G.R. No. 114311 - Cosmic Lumber Corp. vs. Court of Appeals

On January 28, 1985, Cosmic Lumber Corporation, through its General Manager, executed a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact.
The authority granted allowed Villamil-Estrada to initiate, institute, and file any court action to eject third persons and/or squatters occupying Lots Nos. 9127 and 443, covered by TCT Nos. 37648 and 37649.
She was also empowered to appear at pre-trial conferences and enter into stipulations of facts and/or compromise agreements, but only insofar as these protected the rights and interests of Cosmic Lumber Corporation in the property.

On March 11, 1985, Villamil-Estrada filed an ejectment case against Isidro Perez before the Regional Trial Court (RTC) of Dagupan, docketed as Civil Case No. D-7750.
On November 25, 1985, Villamil-Estrada entered into a Compromise Agreement with Isidro Perez wherein:

A portion of Lot 443 measuring 333 square meters occupied by Perez was recognized as his ownership and possession.
Perez agreed to pay P26,640.00 to the plaintiff, computed at P80.00 per square meter.
The plaintiff recognized Perez’s ownership over said portion as per the relocation sketch plan.
All expenses of subdivision, registration, and other incidental expenses were to be borne by Perez.

On November 27, 1985, the RTC approved the compromise agreement and rendered judgment accordingly.

The final and executory judgment was not executed within five years due to the petitioner’s failure to produce an owner's duplicate copy of Title No. 37649, necessary for settlement execution.
On January 25, 1993, Isidro Perez filed a complaint to revive the judgment, docketed as Civil Case No. D-10459.

Petitioner alleged it only learned of the compromise agreement during the service of summons in the revival case.
Petitioner moved for annulment of the trial court decision on the ground that the compromise agreement was void, arguing:

Villamil-Estrada lacked authority to sell or dispose of the property.
Her authority was limited to ejectment suits and eviction of squatters for possession, not sale or alienation.
No Board Resolution authorized the sale or encumbrance of corporate property.
The consideration amount was never received by the petitioner.
Perez acted in bad faith knowing Villamil-Estrada’s lack of authority.

On October 29, 1993, the RTC dismissed the annulment complaint, finding no ground such as lack of jurisdiction, fraud, or illegality.

The Court of Appeals (CA) denied petitioner’s motion for reconsideration and held that any alleged nullity of the compromise agreement may only be raised as a defense in execution but not as a ground for annulment of judgment.
Petitioner elevated the case to the Supreme Court.

Whether or not the attorney-in-fact, Paz G. Villamil-Estrada, had the authority to sell a portion of Lot No. 443 and enter into a valid compromise agreement that divested Cosmic Lumber Corporation of ownership.
Whether the compromise agreement and the judgment based thereon are valid and binding on petitioner.
Whether the trial court and the Court of Appeals correctly dismissed the petition for annulment of judgment.
Whether Villamil-Estrada’s acts constitute extrinsic fraud entitling petitioner to annulment of the judgment.
The extent and limits of authority conferred by a special power of attorney to an agent with regard to real property transactions.