Ayala Land, Inc. v. ASB Realty Corporation
REITERATIONFacts
The Antecedents: Ayala Land, Inc. (ALI) entered into a Contract to Sell dated May 18, 1994, with the Ramos children for the purchase of E.M. Ramos & Sons, Inc.'s (EMRASON) 372-hectare property in Dasmariñas, Cavite. ALI alleged that EMRASON's brokers and certain officers represented they had full authority to act on EMRASON's behalf, citing a letter from EMRASON's President, Ramos, Sr. Subsequently, ALI learned of a Letter-Agreement dated May 21, 1994, and a Real Estate Mortgage executed by Ramos, Sr. and Antonio for EMRASON with ASB Realty Corporation (ASBRC). The Ramos children also allegedly informed ASBRC of the Contract to Sell with ALI. Respondents averred that EMRASON rejected ALI's proposal and accepted ASBRC's more advantageous offer, leading to the May 21, 1994 Letter-Agreement and a Real Estate Mortgage on May 22, 1994. They stated that EMRASON's Board of Directors and stockholders authorized Ramos, Sr. and Antonio to sign the Letter-Agreement. Upon learning of the Contract to Sell between ALI and the Ramos children and its annotation on the titles, ASBRC and EMRASON filed a complaint to nullify the Contract to Sell and cancel the annotations. Procedural History: The Regional Trial Court (RTC) declared the Contract to Sell between ALI and the Ramos children void for lack of authority of the Ramos children to sign on behalf of EMRASON, finding that ALI knew of Ramos, Sr.'s authority and acted in bad faith. The RTC declared the Letter-Agreement between EMRASON and ASBRC valid, holding that Ramos, Sr., as President, had presumed authority, and even if not, EMRASON's subsequent ratification cured the defect. The RTC ordered the cancellation of annotations, declared the Letter-Agreement valid, and awarded damages and attorney's fees against ALI and the Ramos children. The Court of Appeals (CA) affirmed the RTC's decision, reiterating that the Ramos children lacked authority and ALI was aware of this, and also upheld the validity of the Letter-Agreement, citing Ramos, Sr.'s presumed authority and EMRASON's ratification. The Petition: ALI filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision and resolution. ALI argued that the CA erred in annulling the Contract to Sell despite evidence of EMRASON's confirmation of the Ramos children's authority, in upholding the Letter-Agreement despite the Contract to Sell pre-dating it and lacking board authority, and in affirming the dismissal of its counterclaim and cross-claim.
Issue(s)
Whether the Court of Appeals gravely erred in annulling the Contract to Sell between petitioner (ALI) and EMRASON, notwithstanding evidence of EMRASON's confirmation of the Ramos children's authority to close the sale. Whether the Court of Appeals seriously erred in upholding the validity of the Letter-Agreement between ASBRC and EMRASON despite the Contract to Sell signed by the Ramos children pre-dating it and allegedly lacking board authority. Whether the Court of Appeals seriously erred in affirming the RTC's dismissal of petitioner's compulsory counterclaim and cross-claim despite evidence of bad faith and damage inflicted by EMRASON on petitioner.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the issues raised by ALI were factual in nature, and it failed to show any reversible error on the part of the CA. The Contract to Sell between ALI and the Ramos children was declared null and void for lack of authority of the Ramos children to bind EMRASON. The Letter-Agreement between EMRASON and ASBRC was declared valid and enforceable.
Ratio Decidendi
On the annulment of the Contract to Sell: The Court reiterated that for juridical entities, consent is given through the board of directors. Acts done by corporate officers beyond the scope of their authority do not bind the corporation unless ratified or the corporation is estopped from denying them. The August 3, 1993 letter from Ramos, Sr. to ALI only authorized the Ramos children to "collaborate and continue negotiating and discussing" terms and conditions, not to sell the property absolutely or act as signatories. The Court found that ALI failed to establish the nature and extent of the Ramos children's authority, which is a burden upon those dealing with an assumed agent. Furthermore, the formal defects in the Contract to Sell, such as blank spaces for EMRASON's signatories and lack of their community tax certificate numbers, indicated ALI's awareness of the absence of the Ramos children's authority. The Court emphasized that ALI, as an established business entity, should know that a corporation acts through its Board of Directors, not its controlling shareholders. On the validity of the Letter-Agreement: The Court found that Ramos, Sr., as President of EMRASON, had presumed authority to enter into the Letter-Agreement. This was supported by the minutes of the Board meeting on May 17, 1994, which authorized Ramos, Sr. and Antonio to execute the agreement, and the subsequent ratification by the stockholders in a meeting on March 6, 1995. The Court noted that correspondence between ALI and EMRASON had always been addressed to Ramos, Sr., and ALI itself relied on his August 3, 1993 letter, thereby acknowledging his authority. The Court clarified that it is not the quantity of similar acts but the vesting of a corporate officer with the power to bind the corporation that establishes apparent authority. A party dealing with the president is entitled to assume the president has the authority to enter into contracts within the corporation's scope of powers. On the dismissal of the counterclaim and cross-claim: The Court found no reversible error in the CA's affirmation of the RTC's dismissal of ALI's counterclaim and cross-claim. The issues raised by ALI regarding bad faith and damages were factual in nature. Since the RTC and CA, as triers of fact, found no sufficient basis for these claims, and ALI failed to demonstrate any reversible error in their findings, the Supreme Court declined to re-evaluate the evidence. The Court reiterated that it is not a trier of facts and does not re-calibrate evidence that has already passed the scrutiny of lower courts, especially when their findings are affirmed.
Main Doctrine
The doctrine of apparent authority, a species of estoppel, binds a principal when its voluntary acts place an agent in a situation where a person of ordinary prudence is justified in presuming the agent has the authority to perform a particular act. For juridical entities, consent is given through the board of directors, and acts beyond the scope of authority of corporate officers do not bind the corporation unless ratified or the corporation is estopped from denying them. Persons dealing with an assumed agent are bound to ascertain the nature and extent of the agent's authority.