San Miguel Corporation v. Trinidad
REITERATIONFacts
The Antecedents: Respondents Leonara Francisco Vda. De Trinidad, et al. (Trinidad, et al.) are co-owners of several parcels of land. Roberto N. Gandionco (Roberto), Gemma Trinidad-Gandionco's brother-in-law, needed collateral for a beer dealership with San Miguel Corporation (SMC). Trinidad, et al., through Gemma, lent their Transfer Certificates of Title (TCTs) to Roberto on four separate occasions, executing Special Powers of Attorney (SPAs) in his favor. These SPAs authorized Roberto to "offer as collateral, security or property bond" the subject properties. It was the understanding of Trinidad, et al., that they would sign the necessary documents only if SMC accepted their titles as collateral. However, Roberto, using the SPAs, executed Real Estate Mortgages (REMs) over two of the properties in favor of SMC. Roberto defaulted on his obligations to SMC, amounting to approximately P7,000,000.00, evidenced by dishonored checks. SMC foreclosed the REMs extra-judicially, with SMC emerging as the highest bidder. Upon learning of the foreclosure, Trinidad, et al., revoked the SPAs and informed SMC, but SMC did not reply until the foreclosure proceedings. Procedural History: Trinidad, et al., filed a complaint for annulment of mortgage and foreclosure sale. The Regional Trial Court (RTC) voided the REMs and foreclosure, holding that Roberto's authority was only to offer the properties as collateral, not to mortgage them, and that SMC should have been put on guard by the long execution of the SPAs before the mortgages. The RTC also ordered the return of the TCTs and awarded damages. SMC appealed to the Court of Appeals (CA). The CA affirmed the RTC's decision, stating that SPAs must be strictly construed and that "to offer" does not include the power to mortgage. The CA also deleted the award for moral damages and attorney's fees for lack of proof of bad faith. SMC filed the present petition for review on certiorari. The Petition: SMC seeks to reverse the CA's ruling, arguing that the CA erred in finding that the SPAs did not include the authority to mortgage, despite the attendant circumstances. SMC also questioned the denial of its cross-claim against Roberto.
Issue(s)
Whether the Special Powers of Attorney (SPAs) granted to Roberto N. Gandionco included the authority to mortgage the subject properties, and if not, whether San Miguel Corporation (SMC) is still bound by the mortgages under the doctrine of apparent authority. Whether San Miguel Corporation (SMC) is bound by the mortgages executed by Roberto N. Gandionco under the doctrine of apparent authority. Whether SMC's cross-claim against Roberto N. Gandionco should be granted.
Ruling
The petition is partly granted. The Court reversed and set aside the Court of Appeals' decision declaring the real estate mortgages and foreclosure sales void, and dismissed SMC's cross-claim against Roberto Gandionco. The case is remanded to the Regional Trial Court for the determination of Roberto Gandionco's outstanding liability to SMC.
Ratio Decidendi
On the authority to mortgage and apparent authority: The Court ruled that the SPAs, which specifically authorized Roberto to "offer as collateral, security or property bond" the subject properties with SMC, coupled with the grant of "full power and authority" to do all that is necessary, constituted sufficient and express authority to mortgage the properties. The Court emphasized that the plain meaning rule under Article 1370 of the Civil Code dictates that the literal meaning of the stipulations controls when the terms are clear and unambiguous. The Court found that executing real estate mortgages and registering them were within the scope of the authority granted, especially considering the purpose of complying with SMC's collateral requirement for the dealership. The Court rejected the CA's interpretation that "to offer" did not include the power to mortgage, finding it to unduly enlarge the term. Even assuming Roberto exceeded his authority, the Court held that Trinidad, et al., are still bound by the mortgages under the doctrine of apparent authority. The Court explained that apparent authority arises when the principal knowingly permits the agent to hold himself out as having such authority or clothes the agent with the indicia of authority, leading a reasonably prudent person to believe the agent has such authority. In this case, the execution of similarly worded SPAs, the delivery of original owner's duplicate TCTs to Roberto on four separate occasions, and Roberto's possession of these documents made it appear to SMC that he had the requisite authority to execute and register the REMs. The Court noted that Trinidad, et al., failed to exercise diligence in ascertaining the whereabouts of their TCTs and relied on Roberto's explanations, making them bound by the mortgages executed by him. The Court applied the principle that "as between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible by his act of confidence must bear the loss." On apparent authority: Even assuming Roberto exceeded his authority, the Court held that Trinidad, et al., are still bound by the mortgages under the doctrine of apparent authority. The Court explained that apparent authority arises when the principal knowingly permits the agent to hold himself out as having such authority or clothes the agent with the indicia of authority, leading a reasonably prudent person to believe the agent has such authority. In this case, the execution of similarly worded SPAs, the delivery of original owner's duplicate TCTs to Roberto on four separate occasions, and Roberto's possession of these documents made it appear to SMC that he had the requisite authority to execute and register the REMs. The Court noted that Trinidad, et al., failed to exercise diligence in ascertaining the whereabouts of their TCTs and relied on Roberto's explanations, making them bound by the mortgages executed by him. The Court applied the principle that "as between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible by his act of confidence must bear the loss." On SMC's cross-claim against Roberto: The Court sustained the denial of SMC's cross-claim against Roberto. The CA correctly noted that SMC failed to present sufficient evidence to prove Roberto's liability for the P7,000,000.00. The Certificate of Sale only proved that SMC was the highest bidder at the foreclosure sale, not the actual amount of Roberto's outstanding debt. However, the Court found it necessary to remand the case to determine Roberto's outstanding liability after applying the proceeds of the foreclosure sale, as Roberto's indebtedness arose from his personal dealership agreement with SMC, and Trinidad, et al., were only third-party mortgagors liable only to the extent of the mortgaged properties.
Main Doctrine
A Special Power of Attorney (SPA) authorizing an agent to 'offer as collateral, security or property bond' a parcel of land, coupled with the grant of 'full power and authority' to do all that is necessary, constitutes sufficient authority to mortgage the property. Furthermore, even if the agent exceeded the limits of the authority granted, the principal is bound by the mortgage under the doctrine of apparent authority if the principal's acts clothed the agent with the indicia of authority, leading a reasonably prudent person to believe the agent had such authority, and the third party relied on such belief in good faith.