[associated bank vs. pronstroller, 558 scra 113(2008)]

8/9/2019 [Associated Bank vs. Pronstroller, 558 SCRA 113(2008)]

http://slidepdf.com/reader/full/associated-bank-vs-pronstroller-558-scra-1132008 1/22

G.R. No. 148444.

July 14, 2008.*

ASSOCIATED BANK (now UNITED OVERSEAS BANK

[PHILS.]), petitioner, SPOUSES RAFAEL and

MONALIZA PRONSTROLLER, respondents.

—Well-settled is the rule that the findings of theRTC, as affirmed by the appellate court, are binding on this Court.

In a petition for review on under Rule 45 of the Rules of

Court, as in this case, this Court may not review the findings of fact

all over again. It must be stressed that this Court is not a trier of

facts, and it is not its function to re-examine and weigh anew the

respective evidence of the parties. The findings of the CA are

conclusive on the parties and carry even more weight when these

coincide with the factual findings of the trial court, unless the

factual findings are not supported by the evidence on record.Petitioner failed to show why the above doctrine should not be

applied to the instant case.

—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. The

power and responsibility to decide whether the corporation should

enter into a contract that will bind the corporation is lodged in the

board of directors. However, just as a natural person may authorize

another to do



_______________

* THIRD DIVISION.

114

114 SUPREME COURT REPORTS ANNOTATED

certain acts for and on his behalf, the board may validly delegate

some of its functions and powers to officers, committees and 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. The authority of acorporate officer or agent in dealing with third persons may be

actual or apparent. The doctrine of “apparent authority,” with

special reference to banks, had long been recognized in this

jurisdiction. Apparent 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 authority to actfor and to bind a corporation may be presumed from acts of

recognition in other instances, wherein the power was exercised

without any objection from its board or shareholders. Undoubtedly,

petitioner had previously allowed Atty. Soluta to enter into the first

agreement without a board resolution expressly authorizing him;

thus, it had clothed him with apparent authority to modify the same

via the second letter-agreement. 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. Naturally, the thirdperson has little or no information as to what occurs in corporate

meetings; and he must necessarily rely upon the external

manifestations of corporate consent. The integrity of commercial

http://central.com.ph/sfsreader/session/000001426c01c8cfe8eb5d29000a0082004500cc/p/AAAG6548/?username=Jeric#body_ftn1



that a person takes ordinary care of his concerns applies and

remains unrebutted. Obviously therefore, respondents made the

new offer without abandoning the previous contract. Since there

was never a perfected new contract, the July 14, 1993 agreement

was still in effect and there was no abandonment to speak of.

116


—

, which literally means pending suit, refers to the

jurisdiction, power or control which a court acquires over property

involved in a suit, pending the continuance of the action, and untilfinal judgment. Founded upon public policy and necessity,

is intended to keep the properties in litigation within the

power of the court until the litigation is terminated, and to prevent

the defeat of the judgment or decree by subsequent alienation. Its

notice is an announcement to the whole world that a particular

property is in litigation and serves as a warning that one who

acquires an interest over said property does so at his own risk or

that he gambles on the result of the litigation over said property.

The filing of a notice of has a twofold effect: (1) to keep

the subject matter of the litigation within the power of the court

until the entry of the final judgment to prevent the defeat of the

final judgment by successive alienations; and (2) to bind a

purchaser, or not, of the land subject of the litigation to

the judgment or decree that the court will promulgate subsequently.

—This

registration, therefore, gives the court clear authority to cancel the

title of the spouses Vaca, since the sale of the subject property was



made after the notice of . Settled is the rule that the

notice is not considered a collateral attack on the title, for the

indefeasibility of the title shall not be used to defraud another

especially if the latter performs acts to protect his rights such as the

timely registration of a notice of .

