General Manager Teofilo H. Landicho who sent the following letter dated December 18, 1992 Notice of Award signed by PPA General Manager Rogelio Dayan was sent to plaintiff for the phase I Reclamation Contract in the amount of P30,794,230.89 and instructing it to "enter into and execute the contract agreement with this Office" and to furnish the documents representing performance security and credit line. At its meeting held on September 9, 1994, the Board decided not to approve the contract proposal, as reflected in the following excerpt of the minutes taken during said board meeting. It appears that PPA did not formally advise the plaintiff of the Boards action on their contract proposal. As plaintiff learned that the Board was not inclined to favor its Supplemental Agreement, Mr. Go wrote General Manager Agustin requesting that the same be presented again to the Board meeting for approval. However, no reply was received by plaintiff from the defendant. On June 30, 1997, plaintiff filed a complaint for specific performance and damages before the Regional Trial Court of Manila alleging that defendant PPAs unjustified refusal to comply with its undertaking, unnecessarily leading to the delay in the implementation of the award under the August 26, 1993 Notice of Award, has put on hold plaintiffs men and resources earmarked for the project, aside from effectively tying its hands in undertaking other projects for fear that plaintiffs incapacity to undertake work might be spread thinly and it might not be able to function efficiently if the PPA project and other projects should require simultaneous attention. Defendant PPA thru the Office of the Government Corporate Counsel (OGCC) filed its Answer with Compulsory Counterclaim contending that the alleged Notice of Award has already been properly revoked when the Supplemental Agreement which should have implemented the award was denied approval by defendants Board of Directors. After trial, the lower court rendered a decision in favor of the plaintiff. On August 22, 2005, the CA rendered the assailed decision reversing the trial courts decision and dismissing petitioners complaint for specific performance and damages.

Issue: Whether or not a contract has been perfected between the parties which, in turn, depends on whether or not the general manager of PPA is vested with authority to enter into a contract for and on behalf of PPA. Held: The contract was not perfected because the general manager of PPA is not vested with authority. Petitioner contends that the existence of "Notice of Award of Contract and Contractors Conforme thereto," resulting from its negotiation with respondent, proves that a contract has already been perfected, and that the other documents enumerated under the amended Rules and Regulations implementing P.D. 1594 are mere physical representations of the parties meeting of the minds; that the "Approval of Award by Approving Authority" is only a "supporting document," and not an evidence of perfection of contract, and which merely "facilitates the approval of the contract;" that PPA is bound by the acts of its general manager in issuing the Notice of Award under the doctrine of apparent authority; and that the doctrine of estoppel, being an equitable doctrine, cannot be invoked to perpetuate an injustice against petitioner. On the matter of entering into negotiated contracts by government-owned and controlled corporations, the provisions of existing laws are crystal clear in requiring the governing boards approval thereof. Contracts to which the government is a party are generally subject to the same laws and regulations which govern the validity and sufficiency of contracts between private individuals.A government contract, however, is perfected only upon approval by a competent authority, where such approval is required. The contracting officer functions as agent of the Philippine government for the purpose of making the contract. There arises then, in that regard, a principal-agent relationship between the Government, on one hand, and the contracting official, on the other. The latter though, in contemplation of law, possesses only actual agency authority. This is to say that his contracting power exists, where it exists at all, only because and by virtue of a law, or by authority of law, creating and conferring it. And it is well settled that he may make only such contracts as he is so authorized to make. Flowing from these basic guiding principles is another stating that the government is bound only to the extent of the power it has actually given its officers-agents. It goes without saying then that, conformably to a fundamental principle in agency, the acts of such agents in entering into agreements or contracts beyond the scope of their actual authority do not bind or obligate the Government. The moment this happens, the principal-agent relationship between the Government and the contracting officer ceases to exist. It was stressed that the contracting official who gives his consent as to the subject matter and the consideration ought to be empowered legally to bind the Government and that his actuations in a particular contractual undertaking on behalf of the government come within the ambit of his authority. On top of that, the approval of the contract by a higher authority is usually required by law or administrative regulation as a requisite for its perfection.

Under Article 1881 of the Civil Code, the agent must act within the scope of his authority to bind his principal. So long as the agent has authority, express or implied, the principal is bound by the acts of the agent on his behalf, whether or not the third person dealing with the agent believes that the agent has actual authority. Thus, all signatories in a contract should be clothed with authority to bind the parties they represent. P.D. 857 likewise states that one of the corporate powers of respondents Board of Directors is to "reclaim any part of the lands vested in the Authority." It also "exercise[s] all the powers of a corporation under the Corporation Law." On the other hand, the law merely vests the general manager the "general power to sign contracts" and "to perform such other duties as the Board may assign" Therefore, unless respondents Board validly authorizes its general manager, the latter cannot bind respondent PPA to a contract. The Court completely agrees with the CA that the petitioner failed to present competent evidence to prove that the respondents general manager possessed such actual authority delegated either by the Board of Directors, or by statutory provision. The authority of government officials to represent the government in any contract must proceed from an express provision of law or valid delegation of authority. Without such actual authority being possessed by PPAs general manager, there could be no real consent, much less a perfected contract, to speak of. It is of no moment if the phrase "approval of higher authority" appears nowhere in the Notice of Award. It neither justifies petitioners presumption that the required approval "had already been granted" nor supports its conclusion that no other condition (than the completion of fendering of Pier 2 as stated in the Notice of Award) ought to be complied with to create a perfected contract. Applicable laws form part of, and are read into, the contract without need for any express reference thereto; more so, to a purported government contract, which is imbued with public interest.