Francisco v. Government Service Insurance System
REITERATIONFacts
The Antecedents: Trinidad J. Francisco obtained a loan of P400,000.00 from the Government Service Insurance System (GSIS), out of which P336,100.00 was released. As security, she mortgaged the Vic-Mari Compound, payable within ten years in monthly installments with interest. On January 6, 1959, GSIS extrajudicially foreclosed the mortgage due to plaintiff's arrears amounting to P52,000.00, with GSIS being the buyer in the foreclosure sale. On February 20, 1959, plaintiff's father, Atty. Vicente J. Francisco, proposed to pay P30,000.00 to set aside the foreclosure, with GSIS administering the property to collect installments and cover the remaining arrears. On the same date, GSIS sent a telegram stating its Board approved the request for redemption. Atty. Francisco remitted P30,000.00, which GSIS accepted. However, GSIS did not administer the property. Plaintiff continued collecting payments and remitted them to GSIS, along with subsequent remittances. GSIS later demanded a new proposal for payment, claiming the one-year redemption period had expired and citing attorney's fees and other expenses. Plaintiff protested, citing the prior agreement. GSIS countered that the telegram was erroneous and demanded payment of foreclosure expenses. GSIS then consolidated the title in its name on July 5, 1960. Procedural History: Plaintiff filed a suit for specific performance and damages. The Court of First Instance of Rizal declared the consolidation null and void, ordered the restoration of the title to the plaintiff, credited plaintiff's payments as amortizations, and ordered GSIS to abide by the contract. Plaintiff appealed for damages and attorney's fees, while GSIS appealed the decision. The Petition: Both parties appealed the decision of the Court of First Instance.
Issue(s)
Whether the telegram sent by the GSIS General Manager's office created a valid and binding compromise agreement that GSIS is estopped from denying. Whether the plaintiff is entitled to actual, moral, and exemplary damages, as well as attorney's fees, arising from GSIS's attempt to consolidate title.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance, declaring the consolidation of title null and void and ordering the restoration of the title to the plaintiff. The Court held that the GSIS was bound by the telegram accepting the plaintiff's offer, despite claims of error or lack of authority, due to the principle of apparent authority and subsequent ratification. The claims for damages and attorney's fees by the plaintiff were denied.
Ratio Decidendi
On Issue 1: The Court held that GSIS is bound by the terms of the telegram under the doctrine of apparent authority and estoppel. It reasoned that corporate transactions would come to a standstill if parties dealing with responsible officers were required to verify board resolutions for every act. Andal, as General Manager, possessed apparent authority to bind the corporation, and GSIS 'clothed' him with such power. Furthermore, when the plaintiff remitted P30,000.00 while explicitly quoting the telegram in her letter, GSIS received notice of the telegram's contents. By pocketing the payment and remaining silent for over a year while accepting further remittances, GSIS tacitly ratified the contract pursuant to Article 1393 of the Civil Code. The Court applied the equitable maxim that between two innocent parties, the one who made the wrong possible must bear the loss. On Issue 2: The Court denied the claims for damages due to insufficient evidentiary basis. Actual or compensatory damages were refused because the plaintiff failed to provide competent evidence regarding the difference between the actual value of the property and the alleged lost sale price. Moral damages were disallowed because a breach of contract only warrants such damages under Article 2220 if the defendant acted with fraud or malice, which was not proven here. Additionally, the plaintiff failed to testify regarding her social humiliation or mental anguish. Exemplary damages were denied because they are merely ancillary and require the award of moral, temperate, or compensatory damages as a prerequisite. Finally, attorney's fees were not awarded as there was no evidence of gross or evident bad faith on the part of GSIS in litigating the claim.
Main Doctrine
A corporation is bound by the apparent authority of its agents, and cannot deny such authority to the prejudice of innocent third parties who relied in good faith on the manifestations of such authority. Furthermore, a corporation may be deemed to have ratified a contract through its subsequent actions, even if the initial acceptance was irregular.