The Supreme Court clarified that a general power of attorney does not automatically grant an agent the authority to sell real property. For an agent to validly sell property on behalf of a principal, the power of attorney must explicitly state the power to sell. This ruling protects property owners from unauthorized sales by agents who might overstep the boundaries of their general administrative powers. It emphasizes the need for clear, specific authorization when dealing with real estate transactions through an agent, ensuring that property rights are securely protected.

Agency Law: When Does a General Power Authorize Property Sale?

This case revolves around Florentina Bautista-Spille, who granted her brother, Benjamin Bautista, a general power of attorney to manage her affairs in the Philippines. Benjamin then entered into a contract to sell Florentina’s land to NICORP Management and Development Corporation. Florentina contested the sale, arguing that the general power of attorney did not authorize Benjamin to sell her property. The central legal question is whether a general power of attorney, which allows an agent to manage a principal’s affairs, extends to the authority to sell real property. This requires an examination of agency law and the specific requirements for granting an agent the power to dispose of immovable property.

The core issue before the Supreme Court was whether Benjamin Bautista had the authority to sell Florentina Bautista-Spille’s property based on the general power of attorney granted to him. Philippine law is very specific about the sale of land through an agent. Article 1874 of the Civil Code is clear on this matter:

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.

Building on this, Article 1878 of the Civil Code further emphasizes the necessity of a special power of attorney (SPA) for specific acts:

Art. 1878. Special powers of attorney are necessary in the following cases:
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration.

These provisions underscore that selling real property requires explicit authorization. The authority must be conferred in writing and must express the agent’s powers in clear and unmistakable language. In the absence of such specific authorization, the agent’s actions are considered invalid. This protects the principal from unauthorized disposition of their real property.

The Supreme Court referred to Cosmic Lumber Corporation v. Court of Appeals, reiterating the stringent requirements for an agent’s authority to sell real estate. The Court emphasized that the mandate must expressly mention a sale or include it as a necessary ingredient of the authorized act. The language used must leave no reasonable doubt that such power is conveyed. When there is ambiguity, the document is construed against granting the power to sell. This strict interpretation ensures that the principal’s intent to grant such a significant power is clear and unequivocal.

In evaluating the general power of attorney, the Supreme Court found that it did not grant Benjamin the explicit power to sell Florentina’s property. The document authorized Benjamin to administer and control Florentina’s business and property and to act as her representative to buy, sell, negotiate, and contract on her behalf. However, this general language was deemed insufficient to confer the specific power to sell real estate. The Court highlighted that the power of administration does not include acts of disposition, which are acts of strict ownership. The authority to dispose of property cannot be inferred from a general authority to administer it. The two powers must be conferred separately and explicitly.

The Court also addressed whether NICORP acted in good faith. A person dealing with an assumed agent must ascertain not only the fact of agency but also the nature and extent of the agent’s authority. The law requires a higher degree of prudence when dealing with someone who is not the registered owner of the property. The buyer is expected to examine all factual circumstances to determine if there are any flaws in the title of the transferor or in their capacity to transfer the land. In this case, the Court agreed with the RTC that NICORP was aware that Benjamin was not properly authorized to sell Florentina’s property. The contract to sell required Benjamin to secure a special power of attorney from Florentina, indicating NICORP’s awareness of the deficiency in Benjamin’s authority. This requirement negated any claim of good faith on NICORP’s part.

The Supreme Court concluded that there was no perfected contract to sell between Florentina and NICORP because Florentina’s consent was not validly obtained. Since NICORP was considered a builder in bad faith, it was not entitled to a refund for any improvements made on the property. The decision underscores the importance of adhering to the specific requirements of agency law when dealing with real estate transactions. It protects property owners from unauthorized sales and ensures that agents act within the bounds of their conferred authority.

Therefore, the Supreme Court reversed the Court of Appeals’ decision and reinstated the Regional Trial Court’s ruling, which declared the contract to sell null and void.

FAQs

What was the key issue in this case?	The key issue was whether a general power of attorney authorized an agent to sell real property without explicit authorization to do so. The Supreme Court ruled it does not.
What is a general power of attorney?	A general power of attorney is a legal document that grants an agent broad authority to act on behalf of the principal in various matters. However, it does not automatically include the power to sell real property.
What is a special power of attorney (SPA)?	A special power of attorney is a legal document that grants an agent specific authority to perform a particular act, such as selling real property. It must explicitly state the agent’s power to sell the property.
What does the Civil Code say about selling land through an agent?	Article 1874 of the Civil Code requires that the authority of an agent to sell land must be in writing. Article 1878 requires a special power of attorney to enter into contracts that transmit ownership of immovable property.
What happens if an agent sells property without proper authority?	If an agent sells property without proper authority, the sale is considered void. The principal is not bound by the unauthorized transaction, and the buyer does not acquire valid title to the property.
What is the duty of a buyer dealing with an agent?	A buyer dealing with an agent has a duty to ascertain not only the fact of agency but also the nature and extent of the agent’s authority. They must exercise due diligence to ensure that the agent is authorized to sell the property.
What does it mean to be a buyer or builder in bad faith?	A buyer or builder in bad faith is one who is aware of a defect or lack of authority in the transaction but proceeds anyway. Such a party is not entitled to compensation for improvements made on the property.
Can a general power of attorney be used to sell real property?	No, a general power of attorney cannot be used to sell real property unless it explicitly grants the agent the power to do so. The power to sell must be stated clearly and unmistakably.
What was NICORP’s role in the case?	NICORP was the buyer in the contract to sell. The Court found they were aware that Benjamin lacked proper authorization, making them a buyer in bad faith.

This case serves as a crucial reminder of the importance of clearly defined authority in agency agreements, especially when dealing with real property. The decision reinforces the protection afforded to property owners and underscores the need for careful due diligence in real estate transactions.

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: Florentina Bautista-Spille vs. Nicorp Management and Development Corporation, G.R. No. 214057, October 19, 2015