G.R. No. 148444, 14 July 2008


On April 21, 1988, the spouses Eduardo and Ma. Pilar Vaca (spouses Vaca) executed a Real Estate Mortgage (REM) in favor of the petitioner over their parcel of residential land with an area of 953 sq. m. and the house constructed thereon, located at Green Meadows Subdivision 1, Quezon City . 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 in the name of spouses Vaca, was cancelled and a new one was issued in the name of the petitioner.

The spouses Vaca, however, commenced an action for the nullification of the real estate mortgage and the foreclosure sale. During the pendency of the aforesaid cases, petitioner advertised the subject property for sale to interested buyers. Respondents Rafael and Monaliza Pronstroller offered to purchase the property. Said offer was made through Atty. Jose Soluta, Jr., petitioner’s Vice-President, Corporate Secretary and a member of its Board of Directors. Petitioner accepted respondents’ offer of ₱7.5 million. Consequently, respondents paid petitioner ₱750,000.00, or 10% of the purchase price, as down payment.

On March 18, 1993, petitioner, through Atty. Soluta, and respondents, executed a Letter-Agreement setting forth therein the terms and conditions of the sale. 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, 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 petitioner’s right to possess the subject property. Atty. Soluta referred respondents’ proposal to petitioner’s Asset Recovery and Remedial Management Committee (ARRMC) but the latter deferred action thereon.

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 Vaca case) and/or the delivery of the property to them free from occupants.

In early 1994, petitioner reorganized its management. Atty. Braulio 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 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 petitioner’s Legal Department for rescission or cancellation of the contract due to respondents’ breach thereof..

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. 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.

On July 28, 1994, respondents commenced the instant suit by filing a Complaint for Specific Performance before the RTC of Antipolo, Rizal. Respondents prayed 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 lis pendens at the dorsal portion of TCT No. 52593. On appeal, the CA affirmed the RTC decision and upheld Atty. Soluta’s authority to represent the petitioner.


Is the petitioner bound by the July 14, 1993 Letter-Agreement signed by Atty. Soluta under the doctrine of apparent authority?


The petition is unmeritorious.

The Court notes that the March 18, 1993 Letter-Agreement was written on a paper with petitioner’s letterhead. It was signed by Atty. Soluta with the conformity of respondents. The authority of Atty. Soluta to act for and on behalf of petitioner was not reflected in said letter or on a separate paper attached 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 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 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 acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers.

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. Hence, petitioner may not impute negligence on the part 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..

The petition is DENIED. The Decision of the Court of Appeals are AFFIRMED.

*Case Digest by Paul C. Gandola, Refresher, Andres Bonifacio Law School, SY 2019-2020