Bautista-Spille vs. NICORP Management and Development Corporation

A General Power of Attorney expressed in broad terms of administration does not confer authority to sell immovable property; a Special Power of Attorney is required under Articles 1874 and 1878 of the Civil Code, and any sale executed without such special authority is void.

Petitioner Florentina Bautista-Spille was the registered owner of a parcel of land in Imus City, Cavite, covered by TCT No. T-197, with an area of approximately 33,052 square meters. On June 20, 1996, she and her spouse executed a notarized General Power of Attorney in favor of her brother, respondent Benjamin Bautista, authorizing him to administer all her businesses and properties in the Philippines. The document was notarized before the Consulate General of the Philippines in New York. Years later, Benjamin entered into a contract to sell the subject property to NICORP Management and Development Corporation, prompting petitioner to seek nullification of the transaction on the ground that Benjamin lacked authority to sell.

Petitioner Florentina Bautista-Spille was the registered owner of a parcel of land covered by Transfer Certificate of Title No. T-197, located in Imus City, Cavite, with an area of more or less 33,052 square meters. On June 20, 1996, petitioner and her spouse, Harold E. Spille, executed a notarized General Power of Attorney in favor of her brother, respondent Benjamin Bautista, authorizing him to administer and conduct all her affairs and properties in the Philippines. The document was notarized before the Consulate General of the Philippines in New York, United States of America.

On August 13, 2004, Benjamin and NICORP Management and Development Corporation entered into a contract to sell covering the parcel of land under TCT No. T-197 for the agreed amount of ₱15,000,000.00. NICORP agreed to pay a down payment equivalent to twenty percent of the purchase price and the remaining balance within eight months. The contract stipulated that upon receipt of the down payment, the TCT would be deposited with the International Exchange Bank (IE Bank) and placed in escrow, to be released only upon full payment. Furthermore, Benjamin was required to submit a special power of attorney covering the sale transaction; otherwise, payment of the balance would be suspended and a penalty of ₱150,000.00 per month would be imposed. Pursuant to the contract, an Escrow Agreement dated October 13, 2004 was executed designating IE Bank as escrow agent. On October 14, 2004, NICORP issued a check for ₱2,250,000.00 representing the down payment, and the TCT was deposited with IE Bank in escrow.

Upon discovering the sale, petitioner's lawyer immediately sent demand letters to NICORP and Benjamin on October 27, 2004, and to IE Bank on October 28, 2004, informing them that she opposed the sale and that Benjamin lacked authority to enter into the contract to sell, and demanding the return of the owner's copy of the certificate of title to her attorney-in-fact, Manuel B. Flores, Jr. NICORP, Benjamin, and IE Bank failed and refused to return the title. Petitioner then filed a complaint before the RTC against Benjamin, NICORP, and IE Bank for declaration of nullity of the contract to sell, injunction, recovery of possession, and damages, with a prayer for a temporary restraining order or preliminary injunction, because NICORP had begun developing the subject property into a residential subdivision and was planning to sell lots to prospective buyers. Petitioner denied receiving the down payment.

NICORP sought dismissal, asserting that Benjamin was empowered by the General Power of Attorney to enter into the contract to sell, that the authority remained valid absent a specific revocation, and that even if Benjamin had exceeded his authority, the agency was "coupled with interest" due to the partial payment. NICORP also argued that the contract could not be revoked without reimbursing its down payment and development costs. IE Bank denied liability, contending that Benjamin possessed the necessary authority at the time the escrow was constituted and that, absent a court order, it was proper for the bank not to comply with petitioner's demand. Benjamin did not file any responsive pleading and was declared in default.

The RTC granted the writ of preliminary injunction on January 24, 2005, enjoining NICORP from making improvements, subdividing, or selling any subdivided lot of the subject property. On May 24, 2010, the RTC rendered judgment declaring the contract to sell null and void, finding that the General Power of Attorney pertained only to acts of administration and did not include authority to sell, and that NICORP was aware of Benjamin's lack of authority as evidenced by the contract's own requirement for an SPA. NICORP appealed to the CA, which reversed the RTC decision, holding that the General Power of Attorney authorized Benjamin to perform not only acts of administration but also acts of dominion including the power to dispose of the property. Petitioner's motion for reconsideration was denied.

• Insufficiency of the General Power of Attorney: Petitioner argued that the General Power of Attorney did not clothe Benjamin with authority to enter into a contract to sell the subject property, as it pertained only to the power to buy, sell, negotiate, and contract over the business and personal property but did not specifically authorize the sale of the subject property.
• Judicial Admission of Lack of Authority: Petitioner asserted that the CA erred in disregarding NICORP's stipulation during pre-trial proceedings, as stated in the pre-trial order, that Benjamin "acted beyond the scope of his authority when he failed to inform plaintiff personally as to his dealing or negotiation with NICORP and when he signed the Contract to Sell," which indicated that NICORP did not consider the General Power of Attorney as an SPA authorizing the sale.
• Bad Faith of Respondent: Petitioner contended that NICORP's knowledge of the insufficiency of the General Power of Attorney, as shown by the contract's own requirement for an SPA, indicated bad faith.
• Misapplication of Precedent: Petitioner argued that the CA erred in applying Estate of Lino Olaguer vs. Ongjoco because the facts of that case were not on all fours with the present case, and that the CA contravened the ruling in Lillian N. Mercado vs. Allied Banking Corporation.

