FIRST DIVISION
G.R. No. 237506, July 28, 2020
SAN MIGUEL CORPORATION, PETITIONER, V. LEONARA* FRANCISCO VDA. DE TRINIDAD, SPS. TEODORICO F. TRINIDAD AND SUSANA COSME-TRINIDAD, SPS. GEMMA F. TRINIDAD-GANDIONGCO* AND ALFREDO M. GANDIONGCO,** JR., SPS. MANUEL F. TRINIDAD AND RUBI REMIGIO TRINIDAD AND SPS. GRACE F. TRINIDAD-MALOLOS AND BISMARK D. MALOLOS, ROBERTO N. GANDIONCO, RESPONDENTS.
D E C I S I O N
REYES, J. JR., J.:
Through this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court petitioner San Miguel Corporation (SMC) seeks a review of the Court of Appeals' (CA) Decision2 dated October 10, 2017 and Resolution3 dated February 14, 2018 which denied SMC's appeal, and, thus, affirmed the Regional Trial Court's (RTC) Decision dated August 28, 2014 which voided the real estate mortgages (REMs) and subsequent foreclosure over the subject properties for lack of authority to mortgage on the part of the attorney-in-fact.
To offer as collateral, security or property bond with [SMC] a parcel of land located at Las Pinas City containing an area of square meters and all improvements thereon and covered by TCT No.____.When asked about the status of the certificates of title, Roberto would explain that the titles were still in SMC's possession which has yet to decide which title to accept as collateral. It was the understanding of Gemma and Trinidad, et al., that should SMC accept their certificates of title as collateral, Roberto would bring the necessary documents from SMC which Gemma and Trinidad, et al., would then sign.8
HEREBY GIVING AND GRANTING unto my/our said Attorney-in-Fact full power and authority whatsoever requisite necessary to be done in and about the premises as fully to all intents and purposes as I/WE might or could lawfully do if personally present and acting; and
HEREBY RATIFYING AND CONFIRMING all that my/our Attorney-in-Fact shall lawfully do or cause to be done under and by virtue of these presents.7cralawlawlibrary
In disposal, the CA held:
WHEREFORE, premises considered, the Appeal is DENIED. The Assailed Decision dated 28 August 2014 in Civil Case no. 08-0093 is AFFIRMED with MODIFICATIONS in so far as the award for moral damages in the amount of Five Hundred Thousand Pesos (Php 500,000.00) and the award of attorney's fees and costs of suit in the amount of Three Hundred Thousand Pesos (Php 300,000.00) are hereby DELETED.
SO ORDERED.
Thus, SMC's resort to the present petition raising the following:Issues
Whether the [CA] erred when it affirmed the trial court's ruling that the SPAs did not include the authority to mortgage the property, despite the attendant circumstances in the case.
Whether the [CA] erred in denying the cross-claims of SMC against [Gandionco], considering that [Gandionco] was declared in default, applying Section 3 of Rule 9 of the Rules of Court.14cralawlawlibrary
To offer as collateral, security or property bond with [SMC] a parcel of land located at Las Pifias City containing an area of square meters and all improvements thereon and covered by TCT No._____.The language of the subject SPAs are clear and unambiguous. In interpreting contracts, Article 1370 of the Civil Code unequivocally provides that "if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control."18 This is similar to the "plain meaning rule" which assumes that the intent of the parties to an instrument is "embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement."19
HEREBY GIVING AND GRANTING unto my/our said Attorney-in-Fact full power and authority whatsoever requisite necessary to be done in and about the premises as fully to all intents and purposes as I/WE might or could lawfully do if personally present and acting; and
HEREBY RATIFYING AND CONFIRMING all that my/our Attorney-in-Fact shall lawfully do or cause to be done under and by virtue of these presents.17cralawlawlibrary
It bears stressing that apparent authority is based on estoppel and can arise from two instances: first, the principal may knowingly permit the agent to so hold himself out as having such authority, and in this way, the principal becomes estopped to claim that the agent does not have such authority; second, the principal may so clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that he actually has such authority. There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as claimant and such must have produced a change of position to its detriment. The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the agent.In this case, in addition to executing similarly worded SPAs expressly authorizing Roberto to offer specific properties as collateral and to do all things necessary in furtherance of said purpose, Gemma and Trinidad, et.al., delivered their original owner's duplicate TCTs to Roberto. This happened not only once, but even on four separate occasions, and this made possible the execution of the mortgages on two of the properties, their registration, and the delivery by SMC of beer stocks to Roberto.
