Case Summary (G.R. No. 237506)
Factual Background
The case arose from four transactions in which respondents, as registered owners of parcels of land in Pamplona, Las Piñas City, executed similarly worded special powers of attorney (SPAs) in favor of Roberto N. Gandionco authorizing him “to offer as collateral, security or property bond with San Miguel Corporation” specified parcels covered by Transfer Certificate of Title Nos. T-6346, T-6347, T-5433, and T-52796. The SPAs contained a clause granting the attorney-in-fact “full power and authority whatsoever requisite necessary to be done in and about the premises” and ratifying acts done thereunder. On four occasions the registered owners also delivered the original owner’s duplicate TCTs to Roberto, who presented titles to San Miguel Corporation as part of a dealership collateral requirement. Roberto obtained beer stocks from San Miguel Corporation and issued post-dated checks which were later dishonored, leaving obligations of about Seven Million Pesos (P7,000,000.00). Using the SPAs, Roberto executed real estate mortgages (REMs) on at least two of the properties and San Miguel Corporation ultimately conducted extrajudicial foreclosure, becoming the highest bidder at the sale.
Procedural History
Upon learning of the mortgages and foreclosure, respondents revoked the SPAs and filed a complaint for annulment of mortgage and foreclosure sale and for recovery of their titles. San Miguel Corporation answered with a compulsory counterclaim and cross-claim, contending that the SPAs authorized Roberto to mortgage the properties and asserting laches on the part of respondents. Roberto did not answer and was declared in default. The RTC rendered judgment on August 28, 2014 voiding the REMs and the foreclosure sale, ordering return of the owner’s duplicate TCTs, and awarding moral damages, attorney’s fees, and costs of suit; the RTC dismissed San Miguel Corporation’s cross-claim against Roberto for lack of proof. The Court of Appeals affirmed with modification by deleting the awards for moral damages and attorney’s fees, and it sustained the dismissal of the cross-claim. San Miguel Corporation appealed to the Supreme Court.
Issues Presented
San Miguel Corporation raised two principal questions: whether the Court of Appeals erred in affirming the RTC’s finding that the SPAs did not include authority to mortgage the properties despite attendant circumstances; and whether the CA erred in denying San Miguel Corporation’s cross-claims against Roberto in light of his default under Section 3 of Rule 9, Rules of Court.
Trial Court and Court of Appeals Findings
The Regional Trial Court concluded that Roberto’s authority under the SPAs was limited to offering the properties as collateral and did not extend to constituting mortgages, and that San Miguel Corporation should have been placed on guard by the long interval between execution of the SPAs and the REMs. The RTC declared the REMs and foreclosure void and awarded damages and fees. The Court of Appeals applied the rule that a power of attorney must be strictly construed, found that the word “to offer” did not authorize mortgaging, and held that Roberto exceeded his authority, rendering the mortgages and foreclosures void; the CA also found San Miguel Corporation failed to prove Roberto’s liability and deleted certain damages awarded by the RTC.
Supreme Court Disposition
The Supreme Court partly granted the petition, reversing and setting aside the portions of the Court of Appeals Decision that declared the REMs and extrajudicial foreclosure sales void, ordered return of owner’s duplicate TCT Nos. T-6347 and T-5433, and dismissed San Miguel Corporation’s cross-claim against Roberto. The Supreme Court denied San Miguel Corporation’s prayer for awards of moral damages, exemplary damages, and attorney’s fees for lack of factual and legal pleading. The case was remanded to the Regional Trial Court of Las Piñas City for determination of Roberto’s exact outstanding liability to San Miguel Corporation, if any, after applying the proceeds of foreclosure.
Legal Basis and Reasoning — Authority to Mortgage
The Court held that the SPAs’ language authorizing Roberto “to offer as collateral, security or property bond with San Miguel Corporation” together with the grant of “full power and authority whatsoever requisite necessary to be done in and about the premises” was clear and unambiguous and must be given its literal meaning under Art. 1370, Civil Code. The Court ruled that such express authority constituted sufficient legal authority to enter into contracts of mortgage under Art. 1878, Civil Code, which requires an SPA where real rights over immovable property are created or conveyed.
Legal Basis and Reasoning — Apparent Authority and Owner’s Duplicate TCTs
The Court further reasoned that even if Roberto exceeded actual authority, the acts fell within the doctrine of apparent authority as codified in Art. 1900, Art. 1902, and Art. 1911, Civil Code, and as expounded in precedents. The repeated execution of similar SPAs, the successive delivery of original owner’s duplicate TCTs to Roberto on four occasions, and the conduct that allowed registration of the REMs and delivery of beer stocks rendered Roberto’s authority apparent to San Miguel Corporation. The Court analogized to decisions holding that delivery of owner’s duplicate titles and possession of executed instruments support reliance by third parties and may preclude the principal from denying the agent’s authority when third parties acted in good faith and with ordinary prudence.
