G.R. No. 140667 August 12, 2004 WOODCHILD HOLDINGS, INC., petitioner, vs. ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., respondent G.R. No. 160215 November 10, 2004 HYDRO RESOURCES

8/13/2019 G.R. No. 140667 August 12, 2004 WOODCHILD HOLDINGS, INC., petitioner, vs. ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., respondent G.R. No. 160215 Novembe

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Republic of the Philippines

SUPREME COURTManila

SECOND DIVISIONG.R. No. 140667 August 12, 2004WOODCHILD HOLDINGS, INC.,petitioner,vs.ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC.,respondent.

D E C I S I O N

CALLEJO, SR., J.:This is a petition for review on certiorari of the Decision1of the Court of Appeals in CA-G.R. CV No. 56125 reversing theDecision2of the Regional Trial Court of Makati, Branch 57, which ruled in favor of the petitioner.

The AntecedentsThe respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the Roxas Electric and ConstructionCompany, was theowner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer Certificate of Title (TCT) No. 78085and Lot No. 491-A-3-B-2 covered by TCT No. 78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt road accessing to the Sumulong Highway, Antipolo, Rizal.At a special meeting on May 17, 1991, the respondent's Board of Directors approved a resolution authorizing thecorporation, through its president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an areaof 7,213 square meters, at a price and under such terms and conditions which he deemed most reasonable and advantageousto the corporation; and to execute, sign and deliver the pertinent sales documents and receive the proceeds of the sale forand on behalf of the company.3
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Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered by TCT No. 78086 on which itplanned to construct its warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-footcontainer van would be able to readily enter or leave the property. In a Letter to Roxas dated June 21, 1991, WHI PresidentJonathan Y. Dy offered to buy Lot No. 491-A-3-B-2 under stated terms and conditions for P1,000 per square meter or at theprice of P7,213,000.4One of the terms incorporated in Dy's offer was the following provision:5. This Offer to Purchase is made on the representation and warranty of the OWNER/SELLER, that he holds a good and

registrable title to the property, which shall be conveyed CLEAR and FREE of all liens and encumbrances, and that thearea of 7,213 square meters of the subject property already includes the area on which the right of way traverses from themain lot (area) towards the exit to the Sumulong Highway as shown in the location plan furnished by the Owner/Seller tothe buyer. Furthermore, in the event that the right of way is insufficient for the buyer's purposes (example: entry of a 45-foot container), the seller agrees to sell additional square meter from his current adjacent property to allow the buyer to fullaccess and full use of the property.

5Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month later or on July 1, 1991, Roxas, asPresident of RECCI, as vendor, and Dy, as President of WHI, as vendee, executed a contract to sell in which RECCI boundand obliged itself to sell to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.

6On September 5, 1991, a

Deed of Absolute Sale7

in favor of WHI was issued, under which Lot No. 491-A-3-B-2 covered by TCT No. 78086 wassold for P5,000,000, receipt of which was acknowledged by Roxas under the following terms and conditions: The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial use of and a right of way fromSumulong Highway to the property herein conveyed consists of 25 square meters wide to be used as the latter's egress fromand ingress to and an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or maneuvering areafor Vendee's vehicles.The Vendor agrees that in the event that the right of way is insufficient for the Vendee's use (ex entry of a 45-footcontainer) the Vendor agrees to sell additional square meters from its current adjacent property to allow the Vendee full

access and full use of the property.The Vendor hereby undertakes and agrees, at its account, to defend the title of the Vendee to the parcel of land andimprovements herein conveyed, against all claims of any and all persons or entities, and that the Vendor hereby warrantsthe right of the Vendee to possess and own the said parcel of land and improvements thereon and will defend the Vendeeagainst all present and future claims and/or action in relation thereto, judicial and/or administrative. In particular, theVendor shall eject all existing squatters and occupants of the premises within two (2) weeks from the signing hereof. Incase of failure on the part of the Vendor to eject all occupants and squatters within the two-week period or breach of any of

the stipulations, covenants and terms and conditions herein provided and that of contract to sell dated 1 July 1991, theVendee shall have the right to cancel the sale and demand reimbursement for all payments made to the Vendor with interest
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thereon at 36% per annum. On September 10, 1991, the Wimbeco Builder's, Inc. (WBI) submitted its quotation for P8,649,000 to WHI for theconstruction of the warehouse building on a portion of the property with an area of 5,088 square meters .9WBI proposed tostart the project on October 1, 1991 and to turn over the building to WHI on February 29, 1992.10In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc. confirmed its lease agreement with WHI of

a 5,000-square-meter portion of the warehouse yet to be constructed at the rental rate of P65 per square meter. Ponderosaemphasized the need for the warehouse to be ready for occupancy before April 1, 1992 .11WHI accepted the offer.However, WBI failed to commence the construction of the warehouse in October 1, 1991 as planned because of thepresence of squatters in the property and suggested a renegotiation of the contract after the squatters shall have beenevicted.

12Subsequently, the squatters were evicted from the property.