For the principle of apparent authority to apply, the petitioner was burdened to prove the following: (a) the acts of the respondent justifying belief in the agency by the petitioner; (b) knowledge thereof by the respondent which is sought to be held; and, (c) reliance thereon by the petitioner consistent with ordinary care and prudence.22 x x x (Citations omitted)
The sale was admittedly made with the aid of Bacani, petitioner's agent, who had with him the original of the owner's duplicate Certificate of Title to the property, free from any liens or encumbrances. The signatures of Spouses Domingo, the registered owners, appear on the Deed of Absolute Sale. Petitioner's husband met with Respondent Yolanda Robles and received payment for the property. The Torrens Act requires, as a prerequisite to registration, the production of the owner's certificate of title and the instrument of conveyance. The registered owner who places in the hands of another an executed document of transfer of registered land effectively represents to a third party that the holder of such document is authorized to deal with the property.24Although the present case involves an SPA and not an executed deed, the Court finds the above quoted-ruling applicable by analogy since Roberto's possession of the SPAs and the owner's duplicates of the TCTs made it appear to SMC that he had the requisite authority to execute the REMs, and to register the same with the register of deeds.
There is x x x no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another's obligation by mortgaging his own property to be solidarity bound with the principal obligor, x x x The signatory to the principal contract - loan - remains to be primarily bound. It is only upon the default of the latter that the creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. And the liability of the third-party mortgagors extends only to the property mortgaged. Should there be any deficiency, the creditor has recourse on the principal debtor.26 (Citation omitted)Unfortunately, the records available to the Court are insufficient to determine whether Roberto still has any outstanding liability to SMC after applying the proceeds of the foreclosure sale. In particular, the amount secured by the mortgages, as well as SMC's bid in the foreclosure sale, are not specified in the pleadings or in the attachments thereto. For this reason, the Court deems it to the best interest of the parties to give due course to SMC's cross-claim against Roberto, and consequently, to remand the case solely for the purpose of determining the amount of Roberto's outstanding liability, if any, after applying the proceeds of foreclosure to satisfy his indebtedness.
Endnotes:
* Also referred to as "Leonara" in some parts of the rollo.
* Referred to as Gandionco in some parts of the rollo.
** Also referred to as Gandionco in some parts of the rollo.
1Rollo, pp. 11-30.
2 Penned by Associate Justice Renato C. Francisco, with Associate Justices Sesinando E. Villon and Manuel M. Barrios, concurring; id. at 31-46.
3 Id. at 47-48.
4 Id. at 33.
5 Id. at 13.
6 Id. at 34.
7 Id. at 40.
8 Id. at 34.
9 Id. at 14.
10 Id. at 35.
11 Id. at 36.
12 Id.
13 Id. at 38.
14 Id. at 16.
15See CIVIL CODE, Article 2085.
16 ART. 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (Emphasis supplied)
17 Supra note 7.
18 CIVIL CODE, Article 1370.
19Norton Resources and Development Corporation v. All Asia Bank Corporation, 620 Phil. 381, 388 (2009), citing Benguet Corporation v. Cabildo, 585 Phil. 23 (2008).
20 Supra note 8.
21 479 Phil. 896(2004).
22 Id. at 914.
23 G.R. No. 153743, March 18, 2005, 453 SCRA 812.
24Rollo, p. 819.
