Ernest Levanza Yasuma vs.

Heirs of De Villa Topic: Nature: Petition for review on certiorari of a decision of the CA Facts: 1. On September 15, October 21 and December 5, 1988, Cecilio S de Villa obtained loans from Koji Yasuma in the amount of 1100000, 100000 and 100000 with total amount of 1.3 million a. Loans were evidenced by the promissory notes signed by de Villa as borrower. b. The last promissory note in the amount of 1300000 cancelled the first two notes. 2. Loans were secured by 3 separate real estate mortgages on a parcel of land with TCT 176575 a. Third real estate mortgage later cancelled the first two 3. De Villa failed to pay 4. Kuji filed a collection suit in the RTC-Makati against de Villa and respondent corporation in default and resolved the case in favor of Kuji. 5. De Villa appealed and on appeal, RTC-Makati decision was annulled on the ground of improper service of summons, thus case was remanded for retrial 6. During pendency of the case, de Villa died. 7. Yasuma impleaded the heirs of de Villa as defendants 8. RTC-Makati rendered judgment in favor of Yasuma and against respondent corporation. a. Ordered respondent corporation to pay petitioner 1.3M plus legal interest, attorneys fees, liquidated damages and cost of suit. 9. CA reversed a. Loan was personal to de Villa and that the mortgage was null and void for lack of authority from the corporation. Issue: Whether the loans were personal liabilities of de Villa or debts of respondent corporation Whether the mortgage on respondent corporations properties was null and void for having been executed without its authority Held: Personal liabilities Mortgage void Ratio: 1. A corporation is a juridical person, separate and distinct from its stockholders. Being a juridical entity, a corporation may act through its board of directors, as provided in section 23 of the corporation code. a. Sec 23. Board of Directors and Trustees Unless otherwise provided in this code, the corporate powers off all corporations formed under this code shall be exercised, all business

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conducted and all property of such corporation controlled and held by the board of directors or trustees The corporation can also act through its officers who maybe authorized either expressly by the by-laws or board resolutions or impliedly such as by general practice or policy or as are implied from express powers. The general principles of agency govern the relation between the corporation and its officers or agents. a. When authorized, their acts can bind the corporation. When not, it cannot bind. However, the corporation may ratify the unauthorized act of its corporate officer a. Ratification means that the principal voluntarily adopts, confirms and gives sanction to some unauthorized act of its agent on its behalf. The power to borrow money is one of those cases where corporate officers as agents of the corporation need a special power of attorney. a. In the case at bar, no special power of attorney conferring authority on de Villa was ever presented. b. The promissory notes evidencing the loans were signed by de Villa (who was the president of respondent corporation c. Respondent however, contends that the corporation admission that it received the total amount of 1.3M was effectively a ratification of the act of its former president. i. Defendants ADMIT that the total amount of 1.3M subject matter of the promissory notes was received by the defendant corporation d. CA Held that this admission was not tantamount to ratification because what the corporation admitted was that money was in fact received as an investment. i. Even if the corporation received the money, it cannot be held responsible for not knowing the preceding transaction between the president and the petitioner as in fact there was a misrepresentation made to the respondent to the effect that the money was an investment and not a loan. The alleged investment is actually a personal loan Notes did not show that de Villa acted on behalf of the corporation. Corporation could not ratify the act of de Villa because there was no proof that it knew that he took out a loan on its behalf. a. Ratification is a voluntary choice that is knowingly made b. The corporation could not have ratified an act it had no knowledge of. c. Material facts were suppressed or unknown, there can be no valid ratification Mortgage was void a. A special power of attorney is necessary to create or convey real rights over immovable property. Furthermore, the special power of attorney must appear in a public document. In the absence of a special power of attorney, no valid mortgage could have been executed by him. Since mortgage was void, it cannot be ratified.