G.R. Nos. 89679-81 September 28, 1990 58. LAND BANK OF THE PHILIPPINES, petitioner, vs COMMISSION ON AUDIT, respondent.

Menandro A. Alvarez and Norberto L. Martinez for petitioner.

MELENCIO-HERRERA, J.: This Petition raises the issue of whether it is within the corporate powers of the Land Bank of the Philippines (LBP) to waive the penalty charges of P9,636.36 on the loan of the Home Savings Bank and Trust Company (HSBTC). The LBP asserts that, as a banking institution, its Charter authorizes it to condone claims or liabilities. The Commission on Audit, on the other hand, maintains that such power is exclusively vested in the Commission pursuant to Section 36 of Pres. Decree No. 1445, or the Government Auditing Code. The records indicate that on 22 July 1980, the Board of Directors of the LBP issued Resolution No. 80-222 (Rollo, pp. 4-5, pp. 91-93) fixing the new rates for penalty charges on past due loans/amortization and other credit accommodations. The Resolution also provided that "in cases of defaults in loan payment and other credit accommodations due to unforeseen, highly justifiable reasons/circumstances beyond the control of the borrower such as damages due to natural calamities, sickness, adverse government rulings or court judgments, duly processed and verified by the lending units, penalty charges may be condoned / reduced by the Loan Executive Committee upon recommendation of the appropriate lending units" (Emphasis supplied) Pursuant to this Resolution, LBP, through its Loan Executive Committee, waived the penalty charges in the amount of Nine Thousand Six Hundred Thirty Six Pesos and Thirty Six Centavos (P9,636.36) on the loan of HSBTC, a thrift banking institution organized under Philippine laws (Rollo, p. 4). On 23 September 1986, LBP requested its Corporate Auditor to pass in audit its waiver of the penalty charges. Said official questioned the waiver and opined that the power to condone interests or penalties is vested exclusively in the COA but, in the absence of a categorical ruling on the matter applicable to a government banking institution, referred the LBP request to the COA in a letter dated 20 January 1987. In COA Decision No. 551, dated 29 June 1988 (Annex "C", Petition, Rollo, p. 29), the COA held that the waiver is unauthorized and should outrightly be disallowed in audit, pursuant to Pres. Decree No. 1445, Section 36, infra. Reconsiderations successively sought by LBP met with denial in COA Decision No. 701, dated 13 December 1988 (Annex "F", Petition, Rollo, p. 38), and in COA Decision No. 977, dated 6 June 1989 (Annex "A", ibid., p. 25), both of which Decisions emphasized COA's exclusive prerogative to settle and/or compromise claims. Thus, this Petition and Amended Petition erroneously brought under Rules 44 and 43 of the Rules of Court, respectively, the proper remedy being that of certiorari under Rule 65 (Article IX (A) Sec. 7, 1987 Constitution).

The issue for resolution is whether or not LBP is authorized to compromise or release claims or liabilities in whole or in part. COA maintains that it has the sole prerogative to compromise liabilities to the Government pursuant to Section 36 of Pres. Decree No. 1445, the Government Auditing Code, which provides, inter alia, that: Sec. 36. Power to compromise claims. (1) When the interest of the government so requires, the Commission may compromise or release in whole or in part, any claim or settled liability to any government agency not exceeding ten thousand pesos and with the written approval of the Prime Minister, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the Prime Minister, with their recommendations, to the National Assembly. xxx xxx xxx On the other hand, LBP claims that it, too, has the power to condone penalties being a commercial bank clothed with authority to exercise all the general powers mentioned in the Corporation Law and the General Banking Act, as provided in Section 75[12] of its Charter, Rep. Act. No. 3844, as amended by Pres. Decree No. 251, among which is the power to write off loans and advances (General Banking Act, Sec. 84, infra), which necessarily includes the lesser power to charge off interests and penalties. LBP also submits that its Charter (Rep. Act No. 3844, as amended), being a special law, should prevail over the general grant of authority to COA by Pres. Decree No. 1445 to compromise claims. We agree with LBP. LBP was created as a body corporate and government instrumentality to provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform (Rep. Act No. 3844, as amended, Sec. 74). Section 75 of its Charter vests in LBP specific powers normally exercised by banking institutions, such as the authority to grant short, medium and long-term loans and advances against security of real estate and/or other acceptable assets; to guarantee acceptance(s), credits, loans, transactions or obligations; and to borrow from, or rediscount notes, bills of exchange and other commercial papers with the Central Bank. In addition to the enumeration of specific powers granted to LBP, Section 75 of its Charter also authorizes it: 12. To exercise the general powers mentioned in the Corporation Law and the General Banking Act, as amended, insofar as they are not inconsistent or incompatible with this Decree. One of the general powers mentioned in the General Banking Act is that provided for in Section 84 thereof, reading: xxx xxx xxx

Writing-off loans and advances with an outstanding amount of one hundred thousand pesos or more shall require the prior approval of the Monetary Board (As amended by PD 71). It will thus be seen that LBP is a unique and specialized banking institution, not an ordinary "government agency" within the scope of Section 36 of Pres. Decree No. 1445. As a bank, it is specifically placed under the supervision and regulation of the Central Bank of the Philippines pursuant to its Charter (Sec. 97, Rep. Act No. 3844, as amended by Pres. Decree No. 251). In so far as loans and advances are concerned, therefore, it should be deemed primarily governed by Central Bank Circular No. 958, Series of 1983, which vests the determination of the frequency of writing-off loans in the Board of Directors of a bank provided that the loans writtenoff do not exceed a certain aggregate amount. The pertinent portion of that Circular reads: b. Frequency/ceiling of write-off. The frequency for writing-off loans and advances shall be left to the discretion of the Board of Directors of the bank concerned. Provided, that the aggregate amount of loans and advances which may be written-off during the year, shall in no case exceed 3% of total loans and investments; Provided, further, that charge-offs are made against allowance for possible losses, earnings during the year and/or retained earnings. The authority to write-off loans and advances should be construed to include within its scope the waiver of penalty charges on past due loans, which are of a lesser category. Concededly, the power to write-off is not expressly granted in the LBP Charter. It can be logically implied however, from LBP's authority to exercise the general powers vested in banking institutions as provided in the General Banking Act. The clear intendment of its Charter is for LBP to be clothed not only with the express powers granted to it, but also with those implied, incidental and necessary for the exercise of those express powers. "The test to be applied is whether the act of the corporation is in direct and immediate furtherance of its business, fairly incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the power to do it; otherwise, not" (Montelibano v. Bacolod-Murcia Milling Co. Inc., L-15092, 18 May 1962, 5 SCRA 36). It bears emphasizing that LBP was created to provide adequate financial support to the agrarian reform program as well as to grant loans to farmers' cooperatives/associations, and to finance and/or guarantee the acquisition of farm lots transferred to tenant-farmers. Its clientele consists primarily of agrarian reform beneficiaries, landowners affected by agrarian reform and Land Bank bond-holders. It should, therefore, be given some measure of flexibility in its operations in order not to hamper it unduly in the fulfillment of its objectives. Moreover, it is only the penalty charges on a past due loan of the HSBTC that are being condoned and not the loan itself. The criteria for waiver are likewise specifically spelled out in LBP Resolution No. 80-222, namely, for "unforeseen, highly justifiable reasons/circumstances beyond the control of the borrower such as damages due to natural calamities, sickness, adverse government rulings or court judgments, duly processed and verified by the appropriate lending units." But while we rule that LBP is empowered by its corporate charter to waive penalty charges, thereby overruling COA's avowed exclusive prerogative to settle and compromise liabilities to the Government, nevertheless, pursuant to Pres. Decree No. 1445, LBP is still subject to COA's general audit jurisdiction to see to it that the fiscal responsibility that rests directly with the head