On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of the warehouse building forP11,804,160.13The contractor started construction in April 1992 even before the building officials of Antipolo City issueda building permit on May 28, 1992. After the warehouse was finished, WHI issued on March 21, 1993 a certificate ofoccupancy by the building official. Earlier, or on March 18, 1993, WHI, as lessor, and Ponderosa, as lessee, executed a

contract of lease over a portion of the property for a monthly rental of P300,000 for a period of three years from March 1,1993 up to February 28, 1996.14In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a portion of the propertyover which WHI had been granted a right of way. Roxas promised to look into the matter. Dy and Roxas discussed the needof the WHI to buy a 500-square-meter portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as provided for in thedeed of absolute sale. However, Roxas died soon thereafter. On April 15, 1992, the WHI wrote the RECCI, reiterating itsverbal requests to purchase a portion of the said lot as provided for in the deed of absolute sale, and complained about thelatter's failure to eject the squatters within the three-month period agreed upon in the said deed. The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 for its beneficialuse within 72 hours from notice thereof, otherwise the appropriate action would be filed against it. RECCI rejected thedemand of WHI. WHI reiterated its demand in a Letter dated May 29, 1992. There was no response from RECCI.On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial Court of Makati, for specificperformance and damages, and alleged, inter alia, the following in its complaint:5. The "current adjacent property" referred to in the aforequoted paragraph of the Deed of Absolute Sale pertains to theproperty covered by Transfer Certificate of Title No. N-78085 of the Registry of Deeds of Antipolo, Rizal, registered in thename of herein defendant Roxas Electric.6. Defendant Roxas Electric in patent violation of the express and valid terms of the Deed of Absolute Sale unjustifiably
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refused to deliver to Woodchild Holdings the stipulated beneficial use and right of way consisting of 25 square meters and55 square meters to the prejudice of the plaintiff.7. Similarly, in as much as the 25 square meters and 55 square meters alloted to Woodchild Holdings for its beneficial useis inadequate as turning and/or maneuvering area of its 45-foot container van, Woodchild Holdings manifested its intentionpursuant to para. 5 of the Deed of Sale to purchase additional square meters from Roxas Electric to allow it full access anduse of the purchased property, however, Roxas Electric refused and failed to merit Woodchild Holdings' request contrary to

defendant Roxas Electric's obligation under the Deed of Absolute Sale (Annex "A"). 8. Moreover, defendant, likewise, failed to eject all existing squatters and occupants of the premises within the stipulatedtime frame and as a consequence thereof, plaintiff's planned construction has been considerably delayed for seven (7)months due to the squatters who continue to trespass and obstruct the subject property, thereby Woodchild Holdingsincurred substantial losses amounting to P3,560,000.00 occasioned by the increased cost of construction materials andlabor.9. Owing further to Roxas Electric's deliberate refusal to comply with its obligation under Annex "A," Woodchild Holdingssuffered unrealized income of P300,000.00 a month or P2,100,000.00 supposed income from rentals of the subject property

for seven (7) months.10. On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to comply with its obligations andwarranties under the Deed of Absolute Sale but notwithstanding such demand, defendant Roxas Electric refused and failedand continue to refuse and fail to heed plaintiff's demand for compliance. Copy of the demand letter dated April 15, 1992 is hereto attached as Annex "B" and made an integral part hereof. 11. Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to Roxas Electric to particularlyannotate on Transfer Certificate of Title No. N-78085 the agreement under Annex "A" with respect to the beneficial use

and right of way, however, Roxas Electric unjustifiably ignored and disregarded the same. Copy of the letter request dated 29 May 1992 is hereto attached as Annex "C" and made an integral part hereof. 12. By reason of Roxas Electric's continuous refusal and failure to comply with Woodchild Holdings' valid demand forcompliance under Annex "A," the latter was constrained to litigate, thereby incurring damages as and by way of attorney'sfees in the amount of P100,000.00 plus costs of suit and expenses of litigation.

15The WHI prayed that, after due proceedings, judgment be rendered in its favor, thus: WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild Holdings and ordering Roxas
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Electric the following:a) to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square meters and 55 square meters; b) to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full access and use of the purchasedproperty pursuant to para. 5 of the Deed of Absolute Sale;c) to cause annotation on Transfer Certificate of Title No. N-78085 the beneficial use and right of way granted toWoodchild Holdings under the Deed of Absolute Sale;d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual damages and unrealized income; e) to pay attorney's fees in the amount of P100,000.00; and f) to pay the costs of suit.Other reliefs just and equitable are prayed for.16In its answer to the complaint, the RECCI alleged that it never authorized its former president, Roberto Roxas, to grant thebeneficial use of any portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or create a lien or burdenthereon. It alleged that, under the Resolution approved on May 17, 1991, it merely authorized Roxas to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086. As such, the grant of a right of way and the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 in the said deed are ultra vires. The RECCI further alleged that the provision thereinthat it would sell a portion of Lot No. 491-A-3-B-1 to the WHI lacked the essential elements of a binding contract.

