ESCUETA v. LIM (2007) : Topic: Kinds of Agency

ESCUETA v.
LIM (2007)
Topic: Kinds of Agency
PARTIES:
 Petitioner: Corazon L. Escueta, et.al
 Respondent: Rufina Lim
FACTS:
 Rufina Lim filed an action to remove cloud on, or quiet title to, real property with
preliminary injunction and issuance of a hold-departure order from the Philippines
against Ignacio Rubio.
 Lim averred that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio
and the heirs of Luz Bololoy, and other co-heirs; that said vendors executed a contract of
sale in her favor; that Ignacio Rubio and the heirs received a down payment or earnest
money in the amount of P102K and P450K respectively; that it was agreed in the
contract of sale that the vendors would secure certificates of title covering their
respective hereditary shares; that the balance of the purchase price would be paid to
each heir upon presentation of their individual certificates of title, but Rubio refused to
receive the other half of the down-payment which is P100K as well as to deliver the
certificates of title covering his share on the two lots and the shares of the other co-
heirs.
 Petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already
been sold by Rubio to Lim, it is alleged that a simulated deed of sale involving said lots
was effected by Rubio in her favor; and that the simulated deed of sale by Rubio to
Escueta has raised doubts and clouds over Lim’s title.
 Escueta says there is no cause of action, because Rubio has not entered into a contract
of sale with her; that he has appointed his daughter Patricia Llamas to be his attorney-in-
fact and not in favor of Virginia Rubio Laygo Lim who was the one who represented him
in the sale of the disputed lots in favor of Lim; that the P100K Lim claimed Rubio
received as down payment for the lots is a simple transaction by way of a loan with Lim.
 The trial court ruled in favor of Lim and ordered the Baloloys to execute a Deed of
Absolute Sale over their hereditary shares in favor of Lim.
 The Baloloys appealed, but the CA affirmed the decision of the trial court and denied the
petition.
 The Baloloys argue that the sale by Virginia to respondent is not binding. Rubio did not
authorize Virginia to transact business in his behalf pertaining to the property. The SPA
was constituted in favor of Llamas, and the latter was not empowered to designate a
substitute attorney-in-fact. Llamas even disowned her signature appearing on the “Joint
Special Power of Attorney,” which constituted Virginia as her true and lawful attorney-
in-fact in selling Rubio’s properties.
 Dealing with an assumed agent, Lim should ascertain not only the fact of agency, but
also the nature and extent of the former’s authority. Besides, Virginia exceed the
authority for failing to comply with her obligations under the “Joint Special Power of
Attorney.”
ISSUES/HELD:
 W/N the contract of sale between petitioners and respondents is valid.
o YES. Art. 1892 of the CC provides: “The agent may appoint a substitute if the principal
has not prohibited him from doing so; but he shall be responsible for the acts of the
substitute: (1) When he was not given the power to appoint one.”
o Applying this provision to the SPA executed by Rubio in favor of his daughter Llamas, it
is clear that she is not prohibited from appointing a substitute. By authorizing Virginia
Lim to sell the subject properties, Patricia merely acted within the limits of the
authority given by her father, but she will have to be “responsible for the acts of the
sub-agent” among which is precisely the sale of the subject properties in favor of
respondent.
o Even assuming that Virginia Lim has no authority to sell the subject properties, the
contract she executed in favor of Lim is not void, but simply unenforceable under Art.
1317(2).
o Rubio merely denies the contract of sale. He claims, without substantiation, that what
he received was a loan, not the down payment for the sale of the subject properties.
o His acceptance and encashment of the check, however, constitute ratification of the
contract of sale and “produce the effects of an express power of agency.” “[H]is action
necessarily implies that he waived his right of action to avoid the contract, and,
consequently, it also implies the tacit, if not express, confirmation of the said sale
effected” by Virginia Lim in favor of respondent.
o Similarly, the Baloloys have ratified the contract of sale when they accepted and
enjoyed its benefits. “The doctrine of estoppel applicable to petitioners here is not
only that which prohibits a party from assuming inconsistent positions, based on the
principle of election, but that which precludes him from repudiating an obligation
voluntarily assumed after having accepted benefits therefrom. To countenance such
repudiation would be contrary to equity, and would put a premium on fraud or
misrepresentation.”
o Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has
the title to the subject properties passed to the latter upon delivery of the thing sold,
but there is also no stipulation in the contract that states the ownership is to be
reserved in or “retained by the vendor until full payment of the price.”
o Applying Article 1544 of the Civil Code, a second buyer of the property who may have
had actual or constructive knowledge of such defect in the seller’s title, or at least was
charged with the obligation to discover such defect, cannot be a registrant in good
faith. Such second buyer cannot defeat the first buyer’s title.
o Consequently, Ignacio Rubio could no longer sell the subject properties to Escueta,
after having sold them to Lim. The records do not show that Rubio asked for a
rescission of the contract. What he adduced was a belated revocation of the SPA he
executed in favor of Patricia Llamas.
DOCTRINE:
 The agent may appoint a substitute if the principal has not prohibited him from doing so.
(Art. 1892)
 The agent may appoint a substitute if the principal has not prohibited him from doing so.—
Article 1892 of the Civil Code provides: Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall be responsible for the acts of
the substitute: (1) When he was not given the power to appoint one x x x. Applying the
above-quoted provision to the special power of attorney executed by Ignacio Rubio in
favor of his daughter Patricia Llamas, it is clear that she is not prohibited from appointing a
substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely acted
within the limits of the authority given by her father, but she will have to be “responsible
for the acts of the sub-agent,” among which is precisely the sale of the subject properties
in favor of respondent.
 A contract executed by an agent without authority to sell is not void but simple
unenforceable.
 The acceptance and encashment by the owner of a check representing the purchase price
of his property sold through his agent constitute ratification of the contract of sale and
produce the effects of an express power of agency.
 The doctrine of estoppel is not only that which prohibits a party from assuming
inconsistent positions, based on the principle of election, but that which precludes him
from repudiating an obligation voluntarily assumed after having accepted benefits
therefrom.
JUDGMENT: Petition is DENIED.

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JUDGMENT: Petition is DENIED.

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