Woodchild Holdings, Inc. v. Roxas Electric and Construction Company, Inc.
REITERATIONFacts
The Antecedents: Roxas Electric and Construction Company, Inc. (RECCI) owned two parcels of land. Petitioner Woodchild Holdings, Inc. (WHI) offered to buy Lot No. 491-A-3-B-2 and a portion of Lot No. 491-A-3-B-1 for warehouse construction and access. RECCI's President, Roberto B. Roxas, executed a Contract to Sell and a Deed of Absolute Sale for Lot No. 491-A-3-B-2, which included provisions for a right of way over Lot No. 491-A-3-B-1 and an option for WHI to purchase an additional portion of Lot No. 491-A-3-B-1. The Deed of Absolute Sale also stipulated that RECCI would eject squatters within two weeks. WHI proceeded with plans for warehouse construction, securing a contractor and a lease agreement. However, construction was delayed due to the presence of squatters. WHI complained about the delay in squatter eviction and the failure to grant the right of way and sell the additional portion of Lot No. 491-A-3-B-1. After Roxas' death, WHI reiterated its demands. Procedural History: WHI filed a complaint for specific performance and damages against RECCI. The Regional Trial Court (RTC) ruled in favor of WHI, finding RECCI estopped from disowning Roxas' apparent authority. The Court of Appeals (CA) reversed the RTC decision, holding that the provisions granting a right of way and an option to buy were ultra vires and not binding on RECCI, and that the delay was WHI's fault. The Petition: WHI filed a petition for review on certiorari, asserting that the CA erred in holding the Deed of Absolute Sale ultra vires, in reversing the RTC's ruling on the right of way and option to buy, and in finding WHI responsible for the delay.
Issue(s)
Whether the respondent is bound by the provisions in the deed of absolute sale granting to the petitioner beneficial use and a right of way over a portion of Lot No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option to the petitioner to buy a portion thereof. Whether the respondent failed to eject the squatters on its property within two weeks from the execution of the deed of absolute sale. Whether the respondent is liable to the petitioner for damages.
Ruling
The Court affirmed the Court of Appeals' decision in part, modifying the award of damages. The Court ruled that RECCI is not bound by the provisions granting a right of way and an option to buy a portion of Lot No. 491-A-3-B-1, as these acts were ultra vires and not authorized by the Board of Directors' resolution. However, the Court found RECCI liable for damages due to its failure to eject the squatters within the stipulated period, affirming the RTC's award of damages and attorney's fees, albeit with modification.
Ratio Decidendi
On the issue of whether RECCI is bound by the provisions granting a right of way and an option to buy: The Court held that RECCI is not bound by these provisions. Under Section 23 of the Corporation Code, corporate powers are exercised by the board of directors. Acts of corporate officers beyond their authority are unenforceable unless ratified or the corporation is estopped. The May 17, 1991 Resolution authorized the sale of Lot No. 491-A-3-B-2 only, not the grant of a right of way or an option to buy a portion of Lot No. 491-A-3-B-1. Such acts require a special power of attorney under Article 1878 of the Civil Code and must appear in a public document under Article 1358. The petitioner failed to prove that Roxas had specific written authority for these acts or that RECCI ratified them. The principle of apparent authority was not applicable as there was no evidence of RECCI's acts justifying the petitioner's belief in Roxas' authority. The retention of the purchase price for Lot No. 491-A-3-B-2 did not constitute ratification of the unauthorized acts concerning Lot No. 491-A-3-B-1. On the issue of whether RECCI failed to eject squatters and is liable for damages: The Court found that RECCI failed to eject the squatters within the stipulated two-week period. This failure directly caused the delay in WHI's warehouse construction. The CA erred in attributing the delay to WHI's fault in securing a building permit, as WHI could not reasonably do so while squatters occupied the property. RECCI's failure to comply with its obligation under Article 1170 of the Civil Code made it liable for damages. The Court affirmed the RTC's award for actual damages and unrealized income, as well as attorney's fees, modifying the amount to P5,612,980 for actual damages and P100,000 for attorney's fees.
Main Doctrine
A corporation can only act through its board of directors or authorized officers. Acts of corporate officers beyond the scope of their authority are unenforceable against the corporation unless ratified or unless the corporation is estopped from denying them. Persons dealing with an assumed agency are bound to ascertain the nature and extent of the agent's authority.