17In its amended answer to the complaint, the RECCI alleged that the delay in the construction of its warehouse building wasdue to the failure of the WHI's contractor to secure a building permit thereon.18During the trial, Dy testified that he told Roxas that the petitioner was buying a portion of Lot No. 491-A-3-B-1 consistingof an area of 500 square meters, for the price of P1,000 per square meter. On November 11, 1996, the trial court rendered judgment in favor of the WHI, the decretal portion of which reads: WHEREFORE, judgment is hereby rendered directing defendant:(1) To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25 sq. m. and 55 sq. m.; (2) To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to allow said plaintiff full access and use
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of the purchased property pursuant to Par. 5 of their Deed of Absolute Sale; (3) To cause annotation on TCT No. N-78085 the beneficial use and right of way granted by their Deed of Absolute Sale; (4) To pay plaintiff the amount of P5,568,000 representing actual damages and plaintiff's unrealized income; (5) To pay plaintiff P100,000 representing attorney's fees; andTo pay the costs of suit.SO ORDERED.19The trial court ruled that the RECCI was estopped from disowning the apparent authority of Roxas under the May 17, 1991Resolution of its Board of Directors. The court reasoned that to do so would prejudice the WHI which transacted withRoxas in good faith, believing that he had the authority to bind the WHI relating to the easement of right of way, as well asthe right to purchase a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085.The RECCI appealed the decision to the CA, which rendered a decision on November 9, 1999 reversing that of the trialcourt, and ordering the dismissal of the complaint. The CA ruled that, under the resolution of the Board of Directors of theRECCI, Roxas was merely authorized to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, but not to grant right ofway in favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to grant an option to the petitioner to buy a portionthereof. The appellate court also ruled that the grant of a right of way and an option to the respondent were so lopsided infavor of the respondent because the latter was authorized to fix the location as well as the price of the portion of its propertyto be sold to the respondent. Hence, such provisions contained in the deed of absolute sale were not binding on the RECCI.The appellate court ruled that the delay in the construction of WHI's warehouse was due to its fault. The Present PetitionThe petitioner now comes to this Court asserting that:

I.THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE SALE (EXH. "C") IS ULTRAVIRES.

II.THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUO


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ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL USE OF THE EXISTING RIGHT OF WAY PLUS THESTIPULATED 25 SQUARE METERS AND 55 SQUARE METERS BECAUSE THESE ARE VALID STIPULATIONSAGREED BY BOTH PARTIES TO THE DEED OF ABSOLUTE SALE (EXH. "C").

III.THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS TO RULE THAT THE

STIPULATIONS OF THE DEED OF ABSOLUTE SALE (EXH. "C") WERE DISADVANTAGEOUS TO THEAPPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS.

IV.IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT DUE PROCESS BY THEASSAILED DECISION.

V.THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE APPELLANT TO EVICT THESQUATTERS ON THE LAND AS AGREED IN THE DEED OF ABSOLUTE SALE (EXH. "C").

VI.THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUODIRECTING THE DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF P5,568,000.00 REPRESENTINGACTUAL DAMAGES AND PLAINTIFF'S UNREALIZED INCOME AS WELL AS ATTORNEY'S FEES.20The threshold issues for resolution are the following: (a) whether the respondent is bound by the provisions in the deed of

absolute sale granting to the petitioner beneficial use and a right of way over a portion of Lot No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option to the petitioner to buy a portion thereof,and, if so, whether such agreement is enforceable against the respondent; (b) whether the respondent failed to eject thesquatters on its property within two weeks from the execution of the deed of absolute sale; and, (c) whether the respondentis liable to the petitioner for damages.On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the respondent authorized Roxas, then itspresident, to grant a right of way over a portion of Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for therespondent to buy a portion of the said property. The petitioner contends that when the respondent sold Lot No. 491-A-3-B-

2 covered by TCT No. 78086, it (respondent) was well aware of its obligation to provide the petitioner with a means of


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ingress to or egress from the property to the Sumulong Highway, since the latter had no adequate outlet to the publichighway. The petitioner asserts that it agreed to buy the property covered by TCT No. 78085 because of the grant by therespondent of a right of way and an option in its favor to buy a portion of the property covered by TCT No. 78085. Itcontends that the respondent never objected to Roxas' acceptance of its offer to purchase the property and the terms andconditions therein; the respondent even allowed Roxas to execute the deed of absolute sale in its behalf. The petitionerasserts that the respondent even received the purchase price of the property without any objection to the terms andconditions of the said deed of sale. The petitioner claims that it acted in good faith, and contends that after having been

benefited by the said sale, the respondent is estopped from assailing its terms and conditions. The petitioner notes that therespondent's Board of Directors never approved any resolution rejecting the deed of absolute sale executed by Roxas forand in its behalf. As such, the respondent is obliged to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085with an area of 500 square meters at the price of P1,000 per square meter, based on its evidence and Articles 649 and 651of the New Civil Code.For its part, the respondent posits that Roxas was not so authorized under the May 17, 1991 Resolution of its Board ofDirectors to impose a burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3-B-1, much less conveya portion thereof to the petitioner. Hence, the respondent was not bound by such provisions contained in the deed ofabsolute sale. Besides, the respondent contends, the petitioner cannot enforce its right to buy a portion of the said property

since there was no agreement in the deed of absolute sale on the price thereof as well as the specific portion and area to bepurchased by the petitioner.We agree with the respondent.In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals ,

21we held that:

A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of thecorporation is not the property of its stockholders or members and may not be sold by the stockholders or members withoutexpress authorization from the corporation's board of directors. Section 23 of BP 68, otherwise known as the Corporation

Code of the Philippines, provides:"SEC. 23. The Board of Directors or Trustees.Unless otherwise provided in this Code, the corporate powers of allcorporations formed under this Code shall be exercised, all business conducted and all property of such corporationscontrolled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is nostock, from among the members of the corporation, who shall hold office for one (1) year and until their successors areelected and qualified."Indubitably, a corporation may act only through its board of directors or, when authorized either by its by-laws or by itsboard resolution, through its officers or agents in the normal course of business. The general principles of agency govern

the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant


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provisions of law. Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation. However,under Article 1910 of the New Civil Code, acts done by such officers beyond the scope of their authority cannot bind thecorporation unless it has ratified such acts expressly or tacitly, or is estopped from denying them: Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his

authority.As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies itexpressly or tacitly.Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable against the corporationunless ratified by the corporation.

