Case Summary (G.R. No. 150350)
Applicable Law
This case is governed by the provisions of the 1987 Philippine Constitution and the Corporation Code of the Philippines. The core issues revolve around agency law, particularly the authority of corporate officers, and the principles of ratification in the context of corporate obligations.
Antecedent Facts
Cecilio S. de Villa borrowed P1.3 million from Yasuma, evidenced by three promissory notes, secured by real estate mortgages on property owned by East Cordillera Mining Corporation. After de Villa defaulted on payments, Yasuma initiated a collection action against both de Villa and the corporation. Following de Villa's death, Yasuma amended his complaint to include de Villa's heirs as defendants.
Initial Ruling and Appeal
The Regional Trial Court (RTC) initially ruled in Yasuma’s favor, finding the corporation liable. However, the Court of Appeals (CA) later reversed this decision, determining that the loan was a personal obligation of de Villa, not a corporate debt, thereby nullifying the mortgage secured by the corporation's property for lack of authority.
Issues for Resolution
The Supreme Court identified two principal issues:
- Whether the loans were personal debts of de Villa or corporate obligations of East Cordillera Mining Corporation.
- Whether the mortgage executed on corporate property was valid despite the absence of formal authorization from the corporation.
Personal vs. Corporate Liability
The Supreme Court reaffirmed that a corporation is a distinct legal entity, acting through a board of directors and corporate officers with necessary authority. De Villa's signing of the promissory notes did not explicitly indicate he acted on behalf of the corporation; thus, the loans were primarily deemed personal liabilities. The corporation's admission to receiving the funds did not constitute ratification of the loans, as the context of the transactions suggested that the corporation believed the funds were investment-related, not borrowed.
Ratification and Authority
Ratification requires the principal’s knowledge and voluntary acknowledgment of the unauthorized acts of an agent. The court found that De Villa’s actions in securing the loans did not adhere to any established protocols for borrowing to bind the corporation. Since no special power of attorney was presented, the mortgage agreements were ultimately considered void.
Mortgage Validity
Owing to the lack of appropriate corporate authorization, the Supreme Court concluded that the mortgage executed by De Villa was null and void. The absence of a special power of attorne
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Case Overview
- This case is a petition for review on certiorari filed by Koji Yasuma against the heirs of Cecilio S. de Villa and East Cordillera Mining Corporation.
- The petition challenges the decision of the Court of Appeals (CA) dated October 18, 2001, in CA-G.R. CV No. 61755.
- The case originated from several loans obtained by de Villa from Yasuma, which were secured by real estate mortgages on property owned by East Cordillera Mining Corporation.
Background Facts
- On three separate occasions (September 15, October 21, and December 5, 1988), Cecilio S. de Villa borrowed a total of P1.3 million from Yasuma, documented by three promissory notes.
- These loans were secured by real estate mortgages executed by de Villa, who was the president of East Cordillera Mining Corporation.
- Upon de Villa's failure to repay the loans, Yasuma initiated a collection suit in the Regional Trial Court of Makati City, which initially ruled in his favor.
- The CA later annulled this judgment due to improper service of summons, leading to the case being remanded for retrial.
- Following de Villa's death, Yasuma amended the complaint to include de Villa's heirs as defendants.
- The RTC ultimately ruled in favor of Yasuma, ordering the corporation to pay him the amount owed, but dismissed the case against de Villa's heirs.
Court of Appeals Decision
- The CA reversed the RTC's decision, declaring the mortgage null and void due to lack of authority from the corporati