of the government agency has been properly and effectively discharged (Section 25[1]), and as provided for in its Section 26, reading: Sec. 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts, and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations . . . This is but in keeping with the wide sphere of state audit set forth in the fundamental law of the land. SEC. 2 (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations with original charters, . . . (Article IX [D], Sec. 2[l], 1987 Constitution). Having arrived at the foregoing conclusions, we find no need to pass upon the other arguments raised. WHEREFORE, the Decisions of the Commission on Audit sought to be reviewed are hereby SET ASIDE in so far as they hold that the Commission on Audit, vis-a-vis the Land Bank, has the exclusive prerogative to settle and compromise liabilities to the Government. No costs. SO ORDERED.

60. G.R. No. L-32473 July 31, 1973

IGNACIO VICENTE and MOISES ANGELES, petitioners, vs. HON. AMBROSIO M. GERALDEZ, as Judge of the Court of First Instance of Bulacan, Branch V (Sta. Maria), and HI CEMENT CORPORATION, respondents G.R. No. L-32483 July 31, 1973 JUAN BERNABE, petitioner, vs. HI CEMENT CORPORATION and THE HON. AMBROSIO M. GERALDEZ, Presiding Judge, Branch V, Court of First Instance of Bulacan, respondents. Librado S. Correa for petitioners Ignacio Vicente and Moises Angeles.

Francisco R. Capistrano and Andreciano F. Caballero for petitioner Juan Bernabe. Renato L. Cayetano and Jesus G. Diaz for respondent HI Cement Corporation.

ANTONIO, J.: There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM-201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises Angeles). The two cases are herein decided jointly because they proceed from the same case and involve in substance the same question of law. On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint the plaintiff alleged that it had acquired on October 27, 1965, Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association, under a deed of sale and transfer which was duly registered with the Office of the Mining Recorder of Bulacan on November 4, 1965 and duly approved by the Secretary of Agriculture and Natural Resources on December 15, 1965; that the said Placer Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960 and covered two mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares; that within the limits of Placer Mining Claim Red Star VIII are three parcels of land claimed by the defendants Juan Bernabe (about two hectares), Ignacio Vicente (about two hectares) and Moises Angeles (about one-fourth hectare); that the plaintiff had, on several occasions, informed the defendants, thru its representatives, of the plaintiff's acquisition of the aforesaid placer mining claims which included the areas occupied by them; that the plaintiff had requested the defendants to allow its workers to enter the area in question for exploration and development purposes as well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as damages, but the defendants refused to allow entry of the plaintiff's representatives; that the defendants were threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals therefrom, resulting in its inability to comply with its contractual commitments, for all of which reasons the plaintiff prayed the court to issue preliminary writs of mandatory injunction perpetually restraining the defendants and those cooperating with them from the commission or continuance of the acts complained of, ordering defendants to allow plaintiff, or its agents and workers, to enter, develop and extract minerals from the areas claimed by defendants, to declare the injunction permanent after hearing, and to order the defendants to pay damages to the plaintiff in the amount of P200,000.00, attorney's fees, expenses of litigation and costs. On September 12, 1967 the trial court issued a restraining order and required the defendants to file their answers. The defendants filed their respective answers, which contained the usual admissions and denials and interposed special and affirmative defenses, namely, among others, that they are rightful owners of certain portions of the land covered by the supposed mining claims of the plaintiff; that it was the plaintiff and its workers who had committed acts of force and violence when they entered into and intruded upon the defendants' lands; and that the

complaint failed to state a cause of action. The defendants set up counter-claims against the plaintiff for actual and moral damages, as well as for attorney's fees. In another pleading filed on the same date, defendant Juan Bernabe opposed the issuance of a writ of preliminary mandatory or prohibitory injunction. In its Order dated September 30, 1967, the trial court, however, directed the issuance of a writ of preliminary mandatory injunction upon the plaintiff's posting of a bond in the amount of P100,000.00. In its order, the court suggested the relocation of the boundaries of the plaintiff's claims in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the defendants and to submit his report thereof to the court on or before October 31, 1967. The court also directed the parties to send their representatives to the place of the survey on the date thereof and to furnish the surveyor with copies of their titles. The Commissioner submitted his report to the Court on November 24, 1967 containing the following findings: 1. In the attached survey plan, the area covered and embraced full and heavy lines is the Placer Mining Claims of the Plaintiff containing an area of 107 hectares while the area bounded by fine-broken lines are the properties of the Defendants. 2. The property of the Defendant MOISES ANGELES, consisting of two (2) parcels known as Lot 1-B and Lot 2 of Psu-103374, both described in O.C.T. No. O-1769 with a total area of 34,984 square meters were totally covered by the Claims of the Plaintiff. 3. The property of the Defendant IGNACIO VICENTE, containing an area of 32,619 square meters, is also inside the Claims of the Plaintiff. 4. The property of the defendant JUAN BERNABE known as Psu-178969, described in O.C.T. No. 0-2050 is partially covered by the Claims of the Plaintiff and the area affected is 57,539 square meters. In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in this case." Thereafter, on April 2, 1968 plaintiff HI Cement Corporation filed a motion to amend the complaint "so as to conform to the facts brought out and/or impliedly admitted in the pre-trial. This motion was granted by the court on April 6, 1968. Accordingly, on October 21, 1968, the plaintiff filed its amended complaint. The amendments consisted in the statement of the correct areas of the land belonging to defendants Bernabe (57,539 square meters), Vicente (32,619 square meters) and Angles (34,984 square meters), as well as the addition of allegations to the effect, among others, that at the pre-trial the defendants Angeles and Vicente declared their willingness to sell to the plaintiff their properties covered by the plaintiff's mining claims for P10.00 per square meter, and that when the plaintiff offered to pay only P0.90 per square meter, the said defendants stated that they were willing to go to trial on the issue of what would be the reasonable price for the properties of defendants sought to be taken by plaintiff. With particular reference to defendant Bernabe, the amended complaint alleged that the said defendant neither protested against nor prohibited the predecessor-in-interest of the plaintiff from prospecting, discovering, locating and contracting minerals from the aforementioned

claims, or from conducting the survey thereon, or filed any opposition against the application for lease by the Red Star Mining Association, and that as a result of the failure of said defendant to object to the acts of possession or occupation over the said property by plaintiff, defendant is now estopped from claiming that plaintiff committed acts of usurpation on said property. The plaintiff prayed the court, among other things, to fix the reasonable value of the defendants' properties as reasonable compensation for any resulting damage. Defendant Bernabe filed an amended answer substantially reproducing his original answer and denying the averments concerning him in the amended complaint. The respective counsels of the parties then conferred among themselves on the possibility of terminating the case by compromise, the defendants having previously signified their willingness to sell to the plaintiff their respective properties at reasonable prices. On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the following Compromise Agreement: COMPROMISE AGREEMENT COME NOW the plaintiff and the defendants, represented by their respective counsel, and respectfully submit the following agreement: 1. That the plaintiff is willing to buy the properties subject of litigation, and the defendants are willing to sell their respective properties; 2. That this Honorable Court authorizes the plaintiff and the defendants to appoint their respective commissioners, that is, one for the plaintiff and one for each defendant; 3. That the parties hereby agree to abide by the decision of the Court based on the findings of the Commissioners; 4. That the fees of the Commissioners shall be paid as follows: For those appointed by the parties shall be paid by them respectively; and for the one appointed by the Court, his fees shall be paid pro-rata by the parties; 5. That the names of the Commissioners to be appointed by the parties shall be submitted to the Court on or before February 8, 1969. WHEREFORE, the undersigned respectfully pray that the foregoing agreement be approved. Sta. Maria, Bulacan, January 30, 1969. For the Plaintiff:

(Sgd. ) FRAN CISCO VENT URA t/ FRAN CISCO VENT URA. (Sgd.) FLOR ENTIN O V. CARD ENAS t/ FLOR ENTIN O V. CARD ENAS (Sgd.) ENRIQ UETO I. MAGP ANTA Y t/ ENRIQ UETO I. MAGP ANTA Y For Juan Bernabe: (Sgd.) ANDR ECIAN O F. CABA LLER O t/

ANDR ECIAN O F. CABA LLER O For Ignacio Vicente and Moises Angeles: (Sgd.) CONR ADO MANZ ANO t/ CONR ADO MANZ ANO The Clerk of Court CFI, Sta. Maria, Bulacan GREETINGS: Please submit the foregoing Compromise Agreement to the Honorable Court for the consideration and approval immediately upon receipt hereof. VENTURA, CARDENAS & MAGPANTAY By: (Sgd.) FRANCISCO VENTURA t/ FRANCISCO VENTURA On the same date, the foregoing Compromise Agreement was approved by the trial court, which enjoined the parties to comply with the terms and conditions thereof. Pursuant to the terms of the said compromise agreement the counsels of both parties submitted the names of the persons designated by them as their respective commissioners, and in conformity therewith, the trial court, in its Order dated February 26, 1969, appointed the following as Commissioners: Mr. Larry G. Marquez, to represent the plaintiff; Mr. Demetrio M. Aquino, to represent defendant Bernabe; Mr. Moises Correa, to represent defendant Angeles; Mr. Santiago Cabungcal, to represent defendant Vicente; and Mr. Liberato Barrameda, to represent the court, and directed that said Commissioners should appear before the court on March 17, 1969, to take their oath and qualify as such Commissioners, and then meet on March

31, 1969 in the court for their first session and to submit their report not later than April 30, 1969. On September 15, 1969, Commissioner Liberato Barrameda submitted to the court for its approval a Consolidated Report, containing the three reports of the Commissioners of the plaintiff and the three defendants, together with an analysis of the said reports and a summary of the important facts and conclusions. The following unit prices for the three defendants' properties were recommended in the Consolidated Report: A JUAN BERNABE at P12.00 per square meter, wherefrom plaintiff has been extracting its first output, and would still continue to extract therefrom as the property consists of a mountain of limestone and shale; B IGNACIO VICENTE: a) 60% or 19,571.4 sq. m. (mineral land) at P12.00 per sq. m. b) 40% or 13,047.6 sq. m. (riceland) at P8.00 per sq. m. C MOISES ANGELES (riceland) at P8.00 per sq. m. It is worthy of note that in the individual report of the Commissioner nominated by plaintiff HI Cement Corporation, the price recommended for defendant Juan Bernabe's property was P0.60 per square meter, while in the individual report of the Commissioner nominated by the said defendant, the price recommended was P50.00 per square meter. The Commissioners named by defendants Vicente and Angeles recommended was P15.00 per square meter for the lands owned by the said two defendants, while the Commissioners named by the said two defendants, while the Commissioner named by the plaintiff recommended P0.65 per square meter for Vicente's land, and P0.55 per square meter for Angeles' land. On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI Cement Corporation, filed with the trial court a manifestation stating that on September 1, 1969 he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to abide by the decision of the Court based on the reports of the Commissioners; and that on October 15, 1969 he received a letter from Mr. Diokno, a copy of which was attached to the manifestation. In that letter Mr. Diokno said: While I realize your interest in cooperating with the Court in its desire to expedite the disposition of the case, this commitment would deprive us of the right to appeal if we do not agree with the valuation set by the Court. Our Board, therefore, cannot waive its rights; only when it knows the value set by the Court on the properties can it decide whether to abide by it or appeal therefrom. I would like to stress that, under the law, the compromise agreement requires the express approval of our Board of Directors to be binding on our corporation. Such an approval, I regret to say, cannot be obtained at this time. On November 5, 1969, defendant Bernabe filed an answer to Atty. Ventura's manifestation, praying the court to ignore, disregard and, if possible, order striken from the record, the plaintiff's manifestation on the following grounds: that its filing after the Consolidated Report of

the Commissioners had been submitted and approved, and long after the signing of the Compromise Agreement on January 30, 1969, cast suspicion on the sincerity of the plaintiff's motive; that when the Compromise Agreement was being considered, the court inquired from the parties and their respective lawyers if all the attorneys appearing in the case had been duly authorized and/or empowered to enter into a compromise agreement, and the three lawyers for the plaintiff answered in the affirmative; that in fact it was Atty. Ventura himself who prepared the draft of the Compromise Agreement in his own handwriting and was the first to sign the agreement; that one of the three lawyers for the plaintiff, Atty. Florentino V. Cardenas, who also signed the Compromise Agreement, was the official representative, indeed was an executive official, of plaintiff corporation; that the Compromise Agreement, having been executed pursuant to a pre-trial conference, partakes the nature of a stipulation of facts mutually agreed upon by the parties and approved by the court, hence, was binding and conclusive upon the parties; and that the nomination by the plaintiff of Mr. Larry G. Marquez as its Commissioner pursuant to the Compromise Agreement, was a clear indication of the plaintiff's tacit approval of the terms and conditions of the Compromise Agreement, if not an implied ratification of Atty. Ventura's acts. On March 13, 1970 the court rendered a decision in which the terms and conditions of the Compromise Agreement are reproduced, and the Consolidated Report of the Commissioners is extensively quoted. The rationale and dispositive portion of the decision read: What is fair and just compensation? "Just compensation includes all elements of value that inheres in the property, but it does not exceed market value fairly determined. The sum required to be paid the owner does not depend upon the usage to which he has devoted his land but is to be arrived at upon just consideration of all the uses for which it is suitable. The highest and most profitable use for which the property is adoptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as the measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held." The term fair and just compensation as applied in expropriation or eminent domain proceedings need not necessarily be applied in the present case. In expropriation proceedings the government is the party involved and its use is for public purpose. In the instant case, however, private parties are involved and the use of the land is a private venture and for profit. It appears that defendants' properties are practically adjacent to plaintiff's plant site. It also appears that practically all the surrounding areas were acquired by the plaintiff by purchase. In the report submitted by the commissioner representing the plaintiff, it is claimed that the surrounding areas were acquired thru purchase by the plaintiff in the amount of less than P1.00 per square meter. On the other hand, it appears from the reports submitted by the commissioners representing the defendants that there were some recorded sales around the area from P20.00 to P25.00 per square meter and there were subdivision lots which command even higher prices.