23InBA Finance Corporation v. Court of Appeals,

24we also ruled that persons dealing with an assumed agency, whether theassumed agency be a general or special one, are bound at their peril, if they would hold the principal liable, to ascertain not

only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof isupon them to establish it.In this case, the respondent denied authorizing its then president Roberto B. Roxas to sell a portion of Lot No. 491-A-3-B-1covered by TCT No. 78085, and to create a lien or burden thereon. The petitioner was thus burdened to prove that therespondent so authorized Roxas to sell the same and to create a lien thereon. Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of the respondent, which is worded asfollows:RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any interested buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal, covered by Transfer Certificate of Title No. N-78086, at a priceand on terms and conditions which he deems most reasonable and advantageous to the corporation; FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as he is hereby authorized toexecute, sign and deliver the pertinent sales documents and receive the proceeds of sale for and on behalf of the company .25Evidently, Roxas was not specifically authorized under the said resolution to grant a right of way in favor of the petitioneron a portion of Lot No. 491-A-3-B-1 or to agree to sell to the petitioner a portion thereof. The authority of Roxas, under theresolution, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell a portion of the

adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights thereon. Neither may such authority be implied from
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the authority granted to Roxas to sell Lot No. 491-A-3-B-2 to the petitioner "on such terms and conditions which he deemsmost reasonable and advantageous." Under paragraph 12, Article 1878 of the New Civil Code, a special power of attorneyis required to convey real rights over immovable property.26Article 1358 of the New Civil Code requires that contractswhich have for their object the creation of real rights over immovable property must appear in a public document .27Thepetitioner cannot feign ignorance of the need for Roxas to have been specifically authorized in writing by the Board ofDirectors to be able to validly grant a right of way and agree to sell a portion of Lot No. 491-A-3-B-1. The rule is that if theact of the agent is one which requires authority in writing, those dealing with him are charged with notice of that fact .

28Powers of attorney are generally construed strictly and courts will not infer or presume broad powers from deeds which donot sufficiently include property or subject under which the agent is to deal.

29The general rule is that the power of attorney

must be pursued within legal strictures, and the agent can neither go beyond it; nor beside it. The act done must be legallyidentical with that authorized to be done.30In sum, then, the consent of the respondent to the assailed provisions in the deedof absolute sale was not obtained; hence, the assailed provisions are not binding on it. We reject the petitioner's submission that, in allowing Roxas to execute the contract to sell and the deed of absolute saleand failing to reject or disapprove the same, the respondent thereby gave him apparent authority to grant a right of way overLot No. 491-A-3-B-1 and to grant an option for the respondent to sell a portion thereof to the petitioner. Absent estoppel or

ratification, apparent authority cannot remedy the lack of the written power required under the statement of frauds .31

Inaddition, the petitioner's fallacy is its wrong assumption of the unproved premise that the respondent had full knowledge ofall the terms and conditions contained in the deed of absolute sale when Roxas executed it. It bears stressing that apparent authority is based on estoppel and can arise from two instances: first, the principal mayknowingly permit the agent to so hold himself out as having such authority, and in this way, the principal becomesestopped to claim that the agent does not have such authority; second, the principal may so clothe the agent with the indiciaof authority as to lead a reasonably prudent person to believe that he actually has such authority .32There can be no apparentauthority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must havebeen known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as

claimant and such must have produced a change of position to its detriment. The apparent power of an agent is to bedetermined by the acts of the principal and not by the acts of the agent .33For the principle of apparent authority to apply, the petitioner was burdened to prove the following: (a) the acts of therespondent justifying belief in the agency by the petitioner; (b) knowledge thereof by the respondent which is sought to beheld; and, (c) reliance thereon by the petitioner consistent with ordinary care and prudence .34In this case, there is noevidence on record of specific acts made by the respondent35showing or indicating that it had full knowledge of anyrepresentations made by Roxas to the petitioner that the respondent had authorized him to grant to the respondent an optionto buy a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, or to create a burden or lien thereon, or that therespondent allowed him to do so.The petitioner's contention that by receiving and retaining the P5,000,000 purchase price of Lot No. 491-A-3-B-2, the
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respondent effectively and impliedly ratified the grant of a right of way on the adjacent lot, Lot No. 491-A-3-B-1, and togrant to the petitioner an option to sell a portion thereof, is barren of merit. It bears stressing that the respondent sold LotNo. 491-A-3-B-2 to the petitioner, and the latter had taken possession of the property. As such, the respondent had the rightto retain the P5,000,000, the purchase price of the property it had sold to the petitioner. For an act of the principal to beconsidered as an implied ratification of an unauthorized act of an agent, such act must be inconsistent with any otherhypothesis than that he approved and intended to adopt what had been done in his name .36Ratification is based on waiverthe intentional relinquishment of a known right. Ratification cannot be inferred from acts that a principal has a right to do

independently of the unauthorized act of the agent. Moreover, if a writing is required to grant an authority to do a particularact, ratification of that act must also be in writing.

