Key Takeaway: Employers May Be Held Liable for Their Employees’ Actions Under the Doctrine of Apparent Authority

Eternal Gardens Memorial Park Corp. v. Perlas, et al., G.R. No. 236126, September 07, 2020

Imagine purchasing a burial lot for a loved one, only to discover years later that the transaction was fraudulent. This nightmare became a reality for the Boiser family, who found themselves entangled in a legal battle over their mother’s memorial lots. The Supreme Court’s ruling in this case underscores the importance of understanding the legal principle of apparent authority and its implications for both businesses and individuals.

The case revolves around the fraudulent sale of burial lots owned by Zenaida Boiser, which were sold to Michael Magpantay after her death, and subsequently to Spouses Claudio and Rosita Bonifacio. The central legal question was whether Eternal Gardens Memorial Park Corporation could be held liable for the actions of its employees, who facilitated these transactions without proper authorization.

Legal Context: Apparent Authority and Its Implications

Apparent authority is a legal doctrine that holds a principal (in this case, an employer) liable for the actions of its agent (employee) if a third party reasonably believes the agent has the authority to act on behalf of the principal. This principle is crucial in cases where employees exceed their actual authority, yet their actions are perceived as legitimate by those dealing with them.

The Civil Code of the Philippines, specifically Article 1897, states that “The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.” However, the doctrine of apparent authority can override this provision if certain conditions are met.

For example, if a bank employee processes a loan application without proper authorization, but the bank’s conduct leads the borrower to believe the employee has the authority, the bank may still be liable under apparent authority. This doctrine ensures that businesses are responsible for the actions of their employees when those actions are perceived as authorized by the company.

Case Breakdown: The Journey of the Boiser Family’s Burial Lots

The saga began when Zenaida Boiser purchased 24 burial lots in 1985. After her death in 1999, her daughter Kathryn Boiser discovered that these lots had been sold to Michael Magpantay, who then sold them to Spouses Bonifacio. The Boiser siblings, upon learning of this, filed a complaint against Magpantay, Spouses Bonifacio, and Eternal Gardens, alleging fraud and conspiracy.

The case moved through the Regional Trial Court (RTC) and the Court of Appeals (CA), with each court finding Eternal Gardens liable for the actions of its employees, Noli Balbin and Leandro Resoles. These employees had facilitated the fraudulent transactions by issuing certificates of ownership and acknowledgment receipts.

The Supreme Court upheld the CA’s decision, emphasizing the doctrine of apparent authority. The Court noted, “Under this doctrine, acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal.”

The Court further explained that Eternal Gardens could not deny the authority of its employees, as it had issued the certificate of ownership to Spouses Bonifacio, thereby acknowledging the employees’ authority to transact on its behalf. The Court stated, “If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts.”

The procedural steps included the initial filing of the complaint, the intervention of other Boiser siblings, the trial at the RTC, the appeal to the CA, and finally, the petition to the Supreme Court. Throughout this journey, the focus remained on the fraudulent transactions and the role of Eternal Gardens’ employees.

Practical Implications: Navigating Apparent Authority

This ruling has significant implications for businesses and property owners. Companies must ensure strict oversight of their employees’ actions, especially when dealing with transactions involving property or significant financial commitments. Employers should establish clear policies and procedures to prevent unauthorized actions that could lead to liability under apparent authority.

For individuals, this case serves as a reminder to verify the authority of those with whom they transact, particularly in significant purchases like real estate or memorial lots. It is advisable to request official documentation and, if necessary, seek legal advice to ensure the legitimacy of transactions.

Key Lessons:

• Employers should implement robust internal controls to monitor employee actions.
• Businesses must be cautious about the public perception of their employees’ authority.
• Individuals should always verify the legitimacy of transactions, especially those involving property.

Frequently Asked Questions

What is apparent authority?

Apparent authority is a legal doctrine where a principal (employer) is held liable for the actions of an agent (employee) if a third party reasonably believes the agent has the authority to act on behalf of the principal.

How can a business protect itself from liability under apparent authority?

Businesses can protect themselves by clearly defining employees’ roles and authority, training staff on company policies, and regularly auditing transactions to ensure compliance with internal procedures.

What should individuals do to ensure the legitimacy of property transactions?

Individuals should request official documentation, verify the identity and authority of the seller or agent, and consider seeking legal advice before completing significant transactions.

Can an employee be personally liable for actions taken under apparent authority?

Yes, if an employee exceeds their authority without giving sufficient notice to the third party, they can be personally liable. However, the employer may also be held liable under the doctrine of apparent authority.

What are the potential consequences of fraudulent property transactions?

Fraudulent property transactions can lead to financial loss, legal battles, and criminal charges against those involved. Victims may seek restitution and damages through civil lawsuits.

ASG Law specializes in corporate and property law. Contact us or email hello@asglawpartners.com to schedule a consultation and ensure your business or property transactions are secure.