25Tenio-Obsequio v. Court of Appeals, G.R. No. 107967. March 1, 1994, 230 SCRA 550, 560.
26Land Bank of the Philippines v. Belle Corporation, 768 Phil. 368, 390 (2015), citing Cerna v. Court of Appeals, G.R. No. L-48359, March 30, 1993, 220 SCRA 517, 522-523.
CAGUIOA, J.:
I agree with the ponencia.
I submit this Concurring Opinion only to expound on the significance of delivering the physical possession of the original owner's duplicate Transfer Certificates of Title (TCTs) to Roberto N. Gandionco (Roberto), purported agent of the registered owners thereof (respondents).
To reiterate the facts - petitioner San Miguel Corporation (SMC) requires its dealers to submit sufficient collateral to secure the beer stocks taken out of SMC.1 Roberto approached respondents for help with the submission of the collateral requirement.2 Pursuant thereto, respondents executed similarly worded Special Powers of Attorney (SPAs) authorizing respondent Roberto to "offer as collateral" TCT Nos. T-52796, T-5433, T-6347, and T-6346 in favor of SMC.3 Respondents likewise delivered physical possession of the original owner's duplicate TCTs to Roberto on four different occasions and over the course of several years.4 Thereafter, real estate mortgages (REMs) were executed and annotated on some of the aforementioned titles.5 When Roberto failed to pay, SMC foreclosed on the mortgages.6 It was only then that respondents purportedly learned that Roberto had mortgaged their properties. They informed SMC that the SPAs had been revoked and thereafter filed a complaint for annulment of mortgage and foreclosure sale.7
Based on the foregoing, respondents should be deemed bound by the mortgages under the doctrine of agency by estoppel.
As acutely observed by the ponencia, in addition to executing similarly worded SPAs expressly authorizing Roberto to offer specific properties as collateral and to do all things necessary in furtherance of said purpose, respondents delivered their original owner's duplicate certificates of title to Roberto.8 Notably, no reason was proffered as to why respondents did not or could not instead provide photocopies or certified true copies of the same. Worse, respondents delivered the same on four different occasions over the course of several years.9 During this period, it appears that respondents failed to exercise even ordinary diligence to inquire about the status or whereabouts of their owner's duplicates. This is fatal to respondents' case.
The legal significance of delivering the original owner's duplicate certificate of title must be understood in the context of its distinct and irreplaceable function in the land registration system. In Philippine Bank of Communications v. The Register of Deeds for the Province of Benguet,10 the Court explained:
It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. It is conclusive evidence with respect to the ownership of the land described therein. In The Heirs of Alfredo Cullado v. Gutierrez, the Court explained: ChanRoblesVirtualawlibraryEvidently, the owner's duplicate certificate is "crucial to the full and effective exercise of ownership rights over registered land."12 It is a fundamental aspect of the Torrens system. Presentation of the owner's duplicate certificate constitutes conclusive authority from the registered owner in favor of the Register of Deeds (RD) to enter a new certificate or to make a memorandum of registration in accordance with the accompanying voluntary instrument.13 Conversely, non-presentation of the owner's duplicate certificate of title absolutely bars the registration of any and all voluntary transactions.14 In other words, without the owner's duplicate, a sale or mortgage while valid, will not and cannot bind registered land.Indeed, the bedrock of the Torrens system is the indefeasibility and incontrovertibility of a land title where there can be full faith reliance thereon. Verily, the Government has adopted the Torrens system due to its being the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. To the registered owner, the Torrens system gives him complete peace of mind, in order that he will be secured in his ownership as long as he has not voluntarily disposed of any right over the covered land. On the part of a person transacting with a registered land, like a purchaser, he can rely on the registered owner's title and he should not run the risk of being told later that his acquisition or transaction was ineffectual after all, which will not only be unfair to him, but will also erode public confidence in the system and will force land transactions to be attended by complicated and not necessarily conclusive investigations and proof of ownership, x x xIn other words, ownership of registered land is evidenced by the certificate of title, which is indefeasible and incontrovertible. Presidential Decree No. (P.D.) 1529 or the "Property Registration Decree" mandates the issuance of this certificate of title in duplicates - the original certificate of title, which is either an original certificate of title or TCT to be kept by the Register of Deeds and an owner's duplicate certificate of title to be kept by the registered owner, x x x
