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Case digest · Apparent authority and ratification by silence
Francisco vs. Government Service Insurance System
A telegram over the general manager’s name said the board had approved a redemption offer. More than a year of payments later, the GSIS said the telegram was a mistake.
Facts
October 10, 1956
Trinidad J. Francisco mortgaged the Vic-Mari Compound in Baesa, Quezon City, to the GSIS for a P400,000 loan.
January 6, 1959
The GSIS extrajudicially foreclosed the mortgage for P52,000 in arrears, and itself bought the property at the foreclosure sale.
February 20, 1959
Her father, Atty. Vicente J. Francisco, wrote the GSIS general manager, Rodolfo P. Andal, offering to pay P30,000 if the foreclosure would be set aside, with the GSIS to administer the compound and apply the monthly collections to the rest of the arrears. The same day, he received a telegram over Andal’s name saying the GSIS board had approved the request.
February 28, 1959
He sent a P30,000 check. His covering letter quoted the telegram verbatim. The GSIS received the amount and issued an official receipt.
1959–1960
The GSIS did not take over the administration, so Francisco collected from the occupants herself. In January and February 1960, GSIS letters asked her for a payment proposal, saying the one-year redemption period had expired, and her father protested. From March 1960, she remitted her collections to the GSIS, which received and receipted every remittance.
May 31, 1960
The GSIS told her father, for the first time, that the telegram should be disregarded because it failed to express the board’s resolution. Board Resolution No. 380 (February 20, 1959) had approved the offer on condition that he pay all the expenses the GSIS incurred in the foreclosure.
July 1960
The GSIS consolidated title to the compound in its own name. Francisco sued for specific performance and damages, and the trial court declared the consolidation void, restored her title and credited her payments as amortizations on her loan.
Issue
Was the GSIS bound by the telegram accepting the redemption offer, although its board had approved the offer with a condition the telegram left out?
Ruling
Yes. The GSIS was bound. The Court affirmed the trial court’s judgment.
The telegram was within the general manager’s apparent authority, and nothing in it gave ground to suspect its veracity. Even if, as the GSIS claimed, the board secretary sent it in the general manager’s name, Francisco had no way of knowing that. The letter that came with the P30,000 quoted the telegram verbatim, which was notice to the GSIS of its terms. Yet the GSIS kept the money, stayed silent about the telegram until May 31, 1960, and accepted later remittances. That silence, with the unconditional acceptance of those remittances, was a binding ratification of the agreement, under Article 1393 of the Civil Code. Between two innocent parties, the one who made the wrong possible bears the loss. Because the foreclosure was set aside, the GSIS could no longer collect its foreclosure attorney’s fees and charges. In the companion appeal (G.R. No. L-18155), Francisco’s own claim for damages failed: she had no competent proof of actual damages, and the GSIS’s breach, not being malicious or fraudulent, did not warrant moral damages.
“This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement (Civil Code, Art. 1393).”
Doctrine
“Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face.” The Court then quoted Ramirez vs. Orientalist Co., 38 Phil. 634 (1918), on the settled rule that a corporation which knowingly permits an officer to act within the scope of an apparent authority holds him out as having that power, and is estopped from denying it against anyone who dealt with it in good faith. Ratification by silence rests on knowledge: the GSIS had notice of the telegram’s terms and still kept the payments.
Compare: not ratified
In Woodchild Holdings, Inc. vs. Roxas Electric and Construction Company, Inc., G.R. No. 140667, August 12, 2004, keeping the purchase price did not ratify the extra terms in the deed the president signed, because the company had a right to the price anyway: “Ratification cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the agent.”
Bar tip
For ratification by silence, look for knowledge plus conduct consistent only with approval. Here, the GSIS had notice of the telegram’s terms, kept the P30,000 and the later remittances, and said nothing about the telegram for more than a year.
Hear it explained
Apparent Authority, Podcast Ep. 4, at 7:47
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This digest is general legal information for education, not legal advice, and it is not a substitute for reading the decision. Quoted passages are taken word for word from the full text.