117

VOL. 558, JULY 14, 2008 117

—As to the liability for moral

damages, attorney’s fees and expenses of litigation, we affirm

the appellate court’s conclusion. Article 2220 of the New Civil

Code allows the recovery of moral damages in breaches of contract

where the party acted fraudulently and in bad faith. As found by

the CA, petitioner undoubtedly acted fraudulently and in bad faith

in breaching the letter-agreements. Despite the pendency of the

case in the RTC, it sold the subject property to the spouses Vaca and

allowed the demolition of the house even if there was already a writ

of preliminary injunction lawfully issued by the court. This is apart

from its act of unilaterally rescinding the subject contract. Clearly,

petitioner’s acts are brazen attempts to frustrate the decision thatthe court may render in favor of respondents. It is, likewise,

apparent that because of petitioner’s acts, respondents were

compelled to litigate justifying the award of attorney’s fees and

expenses of litigation.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

for

petitioner.

for

respondents.

NACHURA, :

This is a Petition for Review on under Rule 45

of the Rules of Court filed by petitioner Associated Bank

(now United Overseas Bank [Phils.]) assailing the Court of

Appeals (CA) Decision1 dated February 27, 2001, which in

turn af-

_______________



1 Penned by Associate Justice Romeo J. Callejo, Sr. (now retired

Supreme Court Justice), with Associate Justices Renato C. Dacudao and

Josefina Guevara-Salonga, concurring; , pp. 10-29.

118


firmed the Regional Trial Court2 (RTC) Decision3 dated

November 14, 1997 in Civil Case No. 94-3298 for

. Likewise assailed is the appellate court’s

Resolution4 dated May 31, 2001 denying petitioner’s motion

for reconsideration.

The facts of the case are as follows:

On April 21, 1988, the spouses Eduardo and Ma. Pilar Vaca (spouses Vaca) executed a Real Estate Mortgage

(REM) in favor of the petitioner5 over their parcel of

residential land with an area of 953 sq. m. and the house

constructed thereon, located at No. 18, Lovebird Street,

Green Meadows Subdivision 1, Quezon City (herein referred

to as the subject property). For failure of the spouses Vaca to

pay their obligation, the subject property was sold at public

auction with the petitioner as the highest bidder. Transfer

Certificate of Title (TCT) No. 254504, in the name of spouses

Vaca, was cancelled and a new one—TCT No. 52593—was

issued in the name of the petitioner.6

The spouses Vaca, however, commenced an action for the

nullification of the real estate mortgage and the foreclosure

sale. Petitioner, on the other hand, filed a petition for the

issuance of a writ of possession which was denied by the

RTC. Petitioner, thereafter, obtained a favorable judgment

when the CA granted its petition but the spouses Vaca

questioned the CA decision before this Court in the case

docketed as G.R. No. 109672.7

_______________

2 Branch 72, Antipolo, Rizal.

3 Penned by Presiding Judge Rogelio L. Angeles; Records, pp. 456-

463.

4 CA , p. 742.

5 Associated Bank which eventually became “Westmont Bank” and

now known as “United Overseas Bank.”6 CA , p. 600.

7 The Court finally resolved the matter on July 14, 1994, 234 SCRA

146.










119

VOL. 558, JULY 14, 2008 119

During the pendency of the aforesaid cases, petitioner

advertised the subject property for sale to interested buyersfor P9,700,000.00.8 Respondents Rafael and Monaliza

Pronstroller offered to purchase the property for

P7,500,000.00. Said offer was made through Atty. Jose

Soluta, Jr. (Atty. Soluta), petitioner’s Vice-President,

Corporate Secretary and a member of its Board of

Directors.9 Petitioner accepted respondents’ offer of P7.5

million. Consequently, respondents paid petitioner

P750,000.00, or 10% of the purchase price, as down

payment.10

On March 18, 1993, petitioner, through Atty. Soluta, and

respondents, executed a Letter-Agreement setting forth

therein the terms and conditions of the sale, to wit:

1. Selling price shall be at P7,500,000.00 payable as follows:

a.

10% deposit and balance of P6,750,000.00 to be

deposited under escrow agreement. Said escrow deposit shall

be applied as payment upon delivery of the aforesaid property

to the buyers free from occupants.

b.