The properties are reported to consist of mineral land which are rocky and barren containing limestone and shale. From viewpoint of the owners their property which is described as rocky and barren mineral land must necessarily command a higher price, and this Court believes that the plaintiff will adopt the same attitude from the viewpoint of its business. While it may be true that the plaintiff acquired properties within the area in question at a low price, we cannot overlook the fact that this was so at the time when plaintiff corporation was not yet in operation and that the land owners were not as yet aware of the potential value of their landholdings. Irrespective of the different classifications of the properties owned by the defendants, and considering the benefits that will enure to the plaintiff and bearing in mind the property rights and privileges to which the property owners are entitled both under the constitution and the mining law, coupled with the fact that the plaintiff had already taken advantage of the properties even long before the rightful acquisition of the same, this Court believes that the just and fair market value of the land should be in the amount P15.00 per square meter. In view of the above findings, the plaintiff pursuant to the compromise agreement, is hereby ordered to pay the defendants the amount of P15.00 per square meter for the subject properties, and upon full payment, the restraining order earlier issued by this Court shall be deemed lifted. On March 23, 1970 defendant Juan Bernabe filed an urgent motion for execution of judgment anchored on the proposition that the judgment, being based on a compromise agreement, is not appealable and is, on the other hand, immediately executory. The other two defendants, Moises Angeles and Ignacio Vicente, likewise filed their respective motions for execution. These motions were granted by the court in its Order of April 14, 1970. On April 17, 1970 the plaintiff filed a motion for reconsideration of the April 14, 1970 Order, alleging that it had an opposition to the defendants' motions for execution, and that the Compromise Agreement had been repudiated by the plaintiff corporation through its Vice President, as earlier manifested by the plaintiff. The plaintiff prayed for ten days from the date of the hearing of the motion within which to file its written opposition to the motions for execution. Defendant Juan Bernabe filed an opposition to the plaintiff's motion on April 21, 1970. On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground that the decision of the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement of January 30, 1969 which was itself null and void for want of a special authority by the plaintiff's lawyers to enter into the said agreement. The plaintiff also prayed that the decision dated March 13, 1970 and the Order dated April 14, 1970 granting the defendants' motions for execution, be set aside. Defendant Juan Bernabe filed on April 27, 1970 an opposition to the plaintiff's motion on the grounds that the decision of the court is in accordance with law, for three lawyers for the plaintiff signed the Compromise Agreement, and one of them, Atty. Cardenas, was an official representative of plaintiff corporation, hence, when he signed the Compromise Agreement, he did so in the dual capacity of lawyer and representative of the management of the corporation; that the plaintiff itself pursued, enforced and implemented the agreement by appointing Mr. Larry Marquez as its duly accredited Commissioner; and that the

plaintiff is conclusively bound by the acts of its lawyers in entering into the Compromise Agreement. In the meantime, or on April 24, 1970, the court issued an Order setting aside its Order of April 14, 1970 under which the defendants' motions for execution of judgment had been granted, and gave the plaintiff ten days within which to file an opposition to the defendants' motions for execution. On May 9, 1970 the plaintiff filed an opposition to the motions for execution of judgment, on the grounds that the decision dated March 13, 1970 is contrary to law for it is based on a compromise agreement executed by the plaintiff's lawyers who had no special power of attorney as required by Article 1878 of the Civil Code, or any special authority as required by Section 23, Rule 138 of the Rules of Court; and that the judgment is void for lack of jurisdiction of the court because the same is based on a void compromise agreement. On May 18, 1970 the court issued an Order setting aside its decision dated March 13, 1970, denying the defendants' motions for execution of judgment, and setting for June 23, 1970 a pretrial conference in the case. The three defendants moved for reconsideration, but their motions were denied in an Order dated July 18, 1970. It is in these factual premises that the defendants in Civil Case No. SM-201 came to this Court by means of the present petitions. In G.R. No. L-32473, petitioners Vicente and Angeles pray this Court to issue a writ of preliminary injunction, and, after hearing, to annul and set aside the Order dated May 18,1970 issued by respondent Judge setting aside the decision dated March 13, 1970; to declare the said decision legal, effective and immediately executory; to dissolve the writ of preliminary mandatory injunction issued by respondent Judge on September 30, 1967 commanding petitioners to allow private respondent to enter their respective properties and excavate thereon; to make the preliminary injunction permanent; and to award treble costs in favor of petitioners and against private respondent. In G.R. No. L-32483, petitioner Juan Bernabe prays this Court to issue a writ of preliminary injunction or, at least a temporary restraining order, and, after hearing, to annul and set aside the Order dated April 24, 1970 issued by respondent Judge setting aside his Order of April 14, 1970 and allowing private respondent to file an opposition to petitioners' motion for execution, the Order dated May 18, 1970, and the Order dated July 18, 1970. Petitioner Bernabe also seeks the reinstatement of the trial court's decision dated May 13, 1970 and its Order dated April 14, 1970 granting his motion for execution of judgment, and an award in his favor of attorney's fees and of actual, moral and exemplary damages. At issue is whether the respondent court, in setting aside its decision of March 13, 1970 and denying the motions for execution of said decision, had acted without or in excess of its jurisdiction or with grave abuse of discretion. We hold that said court did not, in view of the following considerations: 1. Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment. 1 Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. 2

The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise. This Court has said that the Rules 3 "require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him." 4 2. The law specifically requires that "juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property." 5 Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon their right to manage the affairs of the corporation according to their honest and informed judgment and discretion as to what is for the best interests of the corporation." 6 This power may however be delegated either expressly or impliedly to other corporate officials or agents. Thus it has been stated, that as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. 7 It is therefore necessary to ascertain whether from the relevant facts it could be reasonably concluded that the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into the said compromise agreement. Petitioners claim that private respondent's attorneys admitted twice in open court on January 30, 1969, that they were authorized to compromise their client's case, which according to them, was never denied by the said lawyers in any of the pleadings filed by them in the case. The claim is unsupported by evidence. On the contrary, in private respondent's "Reply to Defendant Bernabe's Answer Dated November 8, 1969," said counsels categorically denied that they ever represented to the court that they were authorized to enter into a compromise. Indeed, the complete transcript of stenographic notes taken at the proceedings on January 30, 1969 are before Us, and nowhere does it appear therein that respondent corporation's lawyers ever made such a representation. In any event, assuming arguendo that they did, such a self-serving assertion cannot properly be the basis for the conclusion that the respondent corporation had in fact authorized its lawyers to compromise the litigation. 3. Petitioners however insist that there was tacit ratification on the part of the corporation, because it nominated Mr. Larry Marquez as its commissioner pursuant to the agreement, paid his services therefor, and Atty. Florentino V. Cardenas, respondent corporation's administrative manager, not only did not object but even affixed his signature to the agreement. It is also argued that respondent corporation having represented, through its lawyers, to the court and to petitioners that said lawyers had authority to bind the corporation and having induced by such representations the petitioners to sign the compromise agreement, said respondent is now estopped from questioning the same. The infirmity of these arguments is in their assumption that Atty. Cerdenas as administrative manager had authority to bind the corporation or to compromise the case. Whatever authority the officers or agents of a corporation may have is derived from the board of directors, or other governing body, unless conferred by the charter of the corporation. A corporation officer's power

