In the Philippines, the sale of real property through a representative is a common practice, particularly when the owner (the Principal) is based abroad or otherwise incapacitated. This legal relationship is governed primarily by the Civil Code of the Philippines under the Law on Agency (Articles 1868 to 1932). The person authorized to act on behalf of the owner is known as the Attorney-in-Fact (AIF), and their authority is strictly defined by a legal instrument called a Special Power of Attorney (SPA).
1. The Requirement of a Special Power of Attorney (SPA)
Under Article 1878 of the Civil Code, a Special Power of Attorney is mandatory for acts of "strict dominion." Specifically, an SPA is required to:
- Effect more than mere acts of administration.
- Convey, mortgage, or create any real right over immovable property.
- Bind the principal in any contract by which any immovable property is transmitted or acquired.
Without a written SPA specifically describing the property and the authority to sell, any contract entered into by the agent is unenforceable against the principal, unless later ratified.
2. Fundamental Duties of the Attorney-in-Fact
The relationship between a Principal and an AIF is fiduciary in nature, meaning it is built on a high degree of trust and confidence. The AIF's duties include:
A. Duty to Act Within the Scope of Authority
The AIF must act strictly according to the instructions of the Principal. Under Article 1881, the agent must act within the scope of their authority and may perform such acts as may be conducive to the accomplishment of the purpose of the agency. If an AIF sells a property for a price lower than what was authorized, or under different terms, they may be held personally liable for damages.
B. Duty of Loyalty and the Prohibition on Self-Dealing
An AIF is prohibited from putting their interests above the Principal’s. Specifically, Article 1491 of the Civil Code prohibits agents from acquiring by purchase, even at a public or judicial auction, either in person or through an intermediary, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given.
C. Duty to Account and Deliver Funds
One of the most critical duties under Article 1891 is the obligation to render an account of transactions. The AIF must:
- Deliver to the principal whatever they may have received by virtue of the agency (including the full purchase price, earnest money, and deposits).
- Even if the received amount was not strictly due to the principal, the agent must still hand it over.
D. Duty of Diligence
The AIF is bound to carry out the agency with the "diligence of a good father of a family." If the agency was for compensation, the responsibility for negligence is interpreted more strictly by the courts.
3. Compensation and Legal Fees
In the Philippines, there is a legal presumption regarding the payment for services rendered by an agent.
The Presumption of Compensation
According to Article 1875, "Agency is presumed to be for a compensation, unless there is proof to the contrary." If the SPA is silent on the matter of fees, the AIF is still generally entitled to a reasonable fee for their services, often referred to as quantum meruit (as much as they deserve).
Common Fee Structures
- Fixed Fee: A pre-agreed flat rate for the successful execution of the Sale and Transfer of Title.
- Percentage Commission: Similar to a real estate broker, an AIF may receive 3% to 5% of the gross selling price, depending on the complexity of the task (e.g., handling taxes, clearing liens, or finding the buyer).
- Reimbursement of Expenses: Regardless of the "fee," the Principal is obligated to advance the funds necessary for the execution of the agency (e.g., Notarial fees, Capital Gains Tax, Documentary Stamp Tax) or reimburse the AIF for these costs, provided they were incurred without fault on the agent's part (Article 1912).
4. Liability of the Attorney-in-Fact
The AIF is not merely a middleman; they carry significant legal exposure:
| Situation | Liability Status |
|---|---|
| Acting within authority | The Principal is liable; the AIF is generally immune from personal liability. |
| Exceeding authority | The AIF is personally liable to the third party unless the Principal ratifies the act. |
| Fraud or Negligence | The AIF is liable to the Principal for damages caused by their fault or bad faith. |
| Appointment of a Substitute | If the Principal did not prohibit a substitute, the AIF is liable for the substitute's acts if the substitute is notoriously incompetent or insolvent. |
5. Formalities for Property Sales
To ensure the sale is valid and registrable with the Land Registration Authority (LRA) and the Register of Deeds, the following must be observed:
- Notarization: The SPA must be notarized. If executed abroad, it must be Apostilled (or authenticated by the Philippine Consulate if the country is not a member of the Apostille Convention).
- Specific Description: The SPA should contain the Transfer Certificate of Title (TCT) number, the technical description, and the specific power to "sell, sign documents, and receive proceeds."
- Tax Compliance: The AIF is often tasked with ensuring the BIR (Bureau of Internal Revenue) receives the correct Capital Gains Tax (6%) and Documentary Stamp Tax (1.5%) to secure the Certificate Authorizing Registration (CAR).
Failure of the AIF to remit taxes or account for the sale proceeds constitutes a criminal act (Estafa) under the Revised Penal Code of the Philippines, in addition to civil liabilities.