Vda. De Chua v.

IAC
AUTHOR:
G.R. No. 70909. January 5, 1994
NOTES:
TOPIC: Cases Where Special Powers of Attorney Are Necessary
PONENTE: QUIASON, J.:
FACTS:
1. Sometime in 1950, defendant Herminigilda Herrera executed a Contract of Lease in favor of Tian On (or Sy Tian On)
whereby the former leased to the latter a couple of lots in Cebu City, for a term of ten (10) years, renewable for another five
(5) years. The contract of lease contains a stipulation giving the lessee an option to buy the leased property and that the lessor
guarantees to leave the possession of said property to the lessee for a period of ten (10) years or as long as the lessee faithfully
fulfills the terms and conditions of their contract.
2. In accordance with the said contract of lease, the lessee, Tian On, erected a residential house on the leased premises.
3. Within 4 years from the execution of the said contract of lease, the lessee, Sy Tian On, executed a Deed of Absolute Sale of
Building in favor of Chua Bok, the predecessor-in-interest of the plaintiffs herein, whereby the former sold to the latter the
aforesaid residential house for and in consideration of the sum of P8,000.00
4. In the deed, it was said that the sale was is made with the knowledge and express consent of the lot-owner and lessor,
Herminigilda Herrera who is represented by her attorney-in-fact, Vicenta R. de Reynes who hereby also honors the annulment
of the lease made by Sy Tian On in favor of Chua Bok, and promises and binds herself to respect and abide by all the terms
and conditions of the lease contract which is now assigned to the said Chua Bok.
5. After the expiration of the contract of lease in the plaintiffs herein, who are the successors-in-interest of Chua Bok (who had
meanwhile died) continued possession of the premises up to April 1978, with adjusted rental rate.
6. On July 26, 1977, defendant Herrera through her attorney-in-fact, Mrs. Luz M. Tormis, who was authorized with a special
power of attorney, sold the lots in question to defendants-spouses, Vicente and Victoria Go. The defendants-spouses were able
to have aforesaid sale registered with the Register of Deeds of the City of Cebu and the titles to the two parcels of land were
transferred in their names.
7. Thereafter, plaintiffs filed the instant case seeking the annulment of the said sale between Herminigilda Herrera and spouses
Vicente and Victoria Go, alleging that the conveyance was in violation of the plaintiffs right of option to buy the leased
premises as provided in the Contract of Lease and that the defendants-spouses acted in bad faith in purchasing the said lots
knowing fully well that the said plaintiffs have the option to buy those lots.
ISSUE(S):
1. W/N the defendants was in bad faith in the purchase of the lots knowing that plaintiffs had the option to buy said lots
HELD:
1. No.
RATIO: The lease contract, petitioners cause of action, involves the lease of real property for a period of more than one year. The
contract was entered into by the agent of the lessor and not the lessor herself. In such a case, the law requires that the agent be armed
with a special power of attorney to lease the premises.
Article 1878 of the New Civil Code, in pertinent part, provides: "Special Powers of Attorney are necessary in the following cases
(8) To lease any real property to another person for more than one year."
It is true that respondent Herrera allowed petitioners to occupy the leased premises after the expiration of the lease contract and under
Article 1670 of the Civil Code of the Philippines, a tacit renewal of the lease is deemed to have taken place. However, a tacit renewal is
limited only to the terms of the contract which are germane to the lessees right of continued enjoyment of the property and does not
extend to alien matters, like the option to buy the leased premises.
We dismissed Dizons appeal and sustained the interpretation of the Court of Appeals that "the other terms of the original contract"
mentioned in Article 1670, are only those terms which are germane to the lessees right of continued enjoyment of the property leased.
We held:
This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to continue
enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such enjoyment shall be for the
entire period corresponding to the rent which is customarily paid in this case up to the end of the month because the rent was paid
monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of possession, the presumption covers the other terms
of the contract related to such possession, such as the amount of rental, the date when it must be paid, the care of the property, the
responsibility for repairs, etc. But no such presumption may be indulged in with respect to special agreements which by nature are
foreign to the right of occupancy or enjoyment inherent in a contract of leas.
CASE LAW/ DOCTRINE: A tacit renewal is limited only to the terms of the contract which are germane to the lessees right of
continued enjoyment of the property and does not extend to alien matters, like the option to buy the leased premises.
DISSENTING/CONCURRING OPINION(S):
(If any)

Vicente v Geraldez

FACTS:
In 1967, HI Cement Corporation was granted authority to operate mining facilities in Bulacan. However, the
areas allowed for it to explore cover areas which were also being explored by Ignacio Vicente, Juan
Bernabe, and Moises Angeles. And so a dispute arose between the three and HI Cement as neither side
wanted to give up their mining claims over the disputed areas.

