10 Vicente V. Geraldez.docx

[KINDS OF AGENCY] VICENTE V. GERALDEZ July 31, 1973 | Antonio, J. | Petitioner: Ignacio Vicente, Moises Angeles, Juan Bernabe Respondent: Hon. Ambrosio Geraldez and Hi Cement Corporation Doctrine: Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment. Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority/compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash Facts: ● Hi Cement Corporation (HCC) filed with CFI of Bulacan a complaint for injunction and damages against petitioners. ● HCC alleges that it had acquired a Placer Lease Contract from the Banahaw Shale Mining Association, under a deed of sale and transfer which was duly registered with the Office of the Mining Recorder of Bulacan and duly approved by the Secretary of Agriculture and Natural Resources ○ Such lease was for a period of 25 years and covering 2 mining claims for a combined area of 51 hectares. ○ Among the 51 areas, three parcels of land are occupied by the petitioners1 ● HCC has informed petitioners of acquisition of the placer miing claims which include the areas occupied by them and has requested that petitioners allow their workers to enter the area in question for exploration and development as well as for extraction of minerals, promising to pay damages. ○ Petitioners denied this offer and even threatened the workers with bodily harm if they enter the premises. ○ As a result of the refusal, HCC has suffered irreperable damages due to its failure to work on and develop its claims and to extract minerals resulting to its inability to comply with its contractual commitments. ○ Hence, HCC filed complaint for injunction with CFI of Bulacan. CFI: Issued TRO and required petitioners to file their answers.  During pre-trial, the possibility of an amicable settlement was explored where HCC offered to purchase the areas of claims of Vicente et al at the

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Bernabe – 2 hectares; Vicente – 2 hectares; Angeles – ¼ hectare

rate of P0.90 per square meter. Vicente et al however wanted P10.00 per square meter.  The respective counsels of the parties then conferred among themselves on the possibility of terminating the case by compromise, the defendants having previously signified their willingness to sell to the plaintiff their respective properties at reasonable prices.  A compromise agreement was thereafter executed on January 30, 1969 and approved by the trial court  Pursuant to the terms of the said compromise agreement the counsel of both parties submitted the names of the persons designated by them as their respective commissioners, and in conformity therewith, the trial court appointed the commissioners for the purpose of assessing the value of the disputed areas of claim.  An assessment was subsequently made pursuant to the compromise agreement and the commissioners recommended a price rate of P15.00 per square meter.  One of the lawyers of HCC, Atty. Francisco Ventura, then notified the Board of Directors of HCC for the approval of the compromise agreement. But the Board disapproved the compromise agreement; hence Atty. Ventura filed a motion with the court to disregard the compromise agreement.  Petitioners naturally assailed the motion. Petitioners insisted that the compromise agreement is binding because prior to entering into the compromise agreement, the three lawyers of HCC declared in open court that they are authorized to enter into a compromise agreement for HCC; that one of the lawyers of HCC, Atty. Florentino Cardenas, is an executive official of HCC; that Cardenas even nominated one of the commissioners; that such act ratified the compromise agreement even if it was not approved by the Board. HCC, in its defense, averred that the lawyers were not authorized and that in fact there was no special power of attorney executed in their favor for the purpose of entering into a compromise agreement. CFI: Ruled in favor of HCC Issue:

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W/N the Compromise Agreement is Valid? W/N there was a tacit representation on the part of the corporation?

Held: 1. NO. SPA is needed to bind the Corporation.  Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a

judgment. Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority/compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash  The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise.  the Rules "require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him.  The law specifically requires that "juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property." Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon their right to manage the affairs of the corporation according to their honest and informed judgment and discretion as to what is for the best interests of the corporation."  This power may however be delegated either expressly or impliedly to other corporate officials or agents. Thus it has been stated, that as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concluded that the Board of Directors of the HCC had authorized its lawyers to enter into the said compromise agreement.  Petitioners’ claim that private respondent's attorneys admitted twice in open court that they were authorized to compromise their client’s case is not supported by evidence. On the contrary, said counsels categorically denied that they ever represented to the court that they were authorized to enter into a compromise 2.NO. No resolution of the board was issued giving the right to be represented by Mr. Larry Marquez.  Petitioners insist that there was tacit ratification on the part of the corporation, because it nominated Mr. Larry Marquez as its commissioner

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pursuant to the agreement. paid his services, and Atty. Florentino V. Cardenas, respondent corporation's administrative manager, not only did not object but even affixed his signature to the agreement. It is also argued that respondent corporation having represented, through its lawyers, to the court and to petitioners that said lawyers had authority to bind the corporation and having induced by such representations the petitioners to sign the compromise agreement, said respondent is now estopped from questioning the same. Whatever authority the officers or agents of a corporation may have is derived from the board of directors, or other governing body, unless conferred by the charter of the corporation. A corporate officer's power as an agent of the corporation must therefore be sought from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of the board of directors, formally expressed or implied from a habit or custom of doing business. In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HCC has been cited, from which We could reasonably infer that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual. As regards the nomination of Mr. Larry Marquez, There is no iota of proof that at the time of the submission to the Court, on February 26, 1969, of the name of Mr. Marquez, respondent corporation knew of the contents of the compromise agreement. In the absence of any proof that the governing body of respondent corporation had knowledge, either actual or constructive, or the contents of the compromise agreement before September 1, 1969, why should the nomination of Mr. Marquez as commissioner, by Attys. Ventura, Cardenas and Magpantay, on February 26, 1969, be considered as a form of tacit ratification of the compromise agreement by the corporation? In order to ratify the unauthorized act of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material Vicente vs. Geraldez facts connected with the transaction to which it relates. ratification can never be made "on the part of the corporation by the same persons who wrongfully assume the power to make the contract, but the ratification must be by the officer or governing body having authority to make such contract and, as we have seen, must be with full knowledge."

Dispositive

Petitions dismissed. Notes Although article 1878 of the new Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. (Duñgo vs. Lopena, 6 SCRA 1013). Where the special authority to compromise is not, however, in writing, the same may still be established by other evidence, other than the selfserving assertion of counsel himself that such authority was verbally given him. (Home Insurance Co. vs. United States Lines Co., 21 SCRA 863). In view of the fact that a compromise agreement entered into by an attorney without the specific authority of his client is not void but merely unenforceable, where it appears that the client, on becoming aware of the compromise and the judgment thereon, fails to repudiate promptly the action of his attorney in compromising his case, he 'will not be heard to contest its validity. (Acenas vs. Sison, 8 SCRA 711). Parenthetically, miscalculation or misappreciation of the legal import of the compromise agreement, where the party is assisted by counsel, will not provide a basis for setting aside said agreement on the ground of mistake or error. (Periquet vs. Reyes, 21 SCRA 1503).