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AYALA LAND v. ASB REALTY CORPORATION

FACTS:

The case involves a dispute between petitioner Ayala Land, Inc. (ALI) and respondent E.M. Ramos & Sons, Inc. (EMRASON) regarding the validity of a Contract to Sell and a Letter-Agreement involving a property in Dasmariñas, Cavite. ALI claimed that it entered into a Contract to Sell with the Ramos children, who allegedly had full authority to act on behalf of EMRASON. On the other hand, EMRASON and ASB Realty Corporation (ASBRC) argued that they entered into a Letter-Agreement because the terms were more beneficial. The Regional Trial Court declared the Contract to Sell void for lack of authority of the Ramos children to sign on behalf of EMRASON. ALI then appealed to the Court of Appeals, which affirmed the RTC's decision. ALI now seeks recourse from the Supreme Court.

The defendants, the Ramos children, claimed to be authorized representatives of EMRASON and entered into a contract to sell the property with Ayala Land Inc. (ALI). ALI even acknowledged the position of Emerito Ramos Sr., sending him a letter and requesting a meeting. However, the contract itself had formal defects, such as blank spaces and failure to acknowledge the identities of EMRASON's representatives. The Regional Trial Court declared the contract void and cancelled the annotations on the title. They also deemed a Letter-Agreement between EMRASON and ASB Realty Corporation (ASBRC) valid, based on the presumed authority of Emerito Ramos Sr. as president of EMRASON and subsequent ratification by the stockholders.

Ayala Land Inc. (ALI) filed a complaint for rescission of the Contract to Sell, claiming that the Ramos children lacked authority to enter into the contract. The Regional Trial Court (RTC) ruled in favor of ALI, declaring the contract void for lack of authority and ordering the Ramos children to pay attorney's fees and costs. ALI and the Ramos children appealed to the Court of Appeals (CA), who affirmed the RTC's findings. The CA agreed that the Ramos children failed to prove their authority to enter into the contract, with ALI presenting evidence of letters and deposition showing that Emerito Ramos Sr. was the authorized representative of EMRASON.

ISSUES:

  1. Whether the Court of Appeals erred in annulling the contract to sell between petitioner and EMRASON despite evidence showing the authority and capacity of the Ramos children to close the sale.

  2. Whether the Court of Appeals erred in upholding the validity of the letter-agreement between ASBRC and EMRASON despite evidence showing that the contract to sell signed by the Ramos children pre-dated the letter-agreement and carried no board authority.

  3. Whether the Court of Appeals erred in affirming the dismissal of petitioner's counterclaim and cross-claim despite evidence showing bad faith on the part of EMRASON.

  4. Whether the actions of the Ramos children bound EMRASON under the doctrine of apparent authority or ostensible agency.

  5. Whether the August 3, 1993 letter of Ramos, Sr. to ALI authorized the Ramos children to enter into a Contract to Sell regarding the Dasmariñas Property.

  6. The issue in this case is whether Emerito Ramos, Sr. had the authority to execute and enter into a Letter-Agreement on behalf of EMRASON.

RULING:

  1. The Supreme Court denied the petition for review on certiorari for raising factual issues and failing to show any reversible error committed by the Court of Appeals. The Court emphasized that only questions of law are allowed in a petition for review on certiorari, and the Supreme Court is not a trier of facts. The Court further stated that the petitioner failed to show any reversible error on the part of the Court of Appeals.

  2. The actions of the Ramos children did not bind EMRASON under the doctrine of apparent authority or ostensible agency. The August 3, 1993 letter authorized the Ramos children only to negotiate the terms of a potential sale over the Dasmariñas Property, and not to sell the property in an absolute way or act as signatories in the contract. Acts done by corporate officers beyond the scope of their authority cannot bind the corporation unless it has expressly ratified such acts or is estopped from denying them.

  3. The August 3, 1993 letter did not authorize the Ramos children to enter into a Contract to Sell regarding the Dasmariñas Property. The letter only authorized them to collaborate, negotiate, and discuss terms and conditions that are mutually beneficial to both parties. To construe the letter as a carte blanche to sell the property would be stretching one's imagination.

  4. The Supreme Court held that Ramos, Sr. had the authority to execute the Letter-Agreement on behalf of EMRASON. The court found that Ramos, Sr.'s authority to enter into the agreement was clearly proven through the testimony and evidence presented. The court also emphasized that a party dealing with the president of a corporation is entitled to assume that he has the authority to enter into contracts on behalf of the corporation within the scope of the corporation's powers and without violating any laws or public policy. Therefore, Ramos, Sr. was properly authorized to execute the Letter-Agreement with ASBRC.

PRINCIPLES:

  • A contract is void if one of the essential requisites of contracts, such as consent, is lacking (Article 1318, New Civil Code).

  • For a juridical entity, like a corporation, consent is given through its board of directors. No person, including the officers, can validly bind a corporation without the authority of the board of directors.

  • Exceptions to the general rule of requiring board authority for contract binding a corporation include cases where third persons' actions bind the corporation under the doctrine of apparent authority or ostensible agency.

  • The doctrine of apparent authority is a species of the doctrine of estoppel. Through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.

  • Persons dealing with an agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of the agent's authority, and the burden of proof is upon them to establish it.

  • Acts done by corporate officers beyond the scope of their authority cannot bind the corporation unless it has expressly ratified such acts or is estopped from denying them.

  • A corporation acts through its Board of Directors and not through its controlling shareholders.

  • The authority of a corporate president to bind the corporation may be shown expressly or impliedly by habit, custom, or acquiescence in the general course of business.

  • A party dealing with the president of a corporation is entitled to assume that he has the authority to enter into contracts on behalf of the corporation within the scope of the corporation's powers and without violating any laws or public policy.

  • The quantity of similar acts does not establish apparent authority, but the vesting of a corporate officer with the power to bind the corporation does.