Riosa vs. Tabaco La Suerte Corporation

A corporation can only exercise its power to purchase real property through its board of directors or a corporate agent duly authorized by the board; an individual officer, even the Chief Executive Officer, cannot bind the corporation in a contract for the sale of real property without a board resolution authorizing such transaction. Additionally, a contract of sale requires a meeting of the minds between the parties, and where consent is obtained through fraud (e.g., a party signs a document believing it to be a receipt for a loan when it is actually a deed of sale), no valid contract exists.

Aquiles Riosa owned a 52-square meter commercial lot in Tabaco City, Albay, which he acquired from his parents. He borrowed money from Sia Ko Pio, the Chief Executive Officer of Tabaco La Suerte Corporation (La Suerte), believing he was signing a receipt for the loan. The document was later revealed to be a deed of absolute sale conveying the property to La Suerte, which was subsequently registered in the corporation's name. Riosa filed a suit to annul the sale, claiming he was fraudulently induced to sign and that Sia Ko Pio lacked authority to bind the corporation.

• Aquiles Riosa was the owner of a 52-square meter commercial lot in Barangay Quinale, Tabaco City, Albay, acquired through a deed of cession and quitclaim from his parents, Pablo Riosa, Sr. and Sabiniana Biron.
• He declared the property in his name and paid realty taxes thereon continuously.
• His daughter, Annie Lyn Riosa Zampelis, renovated the commercial building on the lot, introducing improvements costing no less than P300,000.00.
• Aquiles obtained loans from Sia Ko Pio (the Chief Executive Officer of La Suerte) on three occasions totaling P50,000.00.
• As security for the loans, Sia Ko Pio requested a photocopy of the deed of cession and presented a document to Aquiles purportedly a receipt for the loan with an undertaking to pay P52,000.00 (including P2,000.00 attorney's fees).
• Aquiles signed the document without reading it, trusting Sia Ko Pio, who was his long-time friend and former employer.
• In September 2001, Aquiles received a letter from La Suerte informing him that the subject lot was already registered in its name under Transfer Certificate of Title (TCT) No. T-80054, allegedly issued on February 13, 1991.
• The purported Deed of Absolute Sale bore material date discrepancies: the body was dated "8th day of December 1999," while the acknowledgment and notarial reference were dated "7th day of December, 1990."
• The document was notarized by Judge Arsenio Base, Municipal Court Presiding Judge of Tabaco City, as ex-officio notary public, without the required certification that there were no other lawyers or notaries public in the municipality.
• Aquiles' wife, Erlinda, claimed her signature as a witness on the document was forged and that she never appeared before a notary public.
• Juan Pielago Sia, son of Sia Ko Pio and a member of La Suerte's board of directors, testified that he could not find any board resolution authorizing his father to purchase the disputed property for the corporation.
• La Suerte claimed it allowed Aquiles to remain in possession to avoid conflict with his father, and that Aquiles undertook repairs and paid no rent.

• Aquiles argued that there was no perfected contract of sale because there was no meeting of the minds; he believed he was signing a loan receipt, not a deed of sale, and was fraudulently induced by Sia Ko Pio to sign.
• He contended that there was no transaction between him and La Suerte; the loan was personal between him and Sia Ko Pio, and there was no evidence the money came from La Suerte.
• He asserted that Sia Ko Pio had no authority from La Suerte's Board of Directors to purchase the property, as there was no board resolution authorizing the purchase.
• He pointed out that he did not appear before the notary public for notarization, and his wife's signature was forged.
• He highlighted the material discrepancies in the dates appearing in the deed of sale (1999 vs. 1990) as evidence of its irregularity and inauthenticity.

• La Suerte argued that the petition raised questions of fact, which are not allowed under Rule 45 since only questions of law are permitted in a petition for review on certiorari.
• It maintained that the notarized deed of sale was binding evidence of the agreement, and that even a verbal contract of sale of real estate produces legal effects between the parties.
• It claimed that the discrepancy in dates was a mere clerical error that did not invalidate the sale.
• It asserted that the absence of a board resolution was inconsequential because the corporation had ratified the act of Sia Ko Pio.
• It argued that Aquiles' complaint was barred by prescription, laches, estoppel, and the indefeasibility of its certificate of title.

• Procedural Issues:
  • Whether the Supreme Court should review factual findings despite the general rule that only questions of law are allowed in a petition for review on certiorari under Rule 45, given the conflict between the factual determinations of the RTC and the CA.
• Substantive Issues:
  • Whether there was a perfected and valid contract of sale between Aquiles and La Suerte.
  • Whether Sia Ko Pio had the authority to bind La Suerte in the purchase of the subject property on behalf of the corporation.
  • Whether the deed of sale was validly executed and notarized.
  • Whether Aquiles was entitled to damages, attorney's fees, and reconveyance of the property.