37Since the respondent had not ratified the unauthorized acts of Roxas,

the same are unenforceable.38Hence, by the respondent's retention of the amount, it cannot thereby be implied that it hadratified the unauthorized acts of its agent, Roberto Roxas.On the last issue, the petitioner contends that the CA erred in dismissing its complaint for damages against the respondenton its finding that the delay in the construction of its warehouse was due to its (petitioner's) fault. The petitioner asserts thatthe CA should have affirmed the ruling of the trial court that the respondent failed to cause the eviction of the squattersfrom the property on or before September 29, 1991; hence, was liable for P5,660,000. The respondent, for its part, assertsthat the delay in the construction of the petitioner's warehouse was due to its late filing of an application for a building

permit, only on May 28, 1992.The petitioner's contention is meritorious. The respondent does not deny that it failed to cause the eviction of the squatterson or before September 29, 1991. Indeed, the respondent does not deny the fact that when the petitioner wrote therespondent demanding that the latter cause the eviction of the squatters on April 15, 1992, the latter were still in thepremises. It was only after receiving the said letter in April 1992 that the respondent caused the eviction of the squatters,which thus cleared the way for the petitioner's contractor to commence the construction of its warehouse and secure theappropriate building permit therefor.The petitioner could not be expected to file its application for a building permit before April 1992 because the squatters

were still occupying the property. Because of the respondent's failure to cause their eviction as agreed upon, the petitioner'scontractor failed to commence the construction of the warehouse in October 1991 for the agreed price of P8,649,000. In themeantime, costs of construction materials spiraled. Under the construction contract entered into between the petitioner andthe contractor, the petitioner was obliged to pay P11,804,160,39including the additional work costing P1,441,500, or a netincrease of P1,712,980.40The respondent is liable for the difference between the original cost of construction and theincrease thereon, conformably to Article 1170 of the New Civil Code, which reads:Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in anymanner contravene the tenor thereof, are liable for damages. The petitioner, likewise, lost the amount of P3,900,000 by way of unearned income from the lease of the property to thePonderosa Leather Goods Company. The respondent is, thus, liable to the petitioner for the said amount, under Articles
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2200 and 2201 of the New Civil Code:Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profitswhich the obligee failed to obtain.Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall bethose that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or

could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may bereasonably attributed to the non-performance of the obligation. In sum, we affirm the trial court's award of damages and attorney's fees to the petitioner. IN LIGHT OF ALL THE FOREGOING,judgment is hereby rendered AFFIRMINGthe assailed Decision of the Courtof Appeals WITH MODIFICATION. The respondent is ordered to pay to the petitioner the amount of P5,612,980 by wayof actual damages and P100,000 by way of attorney's fees. No costs. SO ORDERED.Puno, J., Chairman, Austria-Martinez, Tinga, and Chico-Nazario, JJ.,concur.

Footnotes1Penned by Associate Justice Salome A. Montoya, with Associate Justices Conrado M. Vasquez, Jr. and Teodoro P.

Regino, concurring.2Penned by Judge Francisco X. Velez.

3Exhibit "L," Records, p. 213.4Exhibit "M," Id. at 214.5Ibid.
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Exhibit "N," Id. at 216.7Exhibit "C," Id. at 192-195.

8Id. at 193-194.9Exhibit "D," Id. at 196.10

Exhibit "D-1," Id. at 197.11Exhibit "G," Id. at 201.12Exhibit "E," Id. at 198.13

Exhibit "F," Id. at 199.14Exhibit "H," Id. at 202-206.15Records, pp. 2-4.16

Id. at 4-5.17Id. at 24-25.18Id. at 247.19

Id. at 482.20Rollo, pp. 22-23.21296 SCRA 631 (1998).22

Id. at 644-645.23Art. 1403. The following contracts are unenforceable, unless they are ratified:(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or
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who has acted beyond his powers.24

211 SCRA 112 (1992).25Records, p. 213.26Art. 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 fora valuable consideration;

(12) To create or convey real rights over immovable property;

(14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion.27Art. 1358. The following must appear in a public document:(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rightsover immovable property; sales of real property or of an interest therein are governed by articles 1403, No. 2, and 1405;

(3) The power to administer property, or any other power which has for its object an act appearing or which should appearin a public document, or should prejudice a third person; (4) The cession of actions or rights proceeding from an act appearing in a public document. 28

State v. Sellers and Resolute Insurance Company, 258 N.W.2d 292 (1977).
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Prior v. Hager, 440 S.W.2d 167 (1969).30

Lang v. Bair, 36 Mo. 85, id.31Union Camp Corporation v. Dyal, Jr., 460 F.2d 678 (1972).32Banker's Protective Life Insurance Co. v. Addison, 273 S.W.2d 694 (1951).33

Id. at 696.34Residon v. Miller Distributors Co., Inc., 139 N.W.2d 12 (1966).35See Wells Fargo Business v. Kozoff, 695 F.2d 940 (1983).36

The Board of Supervisors v. Schack, 18 L.E.2d 556 (1897); American Food Corporation v. Central Carolina Bank &Trust Company, 291 S.W.2d 892.37

