AFPRSBS vs. Sanvictores

When two or more entities are designated as "SELLER" in a contract (using the singular form) without any delineation of their respective rights and obligations, they are bound jointly and severally (in solidum) under Article 1207 of the Civil Code; furthermore, a corporation is estopped from denying the authority of its agent who acted with apparent authority when it knowingly permitted the agent to assume such authority or held the agent out to the public as possessing such authority.

Prime East Properties, Inc. (PEPI), formerly Antipole Properties, Inc., offered to sell on installment basis a parcel of land in Village East Executive Homes, a subdivision project in Binangonan, Rizal, to Eduardo Sanvictores. Despite Sanvictores having fully paid the purchase price on February 27, 1999, PEPI and its co-contracting party, AFP Retirement and Separation Benefits System (AFPRSBS), failed to execute the corresponding deed of absolute sale and deliver the transfer certificate of title, claiming that the title was still with the Philippine National Bank due to an economic crisis.

• On or about 1994, PEPI offered to sell to Eduardo Sanvictores a parcel of land designated as Lot 5, Block 64, Phase II, in Village East Executive Homes, Tayuman, Pantok, Binangonan, Rizal, covering approximately 204 square meters, on an installment basis.
• On April 20, 1994, Sanvictores paid the required down payment of P81,949.04.
• On June 9, 1994, a Contract to Sell was executed between PEPI and AFPRSBS as the "SELLER" and Sanvictores as the "BUYER."
• On February 27, 1999, Sanvictores fully paid the purchase price amounting to P534,378.79.
• Despite full payment, PEPI and AFPRSBS failed to execute the deed of absolute sale and deliver the corresponding transfer certificate of title to Sanvictores.
• On September 6, 2000, Sanvictores demanded from PEPI the execution of the deed of sale and delivery of the title, but PEPI claimed the title was still with the Philippine National Bank (PNB) and could not be released due to the economic crisis.
• PEPI failed to communicate with Sanvictores for a period of four years following the demand.
• The Contract to Sell was signed by Norma Espina for PEPI and Menandro Mena for AFPRSBS, both appearing under the singular designation "SELLER."
• The signatures of Espina and Mena also appeared in the Deed of Restrictions under the word "OWNER," with Espina signing for PEPI and Mena for AFPRSBS.
• AFPRSBS claimed that it was not the owner/developer of the subdivision and that Mena was not its authorized representative, while PEPI claimed that Espina was not AFPRSBS's treasurer.

• AFPRSBS was not the owner/developer of Village East Executive Homes but PEPI, and all certificates of title were in PEPI's name and possession.
• AFPRSBS was not the seller of the subject property; the contract to sell was signed only by Espina, the Treasurer of PEPI, and no authorized representative of AFPRSBS signed the contract.
• Under Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns and heirs; since AFPRSBS was not a party, it could not be affected, favored or prejudiced by the contract.
• AFPRSBS never dealt with Sanvictores regarding the sale, and all transactions and communications were exclusively between Sanvictores and PEPI.
• The failure to deliver the title was due to PEPI's mortgage of the subject lot to PNB, a transaction to which AFPRSBS was not a party.
• Assuming liability exists, it would only be joint and not solidary, as solidary liability cannot be presumed and must be positively and clearly expressed.
• AFPRSBS could not be liable for moral and exemplary damages, costs of litigation, attorney's fees, and administrative fine because it was not the owner or developer of the subject parcel of land.

• Both PEPI and AFPRSBS were referred to as the "seller" in the contract to sell, and the signatures of their respective representatives, Espina and Mena, appeared in the contract.
• AFPRSBS should be estopped from denying the authority of its representative because it gave Mena apparent authority to represent it in the subject transaction.
• There was nothing on the face of the notarized contract to sell that would arouse suspicion that Espina and Mena were not authorized by PEPI and AFPRSBS, respectively.
• PEPI and AFPRSBS were referred to in the entire contract as "Seller" (singular) and not "Sellers," denoting that they were only one entity, and they came to the contracting table with the intention to be bound jointly and severally.
• There was no delineation whatsoever as to their rights and obligations in the contract.
• PEPI and AFPRSBS represented themselves as the "Seller" in the contract and appeared to be partners.
• AFPRSBS should be liable for moral and exemplary damages, costs of litigation, and attorney's fees due to its breach of contractual obligations.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Whether AFPRSBS is solidarily liable with PEPI for the refund of the purchase price, damages, and other monetary awards to Sanvictores.
  • Whether AFPRSBS is liable for moral and exemplary damages, costs of litigation, and attorney's fees.
  • Whether AFPRSBS is liable for the administrative fine imposed for violation of Section 20 in relation to Section 38 of Presidential Decree No. 957.

