Eternal Gardens Memorial Park Corp. vs. Perlas, et al.

A principal is bound by the acts of an agent under the doctrine of apparent authority where the principal’s conduct reasonably leads a third person to believe that actual authority exists, and the principal is estopped from denying such authority. The issuance of a certificate of ownership by a memorial park corporation to a buyer, upon submission of documents processed by its own employees, constitutes a representation that the employees had authority to transact on its behalf, rendering the corporation liable for the consequences of the transaction even if the employees acted without actual authority.

Zenaida F. Boiser purchased 24 burial lots from Eternal Gardens Memorial Park Corp. and was issued Certificate of Ownership No. 5595 in 1985. She died on September 13, 1999. Shortly after, her daughter Kathryn’s former live-in partner, Michael Magpantay, presented to Eternal Gardens an Affidavit of Loss and a Deed of Assignment purportedly signed by the deceased Zenaida, transferring the lots to Magpantay. Relying on these documents, Eternal Gardens issued Certificate of Ownership No. 24007 in Magpantay’s name. Magpantay then sold the lots to Spouses Claudio and Rosita Bonifacio. Eternal Gardens employees Noli Balbin and Leandro Resoles handled the transaction, issued an Acknowledgment Receipt for the P2,200,000 purchase price, and Eternal Gardens subsequently issued Certificate of Ownership No. 24095 in the Spouses Bonifacio’s name. The Boiser siblings later discovered the transfers and sued for nullification.

• The Original Owner and Her Heirs: Zenaida F. Boiser purchased 24 burial lots from petitioner Eternal Gardens Memorial Park Corp. and was issued Certificate of Ownership No. 5595 on June 7, 1985. Zenaida died on September 13, 1999. She was survived by five children, including respondents Katherine Junette B. Perlas and Kathryn Jacquelyn F. Boiser (the Boiser siblings), and her husband Narciso.

• The Fraudulent First Transfer: Sometime after Zenaida’s death, Kathryn’s former live-in partner Michael Magpantay presented to Eternal Gardens an Affidavit of Loss and a Deed of Assignment dated February 22, 2000, purportedly executed by Zenaida in his favor. On the strength of these documents, Eternal Gardens issued Certificate of Ownership No. 24007 in Magpantay’s name. Kathryn herself signed a receipt acknowledging delivery of the new certificate. The Boiser siblings discovered the transfer in 2000 and contended that Zenaida could not have executed the deed because she was already dead.

• The Sale to Spouses Bonifacio: Magpantay then sold the lots to respondent Spouses Claudio and Rosita Bonifacio. Eternal Gardens employees Noli Balbin (Assistant Operations Manager) and Leandro Resoles facilitated the transaction, issued an Acknowledgment Receipt for the full purchase price of P2,200,000, and processed the documentation. Eternal Gardens thereafter issued Certificate of Ownership No. 24095 in the name of Spouses Bonifacio. The Bonifacios interred a grandchild in one of the lots.

• Complaint and Defenses: The Boiser siblings sued Magpantay, Spouses Bonifacio, and Eternal Gardens for nullification of contract. Eternal Gardens denied conspiring with Magpantay and asserted that it acted ministerially on the face of public documents. It claimed that Kathryn actively participated in securing the transfer to Magpantay. Spouses Bonifacio asserted they were innocent purchasers in good faith who relied on the certificate of ownership issued to Magpantay.

• Intervention: Other heirs — Kathreen Jennifer F. Boiser-Santiago and Narciso — intervened. Magpantay was declared in default. Narciso died during the proceedings.

• RTC Findings: The trial court found the Deed of Assignment void because Zenaida was already deceased at the time of its execution. It held Eternal Gardens liable to return the P2,200,000 to Spouses Bonifacio, deducting the value of the lot where their grandchild was buried, reasoning that by issuing a certificate of ownership to the Bonifacios, Eternal Gardens ratified the acts of its employees. It found Magpantay liable for damages.

• CA Modifications: The Court of Appeals affirmed but modified, finding Eternal Gardens solidarily liable with Magpantay and Kathryn for the return of the purchase price and for damages. It emphasized that Eternal Gardens lacked prudence and that Kathryn’s active participation — evidenced by her receipt of Magpantay’s certificate — made her equally liable.

