EDUARDO V. LITONJUA, JR. G.R. No. 144805 and ANTONIO K. LITONJUA,Petitioners,V.
ETERNIT CORPORATION, S.A. FAR EAST BANK & TRUST COMPANY, Respondents.
On appeal via a Petition for Review on Certiorari is the Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 51022, which affirmed the Decision of the Regional Trial Court
(RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution[2] of the CA
denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine
laws. Since 1950, it had been engaged in the manufacture of roofing materials and pipe
products. Its manufacturing operations were conducted on eight parcels of land with a total area
of 47,233 square meters. The properties, located in Mandaluyong City, Metro Manila, were
covered by Transfer Certificates of Title Nos. 451117, 451118, 451119, 451120, 451121,
451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and registered under the laws of Belgium.[3] Jack
Glanville, an Australian citizen, was the General Manager and President of EC, while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in
the Philippines and wanted to stop its operations in the country. The Committee for Asia of ESAC
instructed Michael Adams, a member of ECs Board of Directors, to dispose of the eight parcels
of land. Adams engaged the services of realtor/broker Lauro G. Marquez so that the properties
could be offered for sale to prospective buyers. Glanville later showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986,
Marquez declared that he was authorized to sell the properties for P27,000,000.00 and that the
[4]
terms of the sale were subject to negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo
Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property
for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings offer and relayed
the same to Delsaux in Belgium, but the latter did not respond.On October 28, 1986, Glanville
telexed Delsaux in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua
siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville stating that,
based on the Belgian/Swiss decision, the final offer was US$1,000,000.00 and P2,500,000.00 to
cover all existing obligations prior to final liquidation.[5]
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr.
accepted the counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter
dated February 26, 1987, confirmed that the Litonjua siblings had accepted the counter-proposal
of Delsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days
after execution and preparation of all documents of sale, together with the necessary
governmental clearances.[6]
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security
Bank & Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.[7]
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would
be implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with
the buyer, which had given him the impression that he is prepared to press for a satisfactory
conclusion to the sale.[8] He also emphasized to Delsaux that the buyers were concerned
because they would incur expenses in bank commitment fees as a consequence of prolonged
period of inaction.[9]
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of
the Philippines, the political situation in the Philippines had improved. Marquez received a
telephone call from Glanville, advising that the sale would no longer proceed. Glanville followed it
up with a Letter dated May 7, 1987, confirming that he had been instructed by his principal to
inform Marquez that the decision has been taken at a Board Meeting not to sell the properties on
which Eternit Corporation is situated.[10]
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC
Regional Office had decided not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed
with the sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six
months) and examined the position as far as the Philippines are (sic)
concerned. Considering [the] new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has
 decided not to stop our operations in Manila. In fact, production has started again
last week, and (sic) to recognize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the
policy would change at a later state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)[11]
When apprised of this development, the Litonjuas, through counsel, wrote EC,
demanding payment for damages they had suffered on account of the aborted sale. EC,
however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC
(now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and
ESAC in the RTC of Pasig City. An amended complaint was filed, in which defendant EC was
substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T.
Tan and Deogracias G. Eufemio were impleaded as additional defendants on account of their
purchase of ESAC shares of stocks and were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was
not doing business in the Philippines, it cannot be subject to the jurisdiction of Philippine courts;
the Board and stockholders of EC never approved any resolution to sell subject properties nor
authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was
his own personal making which did not bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and
dismissed the amended complaint.[12] The fallo of the decision reads:
WHEREFORE, the complaint against Eternit Corporation now
Eterton Multi-Resources Corporation and Eteroutremer, S.A. is dismissed on
the ground that there is no valid and binding sale between the plaintiffs and
said defendants.
The complaint as against Far East Bank and Trust Company is
likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-
Resources Corporation and Eteroutremer, S.A. is also dismissed for lack of
merit.[13]
The trial court declared that since the authority of the agents/realtors was not in writing,
the sale is void and not merely unenforceable, and as such, could not have been ratified by the
principal. In any event, such ratification cannot be given any retroactive effect. Plaintiffs could not
assume that defendants had agreed to sell the property without a clear authorization from the
corporation concerned, that is, through resolutions of the Board of Directors and stockholders.
The trial court also pointed out that the supposed sale involves substantially all the assets of
defendant EC which would result in the eventual total cessation of its operation.[14]
The Litonjuas appealed the decision to the CA, alleging that (1) the lower court erred in
concluding that the real estate broker in the instant case needed a written authority from appellee
corporation and/or that said broker had no such written authority; and (2) the lower court
committed grave error of law in holding that appellee corporation is not legally bound for specific
performance and/or damages in the absence of an enabling resolution of the board of
directors.[15] They averred that Marquez acted merely as a broker or go-between and not as
agent of the corporation; hence, it was not necessary for him to be empowered as such by any
written authority. They further claimed that an agency by estoppel was created when the
corporation clothed Marquez with apparent authority to negotiate for the sale of the
properties. However, since it was a bilateral contract to buy and sell, it was equivalent to a
perfected contract of sale, which the corporation was obliged to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors
to bind it; neither were Glanville and Delsaux authorized by its board of directors to offer the
property for sale. Since the sale involved substantially all of the corporations assets, it would
necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment affirming the decision of the
RTC. [16] The Litonjuas filed a motion for reconsideration, which was also denied by the appellate
court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within
the purview of Article 1874 of the New Civil Code. Under Section 23 of the Corporation Code, he
needed a special authority from ECs board of directors to bind such corporation to the sale of its
properties. Delsaux, who was merely the representative of ESAC (the majority stockholder of EC)
had no authority to bind the latter. The CA pointed out that Delsaux was not even a member of
the board of directors of EC. Moreover, the Litonjuas failed to prove that an agency by estoppel
had been created between the parties.
In the instant petition for review, petitioners aver that
I.THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO
PERFECTED CONTRACT OF SALE.
II.THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING
THAT MARQUEZ NEEDED A WRITTEN AUTHORITY FROM RESPONDENT
ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND
DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY
RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENT
AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING
POWER TO SELL THE SAID PROPERTIES.[17]
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of
the parcels of land and the improvements thereon for US$1,000,000.00 plus P2,500,000.00 to
cover obligations prior to final liquidation. Petitioners insist that they had accepted the counter-
offer of respondent EC and that before the counter-offer was withdrawn by respondents, the
acceptance was made known to them through real estate broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC
for Marquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an
ordinary agent because his authority was of a special and limited character in most respects. His
only job as a broker was to look for a buyer and to bring together the parties to the
transaction. He was not authorized to sell the properties or to make a binding contract to
respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was
able to communicate both the offer and counter-offer and their acceptance of respondent ECs
counter-offer, resulting in a perfected contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply
shows that Glanville, who was the President and General Manager of respondent EC, and
Delsaux, who was the Managing Director for ESAC Asia, had the necessary authority to sell the
subject property or, at least, had been allowed by respondent EC to hold themselves out in the
public as having the power to sell the subject properties. Petitioners identified such evidence,
thus:
1. The testimony of Marquez that he was chosen by Glanville as
the then President and General Manager of Eternit, to sell the properties of
said corporation to any interested party, which authority, as hereinabove
discussed, need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the subject
properties spanned SEVERAL MONTHS, from 1986 to 1987;
3. The COUNTER-OFFER made by Eternit through GLANVILLE
to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternits offer to
sell the properties as evidenced by the Petitioners ACCEPTANCE of the
counter-offer;
5. The fact that Petitioners DEPOSITED the price of
[US]$1,000,000.00 with the Security Bank and that an ESCROW agreement
was drafted over the subject properties;
6. Glanvilles telex to Delsaux inquiring WHEN WE (Respondents)
WILL IMPLEMENT ACTION TO BUY AND SELL;
7. More importantly, Exhibits G and H of the Respondents, which
evidenced the fact that Petitioners offer was allegedly REJECTED by both
Glanville and Delsaux.[18]
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-
offer to petitioners offer and thereafter reject such offer unless they were authorized to do so by
respondent EC. Petitioners insist that Delsaux confirmed his authority to sell the properties in his
letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale
of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and
examined the position as far as the Philippines are (sic) concerned. Considering the
new political situation since the departure of MR. MARCOS and a certain stabilization in
the Philippines, the Committee has decided not to stop our operations in Manila[.] [I]n
fact production started again last week, and (sic) to reorganize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy
would change at a later stage we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX[19]
Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were
knowingly permitted by respondent EC to sell the properties within the scope of an apparent
authority. Petitioners insist that respondents held themselves to the public as possessing power
to sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are
factual, hence, are proscribed by Rule 45 of the Rules of Court. On the merits of the petition,
respondents EC (now EMC) and ESAC reiterate their submissions in the CA. They maintain that
Glanville, Delsaux and Marquez had no authority from the stockholders of respondent EC and its
Board of Directors to offer the properties for sale to the petitioners, or to any other person or
entity for that matter. They assert that the decision and resolution of the CA are in accord with
law and the evidence on record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville
and Delsaux, conformed to the written authority of Marquez to sell the properties. The authority of
Glanville and Delsaux to bind respondent EC is evidenced by the fact that Glanville and Delsaux
negotiated for the sale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997.
