Cosmic Lumber Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Cosmic Lumber Corporation (petitioner) executed a Special Power of Attorney (SPA) appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate ejectment suits against squatters on its lots and to take material possession thereof. The SPA also authorized her to appear at pre-trial conferences and enter into stipulations of facts and compromise agreements, provided they protected the corporation's rights and interests. Procedural History: Pursuant to the SPA, Villamil-Estrada filed an ejectment suit against respondent Isidro Perez for a portion of Lot No. 443. Subsequently, Villamil-Estrada entered into a Compromise Agreement with Perez, recognizing Perez's ownership of 333 square meters of Lot No. 443 in exchange for P26,640.00. The trial court approved this agreement and rendered judgment accordingly. The decision became final and executory but was not executed within the five-year period. Perez filed a complaint to revive the judgment. Petitioner Cosmic Lumber Corporation, upon learning of the compromise agreement, filed a complaint for annulment of the judgment, alleging that Villamil-Estrada exceeded her authority, the compromise agreement was void, and the corporation never received the sale proceeds. The Court of Appeals dismissed the complaint for annulment, holding that the alleged nullity of the compromise agreement did not affect the trial court's jurisdiction nor constitute extrinsic fraud. The Petition: Petitioner seeks the annulment of the Court of Appeals' decision, arguing that the judgment based on the void compromise agreement is itself void.
Issue(s)
Whether the compromise agreement entered into by the attorney-in-fact, Paz G. Villamil-Estrada, was void for exceeding her authority, and whether the judgment rendered by the Regional Trial Court based on the void compromise agreement is void. Whether the Court of Appeals erred in dismissing the petition for annulment of judgment based on the trial court's jurisdiction. Whether the conduct of Villamil-Estrada constituted extrinsic fraud.
Ruling
The petition is GRANTED. The decision and resolution of the Court of Appeals dated October 29, 1993, and March 10, 1994, respectively, as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated November 27, 1985, are NULLIFIED and SET ASIDE. The "Compromise Agreement" entered into between Attorney-in-fact Paz G. Villamil-Estrada and respondent Isidro Perez is declared VOID.
Ratio Decidendi
On the voidity of the compromise agreement and the judgment: The Supreme Court held that the Special Power of Attorney granted to Villamil-Estrada was explicit and exclusionary, authorizing her to initiate ejectment suits and enter into compromise agreements only to protect the corporation's rights and interests in the property for the purpose of enabling the corporation to take material possession. She was not granted power to sell the property. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired, and such authority must be in clear and unmistakable language. Since Villamil-Estrada acted without authority by selling a portion of the petitioner's land, the sale and the compromise agreement were ipso jure void. Consequently, the judgment based on this void agreement was necessarily void. On the jurisdiction of the trial court: The Supreme Court ruled that the nullity of the compromise agreement impaired the jurisdiction of the trial court to render a decision based thereon. A judgment based on a compromise entered into by an attorney without specific authority from the client is void ab initio and the court acquires no jurisdiction to render it. Such a void judgment may be impugned in any proceeding by the party against whom it is sought to be enforced. Therefore, the petition to annul the decision before the Court of Appeals was proper. On extrinsic fraud: The Supreme Court found that the conduct of Villamil-Estrada constituted extrinsic or collateral fraud because she deliberately concealed from her principal that a compromise agreement had been forged, resulting in the sale of a portion of the petitioner's property. This deception prevented the petitioner from presenting its case fully. Extrinsic fraud operates on matters outside the judgment itself, pertaining to how it was procured, preventing a fair submission of the controversy. While a principal is generally bound by the knowledge of its agent, an exception exists when the agent is committing fraud upon the principal for personal benefit, as in this case where the agent acted outside the scope of her agency and in secret hostility to the principal's interests.
Main Doctrine
A compromise agreement entered into by an attorney-in-fact without special authority to sell the principal's immovable property is void, and a judgment based on such void agreement is likewise void and may be annulled.