In the Philippines, selling someone else’s land requires explicit written permission. The Supreme Court’s decision in Mactan-Cebu International Airport Authority v. Richard E. Unchuan clarifies that an agent must have a special power of attorney to validly sell real property on behalf of others; without it, the sale is void. This ruling protects landowners by ensuring their property cannot be sold without their express written consent, emphasizing the importance of due diligence in real estate transactions.

Landmark Case: Can an Attorney-in-Fact Sell Property Without Explicit Written Authorization?

This case revolves around a dispute over two lots in Lapu-Lapu City, originally owned by the heirs of Eugenio Godinez. Richard Unchuan claimed ownership through deeds of sale from the surviving heirs. However, the Mactan-Cebu International Airport Authority (MCIAA) asserted its right to the land based on a prior sale to its predecessor, the Civil Aeronautics Administration (CAA), by Atanacio Godinez, purportedly acting as the heirs’ attorney-in-fact. The central legal question is whether Atanacio had the authority to sell the land on behalf of all the heirs, and what the implications are if he acted without proper written authorization.

The Regional Trial Court (RTC) and the Court of Appeals (CA) both ruled in favor of Unchuan, declaring the sale to CAA void because Atanacio lacked a special power of attorney. MCIAA appealed, arguing that Atanacio was authorized, and the subsequent Deed of Partition ratified the sale. The Supreme Court (SC), however, affirmed the CA’s decision with modifications, emphasizing the importance of a written special power of attorney in real estate sales, as mandated by Article 1874 and Article 1878 of the Civil Code.

Building on this principle, the SC underscored that without a written special power of attorney, Atanacio could not legally represent the other co-owners in selling the property. This requirement is not a mere formality; it’s a fundamental protection for landowners.

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.

This provision ensures that the agent’s authority is clearly defined and documented, preventing unauthorized transactions.

Furthermore, the court stated the significance of requiring the authority of an agent to be put into writing as amplified in Dizon v. Court of Appeals, to wit:

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.

Additionally, the Court rejected MCIAA’s argument that the Deed of Partition ratified the sale. The SC cited Article 1410 of the Civil Code, which states that actions to declare the inexistence of a void contract do not prescribe. Thus, a void contract cannot be ratified. The Court clarified that a void contract produces no effect and cannot be ratified. This means that even if the heirs later acknowledged the sale, it did not validate the original unauthorized transaction.

However, the SC made an important distinction: the sale was valid to the extent of Atanacio’s own share in the property. Citing Article 493 of the Civil Code, the Court recognized that each co-owner has full ownership of their part and may alienate, assign, or mortgage it.

Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

Consequently, while the sale to CAA was void concerning the other heirs’ shares, it was valid for Atanacio’s share, making CAA a co-owner. This meant Unchuan was not entitled to the entire property but only to the shares of the heirs who validly sold to him.

This approach contrasts with a situation where the entire sale would be invalidated. Instead, the SC sought to balance the rights of all parties involved, recognizing the partial validity of the transaction. The Court also addressed the issue of payment, noting that the presumption of sufficient consideration for a contract was not overcome by Unchuan’s mere allegation of non-payment.

Furthermore, the SC acknowledged that the land now forms part of the Mactan-Cebu International Airport, serving a public purpose. Therefore, the Court directed MCIAA to initiate expropriation proceedings to compensate the remaining landowners for their shares. In the interim, MCIAA was ordered to pay rentals for the use of the property. The directive balances public interest with the private rights of landowners, ensuring fair compensation for property taken for public use.

The Court’s decision emphasizes the necessity of initiating expropriation proceedings. This action ensures that landowners receive just compensation for their properties, especially when these properties are utilized for public purposes. Additionally, the order for MCIAA to pay rentals acknowledges the landowners’ rights to benefit from their property until just compensation is fully settled. This aspect of the ruling serves to protect landowners from potential exploitation while recognizing the public benefit derived from the use of their land.

FAQs

What was the key issue in this case?	The key issue was whether Atanacio Godinez had the authority to sell the land on behalf of all the heirs of Eugenio Godinez to the Civil Aeronautics Administration (CAA), and what the implications are if he acted without proper written authorization.
What is a special power of attorney and why is it important in real estate sales?	A special power of attorney is a written document authorizing an agent to perform specific acts on behalf of another person. In real estate sales, it is crucial because it provides clear, written evidence that the agent has the legal authority to sell the property.
What happens if an agent sells land without a special power of attorney?	If an agent sells land without a special power of attorney, the sale is considered void, meaning it has no legal effect. The true owners of the property retain their rights, and the buyer does not gain valid ownership.
Can a void contract be ratified?	No, a void contract cannot be ratified. This means that even if the parties later try to approve or validate the contract, it remains legally ineffective.
What is expropriation and why was it ordered in this case?	Expropriation is the act of the government taking private property for public use, with just compensation paid to the owner. It was ordered in this case because the land in question is now part of an airport, serving a public purpose.
What is the significance of Article 493 of the Civil Code in this case?	Article 493 of the Civil Code recognizes that each co-owner has full ownership of their share and can sell or dispose of it independently. In this case, it allowed Atanacio Godinez to validly sell his share of the property, even though he couldn’t sell the shares of the other heirs without their written consent.
What was the final ruling of the Supreme Court in this case?	The Supreme Court ruled that the sale to CAA was valid only to the extent of Atanacio Godinez’s share in the property, making CAA a co-owner. The Court ordered MCIAA to initiate expropriation proceedings to compensate the other landowners for their shares and to pay rentals for the use of the property in the interim.
What practical lesson can be learned from this case?	The practical lesson is that anyone involved in a real estate transaction should ensure that agents have a clear, written special power of attorney. This ensures the validity of the transaction and protects the rights of all parties involved.

In conclusion, the Supreme Court’s decision in Mactan-Cebu International Airport Authority v. Richard E. Unchuan serves as a crucial reminder of the importance of adhering to the legal requirements for agency in real estate transactions. It highlights the necessity of a written special power of attorney for agents selling property on behalf of others and underscores the principle that void contracts cannot be ratified. This ruling not only protects the rights of property owners but also ensures fairness and clarity in real estate dealings.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, VS. RICHARD E. UNCHUAN, G.R. No. 182537, June 01, 2016