• Sufficiency of the General Power of Attorney: NICORP countered that the General Power of Attorney sufficiently conferred authority on Benjamin to enter into the contract to sell, asserting that the written authority expressly authorized him to sell the subject property.
• Good Faith of Purchaser: NICORP insisted that it was a buyer in good faith and was never negligent in ascertaining the extent of Benjamin's authority to sell the property.
• Purpose of the SPA Requirement: NICORP explained that though the General Power of Attorney clothed Benjamin with authority to sell, it nonetheless required him to submit the SPA in order to comply with the requirements of the Register of Deeds and the Bureau of Internal Revenue.
• Escrow Agent's Position: IE Bank denied any liability, asserting that at the time of its constitution as escrow agent, Benjamin possessed the necessary authority from petitioner, and that in the absence of any court order, it was proper for the bank not to comply with petitioner's demand for surrender of the certificate of title.

• Authority to Sell: Whether Benjamin Bautista was authorized to sell the subject property under the General Power of Attorney executed by petitioner in his favor.
• Good Faith of Purchaser: Whether NICORP may be considered a purchaser in good faith.

• Authority to Sell: No. The General Power of Attorney, couched in broad terms of administration, did not confer authority to sell immovable property; a Special Power of Attorney is required under Articles 1874 and 1878 of the Civil Code for the conveyance of real rights over immovable property.
• Good Faith of Purchaser: No. NICORP was not a purchaser in good faith because it was fully aware that Benjamin lacked proper authority, as evidenced by the contract to sell's own requirement that Benjamin secure an SPA from petitioner, coupled with the imposition of a substantial penalty for non-compliance.

• Authority to Sell: The well-established rule is that when a sale of land or any interest therein is through an agent, the agent's authority must be in writing; otherwise, the sale is void, pursuant to Article 1874 of the Civil Code. Article 1878 further requires a special power of attorney to enter into any contract by which ownership of an immovable is transmitted or acquired, whether gratuitously or for valuable consideration. The Court relied on Cosmic Lumber Corporation vs. Court of Appeals, which held that the express mandate required by law to enable an appointee under a general agency to sell must be one that expressly mentions a sale or includes a sale as a necessary ingredient of the act mentioned. A power of attorney must express the powers of the agent in clear and unmistakable language, and when there is reasonable doubt that the language conveys such power, no such construction shall be given the document. A power of attorney must be strictly construed, and courts will not infer broad powers from deeds that do not sufficiently include the property or subject under which the agent is to deal. When authority is couched in general terms without mentioning any specific power to sell, mortgage, or perform other acts of strict dominion, only acts of administration are deemed conferred. The power of administration does not include acts of disposition, which are acts of strict ownership; an authority to dispose cannot proceed from an authority to administer. The General Power of Attorney in this case granted Benjamin authority to "exercise administration, general control and supervision" over petitioner's business and property and "to buy, sell, negotiate and contract" on her behalf, but nowhere did it specifically authorize the sale of the subject property or any portion thereof. There was thus no perfected contract to sell between petitioner and NICORP.

• Good Faith of Purchaser: A person dealing with an assumed agent is bound to ascertain not only the fact of agency but also the nature and extent of the agent's authority. The law requires a higher degree of prudence from one who buys from a person who is not the registered owner. In ascertaining good faith, courts are controlled by the evidence of conduct and outward acts. The Court agreed with the RTC that NICORP was fully aware Benjamin was not properly authorized to enter into any transaction regarding the sale of petitioner's property. The contract to sell itself required Benjamin to secure an SPA from petitioner within ninety days and imposed a penalty of ₱150,000.00 per month for non-compliance, plus suspension of payment of the balance. NICORP's explanation that the SPA was required merely for compliance with Register of Deeds and BIR requirements was bereft of merit, as NICORP is a real estate company familiar with the intricacies of the realty business. There was no evidence that petitioner ratified Benjamin's act; on the contrary, she immediately wrote to NICORP, IE Bank, and Benjamin opposing the sale and demanding return of the title. NICORP was therefore negligent in its dealings with Benjamin and was considered a builder in bad faith, with no right to be refunded the value of improvements it introduced on the subject property.

• Doctrine of Special Power of Attorney for Sale of Immovable Property — Under Articles 1874 and 1878 of the Civil Code, when a sale of land or any interest therein is through an agent, the authority of the agent must be in writing; otherwise, the sale is void. A special power of attorney is necessary to enter into any contract by which ownership of an immovable is transmitted or acquired, whether gratuitously or for valuable consideration. The express mandate required to enable an appointee under a general agency to sell must expressly mention a sale or include a sale as a necessary ingredient of the act mentioned. A power of attorney must express the powers of the agent in clear and unmistakable language; when there is reasonable doubt that the language conveys such power, no such construction shall be given the document. The Court applied this doctrine by finding that the General Power of Attorney, which used broad terms of administration and general authority to "buy, sell, negotiate and contract," did not specifically authorize the sale of the subject property, rendering the contract to sell void.

