Estate of Lino Olaguer vs. Emiliano M. Ongjoco

When real property is sold through an agent, the agent's authority must be in writing, and a special power to sell an immovable may be validly incorporated in a general power of attorney if the act is expressly specified; a buyer who relies on a duly notarized power of attorney containing such express authority is an innocent purchaser for value, but a buyer cannot claim good faith where no written power of attorney is presented to prove the agent's authority.

Lino Olaguer died leaving an estate under probate, with Olivia P. Olaguer as administrator and Eduardo Olaguer later as co-administrator. Olivia subsequently married Jose A. Olaguer. The estate's properties, including Lot No. 76 in Guinobatan, Albay, became the subject of multiple dispositions. The dispute concerns the Civil Code rules on agency, particularly the writing and special-power requirements for sales of land through an agent, and the status of a purchaser for value.

Lino Olaguer died on October 3, 1957, and Special Proceedings No. 528 for probate of his will was filed in the then Court of First Instance of Albay. Olivia P. Olaguer, his surviving spouse, was appointed administrator pursuant to the will, and Eduardo Olaguer was later appointed co-administrator. Olivia married Jose A. Olaguer on October 15, 1959 before the Justice of the Peace of Sto. Domingo (Libog), Albay, and they were married in church on January 24, 1965. In an order dated April 4, 1961, the probate court authorized the sale of some estate properties to pay the estate's obligations.

Pursuant to that authority, on December 12, 1962, administrators Olivia and Eduardo sold twelve parcels of land—Lots 4518, 4526, 4359, 8750, 7514, 6608, 8582, 8157, 7999, 6167, 8266, and 76, with a total area of 99 hectares—to Pastor Bacani for P25,000; the probate court approved the sale on December 12, 1962. The next day, December 13, 1962, Bacani sold back the properties: Lot No. 76 to Eduardo and Olivia for P12,000 in the proportion of 7/13 and 6/13 pro indiviso, respectively; four lots (4518, 4526, 4359, and 8750) to Olivia for P10,700; and seven lots (7514, 6608, 8582, 8157, 7999, 6167, and 8266) to Eduardo for P2,500. TCT No. T-14654 for Lot No. 76 was issued on December 13, 1962 in the names of Eduardo B. Olaguer and Olivia P. Olaguer to the extent of 7/13 and 6/13 pro indiviso, respectively.

Relying on the same April 4, 1961 order but without prior notice or permission from the probate court, Olivia and Eduardo sold ten parcels of land to Estanislao Olaguer on November 1, 1965 for P7,000; the probate court approved this sale on November 12, 1965. Thereafter, a series of powers of attorney and transfers followed. On July 7, 1966, Olivia executed a special power of attorney in favor of Jose A. Olaguer authorizing him to sell, mortgage, assign, transfer, endorse, and deliver properties covered by TCT No. 14654 for Lot 76 6/13 share only, and other titles; on the same date, Estanislao executed a special power of attorney in favor of Jose over other properties. On March 1, 1967, Jose, as attorney-in-fact of Estanislao, mortgaged Lots 7589, 7593, and 7396 to the Philippine National Bank (PNB) as security for a P10,000 loan; the mortgage was foreclosed on June 13, 1973, and the properties were sold at public auction to PNB, which transferred them to the Republic of the Philippines on December 10, 1990 pursuant to Executive Order No. 407 for agrarian reform purposes. On October 29, 1966, Estanislao executed a general power of attorney in favor of Jose; on December 29, 1966, Estanislao sold ten parcels to Jose for P15,000; on March 16, 1968, Estanislao sold Lots 4521 and 4522 to Jose for P1 and other valuable consideration; on June 5, 1968, Estanislao sold Lots 8635 and 8638 to Jose for P1 and other valuable consideration; on May 13, 1971, Jose, as attorney-in-fact of Estanislao, sold Lots 1557 and 1676 to his son Virgilio Olaguer for P1 and other valuable consideration; and on July 15, 1974, Jose sold Lots 4521 and 4522 to Virgilio for P1,000. On September 16, 1978, Virgilio executed a general power of attorney in favor of Jose.