• Ultra Vires Acts of Employees: Eternal Gardens argued that employees Balbin and Resoles acted beyond the scope of their duties because they were not sales agents. Their acts of selling memorial lots were ultra vires and therefore personally binding only on them, not on the corporation.
• Inapplicability of Apparent Authority: Eternal Gardens contended that the doctrine of apparent authority did not apply because Spouses Bonifacio knew they were dealing with Magpantay’s agents, not the corporation’s agents, and that Article 1897 of the Civil Code shielded the principal from unauthorized acts of an agent.
• Absence of Receipt of Funds: Eternal Gardens maintained that it never received the P2,200,000 purchase price and that the acknowledgment receipt issued by its employees was falsified. It argued that only Magpantay and Kathryn should be ordered to return the amount.
• Claim for Damages and Attorney’s Fees: Eternal Gardens insisted that Magpantay and Kathryn should be held liable to it for moral damages, exemplary damages, attorney’s fees, and litigation costs because their falsification compelled the corporation to litigate and defend its interests.

• Employer’s Liability and Negligence: The Boiser siblings countered that Eternal Gardens is answerable for the adverse consequences of its employees’ acts regardless of whether the transaction was officially sanctioned. They argued that Eternal Gardens failed to exercise prudence in processing the transfer of ownership, and this negligence made it liable to return the amount paid by Spouses Bonifacio.

• Apparent Authority and Estoppel: Whether Eternal Gardens is bound by the acts of its employees, Balbin and Resoles, under the doctrine of apparent authority and is estopped from denying their authority to transact on its behalf, despite the absence of actual authority.
• Applicability of Article 1897: Whether Article 1897 of the Civil Code absolves Eternal Gardens from liability on the ground that its employees exceeded their authority.
• Liability for Restitution: Whether Eternal Gardens may be held liable to return the P2,200,000 purchase price to Spouses Bonifacio absent proof that the corporation received the money.
• Solidary Liability: Whether the Court of Appeals correctly held Eternal Gardens solidarily liable with Magpantay and Kathryn for the return of the purchase price and for damages.
• Entitlement to Damages and Attorney’s Fees: Whether Eternal Gardens is entitled to moral damages, exemplary damages, attorney’s fees, and litigation costs from Magpantay and Kathryn.

• Apparent Authority and Estoppel: The doctrine of apparent authority squarely applied. By issuing a certificate of ownership in favor of Spouses Bonifacio, Eternal Gardens acknowledged the authority of its employees Balbin and Resoles to transact business on its behalf. The principal’s conduct led the Bonifacios reasonably to believe that the employees possessed authority, and Eternal Gardens was therefore estopped from denying such authority. The corporation knowingly accepted the documents accomplished by its own employees and could not later disown the transaction.

• Applicability of Article 1897: Article 1897 was inapplicable. The provision governs an agent’s personal liability to the party with whom he contracts when he exceeds his authority without sufficient notice. Here, no agency relationship was established between Magpantay and Balbin and Resoles; a special power of attorney would have been required for them to sell immovable property in Magpantay’s name, and none was executed. Regardless, Eternal Gardens remained liable under apparent authority and estoppel.

• Liability for Restitution: Eternal Gardens was properly ordered to return the P2,200,000 less the value of the lot used for burial. The acknowledgment receipt issued by its employees constituted prima facie evidence that the amount was received. Eternal Gardens failed to rebut this presumption with competent evidence beyond a bare denial that it was not an official receipt. The corporation’s lack of diligence and supervision of its employees facilitated the fraudulent transactions and reinforced its liability to the innocent buyers.

• Solidary Liability: The imposition of solidary liability on Eternal Gardens, Magpantay, and Kathryn was affirmed. The fraud perpetrated by Magpantay and Kathryn — through the falsified affidavit of loss and deed of assignment — could not have resulted in the transfer to the Bonifacios without the active participation of Eternal Gardens’ employees and the corporation’s subsequent issuance of certificates of ownership. All three actors contributed indispensably to the injury suffered by the Boiser siblings and Spouses Bonifacio, justifying solidary liability as joint tortfeasors.

• Entitlement to Damages and Attorney’s Fees: Eternal Gardens was not entitled to moral and exemplary damages or attorney’s fees. The acts of Kathryn and Magpantay — falsification of public documents — were illegal, not merely contra bonus mores under Article 21 of the Civil Code. The requisites for a claim under Article 21 were therefore unsatisfied. Moreover, Eternal Gardens could have prevented the fraudulent transfer had it exercised ordinary prudence when presented with falsified documents; it was not compelled to litigate in the legal sense that would support an award of attorney’s fees. The awards of moral and exemplary damages to the Boiser siblings and Spouses Bonifacio were, however, justified.

