Gutierrez Hermanos vs. Orense

A contract executed in the name of another without authority is voidable, but a subsequent ratification by the person in whose name it was executed—even if made orally and under oath in a judicial proceeding—validates the contract and extinguishes the action for nullity. The Statute of Frauds does not require the ratification itself to be in writing; the principal’s sworn admission of consent is conclusive proof of agency and binds the principal as though the authority had been given in writing.

Engracio Orense owned a parcel of land with improvements in Guinobatan, Albay, recorded in the property registry. On February 14, 1907, his nephew, Jose Duran, executed a notarial deed of sale with right of repurchase over the property in favor of Gutierrez Hermanos for P1,500, with a four-year redemption period. Duran was not the owner and held no written power of attorney from Orense. The plaintiff did not take possession because the property remained occupied by Duran and Orense under a lease. When the repurchase period expired on February 14, 1911, Orense refused to deliver the property or execute a deed of conveyance, claiming sole ownership.

• The Unauthorized Sale: Jose Duran, nephew of Engracio Orense, executed a notarial deed on February 14, 1907, selling a parcel of land and a masonry house with a nipa roof to Gutierrez Hermanos for P1,500, reserving a right to repurchase within four years. Duran did not own the property; title was registered in Orense’s name. No written power of attorney from Orense to Duran was produced. The plaintiff did not take physical possession, as Duran and Orense continued occupancy under a lease contract.

• The Criminal Case and Ratification: Gutierrez Hermanos filed an estafa complaint against Jose Duran for misrepresenting ownership. At Duran’s trial, Orense testified as a witness and, when asked by the fiscal whether he had consented to the sale under right of redemption, answered affirmatively. On the strength of that testimony, Duran was acquitted. The sworn statement operated as a judicial admission that Orense had authorized the transaction.

• Demand and Refusal: The four-year repurchase period lapsed on February 14, 1911. Orense refused to execute a deed of final conveyance or to deliver possession, claiming he remained the lawful owner and that his registered title was conclusive. Plaintiff demanded rental at P30 per month from the expiration of the redemption period and alleged that Duran was insolvent, rendering an action for refund of the purchase price ineffectual.

• Trial Court Findings: The trial court found that Orense had consented to the sale and subsequently confirmed and ratified it. It ordered Orense to execute a public instrument transferring all his rights in the property to the plaintiff and to pay P780 in damages and costs.

• Lack of Written Authority: Orense maintained that he had neither executed a written power of attorney nor given verbal authorization to Duran to sell the property in his name. He argued that the contract of sale was void under paragraph 5, section 335 of the Code of Civil Procedure (Statute of Frauds) because the alleged authority was not in writing.

• No Inducement or Estoppel: Orense contended that prior to the execution of the sale, he performed no act that could have induced the plaintiff to believe Duran was authorized, nor did he intentionally lead the plaintiff to act to its detriment.

• Conclusive Registered Title: Orense argued that his title was registered under the Torrens system (Act No. 496) following proceedings in rem, making it conclusive against the plaintiff’s unregistered claims. Rights acquired from Duran before registration could not prevail.

• Failure to State a Cause of Action: Orense’s special defense asserted that the facts alleged in the complaint did not constitute a cause of action, either for specific performance or for recovery of the property’s value.

• Consent and Ratification: Gutierrez Hermanos asserted that Orense had given his knowledge and consent to the sale, as confirmed and ratified by Orense publicly and freely. They relied on Orense’s sworn testimony in the estafa case as conclusive proof of ratification.

• Insolvency and Irreparable Injury: The plaintiff argued that Duran was notoriously insolvent and could not reimburse the purchase price or pay damages. Unless a deed of conveyance was ordered, the plaintiff would suffer fraud perpetrated by Duran in connivance with Orense.

• Continuing Occupancy and Damages: Gutierrez Hermanos demanded that Orense pay reasonable rental of P30 per month from February 14, 1911, for his continued occupation of the property, possession of which he refused to deliver in bad faith.

• Validity of the Sale: Whether the sale of land executed by Jose Duran in his own name was valid and binding upon the true owner, Engracio Orense, absent a written power of attorney.

• Ratification by Sworn Testimony: Whether Orense’s sworn statement in the criminal estafa case, acknowledging consent to the sale, constituted a valid ratification of the otherwise unauthorized contract under the Civil Code.

• Statute of Frauds: Whether the Statute of Frauds required Orense’s ratification or consent to be in writing to render the sale enforceable against him.

• Validity of the Sale: The sale was initially void because Duran lacked authorization to contract in the name of Orense, pursuant to Article 1259 of the Civil Code. However, a contract executed without authority is not absolutely void; it becomes perfectly valid upon ratification by the person in whose name it was made.