Lot No. 76, with an area of 2,363 square meters, is in the heart of the Poblacion of Guinobatan, Albay; Lino Olaguer inherited it from his parents, and their ancestral home stood on it. Jose caused the subdivision survey of Lot No. 76 into eleven lots—76-A through 76-K—on April 3, 1972, and the survey was approved on October 5, 1973. A subdivision agreement was entered into on November 17, 1973 among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre, and Emiliano M. Ongjoco, and it was annotated in TCT No. 14654. Under the agreement, Olivia received Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G; Domingo Candelaria received Lot 76-A; Domingo O. de la Torre received Lots 76-H, 76-I, and 76-J; and Ongjoco received Lot 76-K with an area of 473 square meters. After the subdivision, Jose, as attorney-in-fact of Olivia, sold Lots 76-B to 76-G to his son Virgilio on January 9, 1974 for P3,000. Lots 76-B and 76-C were consolidated and subdivided anew into Lot No. 1, with an area of 186 square meters, and Lot No. 2, with an area of 185 square meters, under Consolidation Subdivision Plan (LRC) Pcs-20015.

Ongjoco thereafter acquired several of these lots from Jose, who acted as purported attorney-in-fact of Virgilio. On January 15, 1976, Jose, claiming to be Virgilio's attorney-in-fact under a general power of attorney, Doc. No. 141, Page No. 100, Book No. 7, Series of 1972, sold Lot No. 1 to Ongjoco for P10,000; that power of attorney was not presented, marked, or formally offered in evidence. On September 7, 1976, Jose, again claiming authority under the same general power of attorney, sold Lot No. 2 to Ongjoco for P10,000. On July 16, 1979, Jose, as attorney-in-fact of Virgilio under a general power of attorney, Doc. No. 378, Page No. 76, Book No. 14, Series of 1978, sold Lot No. 76-D to Ongjoco for P5,000; the same Lot No. 76-D was sold again to Ongjoco on October 22, 1979 for P10,000. On July 3, 1979, Jose sold Lots 76-E and 76-F to Ongjoco for P15,000; the same lots were sold again to Ongjoco on October 25, 1979 for P30,000. On July 2, 1979, Jose sold Lot No. 76-G to Ongjoco for P10,000; the same Lot No. 76-G was sold again to Ongjoco on February 29, 1980 for P10,000. Although Lot No. 76-D had already been sold to Ongjoco in 1979, Jose, as attorney-in-fact of Virgilio, filed a petition for the issuance of a second owner's copy of the title on August 8, 1980 without mentioning the sale. Virgilio later executed an affidavit on August 1, 1986 denying that he had bought any property from the estate of Lino Olaguer and stating that if documents showed such a fact, he did not know how they came about.

Olivia and Eduardo were removed as administrators, and on February 12, 1980, Linda Olaguer Montayre was appointed administrator by the probate court. Jose died on January 24, 1985, and Olivia died on August 21, 1997. On January 28, 1980, the Estate of Lino Olaguer, represented by the legitimate children of Lino Olaguer and Olivia P. Olaguer, filed an action for Annulment of Sales of Real Property and/or Cancellation of Titles in the then Court of First Instance of Albay, docketed as Civil Case No. 6223. The original complaint alleged that the sales of Lots Nos. 578, 1557, 1676, 4521, 4522, 8635, 8638, 7589, 7593, and 7396 to Estanislao Olaguer were absolutely simulated or fictitious and prayed for annulment of the resulting titles. An amended complaint later impleaded Ongjoco as transferee of Virgilio with respect to Lots 1, 2, 76-D, 76-E, 76-F, and 76-G. The trial court found that the sales to Pastor Bacani and Estanislao Olaguer were absolutely simulated and void ab initio for lack of consideration and intended to deprive compulsory heirs of their legitime; it also found that Ongjoco could not claim good faith because he did not verify the title and capacity of his vendor, knew from the 1973 subdivision agreement that Olivia owned Lots 76-B to 76-G, and that the documents for the lots he bought from Jose as attorney-in-fact of Virgilio suffered from infirmities. The Court of Appeals, on the other hand, found the evidence insufficient to show that Ongjoco knew of facts indicative of a defect in the title of Olivia or Virgilio.