The deposit shall be made within ninety (90) days from

date hereof. Any interest earned on the aforesaid investment

shall be for the buyer’s account. However, the 10% deposit is

non-interest earning.11

Prior to the expiration of the 90-day period within which

to make the escrow deposit, in view of the pendency of the

case between the spouses Vaca and petitioner involving the

subject property,12 respondents requested that the balance

of the purchase price be made payable only upon service onthem of a final decision or resolution of this Court affirming

peti-

_______________

8 Exhibit “A,” folder of exhibits, p. 1.

9 CA , p. 601.

10 Payment was made on March 8, 1993; Exhibit “D,” folder of

exhibits, p. 4.

11 Exhibit “B,” folder of exhibits, pp. 2-3.

12 And, thus, petitioner will not be able to deliver the same free from

any occupants.








120


tioner’s right to possess the subject property. Atty. Soluta

referred respondents’ proposal to petitioner’s Asset Recoveryand Remedial Management Committee (ARRMC) but the

latter deferred action thereon.13

On July 14, 1993, a month after they made the request

and after the payment deadline had lapsed, respondents

and Atty. Soluta, acting for the petitioner, executed another

Letter-Agreement allowing the former to pay the balance of

the purchase price upon receipt of a final order from this

Court (in the case) and/or the delivery of the property

to them free from occupants.14

Towards the end of 1993, or in early 1994, petitioner

reorganized its management. Atty. Braulio Dayday (Atty.

Dayday) became petitioner’s Assistant Vice-President and

Head of the Documentation Section, while Atty. Soluta was

relieved of his responsibilities. Atty. Dayday reviewed

petitioner’s records of its outstanding accounts and

discovered that respondents failed to deposit the balance of

the purchase price of the subject property. He, likewise,

found that respondents requested for an extension of timewithin which to pay. The matter was then resubmitted to

the ARRMC during its meeting on March 4, 1994, and it

was disapproved. ARRMC, thus, referred the matter to

petitioner’s Legal Department for rescission or cancellation

of the contract due to respondents’ breach thereof.15

On May 5, 1994, Atty. Dayday informed respondents that

their request for extension was disapproved by ARRMC

and, in view of their breach of the contract, petitioner was

rescinding the same and forfeiting their deposit. Petitioner

added that if respondents were still interested in buying the

subject property, they had to submit their new proposal.16

Respon-

_______________

13 CA , p. 602.

14 Exhibit “E,” folder of exhibits, p. 5.

15 CA , pp. 602-603.

16 , at p. 603.

121








that petitioner be ordered to sell the subject property to

them in accordance with their letter-agreement of July 14,

1993. They, likewise, caused the annotation of a notice of

at the dorsal portion of TCT No. 52593.For its part, petitioner contended that their contract had

already been rescinded because of respondents’ failure to

deposit in escrow the balance of the purchase price within

the stipulated period.23

During the pendency of the case, petitioner sold the

subject property to the spouses Vaca, who eventually

registered the sale; and on the basis thereof, TCT No. 52593

was cancelled and TCT No. 158082 was issued in their

names.24 As new owners, the spouses Vaca started

demolishing the house on the subject property which,

however, was not completed by virtue of the writ of

preliminary injunction issued by the court.25

On November 14, 1997, the trial court finally resolved

the matter in favor of respondents, disposing, as follows:

“WHEREFORE, premises considered, the Court finds defendant’s

rescission of the Agreement to Sell to be null and void for being

contrary to law and public policy.

ACCORDINGLY, defendant bank is hereby ordered to acceptplaintiffs’ payment of the balance of the purchase price in the

amount of Six Million Seven Hundred Fifty Thousand Pesos

(P6,750,000.00) and to deliver the title and possession to subject

property, free from all liens and encumbrances upon receipt of said

payment. Likewise, defendant bank is ordered to pay plaintiffs

moral damages and attorney’s fees in the amount of One Hundred

Thirty Thousand Pesos (P130,000.00) and expenses of litigation in

the amount of Twenty Thousand Pesos (P20,000.00).

