Bitte vs. Jonas

A deed of sale executed by an agent whose authority has been revoked is unenforceable against the principal where the third party had notice—actual or implied—of the revocation; the doctrine of apparent authority does not protect a third party who dealt directly with the principal and was thereby put on inquiry as to the continuation of the agent's authority, and a deed of sale that was not duly notarized is a private document whose genuineness and due execution must be independently proved.

Rosa Elsa Serrano Jonas owned a property at 820 corner Jacinto Street and Quezon Boulevard, Davao City, covered by TCT No. T-112717. Before emigrating to Australia in 1985, she executed a Special Power of Attorney authorizing her mother, Andrea C. Serrano, to sell the property. Rosa Elsa's brother, Cipriano Serrano, later offered the property for sale to Spouses Benjamin and Farida Yap Bitte, presenting Andrea's SPA as authority for the transaction. The property was at all material times mortgaged to Mindanao Development Bank, which later foreclosed the mortgage and sold the property at public auction on December 14, 1998. The parties' conflicting claims over the property spawned two civil cases that were eventually consolidated.

Rosa Elsa Serrano Jonas was the registered owner of a property at 820 corner Jacinto Street and Quezon Boulevard, Davao City, covered by TCT No. T-112717. On July 19, 1985, before leaving for Australia, she executed a Special Power of Attorney authorizing her mother, Andrea C. Serrano, to sell the property. Sometime in May 1996, Cipriano Serrano, Andrea's son and Rosa Elsa's brother, offered the property for sale to Spouses Benjamin and Farida Yap Bitte, showing them Andrea's SPA. On September 3, 1996, Cipriano received ₱200,000.00 from Spouses Bitte as advance payment, followed by ₱400,000.00 on September 10, 1996. Spouses Bitte then sought a meeting for final negotiation with Rosa Elsa, who was in Australia and had no funds for travel; to enable her return, Spouses Bitte paid for her round-trip ticket.

On October 10, 1996, shortly after her arrival in the Philippines, Rosa Elsa revoked the SPA through an instrument of even date and handed a copy to Andrea. The next day, October 11, 1996, the parties met at Farida Bitte's office, but no final agreement was reached. Rosa Elsa offered to refund the airfare and return the unused ticket, but Spouses Bitte refused. The following day, Rosa Elsa withdrew from the transaction. On October 17, 1996, Spouses Bitte filed a Complaint for Specific Performance with Damages before the RTC, docketed as Civil Case No. 24,771-96, seeking to compel Rosa Elsa, Andrea, and Cipriano to transfer title to their names.

While the case was pending, Andrea sold the subject property to Spouses Bitte through a deed of absolute sale dated February 25, 1997, notarized by Atty. Bernardino Bolcan, Jr. Rosa Elsa asked Andrea about the sale, but her questions were ignored and her pleas for cancellation and restoration of the property were disregarded. The property had earlier been mortgaged by Rosa Elsa to Mindanao Development Bank; upon her failure to pay the loan on maturity, the mortgage was foreclosed and the property sold at public auction on December 14, 1998. Armed with the deed of absolute sale from Andrea, Spouses Bitte redeemed the property on September 14, 1998 from the highest bidder, Thelma Jean Salvana, for ₱1.6 million. Thereafter, Spouses Bitte sold the property to Ganzon Yap, married to Haima Yap, and a new title, TCT No. T-315273, was issued in the Yaps' names.

On November 16, 1999, Spouses Jonas filed a complaint for Annulment of Deed of Absolute Sale, Cancellation of TCT, and Recovery of Possession, docketed as Civil Case No. 27,667-99. The two cases were eventually consolidated and jointly heard before RTC-Branch 13. Spouses Bitte were repeatedly declared in default or non-suited for failure to attend pre-trial conferences, and Rosa Elsa presented her evidence ex parte. The RTC, on January 18, 2007, confirmed the dismissal of Civil Case No. 24,771-96 and directed Spouses Bitte to pay Rosa Elsa ₱1,546,752.80 representing the balance of the sale, with 12% interest per annum. The Court of Appeals reversed, declaring the deed of absolute sale null and void, cancelling TCT No. T-315273, and ordering reinstatement of TCT No. T-112717 in Rosa Elsa's name.

