Development Bank of the Philippines v. Ong
REITERATIONFacts
The Antecedents: Respondents Spouses Francisco and Leticia Ong offered to buy a foreclosed property of petitioner Development Bank of the Philippines (DBP) for ₱136,000.00, with a downpayment of ₱14,000.00. Their offer stipulated that payment was in cash upon ejection of occupants and that the deposit did not bind DBP until approved by higher authorities. DBP's branch head noted the offer and issued a receipt for the deposit. DBP later informed respondents of a higher offer from a third party who would assume the responsibility of ejecting occupants, giving respondents three days to match it. Respondents submitted a new offer assuming this responsibility. Subsequently, respondents were notified that the property would be offered for public bidding. Procedural History: Respondents filed a complaint for breach of contract and/or specific performance. The Regional Trial Court (RTC) initially dismissed the complaint, finding no perfected contract. Upon reconsideration, the RTC vacated its decision and, after reception of evidence, rendered judgment in favor of respondents, ordering DBP to execute a final sale, accept the balance of the purchase price, and pay damages and expenses. The Court of Appeals (CA) affirmed the RTC decision in toto. The Petition: DBP filed a petition for review on certiorari, arguing that the CA erred in allowing parol evidence to prove a perfected contract, that the quantum of proof was wanting, and that the burden of proof was not met.
Issue(s)
Whether a perfected contract of sale was entered into between the petitioner and the respondents. Whether the parol evidence rule was correctly applied. Whether the quantum of proof was sufficient to establish a perfected contract of sale.
Ruling
The petition is granted. The assailed decision and resolution of the Court of Appeals are reversed and set aside. The complaint filed in this case is dismissed.
Ratio Decidendi
On the issue of a perfected contract of sale: The Court held that no perfected contract of sale was entered into between the petitioner and the respondents. A perfected contract requires a meeting of the minds on the object and the cause or consideration. In this case, the respondents' offer to purchase explicitly stated that the deposit did not bind DBP until approved by higher authorities. The branch manager's act of merely 'noting' the offer, as evidenced by his signature below the word 'NOTED,' did not constitute approval. Furthermore, the assurance given by Roy Palasan, a mere bank clerk, that the manager had approved the sale, could not bind the bank, as a clerk does not possess the authority to enter into such contracts. The encashment of the deposit, even if termed a 'downpayment' in the receipt, did not signify perfection because the offer itself was conditional upon approval by higher authorities, which never materialized. Therefore, the action for breach of contract and specific performance lacked a legal basis. On the application of the parol evidence rule: The Court found that the lower courts erred in relying on parol evidence to establish a perfected contract. The parol evidence rule, as stated in Rule 130, Section 9 of the Rules of Court, generally prohibits the admission of evidence that contradicts or varies the terms of a written instrument. While exceptions exist, the Court found that the written offer to purchase clearly stipulated conditions for its binding effect, which were not met. The oral testimony of respondent Francisco Ong, attempting to establish a perfected contract despite the written terms, was therefore inadmissible to vary the terms of the written offer. The Court noted that the petitioner had opposed the contents of the oral testimony by filing a memorandum attaching documentary and pleading declarations on the non-perfection of the contract, which had already been passed upon by the court in its initial judgment. On the quantum of proof: The Court determined that the quantum of proof was wanting to establish a perfected contract of sale. The respondents' case relied heavily on the oral testimony of Francisco Ong, which was contradicted by the express terms of their written offer to purchase. The written offer clearly indicated that the transaction was subject to approval by higher authorities, and there was no evidence presented to show that such approval was ever granted. The mere 'noting' of the offer by the branch manager and the assurances of a bank clerk were insufficient to establish a meeting of the minds on the essential elements of a contract of sale. Consequently, the respondents failed to discharge their burden of proving the existence of a perfected contract.
Main Doctrine
A perfected contract of sale requires the meeting of the minds between the parties on the object and the cause or consideration. An offer to purchase, even with a deposit, does not constitute a perfected contract if it is expressly understood that the offer is not binding until approved by higher authorities of the bank, and such approval is never obtained. The apparent authority of an agent binds the principal only when the agent acts within the scope of such apparent authority, and the third party has no knowledge of the agent's lack of actual authority.