G.R. No. 210043 . September 26, 2018.
AYALA LAND, INC., PETITIONER, VS. ASB REALTY CORPORATION AND E.M. RAMOS & SONS, INC., RESPONDENTS.

FACTS

Petitioner Ayala Land, Inc. (ALI) sought to purchase a 372-hectare property in Dasmariñas, Cavite owned by respondent E.M. Ramos & Sons, Inc. (EMRASON). ALI negotiated with several Ramos family members (the Ramos children) and, relying on a 1993 letter from EMRASON’s President Emerita Ramos, Sr., entered into a Contract to Sell on May 18, 1994. ALI claimed the Ramos children had apparent authority to represent EMRASON. However, EMRASON, through its President Ramos, Sr., had already informed ALI on May 17, 1994 of its decision to accept a more favorable proposal from respondent ASB Realty Corporation (ASBRC). Consequently, EMRASON and ASBRC executed a Letter-Agreement on May 21, 1994, which was preceded by a formal board resolution and stockholder ratification on May 17, 1994. Upon learning of the competing Contract to Sell, ASBRC and EMRASON sued for its nullification.
The Regional Trial Court declared the Contract to Sell between ALI and the Ramos children null and void, finding that the Ramos children lacked any corporate authority from EMRASON to sell the property. The court noted ALI’s prior dealings were consistently addressed to President Ramos, Sr., undermining its claim of good faith belief in the children’s authority. The Court of Appeals affirmed the RTC decision, emphasizing the absence of any board resolution authorizing the Ramos children to bind the corporation.

ISSUE

Whether the Ramos children possessed apparent authority to bind EMRASON in the Contract to Sell with ALI, thereby rendering the contract valid and enforceable.

RULING

No. The Supreme Court denied ALI’s petition and affirmed the lower courts’ rulings. The doctrine of apparent authority requires that the principal, by its voluntary acts, placed the agent in a position that would lead a reasonably prudent person to believe the agent had authority. For apparent authority to apply, the party asserting it must prove: (1) acts of the principal justifying belief in the agency; (2) the principal’s knowledge of those acts; and (3) the party’s reliance consistent with ordinary care. ALI failed to meet this burden.
The Court found that EMRASON did not hold out the Ramos children as authorized agents. The 1993 letter from President Ramos, Sr. acknowledged only that the children were authorized to “represent” EMRASON in joint venture discussions, not to conclusively sell corporate property. Crucially, ALI’s own conduct demonstrated it knew the limits of this authority. Its correspondence was consistently directed to President Ramos, Sr., and its final formal offer on May 11, 1994 was explicitly addressed to him for “acceptance and approval.” This proved ALI was aware that ultimate authority resided with Ramos, Sr., not the children. A person of ordinary prudence, conversant with business usages, would have verified the specific authority to sell such a significant corporate asset. ALI’s failure to require a board resolution or secretary’s certificate authorizing the Ramos children to execute the Contract to Sell constituted a lack of ordinary care, precluding reliance on apparent authority. Therefore, the Contract to Sell was void for lack of authority, and the subsequently ratified Letter-Agreement with ASBRC was valid.