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Case digest · Authority of corporate officers and ratification
Woodchild Holdings, Inc. vs. Roxas Electric and Construction Company, Inc.
The board authorized the president to sell one lot. The deed he signed also gave the buyer a right of way over the company’s neighboring lot, and a promise to sell more of it if the road proved insufficient.
Facts
The two lots
Roxas Electric and Construction Company, Inc. owned two adjoining lots in Antipolo, Rizal: Lot No. 491-A-3-B-2, and Lot No. 491-A-3-B-1, part of which was a dirt road to the Sumulong Highway.
May 17, 1991
At a special meeting, the board authorized the company, through its president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 at a price and on terms he deemed most reasonable and advantageous to the corporation, and to sign the sale documents and receive the proceeds.
June 21, 1991
Woodchild Holdings, Inc., which wanted the lot for a warehouse, offered to buy it. Its offer said that if the right of way was insufficient, for example for a 45-foot container van, the seller would sell additional square meters from its adjacent property. Roxas accepted the offer.
September 5, 1991
Roxas signed a Deed of Absolute Sale for P5,000,000, acknowledging receipt of the price. The deed also gave the buyer the beneficial use of and a right of way over the adjacent lot, an extra turning area, and a promise to sell additional square meters of it if the right of way proved insufficient. The company also undertook to eject the squatters on the property.
1991–1992
The company did not have the squatters evicted by September 29, 1991, and they were still there in April 1992. The warehouse construction could not start in October 1991 as planned, and its cost rose.
1991–1992
The company’s vehicles were parked on the right of way, Roxas died, and the company rejected the buyer’s demand to sell part of the adjacent lot. On June 17, 1992, the buyer sued for specific performance and damages. The company answered that it never authorized Roxas to burden or sell any part of the adjacent lot.
The rulings below
The trial court ruled for the buyer, holding the company estopped by Roxas’s apparent authority, and ordered it to sell 500 square meters of the adjacent lot and pay damages. The Court of Appeals reversed and dismissed the complaint.
Issue
Was the corporation bound by the right of way and the promise to sell part of its adjacent lot, terms in a deed of sale its board had authorized only for another lot? And did keeping the P5,000,000 price ratify them?
Ruling
No. The corporation was not bound by those terms; the sale of the authorized lot stood. But it had to pay P5,612,980 in actual damages and P100,000 in attorney’s fees for failing to evict the squatters on time.
The resolution authorized Roxas to sell one lot. It did not authorize him to grant a right of way over the adjacent lot or to agree to sell part of it, and that power could not be implied from his authority to set the terms he deemed most reasonable. A special power of attorney is required to convey real rights over immovable property, and those dealing with an agent whose act requires written authority are charged with notice of that fact. There was no apparent authority either: no evidence showed that the company knew of or allowed Roxas’s representations, and apparent authority is determined by the acts of the principal, not the agent. Keeping the P5,000,000 was not ratification, because the company had the right to the price of the lot it actually sold. And if a writing is required to grant an authority, ratification must also be in writing. The terms were therefore not binding on the company. On damages, however, the buyer’s claim succeeded: the company admittedly failed to evict the squatters on time, and it had to answer for the increased construction cost and the lost rentals. The Court affirmed the Court of Appeals with modification.
“Ratification is based on waiver – the intentional relinquishment of a known right. Ratification cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the agent.”
Doctrine
“The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the agent.” The party relying on apparent authority must prove the principal’s acts justifying belief in the agency, the principal’s knowledge of them, and its own reliance with ordinary care and prudence. Ratification is a waiver of a known right, so it cannot be inferred from what the principal had a right to do anyway, such as keeping the price of what it actually sold.
Compare: ratified
In Francisco vs. Government Service Insurance System, G.R. No. L-18287, March 30, 1963, the GSIS was bound: it had notice of the telegram’s terms, kept the payments and stayed silent about the telegram. “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).”
Bar tip
Read the board resolution strictly: authority to sell one lot is not authority to burden or sell another. Then ask whether the money the corporation kept was money it was owed anyway; if so, keeping it is not ratification. And remember the other half of the result: the corporation still paid damages for failing to evict the squatters on time.
Hear it explained
Apparent Authority, Podcast Ep. 4, at 9:57
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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.