• Validity of the Deed of Sale: Petitioners argued that the deed of absolute sale executed by Andrea was valid and legal because the SPA was not validly revoked—the revocation was not registered in the Office of the Register of Deeds of Davao City, and thus Andrea's authority to transact on behalf of Rosa Elsa subsisted.
• Effect of the CA Ruling on Foreclosure: Petitioners maintained that the CA's declaration of the deed null and void, coupled with cancellation of TCT No. T-315273 and reinstatement of TCT No. T-112717, without attacking the auction sale and redemption by Spouses Bitte, was a highly questionable act.
• Right of Redemption: Petitioners contended that, considering the deed of absolute sale was valid, they could redeem the property pursuant to Act No. 3135, as amended, and Section 27 of Rule 39 of the Rules of Court.
• Good Faith of Spouses Yap: Petitioners asserted that no evidence was presented showing that Ganzon Yap bought the property in bad faith, given that TCT No. T-112717 bore no annotation that should have alarmed him; as a layman, he could not have been expected to go beyond the title to look for vices or defects.

• Loss of Personality to File Petition: Respondents countered that Spouses Bitte had been declared in default by the RTC and, being in default, had lost the legal personality to resort to the petition.
• Factual Nature of Issues: Respondents argued that the questions presented in the petition were factual, not legal, and that this Court, not being a trier of facts, must deny the petition.
• Invalidity of the Deed of Sale: Respondents maintained that the SPA was not enforceable and that the deed of absolute sale executed by Andrea was a nullity because it was made with knowledge on the part of Spouses Bitte of the revocation of Andrea's authority.
• Bad Faith of Spouses Yap: Respondents averred that Spouses Yap could not be considered purchasers in good faith because they failed to verify the authority of their vendors, Spouses Bitte, considering that the certificate of title was still registered in Rosa Elsa's name.

• Procedural — Admissibility of Appellants' Brief: Whether the Court of Appeals departed from the accepted and usual course of judicial proceedings when it allowed the appellants' brief filed by respondents in violation of Section 7, Rule 44 of the Rules of Court.
• Revocation of SPA — Enforceability Against Third Persons: Whether the CA's finding that the revocation of the SPA was enforceable against third persons, despite lack of basis, is in accord with law.
• Validity of the Deed of Sale: Whether the CA's finding that the deed of sale was invalid is supported by strong and conclusive evidence as required by law.
• Legal Effects of Foreclosure Sale: Whether the CA's ruling disregarding the legal effects of the foreclosure sale departed from established juridical pronouncements.
• Innocent Purchaser for Value: Whether the CA's ruling not finding Ganzon Yap as an innocent purchaser for value is consistent with the principle of indefeasibility of title.

• Procedural — Admissibility of Appellants' Brief: No. The petition was denied outright on the ground that the issues raised were factual, not legal, and this Court is not a trier of facts; none of the recognized exceptions to the binding nature of CA factual findings were invoked.
• Revocation of SPA — Enforceability Against Third Persons: Yes. The revocation of the SPA was enforceable against Spouses Bitte because they had implied notice of the revocation when Rosa Elsa directly negotiated with them, thereby putting them on inquiry as to Andrea's continuing authority pursuant to Article 1924 of the Civil Code.
• Validity of the Deed of Sale: Yes. The deed of sale was unenforceable because it was not duly notarized—the National Archives certified that no copy was on file and the notarial entries corresponded to a different document—and Spouses Bitte, having been declared in default, failed to prove its genuineness and due execution as required for a private document under Section 20, Rule 132 of the Rules of Court.
• Legal Effects of Foreclosure Sale: No. Spouses Bitte had no personality to redeem the foreclosed property because they acquired no valid interest in the property, the deed of sale being unenforceable; they were not among the persons authorized to redeem under Section 6 of Act No. 3135 and Section 27 of Rule 39 of the Rules of Court.
• Innocent Purchaser for Value: No. Spouses Yap were not purchasers in good faith and for value because they bought from Spouses Bitte, who were not the registered owners—the title was still in Rosa Elsa's name—and they failed to present any evidence of the diligence required of a buyer dealing with a non-registered owner.

