G.R. No. 114311 November 29, 1996
COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and ISIDRO PEREZ, respondents.

FACTS

Cosmic Lumber Corporation, through its General Manager, executed a Special Power of Attorney (SPA) appointing Paz G. Villamil-Estrada as attorney-in-fact. The SPA authorized her to institute an ejectment action against squatters on its lots to enable the corporation to take material possession, and for that purpose, to appear at pre-trial and enter into stipulations or compromise agreements protecting the corporation’s rights. Relying on this SPA, Villamil-Estrada filed an ejectment case against Isidro Perez. During the proceedings, she entered into a Compromise Agreement with Perez, whereby she agreed to sell him a 333-square-meter portion of the lot for P26,640. The trial court approved this agreement and rendered a judgment based on it.
The judgment became final but was not executed. Years later, Perez filed an action to revive the judgment. Cosmic Lumber claimed it only learned of the compromise agreement upon service of the summons in the revival case. The corporation then sought annulment of the judgment before the Court of Appeals, arguing the compromise was void as Villamil-Estrada lacked authority to sell corporate property. The Court of Appeals dismissed the petition, ruling that the alleged nullity of the compromise was not a proper ground for annulment of judgment, as it did not affect the trial court’s jurisdiction nor constitute extrinsic fraud.

ISSUE

Whether the Compromise Agreement and the judgment based upon it are void due to the attorney-in-fact’s lack of authority to sell the corporate property.

RULING

Yes, the Compromise Agreement and the consequent judgment are void. The Supreme Court granted the petition, nullifying the decisions of the lower courts and the Compromise Agreement. The legal logic is anchored on the principles of agency. A special power of attorney must be construed strictly, and the agent can only act within the specific authority granted. The SPA in this case explicitly limited Villamil-Estrada’s authority to actions for ejectment to recover material possession of the entire lot. The power to enter into a compromise was expressly circumscribed by the clause “so far as it shall protect the rights and interest of the corporation.”
The authority to sell or convey real property is not implied from a general power to compromise; it must be expressly granted. The SPA contained no such express grant. Therefore, Villamil-Estrada’s act of selling a portion of the lot via the compromise agreement was an ultra vires act entirely outside the scope of her agency. Since the agent acted without authority, the contract did not bind the principal, Cosmic Lumber. A judgment based on a void contract is itself void and can be assailed at any time. The Court of Appeals erred in not recognizing this fundamental nullity. The Supreme Court set aside the void judgment and agreement, allowing Cosmic Lumber to pursue its original ejectment action.