Eventually, HI Cement filed a civil case against the three. During pre-trial, the possibility of an amicable
settlement was explored where HI Cement offered to purchase the areas of claims of Vicente et al at the
rate of P0.90 per square meter. Vicente et al however wanted P10.00 per square meter.

In 1969, the lawyers of HI Cement agreed to enter into a compromise agreement with the three whereby
commissioners shall be assigned by the court for the purpose of assessing the value of the disputed areas
of claim.

An assessment was subsequently made pursuant to the compromise agreement and the commissioners
recommended a price rate of P15.00 per square meter.

One of the lawyers of HI Cement, Atty. Francisco Ventura, then notified the Board of Directors of HI Cement
for the approval of the compromise agreement. But the Board disapproved the compromise agreement
hence Atty. Ventura filed a motion with the court to disregard the compromise agreement.

Vicente et al naturally assailed the motion. Vicente et al insisted that the compromise agreement is
binding because prior to entering into the compromise agreement, the three lawyers of HI Cement
declared in open court that they are authorized to enter into a compromise agreement for HI Cement; that
one of the lawyers of HI Cement, Atty. Florentino Cardenas, is an executive official of HI Cement; that
Cardenas even nominated one of the commissioners; that such act ratified the compromise agreement
even if it was not approved by the Board. HI Cement, in its defense, averred that the lawyers were not
authorized and that in fact there was no special power of attorney executed in their favor for the purpose
of entering into a compromise agreement.

CFI (Judge Ambrosio Geraldez) ruled in favor of HI Cement.

CA set aside CFIs Decision

ISSUE: Whether or not a compromise agreement entered into by a lawyer purportedly in behalf of the
corporation is valid without a written authority.
HELD: NO.

Corporations may compromise only in the form and with the requisites which may be necessary to alienate
their property.

Under the corporation law the power to compromise or settle claims in favor of or against the corporation
is ordinarily and primarily committed to the Board of Directors but such power may be delegated.

The delegation must be clearly shown for as a general rule an officer or agent of the corporation has no
power to compromise or settle a claim by or against the corporation, except to the extent that such power
is given to him either expressly or by reasonable implication from the circumstances.

In the case at bar, there was no special power of attorney authorizing the three lawyers to enter into a
compromise agreement. This is even if the lawyers declared in open court that they are authorized to do
so by the corporation (in this case, the transcript of stenographic notes does not show that the lawyers
indeed declare such in open court).

The fact that Cardenas, an officer of HI Cement, acted in effecting the compromise agreement, i.e.
nominating a commissioner, does not ratify the compromise agreement.

There is no showing that Cardenas act binds HI Cement; no proof that he is authorized by the Board; no
proof that there is a provision in the articles of incorporation of HI Cement that he can bind the
corporation.

Negotiable Instruments Case Digest: Insular Drugs V. PNB (1933)

Lessons Applicable: Liabilities of person who did not sign and liability of an agent
(Negotiable Instruments Law)
FACTS:

Foerster formerly a salesman and collector of Insular Drug Co., Inc (Insular) for the Islands of
Panay and Negros

Was instructed to take the checks which came to his hands to the Iloilo branch of the
Chartered Bank of India, Australia and China and deposit the amounts to the credit of the Insular
He, instead, placed the checks in his personal account
Some of the checks were drawn against the Bank of Philippine National Bank.
After the indorsement on the checks was written "Received payment prior indorsement guaranteed
by Philippine National bank, Iloilo Branch, Angel Padilla, Manager."

Insular Manila office discovered the anomalies and Foerster committed suicide

Insular filed against the bank for total of 132 checks amounting to P18,285.92

ISSUE: W/N Insular can file against the bank

HELD: YES. The bank will have to stand the loss occasioned by the negligence of its agent

the bank permitted Foerster, Foerster's wife and clerk to indorse checks and then place them to his
personal account

The right of an agent to indorse commercial paper is a very responsible power and will not
be lightly inferred.

A salesman with authority to collect money belonging to his principal does not have
the implied authority to indorse checks received in payment