SPA And The Law Of Agency in the Philippines
Ever wished you can be at two places in one time? In effect, the law of agency allows you to do that for transactions allowed by the law and upon meeting certain conditions.
There are a host of reasons for one person wanting another to act on his behalf. It may be lack of time, resources or understanding of a certain matter, hence appointing another to act for him or her may be the better option. Other times, constraints imposed by physical inability or distance play a huge role. It is not uncommon in our country for OFWs, for instance, to appoint trusted relatives to oversee an income-generating rental property. Or for a rather busy person to request a friend to secure a government certification from him or her during business hours.
In business scenarios, a corporation, as a juridical entity, appoints its officers or other employees to do certain tasks for the corporation, such as signing a contract, opening and maintaining accounts, or obtaining permits.
All these scenarios are governed by the law on agency where, in effect, a person is represented by another person who is authorized to bind and do legal acts for and in behalf of the former. Under the Civil Code, by the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Art. 1868, Civil Code) The agency may be express or implied. It is generally not required to be in writing; the contract may be oral unless the law requires a specific form.
For instance, 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. (Art. 1874, Civil Code) Further, Special Powers of Attorney (SPA) are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (Art. 1878)
A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell (Art. 1879) and a special power to compromise does not authorize submission to arbitration. (Art. 1880)
Needless to state, the agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him.
In the case of Heirs of Sarili vs Lagrosa (G.R. 193517, 15 January 2014), the Supreme Court ruled that a higher degree of prudence is required from one who buys from a person who is not the registered owner, although the land object of the transaction is registered. In such a case, the buyer is expected to examine not only the certificate of title but also the authority and identity of the person with whom he is dealing with.
If there are flaws in the face of the SPA, mere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution. In Heirs of Sarili, the buyers purchased the subject property from a purported agent, however the latter’s SPA shows flaws in its notarial acknowledgment. The agent’s community tax certificate (CTC) number was not indicated thereon. Despite this irregularity, however, buyers failed to show that they conducted an investigation beyond the subject SPA and into the circumstances of its execution as required by prevailing jurisprudence. Hence, Sps. Sarili cannot be considered as innocent purchasers for value. For indeed, the due execution and authenticity of an SPA in a real estate transaction is of great significance in determining the validity of the sale.