as an agent of the corporation must therefore be sought from the statute, the charter, the bylaws, or in a delegation of authority to such officer, from the acts of board of directors, formally expressed or implied from a habit or custom of doing business. 8 In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited, from which We could reasonably infer that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual. 4. As regards the nomination of Mr. Marquez as commissioner, counsel for respondent corporation has explained and this has not been disproven that Atty. Cardenas, apparently on his own, submitted the same to the court. There is no iota of proof that at the time of the submission to the Court, on February 26, 1969, of the name of Mr. Marquez, respondent corporation knew of the contents of the compromise agreement. As matter of fact, according to the manifestation of Atty. Ventura to the court, it was only on September 1, 1969 that he sent to Mr. Antonio Diokno, Vice-President of the corporation, a copy of the compromise agreement for the approval by the board of directors and on October 22, 1969, Mr. Diokno informed him that the approval of the Board cannot be obtained, as under the agreement the corporation is deprived of its right to appeal from the judgement. In the absence of any proof that the governing body of respondent corporation had knowledge, either actual or constructive, or the contents of the compromise agreement before September 1, 1969, why should the nomination of Mr. Marquez as commissioner, by Attys. Ventura, Cardenas and Magpantay, on February 26, 1969, be considered as a form of tacit ratification of the compromise agreement by the corporation? In order to ratify the unauthorized act of an agent and make it binding on the corporation, it must be shown that the governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected with the transaction to which it relates. 9 It cannot be assumed also that Atty. Cardenas, as administrative manager of the corporation, had authority to ratify. For ratification can never be made "on the part of the corporation by the same persons who wrongfully assume the power to make the contract, but the ratification must be by the officer or governing body having authority to make such contract and, as we have seen, must be with full knowledge." 10 5. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of estoppel must be those of the corporation, its governing body or authorized officers, and not those of the purported agent who is himself responsible for the misrepresentation. 11 It having been found by the trial court that "the counsel for the plaintiff entered into the compromise agreement without the written authority of his client and the latter did not ratify, on the contrary it repudiated and disowned the same ...", 12 We therefore declare that the orders of the court a quo subject of these two petitions, have not been issued in excess of its jurisdictional authority or in grave abuse of its discretion. WHEREFORE, the petitions in these two cases are hereby dismissed. Costs against the petitioners.

61. G.R. No. L-68555 March 19, 1993

PRIME WHITE CEMENT CORPORATION, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT and ALEJANDRO TE, respondents. De Jesus & Associates for petitioner. Padlan, Sutton, Mendoza & Associates for private respondent.

CAMPOS, JR., J.: Before Us is a Petition for Review on Certiorari filed by petitioner Prime White Cement Corporation seeking the reversal of the decision * of the then Intermediate Appellate Court, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, the judgment appealed from is hereby affirmed in toto. 1

The facts, as found by the trial court and as adopted by the respondent Court are hereby quoted, to wit: On or about the 16th day of July, 1969, plaintiff and defendant corporation thru its President, Mr. Zosimo Falcon and Justo C. Trazo, as Chairman of the Board, entered into a dealership agreement (Exhibit A) whereby said plaintiff was obligated to act as the exclusive dealer and/or distributor of the said defendant corporation of its cement products in the entire Mindanao area for a term of five (5) years and proving (sic) among others that: a. The corporation shall, commencing September, 1970, sell to and supply the plaintiff, as dealer with 20,000 bags (94 lbs/bag) of white cement per month; b. The plaintiff shall pay the defendant corporation P9.70, Philippine Currency, per bag of white cement, FOB Davao and Cagayan de Oro ports; c. The plaintiff shall, every time the defendant corporation is ready to deliver the good, open with any bank or banking institution a confirmed, unconditional, and irrevocable letter of credit in favor of the corporation and that upon certification by the boat captain on the bill of lading that the goods have been loaded on board the vessel bound for Davao the said bank or banking institution shall release the corresponding amount as payment of the goods so shipped.

Right after the plaintiff entered into the aforesaid dealership agreement, he placed an advertisement in a national, circulating newspaper the fact of his being the exclusive dealer of the defendant corporation's white cement products in Mindanao area, more particularly, in the Manila Chronicle dated August 16, 1969 (Exhibits R and R-1) and was even congratulated by his business associates, so much so, he was asked by some of his businessmen friends and close associates if they can be his sub-dealer in the Mindanao area. Relying heavily on the dealership agreement, plaintiff sometime in the months of September, October, and December, 1969, entered into a written agreement with several hardware stores dealing in buying and selling white cement in the Cities of Davao and Cagayan de Oro which would thus enable him to sell his allocation of 20,000 bags regular supply of the said commodity, by September, 1970 (Exhibits O, O-1, O-2, P, P-1, P-2, Q, Q-1 and Q-2). After the plaintiff was assured by his supposed buyer that his allocation of 20,000 bags of white cement can be disposed of, he informed the defendant corporation in his letter dated August 18, 1970 that he is making the necessary preparation for the opening of the requisite letter of credit to cover the price of the due initial delivery for the month of September, 1970 (Exhibit B), looking forward to the defendant corporation's duty to comply with the dealership agreement. In reply to the aforesaid letter of the plaintiff, the defendant corporation thru its corporate secretary, replied that the board of directors of the said defendant decided to impose the following conditions: a. Delivery of white cement shall commence at the end of November, 1970; b. Only 8,000 bags of white cement per month for only a period of three (3) months will be delivered; c. The price of white cement was priced at P13.30 per bag; d. The price of white cement is subject to readjustment unilaterally on the part of the defendant; e. The place of delivery of white cement shall be Austurias (sic); f. The letter of credit may be opened only with the Prudential Bank, Makati Branch; g. Payment of white cement shall be made in advance and which payment shall be used by the defendant as guaranty in the opening of a foreign letter of credit to cover costs and expenses in the procurement of materials in the manufacture of white cement. (Exhibit C). xxx xxx xxx

Several demands to comply with the dealership agreement (Exhibits D, E, G, I, R, L, and N) were made by the plaintiff to the defendant, however, defendant refused to comply with the same, and plaintiff by force of circumstances was constrained to cancel his agreement for the supply of white cement with third parties, which were concluded in anticipation of, and pursuant to the said dealership agreement.
Notwithstanding that the dealership agreement between the plaintiff and defendant was in force and subsisting, the defendant corporation, in violation of, and with evident intention not to be bound by the terms and conditions thereof, entered into an exclusive dealership agreement with a certain Napoleon Co for the marketing of white cement in Mindanao (Exhibit T) hence, this suit. (Plaintiff's Record on Appeal, pp. 86-90). 2

