G.R. No. 148444.July 14, 2008.

ASSOCIATED BANK (now UNITED OVERSEAS BANK

[PHILS.]), petitioner,
SPOUSES RAFAEL and
MONALIZA PRONSTROLLER, respondents.

Wellsettled 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 reexamine 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 a
corporate 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 act

for 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 letteragreement. 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 third
person 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

transactions can only be maintained by holding the corporation

strictly to the liability fixed upon it by its agents in accordance with
law. What transpires in the corporate board room is entirely an
internal matter. Hence, petitioner may not impute negligence on the
part of the respondents in
115

VOL. 558, JULY 14, 2008

115

failing to find out the scope of Atty. Solutas authority. Indeed, the
public has the right to rely on the trustworthiness of bank officers
and their acts.

Basic is the rule that a contract constitutes the law between the
parties. Concededly, parties may validly stipulate the unilateral
rescission of a contract. This is usually in the form of a stipulation
granting the seller the right to forfeit installments or deposits made
by the buyer in case of the latters 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, the execution of the July 14 Agreement
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, which was 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. 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, to
abandon their right to the contract and 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. 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

116

SUPREME COURT REPORTS ANNOTATED

, 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 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, attorneys fees and expenses of litigation, we affirm
the appellate courts 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 letteragreements. 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,
petitioners acts are brazen attempts to frustrate the decision that
the court may render in favor of respondents. It is, likewise,
apparent that because of petitioners acts, respondents were
compelled to litigate justifying the award of attorneys 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 GuevaraSalonga, concurring;

, pp. 1029.
118

118

SUPREME COURT REPORTS ANNOTATED

firmed the Regional Trial Court2 (RTC) Decision3 dated

November 14, 1997 in Civil Case No. 943298 for
. Likewise assailed is the appellate courts
4
Resolution dated May 31, 2001 denying petitioners 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 oneTCT No. 52593was
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 buyers
for 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), petitioners VicePresident,
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 LetterAgreement 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 buyers account. However, the 10% deposit is
noninterest earning.11

Prior to the expiration of the 90day 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 on
them 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. 23.
12 And, thus, petitioner will not be able to deliver the same free from
any occupants.

120

120

SUPREME COURT REPORTS ANNOTATED

tioners right to possess the subject property. Atty. Soluta

referred respondents proposal to petitioners Asset Recovery
and 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
LetterAgreement 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 petitioners Assistant VicePresident and
Head of the Documentation Section, while Atty. Soluta was
relieved of his responsibilities. Atty. Dayday reviewed
petitioners 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 time
within 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
petitioners 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
16

, pp. 602603.

, at p. 603.
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VOL. 558, JULY 14, 2008

121

dents went to the petitioners office, talked to Atty. Dayday

and gave him the LetterAgreement of July 14, 1993 to
show that they were granted an extension. However, Atty.
Dayday claimed that the letter was a mistake and that Atty.
Soluta was not authorized to give such extension.17
On June 6, 1994, respondents proposed to pay the
balance of the purchase price as follows: P3,000,000.00 upon
the approval of their proposal and the balance after six (6)
months.18 However, the proposal was disapproved by the
petitioners President. In a letter dated June 9, 1994,
petitioner advised respondents that the former would accept
the latters proposal only if they would pay interest at the
rate of 24.5%
on the unpaid balance. Petitioner
also allowed respondents a refund of their deposit of
P750,000.00 if they would not agree to petitioners new
proposal.19
For failure of the parties to reach an agreement,
respondents, through their counsel, informed petitioner that
they would be enforcing their agreement dated July 14,
1993.20 Petitioner countered that it was not aware of the
existence of the July 14 agreement and that Atty. Soluta
was not authorized to sign for and on behalf of the bank. It,
likewise, reiterated the rescission of their previous
agreement because of the breach committed by
respondents.21
On July 14, 1994, in the
case, this Court upheld
petitioners right to possess the subject property.
On July 28, 1994, respondents commenced the instant
suit by filing a Complaint for
before
22
the RTC of Antipolo, Rizal. The case was raffled to Branch
72 and was docketed as Civil Case No. 943298.
Respondents prayed
_______________
17

, at p. 604.