x x x x
x x x [T]here is no doubt that the owner's duplicate certificate of title is a fundamental aspect of the Torrens system. While a registered owner is free to exercise and enjoy all manner of rights over his/her property [i.e., (1) Jus possidendi or the right to possess; (2) Jus utendi or the right to use and enjoy; (3) Jus fruendi or the right to the fruits; (4) Jus accessionis or right to accessories; (5) Jus abutendi or the right to consume the thing by its use; (6) Jus disponendi or the right to dispose or alienate; and (7) Jus vindicandi or the right to vindicate or recover] and non-registration thereof does not affect the validity of said acts as between the parties, no voluntary transaction affecting the land will be registered (and thus bind third persons) without the owner's duplicate certificate of title as mandated by P.P. 1529, viz.: ChanRoblesVirtualawlibraryThe requirement that the owner's duplicate certificate of title be presented for voluntary transactions is precisely what gives the registered owner "security" and "peace of mind" under the Torrens System. Without the owner's duplicate certificate of title, transfers and conveyances like sales and donations, mortgages and leases, and agencies and trusts while valid, will not bind the registered land. As such, the owner's duplicate certificate of title safeguards ownership, x x x11cralawlawlibraryCHAPTER V
SUBSEQUENT REGISTRATION
I. VOLUNTARY DEALINGS WITH REGISTERED
LANDS
GENERAL PROVISIONS
SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies.
SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.
SEC. 53. Presentation of owner's duplicate upon entry of new certificate. - No voluntary instrument shall be registered by the Register of Deeds, unless the owner's duplicate certificate is presented with such
instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.
The production of the owner's duplicate certificate, whenever any voluntary instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder for value of a certificate of title. After the entry of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or other instrument, shall be null and void.
SEC. 54. Dealings less than ownership, how registered. - No new certificate shall be entered or issued pursuant to any instrument which does not divest the ownership or title from the owner or from the transferee of the registered owners. All interests in registered land less than ownership shall be registered by filing with the Register of Deeds the instrument which creates or transfers or claims such interests and by a brief memorandum thereof made by the Register of Deeds upon the certificate of title, and signed by him. A similar memorandum shall also be made on the owner's duplicate. The cancellation or extinguishment of such interests shall be registered in the same manner, x x x
ART. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers, (n)15cralawlawlibraryThe Court has held that "one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be."16 In an agency by estoppel, "the principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing."17 Thus, in the early case of Macke v. Camps,18 the Court held a cafe owner liable for the payment of goods received by a certain Ricardo Flores, after it was shown that the former left the latter in charge of the business and allowed him to use the title of "managing agent" during periods of prolonged absence. Similarly, the Court in Cuison v. Court of Appeals19 held petitioner liable for the payment of various paper products delivered in accordance with orders made by a certain Tiu Huy Tiac, after it was shown that petitioner held the latter out to the public as the manager of his store. The Court therein explained:
"More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides: ChanRoblesVirtualawlibraryTiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person reiving thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice of the other party who, in good faith, relied upon them (Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).'Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.'The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint tortfeasors whose liability is joint and solidary.
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of the agent's misdeed is of no moment."