• Good Faith of Ongjoco: Petitioners maintained that the Court of Appeals erred in ruling that respondent Emiliano M. Ongjoco was a buyer in good faith despite facts and circumstances found by the trial court that should have put him on notice of the estate's right or interest over the properties.
• Duty to Verify: Petitioners argued that because Ongjoco knew Olivia P. Olaguer owned the properties in 1973 and dealt only with Jose A. Olaguer as an agent in January 1976, he should have ascertained the extent of Jose's authority and the title of Virgilio Olaguer as principal and owner.
• Bad-Faith Circumstances: Petitioners cited the affidavit of Virgilio Olaguer denying any purchase from the estate; the failure to present or offer the power of attorney for Lots 1 and 2; the existence of two deeds of sale over Lot 76-D, two over Lots 76-E and 76-F, and two over Lot 76-G; and Jose's filing of a petition for a second owner's copy of the title to Lot 76-D on August 8, 1980 after the alleged sale to Ongjoco, without mentioning the sale.
• Disregard of Trial Court Findings: Petitioners argued that the Court of Appeals disregarded the trial court's clear findings of fact and conclusions absent strong and cogent reasons.
• PNB Restitution: In the Court of Appeals, petitioners also argued that the trial court erred in not ordering restitution or compensation for the value of the parcels mortgaged to PNB despite the mortgage being declared null and void, contending that PNB benefited from a void transaction and should be liable for the value of the land minus the cost of the mortgage and reasonable expenses for foreclosure, consolidation, and transfer.

• Innocent Purchaser: Respondent countered that he was an innocent purchaser for value, invoking the Court of Appeals' ruling.
• Ownership by Virgilio: Respondent insisted that when he acquired the subject properties, they were already owned by Virgilio Olaguer.
• Written Authority: Respondent argued that Jose A. Olaguer was duly authorized by a written power of attorney when the properties were sold to him, and that this fact alone validated the sales and foreclosed the need for any inquiry beyond the title of the principal; all the law requires is that the agent's authority be in writing.
• Affirmative Defenses: In the Court of Appeals, respondent argued that the trial court erred in declaring the deeds of sale in favor of Pastor Bacani and Eduardo Olaguer, and subsequent transfers and certificates, null and void; in ordering reconveyance of the lots sold to him; and in failing to resolve his affirmative defenses of prescription, the authority of Olivia and Eduardo to dispose of properties formerly belonging to the estate, recourse in a court of co-equal jurisdiction, and forum shopping.

• Good Faith as to Lots 1 and 2: Whether Emiliano M. Ongjoco was an innocent purchaser for value of Lots 1 and 2 sold to him by Jose A. Olaguer as purported attorney-in-fact of Virgilio Olaguer despite the absence of a written power of attorney.
• Good Faith as to Lots 76-D to 76-G: Whether Emiliano M. Ongjoco was an innocent purchaser for value of Lots 76-D, 76-E, 76-F, and 76-G sold to him by Jose A. Olaguer under a general power of attorney executed by Virgilio Olaguer.

• Good Faith as to Lots 1 and 2: No. Ongjoco was in bad faith because the written power of attorney purportedly issued by Virgilio Olaguer to Jose A. Olaguer for the sale of Lots 1 and 2 was never presented or offered in evidence; under Article 1874 of the Civil Code, a sale of land through an agent without written authority is void.
• Good Faith as to Lots 76-D to 76-G: Yes. Ongjoco was an innocent purchaser for value because he relied on a duly notarized general power of attorney executed by Virgilio Olaguer that expressly empowered Jose A. Olaguer to sell any of Virgilio's properties; the special-power requirement was satisfied by that express mandate.

