CIVIL LAW; RTC Jurisdiction vis-à-vis Special Commercial Courts; SPA for Sale of Real Property Must Expressly State Authority of Agent to Sell the Land; Rule that Buyer May Rely on Title Inapplicable when Agency is Contested; Person Dealing with Agent Must Ascertain the Extent of the Agent’s Authority

Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, 31 July 2013.

The RTC and not the SEC has jurisdiction over the case because it involves the application of the Civil Code, which are properly cognizable by courts of general jurisdiction.

  

“The CA correctly ruled that the RTC has jurisdiction over the present case. Joy Training seeks to nullify the sale of the real properties on the ground that there was no contract of agency between Joy Training and the spouses Johnson. This was beyond the ambit of the SEC's original and exclusive jurisdiction prior to the enactment of Republic Act No. 8799 which only took effect on August 3, 2000. The determination of the existence of a contract of agency and the validity of a contract of sale requires the application of the relevant provisions of the Civil Code. It is a well-settled rule that "[d]isputes concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction." Indeed, no special skill requiring the SEC's technical expertise is necessary for the disposition of this issue and of this case.” (Emphasis and underscoring supplied)

SPA for the sale of real property must expressly mention a sale or express the agent’s power in clear and unmistakable terms.

  

“Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." It may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral. However, it must be written when the law requires a specific form. Specifically, Article 1874 of the Civil Code provides that the contract of agency must be written for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the Civil Code, states that special powers of attorney are necessary to convey real rights over immovable properties.

The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act. We unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals that a special power of attorney must express the powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. The purpose of the law in requiring a special power of attorney in the disposition of immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another and to caution the buyer to assure himself of the specific authorization of the putative agent.” (Emphasis and underscoring supplied)

Failure to Produce Original of Documents and to show that Exceptions for the Introduction of Secondary Evidence Applies makes Evidence Inadmissible.

  

“The lower courts should not have relied on the resolution and the certification in resolving the case. The spouses Yoshizaki did not produce the original documents during trial. They also failed to show that the production of pieces of secondary evidence falls under the exceptions enumerated in Section 3, Rule 130 of the Rules of Court. Thus, the general rule — that no evidence shall be admissible other than the original document itself when the subject of inquiry is the contents of a document — applies.” (Emphasis and underscoring supplied)

Rule that person dealing with registered land need only to rely on the face of the title applies only to ownership of land and not when the fact of agency is contested; Person who deals with agent must examine and verify extent of agent’s authority.

  

“Necessarily, the absence of a contract of agency renders the contract of sale unenforceable; Joy Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She misapprehended the rule that persons dealing with a registered land have the legal right to rely on the face of the title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. This rule applies when the ownership of a parcel of land is disputed and not when the fact of agency is contested.

At this point, we reiterate the established principle that persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of the agent's authority.  A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover on his own peril the authority of the agent. Thus, Sally bought the real properties at her own risk; she bears the risk of injury occasioned by her transaction with the spouses Johnson.” (Emphasis and underscoring supplied)