SO ORDERED.”26

_______________

23 , at pp. 11-18.

24 CA , p. 606.

25

26 Records, p. 463.

123

VOL. 558, JULY 14, 2008 123







Applying the rule of “apparent authority,”27 the court

upheld the validity of the July 14, 1993 Letter-Agreement

where the respondents were given an extension within

which to make payment. Consequently, respondents did not

incur in delay, and thus, the court concluded that the

rescission of the contract was without basis and contrary to

law.28

On appeal, the CA affirmed the RTC decision and upheld

Atty. Soluta’s authority to represent the petitioner. It

further ruled that petitioner had no right to unilaterally

rescind the contract; otherwise, it would give the bank

officers license to continuously review and eventually

rescind contracts entered into by previous officers. As to

whether respondents were estopped from enforcing the July

14, 1993 Letter-Agreement, the appellate court ruled in the

negative. It found, instead, that petitioners were estoppedfrom questioning the efficacy of the July 14 agreement

because of its failure to repudiate the same for a period of

one year.29 Thus, the court said in its decision:

“1. The Appellant (Westmont Bank) is hereby ordered to

execute a “Deed of Absolute Sale” in favor of the Appellees over

the property covered by Transfer Certificate of Title No. 52593,

including the improvement thereon, and secure, from the Register

of Deeds, a Torrens Title over the said property free from all liens,

claims or encumbrances upon the payment by the Appellees of the

balance of the purchase price of the property in the amount of

P6,750,000.00;

2. The Register of Deeds is hereby ordered to cancel Transfer

Certificate of Title No. 158082 under the names of the Spouses Edu-

_______________

27 The doctrine states that although an officer or agent acts without or in

excess of his actual authority, if he acts within the scope of an apparent

authority with which the corporation has clothed him by holding him out or

permitting him to appear as having such authority, the corporation is bound

thereby in favor of a person who deals with him in good faith.

28 Records, pp. 461-462.

29 CA , pp. 608-617.

124


ardo [and Ma. Pilar] Vaca and to issue another under the names of






the Appellees as stated in the preceding paragraph;

3. The appellant is hereby ordered to pay to the appellee Rafael

Pronstroller the amount of P100,000.00 as and by way of moral

damages and to pay to the Appellees the amount of P30,000.00 as

and by way of attorney’s fees and the amount of P20,000.00 for

litigation expense.

4. The counterclaims of the Appellant are dismissed.

SO ORDERED.”30

Petitioner’s motion for reconsideration was denied on

May 31, 2001. Hence, the present petition raising the

following issues:

I.

THE NARRATION OR STATEMENT OF THE FACTS OF THE

CASE BY THE HONORABLE COURT OF APPEALS IS TOTALLY

BEREFT OF EVIDENTIARY SUPPORT, CONTRARY TO THE

EVIDENCE ON RECORD AND PURELY BASED ON

ERRONEOUS ASSUMPTIONS, PRESUMPTIONS, SURMISES,

AND CONJECTURES.

II.

THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN

MERELY RELYING UPON THE MANIFESTLY ERRONEOUS

FINDING OF THE HONORABLE TRIAL COURT ON THE

ALLEGED APPARENT AUTHORITY OF ATTY. JOSE SOLUTA,

JR. IN THAT THE LATTER’S FINDING IS CONTRARY TO THE

UNDISPUTED FACTS AND THE EVIDENCE ON RECORD.III.

THE HONORABLE COURT OF APPEALS’ OWN FINDING THAT

ATTY. JOSE SOLUTA, JR. HAD AUTHORITY TO SELL THE

SUBJECT PROPERTY ON HIS OWN (EVEN WITHOUT THE

COMMITTEE’S APPROVAL) IS LIKEWISE GROSSLY

ERRONEOUS, FINDS NO EVIDENTIARY SUPPORT AND IS

EVEN CONTRARY TO THE EVIDENCE ON RECORD IN THAT—

_______________

30 , at p. 618.