Reuschlin and Gregory, The Law of Agency and Partnership, 2nd ed., p. 75.38

Article 1403, New Civil Code (infra).39Exhibit "F," Records, p. 199.40TSN, 30 September 1993, p. 13.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISIONG.R. No. 160215 November 10, 2004HYDRO RESOURCES CONTRACTORS CORPORATION,petitioner,vs.NATIONAL IRRIGATION ADMINISTRATION,respondent.
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D E C I S I O N

YNARES-SANTIAGO, J.:Challenged in this petition for review on certiorari under Rule 45 is the Decision of the Court of Appeals

1dated October

29, 2002 and its Resolution dated September 24, 20032in CA-G.R. SP No. 44527,3reversing the judgment of theConstruction Industry Arbitration Commission (CIAC) dated June 10, 1997

4in CIAC Case No. 14-98 in favor of petitioner

Hydro Resources Contractors Corporation.The facts are undisputed and are matters of record.In a competitive bidding conducted by the National Irrigation Administration (NIA) sometime in August 1978, HydroResources Contractors Corporation (Hydro) was awarded Contract MPI-C-25involving the main civil work of the Magat

River Multi-Purpose Project. The contract price for the work was pegged at P1,489,146,473.72 with the peso componentthereof amounting to P1,041,884,766.99 and the US$ component valued at $60,657,992.37 at the exchange rate of P7.3735to the dollar or P447,361,706.73.On November 6, 1978, the parties signed Amendment No. 16of the contract whereby NIA agreed to increase the foreigncurrency allocation for equipment financing from US$28,000,000.00 for the first and second years of the contract toUS$38,000,000.00, to be made available in full during the first year of the contract to enable the contractor to purchase theneeded equipment and spare parts, as approved by NIA, for the construction of the project. On April 9, 1980, the partiesentered into a Memorandum of Agreement7(MOA) whereby they agreed that Hydro may directly avail of the foreigncurrency component of the contract for the sole purpose of purchasing necessary spare parts and equipment for the project.

This was made in order for the contractor to avoid further delays in the procurement of the said spare parts and equipment. A few months after the MOA was signed, NIA and Hydro entered into a Supplemental Memorandum of Agreement(Supplemental MOA) to include among the items to be financed out of the foreign currency portion of the Contract"construction materials, supplies and services as well as equipment and materials for incorporation in the permanent worksof the Project."8Work on the project progressed steadily until Hydro substantially completed the project in 1982 and the final acceptancewas made by NIA on February 14, 1984.9During the period of the execution of the contract, the foreign exchange value of the peso against the US dollar declined
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and steadily deteriorated. Whenever Hydro's availment of the foreign currency component exceeded the amount of theforeign currency payable to Hydro for a particular period, NIA charged interest in dollars based on the prevailing exchangerate instead of the fixed exchange rate of P7.3735 to the dollar. Yet when Hydro received payments from NIA in PhilippinePesos, NIA made deductions from Hydro's foreign currency component at the fixed exchange rate of P7.3735 to US$1.00instead of the prevailing exchange rate.Upon completion of the project, a final reconciliation of the total entitlement of Hydro to the foreign currency component

of the contract was made. The result of this final reconciliation showed that the total entitlement of Hydro to the foreigncurrency component of the contract exceeded the amount of US dollars required by Hydro to repay the advances made byNIA for its account in the importation of new equipment, spare parts and tools. Hydro then requested a full and finalpayment due to the underpayment of the foreign exchange portion caused by price escalations and extra work orders. In1983, NIA and Hydro prepared a joint computation denominated as the "MPI-C-2 Dollar Rate Differential on ForeignComponent of Escalation."

10Based on said joint computation, Hydro was still entitled to a foreign exchange differential of

US$1,353,771.79 equivalent to P10,898,391.17.Hydro then presented its claim for said foreign exchange differential to NIA on August 12, 198311but the latter refused tohonor the same. Hydro made several

12demands to recover its claim until the same was turned down with finality by then

NIA Administrator Federico N. Alday, Jr. on January 6, 1987.13

On December 7, 1994, Hydro filed a request for arbitration with the Construction Industry Arbitration Commission(CIAC).14In the said request, Hydro nominated six (6) arbitrators. The case was docketed as CIAC Case No. 18-94.NIA filed its Answer with Compulsory Counterclaim15raising laches, estoppel and lack of jurisdiction by CIAC as itsspecial defenses. NIA also submitted its six (6) nominees to the panel of arbitrators. After appointment of the arbitrators,both parties agreed on the Terms of Reference16as well as the issues submitted for arbitration.On March 13, 1995, NIA filed a Motion to Dismiss17questioning CIAC's jurisdiction to take cognizance of the case. The

latter, however, deferred resolution of the motion and set the case for hearing for the reception of evidence .18

NIAmoved19for reconsideration but the same was denied by CIAC in an Order dated April 25, 1995.20Dissatisfied, NIA filed a petition for certiorari and prohibition with the Court of Appeals where the same was docketed asCA-G.R. SP No. 37180,21which dismissed the petition in a Resolution dated June 28, 1996.22NIA challenged the resolution of the Court of Appeals before this Court in a special civil action for certiorari, docketed asG.R. No. 129169.23Meanwhile, on June 10, 1997, the CIAC promulgated a decision in favor of Hydro.24NIA filed a Petition for Review on