After trial, the trial court adjudged the corporation liable to Alejandro Te in the amount of P3,302,400.00 as actual damages, P100,000.00 as moral damages, and P10,000.00 as and for attorney's fees and costs. The appellate court affirmed the said decision mainly on the following basis, and We quote:
There is no dispute that when Zosimo R. Falcon and Justo B. Trazo signed the dealership agreement Exhibit "A", they were the President and Chairman of the Board, respectively, of defendant-appellant corporation. Neither is the genuineness of the said agreement contested. As a matter of fact, it appears on the face of the contract itself that both officers were duly authorized to enter into the said agreement and signed the same for and in behalf of the corporation. When they, therefore, entered into the said transaction they created the impression that they were duly clothed with the authority to do so. It cannot now be said that the disputed agreement which possesses all the essential requisites of a valid contract was never intended to bind the corporation as this avoidance is barred by the principle of estoppel. 3

In this petition for review, petitioner Prime White Cement Corporation made the following assignment of errors. 4 I THE DECISION AND RESOLUTION OF THE INTERMEDIATE APPELLATE COURT ARE UNPRECEDENTED DEPARTURES FROM THE CODIFIED PRINCIPLE THAT CORPORATE OFFICERS COULD ENTER INTO CONTRACTS IN BEHALF OF THE CORPORATION ONLY WITH PRIOR APPROVAL OF THE BOARD OF DIRECTORS. II THE DECISION AND RESOLUTION OF THE INTERMEDIATE APPELLATE COURT ARE CONTRARY TO THE ESTABLISHED JURISPRUDENCE, PRINCIPLE AND RULE ON FIDUCIARY DUTY OF DIRECTORS AND OFFICERS OF THE CORPORATION. III THE DECISION AND RESOLUTION OF THE INTERMEDIATE APPELLATE COURT DISREGARDED THE PRINCIPLE AND JURISPRUDENCE,

PRINCIPLE AND RULE ON UNENFORCEABLE CONTRACTS AS PROVIDED IN ARTICLE 1317 OF THE NEW CIVIL CODE. IV THE DECISION AND RESOLUTION OF THE INTERMEDIATE APPELLATE COURT DISREGARDED THE PRINCIPLE AND JURISPRUDENCE AS TO WHEN AWARD OF ACTUAL AND MORAL DAMAGES IS PROPER. V IN NOT AWARDING PETITIONER'S CAUSE OF ACTION AS STATED IN ITS ANSWER WITH SPECIAL AND AFFIRMATIVE DEFENSES WITH COUNTERCLAIM THE INTERMEDIATE APPELLATE COURT HAS CLEARLY DEPARTED FROM THE ACCEPTED USUAL, COURSE OF JUDICIAL PROCEEDINGS. There is only one legal issue to be resolved by this Court: whether or not the "dealership agreement" referred by the President and Chairman of the Board of petitioner corporation is a valid and enforceable contract. We do not agree with the conclusion of the respondent Court that it is. Under the Corporation Law, which was then in force at the time this case arose, 5 as well as under the present Corporation Code, all corporate powers shall be exercised by the Board of Directors, except as otherwise provided by law. 6 Although it cannot completely abdicate its power and responsibility to act for the juridical entity, the Board may expressly delegate specific powers to its President or any of its officers. In the absence of such express delegation, a contract entered into by its President, on behalf of the corporation, may still bind the corporation if the board should ratify the same expressly or impliedly. Implied ratification may take various forms like silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. 7 Furthermore, even in the absence of express or implied authority by ratification, the President as such may, as a general rule, bind the corporation by a contract in the ordinary course of business, provided the same is reasonable under the circumstances. 8 These rules are basic, but are all general and thus quite flexible. They apply where the President or other officer, purportedly acting for the corporation, is dealing with a third person, i. e., a person outside the corporation. The situation is quite different where a director or officer is dealing with his own corporation. In the instant case respondent Te was not an ordinary stockholder; he was a member of the Board of Directors and Auditor of the corporation as well. He was what is often referred to as a "selfdealing" director. A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. 9 In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship "is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders." 10 In the case of Gokongwei v. Securities and Exchange Commission, this Court quoted with favor from Pepper v. Litton, 11 thus:

. . . He cannot by the intervention of a corporate entity violate the ancient precept against serving two masters. . . . He cannot utilize his inside information and his strategic position for his own preferment. He cannot violate rules of fair play by doing indirectly through the corporation what he could not do directly. He cannot use his power for his personal advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power may be and no matter how meticulous he is to satisfy technical requirements. For that power is at all times subject to the equitable limitation that it may not be exercised for the aggrandizement, preference, or advantage of the fiduciary to the exclusion or detriment of the cestuis. . . . . On the other hand, a director's contract with his corporation is not in all instances void or voidable. If the contract is fair and reasonable under the circumstances, it may be ratified by the stockholders provided a full disclosure of his adverse interest is made. Section 32 of the Corporation Code provides, thus: Sec. 32. Dealings of directors, trustees or officers with the corporation. A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present: 1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting; 2. That the vote of such director or trustee was not necessary for the approval of the contract; 3. That the contract is fair and reasonable under the circumstances; and 4. That in the case of an officer, the contract with the officer has been previously authorized by the Board of Directors. Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances. Although the old Corporation Law which governs the instant case did not contain a similar provision, yet the cited provision substantially incorporates well-settled principles in corporate law. 12 Granting arguendo that the "dealership agreement" involved here would be valid and enforceable if entered into with a person other than a director or officer of the corporation, the fact that the other party to the contract was a Director and Auditor of the petitioner corporation changes the whole situation. First of all, We believe that the contract was neither fair nor reasonable. The "dealership agreement" entered into in July, 1969, was to sell and supply to

respondent Te 20,000 bags of white cement per month, for five years starting September, 1970, at thefixed price of P9.70 per bag. Respondent Te is a businessman himself and must have known, or at least must be presumed to know, that at that time, prices of commodities in general, and white cement in particular, were not stable and were expected to rise. At the time of the contract, petitioner corporation had not even commenced the manufacture of white cement, the reason why delivery was not to begin until 14 months later. He must have known that within that period of six years, there would be a considerable rise in the price of white cement. In fact, respondent Te's own Memorandum shows that in September, 1970, the price per bag was P14.50, and by the middle of 1975, it was already P37.50 per bag. Despite this, no provision was made in the "dealership agreement" to allow for an increase in price mutually acceptable to the parties. Instead, the price was pegged at P9.70 per bag for the whole five years of the contract. Fairness on his part as a director of the corporation from whom he was to buy the cement, would require such a provision. In fact, this unfairness in the contract is also a basis which renders a contract entered into by the President, without authority from the Board of Directors, void or voidable, although it may have been in the ordinary course of business. We believe that the fixed price of P9.70 per bag for a period of five years was not fair and reasonable. Respondent Te, himself, when he subsequently entered into contracts to resell the cement to his "new dealers" Henry Wee 13 and Gaudencio Galang 14 stipulated as follows: The price of white cement shall be mutually determined by us but in no case shall the same be less than P14.00 per bag (94 lbs). The contract with Henry Wee was on September 15, 1969, and that with Gaudencio Galang, on October 13, 1967. A similar contract with Prudencio Lim was made on December 29, 1969. 15 All of these contracts were entered into soon after his "dealership agreement" with petitioner corporation, and in each one of them he protected himself from any increase in the market price of white cement. Yet, except for the contract with Henry Wee, the contracts were for only two years from October, 1970. Why did he not protect the corporation in the same manner when he entered into the "dealership agreement"? For that matter, why did the President and the Chairman of the Board not do so either? As director, specially since he was the other party in interest, respondent Te's bounden duty was to act in such manner as not to unduly prejudice the corporation. In the light of the circumstances of this case, it is to Us quite clear that he was guilty of disloyalty to the corporation; he was attempting in effect, to enrich himself at the expense of the corporation. There is no showing that the stockholders ratified the "dealership agreement" or that they were fully aware of its provisions. The contract was therefore not valid and this Court cannot allow him to reap the fruits of his disloyalty. As a result of this action which has been proven to be without legal basis, petitioner corporation's reputation and goodwill have been prejudiced. However, there can be no award for moral damages under Article 2217 and succeeding articles on Section 1 of Chapter 3 of Title XVIII of the Civil Code in favor of a corporation. In view of the foregoing, the Decision and Resolution of the Intermediate Appellate Court dated March 30, 1984 and August 6, 1984, respectively, are hereby SET ASIDE. Private respondent Alejandro Te is hereby ordered to pay petitioner corporation the sum of P20,000.00 for attorney's fees, plus the cost of suit and expenses of litigation. SO ORDERED.