125

VOL. 558, JULY 14, 2008 125

A.) AT NO TIME DID PETITIONER ADMIT THAT ATTY.

JOSE SOLUTA, JR. IS AUTHORIZED TO SELL THE

SUBJECT PROPERTY ON HIS OWN;

B.) THE AUTHORITY OF ATTY. JOSE SOLUTA, JR.




CANNOT BE PRESUMED FROM HIS DESIGNATIONS OR

TITLES; AND

C.) RESPONDENTS FULLY KNEW OR HAD

KNOWLEDGE OF THE LACK OF AUTHORITY OF ATTY.

JOSE SOLUTA, JR. TO SELL THE SUBJECT PROPERTY

ON HIS OWN.

IV.

THE HONORABLE TRIAL COURT AND THE HONORABLECOURT OF APPEALS GROSSLY MISAPPLIED THE DOCTRINE

OF APPARENT AUTHORITY IN THE PRESENT CASE.

V.

THE HONORABLE TRIAL COURT AND THE HONORABLE

COURT OF APPEALS GROSSLY ERRED IN NOT HOLDING

THAT THE CONTRACT TO SELL CONTAINED IN THE MARCH

18, 1993 LETTER WAS VALIDLY RESCINDED BY PETITIONER.

VI.

THE HONORABLE COURT OF APPEALS GROSSLY ERRED INNOT HOLDING RESPONDENTS ESTOPPED FROM DENYING

THE VALIDITY OF THE RESCISSION OF THE CONTRACT TO

SELL AS EMBODIED IN THE MARCH 18, 1993 LETTER AND

THE LACK OF AUTHORITY OF ATTY. SOLUTA, JR. TO GRANT

THE EXTENSION AS CONTAINED IN HIS LETTER OF JULY 14,

1993 AFTER THEY VOLUNTARILY SUBMITTED WITH FULL

KNOWLEDGE OF ITS IMPORT AND IMPLICATION A NEW

OFFER TO PURCHASE THE SUBJECT PROPERTY CONTAINED

IN THEIR LETTER DATED JUNE 6, 1994.

VII.

IN ANY EVENT, THE HONORABLE COURT OF APPEALS

ERRED IN NOT HOLDING THAT THE CONTRACT TO SELL

UNDER THE LETTER OF MARCH 18, 1993 AND THE LETTER

OF JULY 14, 1993 HAD BEEN VACATED WHEN

RESPONDENTS VOLUNTARILY SUBMITTED WITH FULL

KNOWLEDGE OF ITS IMPORT AND IMPLICATION THEIR NEW

OFFER CONTAINED

126


IN THEIR LETTER OF JUNE 6, 1994 WITHOUT ANY

CONDITION OR RESERVATION WHATSOEVER.

VIII.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

PETITIONER ESTOPPED FROM QUESTIONING THE VALIDITY OF THE JULY 14, 1993 LETTER SIGNED BY ATTY. JOSE

SOLUTA, JR.

IX.



THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN

HOLDING THAT PETITIONER ALLEGEDLY ACTED

FRAUDULENTLY AND IN BAD FAITH IN ITS DEALINGS WITH

RESPONDENTS.

X.

THE ORDER OF THE HONORABLE COURT OF APPEALS TO

CANCEL TCT NO. 158082 UNDER THE NAMES OF SPS. VACA

IS A COLLATERAL ATTACK AGAINST THE SAID CERTIFICATEOF TITLE WHICH IS PROSCRIBED BY SECTION 48 OF P.D.

1529.

XI.

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING

MORAL DAMAGES, ATTORNEY’S FEES, AND EXPENSES OF

LITIGATION IN FAVOR OF RESPONDENTS.31

Reduced to bare essentials, the decision on the instant

petition hinges on the resolution of the following specific

questions: 1) Is the petitioner bound by the July 14, 1993

Letter-Agreement signed by Atty. Soluta under the doctrine

of apparent authority? 2) Was there a valid rescission of the

March 18, 1993 and/or July 14, 1993 Letter-Agreement? 3)

Are the respondents estopped from enforcing the July 14

Letter-Agreement because of their June 6, 1994 “new”

proposal? 4) Is the petitioner estopped from questioning the

validity of the July 14 letter because of its failure to

repudiate the same and

_______________

31 , pp. 54-56.