Given the significance of their positions and their duties in respondent EC at the time of the
transaction, and the fact that respondent ESAC owns 90% of the shares of stock of respondent
EC, a formal
resolution of the Board of Directors would be a mere ceremonial formality. What is important,
petitioners maintain, is that Marquez was able to communicate the offer of respondent EC and
the petitioners acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and
Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised by
petitioner in this case are factual. Whether or not Marquez, Glanville, and Delsaux were
authorized by respondent EC to act as its agents relative to the sale of the properties of
respondent EC, and if so, the boundaries of their authority as agents, is a question of fact.In the
absence of express written terms creating the relationship of an agency, the existence of an
agency is a fact question.[20] Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is estopped to deny
the apparent authority of its agent are, likewise, questions of fact to be resolved on the basis of
the evidence on record.[21] The findings of the trial court on such issues, as affirmed by the CA,
are conclusive on the Court, absent evidence that the trial and appellate courts ignored,
misconstrued, or misapplied facts and circumstances of substance which, if considered, would
warrant a modification or reversal of the outcome of the case. [22]
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules
of Court because the Court is not a trier of facts. It is not to re-examine and assess the evidence
on record, whether testimonial and documentary. There are, however, recognized exceptions
where the Court may delve into and resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations,
surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings of the Court
of Appeals are contrary to those of the trial court; (8) when the findings of
fact are conclusions without citation of specific evidence on which they are
based; (9) when the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify
a different conclusion; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted by
the evidence on record.[23]
We have reviewed the records thoroughly and find that the petitioners failed to establish that the
instant case falls under any of the foregoing exceptions. Indeed, the assailed decision of the
Court of Appeals is supported by the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its
properties and that it had empowered Adams, Glanville and Delsaux or Marquez to offer the
properties for sale to prospective buyers and to accept any counter-offer. Petitioners likewise
failed to prove that their counter-offer had been accepted by respondent EC, through Glanville
and Delsaux. It must be stressed that when specific performance is sought of a contract made
with an agent, the agency must be established by clear, certain and specific proof.[24]
Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of
the Philippines, provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in
this Code, the corporate powers of all corporations formed under this Code
shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1) year
and until their successors are elected and qualified.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders
and is not affected by the personal rights,
obligations and transactions of the latter.[25] It may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents in the
normal course of business. The general principles of agency govern the relation between the
corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant
provisions of law.[26]
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, carry out the agency, or from his silence or inaction according to the circumstances.[34] Agency
subject to the limitations prescribed by law and the Constitution, as follows: may be oral unless the law requires a specific form.[35] However, to create or convey real rights

SEC. 36. Corporate powers and capacity. Every corporation incorporated over immovable property, a special power of attorney is necessary. [36] Thus, when a sale of a
under this Code has the power and capacity: piece of land or any portion thereof is through an agent, the authority of the latter shall be in
writing, otherwise, the sale shall be void.[37]
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal property, including
securities and bonds of other corporations, as the transaction of a lawful In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the
business of the corporation may reasonably and necessarily require, subject
to the limitations prescribed by the law and the Constitution. Board of Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to
sell, let alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent
EC including the improvements thereon. The bare fact that Delsaux may have been authorized to
The property of a corporation, however, is not the property of the stockholders or members, and
sell to Ruperto Tan the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as
as such, may not be sold without express authority from the board of directors. [27] Physical acts,
basis for petitioners claim that he had likewise been authorized by respondent EC to sell the
like the offering of the properties of the corporation for sale, or the acceptance of a counter-offer
parcels of land.
of prospective buyers of such properties and the execution of the deed of sale covering such
property, can be performed by the corporation only by officers or agents duly authorized for the
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of
purpose by corporate by-laws or by specific acts of the board of directors.[28] Absent such valid
Delsaux, who, in turn, acted on the authority of respondent ESAC, through its Committee for
delegation/authorization, the rule is that the declarations of an individual director relating to the
Asia,[38] the Board of Directors of respondent ESAC,[39] and the Belgian/Swiss component of the
affairs of the corporation, but not in the course of, or
management of respondent ESAC.[40] As such, Adams and Glanville engaged the services of
connected with, the performance of authorized duties of such director, are not binding on the
Marquez to offer to sell the properties to prospective buyers. Thus, on September 12, 1986,
corporation.[29]
Marquez wrote the petitioner that he was authorized to offer for sale the property
for P27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners
While a corporation may appoint agents to negotiate for the sale of its real properties, the final
offered to purchase the property for P20,000,000.00, through Marquez, the latter relayed
say will have to be with the board of directors through its officers and agents as authorized by a
petitioners offer to Glanville; Glanville had to send a telex to Delsaux to inquire the position of
board resolution or by its by-laws.[30] An unauthorized act of an officer of the corporation is not
respondent ESAC to petitioners offer.However, as admitted by petitioners in their Memorandum,
binding on it unless the latter ratifies the same expressly or impliedly by its board of directors.
Delsaux was unable to reply immediately to the telex of Glanville because Delsaux had to wait for
Any sale of real property of a corporation by a person purporting to be an agent thereof but
confirmation from respondent ESAC.[41] When Delsaux finally responded to Glanville on February
without written authority from the corporation is null and void. The declarations of the agent alone
12, 1987, he made it clear that, based on the Belgian/Swiss decision the final offer of respondent
are generally insufficient to establish the fact or extent of his/her authority. [31]
ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior to final
liquidation.[42] The offer of Delsaux emanated only from the Belgian/Swiss decision, and not the
By the contract of agency, a person binds himself to render some service or to do something in
entire management or Board of Directors of respondent ESAC. While it is true that petitioners
representation on behalf of another, with the consent or authority of the latter. [32]Consent of both
accepted the counter-offer of respondent ESAC, respondent EC was not a party to the
principal and agent is necessary to create an agency. The principal must intend that the agent
transaction between them; hence, EC was not bound by such acceptance.
shall act for him; the agent must intend to accept the authority and act on it, and the intention of
the parties must find expression either in words or conduct between them.[33]
While Glanville was the President and General Manager of respondent EC, and Adams and
Delsaux were members of its Board of Directors, the three acted for and in behalf of respondent
An agency may be expressed or implied from the act of the principal, from his silence or lack of
ESAC, and not as duly authorized agents of respondent EC; a board resolution evincing the
action, or his failure to repudiate the agency knowing that another person is acting on his behalf
grant of such authority is needed to bind EC to any agreement regarding the sale of the subject
without authority. Acceptance by the agent may be expressed, or implied from his acts which
properties. Such board resolution is not a mere formality but is a condition sine qua non to bind
respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of respondent
EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another,
or even all of such shares of stocks, taken alone, will not justify their being treated as one
corporation.[43]
It bears stressing that in an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the latter would have him do. Such a relationship
can only be effected with the consent of the principal, which must not, in any way, be compelled
[44]
by law or by any court.
The petitioners cannot feign ignorance of the absence of any regular and valid authority of
respondent EC empowering Adams, Glanville or Delsaux to offer the properties for sale and to
sell the said properties to the petitioners. A person dealing with a known agent is not authorized,
under any circumstances, blindly to trust the agents; statements as to the extent of his powers;
such person must not act negligently but must use reasonable diligence and prudence to
[45]
ascertain whether the agent acts within the scope of his authority. The settled rule is that,
persons dealing with an assumed agent are bound at their peril, and if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is upon them to prove it.[46] In this case, the
petitioners failed to discharge their burden; hence, petitioners are not entitled to damages from
respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their
agent. As gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed,
for and in behalf of the petitioners, that the latter had accepted such offer to sell the land and the
improvements thereon. However, we agree with the ruling of the appellate court that Marquez
had no authority to bind respondent EC to sell the subject properties. A real estate broker is one
who negotiates the sale of real properties. His business, generally speaking, is only to find a
purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to
bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of real
property does not include an authority to sell.[47]
Equally barren of merit is petitioners contention that respondent EC is estopped to
deny the existence of a principal-agency relationship between it and Glanville or Delsaux. For an
agency by estoppel to exist, the following must be established: (1) the principal manifested a
representation of the agents authority or knowlingly allowed the agent to assume such
authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon
such representation, such third person has changed his position to his detriment. [48]An agency by
estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the representations predated the action taken
in reliance.[49] Such proof is lacking in this case. In their communications to the petitioners,
Glanville and Delsaux positively and unequivocally declared that they were acting for and in
behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified the transactions between the petitioners
and respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the
various communications inter se were never submitted to the Board of Directors of respondent
EC for ratification.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioners.
DIGEST
FACTS: 1. Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws and had been engaged in the manufacture or roofing materials and pipe
products. Its manufacturing operations were conducted on eight parcels of land. The properties
were located in Mandaluyong City under the name of Far East Bank as trustee.
2. 90% of the shares of stock of stocks of EC were owned by Eteroutremer S.A. Corp (ESAC),
corporation organized under the laws of Belgium. Jack Glanville was the General Manager and
President of EC while Delsaux was the Regional Director for Asia of ESAC. Both holding offices
in Belgium.
3. In 1986, ESAC management grew concerned of the political situation in the Philippines and
instructed Michael Adams to dispose of the eight parcels of land. Adams engaged the services of
broker Marquez so the properties be offered for sale.
4. Litonjua, Jr. & Antonio Litonjua responded to the offer and offered to buy the property at P20M
and Glanville sent the counterproposal of the Litonjuas to Delsaux.
5. It was only on February 12, 1987 that Delsaux replied with the final offer to which Litonjua
agreed to and deposited the amoun in Security Bank with Escrow Agreement.
6. With the assumption of Cory Aquino as President, ESAC decided to continue its operations in
the Philippines and no longer proceed with the sale of the eight parcels of land.
7. Marquez informed the Litonjuas of the development and the latter filed a complaint for specific
performance and damages against EC after writing several demands to honor the sale.
8. TC = ruled in favor of EC; The authority of the real estate broker did not include the authority to
sell therefore there was no valid agency. Marquez has no authority to sell because there was no
board resolution authorizing him to do so. Same ruling as to Glanville and Delsaux. The
contention of agency by estoppel is untenable.
9. CA = affirmed the lower court ruling.
ISSUE: Whether or not Marquez, Glanville and Delsaux have the necessary authority as agents
to do acts within the scope of their authority to sell the properties?
HELD: 1. No, it must be stressed that when specific performance is sought of a contract made
with an agent, the agency must be established by clear, certain and specific proof.
RATIO: 1. A corporation is a juridical person separate and distinct from its members of
stockholders and is not affected by the personal rights, obligations, and transactions of its
members or stockholders. It may only act through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the normal course
of business.
2. The general principles of agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions of law.
3. While a corporation may appoint agents to negotiate for the sale of its real properties, the final
say will have to be with the board of directors through its officers and agents as authorized by a
board resolution or by its by-laws. Any sale of real property of a corporation by a person
purporting to be an agent thereof but without written authority from the corporation is null and
void.
4. An agency may be express or implied from the act of the principal, from his silence or lack of
action, or his failure to repudiate the agency knowing that another person is acting on his behalf
without authority.
5. Agency may be oral unless the law requires a specific form. However, to create or convey real
rights over immovable property, a special power of attorney is necessary. (Art. 1874; 1878)
6. In this case, there was no board resolution clothing Adams, Glanville nor Delsaux the authority
to sell the properties.