63. [G.R. No. 115849. January 24, 1996]

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA,petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents. DECISION
PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such apparent authority after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a derivative suit by the majorityshareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals in CA-G.R. CV No. 35756 and the Resolution promulgatedJune 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:
[1]

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED. All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito. Costs against appellant bank.

The dispositive portion of the trial courts decision dated July 10, 1991, on the other hand, is as follows:
[2]

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos; 2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T. Nos. T106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs; 3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P 200,000.00 each in moral damages; 4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary damages; 5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorneys fees; 6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00; With costs against the defendants. After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution datedJanuary 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision.

The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head Manager of the Property Management Department of the petitioner Bank. Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. The Facts The facts of this case are summarized in the respondent Courts Decision, as follows:
[3]

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer Certificates of Title Nos. T106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral fora loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. B), as follows: August 30, 1987 The Producers Bank of the Philippines Makati, Metro Manila

Attn. Gentlemen:

Mr. Mercurio Q. Rivera Manager, Property Management Dept.

I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. TCT NO. AREA 113,580 70,899 52,246 96,768 187,114 481,481 sq.m. sq.m. sq.m. sq.m. sq.m. sq.m.

T-106932 T-106933 T-106934 T-106935 T-106936 T-106937

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Kindly contact me at Telephone Number 921-1344. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. C): September 1, 1987 J-P M-P GUTIERREZ ENTERPRISES 142 Charisma St., Doa Andres II Rosario, Pasig, Metro Manila Attention: JOSE O. JANOLO Dear Sir:

Dear Sir: Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for more than 101 hectares on lot basis. We shall be very glad to hear your position on the matter. Best regards.

(4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh. September 17, 1987 Producers Bank Paseo de Roxas Makati, Metro Manila Attention: Mr. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH. Hoping that this proposal meets your satisfaction. (5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. E): The Producers Bank of the Philippines Paseo de Roxas, Makati Metro Manila Attention: Mr. Mercurio Rivera Re: Gentlemen: Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). Thank you. 101 Hectares of Land in Sta. Rosa, Laguna

(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F): Attention: Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. For your information. (7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected sale agreement. Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exhs. H and H-1). Plaintiffs demanded the execution by the bank of the documents on what was considered as a perfected agreement. Thus: Mr. Mercurio Rivera Manager, Producers Bank Paseo de Roxas, Makati Metro Manila Dear Mr. Rivera: This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T106932 to 106937. From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987. Atty. Demetrio Demetria

In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others. In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our client. We trust that you will be guided accordingly. (8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our Conservator for proper disposition. However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs letter reads: PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas, Makati, Metro Manila Attn.: Atty. NIDA ENCARNACION Central Bank Conservator Gentlemen: We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank. This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform us of the date of documentation of the sale immediately. Kindly acknowledge receipt of our payment. (9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank

with its obligations under the considered perfected contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale. (10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price. On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for intervention. In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private respondent. On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 921606, against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale. In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a
[4]

Motion for Leave of Court to Dismiss the Case Without Prejudice. Private respondent opposed this motion on the ground, among others, that plaintiffs act of forum shopping justifies the dismissal of both cases, with prejudice. Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.
[5]

In their Petition and Memorandum, petitioners summarized their position as follows:

[6] [7]

I.

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.

The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management.
IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on record. On the other hand, private respondents prayed for dismissal of the instant suit on the ground that:
[8]

I.

Petitioners have engaged in forum shopping.

II.

The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case.
III.

The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by respondent Ejercito) and the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no authority to revoke the contract of sale. The Issues From the foregoing positions of the parties, the issues in this case may be summed up as follows: 1) Was there forum-shopping on the part of petitioner Bank? 2) Was there a perfected contract of sale between the parties? 3) Assuming there was, was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in said courts or agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.
[9]

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping because the instant

petition pending before this Court involves identical parties or interests represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a judgment or resolution in either case will constitute res judicata in the other.
[10]

On the other hand, petitioners explain that there is no forum-shopping because:

[11]

1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the plaintiff; 2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances; 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal question for the courts to decide; 4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION. We rule for private respondent. To begin with, forum-shopping originated as a concept in private international law, where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking remedies elsewhere.
[12]

In this light, Blacks Law Dictionary says that forum-shopping occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. Hence, according to Words and Phrases, a litigant is open to the charge of forum shopping whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should
[13] [14]

be encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on the courts. In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal - each remedy being available independently of the others - although he cannot recover more than once. In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action. This was the original concept of the term forum shopping. Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to some of the parties to the action. Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice.
[15]

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and misused to assure scheming litigants of dubious reliefs. To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases the inveterate use of this insidious malpractice. Forum-shopping as the filing of repetitious suits in different courts has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs
[16]

of Orval Hughes, et al., as a reprehensible manipulation of court processes and proceedings x x x. When does forum-shopping take place?
[17]

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no jurisdiction
[18]

The test for determining whether a party violated the rule against forumshopping has been laid down in the 1986 case of Buan vs. Lopez, also by Chief Justice Narvasa, and that is, forum-shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows:
[19]

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant. xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive. Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is a bar to the

others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two (or more) complaints or petitions, and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.
[20]

Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought. Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to declare such purported sale involving the same real property as unenforceable as against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit, this Court ruled that the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping:
[21] [22]

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein - PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the letter-directive of the COA of October 10, 1988 disapproving the sale. (italics supplied) In an earlier case, but with the same logic and vigor, we held:
[23]

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not become functus oflcio. It remained an effective vehicle for obtention of relief; and petitioners remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible. In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because: Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a derivative suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the Producers Bank of the Philippines. Indeed, this is the very essence of a derivative suit:
[24]

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded

as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; italics supplied). In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued derivatively or directly, there is undeniably an identity of interests/entity represented. Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals.
[25]

In addition to the many cases where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.
[26]

Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional Trial Court, Branch 63, Makati, etc. et al., where the Court held:
[27]

The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of action, specific denials, special

and affirmative defenses or even counterclaims. Thus, Velhagens and Kings motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. (italics supplied) Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said case. Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint - as a result of which, the issues were joined. Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second Case. Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and partieslitigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other.
[28]

The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners present counsel entered their appearance only during the proceedings in this Court, and the Petitions VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to

trifle with court proceedings and processes. They are warned that a repetition of the same will be dealt with more severely. Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised, as will be discussed shortly. The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court stated: There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Banks Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I provide the Committee with necessary information about the property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding the price, as determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31, 1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority to sell any property? A: No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how long it will take for the committee to decide and he said the committee meets every week. If I am not mistaken Wednesday and in about two weeks (sic) time, in effect what he was saying he was not the one who was to decide. But he would refer it to the committee and he would relay the decision of the committee to me.