127

VOL. 558, JULY 14, 2008 127

5) Is the instant case a collateral attack on TCT No.

158082 in the name of the spouses Vaca?

The petition is unmeritorious.

Well-settled is the rule that the findings of the RTC, as

affirmed by the appellate court, are binding on this Court.

In a petition for review on under Rule 45 of the

Rules of Court, as in this case, this Court may not review

the findings of fact all over again. It must be stressed that

this Court is not a trier of facts, and it is not its function to

re-examine and weigh anew the respective evidence of the

parties.32 The findings of the CA are conclusive on the




parties and carry even more weight when these coincide

with the factual findings of the trial court, unless the factual

findings are not supported by the evidence on record.33

Petitioner failed to show why the above doctrine should not

be applied to the instant case.

Contrary to petitioner’s contention that the CA’s factual

findings are not supported by the evidence on record, the

assailed decision clearly shows that the appellate court notonly relied on the RTC’s findings but made its own analysis

of the record of the case. The CA decision contains specific

details drawn from the contents of the pleadings filed by

both parties, from the testimonies of the witnesses and from

the documentary evidence submitted. It was from all these

that the appellate court drew its own conclusion using

applicable legal principles and jurisprudential rules.

The Court notes that the March 18, 1993 Letter-

Agreement was written on a paper with petitioner’sletterhead. It was signed by Atty. Soluta with the

conformity of respondents. The authority of Atty. Soluta to

act for and on behalf of peti-

_______________

32 , G.R. No. 152251, August 17, 2006, 499 SCRA 212,

214-215, citing 432 SCRA 329, 336 (2004).

33

, G.R. No. 138700, June 9, 2004, 431

SCRA 458, 466.

128


tioner was not reflected in said letter or on a separate paperattached to it. Yet, petitioner recognized Atty. Soluta’s

authority to sign the same and, thus, acknowledged its

binding effect. On the other hand, the July 14, 1993 letter

was written on the same type of paper with the same

letterhead and of the same form as the earlier letter. It was

also signed by the same person with the conformity of the

same respondents. Again, nowhere in said letter did

petitioner specifically authorize Atty. Soluta to sign it for

and on its behalf. This time, however, petitioner questionedthe validity and binding effect of the agreement, arguing

that Atty. Soluta was not authorized to modify the earlier

terms of the contract and could not in any way bind the





petitioner.

We beg to differ.

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. The power and responsibility to

decide whether the corporation should enter into a contract

that will bind the corporation is lodged in the board of

directors. However, just as a natural person may authorizeanother to do certain acts for and on his behalf, the board

may validly delegate some of its functions and powers to

officers, committees and 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.34

The authority of a corporate officer or agent in dealing

with third persons may be actual or apparent. The doctrineof “apparent authority,” with special reference to banks, had

long

_______________

34 , 451 Phil.

554, 559-560; 403 SCRA 452, 457 (2003), citing

, 357 Phil. 850; 297 SCRA 170

(1998); , 450 Phil. 401, 414; 402 SCRA 339,

350 (2003).

129

VOL. 558, JULY 14, 2008 129

been recognized in this jurisdiction.35 Apparent authority is

derived not merely from practice. Its existence may beascertained 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)

36

Accordingly, the authority to act for and to bind a

corporation may be presumed from acts of recognition inother instances, wherein the power was exercised without

any objection from its board or shareholders. Undoubtedly,

petitioner had previously allowed Atty. Soluta to enter into




the first agreement without a board resolution expressly

authorizing him; thus, it had clothed him with apparent

authority to modify the same via the second letter-

agreement. 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.37

Naturally, the third person has little or no information as

to what occurs in corporate meetings; and he mustnecessarily rely upon the external manifestations of

corporate consent. The integrity of commercial transactions

can only be maintained by holding the corporation strictly

to the liability fixed upon it by its agents in accordance with

law.38 What tran-

_______________

35 , 322 Phil.