• Ratification by Sworn Testimony: Orense’s testimony under oath in the estafa trial—that he had consented to Duran’s selling the property—constituted an express ratification. Under Article 1259, ratification retroactively validates the contract and, under Article 1313, remedies all defects from the moment of execution. Article 1309 further extinguishes the action for nullity once the contract is validly confirmed. The sworn statement produced the effects of an express power of agency, and Orense could not afterwards deny that admission to the prejudice of the purchaser.

• Statute of Frauds: Although the authority to sell was not in writing, Orense’s repeated and successive sworn admissions in two actions constituted conclusive proof of consent. The principal is bound as though the agency had been in writing. Precedents (Conlu vs. Araneta, Gallemit vs. Tabiliran, Kuenzle & Streiff vs. Jiongco) established that when the fact of agency is satisfactorily proven by the principal’s own testimony, the absence of a written authorization does not invalidate the contract. The Statute of Frauds was therefore satisfied.

• Ratification of Unauthorized Contracts (Article 1259, Civil Code) — A contract executed in the name of another without authorization is voidable, not void ab initio. Ratification by the person in whose name it was executed validates the contract and produces the effect of an express authorization, relating back to the moment of execution.

• Effects of Ratification (Articles 1309 and 1313, Civil Code) — Once a voidable contract is validly ratified, the action for nullity is extinguished, and all defects existing at the time of execution are cured.

• Proof of Agency and the Statute of Frauds — Where the principal’s consent to an agency is conclusively proven by his own sworn testimony in judicial proceedings, the absence of a written power of attorney does not bar enforcement of the contract. The principal is bound by the consequences of the agency as though the authority had been given in writing.

• Judicial Admissions as Ratification — A sworn statement made by a principal in open court acknowledging consent to a sale operates as a full ratification and estops the principal from subsequently repudiating the transaction.

• “No one can contract in the name of another without being authorized by him or without his legal representation according to law. A contract executed in the name of another by one who has neither his authorization nor legal representation shall be void, unless it should be ratified by the person in whose name it was executed before being revoked by the other contracting party.” (Article 1259, Civil Code, quoted in the decision)

• “The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of Duran for estafa, virtually confirms and ratifies the sale of his property effected by his nephew, Duran, and, pursuant to article 1313 of the Civil Code, remedies all defects which the contract may have contained from the moment of its execution.”

• “If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran’s selling the property in litigation to Gutierrez Hermanos, it is not just nor is it permissible for him afterward to deny that admission, to the prejudice of the purchaser, who gave P1,500 for the said property.”

• “The repeated and successive statements made by the defendant Orense in two actions, wherein he affirmed that he had given his consent to the sale of his property, meet the requirements of the law and legally excuse the lack of written authority, and, as they are a full ratification of the acts executed by his nephew Jose Duran, they produce the effects of an express power of agency.”

• Conlu vs. Araneta and Guanko, 15 Phil. Rep., 387 — Followed; the principal is bound by the consequences of an agency as though it had been given in writing when the consent is proven by the principal’s own testimony.

• Gallemit vs. Tabiliran, 20 Phil. Rep., 241 — Followed; similar principle that satisfactory proof of agency excuses the absence of written authorization.

• Kuenzle & Streiff vs. Jiongco, 22 Phil. Rep., 110 — Followed; applied the rule that a principal may be bound by an oral or implied agency when proven by competent evidence.

• Article 1259, Civil Code — Contracting in the name of another; void unless ratified. Applied to hold that Duran’s sale was initially void but susceptible to ratification.

• Article 1309, Civil Code — Extinguishment of action for nullity upon valid ratification. Applied to bar Orense from attacking the contract after his sworn confirmation.

• Article 1313, Civil Code — Ratification cures defects of the contract from the moment of execution. Applied to retroactively validate the sale.

• Articles 1709, 1710, and 1727, Civil Code — Obligations of the principal under an agency contract. Applied to bind Orense to fulfill the obligations contracted by Duran within the scope of his authority.

• Articles 1888 and 1892, Civil Code — Ratification of acts of a business manager (negotiorum gestio) producing the effects of express authorization. Applied to treat Duran’s act as implicitly authorized.

• Section 335, paragraph 5, Code of Civil Procedure — Statute of Frauds requiring agreements for the sale of land or authority to sell to be in writing. Distinguished; the sworn admission of consent rendered the agreement enforceable despite the absence of a written power of attorney.

Chief Justice Arellano and Justices Johnson, Carson, Moreland, and Araullo concurred.