Cosmic Lumber v.

Court of Appeals, 265 SCRA 168 (1996)

Cosmic Lumber vs CA

FACTS

Cosmic Lumber Corporation made a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney in
fact to initiate, institute and file any court action for ejectment of the squatters for lot 9127 and 443 and to protect the
rights of company’s rights.

Paz then instituted an action for ejectment in RTC Dagupan against the private respondent Isidro Perez and recover
possession of portion of lot 443. However, parties entered into a Compromise Agreement wherein Paz sold portion
of the said lot portion where Perez has his house for 80 pesos per sqm or 26,640 pesos. RTC approved said
agreement. However, 5 years later said agreement was not executed for failure of Cosmic Lumber to produce
owner’s duplicate copy of the Title. Thus, private respondent filed a complaint to revive said RTC judgment.

Cosmic Lumber said that it only knew of said Compromise Agreement when it was summoned during the complaint
for revival of judgment. Hence, it filed annulment of RTC decision in CA alleging that it was void because:

1. Paz was only authorize to file an ejectment suit, not dispose said property.

2. SPA allowed PAZ to enter into Compromise which pertains not to dispose but to make the company take
material possession of the lot

3. Amount paid was not given to the company

4. Private respondent acted in bad faith for he knew that said SPA has no such authority

5. Disposition of said property needs Board Resolution

CA dismissed complaint saying that not one of the grounds for annulment like lack of jurisdiction, fraud or illegality
were shown to exist. MR was also denied on the ground that Paz Spa does not affect jurisdiction of RTC over the
action nor does it amount to extrinsic fraud.

ISSUE

Did the SPA grant PAZ the power to dispose said lot area to Perez?

RULING

NO. No such express or implied power was granted to Paz as it contravenes the SPA’s statement to protect the rights
and interest of the corporation and only for ejectment of third persons. Further, the 80 pesos per sqm is much lesser
that its assessed value of 250 pesos per sqm.

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. 9 Thus the authority of an agent to execute a contract for the sale of real
estate must be conferred in writing and must give him specific authority, either to conduct the general business of
the principal or to execute a binding contract containing terms and conditions which are in the contract he did
execute. A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration.The express mandate
required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly
mentions a sale or that includes a sale as a necessary ingredient of the act mentioned.

SC ruled in Alviar vs RTC La Union that when since agreement is void, court acquired no jurisdiction to render its
execution. What the company may do is file a petition to quash execution. Since the company is not a party to said
Compromise Agreement, it cannot bind it since no special authority was granted to Paz, as required under Article
1878 of Civil Code.

Under BP 129, a party can file annulment of RTC judgments in CA but the requirement that it must be satisfied that
either :

1. it is void for lack of jurisdiction or

2. lack of due process of law or
3. such is obtained by fraud

That’s why the action of Cosmic to annul the agreement in CA was valid for lack of jurisdiction.

Meanwhile, the act of Paz constituted extrinsic or collateral fraud. There was fraud when Cosmic was not made
aware of transaction.

Extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the
trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or
deception practiced on him by his opponent.

Discussion on principal is bound by knowledge of notice of agent

Such general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence
there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as to
raise a clear presumption that he will not communicate to the principal the facts in controversy.The logical reason
for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or
to expect that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetration
of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really acting
for himself, entirely outside the scope of his agency. Indeed, the basic tenets of agency rest on the highest
considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own
personal advantage, and his act in secret hostility to the interests of his principal transcends the power afforded him.

Hence, petition is granted.