Third-Party Mortgagors’ Liability and Cross-Claim
The Court recognized Roberto’s indebtedness to San Miguel Corporation but emphasized the settled rule that a third person who mortgages his property to secure another’s obligation is not solidarily bound with the principal obligor; the liability of third-party mortgagors extends only to the property mortgaged and the creditor’s recourse against the principal remains for any deficiency. Because the record lacked specific evidence of the amounts secured by the mortgages and of San Miguel Corporation’s bid at the foreclosure sale, the Supreme Court remanded the cross-claim to the RTC to determine whether any outstanding liability by Roberto remained after applying foreclosure proceeds.
Damages and Claims Denied
The Court denied San Miguel Corporation’s claims for moral damages, exemplary damages, an
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Case Syllabus (G.R. No. 237506)
Parties and Procedural Posture
- San Miguel Corporation (SMC) filed a Petition for Review on Certiorari under Rule 45, Rules of Court from the Court of Appeals' Decision dated October 10, 2017 and Resolution dated February 14, 2018.
- The principal respondents are Leonara Francisco Vda. De Trinidad, Spouses Teodorico F. Trinidad and Susana Cosme-Trinidad, Spouses Gemma F. Trinidad-Gandiongco and Alfredo M. Gandiongco, Jr., Spouses Manuel F. Trinidad and Rubi Remigio Trinidad, Spouses Grace F. Trinidad-Malolos and Bismark D. Malolos, and Roberto N. Gandionco.
- The Regional Trial Court of Las Piñas City rendered the Decision dated August 28, 2014 voiding the challenged real estate mortgages and extra-judicial foreclosure sales.
- The Court of Appeals affirmed the RTC Decision in the appealed aspects but modified awards for damages and fees, prompting the present appeal to the Supreme Court.
- Roberto N. Gandionco did not answer the complaint at trial and was declared in default.
Key Factual Allegations
- The contested properties consist of parcels in Pamplona, Las Piñas City covered by Transfer Certificate of Title Nos. T-6346, T-6347, T-5433, and T-52796 owned by the respondents.
- Roberto N. Gandionco opened a beer dealership with SMC and was required by SMC to furnish collateral to secure beer stocks.
- On four separate occasions between 2005 and 2007, respondents executed similarly worded special powers of attorney (SPAs) in favor of Roberto authorizing him "to offer as collateral, security or property bond with SMC" the specific titled parcels.
- The respondents delivered the original owner’s duplicate certificates of title to Roberto on multiple occasions and permitted him to present the titles to SMC.
- Using the SPAs and the owners' duplicates, Roberto caused real estate mortgages to be executed and annotated on two titles in favor of SMC, after which SMC delivered beer stocks to Roberto.
- Roberto issued 18 successive post-dated checks that were dishonored, leaving unpaid obligations of about P7,000,000.00.
- SMC initiated extra-judicial foreclosure of the mortgages and became the highest bidder at the foreclosure sale.
- Upon discovering the mortgages and foreclosure, respondents revoked the SPAs and notified SMC, and thereafter filed the complaint for annulment of mortgage and foreclosure sale and for recovery of titles.
Trial Court and Court of Appeals Findings
- The RTC ruled that the SPAs merely authorized Roberto to offer the properties as collateral and that he lacked authority to mortgage the properties, and thus declared the REMs and foreclosures void.
- The RTC ordered SMC to return the owner’s duplicate TCTs and awarded moral damages, attorney’s fees, and costs of suit, while dismissing SMC's cross-claim against Roberto for lack of proof.
- The Court of Appeals affirmed the RTC on the ground that a power of attorney must be strictly construed and that "to offer" did not include power to mortgage, but it deleted the awards for moral damages and attorney’s fees for lack of proof.
- The Court of Appeals sustained dismissal of SMC's cross-claim because SMC failed to prove Roberto's liability beyond producing the Certificate of Sale.
Issues Presented
- Whether the Court of Appeals erred in affirming the RTC's ruling that the SPAs did not include authority to mortgage the property despite attendant circumstances.
- Whether the Court of Appeals erred in denying SMC's cross-claims against Roberto in view of Roberto's default and Section 3, Rule 9, Rules of Court.
Supreme Court Ruling and Disposition
- The petition was partly granted and the Court reversed and set aside the Court of Appeals insofar as it declared the real estate mortgages dated September 20, 2007 and July 12, 2007 and the consequent extrajudicial foreclosure sales as void.
- The Court held that the SPAs expressly authorizing Roberto "to offer as collateral, security or property bond with SMC" together with the grant of "full power and authority" constituted sufficient authority to mortgage the properties in favor of SMC.
- The Court reversed the orders requiring SMC to return owner’s duplicate TCTs and reversed the dismissal of SMC's cross-claim to the extent remand was necessary to determine Roberto's outstanding liability.
- The Court remanded the case to the RTC of Las Piñas City solely for the limited purpose of determining the exact amount of Roberto's outstandi