• Good Faith as to Lots 1 and 2: Article 1874 requires that when the sale of a piece of land or any interest therein is made through an agent, the agent's authority must be in writing; otherwise, the sale is void. Article 1878 also requires a special power of attorney for an agent to enter into a contract transmitting or acquiring ownership of an immovable. When Lots 1 and 2 were sold to Ongjoco through Jose A. Olaguer, the transfer certificates of title were in Virgilio's name. The power of attorney purportedly issued by Virgilio in favor of Jose for the sale of Lots 1 and 2 was never presented to the trial court, and Ongjoco offered no explanation for the omission. Apart from Ongjoco's self-serving statement, no evidence proved the alleged written power of attorney. Because no written power of attorney existed in the record, the trial court correctly disregarded the claim of its existence, and Ongjoco's claim of good faith as to Lots 1 and 2 had no basis.
• Good Faith as to Lots 76-D to 76-G: For Lots 76-D, 76-E, 76-F, and 76-G, Ongjoco presented a general power of attorney executed by Virgilio Olaguer. Although the law requires a special power of attorney, the general power of attorney was sufficient because Jose A. Olaguer was expressly empowered to sell any of Virgilio's properties and to sign, execute, acknowledge, and deliver any agreement therefor. Even if a document is designated as a general power of attorney, the special-power requirement is met if there is a clear mandate from the principal specifically authorizing the performance of the act; the special power may be included in the general power when the act or transaction for which the special power is required is specified therein. On its face, the written power of attorney contained Virgilio Olaguer's signature and was duly notarized, making it a public document with the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence. No evidence overcame that presumption, and no circumstance involving the document would have aroused Ongjoco's suspicion or required him to inquire beyond its four corners in the exercise of reasonable prudence. Ongjoco therefore had every right to rely on the power of attorney in entering into the contracts of sale of Lots 76-D to 76-G with Jose A. Olaguer. Virgilio's affidavit disavowing any purchase was irrelevant because it was executed on August 1, 1986, six years after the last sale in 1980; good faith is determined at the time the parties entered into the contract of sale. The fact that Lots 76-D to 76-G were sold to Ongjoco twice did not warrant a conclusion of bad faith, as those incidents might point to other obscured motives but did not indicate that Ongjoco knew of any defect in the owner's title. Jose's petition for a second owner's copy of the title to Lot 76-D after the sale did not inevitably indicate Ongjoco's bad faith; it was more likely that Jose was compiling documents necessary for transfer, and if the title was lost before transfer, it would be the vendor's responsibility to cause its reconstitution.