Appeal before the Court of Appeals, which was docketed as CA-G.R. SP No. 44527.25
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During the pendency of CA-G.R. SP No. 44527 before the Court of Appeals, this Court dismissed special civil action forcertiorari docketed as G.R. No. 129169 on the ground that CIAC had jurisdiction over the dispute and directed the Court ofAppeals to proceed with reasonable dispatch in the disposition of CA-G.R. SP No. 44527. NIA did not move forreconsideration of the said decision, hence, the same became final and executory on December 15, 1999 .26Thereafter, the Court of Appeals rendered the challenged decision in CA-G.R. SP No. 44527, reversing the judgment of theCIAC on the grounds that: (1) Hydro's claim has prescribed; (2) assuming that Hydro was entitled to its claim, the rate of

exchange should be based on a fixed rate; (3) Hydro's claim is contrary to R.A. No. 529;27

(4) NIA's Certification of Non-Forum-Shopping was proper even if the same was signed only by counsel and not by NIA's authorized representative; and(5) NIA did not engage in forum-shopping.Hydro's Motion for Reconsideration was denied in Resolution of September 24, 2003.Hence, this petition.Addressing first the issue of prescription, the Court of Appeals, in ruling that Hydro's claim had prescribed, reasoned thus:Nevertheless, We find good reason to apply the principle of prescription against HRCC. It is well to note that Section 25 ofthe General Conditions of the subject contract provides (CIAC Decision, p. 15, Rollo, p. 57):Any controversy or dispute arising out of or relating to this Contract which cannot be resolved by mutual agreement shallbe decided by the Administrator within thirty (30) calendar days from receipt of a written notice from Contractor and whoshall furnish Contractor a written copy of this decision. Such decision shall be final and conclusive unless within thirty (30)calendar days from the date of receipt thereof, Contractor shall deliver to NIA a written notice addressed to theAdministrator that he desires that the dispute be submitted to arbitration. Pending decision from arbitration, Contractorshall proceed diligently with the performance of the Contract and in accordance with the decision of the Administrator.(Emphasis and Underscoring Ours)Both parties admit the existence of this provision in the Contract (Petition, p. 4; Comment, p. 16; Rollo, pp. 12 and 131).Apropos, the following matters are clear: (1) any controversy or dispute between the parties arising from the subjectcontract shall be governed by the provisions of the contract; (2) upon the failure to arrive at a mutual agreement, thecontractor shall submit the dispute to the Administrator of NIA for determination; and (3) the decision of the Administratorshall become final and conclusive, unless within thirty (30) calendar days from the date of receipt thereof, the Contractorshall deliver to NIA a written notice addressed to the Administrator that he desires that the dispute be submitted forarbitration.Prescinding from the foregoing matters, We find that the CIAC erred in granting HRCC's claim considering that the latter's

right to make such demand had clearly prescribed. To begin with, on January 7, 1986, Cesar L. Tech (NIA's Administratorat the time) informed HRCC in writing that after a review of the additional points raised by the latter, NIA confirms its
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original recommendation not to allow the said claim (Annex "F"; Rollo, p. 81; CIAC Decision, p. 11; Rollo, p. 53). Thisshould have propelled private respondent to notify and signify to NIA of intention to submit the dispute to arbitrationpursuant to the provision of the contract. Yet, it did not. Instead it persisted to send several letters to NIA reiterating thereason for its rejected claim (CIAC Decision, p. 11; Rollo, p. 53).28We disagree for the following reasons:First, the appellate court clearly overlooked the fact that NIA, through then Administrator Fedrico N. Alday, Jr., denied"with finality" Hydro's claim only on January 6, 1987 in a letter bearing the same date29which reads:This refers to your letter dated November 7, 1986 requesting reconsideration on your claim for payment of the Dollar RateDifferential of Price Escalation in Contract No. MPI-C-2.We have reviewed the relevant facts and issues as presented and the additional points raised in the abovementioned letter inthe context of the Contract Documents and we find no strong and valid reason to reverse the earlier decision of NIA'sprevious management denying your claim. Therefore, we regret that we have to reiterate the earlier official stand of NIAunder its letter dated January 7, 1986, that confirms the original recommendation which had earlier been presented in our

4th Indorsement dated February 5, 1985 to your office.In view hereof, we regret to say with finality that the claim cannot be given favorable consideration. (Emphasis and italicssupplied)Hydro received the above-mentioned letter on January 27, 1987.30Pursuant to Section 25 of the Contract's GeneralConditions (GC-25), Hydro had thirty (30) days from receipt of said denial, or until February 26, 1987, within which tonotify NIA of its desire to submit the dispute to arbitration.On February 18, 1987, Hydro sent a letter31to NIA, addressed to then NIA Administrator Federico N. Alday, Jr.,

manifesting its desire to submit the dispute to arbitration. The letter was received by NIA on February 19, 1987, which waswithin the thirty-day prescriptive period.Moreover, a circumspect scrutiny of the wording of GC-25 with regard to the thirty-day prescriptive period shows that saidproviso is intended to apply to disputes which arose during the actual construction of the project and not for controversieswhich occured after the project is completed. The rationale for such a stipulation was aptly explained thus by the CIAC inits Decision in CIAC Case No. 18-94:In construction contracts, there is invariably a provision for interim settlement of disputes. The right to settle disputes isgiven to the owner or his representative, either an architect or engineer, designated as "owner's representative," only for the

