Yoshizaki vs. Joy Training Center of Aurora, Inc.

For a corporate board resolution authorizing the sale of real property to be valid, the approval of a majority of the number of trustees or directors as fixed in the Articles of Incorporation—not merely a majority of the actual members currently serving—is required to constitute a quorum and validate the corporate act. Furthermore, a certificate of title indicating that certain individuals are "representatives" of the corporation does not constitute a special power of attorney to sell; a buyer dealing with corporate agents must ascertain not only the fact of agency but also the nature and extent of the agent's authority, and cannot rely solely on the face of the title to establish authority to sell.

Joy Training Center of Aurora, Inc. was a non-stock, non-profit religious educational institution incorporated under Philippine law. Its Articles of Incorporation fixed the number of board of trustees at seven members. However, due to failure to hold subsequent elections after incorporation, only five individuals were actually serving as trustees. Two of these trustees, spouses Richard and Linda Johnson, sold real properties registered in the corporation's name to spouses Sally and Yoshio Yoshizaki, purportedly pursuant to a board resolution authorizing the sale. The corporation challenged the transaction, leading to a dispute over the extent of corporate authority required to validly alienate corporate real assets and the proper forum for resolving such disputes.

• Joy Training Center of Aurora, Inc. was a non-stock, non-profit religious educational institution and registered owner of a parcel of land and building in Baler, Aurora, covered by TCT No. T-25334.
• The Articles of Incorporation fixed the board of trustees at seven members: the spouses Johnson, Reuben Rubio, Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.
• Due to failure to hold elections after incorporation, only five individuals were actually serving as trustees: the spouses Johnson, Reuben Rubio, Alexander Abadayan, and Abelardo Aquino.
• On November 10, 1998, the spouses Johnson sold the real properties, a Wrangler jeep, and other personal properties to the spouses Yoshizaki, executing a Deed of Absolute Sale and Deed of Sale of Motor Vehicle.
• On December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-26052 was issued in the name of the spouses Yoshizaki.
• The Johnsons relied on a board resolution dated September 1, 1998 purportedly authorizing the sale, allegedly approved by a majority of the board, and a certification dated February 20, 1998 from the corporate secretary authorizing the Johnsons to act on the corporation's behalf.
• Joy Training filed suit on December 8, 1998, alleging the Johnsons sold the properties without requisite board authority and assailing the validity of the September 1, 1998 resolution.
• During trial, the spouses Yoshizaki offered photocopies of the resolution and certification, which the RTC excluded on best evidence rule grounds for failure to show they fell under exceptions for secondary evidence.
• The RTC ruled for the Yoshizakis, recognizing only five actual board members and finding majority approval valid.
• The CA reversed, holding that the basis for board composition is the number fixed in the Articles of Incorporation (seven), not actual membership, thus the resolution lacked majority approval.

• The RTC lacked jurisdiction because the case involved nullification of a corporate act, which was within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC), and the transfer of such jurisdiction to the RTC under Republic Act No. 8799 (effective August 3, 2000) did not retroactively apply.
• The spouses Johnson were authorized to sell the parcel of land, and Sally Yoshizaki was a buyer in good faith who relied on TCT No. T-25334 which indicated the Johnsons were the corporation's representatives.
• A party dealing with registered land need not go beyond the certificate of title to determine the property's condition, and the resolution and certification merely reiterated the authority already stated in the title.
• The resolution and certification were unnecessary to clothe the Johnsons with authority to sell because the certificate of title already indicated their representative capacity.
• Under Section 108 of Presidential Decree No. 1529, revocation of authority must be approved by a court and no revocation was reflected in the certificate of title, thus the agency was subsisting at the time of sale.

• The RTC had jurisdiction because the action was essentially for recovery of property and damages, cognizable by courts of general jurisdiction, not an intra-corporate dispute requiring SEC expertise.
• Sally Yoshizaki was estopped from questioning RTC jurisdiction because she sought to reinstate the RTC ruling in her favor.
• Joy Training did not authorize the spouses Johnson to sell the real properties; TCT No. T-25334 did not specifically grant authority to sell.
• The resolution and certification should not be given probative value because they were not admitted in evidence by the RTC under the best evidence rule.
• The resolution was void for failure to comply with voting requirements under Section 40 of the Corporation Code, as it was not approved by a majority of the seven trustees as fixed in the Articles of Incorporation.
• The certification was void because it lacked material particulars such as the date and names of trustees present in the meeting.

• Procedural Issues: Whether the Regional Trial Court had jurisdiction over the action for cancellation of sales and damages, or whether it was an intra-corporate dispute within the exclusive jurisdiction of the Securities and Exchange Commission.
• Substantive Issues:
  • Whether there was a valid contract of agency between Joy Training and the spouses Johnson to sell the real properties.
  • Whether there was a valid contract of sale of the real properties between Joy Training and the spouses Yoshizaki.
  • Whether the board resolution dated September 1, 1998 validly authorized the sale of corporate real assets.

