Title
Calubad vs. Ricarcen Development Corp.
Case
G.R. No. 202364
Decision Date
Aug 30, 2017
Ricarcen Development Corporation estopped from denying president's authority in loan and mortgage transactions due to apparent authority and estoppel.
loan
mortgage contract
authority
A

Case Summary (G.R. No. 202364)

Petitioner

Calubad extended loans to Ricarcen purportedly through Marilyn acting as president, took the real estate mortgage as security, initiated extrajudicial foreclosure when payments ceased, became highest bidder at auction, and was issued a Certificate of Sale which was annotated on the title.

Respondent

Ricarcen denied having authorized Marilyn to obtain the loans or mortgage the property, claimed the Board Resolution and Secretary’s Certificates presented to Calubad were fabricated, removed Marilyn upon discovering the foreclosure, and sued for annulment of the mortgage, extrajudicial foreclosure, and sale, seeking cancellation of title transfer and damages.

Key Dates and Procedural History

Principal transactions: October 15, 2001 (P4,000,000 loan and Deed of Real Estate Mortgage), December 6, 2001 (amendment increasing loan to P5,000,000), May 8, 2002 (additional P2,000,000 loan). Foreclosure: auction set March 19, 2003; Certificate of Sale issued March 27, 2003; annotation on TCT April 10, 2003. Ricarcen filed suit September 9, 2003. Trial court judgment annulling mortgages and foreclosure issued January 6, 2009. Court of Appeals affirmed January 25, 2012. Supreme Court decision granting petition and reversing Court of Appeals rendered August 30, 2017. (Applicable procedural rule for review: Rule 45 of the Rules of Court.)

Applicable Law

Constitutional framework: 1987 Philippine Constitution (decision date post-1990). Statutory and doctrinal authorities applied: Corporation Code, Section 23 (corporate powers exercised by board; delegation to officers/agents); Civil Code provisions on agency and estoppel (Arts. 1317, 1431, 1869); Civil Code provisions on exemplary damages and damages recoverable (Arts. 2232, 2208); Rules of Court (Rule 45, limitation to questions of law and exceptions). Controlling jurisprudence cited includes Yao Ka Sin Trading v. Court of Appeals (on estoppel/apparent authority) and cases on standards for moral and exemplary damages.

Factual Background — Loans, Security, and Documentary Evidence

Marilyn executed three mortgage instruments on behalf of Ricarcen: the original Deed of Real Estate Mortgage (P4,000,000), an amendment adding P1,000,000 (December 6, 2001), and a Second Amendment adding P2,000,000 (May 8, 2002). Marilyn presented to Calubad a Board Resolution dated October 15, 2001 and Secretary’s Certificates dated December 6, 2001 and May 8, 2002, purportedly signed by Elizabeth as corporate secretary, authorizing her to secure loans and mortgage the subject property. The loan proceeds were issued by checks payable to Ricarcen and were deposited into Ricarcen’s bank account; numerous checks issued thereafter by Ricarcen (signed by combinations of Marilyn, Elizabeth, and/or Erlinda) were presented as interest and principal payments to Calubad and many such checks cleared. Marilyn also possessed the owner’s duplicate copy of the TCT. Elizabeth later denied having signed the purported Board Resolution and Secretary’s Certificates and stated she habitually signed blank documents left with Marilyn.

Extrajudicial Foreclosure, Sale, and Title Annotation

After alleged default, Calubad initiated extrajudicial foreclosure proceedings; he became highest bidder at the auction, received a Certificate of Sale on March 27, 2003, and had the Certificate of Sale annotated on the subject title on April 10, 2003. Ricarcen asserted it first learned of the mortgage, foreclosure, and sale in July 2003 upon receipt of a notice of foreclosure and then removed Marilyn and caused the institution of the annulment action.

Trial Court Findings and Relief Granted

The Regional Trial Court found that Marilyn failed to present a special power of attorney evidencing authority from Ricarcen, and that the Board Resolution and Secretary’s Certificates were fabricated. The notary purported to have notarized those documents denied doing so and the documents were not in his notarial register. The trial court annulled the mortgage contracts, extrajudicial foreclosure, and sale; ordered cancellation of the title issued to Calubad and reinstatement of the original title in Ricarcen; dismissed the complaint against Registry of Deeds employees; and awarded Php250,000 as attorney’s fees and costs of litigation against Marilyn, her spouse, and Calubad jointly and severally.

Court of Appeals Ruling

The Court of Appeals affirmed the trial court, holding that the presumption of validity attaching to notarized corporate documents is not absolute and can be overcome by clear, convincing, strong and irrefutable evidence. It found Ricarcen had discharged the burden of showing fabrication of the Board Resolution and Secretary’s Certificates. The Court of Appeals rejected Calubad’s defenses of laches and estoppel, reasoning that Ricarcen could not have ratified or knowingly accepted benefits from the loans when it had no knowledge of the mortgages, and that it acted promptly upon discovery.

Issue Presented to the Supreme Court and Standard for Review

The sole issue before the Supreme Court was whether Ricarcen is estopped from denying Marilyn’s authority to enter into the loan and mortgage agreements with Calubad. The Court recognized Rule 45’s limitation to questions of law but examined whether the case fell within exceptions allowing review of factual findings (Medina exceptions), concluding that the matter implicated an inference that was manifestly mistaken and therefore warranted review.

Supreme Court Legal Framework on Agency and Apparent Authority

The Supreme Court reiterated that a corporation ordinarily acts through its board of directors pursuant to the Corporation Code, but that authority to bind the corporation may be delegated. It distinguished actual authority (express or implied) from apparent authority, explaining that apparent authority arises from the principal’s conduct, leading innocent third parties reasonably to believe the agent is authorized (doctrine of estoppel). The Court emphasized the burden on the third party to prove how the corporation’s acts produced that reasonable belief, and that apparent authority is determined by the principal’s acts, not by the agent’s representations alone.

Supreme Court Findings on Evidentiary Basis for Apparent Authority and Estoppel

The Supreme Court found ample evidence that Ricarcen clothed Marilyn with apparent authority and that Calubad reasonably relied on that appearance of authority. Relevant findings included: (1) possession by Marilyn of the owner’s duplicate title; (2) the practice of the corporate secretary signing blank documents and leaving them with Marilyn; (3) the presentation and acceptance of loan proceeds by checks payable to Ricarcen and deposited into its bank account; (4) numerous post-loan checks issued and signed by Ricarcen’s officers (Erlinda and Elizabeth, sometimes jointly with Marilyn) to Calubad representing interest and principal payments, and many of those chec

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