18 Exhibit F, folder of exhibits, p. 6.

19 Exhibit G, folder of exhibits, p. 7.
20 Exhibit H, folder of exhibits, pp. 89.
21 Exhibit I, folder of exhibits, pp. 1012.
22 Records, pp. 15.
122

122

SUPREME COURT REPORTS ANNOTATED

that petitioner be ordered to sell the subject property to

them in accordance with their letteragreement 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 defendants
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 accept
plaintiffs 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 attorneys 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. 1118.

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 LetterAgreement
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. Solutas 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 LetterAgreement, the appellate court ruled in the
negative. It found, instead, that petitioners were estopped
from 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. 461462.
29 CA

, pp. 608617.
124

124

SUPREME COURT REPORTS ANNOTATED

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 attorneys fees and the amount of P20,000.00 for
litigation expense.
4.The counterclaims of the Appellant are dismissed.
SO ORDERED.30

Petitioners 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 LATTERS 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
COMMITTEES
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 HONORABLE
COURT 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 IN
NOT 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

126

SUPREME COURT REPORTS ANNOTATED

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 CERTIFICATE
OF TITLE WHICH IS PROSCRIBED BY SECTION 48 OF P.D.
1529.
XI.
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING
MORAL DAMAGES, ATTORNEYS 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
LetterAgreement 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 LetterAgreement? 3)
Are the respondents estopped from enforcing the July 14
LetterAgreement 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. 5456.
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.
Wellsettled 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
reexamine 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 petitioners contention that the CAs factual
findings are not supported by the evidence on record, the
assailed decision clearly shows that the appellate court not
only relied on the RTCs 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 petitioners
letterhead. 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,

214215, citing

432 SCRA 329, 336 (2004).

33
, G.R. No. 138700, June 9, 2004, 431
SCRA 458, 466.
128

128

SUPREME COURT REPORTS ANNOTATED

tioner was not reflected in said letter or on a separate paper

attached to it. Yet, petitioner recognized Atty. Solutas
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 questioned
the 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 authorize
another 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 doctrine
of apparent authority, with special reference to banks, had
long
_______________
34

, 451 Phil.

554, 559560; 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 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)
36

Accordingly, the authority to act for 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.37
Naturally, the third person 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 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, 319320; 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; 325
SCRA 99, 110 (2000).
130

130

SUPREME COURT REPORTS ANNOTATED

spires in the corporate board room is entirely an internal

matter. Hence, petitioner may not impute negligence on the
part of the respondents in failing to find out the scope of
Atty. Solutas 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 90day 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 Courts
decision confirming petitioners right to the subject
property. The matter was brought to the petitioners
attention and was in fact discussed by the members of the
Board. Instead of acting on said request (considering that
the 90day period was about to expire), the board deferred

action on the request. It was only after one year and after
the banks reorganization that the board rejected
respondents request. We cannot therefore blame the
respondents in relying on the July 14, 1993 Letter
Agreement. Petitioners 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 other
conclusion 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, the
corporation will, as against any person who has dealt in
good faith with
_______________
39
, at p. 38.
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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 LetterAgreements
had already been rescindedthe March 18 agreement
because 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 in
case of the latters 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. 184185.
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 LetterAgreement 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:
xxxx
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

132

SUPREME COURT REPORTS ANNOTATED

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, which
was 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 contract
and 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 matter
and 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).
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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 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.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 the
title 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. 492493;

, 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

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SUPREME COURT REPORTS ANNOTATED

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

notice of
.
As to the liability for moral damages, attorneys fees and
expenses of litigation, we affirm
the appellate courts
49
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 letteragreements. 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,
petitioners 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 petitioners acts,
respondents were compelled to litigate justifying the award
of attorneys 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

CAG.R. CV No. 60315 are AFFIRMED.

SO ORDERED.
and

., concur.

_______________
49 Article2220.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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