San Miguel Corporation v. Vda. De Trinidad, et. Al G.R. No. 237506 28 July2020 Reyes, Jr., J.

San Miguel Corporation v. Vda. De Trinidad, et. Al

G.R. No. 237506

28 July2020

Reyes,Jr. J.:

First Division

Nature of the Action: This is a petition for Review on Certiorari where the petitioner seeks a review of the Court of Appeals’ Decision and Resolution denying SMC’s appeal and thus affirming the RTC’s decision 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.

Facts:

Respondents are the registered co-owners of two parcels of land which are covered by TCTs. On the other hand, Respondent Gemma is the registered owner of another two parcels of land and covered by TCTs. 

Then, Gemma’s brother in law (Roberto), opened a beer dealership for Masbate City with SMC. For the collateral requirement, Gemma’s TCTs was offered as collateral. He asked for additional collateral in order to have additional stocks. In sum, there are four instances where the Respondent lent their TCTs to Roberto. The respondents executed the corresponding SPA in favor of Roberto which were similarly- worded and varying only as to the property involved. 

When Roberto was asked about the TCTs, he would explain that the titles were still in SMC’s possession which has yet to decide. However, using the said SPAs, Roberto executed REMs over the properties in favor of SMC. The said mortgages were annotated on the titles. When SMC failed to collect to Roberto, it undertook to extra-judicially foreclose the REMs. At the foreclosure sale, SMC emerged as the highest bidder.

When Gemma et.al learned these, they revoked the SPAs in favor of Roberto. They informed SMC but no reply was given until they’ve learned the foreclosure proceedings. Thus, they filed a complaint for the annulment of mortgage and foreclosure sale and the recovery of their titles.

Consequently, the RTC rendered judgment voiding the subject REMs and the extra-judicial foreclosure over the properties. It held that Roberto’s authority is only to offer the subject properties as collateral. SMC moved for reconsideration but the same was denied.

On appeal, CA dismissed the appeal and held that a power of attorney must be strictly construed. The subject SPAs merely authorized Roberto to offer the subject properties as collateral, but not to enter into a mortgage contract.

Hence, this present petition.

Issue:

Whether the SPAs include the authority to mortgage the property, thus the contract of mortgage.

Ruling:

The petition is partly granted.

For a contract of mortgage to be valid, the following essential requisites must be met: first, that the mortgage is constituted to secure the fulfillment of a principal obligation; second, the mortgagor is the absolute owner of the thing mortgaged; and third, the persons constituting the mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Third persons not parties to the principal obligation may secure such obligation by mortgaging their own property.

In the instant case, it was Roberto who obtained certain obligations from SMC which he secured with the subject properties. The properties, are, in turn, owned by Gemma and Trinidad, et al., who are third parties in relation to the principal obligation of Roberto to SMC. Since Gemma and Trinidad, et al., were not the ones who personally mortgaged their properties to secure Roberto's obligations with SMC, the query to be had is whether Roberto was legally authorized to do so.

 

Article 1878 16 of the Civil Code requires an SPA in cases where real rights over immovable property are created or conveyed. Here, the SPAs specifically authorized Roberto to "offer as collateral" to SMC the subject properties, to wit:

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._____

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.

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." 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."

Contrary to the CA's ruling, the phrase "to offer" the subject properties "as collateral, security or property bond with SMC," coupled with the "full power and authority" to do all that is necessary for all intents and purposes of the contract, is a specific and express authority to mortgage the subject properties in favor of SMC. This is so considering that the presentation of the TCTs by Roberto to SMC was for the purpose of complying with the collateral requirement for the dealership. As such, executing the real estate mortgages and registering the same with the register of deeds are well within the scope of the authority granted.

It is of no moment that it was the supposed "understanding" of the registered owners that "should SMC accept their certificates of title as collateral, Roberto would bring the necessary documents from SMC which [the registered owners] would then sign." Article 1900 of the Civil Code expressly states that "[s]o far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent." Article 1902 likewise unequivocally states that "[p]rivate or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown to them."

Assuming, however, that Roberto exceeded the limits of his authority under the SPA and such unauthorized acts were not ratified by Gemma and Trinidad, et al., the latter are still bound by the mortgages entered by Roberto under the doctrine of apparent authority. As explained in Woodchild Holdings, Inc. v. Roxas Electric and Construction Co., Inc.:

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.

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)

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.

On the basis of the foregoing, a reversal of the assailed C A ruling is in order.