CASE LAW/ DOCTRINE: An agency may be express or implied from the act of the principal,
from his silence or lack of action or failure to repudiate the agency. Agency may be oral unless
the law requires a specific form. However, to create or convey real rights, a special power of
attorney is necessary.
[G.R. No. 104720. April 4, 2001] PILIPINAS LOAN COMPANY, INC., petitioner, vs. HON.
SEC AND FILIPINAS PAWNSHOP, INC.,[1] respondents.
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the
Decision[2] of the Court of Appeals in CA-G.R. SP No. 25782 entitled Pilipinas Loan Company,
Inc. vs. Honorable Securities and Exchange Commission and Filipinas Pawnshop, Inc. dated
October 31, 1991 and Resolution dated March 19, 1992 which denied the motion for
reconsideration of herein petitioner Pilipinas Loan Company, Inc. (petitioner).
Private respondent Filipinas Pawnshop, Inc. (private respondent) is a duly organized
corporation registered with the Securities and Exchange Commission (SEC) on February 9, 1959
with its principal place of business located along Pedro Gil St Paco, Metro Manila. The articles of
incorporation of private respondent states that its primary purpose is to extend loans at legal
interest on the security of either personal properties or on the security of real properties, and to
finance installment sales of motor vehicles, home appliances and other chattels.
Petitioner is a lending corporation duly registered with the SEC on July 27, 1989 with some
of its places of business located along Pedro Gil, Sta. Ana, Manila and Onyx St., cor. Augusto
Francisco St., San Andres, Paco, Manila. Based on its articles of incorporation, the primary
purpose of petitioner is:
To act as a lending investor or, otherwise, to engage in the practice of lending money or
extending loans on the security of real or personal, tangible or intangible properties
whether as pledge, real or chattel mortgage or otherwise, xxx without however, engaging
in pawnbroking as defined under PD 114.
On September 11, 1990, private respondent filed a complaint against petitioner with the
Prosecution and Enforcement Department (PED) of the SEC docketed as PED CASE No. 90-
0737. The complaint alleged that: (1) petitioner, contrary to the restriction set by the Commission,
has been operating and doing business as a pawnbroker, pawnshop or sanglaan in the same
neighborhood where private respondent has had its own pawnshop for 30 years in violation of its
primary purpose and without the imprimatur of the Central Bank to engage in the pawnshop
business thereby causing unjust and unfair competition with private respondent; and (2) the
business name of petitioner, PILIPINAS Loan, bears similarity in spelling and phonetics with the
corporate name of private respondent, FILIPINAS Pawnshop, creating constant confusion in the
minds of the public and the customers of private respondent. In the same complaint, private
respondent urged the SEC to: (1) order petitioner to change its business name, Pilipinas Loan,
and cease from using it in the near future; (2) order Pilipinas Loan to cease and desist from
engaging in the business of pawnbroking as defined under PD No. 114; and (3) impose upon the
director, officers, employees or persons responsible such penalties as may be proper under the
law.
On October 18, 1990, petitioner filed its Comment/Answer questioning the power of the
SEC to take cognizance of the complaint involving (1) a supposed violation of the Pawnshop
Regulations Act which is more properly within the jurisdiction of the Central Bank; and (2) the
determination of whether a corporate name is confusingly similar to another which is within the
jurisdiction of the regular courts.Petitioner denied that it is engaged in the pawnshop business,
alleging that it is a lending investor duly registered with the Central Bank.
On October 18, 1991, private respondent filed its reply to the Comment/Answer.
On April 8, 1991, the PED of the SEC issued an Order directing petitioner to amend its
articles of incorporation by changing the word Pilipinas in its corporate name, and to cease and
desist from further engaging in the business of pawnshop or sanglaan.
On August 13, 1991, the SEC en banc rendered a Decision affirming with modification the
aforementioned Order. The Decision ordered petitioner to (1) amend its articles of incorporation
by deleting the word pledge in its primary purpose and the word Pilipinas as part of its corporate
name and substituting another word in lieu thereof within fifteen (15) days from receipt of the
decision; and (2) to cease and desist from further engaging in business as a pawnshop or
pawnbroker or sanglaan as defined in Presidential Decree No. 114, otherwise known as the
Pawnshop Regulation Act, until the proper license shall have been secured from the Central
Bank of the Philippines.
Aggrieved, petitioner filed a petition for review before the Court of Appeals docketed as CA
G.R. SP No. 25782.
On October 31, 1991 the Court of Appeals rendered a Decision affirming with modification
the decision of the SEC. The dispositive portion of the now assailed decision reads:
WHEREFORE, premises considered, the decision appealed from is hereby modified, setting
aside that portion ordering petitioner to amend its articles of incorporation by deleting the word
pledge in its primary purposes and the word Pilipinas as part of its corporate name. However,
petitioner Pilipinas Loan Co., Inc., its directors, officers agents or other persons acting in its
behalf are forthwith ordered to CEASE AND DESIST from further engaging in business as a
pawnshop or pawnbroker or sanglaan as defined in Presidential Decree No. 114, otherwise
known as the Pawnshop Regulation Act until the proper license shall have been secured from the
Central Bank of the Philippines. In all other respects, the decision is affirmed.[3]
On March 19, 1992, the Court of Appeals issued a Resolution denying the motion for
reconsideration filed by petitioner.
Hence, this petition for review anchored on these grounds:
1. Respondent Court of Appeals gravely erred in not holding that the determination by the Central
Bank of alleged violation of PD No. 114 is a condition precedent to the exercise by respondent
Securities and Exchange Commission of its regulatory power over petitioner.
2. Respondent Court of Appeals gravely erred in not ruling that the finding by respondent SEC is
not supported by substantial evidence and that petitioner was denied of its right to due process.
3. Respondent Court of Appeals erred in holding that the activities of petitioner constitute
pawnbroking.[4]
While petitioner concedes that the SEC has jurisdiction to determine whether the condition
or restriction in the articles of incorporation of a corporation has been violated, petitioner disputes
the authority of the SEC to determine whether a registered entity is violating PD 114. Petitioner
maintains that PD 114 vests this authority solely in the Central Bank.
In upholding the jurisdiction of the SEC, the Court of Appeals ruled that there is nothing in
PD 114 that grants exclusively to the Central Bank the authority to determine if there has been a
violation of said decree. Petitioner insists that this interpretation is erroneous on the ground that it
runs counter to the time-honored maxim of expressio unius est exclusio alterius. The express
and specific mention of the Central Bank in PD 114 allegedly implies the exclusion of other
governmental agencies from making a determination of violations of the provisions of said
decree. In support of its argument, petitioner cites Section 17 of PD 114 that provides:
Section 17. Grant of authority to the Central Bank. The Central Bank is hereby authorized (a) to
issue rules and regulations to implement the provisions contained therein; (b) to require from
pawnshops reports of condition and such other reports necessary to determine compliance with
the provisions of this Decree; (c) to exercise visitorial powers whenever deemed necessary; (d)
to impose such administrative sanctions including the imposition of fines for violations of this
Decree and regulations issued by the Central Bank in pursuance thereto.
Petitioner points out that in the enforcement of PD 114, the Central Bank is possessed with
investigatory or inquisitorial powers which include the power to inspect, or to secure, or to require
the disclosure of information by means of accounts, records, reports, statements, testimony of
witnesses, production of documents, etc. Allegedly, it is only after the Central Bank has made a
determination of whether petitioner is engaged in pawnbroking that the SEC can exercise its
regulatory powers over petitioner. Petitioner thus insists that the jurisdiction of the SEC is limited
to matters intrinsically connected with the regulation of corporations, partnerships and
associations and those dealing with the internal affairs of such entities. The SEC allegedly cannot
arrogate unto itself the power to look into violations of PD 114 when such power rests solely with
the Central Bank.
The petition is without merit.
Petitioner conjures a supposed conflict of jurisdiction between the Central Bank and the
SEC by insisting that it is only the Central Bank that has jurisdiction over violations of PD
114. The argument is misplaced. Basic is the rule that it is the allegations in the complaint that
vests jurisdiction.[5] A case in point is Philippine Womans Christian Temperance Union, Inc. vs.
Abiertas House of Friendship, Inc.[6]wherein we held that when the thrust of a complaint is on
the ultra vires act of a corporation, that is the complained act of a corporation is contrary to its
declared corporate purposes, the SEC has jurisdiction to entertain the complaint before it.
It must be recalled that the complaint of private respondent alleged that the articles of
incorporation of petitioner contained this prohibition: without, however, engaging in pawnbroking
as defined in PD 114 and despite this restriction, petitioner allegedly continued to actually
operate and do business as a pawnshop. The complaint thus treats of a violation of petitioners
primary franchise. Section 5 of PD 114, the same law invoked by petitioner, mandates that a
corporation desiring to engage in the pawnshop business must first register with the
SEC. Without question, the complaint filed by private respondent against petitioner called upon
the SEC to exercise its adjudicatory and supervisory powers. By law, the SEC has absolute
jurisdiction, supervision and control over all corporations that are enfranchised to act as
corporate entities.[7] A violation by a corporation of its franchise is properly within the jurisdiction
of the SEC.
A corporation, under the Corporation Code, has only such powers as are expressly granted
to it by law and by its articles of incorporation, [8] those which may be incidental to such conferred
powers, those reasonably necessary to accomplish its purposes and those which may be
incident to its existence.[9] In the case at bar, the limit of the powers of petitioner as a corporation
is very clear, it is categorically prohibited from engaging in pawnbroking as defined under PD
114. Hence, in determining what constitutes pawnbrokerage, the relevant law to consider is PD
114. This reference to PD 114 is also in line with Article 2123 of the Civil Code that states that:
Art. 2123. With regard to pawnshops and other establishments, which are engaged in making
loans secured by pledges, the special laws and regulations concerning them shall be observed,
and subsidiarily, the provisions of this Title.
Indispensable therefore to the determination of whether or not petitioner had violated its
articles of incorporation, was an inquiry by the SEC if petitioner was holding out itself to the public
as a pawnshop. It must be stressed that the determination of whether petitioner violated PD 114
was merely incidental to the regulatory powers of the SEC, to see to it that a corporation does not
go beyond the powers granted to it by its articles of incorporation.