purpose of avoiding delay in the completion of the project. In this particular contract, that right was reserved to the NIAAdministrator. The types of disputes contemplated were those which may have otherwise affected the progress of the work.
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It is very clear that this is the purpose of the limiting periods in this clause that the dispute shall be resolved by theAdministrator within 30 days from receipt of a written notice from the Contractor and that the Contractor may submit toarbitration this dispute if it does not agree with the decision of the Administrator, and "Pending decision from arbitration,Contractor shall proceed diligently with the performance of the Contract and in accordance with the decision of theAdministrator."In this case, the dispute had arisen after completion of the Project. The reason for the 30-day limitation no longer applies,

and we find no legal basis for applying it. Moreover, in Exhibit "B," NIA Administrator Cesar L. Tech had, instead ofrendering an adverse decision, by signing the document with HRCC's Onofre B. Banson, implicitly approved the paymentof the foreign exchange differential, but this payment could not be made because of the opinion of Auditor Saldua and laterof the Commission on Audit.32Second, as early as April 1983, Hydro and NIA, through its Administrator Cesar L. Tech, prepared the Joint Computationwhich shows that Hydro is entitled to the foreign currency differential.33As correctly found by the CIAC, this computationconstitutes a written acknowledgment of the debt by the debtor under Article 1155 of the Civil Code, which states: ART. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written

extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. (Emphasisand italics supplied)Instead of upholding the CIAC's findings on this point, the Court of Appeals ruled that Cesar L. Tech's act of signing theJoint Computation was an ultra vires act. This again is patent error. It must be noted that the Administrator is the highestofficer of the NIA. Furthermore, Hydro has been dealing with NIA through its Administrator in all of its transactions withrespect to the contract and subsequently the foreign currency differential claim. The NIA Administrator is empowered bythe Contract to grant or deny foreign currency differential claims. It would be preposterous for the NIA Administrator tohave the power of granting claims without the authority to verify the computation of such claims. Finally, the records of thecase will show that NIA itself never disputed its Administrator's capacity to sign the Joint Computation because it knew

that the Administrator, in fact, had such capacity.

Even assuming for the sake of argument that the Administrator had no authority to bind NIA, the latter is already estoppedafter repeatedly representing to Hydro that the Administrator had such authority. A corporation may be held in estoppelfrom denying as against third persons the authority of its officers or agents who have been clothed by it with ostensible orapparent authority.

34Indeed

. . . The rule is of course settled that "[a]lthough an officer or agent acts without, or in excess of, his actual authority if heacts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permittinghim to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good

faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to
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the business, or a particular branch of it, continuously and publicly, for a considerable time.". . . Third, NIA has clearly waived the prescriptive period when it continued to entertain Hydro's claim regarding new mattersraised by the latter in its letters to NIA and then issuing rulings thereon. In this regard, Article 1112 of the Civil Codeprovides that:ART. 1112. Persons with capacity to alienate property may renounce prescription already obtained, but not the right to

prescribe in the future.Prescription is deemed to have been tacitly renounced when the renunciation results from acts which imply theabandonment of the right acquired. (Emphasis and italics supplied) Certainly, when a party has renounced a right acquired by prescription through its actions, it can no longer claimprescription as a defense.

36Fourth, even assuming that NIA did not waive the thirty-day prescriptive period, it clearly waived the effects of such periodwhen it actively participated in arbitration proceedings through the following acts: a) On January 6, 1995, NIA voluntarily filed its written appearance, readily submitted its Answer and asserted its ownCounterclaims;b) In the Compliance which accompanied the Answer, NIA also submitted its six nominees to the Arbitral Tribunal to beconstituted, among of which one was eventually appointed to the tribunal; c) NIA also actively participated in the deliberations for and the formulation of the Terms of Reference during thepreliminary conference set by CIAC; andd) For the purpose of obviating the introduction of testimonial evidence on the authenticity and due execution of itsdocumentary evidence, NIA even had examined, upon prior request to Hydro, all of the documents which the latterintended to present as evidentiary exhibits for the said arbitration case. We now come to the issue of whether or not the provisions of R.A. No. 529, otherwise known as an Act To AssureUniform Value to Philippine Coin And Currency, is applicable to Hydro's claim.The Contract between NIA and Hydro is an internationally tendered contract considering that it was funded by theInternational Bank for Reconstruction and Development (IBRD). As a contract funded by an international organization,particularly one recognized by the Philippines,37the contract is exempt from the provisions of R.A. No. 529. R.A. No. 4100
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amended the provisions of R.A. 529 thus:SECTION 1. Section one of Republic Act Numbered Five hundred and twenty-nine, entitled "An Act to Assure UniformValue of Philippine Coin and Currency," is hereby amended to read as follows: Sec. 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted inthe Philippines which provisions purports to give the obligee the right to require payment in gold or in a particular kind of

coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it ishereby declared against public policy, and null, void, and of no effect, and no such provision shall be contained in, or madewith respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) transactions where the fundsinvolved are the proceeds of loans or investments made directly or indirectly, through bona fide intermediaries or agents,by foreign governments, their agencies and instrumentalities, and international financial and banking institutions so long asthe funds are identifiable, as having emanated from the sources enumerated above; (b) transactions affecting high-priorityeconomic projects for agricultural, industrial and power development as may be determined by the National EconomicCouncil which are financed by or through foreign funds; (c) forward exchange transaction entered into between banks orbetween banks and individuals or juridical persons; (d) import-export and other international banking, financial investmentand industrial transactions. With the exception of the cases enumerated