280, 319-320; 252 SCRA 259, 295 (1996).

36 Emphasis supplied.

37 note

34, at p. 560; p. 457, citing

, 357 Phil. 850; 297 SCRA 170 (1998);

note 34.

38

, G.R. No. 132390, May 21, 2004, 429 SCRA 30, 38;

, 381 Phil. 911, 925; 325SCRA 99, 110 (2000).

130


spires in the corporate board room is entirely an internal

matter. Hence, petitioner may not impute negligence on thepart of the respondents in failing to find out the scope of

Atty. Soluta’s authority. Indeed, the public has the right to

rely on the trustworthiness of bank officers and their acts.39

As early as June 1993, or prior to the 90-day period

within which to make the full payment, respondents already

requested a modification of the earlier agreement such that

the full payment should be made upon receipt of this Court’s

decision confirming petitioner’s right to the subject

property. The matter was brought to the petitioner’sattention and was in fact discussed by the members of the

Board. Instead of acting on said request (considering that

the 90-day period was about to expire), the board deferred







action on the request. It was only after one year and after

the bank’s reorganization that the board rejected

respondents’ request. We cannot therefore blame the

respondents in relying on the July 14, 1993 Letter-

Agreement. Petitioner’s inaction, coupled with the apparent

authority of Atty. Soluta to act on behalf of the corporation,

validates the July 14 agreement and thus binds the

corporation. All these taken together, lead to no otherconclusion than that the petitioner attempted to defraud the

respondents. This is bolstered by the fact that it forged

another contract involving the same property, with another

buyer, the spouses Vaca, notwithstanding the pendency of

the instant case.

We would like to emphasize that if a corporation

knowingly permits its officer, or any other agent, to perform

acts within the scope of an apparent authority, holding him

out to the public as possessing power to do those acts, thecorporation will, as against any person who has dealt in

good faith with

_______________

39

, at p. 38.

131

VOL. 558, JULY 14, 2008 131

the corporation through such agent, be estopped from

denying such authority.40

Petitioner further insists that specific performance is not

available to respondents because the Letter-Agreements

had already been rescinded—the March 18 agreementbecause of the breach committed by the respondents; and

the July 14 letter because of the new offer of the

respondents which was not approved by petitioner.

Again, the argument is misplaced.

Basic is the rule that a contract constitutes the law

between the parties. Concededly, parties may validly

stipulate the unilateral rescission of a contract.41 This is

usually in the form of a stipulation granting the seller the

right to forfeit installments or deposits made by the buyer incase of the latter’s failure to make full payment on the

stipulated date. While the petitioner in the instant case may

have the right, under the March 18 agreement, to




unilaterally rescind the contract in case of respondents’

failure to comply with the terms of the contract,42 the

execution of the July 14 Agree-

_______________

40

note 38, at p. 37;note 34, at p. 415; p. 351;

note 38;

note 34, at p. 865; pp. 184-185.

41 See , G.R. No. 131408, July 31, 2006, 497

SCRA 154; see also

, G.R. No. 154852, October

21, 2004, 441 SCRA 126.

42 The March 18 Letter-Agreement reads:

We are pleased to inform you that your offer to purchase our

property x x x has been accepted by the Bank under the following

terms and conditions:

x x x x

4. Forfeiture of deposit in case of your default in complying

with the terms and conditions herein set forth. (Exhibit “B,”

folder of exhibits, p. 2.)

132


ment prevented petitioner from exercising the right to

rescind. This is so because there was in the first place, no

breach of contract, as the date of full payment had already

been modified by the later agreement.