Jurisprudence has laid down the principle that it is the certificate of incorporation that gives
juridical personality to a corporation and places it within SEC jurisdiction. [10] The case of Orosa,
Jr. vs. Court of Appeals[11] teaches that this jurisdiction of the SEC is not affected even if the
authority to operate a certain specialized activity is withdrawn by the appropriate regulatory body
other than the SEC. With more reason that we cannot sustain the submission of petitioner that a
declaration by the Central Bank that it violated PD 114 is a condition precedent before the SEC
can take cognizance of the complaint against petitioner.
Aside from the supervision and control powers granted by Section 3 of PD 902-A to the
SEC, Section 5 thereof provides that:
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and
exclusive *jurisdiction to hear and decide cases involving:
a) Devices and schemes employed by or any acts of the board of directors, business associates,
its officers or partners, amounting to fraud and misrepresentation which may be detrimental to
the interest of the public and/or of the stockholders, partners, members of associations or
organizations registered with the commission. (Emphasis ours)
Clearly, the recital in the complaint of private respondent that petitioner is engaged in the
pawnshop business when it is not authorized to do so by its articles of incorporation amounts to
fraud, detrimental not only to the corporation but also to the stockholders and the public. The
relationship involved in this controversy is a category of relationship over which the SEC has
exclusive jurisdiction, thus:
(a) between the corporation, partnership or association and the public; (b) between the
corporation, partnership or association and its stockholders, partners, members or officers; (c)
between the corporation, partnership or association and the state in so far as its franchise, permit
or license to operate is concerned; and (d) among the stockholders, partners or associates
themselves.[12]
We agree with the Court of Appeals that petitioner cannot invoke the jurisdiction of the
Central Bank in view of its own avowal that it is not a pawnshop and neither is it engaged in the
business as a pawnshop. The Court of Appeals correctly ruled that:
It must be noted that upon close scrutiny, PD No. 114 provides that the supervisory powers of the
Central Bank extends merely to pawnshops registered with it in accordance with Sec. 6 of the
same law. In connection with this, we take judicial notice of the Rules and Regulations for
Pawnshops (CB Circular No. 374) enacted pursuant to the authority given to the Central Bank to
issue rules and regulations to implement the provisions of PD 114, where it provides the
following:
Sec. 11. Powers of Pawnshop.- A duly organized and licensed pawnshop has, in general, the
power to engage in the business of lending money on the security of personal property within the
framework and limitations of PD No. 114 and this circular, subject to the regulatory and
supervisory powers of the Central Bank.
Sec. 36. Examination, Inspection, or Investigation. - The official of the Central Bank in charge of
non-bank financial intermediary and his duly designated representatives are hereby authorized to
conduct an examination, inspection, or investigation of books, records, business affairs,
administration, and financial condition of any pawnshop, whenever said official deems it
necessary for the effective implementation of Presidential Decree No. 114 and of this Circular.
xxx
Furthermore, under CB Circular No. 381 providing for the Procedure For Processing Complaints
Against Pawnshops, it is provided that:
The Monetary Board, Central Bank of the Philippines, pursuant to its Chapter and Presidential
Decree No. 114, entitled, The Pawnshop Regulation Act, has promulgated the following
procedures for processing complaints against pawnshops;
1. Complaints against pawnshops must be filed with the Office of Non Bank
Financial Intermediaries (ONBFI), Central Bank of the Philippines, in
writing and signed under oath by the complainant;
The foregoing must have also impelled Director Olaso of the Central Bank to send private
respondent a reply letter (Exh. C) apprising it that only over pawnshops, and not lending
institutions, does the Central Bank exercise supervisory powers. Considering that
petitioner is admittedly not a registered pawnshop operator, any complaint filed against it is
not cognizable by the Central Bank.[13] (Emphasis supplied)
The mere fact that a portion of the SEC decision stated that copies of the same be
furnished the Central Bank does not necessarily mean that the SEC recognized the jurisdiction of
the Central Bank over PD 114 violations. Obviously, the SEC had already assumed jurisdiction
over the case and had in fact disposed of it, the transmission of a copy of said decision to the
Central Bank was mainly to apprise the latter of the disposition of the case so that it may
accordingly act on it.
Petitioner bewails the alleged violation of substantive due process when the SEC rendered
the assailed decision based on evidence which petitioner claims it did not receive. The SEC
allegedly reached the conclusion that petitioner is engaged in pawnshop activities based on the
photographs attached by private respondent to its position paper. The photographs in question
show that petitioner used a billboard with the inscription SANGLAAN in front of its
office. Petitioner however claims that it was not furnished a copy of the position paper of private
respondent and that these photographs were not presented during the hearing before the
PED. Except for said photographs, petitioner points out that private respondent did not adduce
any other evidence to substantiate its claim that petitioner is engaged in pawnshop
activities. Petitioner asserts that the photographs cannot be considered as substantial evidence.
We are not persuaded. Due process is not necessarily tantamount to a full-blown trial. The
essence of due process is simply the opportunity to be heard or as applied to administrative
proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of
the ruling or action taken.[14] The records of this case show that petitioner was accorded every
opportunity to be heard during the conference before the PED wherein the parties were required
to file their position papers, and on appeal before the SEC en banc.
Contrary to the claim of petitioner, the Court of Appeals found that the evidence presented
by private respondent was duly appended to the position paper submitted to the PED and to the
SEC en banc.Assuming arguendo that petitioner was not furnished a copy of the photographs, it
is now too late in the day for petitioner to raise this matter before us when it could have submitted
this issue before the hearing officer and the SEC en banc. The records fail to support petitioners
insistence that it raised this issue before the SEC. In its appeal before the SEC, petitioner merely
harped on the fact that in ruling for private respondent, the hearing officer relied only on the
photographs without mentioning that petitioner did not receive a copy of said
photographs. Plainly then, the SEC could not have addressed this issue for the simple reason
that it was not duly informed of this matter, a situation which was petitioners own making.
We reject petitioners claim that the SEC relied solely on the photographs in reaching the
conclusion that petitioner is engaged in pawnshop activities. Aside from the questioned
photographs, other evidence such as affidavits of the past customers of petitioner and the
supposed promissory note between petitioner and its customers were also submitted to the
SEC. The SEC and the Court of Appeals were one in ruling that the so-called promissory note
was more of a pawn ticket than an instrument of indebtedness. We see no cogent reason to set
aside the factual findings of the SEC, also upheld by the Court of Appeals, based on the settled
rule that the findings of fact of the SEC must be respected as long as they are supported by
substantial evidence, as in this case.[15]
The Court of Appeals appreciated the entire evidence, consisting of the affidavits, the
promissory note and photographs, in this manner:
A careful examination and analysis of the records of this case indicates that petitioner has indeed
engaged in the business of pawnbroking. It is not argued that petitioner do (sic) lend money on
the security of personal property. What must be observed though are the very prominent words
SANGLAAN found on its billboards (Exhs. F and G) which cannot but give the impression to the
public that its establishment is more of a pawnshop than a lending institution servicing different
kinds of loans. The word SANGLAAN, especially in big cities, have come to be associated with
pawnshops and it denotes the idea of a place where one presents personal property for a loan,
which is the exclusive domain of a pawnshop. Thus, the use of such word by petitioner was more
calculated to attract customers who will acquire loans on the security of personal properties
alone. That this activity is in fact undertaken can be readily deduced from the graphic and
unmistakable set-up (Exhs. J and K) of petitioners place of business which is a picture of a
typical pawnshop where a person transacts through small glass openings labeled sangla and
tubos. Moreover, the supposed promissory note evidencing a customers transaction with
petitioner, is more of a pawnticket than what it represents. We hereby quote with approval the
argument advanced by private respondent on this point.
1. The contents of the pawnshop tickets issued by respondent PILIPINAS LOAN as promissory
notes are basically pawnshop tickets which as provided in the Pawnshop Regulation Act, PD No.
114 are the following:
a) Name and residence of the pawner;
b) Date when loan is granted;
c) Amount of the principal loan;
d) Interest rate in percentage;
e) Period of maturity;
f) Description of the pawn
g) Signature of the pawnbroker or his authorized representative;
h) Signature of the pawner; and
i) Other terms and conditions.
2. The only document required to be executed by the customers (pawners) of respondent
Pilipinas Loan is the aforesaid Promissory Loan, which is the only document also commonly
required in pawnshops or sanglaan; whereas genuine lending investors require a set of
documents xxx.
3. The respondent Pilipinas Loan always takes possession of the pawn or articles pawned to
secure the loan; whereas, if it is truly operating as a Lending Investor it does not have to take
possession of the article pledged or mortgaged because the borrowers capacity to pay is
established, normally with a co-maker.
xxx xxx xxx[16]
Thus, the totality of the evidence substantially establishes the conclusion that petitioner
contravened its articles of incorporation when it held itself out to the public as a pawnshop.
WHEREFORE, in view of the foregoing, the petition is DENIED. Costs against petitioner.
DIGEST
Petitioner Pilipinas Loan Company is a lending corporation duly registered with the
SEC on July 27, 1989. Based on its Articles, its primary purpose is to act as a lending
investor or engage in the practice of lending money without however engaging in
pawnbroking as defined under PD 114.
Private Respondent Filipinas Pawnshop Inc. filed a complaint with the Prosecution and
Enforcement Department with the SEC alleging that Petitioner has been operating a
pawnshop where respondent has had its own for 30 years in violation of its primary
purpose and without the imprimatur of the CB to engage in the pawnshop business.
The PED issued an order directing Petitioner to cease from further engaging in the
business of pawnshop.
The SEC en banc affirmed.
CA affirmed. Holding that it should cease until it shall have secured the proper license
from the CB.
SC affirms.
Petitioner argues that the determination of violations of PD114 is vested with the CB
and not the SEC. wrong.
1. Allegations in the complaint determine the jurisdiction. And here respondent claims
an ultra vires act of the Corp in engaging in pawnbroking despite its restriction as
stated in the Articles of Petitioner. The complaint treats a violation of Petitioners
primary franchise.
By law, the SEC has absolute jurisdiction, supervision and control over all corporations
that are enfranchised to act as corporate entities. A violation by a Corp of its franchise
is within the jurisdiction of the SEC.