• Doctrine of Apparent Authority — A principal is bound by the acts and contracts of an agent that fall within the apparent scope of authority conferred on him, even if no actual authority was given, where the principal’s conduct leads a third person reasonably to believe that such authority exists. The principal’s liability is limited to third persons who have been misled by the principal’s own representations. The doctrine rests on estoppel: an admission or representation by the principal is rendered conclusive and cannot be disproved as against a person who relied on it in good faith. In this case, Eternal Gardens’ issuance of a certificate of ownership to Spouses Bonifacio based on documents processed by its employees constituted a representation of the employees’ authority, and Eternal Gardens was estopped from denying it.

• Presumption of Regularity of Notarial Acknowledgment — Rebuttable — A notarial acknowledgment attaches full faith and credit to a document but does not itself confer validity or binding effect. The presumption of regularity may be rebutted by strong, complete, and conclusive proof of invalidity. Here, the falsity of the deed of assignment and affidavit of loss was established, rendering the presumption inapplicable.

• Receipt as Prima Facie Evidence of Payment — A receipt is a written and signed acknowledgment that money or goods have been delivered or received. It creates a presumption that the stated amount was received, and the party denying receipt bears the burden of proving otherwise.

• Moral Damages for Corporations — Generally, corporations are not entitled to moral damages. An exception lies under Articles 19, 20, and 21 of the Civil Code. For a claim under Article 21 (acts contra bonus mores), the act must be legal but contrary to morals, good customs, public order, or public policy, and done with intent to injure. Illegal acts — such as falsification of public documents — do not satisfy these requisites.

• “Under this doctrine [of apparent authority], acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal. Furthermore, the principal’s liability is limited only to third persons who have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none was actually given.” — The passage, drawn from Engineering Geoscience, Inc. v. Philippine Savings Bank, encapsulates the controlling principle on which Eternal Gardens’ liability was anchored.

• “If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.” — This formulation links apparent authority to corporate estoppel and was directly applied to Eternal Gardens.

• “Eternal Gardens lacked prudence, due diligence, and supervision of its employees which contributed to facilitate the fraudulent transactions.” — The appellate court’s factual finding, quoted with approval, underscores the corporation’s own negligence as a basis for liability.

• Engineering Geoscience, Inc. v. Philippine Savings Bank, G.R. No. 187262, January 10, 2019 — Applied. The Court relied on this case for the definitive statement of the doctrine of apparent authority and its basis in estoppel.
• Banate v. Philippine Countryside Rural Bank (Liloan, Cebu), Inc., 639 Phil. 35 (2010) — Cited in Engineering Geoscience as precedent on apparent authority.
• Ogawa v. Menigishi, 690 Phil. 359 (2012) — Cited for the principle that a receipt is a written acknowledgment of delivery or receipt of money, creating a presumption of payment.
• University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, 776 Phil. 401 (2016) — Cited for the rule that notarial acknowledgment does not give a document validity where evidence shows it is invalid.
• Carbonell v. Carbonell-Mendes, 762 Phil. 529 (2015); Spouses Miano v. Manila Electric Company, 800 Phil. 118 (2016) — Cited for the general rule that questions of fact are not reviewable under Rule 45 and for the recognized exceptions, none of which applied.

• Article 1897, Civil Code — Provides that an agent who acts as such is not personally liable unless he expressly binds himself or exceeds his authority without giving sufficient notice. Held inapplicable because no agency was created between Magpantay and the employees, and Eternal Gardens’ liability arose from its own conduct, not from agency rules.
• Article 1878(5), Civil Code — A special power of attorney is required for an agent to enter into a contract transmitting or acquiring ownership of immovable property. Invoked to show that Balbin and Resoles could not have been Magpantay’s agents absent a special power of attorney.
• Article 1431, Civil Code — Estoppel renders an admission or representation conclusive upon the person making it and prevents its denial as against the person relying on it. Applied to bar Eternal Gardens from denying its employees’ apparent authority.
• Articles 19, 20, and 21, Civil Code — General provisions on human relations; Article 21 requires an act contra bonus mores that is legal but contrary to public policy, with intent to injure. Eternal Gardens’ claim for moral damages failed because the acts of falsification were illegal, not merely contrary to morals.
• Article 2234, Civil Code — Exemplary damages may be awarded only if the claimant is entitled to moral, temperate, or compensatory damages. Since Eternal Gardens failed to prove entitlement to moral damages, no exemplary damages could be granted.

Associate Justice Perlas-Bernabe (Senior Associate Justice and Chairperson) and Associate Justice Hernando concurred. Associate Justices Inting and Baltazar-Padilla were on official leave.