Engineering Geoscience, Inc. v. Philippine Savings Bank
REITERATIONFacts
The Antecedents: Engineering Geoscience, Inc. (EGI) obtained a loan from Philippine Savings Bank (PSBank) secured by a real estate mortgage. EGI made only partial payments, prompting PSBank to initiate foreclosure proceedings. EGI filed a complaint seeking an injunction, which was granted. Subsequently, EGI and PSBank entered into a compromise agreement, approved by the trial court via a Decision dated January 12, 1993, which stipulated terms for settlement, including a deed of absolute sale over the mortgaged properties if EGI failed to pay a certain amount by December 31, 1993. Procedural History: EGI failed to comply with the compromise agreement, leading PSBank to move for execution. The trial court issued a writ of execution, then held it in abeyance, then reinstated it. A Deed of Absolute Sale was executed in favor of PSBank, and a writ of possession was issued. EGI challenged this, claiming they had one year from registration to vacate. The Court of Appeals (CA) dismissed EGI's petition, holding the writ of possession was a ministerial duty. EGI continued to file various motions and petitions, including a petition for annulment of judgment, alleging lack of authority of its former president, Jose Rolando Santos, to enter into the compromise agreement. The trial court initially denied PSBank's motion for reconsideration of an order that declared the compromise agreement void, but later, the CA annulled the trial court's orders, reinstating the January 12, 1993 Decision. The CA found that the trial court acted with grave abuse of discretion in issuing the questioned orders. The Petition: EGI filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision which annulled the trial court's orders and reinstated the January 12, 1993 Decision, arguing that the compromise agreement was entered into by its former president without the knowledge, consent, and authority of EGI.
Issue(s)
Whether the Court of Appeals erred in annulling and setting aside the Orders dated August 24, 2007 and January 23, 2008 issued by the trial court. Whether the Decision dated January 12, 1993, which approved a Compromise Agreement entered into between PSBank and the former President of EGI, should be reinstated; including the binding nature of the Compromise Agreement and EGI's claims of lack of due process and authority.
Ruling
The petition is denied for lack of merit. The Court of Appeals' Decision promulgated on November 13, 2008, and Resolution promulgated on March 19, 2009, in CA-G.R. SP No. 102885 are affirmed.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in annulling and setting aside the trial court's orders: The Supreme Court affirmed the CA's decision, finding that the trial court acted with grave abuse of discretion amounting to lack or excess of jurisdiction. The CA correctly noted that the trial court's orders overturned a final and executory decision of a co-equal body, specifically the CA's own decision in CA-G.R. SP No. 41348, which had already declared the January 12, 1993 Decision final and executory. The CA's reinstatement of the January 12, 1993 Decision was therefore proper. On the issue of whether the Compromise Agreement entered into by EGI's former president is binding, and EGI's claim of lack of due process and lack of authority: The Court found that EGI is estopped from questioning the authority of its former president, Jose Rolando Santos, to enter into the compromise agreement. EGI had benefited from the loan and the extension of repayment terms under the compromise agreement for over 12 years before raising the issue of lack of authority. This unreasonable delay constituted laches. Furthermore, PSBank had no reason to doubt Santos' authority, as he was the president of EGI at the time and had previously transacted with PSBank on behalf of EGI. The doctrine of apparent authority also applied, as EGI had previously held Santos out as having the authority to transact in its name, including signing promissory notes and mortgages. The compromise agreement itself contained a warranty that the representatives were duly authorized, and PSBank acted in good faith in relying on this representation. The Court found that EGI's arguments were contradicted by its own actions and the records of the case. EGI actively participated in the proceedings before the trial court and even obtained relief therefrom, thus it cannot claim lack of due process. The claim of lack of authority was raised for the first time after 12 years, which the Court deemed to be an abuse of the judicial process to evade a just obligation. The Court also noted that EGI's current representative, Imelda Q. Santos, was a party to the original loan and mortgage, indicating knowledge of the transaction and obligation, yet EGI claimed ignorance of the proceedings. The burden of proving fraud was on EGI, and it failed to present clear and convincing evidence to support its allegations of concealment and misrepresentation by its former president.
Main Doctrine
A party who has benefited from a compromise agreement is estopped from repudiating it, especially when the challenge is raised after an unreasonable delay, constituting laches. Furthermore, a corporation may be bound by the acts of its president under the doctrine of apparent authority, even if actual authority was not expressly granted, if the corporation's conduct led the other party to reasonably believe such authority existed.