Indispensable to determine a violation of the Articles was a determination of w/not
there was a violation of PD114.
Jurisprudence has laid down the principle that it is the certificate of incorporation that
gives juridical personality to a Corp and places it within the jurisdiction of the SEC. and
the jurisdiciont of the SEC is not affected even if the authority to operate a specialized
activity is withdrawn by the appropriate agency other than the SEC.
Here, respondent was able to establish sufficient evidence.
[G.R. No. 125778. June 10, 2003] INTER-ASIA INVESTMENTS INDUSTRIES, INC., petitioner,
vs. CA and ASIA INDUSTRIES, INC., respondents.
The present petition for review on certiorari assails the Court of Appeals Decision[1] of
January 25, 1996 and Resolution[2] of July 11, 1996.
The material facts of the case are as follows:
On September 1, 1978, Inter-Asia Industries, Inc. (petitioner), by a Stock Purchase
Agreement[3] (the Agreement), sold to Asia Industries, Inc. (private respondent) for and in
consideration of the sum of P19,500,000.00 all its right, title and interest in and to all the
outstanding shares of stock of FARMACOR, INC. (FARMACOR).[4] The Agreement was signed
by Leonides P. Gonzales and Jesus J. Vergara, presidents of petitioner and private respondent,
respectively.[5]
Under paragraph 7 of the Agreement, petitioner as seller made warranties and
representations among which were (iv.) [t]he audited financial statements of FARMACOR at and
for the year ended December 31, 1977... and the audited financial statements of FARMACOR as
of September 30, 1978 being prepared by S[ycip,] G[orres,] V[elayo and Co.]... fairly present or
will present the financial position of FARMACOR and the results of its operations as of said
respective dates; said financial statements show or will show all liabilities and commitments of
FARMACOR, direct or contingent, as of said respective dates . . .; and (v.) [t]he Minimum
Guaranteed Net Worth of FARMACOR as of September 30, 1978 shall be Twelve Million Pesos
(P12,000,000.00).[6]
The Agreement was later amended with respect to the Closing Date, originally set up at
10:00 a.m. of September 30, 1978, which was moved to October 31, 1978, and to the mode of
payment of the purchase price.[7]
The Agreement, as amended, provided that pending submission by SGV of FARMACORs
audited financial statements as of October 31, 1978, private respondent may retain the sum of
P7,500,000.00 out of the stipulated purchase price of P19,500,000.00; that from this retained
amount of P7,500,000.00, private respondent may deduct any shortfall on the Minimum
Guaranteed Net Worth of P12,000,000.00;[8] and that if the amount retained is not sufficient to
make up for the deficiency in the Minimum Guaranteed Net Worth, petitioner shall pay the
difference within 5 days from date of receipt of the audited financial statements.[9]
Respondent paid petitioner a total amount of P 12,000,000.00: P5,000,000.00 upon the
signing of the Agreement, and P7,000,000.00 on November 2, 1978.[10]
 From the STATEMENT OF INCOME AND DEFICIT attached to the financial
report[11] dated November 28, 1978 submitted by SGV, it appears that FARMACOR had, for the
ten months ended October 31, 1978, a deficit of P11,244,225.00. [12] Since the stockholders
equity amounted to P10,000,000.00, FARMACOR had a net worth deficiency of P1,244,225.00.
The guaranteed net worth shortfall thus amounted to P13,244,225.00 after adding the net worth
deficiency of P1,244,225.00 to the Minimum Guaranteed Net Worth of P12,000,000.00.
The adjusted contract price, therefore, amounted to P6,225,775.00 which is the difference
between the contract price of P19,500,000.00 and the shortfall in the guaranteed net worth of
P13,224,225.00. Private respondent having already paid petitioner P12,000,000.00, it was
entitled to a refund of P5,744,225.00.
Petitioner thereafter proposed, by letter[13] of January 24, 1980, signed by its president, that
private respondents claim for refund be reduced to P4,093,993.00, it promising to pay the cost of
the Northern Cotabato Industries, Inc. (NOCOSII) superstructures in the amount of P759,570.00.
To the proposal respondent agreed. Petitioner, however, weiched on its promise. Petitioners total
liability thus stood at P4,853,503.00 (P4,093,993.00 plus P759,570.00)[14] exclusive of interest.[15]
[16]
On April 5, 1983, private respondent filed a complaint against petitioner with the
Regional Trial Court of Makati, one of two causes of action of which was for the recovery of
above-said amount of P4,853,503.00[17] plus interest.
Denying private respondents claim, petitioner countered that private respondent failed to
pay the balance of the purchase price and accordingly set up a counterclaim.
Finding for private respondent, the trial court rendered on November 27, 1991 a
Decision,[18] the dispositive portion of which reads:
WHEREFORE, judgment is rendered in favor of plaintiff and against defendant (a) ordering the
latter to pay to the former the sum of P4,853,503.00[19] plus interest thereon at the legal rate from
the filing of the complaint until fully paid, the sum of P30,000.00 as attorneys fees and the costs
of suit; and (b) dismissing the counterclaim. SO ORDERED.
On appeal to the Court of Appeals, petitioner raised the following errors:
THE TRIAL COURT ERRED IN HOLDING THE DEFENDANT LIABLE UNDER THE FIRST
CAUSE OF ACTION PLEADED BY THE PLAINTIFF.
THE TRIAL COURT ERRED IN AWARDING ATTORNEYS FEES AND IN DISMISSING THE
COUNTERCLAIM.
THE TRIAL COURT ERRED IN RENDERING JUDGMENT IN FAVOR OF THE PLAINTIFF, THE
ALLEGED BREACH OF WARRANTIES AND REPRESENTATION NOT HAVING BEEN
SHOWN, MUCH LESS ESTABLISHED BY THE PLAINTIFF.[20]
By Decision of January 25, 1996, the Court of Appeals affirmed the trial courts decision.
Petitioners motion for reconsideration of the decision having been denied by the Court of Appeals
by Resolution of July 11, 1996, the present petition for review on certiorari was filed, assigning
the following errors:
I.THE RESPONDENT COURT ERRED IN NOT HOLDING THAT THE LETTER OF THE
PRESIDENT OF THE PETITIONER IS NOT BINDING ON THE PETITIONER
BEING ULTRA VIRES.
II.THE LETTER CAN NOT BE AN ADMISSION AND WAIVER OF THE PETITIONER AS A
CORPORATION.
III.THE RESPONDENT COURT ERRED IN NOT DECLARING THAT THERE IS NO BREACH
OF WARRANTIES AND REPRESENTATION AS ALLEGED BY THE PRIVATE RESPONDENT.
IV.THE RESPONDENT COURT ERRED IN ORDERING THE PETITIONER TO PAY
ATTORNEYS FEES AND IN SUSTAINING THE DISMISSAL OF THE
COUNTERCLAIM.18 (Underscoring in the original)
Petitioner argues that the January 24, 1980 letter-proposal (for the reduction of private
respondents claim for refund upon petitioners promise to pay the cost of NOCOSII
superstructures in the amount of P759,570.00) which was signed by its president has no legal
force and effect against it as it was not authorized by its board of directors, it citing the
COrporation Law which provides that unless the act of the president is authorized by the board of
directors, the same is not binding on it.
This Court is not persuaded.
The January 24, 1980 letter signed by petitioners president is valid and binding. The case
of Peoples Aircargo and Warehousing Co., Inc. v. Court of Appeals19 instructs:
The general rule is that, in the absence of authority from the board of directors, no
person, not even its officers, can validly bind a corporation. A corporation is a juridical
person, separate and distinct from its stockholders and members, having x x x powers, attributes
and properties expressly authorized by law or incident to its existence.
Being a juridical entity, a corporation may act through its board of directors, which exercises
almost all corporate powers, lays down all corporate business policies and is responsible for the
efficiency of management, as provided in Section 23 of the Corporation Code of the Philippines:
SEC. 23. The Board of Directors or Trustees. - Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees x x x.
Under this provision, the power and responsibility to decide whether the corporation should enter
into a contract that will bind the corporation is lodged in the board, subject to the articles of
incorporation, bylaws, or relevant provisions of law. However, just as a natural person may
authorize another to do certain acts for and on his behalf, the board of directors may
validly delegate some of its functions and powers to officers, committees or agents. The
authority of such individuals to bind the corporation is generally derived from law,
corporate bylaws or authorization from the board, either expressly or impliedly by habit,
custom or acquiescence in the general course of business, viz:
A corporate officer or agent may represent and bind the corporation in transactions with third
persons to the extent that [the] authority to do so has been conferred upon him, and this includes
powers as, in the usual course of the particular business, are incidental to, or may be implied
from, the powers intentionally conferred, powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such apparent powers as the corporation has
caused person dealing with the officer or agent to believe that it has conferred.
xxx
[A]pparent authority is derived not merely from practice. Its existence may be ascertained
through (1) the general manner in which the corporation holds out an officer or agent as having
the power to act or, in other words the apparent authority to act in general, with which it clothes
him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, within or beyond the scope of his ordinary powers.
It requires presentation of evidence of similar act(s) executed either in its favor or
in favor of other parties. It is not the quantity of similar acts whichestablishes
apparent authority, but the vesting of
a corporate officer with power to bind the corporation.
x x x (Emphasis and underscoring supplied)
As correctly argued by private respondent, an officer of a corporation who is authorized to
purchase the stock of another corporation has the implied power to perform all other obligations
arising therefrom, such as payment of the shares of stock. By allowing its president to sign the
Agreement on its behalf, petitioner clothed him with apparent capacity to perform all acts which
are expressly, impliedly and inherently stated therein.[21]
Petitioner further argues that when the Agreement was executed on September 1, 1978, its
financial statements were extensively examined and accepted as correct by private respondent,
hence, it cannot later be disproved by resorting to some scheme such as future financial
auditing;[22] and that it should not be bound by the SGV Report because it is self-serving and
biased, SGV having been hired solely by private respondent, and the alleged shortfall of
FARMACOR occurred only after the execution of the Agreement.
This Court is not persuaded either.