• Procedural:
  • N/A
• Substantive:
  • The Supreme Court affirmed the solidary liability of AFPRSBS with PEPI, ruling that the nature of their obligation was solidary under Article 1207 of the Civil Code. The contract to sell expressly referred to PEPI and AFPRSBS as the "SELLER" (singular), not "SELLERS," and contained no delineation of their respective rights and obligations, indicating they came to the contracting table with the intention to be bound jointly and severally.
  • The Court applied the doctrine of agency by estoppel, holding that AFPRSBS clothed Menandro Mena with apparent authority to act on its behalf. AFPRSBS was estopped from denying Mena's authority because it knowingly permitted him to assume such authority or held him out to the public as possessing such authority, leading Sanvictores to believe that Mena was authorized to represent AFPRSBS.
  • The Court sustained the award of moral and exemplary damages, attorney's fees, and the administrative fine of P10,000.00 for violation of Section 20 in relation to Section 38 of P.D. 957, finding that AFPRSBS's unjustified refusal to execute the deed of absolute sale and deliver the title constituted a substantive breach of its legal and contractual obligations.

• Solidary vs. Joint Obligations (Article 1207, Civil Code) — Solidary obligations exist only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. In a solidary obligation, each debtor is liable for the entire obligation, and each creditor may demand satisfaction of the whole obligation from any or all debtors. Conversely, in a joint obligation, each debtor is liable only for a proportionate part of the debt. The Court applied this doctrine by interpreting the use of the singular "SELLER" to denote both PEPI and AFPRSBS, coupled with the absence of delineation of their respective obligations, as indicative of a solidary obligation.
• Agency by Estoppel/Apparent Authority — A principal is bound by the acts of his agent with apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. A corporation may be held in estoppel from denying, as against innocent third persons, the authority of its officers or agents who have been clothed by it with ostensible or apparent authority. The Court applied this to bind AFPRSBS to the contract signed by Mena, despite AFPRSBS's claim that Mena was unauthorized, because AFPRSBS clothed Mena with indicia of authority.

• "There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity."
• "Solidary obligations cannot be inferred lightly. They must be positively and clearly expressed."
• "There is estoppel when the principal has clothed the agent with indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority."
• "In an agency by estoppel or apparent authority, the principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing."
• "A corporation may be held in estoppel from denying as against innocent third persons the authority of its officers or agents who have been clothed by it with ostensible or apparent authority."

• Spouses Berot v. Siapno, G.R. No. 188944, July 9, 2014 — Cited for the definition of solidary obligation (where each debtor is liable for the entire obligation) versus joint obligation (where each debtor is liable only for a proportionate part).
• Guy v. Gacott, G.R. No. 206147, January 13, 2016 — Cited for the principle that solidary obligations must be positively and clearly expressed and cannot be inferred lightly.
• Megan Sugar Corp. v. Regional Trial Court of Iloilo, Branch 68, 665 Phil. 245 (2011) — Cited for the doctrine of agency by estoppel and the principle that a corporation may be held in estoppel from denying the authority of its agents clothed with apparent authority.
• Republic v. Bañez, G.R. No. 169442, October 14, 2015 — Cited for the definition of agency by estoppel or apparent authority.

• Article 1207, Civil Code — Provides that concurrence of two or more debtors in one obligation does not imply solidarity; solidary liability exists only when expressly stated, or when required by law or the nature of the obligation. This was the primary basis for determining the solidary nature of AFPRSBS's liability.
• Article 1311, Civil Code — Provides that contracts take effect only between the parties, their assigns and heirs. AFPRSBS invoked this to argue it was not bound by the contract, but the Court rejected this argument by finding AFPRSBS was indeed a party through its agent.
• Section 20 in relation to Section 38, Presidential Decree No. 957 (The Subdivision and Condominium Buyers' Protective Decree) — Basis for the administrative fine of P10,000.00 imposed on AFPRSBS for failure to execute the deed of absolute sale and deliver the title despite full payment.