• Procedural: The RTC had jurisdiction over the case. The determination of the existence of a contract of agency and the validity of a contract of sale requires the application of provisions of the Civil Code, not special skills requiring the SEC's technical expertise. Disputes concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction. The action was for recovery of property from third parties, not an intra-corporate controversy.
• Substantive:
  • No contract of agency existed between Joy Training and the spouses Johnson. Article 1874 of the Civil Code requires a written special power of attorney for the validity of the sale of land, which must expressly mention the sale or include it as a necessary ingredient. The documents presented (TCT No. T-25334, the resolution, and the certification) failed to meet this requirement.
  • The resolution was void because it was not approved by a majority of the board of trustees as fixed in the Articles of Incorporation. Section 25 of the Corporation Code provides that a majority of the number of trustees as fixed in the articles constitutes a quorum. With seven trustees fixed in the Articles, the approval of at least four was required; the resolution allegedly approved by only three (the Johnsons and Alexander Abadayan) was insufficient.
  • The certification was merely a general power of attorney comprising acts of administration only, not a special power to sell immovable property as required by Article 1878 of the Civil Code.
  • The contract of sale was unenforceable due to the absence of a valid agency. Sally Yoshizaki could not claim to be a buyer in good faith because persons dealing with an agent must ascertain not only the fact of agency but also the nature and extent of the agent's authority; reliance on the face of the title is insufficient when the authority to sell is contested.

• Corporate Quorum Requirements — The basis for determining the composition of the board of directors or trustees for purposes of quorum and voting is the number fixed in the Articles of Incorporation, not the actual number of members currently serving. Under Section 25 of the Corporation Code, a majority of the number of directors or trustees as fixed in the Articles constitutes a quorum for the transaction of corporate business.
• Special Power of Attorney for Sale of Immovables — Under Articles 1874 and 1878 of the Civil Code, a contract of agency to sell land must be written and must expressly mention the sale or include it as a necessary ingredient of the authorized act. A general power of attorney or general management authority does not suffice for the conveyance of real rights over immovable properties.
• Duty of Inquiry When Dealing with Agents — Persons dealing with an agent must ascertain not only the fact of agency but also the nature and extent of the agent's authority. A third person contracting with an agent bears the risk of injury occasioned by the transaction if they fail to verify the agent's specific authority, and cannot rely solely on the face of a certificate of title when the authority to sell is disputed.

• "The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act."
• "The purpose of the law in requiring a special power of attorney in the disposition of immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another and to caution the buyer to assure himself of the specific authorization of the putative agent."
• "The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover on his own peril the authority of the agent."
• "A majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business."

• Cosmic Lumber Corporation v. Court of Appeals — Cited for the principle that a special power of attorney must express the powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell real estate; when there is reasonable doubt that the language conveys such power, no such construction shall be given.
• Pahud v. Court of Appeals — Cited regarding the purpose of requiring special power of attorney for disposition of immovable property.
• Naawan Community Rural Bank, Inc. v. Court of Appeals — Cited for the rule that persons dealing with registered land have the legal right to rely on the face of the title, except when the party has actual knowledge of facts that would impel a reasonably cautious person to inquire further.
• Country Bankers Insurance Corporation v. Keppel Cebu Shipyard — Cited for the principle that persons dealing with an agent must ascertain the nature and extent of the agent's authority.
• Nautica Canning Corporation v. Yumul — Cited for the rule that disputes concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction.

• Article 1868, Civil Code — Defines contract of agency as a contract whereby a person binds himself to render some service or do something in representation or on behalf of another.
• Article 1874, Civil Code — Requires that the contract of agency must be written for the validity of the sale of a piece of land or any interest therein; otherwise, the sale shall be void.
• Article 1876, Civil Code — Defines general power of attorney as one comprising all the business of the principal.
• Article 1877, Civil Code — States that an agency couched in general terms comprises only acts of administration, even if the principal states that he withholds no power.
• Article 1878, Civil Code — Enumerates acts for which a special power of attorney is required, including the conveyance of real rights over immovable property.
• Article 1902, Civil Code — Provides that a third person with whom the agent wishes to contract may require the presentation of the power of attorney or instructions regarding the agency.
• Article 1403, Civil Code — Regarding unenforceable contracts.
• Section 23, Corporation Code — Trustees hold office for one year and until successors are elected and qualified.
• Section 25, Corporation Code — Provides that a majority of the number of directors or trustees as fixed in the articles of incorporation constitutes a quorum.
• Section 40, Corporation Code — Voting requirements for corporate acts.
• Section 108, Presidential Decree No. 1529 (Property Registration Decree) — Regarding revocation of authority to sell registered land.
• Section 5.2, Republic Act No. 8799 (Securities Regulation Code) — Transfer of jurisdiction from SEC to courts.
• Rule 130, Section 3, Rules of Court — Best evidence rule exceptions.