But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin Nano [(purported agent)] had possession of Jose Vallejo's [(registered owner/purported mortgagor)] title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated, x x xIn Domingo v. Robles,26 which was likewise cited by the ponencia, the Court upheld the purportedly forged sale made with the aid of an agent who had possession of the original owner's duplicate, and held: ChanRoblesVirtualawlibrary
The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a departure from the orthodox principles of property law. Under the common law, if the pretended signature of the mortgagor is a forgery, the instrument is invalid for every purpose and will pass no title or rights to anyone, unless the spurious document is ratified and accepted by the mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly entered in registry, to become the root of a valid title in bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the requirement that no transfer shall be registered unless the owner's certificate was produced along with the instrument of transfer. An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a representation to a third party that the holder of the transfer is authorized to deal with the lands. (53 C. J., 1141, 1142; Act No. 496, as amended, sees. 47, 51, 55.)
x x x x
Other incidental facts might be mentioned and other incidental legal propositions might be discussed, but in its final analysis this is a case of a mortgagee relying upon a Torrens title, and loaning money in all good faith on the basis of the title standing in the name of the mortgagors only thereafter to discover one defendant to be an alleged forger and the other defendant, if not a party to the conspiracy, at least having by his negligence or acquiescence made it possible for the fraud to transpire. Giving to the facts the most favorable interpretation for Vallejo, yet, as announced by the United States Supreme Court, the maxim is, as between two innocent persons, in this case Angela Blondeau and Jose Vallejo, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss, in this case Jose Vallejo. x x x25cralawlawlibrary
The sale was admittedly made with the aid of Bacani, petitioner's agent, who had with him the original of the owner's duplicate Certificate of Title to the property, free from any liens or encumbrances. The signatures of Spouses Domingo, the registered owners, appear on the Deed of Absolute Sale. Petitioner's husband met with Respondent Yolanda Robles and received payment for the property. The Torrens Act requires, as a prerequisite to registration, the production of the owner's certificate of title and the instrument of conveyance. The registered owner who places in the hands of another an executed document of transfer of registered land effectively represents to a third party that the holder of such document is authorized to deal with the property.27cralawlawlibraryThe foregoing reasoning is applicable by analogy to the instant case. By repeatedly signing the subject SPAs and by repeatedly placing the original owner's duplicate TCTs in the hands of Roberto, respondents represented to SMC that Roberto was duly authorized to mortgage the properties. As discussed, without the owner's duplicates, the mortgages could never have been registered.28 Relying in good faith on this apparent authority and believing that the mortgages were validly constituted, SMC approved Roberto's dealership application and delivered beer stocks amounting to about P7,000,000.00.29 In view of the foregoing, respondents are estopped from denying Roberto's authority and are bound to comply with the obligations validly executed in their name.
(Sgd.)ALFREDO BENJAMIN S. CAQGUIOA Associate Justice |
Endnotes:
1Ponencia, p. 2.
2 Id.
3 Id. at 2-3.
4 Id.
5 Id.
6 Id.
7 Id.
8 Id. at 8.
9 Id. at 2.
10 G.R. No. 222958, March 11, 2020.
11 Id. at 7-12.Citations omitted; underscoring supplied.
12 Id. at 12.
13 PROPERTY REGISTRATION DECREE, Presidential Decree No. (P.D.) 1529, June 11, 1978, Sec. 53.
14 Id.
15 Underscoring supplied.
16Cuison v. Court of Appeals, 298 Phil. 162, 167 (1993).
17AFP Retirement and Separation Benefits System v. Sanvictores, 793 Phil. 442, 452-453 (2016).
18 7 Phil. 553, 555(1907).
19 Supra note 16.
20 Id. at 170-171; underscoring supplied.
21Ponencia, p. 3.
22 Id.
23Cuison v. Court of Appeals, supra note 16 at 172.
24 61 Phil. 625(1935).
25 Id. at 627-632; underscoring supplied.
26 493 Phil. 916(2005).
27 Id. at 922; underscoring supplied.
28 P.D. 1529, Sec. 51.
29Ponencia, p. 3.
30Tenio-Obsequio v. Court of Appeals, 300 Phil. 588, 601 (1994).
31 CIVIL CODE, An. 1909 states:
ART. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.chanRoblesvirtualLawlibrary