Calubad v. Ricarcen Development Corporation
REITERATIONFacts
The Antecedents: Respondent Ricarcen Development Corporation (Ricarcen) was the registered owner of a parcel of land in Quezon City. Its president from 2001 to August 2003, Marilyn R. Soliman, acting on behalf of Ricarcen, obtained several loans from petitioner Arturo C. Calubad. These loans, totaling P7,000,000.00, were secured by a real estate mortgage over Ricarcen's property. The loans were evidenced by a Deed of Real Estate Mortgage and subsequent amendments. Marilyn presented a Board Resolution and Secretary's Certificates to prove her authority to enter into these transactions. When Ricarcen failed to pay the loans, Calubad initiated extrajudicial foreclosure proceedings, and he was the highest bidder at the auction sale. Procedural History: Ricarcen claimed it only learned of Marilyn's transactions in July 2003, after the foreclosure. Upon discovery, Ricarcen removed Marilyn as president and authorized the new president to take legal action. Ricarcen filed a Complaint for Annulment of Real Estate Mortgage and Extrajudicial Foreclosure of Mortgage and Sale with Damages against Marilyn, Calubad, and other parties. The Regional Trial Court ruled in favor of Ricarcen, declaring the mortgage contracts, foreclosure, and sale null and void, and ordering the cancellation of Calubad's title and reinstatement of Ricarcen's title, along with damages. Calubad appealed to the Court of Appeals, which dismissed his appeal and affirmed the RTC's decision. Calubad then filed a Petition for Review on Certiorari with the Supreme Court. The Petition: Petitioner Calubad, through a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assails the Court of Appeals' decision. He argues that Ricarcen is estopped from denying Marilyn's authority to enter into the loan and mortgage contracts. Calubad contends that Ricarcen clothed Marilyn with apparent authority, benefited from the loan proceeds, and impliedly agreed to the loans by making interest payments. He asserts that the Board Resolution and Secretary's Certificates, though later disputed, initially demonstrated Marilyn's authority. Calubad also points to the possession of the owner's duplicate title by Marilyn and the issuance of checks payable to Ricarcen as evidence of the corporation's knowledge and benefit from the loans. The core of his petition is that Ricarcen's negligence in its internal affairs should not prejudice an innocent third party who acted in good faith.
Issue(s)
Whether Ricarcen Development Corporation is estopped from denying the authority of its former President, Marilyn R. Soliman, to enter into a contract of loan and mortgage with Arturo C. Calubad. Whether the Court of Appeals erred in disregarding Calubad's arguments on estoppel, laches, and the validity of the documents presented, considering Ricarcen's knowledge and actions regarding the loan.
Ruling
The Supreme Court granted the petition, reversed and set aside the Court of Appeals' decision, and dismissed Ricarcen Development Corporation's Amended Complaint.
Ratio Decidendi
On the issue of estoppel and apparent authority: The Supreme Court held that Ricarcen is estopped from denying Marilyn's authority. The Court reasoned that Ricarcen, as a corporation, exercises its powers through its board of directors, but the board can delegate its functions to officers or agents. The authority to bind the corporation can be express or implied, and apparent authority, based on the principle of estoppel, is also recognized. Apparent authority arises when the corporation clothes its agent with the power to act on its behalf, leading innocent third parties to believe in the agent's authority. In this case, Ricarcen clothed Marilyn with apparent authority by entrusting her with blank, signed documents and the owner's duplicate copy of the title. Furthermore, the issuance of checks payable to Ricarcen for the loan proceeds, deposited into its account, and the subsequent payments of monthly interest through checks drawn by other corporate officers jointly with Marilyn, indicated that Ricarcen benefited from and acquiesced to the transactions. The Court emphasized that Calubad, as an innocent third party dealing in good faith, should not suffer from Ricarcen's negligence in its internal affairs. The doctrine of apparent authority binds the principal to third persons who are reasonably led to believe that the agent was authorized due to the principal's conduct. On the validity of the documents, Ricarcen's knowledge, and the Court of Appeals' alleged error: The Court found that while the RTC and CA declared the board resolution and secretary's certificates as fabricated, Ricarcen's own actuations contradicted its claim of lack of authority. The fact that loan proceeds were deposited into Ricarcen's bank account and that checks signed by other corporate officers (Erlinda and Elizabeth) jointly with Marilyn were issued as payments for loan interest and principal demonstrated that Ricarcen, through its officers, was aware of and benefited from the loans. The Court noted that even if Marilyn acted without or in excess of her actual authority, Ricarcen is bound if she acted within the scope of apparent authority with which Ricarcen clothed her. The Court reiterated the principle that if a corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith.
Main Doctrine
When a corporation intentionally or negligently clothes its agent with apparent authority to act in its behalf, it is estopped from denying its agent's apparent authority as to innocent third parties who dealt with this agent in good faith.