The pertinent provisions of the Agreement read:
7. Warranties and Representations - (a) SELLER warrants and represents as follows:
xxx
(iv) The audited financial statements of FARMACOR as at and for the year ended
December 31, 1977 and
the audited financial statements of FARMACOR as at September 30, 19
78 beingprepared by SGV pursuant to paragraph 6(b) fairly present or
will present the financial position of FARMACOR and the results of its
operations as of said respective dates; said financial statements show
or will show all liabilities and commitments of FARMACOR, direct or
contingent, as of said respective dates; and the receivables set forth in
said financial statements are fully due and collectible, free and clear of any
set-offs, defenses, claims and other impediments to their collectibility.
(v) The Minimum Guaranteed Net Worth of FARMACOR as of September 30,
1978 shall be Twelve Million Pesos (P12,000,000.00), Philippine
Currency.
x x x (Underscoring in the original; emphasis supplied)[23]
True, private respondent accepted as correct the financial statements submitted to it when
the Agreement was executed on September 1, 1978. But petitioner expressly warranted that the
SGV Reports fairly present or will present the financial position of FARMACOR. By such
warranty, petitioner is estopped from claiming that the SGV Reports are self-serving and biased.
As to the claim that the shortfall occurred after the execution of the Agreement, the
declaration of Emmanuel de Asis, supervisor in the Accounting Division of SGV and head of the
team which conducted the auditing of FARMACOR, that the period covered by the audit was
from January to October 1978 shows that the period before the Agreement was entered into (on
September 1, 1978) was covered.[24]
As to petitioners assigned error on the award of attorneys fees which, it argues, is bereft of
factual, legal and equitable justification, this Court finds the same well-taken.
On the matter of attorneys fees, it is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsels fees are not to be awarded every
time a party wins a suit. The power of the court to award
attorneys fees under Article 2208 of the Civil Code demands
factual, legal and equitable justification, without which the award is
a conclusion without a premise, its basis being improperly left
to speculation and conjecture. In all events, the court must explicitly state in the text of
the decision, and not only in the decretal portion thereof, the legal reason for the award of
attorneys fees.[25]
x x x (Emphasis and underscoring supplied; citations omitted)
WHEREFORE, the instant petition is PARTLY GRANTED. The assailed decision of the
Court of Appeals affirming that of the trial court is modified in that the award of attorneys fees in
favor of private respondent is deleted. The decision is affirmed in other respects.
DIGEST
Facts: On 1 September 1978, Inter-Asia Industries, Inc. (Inter-Asia), by a Stock Purchase
Agreement (the Agreement), sold to Asia Industries, Inc. (Asia Industries) for and in
consideration of the sum of P19,500,000.00 all its right, title and interest in and to all the
outstanding shares of stock of FARMACOR, INC. (FARMACOR). The Agreement was signed by
Leonides P. Gonzales and Jesus J. Vergara, presidents of Inter-Asia and Asia Industries,
respectively. Under paragraph 7 of the Agreement, Inter-Asia as seller made warranties and
representations. The Agreement was later amended with respect to the "Closing Date," originally
set up at 10:00 a.m. of 30 September 1978, which was moved to 31 October 1978, and to the
mode of payment of the purchase price. The Agreement, as amended, provided that pending
submission by SGV of FARMACOR's audited financial statements as of 31 October 1978, Asia
Industries may retain the sum of P7,500,000.00 out of the stipulated purchase price of
P19,500,000.00; that from this retained amount of P7,500,000.00, Asia Industries may deduct
any shortfall on the Minimum Guaranteed Net Worth of P12,000,000.00; and that if the amount
retained is not sufficient to make up for the deficiency in the Minimum Guaranteed Net Worth,
Inter-Asia shall pay the difference within 5 days from date of receipt of the audited financial
statements.
Asia Industries paid Inter-Asia a total amount of P12,000,000.00: P5,000,000.00 upon the signing
of the Agreement, and P7,000,000.00 on 2 November 1978. From the STATEMENT OF
INCOME AND DEFICIT attached to the financial report dated 28 November 1978 submitted by
SGV, it appears that FARMACOR had, for the 10 months ended 31 October 1978, a deficit of
P11,244,225.00. Since the stockholder's equity amounted to P10,000,000.00, FARMACOR had
a net worth deficiency of P1,244,225.00. The guaranteed net worth shortfall thus amounted to
P13,244,225.00 after adding the net worth deficiency of P1,244,225.00 to the Minimum
Guaranteed Net Worth of P12,000,000.00. The adjusted contract price, therefore, amounted to
P6,225,775.00 which is the difference between the contract price of P19,500,000.00 and the
shortfall in the guaranteed net worth of P13,224,225.00. Asia Industries having already paid
Inter-Asia P12,000,000.00, it was entitled to a refund of P5,744,225.00. Inter-Asia thereafter
proposed, by letter of 24 January 1980, signed by its president, that Asia Industries's claim for
refund be reduced to P4,093,993.00, it promising to pay the cost of the Northern Cotabato
Industries, Inc. (NOCOSII) superstructures in the amount of P759,570.00. To the proposal
respondent agreed. Inter-Asia, however, welched on its promise.
Inter-Asia's total liability thus stood at P4,853,503.00 (P4,093,993.00 plus P759,570.00)
exclusive of interest. On 5 April 1983, Asia Industries filed a complaint against Inter-Asia with the
Regional Trial Court of Makati, one of two causes of action of which was for the recovery of
above-said amount of P4,853,503.00 17 plus interest. Denying Asia Industries's claim, Inter-Asia
countered that Asia Industries failed to pay the balance of the purchase price and accordingly set
up a counterclaim. Finding for Asia Industries, the trial court rendered on 27 November 1991 a
Decision, ordering Inter-Asia to pay Asia Industries the sum of P4,853,503.00 plus interest
thereon at the legal rate from the filing of the complaint until fully paid, the sum of P30,000.00 as
attorney's fees and the costs of suit; and (b) dismissing the counterclaim. On appeal to the Court
of Appeals, and by Decision of 25 January 1996, the Court of Appeals affirmed the trial court's
decision. Inter-Asia's motion for reconsideration of the decision having been denied by the Court
of Appeals by Resolution of 11 July 1996, Inter-Asia filed the petition for review on certiorari.
Issue: Whether the 24 January 1980 letter signed by Inter-Asias president is valid and binding.
Held: The 24 January 1980 letter signed by Inter-Asia's president is valid and binding. As held in
the case of People's Aircargo and Warehousing Co., Inc. v. Court of Appeals, the general rule is
that, in the absence of authority from the board of directors, no person, not even its officers, can
validly bind a corporation. A corporation is a juridical person, separate and distinct from its
stockholders and members, "having . . . powers, attributes and properties expressly authorized
by law or incident to its existence." Being a juridical entity, a corporation may act through its
board of directors, which exercises almost all corporate powers, lays down all corporate business
policies and is responsible for the efficiency of management, as provided in Section 23 of the
Corporation Code of the Philippines. Under this provision, the power and responsibility to decide
whether the corporation should enter into a contract that will bind the corporation is lodged in the
board, subject to the articles of incorporation, bylaws, or relevant provisions of law. However, just
as a natural person may authorize another to do certain acts for and on his behalf, the board of
directors may validly delegate some of its functions and powers to officers, committees or agents.
The authority of such individuals to bind the corporation is generally derived from law, corporate
bylaws or authorization from the board, either expressly or impliedly by habit, custom or
acquiescence in the general course of business, viz: "A corporate officer or agent may represent
and bind the corporation in transactions with third persons to the extent that [the] authority to do
so has been conferred upon him, and this includes powers as, in the usual course of the
particular business, are incidental to, or may be implied from, the powers intentionally conferred,
powers added by custom and usage, as usually pertaining to the particular officer or agent, and
such apparent powers as the corporation has caused person dealing with the officer or agent to
believe that it has conferred.... [A]pparent authority is derived not merely from practice. Its
existence may be ascertained through (1) the general manner in which the corporation holds out
an officer or agent as having the power to act or, in other words the apparent authority to act in
general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with
actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers. It
requires presentation of evidence of similar acts executed either in its favor or in favor of other
parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting
of a corporate officer with the power to bind the corporation." Hence, an officer of a corporation
who is authorized to purchase the stock of another corporation has the implied power to perform
all other obligations arising therefrom, such as payment of the shares of stock. By allowing its
president to sign the Agreement on its behalf, Inter-Asia clothed him with apparent capacity to
perform all acts which are expressly, impliedly and inherently stated therein.
HEIRS OF FAUSTO C. IGNACIO, Petitioners, v. HOME BANKERS SAVINGS AND TRUST
COMPANY, SPOUSES PHILLIP AND THELMA ZUNIGA, Respondent.
Before the Court is a Petition for Review on Certiorari under Rule 45 assailing the
Decision1 dated July 18, 2006 and Resolution2 dated May 2, 2007 of the Court of Appeals (CA) in
CA-G.R. CV No. 73551. The CA reversed the Decision3 dated June 15, 1999 of the Regional
Trial Court (RTC) of Pasig City, Branch 151 in Civil Case No. 58980.
The factual antecedents:
In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of land to Home Savings
Bank and Trust Company, the predecessor of respondent Home Bankers Savings and Trust
Company, as security for the P500,000.00 loan extended to him by said bank. These properties
which are located in Cabuyao, Laguna are covered by Transfer Certificate of Title Nos. (T-40380)
T-8595 and (T-45804) T-8350 containing an area of 83,303 square meters and 120,110 square
meters, respectively.4?r?l1
When petitioner defaulted in the payment of his loan obligation, respondent bank proceeded to
foreclose the real estate mortgage. At the foreclosure sale held on January 26, 1983, respondent
bank was the highest bidder for the sum of P764,984.67. On February 8, 1983, the Certificate of
Sale issued to respondent bank was registered with the Registry of Deeds of Calamba, Laguna.
With the failure of petitioner to redeem the foreclosed properties within one year from such
registration, title to the properties were consolidated in favor of respondent bank. Consequently,
TCT Nos. T-8595 and T-8350 were cancelled and TCT Nos. 111058 and 111059 were issued in
the name of respondent bank.5?r?l1
Despite the lapse of the redemption period and consolidation of title in respondent bank,
petitioner offered to repurchase the properties. While the respondent bank considered petitioner's
offer to repurchase, there was no repurchase contract executed. The present controversy was
fuelled by petitioner's stance that a verbal repurchase/compromise agreement was actually
reached and implemented by the parties.