• Agency; Sale of Land Through an Agent — Written Authority — Under Article 1874 of the Civil Code, when the sale of a piece of land or any interest therein is made through an agent, the agent's authority must be in writing; absent this requirement, the sale is void. The Court applied this rule to Lots 1 and 2 because the purported written power of attorney from Virgilio Olaguer to Jose A. Olaguer was never presented or offered in evidence, leaving no proof of authority and defeating Ongjoco's claim of good faith.
• Special Power of Attorney for Sale of Immovable; Inclusion in General Power — Article 1878 requires a special power of attorney for an agent to enter into a contract by which ownership of an immovable is transmitted or acquired. The Court clarified that even if a document is designated as a general power of attorney, the special-power requirement is met if there is a clear mandate from the principal specifically authorizing the performance of the act; the special power may be included in the general power when the act or transaction for which the special power is required is specified therein. The Court applied this to the general power of attorney executed by Virgilio Olaguer in favor of Jose A. Olaguer, which expressly empowered Jose to sell any of Virgilio's properties, thereby validating the sales of Lots 76-D to 76-G.
• Innocent Purchaser for Value; Reliance on Notarized Power of Attorney — A duly notarized power of attorney is a public document with the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence. A buyer may rely on such a document absent any circumstance that would arouse suspicion and require inquiry beyond its four corners. The Court applied this doctrine to hold Ongjoco an innocent purchaser for value of Lots 76-D to 76-G, since no evidence overcame the presumption and no suspicious circumstance was shown.
• Good Faith Determined at Time of Contract — In determining whether a buyer is in good faith, the point in time to be considered is the moment when the parties actually entered into the contract of sale. The Court applied this to disregard Virgilio Olaguer's affidavit executed on August 1, 1986, six years after the last sale in 1980, because it did not bear on Ongjoco's knowledge at the time of the sales.
• Duplicate Deeds and Subsequent Vendor Acts Not Necessarily Bad Faith — The existence of duplicate deeds of sale over the same lots and the vendor's subsequent act of filing for a second owner's copy of a title do not necessarily establish that the buyer knew of a defect in the owner's title. The Court applied this to hold that such circumstances did not make Ongjoco a buyer in bad faith as to Lots 76-D to 76-G.

• "When the sale of a piece of land or any interest therein is made through an agent, the authority of the latter shall be in writing. Absent this requirement, the sale shall be void." — This passage states the Article 1874 rule that the Court applied to void the sales of Lots 1 and 2 and to reject Ongjoco's claim of good faith as to those lots.
• "Even if a document is designated as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the performance of the act." — This is the Court's canonical formulation for reconciling a general power of attorney with the Article 1878 special-power requirement, applied to uphold the sales of Lots 76-D to 76-G.
• "On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly notarized. As such, the same is considered a public document and it has in its favor the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence." — This passage explains why Ongjoco could rely on the notarized general power of attorney and be considered an innocent purchaser for value as to Lots 76-D to 76-G.
• "In the determination of whether or not a buyer is in good faith, the point in time to be considered is the moment when the parties actually entered into the contract of sale." — This passage supports the Court's ruling that Virgilio Olaguer's 1986 affidavit did not affect Ongjoco's good faith in the 1976 to 1980 sales.

• Bravo-Guerrero vs. Bravo, G.R. No. 152658, 29 July 2005, 465 SCRA 244, 259 — Cited by the Court for the rule that even if a document is designated as a general power of attorney, the special-power requirement is met if there is a clear mandate from the principal specifically authorizing the performance of the act.
• Veloso vs. Court of Appeals, 329 Phil. 398, 405 (1996) — Cited, as cited in Bravo-Guerrero vs. Bravo, for the proposition that a special power of attorney can be included in a general power when the act or transaction for which the special power is required is specified therein.
• Domingo vs. Robles, G.R. No. 153743, 18 March 2005, 453 SCRA 812, 818-819 — Cited by the Court for the rule that a duly notarized document is considered a public document with the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence.

• Article 1874, Civil Code — Provides that when the sale of a piece of land or any interest therein is made through an agent, the agent's authority shall be in writing; otherwise, the sale shall be void. The Court applied this to Lots 1 and 2 because no written power of attorney was presented to prove Jose A. Olaguer's authority to sell them for Virgilio Olaguer.
• Article 1878, Civil Code — Requires a special power of attorney for an agent to enter into a contract by which ownership of an immovable is transmitted or acquired, either gratuitously or for a valuable consideration. The Court applied this to the sale of real property through Jose A. Olaguer, but held that the requirement was satisfied for Lots 76-D to 76-G by the express mandate in the general power of attorney.
• Rule 45, Revised Rules of Court — The petition was filed as a Petition for Review on Certiorari under Rule 45, the procedural vehicle by which the Supreme Court reviewed the Court of Appeals' decision.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Antonio Eduardo B. Nachura, and Ruben T. Reyes.