• Strict Construction of Powers of Attorney — A power of attorney must be strictly construed, and courts will not infer or presume broad powers from deeds which do not sufficiently include the property or subject under which the agent is to deal. When the authority is couched in general terms without mentioning any specific power to sell, mortgage, or perform other acts of strict dominion, only acts of administration are deemed conferred. The power of administration does not include acts of disposition, which are acts of strict ownership; an authority to dispose cannot proceed from an authority to administer.

• Duty to Ascertain Agent's Authority — A person dealing with an assumed agent is bound to ascertain not only the fact of agency but also the nature and extent of the agent's authority. The law requires a higher degree of prudence from one who buys from a person who is not the registered owner, who is expected to examine all factual circumstances necessary to determine if there are any flaws in the title of the transferor or in his capacity to transfer the land. Good faith is a state of mind judged by actual or fancied tokens or signs of conduct and outward acts.

• Builder in Bad Faith — A builder in bad faith has no right to be refunded the value of whatever improvements it introduced on the subject property, pursuant to Articles 449 and 546 of the Civil Code. The Court applied this by holding that NICORP, being negligent and aware of Benjamin's lack of authority, was a builder in bad faith and thus not entitled to reimbursement for its development costs.

• "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. 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." — This passage, quoting Cosmic Lumber Corporation vs. Court of Appeals, articulates the canonical formulation of the rule requiring written and specific authority for an agent to sell real estate, and is the ratio decidendi for the Court's ruling that the General Power of Attorney was insufficient.

• "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. 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." — This passage establishes the standard for construing general powers of attorney in the context of real property sales, emphasizing that the authority must be express and unmistakable.

• "When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document." — This principle of strict construction resolves any doubt against the existence of authority to sell, and was applied to find that the General Power of Attorney's broad language did not confer the power to dispose of the subject property.

• "The power of administration does not include acts of disposition, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code." — This passage delineates the fundamental distinction between administration and disposition in agency law, forming the doctrinal basis for the Court's conclusion that Benjamin's General Power of Attorney did not authorize the sale.

• Cosmic Lumber Corporation vs. Court of Appeals, 332 Phil. 948 (1996) — Controlling precedent. The Court relied on this case for the canonical formulation of the rule that an agent's authority to sell real estate must be conferred in writing with specific authority, and that a general power of attorney must expressly mention a sale or include it as a necessary ingredient of the act mentioned.
• Woodchild Holdings, Inc. vs. Roxas Electric and Construction Company, Inc., 479 Phil. 896 (2004) — Followed. Cited for the proposition that a special power of attorney is necessary to enter into any contract by which ownership of an immovable is transmitted or acquired, and for the rule that a power of attorney must be strictly construed.
• Veloso vs. Court of Appeals, 329 Phil. 398 (1996) — Followed. Cited for the rule that when authority is couched in general terms without mentioning any specific power to sell or perform other acts of strict dominion, only acts of administration are deemed conferred.
• Aggabao vs. Parulan, 644 Phil. 26 (2010) — Followed. Cited for the distinction between the power of administration and acts of disposition, holding that an authority to dispose cannot proceed from an authority to administer.
• Lintonjua vs. Fernandez, 471 Phil. 440 (2004) — Followed. Cited for the rule that a person dealing with an assumed agent is bound to ascertain not only the fact of agency but also the nature and extent of the agent's authority.
• Abad vs. Guimba, 503 Phil. 321 (2005) — Followed. Cited for the principle that the law requires a higher degree of prudence from one who buys from a person who is not the registered owner.
• Philippine National Bank vs. Militar, 526 Phil. 788 (2006) — Followed. Cited for the principle that good faith, being a question of intention, is judged by conduct and outward acts.
• Yoshizaki vs. Joy Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013 — Followed. Cited for the requirement that the authority to sell real property must be conferred in writing and must express the powers of the agent in clear and unmistakable language.

• Article 1874, Civil Code — Provides that 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. Applied to hold that Benjamin's authority to sell petitioner's property had to be in writing and specifically conferred, which the General Power of Attorney failed to satisfy.
• Article 1878, Civil Code — Enumerates instances where special powers of attorney are necessary, including paragraph (5): to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. Applied to require a special power of attorney for the contract to sell the subject property.
• Articles 449 and 546, Civil Code — Govern the rights of a builder in bad faith. Applied to deny NICORP any right to be refunded the value of improvements it introduced on the subject property, as it was held to be a builder in bad faith.

Teresita J. Leonardo-De Castro, Arturo D. Brion (Acting Chairperson), Diosdado M. Peralta, and Marvic M.V.F. Leonen concurred.