• Procedural — Admissibility of Appellants' Brief: The Court first addressed the procedural question of whether petitioners, having been declared in default, retained the personality to file the petition. The rule is that the right to appeal from a judgment by default is not lost and may be exercised on grounds that the judgment is excessive, different in kind from that prayed for, contrary to the evidence, or contrary to law. Despite the burden of default, petitioners could avail of all remedies, including an appeal by certiorari under Rule 45. On the second procedural matter, the Court found that the questions forwarded were factual in nature. While the rule that CA factual findings are final and conclusive admits of exceptions as enumerated in Development Bank of the Philippines vs. Traders Royal Bank, none were invoked or cited in the petition. On that score alone, the petition should be denied outright.

• Revocation of SPA — Enforceability Against Third Persons: The Court applied the doctrine of apparent authority, under which acts of an agent within the apparent scope of authority bind the principal even after actual authority has been withdrawn, unless the third party had notice—actual or implied—of the revocation. Petitioners relied on Section 52 of the Property Registration Decree, arguing that without registration of the revocation in the Registry of Deeds, they could not be bound by it. The Court rejected this argument. Under Article 1924 of the Civil Code, an agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. Here, Rosa Elsa returned to the Philippines and directly negotiated with Spouses Bitte on October 11, 1996. Her act of taking over the negotiation showed that Andrea's authority had been revoked. At that point, Spouses Bitte had information sufficient to make them believe Andrea was no longer an agent or should have compelled them to make further inquiries. No attempt was shown that they took the necessary steps to ascertain whether Andrea was still authorized. Despite their direct negotiation with Rosa Elsa, they still entered into a contract with Andrea on February 25, 1997. Persons dealing with an agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of the agent's authority.

• Validity of the Deed of Sale: The Court agreed with the CA that the genuineness and due execution of the deed of sale were not established. Although a notarized document enjoys the presumption of regularity, it can be impugned by strong, complete, and conclusive proof of its falsity or nullity. The National Archives certified that it had no copy on file of the Deed of Absolute Sale dated February 25, 1997, sworn before Atty. Bernardino N. Bolcan, Jr., denominated as Doc. No. 988, Page No. 198, Book No. 30, Series of 1997. Their records showed that the document executed on that date with exactly the same notarial entries pertained to a Deed of Assignment of Foreign Letter of Credit in favor of Allied Banking Corporation. This irrefutable fact rendered doubtful that the subject deed was notarized. Not having been properly and validly notarized, the deed could not be considered a public document under Section 19, Rule 132 of the Rules of Court. As a private document, it was subject to the requirement of proof under Section 20, Rule 132, requiring proof of due execution and authenticity. The party invoking the deed's validity bore the burden of proving its authenticity and due execution. Because Spouses Bitte were declared in default, they failed to discharge that burden. Without the presumption of regularity and coupled with the default of the relying party, the purported sale could not be considered—it was as if there was no deed of sale. Even assuming arguendo that genuineness and due execution were proven, the deed was still unenforceable under Articles 1317 and 1403(1) of the Civil Code, as it was executed by one who had no authority or had acted beyond her powers. The sale was executed by an agent whose authority—actual or apparent—had been revoked, and must be treated as having been entered into by Andrea in her personal capacity. One can sell only what one owns or is authorized to sell, and the buyer acquires no more right than what the seller can legally transfer.

