Yasuma v. Heirs of De Villa
REITERATIONFacts
1. The Antecedents: Cecilio S. de Villa obtained loans totaling P1.3 million from Koji Yasuma, evidenced by promissory notes. These loans were initially secured by real estate mortgages on a parcel of land owned by East Cordillera Mining Corporation, executed by de Villa as the corporation's president. De Villa failed to repay the loans, leading to a collection suit filed by Yasuma against de Villa and the corporation. 2. Procedural History: The initial collection suit resulted in a default judgment against de Villa and the corporation, but this was annulled on appeal due to improper service of summons and the case was remanded. After de Villa's death, his heirs were impleaded. The Regional Trial Court (RTC) of Makati City, Branch 139, subsequently ruled in favor of Yasuma against the corporation, ordering it to pay the loan amount plus interest and damages, while dismissing the complaint against the heirs. On appeal, the Court of Appeals (CA) reversed the RTC's decision, holding that the loan was personal to de Villa and the mortgage was void for lack of corporate authority. 3. The Petition: This case is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to overturn the CA's decision. Petitioner Koji Yasuma argues that the CA erred in declaring that the corporation did not ratify the loans despite admitting receipt of the funds, in disregarding agreed-upon facts from pre-trial, and in setting aside the real estate mortgage and awards for attorney's fees, liquidated damages, and interest. The core issues presented are whether the loans were personal liabilities of de Villa or debts of the corporation, and whether the mortgage was valid or void.
Issue(s)
Whether the loans obtained by de Villa were personal liabilities or debts of respondent corporation. Whether the mortgage on respondent corporation's property was null and void for having been executed without its authority. Whether the corporation ratified the unauthorized acts of its president.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed. The loan was personal to de Villa, and the mortgage was void. Respondent corporation is not liable for the loan or the mortgage.
Ratio Decidendi
On the issue of whether the loans obtained by de Villa were personal liabilities or debts of respondent corporation: The Court held that the loans were personal to de Villa. A corporation is a juridical entity distinct from its officers, and corporate powers are exercised by the board of directors. While corporations can act through officers authorized expressly or impliedly, the general principles of agency govern. In this case, de Villa signed the promissory notes as borrower without indicating he was acting for the corporation, and the notes did not mention the corporation. The Court found no special power of attorney authorizing de Villa to borrow money on behalf of the corporation. Petitioner's contention that the corporation's admission of receiving the P1.3 million constituted ratification was rejected. The Court noted that the corporation stated the money was an investment, not a loan, and that it received the amount in good faith, believing it was for a legitimate corporate purpose. Ratification requires voluntary choice made knowingly, and the corporation had no knowledge that de Villa obtained a loan on its behalf. Therefore, the loan was personal to de Villa. On the issue of whether the mortgage on respondent corporation's property was null and void for having been executed without its authority: The Court affirmed the CA's ruling that the mortgage was null and void. For creating or conveying real rights over immovable property, a special power of attorney is necessary and must appear in a public document. Since no such special power of attorney was presented in favor of de Villa as president, the mortgage executed by him was invalid. A void mortgage cannot be ratified. The petitioner failed to verify if de Villa had the authority to mortgage the corporate property. On the issue of whether the corporation ratified the unauthorized acts of its president: The Court found no ratification. Ratification requires the principal to have full knowledge of all material facts and circumstances relating to the unauthorized act. The corporation admitted receiving the P1.3 million, but it did so in good faith, believing it was an investment. There was no showing that the corporation knew de Villa was obtaining a loan on its behalf. The promissory notes and demand letters were addressed to de Villa personally, indicating that petitioner dealt with him in his personal capacity. Therefore, the corporation could not have knowingly ratified an act it was unaware of.
Main Doctrine
A corporation is not liable for loans obtained by its president without express, implied, or apparent authority, nor for mortgages executed without such authority, unless the corporation knowingly ratifies the unauthorized acts. An admission of receiving funds does not constitute ratification if the corporation believed it was an investment and was unaware it was proceeds from a loan.