Neither can the July 14, 1993 agreement be considered

abandoned by respondents’ act of making a new offer, whichwas unfortunately rejected by petitioner. A careful reading

of the June 6, 1994 letter of respondents impels this Court to

believe that such offer was made only to demonstrate their

capacity to purchase the subject property.43 Besides, even if

it was a valid new offer, they did so only due to the

fraudulent misrepresentation made by petitioner that their

earlier contracts had already been rescinded. Considering

respondents’ capacity to pay and their continuing interest in

the subject property,44 to abandon their right to the contractand to the property, absent any form of protection, is

contrary to human nature. The presumption that a person

takes ordinary care of his concerns applies and remains






unrebutted.45 Obviously therefore, respondents made the

new offer without abandoning the previous contract. Since

there was never a perfected new contract, the July 14, 1993

agreement was still in effect and there was no abandonment

to speak of.

In its final attempt to prevent respondents from

attaining a favorable result, petitioner argues that the

instant case should not prosper because the cancellation of TCT No. 158082 is a collateral attack on the title which is

proscribed by law.

Such contention is baseless.

_______________

43 , p. 558.

44 As they never slept on their rights showed by their repeated

follow up of the results of the pending case involving the subject matterand negotiation with the petitioner through its officers, for the payment

and delivery of the property.

45 Revised Rules on Evidence, Rule 131, Sec. 3(d).

133

VOL. 558, JULY 14, 2008 133

Admittedly, during the pendency of the case, respondents

timely registered a notice of to warn the whole

world that the property was the subject of a pending

litigation.

, which literally means pending suit, refers to

the jurisdiction, power or control which a court acquires

over property involved in a suit, pending the continuance of

the action, and until final judgment. Founded upon public

policy and necessity, is intended to keep theproperties in litigation within the power of the court until

the litigation is terminated, and to prevent the defeat of the

judgment or decree by subsequent alienation. Its notice is

an announcement to the whole world that a particular

property is in litigation and serves as a warning that one

who acquires an interest over said property does so at his

own risk or that he gambles on the result of the litigation

over said property.46

The filing of a notice of has a twofold effect:(1) to keep the subject matter of the litigation within the

power of the court until the entry of the final judgment to

prevent the defeat of the final judgment by successive






alienations; and (2) to bind a purchaser, or not, of

the land subject of the litigation to the judgment or decree

that the court will promulgate subsequently.47

This registration, therefore, gives the court clear

authority to cancel the title of the spouses Vaca, since the

sale of the subject property was made after the notice of

. Settled is the rule that the notice is not considered

a collateral attack on the title,48 for the indefeasibility of thetitle shall not be used to defraud another especially if the

latter performs

_______________

46 , G.R. No. 142406, May 16, 2005, 458

SCRA 483, 492.

47 , at pp. 492-493; , G.R.

No. 146262, January 21, 2005, 449 SCRA 173, 186.48 , at p. 495; , 408 Phil. 503, 509; 356

SCRA 386, 392 (2001).

134


acts to protect his rights such as the timely registration of a

notice of .

As to the liability for moral damages, attorney’s fees and

expenses of litigation, we affirm the appellate court’s

conclusion. Article 222049 of the New Civil Code allows the

recovery of moral damages in breaches of contract where the

party acted fraudulently and in bad faith. As found by the

CA, petitioner undoubtedly acted fraudulently and in bad

faith in breaching the letter-agreements. Despite the

pendency of the case in the RTC, it sold the subject propertyto the spouses Vaca and allowed the demolition of the house

even if there was already a writ of preliminary injunction

lawfully issued by the court. This is apart from its act of

unilaterally rescinding the subject contract. Clearly,

petitioner’s acts are brazen attempts to frustrate the

decision that the court may render in favor of respondents.50

It is, likewise, apparent that because of petitioner’s acts,

respondents were compelled to litigate justifying the award

of attorney’s fees and expenses of litigation.WHEREFORE, premises considered, the petition is

DENIED. The Decision of the Court of Appeals dated

February 27, 2001 and its Resolution dated May 31, 2001 in






CA-G.R. CV No. 60315 are AFFIRMED.

SO ORDERED.

and ., concur.

_______________

49 Article 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under the

circumstances, such damages are justly due. The same rule applies to

breaches of contract where the defendant acted fraudulently or in bad

faith.

50 , p. 27.

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