• Legal Effects of Foreclosure Sale: Because Spouses Bitte acquired no interest in the subject property—the deed they anchored their claims on did not bind Rosa Elsa—they did not have the personality to redeem the foreclosed property. Section 6 of Act No. 3135, as amended, and Section 27 of Rule 39 of the Rules of Court enumerate the persons who may exercise the right of redemption: the debtor, successors in interest, judicial creditor, judgment creditor, or any person having a lien on the property subsequent to the mortgage. Spouses Bitte were not among those enumerated, as they were not successors-in-interest or transferees because no right was conveyed by Rosa Elsa on account of the revocation of the authority given to Andrea. As held in Castro vs. IAC, only such persons as are authorized by statute can redeem from an execution sale.

• Innocent Purchaser for Value: The burden of proving the status of a purchaser in good faith and for value lies upon one who asserts that status, and this burden cannot be discharged by mere invocation of the ordinary presumption of good faith. The title was still registered in Rosa Elsa's name when Spouses Yap bought the property from Spouses Bitte. The rule is that a person who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary to determine if there are any flaws in the title of the transferor or in the capacity to transfer the land. A higher degree of prudence is expected. No evidence was presented to show that Spouses Yap exerted the required diligence. They were impleaded in the case but remained silent and did not even join Spouses Bitte in the petition. A purchaser cannot close his eyes to facts which should put a reasonable man on guard and then claim good faith. The transfer to Spouses Yap was null and void because Spouses Bitte had nothing to sell or transfer.

• Doctrine of Apparent Authority — Acts and contracts of an agent within the apparent scope of the authority conferred on him, although actual authority has been withdrawn, revoked, or terminated, bind the principal. Apparent authority survives the termination of actual authority as to third parties who relied in good faith on the appearance of authority, unless they had notice—actual or implied—of the termination. Implied notice may arise when the principal directly deals with the third person, which under Article 1924 of the Civil Code operates as a revocation of the agency and charges the third person with knowledge of the revocation. In this case, Rosa Elsa's direct negotiation with Spouses Bitte on October 11, 1996 constituted implied notice of Andrea's revoked authority, defeating any claim of apparent authority.

• Presumption of Regularity of Notarized Documents — A notarized document enjoys the presumption of regularity and is considered a public document, but this presumption can be impugned by strong, complete, and conclusive proof of falsity or nullity. If the document is shown not to have been duly notarized, it is a private document whose genuineness and due execution must be proved under Section 20, Rule 132 of the Rules of Court. The National Archives' certification that the notarial entries corresponded to an entirely different document rebutted the presumption, rendering the deed a private document. Because Spouses Bitte were in default, they failed to prove its due execution and authenticity.

• Purchaser in Good Faith and For Value — The burden of proving the status of a purchaser in good faith lies upon the one who asserts it; this burden cannot be discharged by mere invocation of the presumption of good faith. A person who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary to determine any flaws in the title or capacity of the transferor, and a higher degree of prudence is required. Spouses Yap failed to adduce any evidence of the requisite diligence, having bought from Spouses Bitte while the title was still in Rosa Elsa's name.

• Right of Redemption from Foreclosure Sale — Only persons expressly authorized by statute may redeem property from an execution or foreclosure sale. Under Section 6 of Act No. 3135 and Section 27 of Rule 39, these include the debtor, successors in interest, judicial or judgment creditors, and persons having a lien subsequent to the mortgage. Spouses Bitte, having acquired no valid interest through the unenforceable deed, were not among those enumerated and had no personality to redeem.

• "Basic is the rule that the revocation of an agency becomes operative, as to the agent, from the time it is made known to him. Third parties dealing bona fide with one who has been accredited to them as an agent, however, are not affected by the revocation of the agency, unless notified of such revocation." — This passage states the foundational rule on revocation of agency and its effect on third parties, anchoring the Court's application of the doctrine of apparent authority.

• "Under Article 1924 of the New Civil Code, 'an agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons.' Logic dictates that when a principal disregards or bypasses the agent and directly deals with such person in an incompatible or exclusionary manner, said third person is deemed to have knowledge of the revocation of the agency." — This passage articulates the principle of implied notice through the principal's direct dealings with the third person, the decisive rationale for finding Spouses Bitte chargeable with knowledge of the revocation.

