Limits of a General Power of Attorney Authority to Sell Real Property in the Philippines

The Supreme Court has long held that a general power of attorney is not enough to authorize the sale of real property. In Bautista-Spille v. NICORP Management and Development Corporation (G.R. No. 214057, October 19, 2015), the Court reaffirmed this rule and explained why buyers dealing with agents must exercise a higher degree of care. The decision serves as a clear warning to both property owners and prospective buyers about the limits of an agent's authority.

The Facts of the Case

Florentina Bautista-Spille owned a 33,052-square-meter parcel of land in Imus City, Cavite, covered by Transfer Certificate of Title No. T-197. In 1996, she executed a document denominated as a "General Power of Attorney" in favor of her brother, Benjamin Bautista, authorizing him to administer all her businesses and properties in the Philippines.

In August 2004, Benjamin entered into a contract to sell the property to NICORP Management and Development Corporation for P15,000,000.00. The contract required Benjamin to submit a special power of attorney (SPA) covering the sale transaction, with a penalty of P150,000.00 per month for non-compliance. An escrow agreement was later executed with the International Exchange Bank, and NICORP paid a down payment of P2,250,000.00.

When Bautista-Spille discovered the sale, she immediately sent demand letters opposing it and demanding the return of her title. She filed a complaint for declaration of nullity of the contract to sell, arguing that Benjamin had no authority to sell the property.

The Issue

The central question was whether the general power of attorney executed by Bautista-Spille authorized Benjamin to enter into a contract to sell her real property.

The Ruling

The Supreme Court ruled in favor of Bautista-Spille, declaring the contract to sell null and void. The Court held that a general power of attorney is insufficient to authorize the sale of real property.

The Law on Authority to Sell Real Property

Articles 1874 and 1878 of the Civil Code are clear on this matter. Article 1874 provides that when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Article 1878 specifically requires a special power of attorney to enter into any contract by which the ownership of an immovable is transmitted or acquired, either gratuitously or for a valuable consideration.

The Court emphasized that the authority of an agent to sell real estate must be conferred in writing and must express the powers of the agent in clear and unmistakable language. When the authority is couched in general terms without mentioning any specific power to sell, then only acts of administration are deemed conferred. The power of administration does not include acts of disposition, which are acts of strict ownership.

In this case, the general power of attorney merely authorized Benjamin to "administer and conduct all affairs" and to "exercise administration, general control and supervision" over Bautista-Spille's business and property. Nowhere in the document was he granted, expressly or impliedly, any power to sell the subject property.

Buyers Cannot Claim Good Faith

The Court also rejected NICORP's claim that it was a purchaser in good faith. The rule is that a person dealing with an assumed agent is bound to ascertain not only the fact of agency but also the nature and extent of the agent's authority. The law requires a higher degree of prudence from one who buys from a person who is not the registered owner.

Significantly, NICORP itself required Benjamin to secure an SPA within ninety days and imposed a substantial penalty for non-compliance. This showed that NICORP was fully aware that Benjamin was not properly authorized to sell the property. As a real estate company familiar with the intricacies of the realty business, NICORP could not claim ignorance.

Practical Takeaways

• A general power of attorney only confers acts of administration, not acts of ownership or disposition such as selling real property.
• To sell real property through an agent, a special power of attorney is required under Articles 1874 and 1878 of the Civil Code, and it must expressly mention the power to sell.
• Buyers of real property from an agent must verify the extent of the agent's authority; failure to do so may result in the sale being declared void.
• A buyer who deals with an unauthorized agent cannot claim to be a purchaser in good faith, especially if the buyer required the agent to secure an SPA.
• Property owners should carefully review the language of any power of attorney they execute and consider revoking or limiting broad grants of authority.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.