• Procedural:
  • The Court held that while the issues raised appeared factual, an exception to the general rule applies where there is a conflict between the factual determination of the trial court and that of the appellate court. In such cases, the Court may revisit the factual circumstances to resolve the conflict and determine which findings are supported by substantial evidence.
• Substantive:
  • The Court found no perfected contract of sale because there was no meeting of the minds. Aquiles testified that he refused to sell the property when Sia Ko Pio asked to buy it, and only signed what he believed to be a loan receipt. Under Article 1475 of the Civil Code, a contract of sale is perfected only upon a meeting of minds on the object and the price.
  • The Court ruled that Sia Ko Pio, as Chief Executive Officer, had no authority to purchase the property for La Suerte without a board resolution. Citing Sections 23 and 36 of the Corporation Code, the Court held that the power to purchase real property is vested in the board of directors. Absent valid delegation or authorization, an individual officer cannot bind the corporation. The Court noted that Juan Sia, a board member, admitted no such resolution existed.
  • The Court found that the loan transaction was between Aquiles and Sia Ko Pio personally, not between Aquiles and La Suerte. There was no evidence that Sia Ko Pio used corporate funds or was authorized to bind the corporation.
  • The Court held that the deed of sale suffered from fatal irregularities: (1) material discrepancies in dates (1999 vs. 1990), removing the document from the presumption of regularity; (2) the notary public (Judge Base) was not authorized to notarize a deed of conveyance as an ex-officio notary without the required certification under Supreme Court Circular No. 1-90; and (3) the document was reduced to a private document requiring proof of due execution, which La Suerte failed to provide.
  • The Court reinstated the RTC decision annulling the deed of sale, canceling TCT No. T-80054, and ordering reconveyance of the property to Aquiles, but clarified that the disposition was without prejudice to any valid claim of the heirs of Sia Ko Pio against Aquiles for the personal loan.

• Authority of the Board of Directors — Under Sections 23 and 36 of the Corporation Code, the corporate powers of a corporation, including the power to purchase real property, are exercised by the board of directors. While a corporation may appoint agents to negotiate for the purchase of real property, the final say must be with the board, whose approval finalizes the transaction. Absent a board resolution or valid delegation, an individual officer (even the CEO) cannot bind the corporation in a contract for the sale or purchase of real property.
• Meeting of the Minds — A contract of sale is perfected only upon a meeting of the minds on the thing which is the object of the contract and on the price (Article 1475, Civil Code). If consent is obtained through fraud (e.g., signing a document under the belief it is a loan receipt when it is actually a deed of sale), there is no meeting of the minds and the contract is voidable or inexistent.
• Ex-Officio Notaries Public — Judges acting as ex-officio notaries public are prohibited from notarizing documents not connected with the exercise of their official functions unless there is a certification in the notarized document attesting to the lack of any lawyer or notary public in the municipality or circuit (Supreme Court Circular No. 1-90). Failure to comply removes the presumption of regularity from the document, reducing it to the status of a private document.
• Implied Trust — A person who obtains property through fraud is considered a trustee of an implied trust for the benefit of the person from whom the property came, and is bound to reconvey the property.

• "It is the board of directors or trustees which exercises almost all the corporate powers in a corporation... Under these provisions, the power to purchase real property is vested in the board of directors or trustees. While a corporation may appoint agents to negotiate for the purchase of real property needed by the corporation, the final say will have to be with the board, whose approval will finalize the transaction."
• "A corporation can only exercise its powers and transact its business through its board of directors and through its officers and agents when authorized by a board resolution or its by-laws. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation."
• "The existence of a signed document purporting to be a contract of sale does not preclude a finding that the contract is invalid when the evidence shows that there was no meeting of the minds between the seller and buyer."

• Spouses Firme v. Bukal Enterprises and Development Corporation — Cited for the doctrine that the power to purchase real property is vested in the board of directors, and that absent valid delegation, an individual director's declarations are not binding on the corporation.
• AF Realty & Development, Inc. v. Dieselman Freight Services, Co. — Cited to support the principle that contracts or acts of a corporation must be made by the board of directors or by a corporate agent duly authorized by the board.
• Tigno v. Aquino — Cited regarding the limitations on ex-officio notaries public; they cannot notarize documents not connected with official duties without the required certification of lack of other notaries.
• Spouses Camara v. Spouses Malabao — Cited by the CA (and distinguished by the SC) for the rule that tax declarations cannot defeat a certificate of title.
• Abadiano v. Spouses Martir — Cited regarding the effect of irregular notarization, which reduces a document to the status of a private document requiring proof of due execution.

• Section 23, Corporation Code (Batas Pambansa Blg. 68) — Provides that corporate powers shall be exercised by the board of directors or trustees.
• Section 36(7), Corporation Code — Grants corporations the power to purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with real and personal property.
• Article 1330, Civil Code — Cited by the RTC; provides that contracts where consent is given through fraud are voidable.
• Article 1475, Civil Code — Provides that the contract of sale is perfected at the moment there is a meeting of minds on the thing which is the object of the contract and on the price.
• Rule 45, Section 1, 1997 Rules of Civil Procedure — Governs petitions for review on certiorari, limiting them to questions of law.
• Rule 132, Section 20, Rules of Court — Regarding the admissibility of private documents.
• Supreme Court Circular No. 1-90 — Governs the authority of ex-officio notaries public.