• "Not having been properly and validly notarized, the deed of sale cannot be considered a public document." — This sentence marks the critical threshold determination that stripped the deed of the presumption of regularity and reclassified it as a private document, shifting the burden of proof to Spouses Bitte, who could not discharge it due to default.

• "A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor." — This formulation encapsulates the standard of diligence required of purchasers dealing with non-registered owners, the basis for denying Spouses Yap the protection accorded to good-faith purchasers.

• Development Bank of the Philippines vs. Traders Royal Bank, 642 Phil. 547 (2010) — Cited for the enumerated exceptions to the rule that factual findings of the Court of Appeals are binding and conclusive on the Supreme Court; none of the exceptions were invoked by petitioners.
• Cervantes vs. Court of Appeals, 363 Phil. 399 (1999) — Cited for the proposition that when a third person knows the agent was acting beyond his power or authority, the principal cannot be held liable for the agent's acts.
• Castro vs. IAC, 248 Phil. 95 (1988) — Cited for the rule that only persons authorized by statute may redeem from an execution sale.
• Banate vs. Philippine Countryside Rural Bank, 639 Phil. 35 (2010) — Cited for the definition of apparent authority and the principle that persons dealing with an agent must ascertain the fact and extent of agency at their peril.
• Ramon Rallos vs. Felix Go Chan and Sons Realty Corporation, 171 Phil. 222 (1978) — Cited for the Civil Code axiom that no one may contract in the name of another without authorization, and that contracts so entered are unenforceable unless ratified.
• Heirs of Bucton vs. Go, G.R. No. 188395, November 20, 2013 — Cited for the rule that the burden of proving good-faith purchaser status lies on the one asserting it and cannot be discharged by mere presumption of good faith.
• Heirs of Sarili vs. Lagrosa, G.R. No. 193517, January 15, 2014 — Cited for the rule that a buyer from a non-registered owner must examine all factual circumstances and exercise a higher degree of prudence.

• Article 1317, Civil Code — Provides that no one may contract in the name of another without authorization, and that a contract entered into by one without authority or who has acted beyond his powers is unenforceable unless ratified. Applied to hold the deed unenforceable because Andrea's authority had been revoked.
• Article 1403(1), Civil Code — Classifies as unenforceable those contracts entered into in the name of another by one given no authority or legal representation, or who has acted beyond his powers. Applied in conjunction with Article 1317.
• Article 1924, Civil Code — Provides that an agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. Applied to find that Rosa Elsa's direct negotiation with Spouses Bitte constituted implied notice of revocation.
• Article 1358, Civil Code — Requires that acts and contracts transmitting or extinguishing real rights over immovable property appear in a public document. Cited to underscore the form requirement for the deed of sale.
• Section 19, Rule 132, Rules of Court — Classifies documents as public or private; documents acknowledged before a notary public are public documents. Applied to determine that the deed, not being duly notarized, was not a public document.
• Section 20, Rule 132, Rules of Court — Requires that before a private document is received as authentic, its due execution and authenticity must be proved. Applied to impose the burden of proof on Spouses Bitte, which they failed to discharge due to default.
• Section 52, Property Registration Decree (P.D. No. 1529) — Provides that registration of conveyances affecting registered land constitutes constructive notice to all persons. Petitioners invoked it, but the Court held that constructive notice through registration was not the exclusive mode of notice; implied notice arose from Rosa Elsa's direct dealings.
• Section 6, Act No. 3135, as amended — Enumerates persons who may redeem foreclosed property: the debtor, successors in interest, judicial creditors, judgment creditors, or persons having a lien subsequent to the mortgage. Applied to deny Spouses Bitte's right of redemption.
• Section 27, Rule 39, Rules of Court — Enumerates persons who may redeem real property sold in execution: the judgment obligor or successor in interest, and creditors having a lien subsequent to that under which the property was sold. Applied in conjunction with Act No. 3135.

Carpio (Chairperson), Del Castillo, Perez, and Leonen, JJ., concurred.