Associated Bank v. Pronstroller
REITERATIONFacts
The Antecedents: Spouses Eduardo and Ma. Pilar Vaca executed a Real Estate Mortgage (REM) in favor of Associated Bank (petitioner) over their residential land and house. Due to failure to pay, the property was foreclosed, and petitioner became the highest bidder. The spouses Vaca challenged the mortgage and foreclosure. During the pendency of these cases, petitioner advertised the property for sale. Respondents Spouses Rafael and Monaliza Pronstroller offered to purchase the property for ₱7,500,000.00 through Atty. Jose Soluta, Jr., petitioner's Vice-President, Corporate Secretary, and a board member. Petitioner accepted the offer, and respondents paid a 10% down payment. A Letter-Agreement dated March 18, 1993, was executed, stipulating the terms, including the balance to be deposited under escrow and applied upon delivery of the property free from occupants. The deposit was to be made within 90 days. Due to the pending case involving the spouses Vaca, respondents requested a modification, proposing to pay the balance only upon receipt of a final court decision affirming petitioner's right to possess the property. Petitioner's committee deferred action. On July 14, 1993, another Letter-Agreement was executed, allowing respondents to pay the balance upon receipt of a final order from the Supreme Court in the Vaca case or delivery of the property free from occupants. Subsequently, petitioner reorganized its management, and Atty. Braulio Dayday took over some of Atty. Soluta's responsibilities. Atty. Dayday discovered respondents' failure to deposit the balance and their request for an extension. The request was disapproved by the Asset Recovery and Remedial Management Committee (ARRMC), which referred the matter to the Legal Department for rescission due to respondents' breach. On May 5, 1994, Atty. Dayday informed respondents of the disapproval and rescission, and forfeiture of their deposit, inviting a new proposal. Respondents presented the July 14, 1993 Letter-Agreement, but Atty. Dayday claimed it was a mistake and Atty. Soluta was unauthorized. On June 6, 1994, respondents proposed a new payment scheme, which petitioner's President disapproved, suggesting payment of the balance with 24.5% interest per annum, or a refund of the deposit. Respondents insisted on enforcing the July 14, 1993 agreement. Petitioner denied knowledge of the July 14 agreement and Atty. Soluta's authority, reiterating rescission. On July 14, 1994, the Supreme Court upheld petitioner's right to possess the property. On July 28, 1994, respondents filed a suit for Specific Performance. Petitioner contended the contract was rescinded due to respondents' failure to deposit the balance. During the case, petitioner sold the property to the spouses Vaca, who registered the sale and began demolishing the house, which was halted by a writ of preliminary injunction. Procedural History: The Regional Trial Court (RTC) ruled in favor of respondents, declaring the rescission null and void, ordering petitioner to accept payment and deliver title and possession, and awarding moral damages, attorney's fees, and expenses of litigation. The RTC applied the doctrine of apparent authority, upholding the July 14, 1993 Letter-Agreement. The Court of Appeals (CA) affirmed the RTC decision, upholding Atty. Soluta's authority and ruling that petitioner had no right to unilaterally rescind. The CA also found petitioner estopped from questioning the July 14 agreement due to its failure to repudiate it for a year. Petitioner's motion for reconsideration was denied. The Petition: Petitioner filed a Petition for Review on Certiorari, assailing the CA's decision and resolution, raising issues regarding the factual findings, the alleged apparent authority of Atty. Soluta, the validity of the rescission, estoppel, and the collateral attack on TCT No. 158082.
Issue(s)
Whether the petitioner is bound by the July 14, 1993 Letter-Agreement signed by Atty. Soluta under the doctrine of apparent authority. Whether there was a valid rescission of the March 18, 1993 and/or July 14, 1993 Letter-Agreement. Whether the respondents are estopped from enforcing the July 14 Letter-Agreement due to their June 6, 1994 "new" proposal. Whether the petitioner is estopped from questioning the validity of the July 14 letter due to its failure to repudiate the same. Whether the instant case constitutes a collateral attack on TCT No. 158082 in the name of the spouses Vaca.
Ruling
The petition is denied. The Decision of the Court of Appeals dated February 27, 2001, and its Resolution dated May 31, 2001, are affirmed.
Ratio Decidendi
On the doctrine of apparent authority and the validity of the July 14, 1993 Letter-Agreement: The Court held that the petitioner is bound by the July 14, 1993 Letter-Agreement under the doctrine of apparent authority. While a corporation generally requires board authorization to bind itself, apparent authority can be derived from the general manner in which the corporation holds out an officer or agent as having the power to act, or from acquiescence in their acts. The Court noted that petitioner had previously allowed Atty. Soluta to enter into the March 18, 1993 agreement without explicit board resolution, thereby clothing him with apparent authority to modify it. The July 14, 1993 letter, written on petitioner's letterhead and signed by Atty. Soluta, was relied upon by respondents in good faith. Petitioner's inaction on respondents' request for modification, coupled with Atty. Soluta's apparent authority, validated the July 14 agreement, binding the corporation. The public has the right to rely on the trustworthiness of bank officers and their acts, and internal corporate matters should not prejudice third parties dealing in good faith. On the validity of the rescission of the contract: The Court ruled that there was no valid rescission of the contract. The March 18, 1993 agreement stipulated conditions for rescission, but the execution of the July 14, 1993 Agreement modified the terms, specifically the payment deadline. Since the date of full payment was extended, respondents did not breach the contract by not paying within the original 90-day period. Therefore, petitioner could not validly exercise its right to rescind based on the original terms. The July 14, 1993 agreement remained in effect. On whether respondents are estopped by their new proposal: The Court found that respondents were not estopped from enforcing the July 14, 1993 Letter-Agreement due to their June 6, 1994 proposal. The Court interpreted the June 6, 1994 letter as an attempt to demonstrate their capacity to purchase, made in response to petitioner's fraudulent misrepresentation that the earlier contracts were rescinded. Even if it were a valid new offer, it was made without abandoning the previous contract, especially since no new contract was perfected. Therefore, the July 14, 1993 agreement was still in effect. On whether petitioner is estopped from questioning the July 14 letter: The Court affirmed that petitioner was estopped from questioning the validity of the July 14, 1993 Letter-Agreement. This estoppel arose from petitioner's inaction for about a year after the agreement was made and its failure to repudiate the same promptly. This inaction, combined with Atty. Soluta's apparent authority, validated the agreement. The Court also noted that petitioner's subsequent actions, such as selling the property to the spouses Vaca despite the pending case and allowing demolition despite an injunction, demonstrated bad faith and an attempt to frustrate the respondents' rights. On the issue of collateral attack on TCT No. 158082: The Court held that the cancellation of TCT No. 158082 was not a collateral attack on the title. Respondents had timely registered a notice of lis pendens, which serves to keep the property within the court's power and warn third parties of the pending litigation. The sale to the spouses Vaca occurred after the notice of lis pendens was registered. The Court reiterated that the indefeasibility of a title cannot be used to defraud another, especially when the latter takes steps to protect their rights, such as registering a notice of lis pendens. The notice of lis pendens provides the court clear authority to cancel titles of subsequent purchasers.
Main Doctrine
A corporation may be bound by the acts of its officer under the doctrine of apparent authority, even if the officer lacked actual authority, if the corporation clothed the officer with the power to act, or acquiesced in similar acts, and the third party relied on such manifestations in good faith. The corporation is estopped from denying such authority.