In the meantime, respondent bank made the following dispositions of the foreclosed properties
already titled in its name:cralawlibrary
TCT No. 111059 (Subdivided into six lots with individual titles - TCT Nos. 117771, 117772, 117773, 117774,
117775 and 117776)
A. TCT No. 117771 (16,350 sq.ms.) - Sold to Fermin Salvador and Bella Salvador under Deed of Absolute
Sale dated May 23, 1984 for the price of P150,000.00
B. TCT No. 11772 (82,569 sq.ms. subdivided into 2 portions
1) Lot 3-B-1 (35,447 sq.ms.) - Sold to Dr. Oscar Remulla and Natividad Pagtakhan, Dr. Edilberto Torres and
Dra. Rebecca Amores under Deed of Absolute Sale dated April 17, 1985 for the price of P150,000.00
2) Lot 3-B-2 covered by separate title TCT No. 124660 (Subdivided into 3 portions -
Lot 3-B-2-A (15,000 sq.ms.) - Sold to Dr. Myrna del Carmen Reyes under Deed of Absolute Sale dated March
23, 1987 for the price of P150,000.00
Lot 3-B-2-B (15,000 sq.ms.) - Sold to Dr. Rodito Boquiren under Deed of Absolute Sale dated March 23, 1987
for the price of P150,000.00
Lot 3-B-2-C (17,122 sq.ms.) covered by TCT No. T-154568 -
C. TCT No.117773 (17,232 sq.ms.) - Sold to Rizalina Pedrosa under Deed of Absolute Sale dated June 4,
1984 for the price of P150,000.00 ???r?bl? ??r??l l?? l?br?r
The expenses for the subdivision of lots covered by TCT No. 111059 and TCT No. 117772 were
shouldered by petitioner who likewise negotiated the above-mentioned sale transactions. The
properties covered by TCT Nos. T-117774 to 117776 are still registered in the name of
respondent bank.6?r?l1
In a letter addressed to respondent bank dated July 25, 1989, petitioner expressed his
willingness to pay the amount of P600,000.00 in full, as balance of the repurchase price, and
requested respondent bank to release to him the remaining parcels of land covered by TCT Nos.
111058 and T-154658 ("subject properties").7 Respondent bank however, turned down his
request. This prompted petitioner to cause the annotation of an adverse claim on the said titles
on September 18, 1989.8?r?l1
Prior to the annotation of the adverse claim, on August 24, 1989, the property covered by TCT
No. 154658 was sold by respondent bank to respondent spouses Phillip and Thelma Rodriguez,
without informing the petitioner. On October 6, 1989, again without petitioner's knowledge,
respondent bank sold the property covered by TCT No T-111058 to respondents Phillip and
Thelma Rodriguez, Catherine M. Zuiga, Reynold M. Zuiga and Jeannette M. Zuiga.9?r?l1
On December 27, 1989, petitioner filed an action for specific performance and damages in the
RTC against the respondent bank. As principal relief, petitioner sought in his original complaint
the reconveyance of the subject properties after his payment of P600,000.00.10 Respondent bank
filed its Answer denying the allegations of petitioner and asserting that it was merely exercising
its right as owner of the subject properties when the same were sold to third parties.
For failure of respondent bank to appear during the pre-trial conference, it was declared as in
default and petitioner was allowed to present his evidence ex parte on the same date (September
3, 1990). Petitioner simultaneously filed an "Ex-Parte Consignation" tendering the amount
of P235,000.00 as balance of the repurchase price.11 On September 7, 1990, the trial court
rendered judgment in favor of petitioner. Said decision, as well as the order of default, were
subsequently set aside by the trial court upon the filing of a motion for reconsideration by the
respondent bank.12?r?l1
In its Order dated November 19, 1990, the trial court granted the motion for intervention filed by
respondents Phillip and Thelma Rodriguez, Catherine Zuiga, Reynold Zuiga and Jeannette
Zuiga. Said intervenors asserted their status as innocent purchasers for value who had no
notice or knowledge of the claim or interest of petitioner when they bought the properties already
registered in the name of respondent bank. Aside from a counterclaim for damages against the
petitioner, intervenors also prayed that in the event respondent bank is ordered to reconvey the
properties, respondent bank should be adjudged liable to the intervenors and return all amounts
paid to it.13?r?l1
On July 8, 1991, petitioner amended his complaint to include as alternative relief under the
prayer for reconveyance the payment by respondent bank of the prevailing market value of the
subject properties "less whatever remaining obligation due the bank by reason of the mortgage
under the terms of the compromise agreement.14?r?l1
On June 15, 1999, the trial court rendered its Decision, the dispositive portion of which
reads:cralawlibrary
WHEREFORE, findings [sic] the facts aver[r]ed in the complaint supported by preponderance of
evidences adduced, judgment is hereby rendered in favor of the plaintiff and against the
defendant and intervenors by:cralawlibrary
1. Declaring the two Deeds of Sale executed by the defendant in favor of the intervenors as null
and void and the Register of Deeds in Calamba, Laguna is ordered to cancel and/or annul the
two Transfer Certificate of Titles No. T-154658 and TCT No. T-111058 issued to the intervenors.
2. Ordering the defendant to refund the amount of P1,004,250.00 to the intervenors as the
consideration of the sale of the two properties.
3. Ordering the defendant to execute the appropriate Deed of Reconveyance of the two (2)
properties in favor of the plaintiff after the plaintiff pays in full the amount of P600,000.00 as
balance of the repurchase price.
4. Ordering the defendant bank to pay plaintiff the sum of P50,000.00 as attorney's fees.
5. Dismissing the counterclaim of the defendant and intervenors against the
plaintiff. ???r?bl? ??r??l l?? l?br?r
Costs against the defendant. SO ORDERED.15
The trial court found that respondent bank deliberately disregarded petitioner's substantial
payments on the total repurchase consideration. Reference was made to the letter dated March
22, 1984 (Exhibit "I")16 as the authority for petitioner in making the installment payments directly
to the Universal Properties, Inc. (UPI), respondent bank's collecting agent. Said court concluded
that the compromise agreement amounts to a valid contract of sale between petitioner, as Buyer,
and respondent bank, as Seller. Hence, in entertaining other buyers for the same properties
already sold to petitioner with intention to increase its revenues, respondent bank acted in bad
faith and is thus liable for damages to the petitioner. Intervenors were likewise found liable for
damages as they failed to exercise due diligence before buying the subject properties.
Respondent bank appealed to the CA which reversed the trial court's ruling, as
follows:cralawlibrary
WHEREFORE, the foregoing premises considered, the instant appeal is hereby GRANTED.
Accordingly, the assailed decision is hereby REVERSED and SET ASIDE. SO ORDERED.
The CA held that by modifying the terms of the offer contained in the March 22, 1984 letter of
respondent bank, petitioner effectively rejected the original offer with his counter-offer. There was
also no written conformity by respondent bank's officers to the amended conditions for
repurchase which were unilaterally inserted by petitioner. Consequently, no contract of
repurchase was perfected and respondent bank acted well within its rights when it sold the
subject properties to herein respondents-intervenors.
As to the receipts presented by petitioner allegedly proving the installment payments he had
completed, the CA said that these were not payments of the repurchase price but were actually
remittances of the payments made by petitioner's buyers for the purchase of the foreclosed
properties already titled in the name of respondent bank. It was noted that two of these receipts
(Exhibits "K" and "K-1")18 were issued to Fermin Salvador and Rizalina Pedrosa, the vendees of
two subdivided lots under separate Deeds of Absolute Sale executed in their favor by the
respondent bank. In view of the attendant circumstances, the CA concluded that petitioner acted
merely as a broker or middleman in the sales transactions involving the foreclosed properties.
Lastly, the respondents-intervenors were found to be purchasers who bought the properties in
good faith without notice of petitioner's interest or claim. Nonetheless, since there was no
repurchase contract perfected, the sale of the subject properties to respondents-intervenors
remains valid and binding, and the issue of whether the latter were innocent purchasers for value
would be of no consequence.
Petitioner's motion for reconsideration was likewise denied by the appellate court.
Hence, this petition alleging that:
A. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
IN REVERSING THE FINDING OF THE TRIAL COURT THAT THERE WAS A PERFECTED
CONTRACT TO REPURCHASE BETWEEN PETITIONER AND RESPONDENT-BANK.
B. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
IN REVERSING THE FINDING OF THE TRIAL COURT THAT PETITIONER DID NOT ACT AS
BROKER IN THE SALE OF THE FORECLOSED PROPERTIES AND THUS FAILED TO
CONSIDER THE EXISTENCE OF OFFICIAL RECEIPTS ISSUED IN THE NAME OF THE
PETITIONER THAT ARE DULY NOTED FOR HIS ACCOUNT.
C. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
IN REVERSING THE FINDING OF THE TRIAL COURT THAT RESPONDENT-BANK DID NOT
HAVE THE RIGHT TO DISPOSE THE SUBJECT PROPERTIES.
D. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
IN REVERSING THE FINDING OF THE TRIAL COURT THAT RESPONDENTS-
INTERVENORS ARE NOT INNOCENT PURCHASERS FOR VALUE IN GOOD
FAITH.19?r?l1 ???r?bl? ??r??l l?? l?br?r
It is to be noted that the above issues raised by petitioner alleged grave abuse of discretion
committed by the CA, which is proper in a petition for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure, as amended, but not in the present petition for review on certiorari under Rule
45.
The core issue for resolution is whether a contract for the repurchase of the foreclosed properties
was perfected between petitioner and respondent bank.
The Court sustains the decision of the CA.
Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. 20 The requisite
acceptance of the offer is expressed in Article 1319 of the Civil Code which states:cralawlibrary
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
In Palattao v. Court of Appeals,21 this Court held that if the acceptance of the offer was not
absolute, such acceptance is insufficient to generate consent that would perfect a contract.
Thus:cralawlibrary
Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting
of the minds. Once there is concurrence between the offer and the acceptance upon the subject
matter, consideration, and terms of payment, a contract is produced. The offer must be certain.
To convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort
from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. Consequently, when something is desired
which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the offer. 22?r?l1
The acceptance must be identical in all respects with that of the offer so as to produce consent or
meeting of the minds.23 Where a party sets a different purchase price than the amount of the
offer, such acceptance was qualified which can be at most considered as a counter-offer; a
perfected contract would have arisen only if the other party had accepted this counter-offer.24 In
Villanueva v. Philippine National Bank25 this Court further elucidated on the meaning of
unqualified acceptance, as follows:cralawlibrary
While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative
that it assents to those points in the offer which, under the operative facts of each contract, are
not only material but motivating as well. Anything short of that level of mutuality produces not a
contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the
consideration of the contract, the offer and its acceptance must be unanimous both on the rate of
the payment and on its term. An acceptance of an offer which agrees to the rate but varies the
term is ineffective.26 (Emphasis supplied)
Petitioner submitted as evidence of a perfected contract of repurchase the March 22, 1984 letter
(Exhibit "I")27 from Rita B. Manuel, then President of UPI, a corporation formed by respondent
bank to dispose of its acquired assets, with notations handwritten by petitioner himself. Said letter
reads:cralawlibrary
March 22, 1984
Honorable Judge Fausto Ignacio
412 Bagumbayan Street, Pateros
Metro Manila
Dear Judge Ignacio:cralawlibrary
Your proposal to repurchase your foreclosed properties located at Cabuyao, Laguna consisting of a total area
of 203,413 square meters has been favorably considered subject to the following terms and
conditions:cralawlibrary
1) Total Selling Price shall be P950,000.00
2) Downpayment of P150,00000 with the balance
Payable in Three (3) equal installments
as follows:cralawlibrary
1st Installment - P 266,667 - on or before May 31, '84
2nd Installment - P 266,667 - on or before Sept. 31, '84
3rd Installment - P 266,666 - on or before Jan. 30, '85
TOTAL - P 800,000.00 ???r?bl? ??r??l l?? l?br?r
3) All expenses pertinent to the subdivision of the parcel of land consisting of 120,110 square meters shall be
for your account. ???r?bl? ??r??l l?? l?br?r
Thank you,
Very truly yours,
RITA B. MANUEL
President ???r?bl? ??r??l l?? l?br?r
According to petitioner, he wrote the notations in the presence of a certain Mr. Lazaro, the
representative of Mrs. Manuel (President), and a certain Mr. Fajardo, which notations supposedly
represent their "compromise agreement."28 These notations indicate that the repurchase price
would be P900,000.00 which shall be paid as follows: P150,000 - end of May '84; P150,000 - end
of June '84; Balance - "Depending on financial position". Petitioner further alleged the following
conditions of the verbal agreement: (1) respondent bank shall release the equivalent land area
for payments made by petitioner who shall shoulder the expenses for subdivision of the land; (2)
in case any portion of the subdivided land is sold by petitioner, a separate document of sale
would be executed directly to the buyer; (3) the remaining portion of the properties shall not be
subject of respondent bank's transaction without the consent and authority of petitioner; (4) the
petitioner shall continue in possession of the properties and whatever portion still remaining, and
attending to the needs of its tenants; and (5) payments shall be made directly to UPI. 29?r?l1
The foregoing clearly shows that petitioner's acceptance of the respondent bank's terms and
conditions for the repurchase of the foreclosed properties was not absolute. Petitioner set a
different repurchase price and also modified the terms of payment, which even contained a
unilateral condition for payment of the balance (P600,000), that is, depending on petitioner's
"financial position." The CA thus considered the qualified acceptance by petitioner as a counter-
proposal which must be accepted by respondent bank. However, there was no evidence of any
document or writing showing the conformity of respondent bank's officers to this counter-
proposal.
Petitioner contends that the receipts issued by UPI on his installment payments are concrete
proof -- despite denials to the contrary by respondent bank -- that there was an implied
acceptance of his counter-proposal and that he did not merely act as a broker for the sale of the
subdivided portions of the foreclosed properties to third parties. Since all these receipts, except
for two receipts issued in the name of Fermin Salvador and Rizalina Pedrosa, were issued in the
name of petitioner instead of the buyers themselves, petitioner emphasizes that the payments
were made for his account. Moreover, petitioner asserts that the execution of the separate deeds
of sale directly to the buyers was in pursuance of the perfected repurchase agreement with
respondent bank, such an arrangement being "an accepted practice to save on taxes and
shortcut paper works."???r?bl? ??r??l l?? l?br?r
The Court is unconvinced.
In Adelfa Properties, Inc. v. CA,30 the Court ruled that:cralawlibrary
x x x The rule is that except where a formal acceptance is so required, although the acceptance
must be affirmatively and clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be made either in a formal or an informal manner, and may
be shown by acts, conduct, or words of the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by
the acts, conduct, or words of a party recognizing the existence of the contract of sale. 31?r?l1
Even assuming that the bank officer or employee whom petitioner claimed he had talked to
regarding the March 22, 1984 letter had acceded to his own modified terms for the repurchase,
their supposed verbal exchange did not bind respondent bank in view of its corporate nature.
There was no evidence that said Mr. Lazaro or Mr. Fajardo was authorized by respondent bank's
Board of Directors to accept petitioner's counter-proposal to repurchase the foreclosed properties
at the price and terms other than those communicated in the March 22, 1984 letter. As this Court
ruled in AF Realty & Development, Inc. v. Dieselman Freight Services, Co. 32?r?l1
Section 23 of the Corporation Code expressly provides that the corporate powers of all
corporations shall be exercised by the board of directors. Just as a natural person may authorize
another to do certain acts in his behalf, so may the board of directors of a corporation validly
delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or
acts of a corporation must be made either by the board of directors or by a corporate agent duly
authorized by the board. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in the course
of, or connected with, the performance of authorized duties of such director, are held not binding
on the corporation.33?r?l1
Thus, a corporation can only execute its powers and transact its business through its Board of
Directors and through its officers and agents when authorized by a board resolution or its by-
laws.34?r?l1
In the absence of conformity or acceptance by properly authorized bank officers of petitioner's
counter-proposal, no perfected repurchase contract was born out of the talks or negotiations
between petitioner and Mr. Lazaro and Mr. Fajardo. Petitioner therefore had no legal right to
compel respondent bank to accept the P600,000 being tendered by him as payment for the
supposed balance of repurchase price.
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds.
When there is merely an offer by one party without acceptance of the other, there is no
contract.35 When the contract of sale is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties. 36?r?l1
In sum, we find the ruling of the CA more in accord with the established facts and applicable law
and jurisprudence. Petitioner's claim of utmost accommodation by respondent bank of his own
terms for the repurchase of his foreclosed properties are simply contrary to normal business
practice. As aptly observed by the appellate court:cralawlibrary
The submission of the plaintiff-appellee is unimpressive.
First, if the counter-proposal was mutually agreed upon by both the plaintiff-appellee and
defendant-appellant, how come not a single signature of the representative of the defendant-
appellant was affixed thereto. Second, it is inconceivable that an agreement of such great
importance, involving two personalities who are both aware and familiar of the practical and legal
necessity of reducing agreements into writing, the plaintiff-appellee, being a lawyer and the
defendant-appellant, a banking institution, not to formalize their repurchase agreement. Third, it
is quite absurd and unusual that the defendant-appellant could have acceded to the condition
that the balance of the payment of the repurchase price would depend upon the financial position
of the plaintiff-appellee. Such open[-]ended and indefinite period for payment is hardly acceptable
to a banking institution like the defendant-appellant whose core existence fundamentally depends
upon its financial arrangements and transactions which, most, if not all the times are intended to
bear favorable outcome to its business. Last, had there been a repurchase agreement, then,
there should have been titles or deeds of conveyance issued in favor of the plaintiff-appellee. But
as it turned out, the plaintiff-appellee never had any land deeded or titled in his name as a result
of the alleged repurchase agreement. All these, reinforce the conclusion that the counter-
proposal was unilaterally made and inserted by the plaintiff-appellee in Exhibit "I" and could not
have been accepted by the defendant-appellant, and that a different agreement other than a
repurchase agreement was perfected between them.37?r?l1
Petitioner Fausto C. Ignacio passed away on November 11, 2008 and was substituted by his
heirs, namely: Marfel D. Ignacio-Manalo, Milfa D. Ignacio-Manalo and Faustino D. Ignacio.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated July 18, 2006
and Resolution dated May 2, 2007 of the Court of Appeals in CA-G.R. CV No. 73551 are hereby
AFFIRMED.
With costs against the petitioners.
DIGEST
Facts: The case sprang from a real estate mortgage of two parcels of land in August 1981.
Fausto C. Ignacio mortgaged the properties to Home Bankers Savings and Trust Company
(Bank) as security for a loan extended by the Bank. After Ignacio defaulted in the payment of the
loan, the property was foreclosed and subsequently sold to the Bank in a public auction.Ignacio
offered to repurchase the property. Universal Properties Inc. (UPI), the banks collecting agent
sent Ignacio a letter on March 22, 1984 which contained the terms of the repurchase. However,
Ignacio annotated in the letter new terms and conditions. He claimed that these were verbal
agreements between himself and the Banks collection agent, UPI.No repurchase agreement
was finalized between Ignacio and the Bank. Thereafter the Bank sold the property to third
parties. Ignacio then filed an action for specific performance against the Bank for the
reconveyance of the properties after payment of the balance of the purchase price. He argued
that there was implied acceptance of the counter-offer of the sale through the receipt of the terms
by representatives of UPI. The Bank denied that it gave its consent to the counter-offer of
Ignacio. It countered that it did not approve the unilateral amendments placed by Ignacio.
Issue: Whether or not the negotiations between Ignacio and UPI is binding on the Bank.
Held: A contract of sale is perfected only when there is consent validly given. There is no consent
when a party merely negotiates a qualified acceptance or a counter-offer. An acceptance must
reflect all aspects of the offer to amount to a meeting of the minds between the parties.In this
case, while it is apparent that Ignacio proposed new terms and conditions to the repurchase
agreement, there was no showing that the Bank approved the modified offer.
The negotiations between Ignacio and UPI, the collection agent, were merely preparatory to the
repurchase agreement and, therefore, was not binding on the Bank. Ignacio could not compel the
Bank to accede to the repurchase of the property.
A corporation may only give valid acceptance of an offer of sale through its authorized officers or
agents. Specifically, a counter-offer to repurchase a property will not bind a corporation by mere
acceptance of an agent in the absence of evidence of authority from the corporations board of
directors.