Q: Please answer the question. A: He did not say that he had the authority(.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that.

Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose Entereso as one of the members. What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee of such matters as original loan of

borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property. There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations, the banks submission on this point does not inspire belief. Both Co and Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be submitted for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera states as the banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).
[29]

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.

Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept. They disputed the factual basis of the respondent Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have perused the evidence but cannot find fault with the said Courts findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. in fact, such findings merit serious consideration by this Court, particularly where, as in this case, said courts carefully and meticulously discussed their findings. This is basic.
[30]

Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the respondent Court. They also delve into the contractual elements of consent and cause. The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals, where it was held that:
[31]

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agents apparent representation yields to the principals true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166). A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and

attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021). Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their depositors. From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following: (a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the Property Management Department of the Bank. By his own admission, Rivera was already the person in charge of the Banks acquired assets (TSN, August 6, 1990, pp. 8-9); (b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 1617); (c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11); (d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11); (e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12); (f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January 16, 1990, p. 18); (g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the Banks offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and SI). In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al., the Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers.
[32]

To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony which seek to establish Riveras actualauthority. These pieces of evidence, however, are inherently weak as they consist of Riveras self-serving testimony and various inter-office memoranda that purport to show his limited actual authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent authority, the existence of which is borne out by the respondent Courts findings, the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned.
[33]

Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Riveras actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases. Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September 17, 1987 extinguished the Banks offer of P5.5 million. They disputed the respondent Courts finding that there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated September 30, 1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September 17, 1987), citing the late Justice Paras, Art. 1319 of the Civil Code and related Supreme Court rulings starting with Beaumont vs. Prieto.
[34] [35] [36] [37]

However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987begins with (p)ursuant to our discussion last 28 September 1987 x x x. Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5 million. However, both the trial court and the Court of Appeals found petitioners testimonial evidence not credible, and we find no basis for changing this finding of fact.
[38]

Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987, Luis Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 3435). Hence, assuming arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.
[39]

We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action, particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12, 1988 or more than seven (7) months after Janolos acceptance. Such delay, and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-minute attempt on the Banks part to get out of a binding contractual obligation. Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made onSeptember 1, 1987 was carried through during the meeting of September 28, 1987. This is the conclusion consistent with human experience, truth and good faith.

It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first time on appeal and should thus be disregarded. This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).
[40]

xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).
[41]

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion is simply that there was a perfected contract of sale. The Third Issue: The petition alleged:
[42]

Is the Contract Enforceable?

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract produced thereby would be unenforceable by action - there being no note, memorandum or writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil Code.) Upon the other hand, the respondent Court in its Decision (p. 14) stated: x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a

contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks letter of September 1, 1987, taken together with plaintiffs letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale. The respondent Court could have added that the written communications commenced not only from September 1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient memoranda - since they include the names of the parties, the terms and conditions of the contract, the price and a description of the property as the object of the contract. But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence, petitioners - by such utter failure to object - are deemed to have waived any defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code: Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them. As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence binding on them thus:
A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany him and we were able to meet Luis Co at the Bank.

xxx

xxx

xxx

Q - Now, what transpired during this meeting with Luis Co of the Producers Bank? A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir. Q - What price? A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is the price they intends (sic) to have, sir. Q - What do you mean? A - That is the amount they want, sir.

Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras counter-offer of 5.5 million was the defendants bank (sic) final offer? A - He said in a day or two, he will make final acceptance, sir. Q - What is the response of Mr. Luis Co? A - He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.] ----0---Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank? A - We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be reduced and he said that was already passed upon by the committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million and we should indicate our position as soon as possible. Q - What was your response to the answer of Mr. Luis Co? A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office. Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers Bank Building during this meeting? A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I. Q - By Mr. Co you are referring to? A - Mr. Luis Co. Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank? A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.] ---- 0 ---Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this amount. What can you say to that statement that the amount of P5.5 million was reached by the Committee? A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.] The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract? It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows: Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary. In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process.
[43]

In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987(Annex V, petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a binding offer - and which unarguably came

months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder: May 12, 1988 Atty. Noe C. Zarate Zarate Carandang Perlas & Ass. Suite 323 Rufino Building Ayala Avenue, Makati, Metro Manila Dear Atty. Zarate: This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a contract to sell and buy with any of them for the following reasons. In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A), you will immediately read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank. Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the sale of any property of the corporation/bank. Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators (starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind the Banks Board or Conservator. We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged tender.

Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance with law. We also have no personal interest in any of the properties of the Bank. Please be advised accordingly. Very truly yours, (Sgd.) Leonida T. Encarnacion LEONIDA T. ENCARNACION Acting Conservator In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such powers must be related to the (preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution. If the legislature itself cannot revoke an existing valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of said law?
[44]

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a banks board of directors. What the said board cannot do - such as repudiating a contract validly entered into under the doctrine of implied authority - the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts - as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. The Fifth Issue: Were There Reversible Errors of Fact?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, we held:
[45]

x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus: The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482,April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596). Barring, therefore, a showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.] Likewise, in Bernardo vs. Court of Appeals, we held:
[46]

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. x x x As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.:
[47]

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the

lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et al. is equally applicable to the present case:
[48]

We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (italics supplied) Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the Banks counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator Romey, after Rivera presented the same for discussion and (2) the meeting with Co was not to scale down the price and start negotiations anew, but a meeting on the already determined price of P5.5 million. Hence, citing Philippine National Bank vs. Court of Appeals, petitioners are asking us to review and reverse such factual findings.
[49]

The first point was clearly passed upon by the Court of Appeals, thus:
[50]

There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established fact, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property. (p. 11, CA Decision) xxx xxx xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision). The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not credible and at best equivocal, andconsidering the gratuitous and self-serving character of these declarations, the banks submissions on this point do not inspire belief. To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence, such suppression gives rise to the presumption that his testimony would have been adverse, if produced.
[51]

The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient by both the trial court and the respondent Court, and instead, it was respondents submissions that were believed and became bases of the conclusions arrived at. In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. This we cannot do. To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals. We have studied both the records and the CA Decision and we find no such exceptions in this case. On the contrary, the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending credibility and dependability to its findings. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners claims, but were closer to the evidence as presented in the trial court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case, the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact of a trial judge - as affirmed by the Court of Appeals - are conclusive upon this Court, absent any serious
[52]

abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. Epilogue In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate contracts entered into by the Banks officers] - which per se could justify the dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of sale and its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Courts decisions and resolutions, we did so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by which the parties, through their respective eloquent counsel, argued their positions before this Court. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x as many people depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks overdraft with the Central Bank had already reached P1.023 billion x x x and there were (other) offers to buy the subject properties for a substantial amount of money.
[53]

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts, nonimpairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law and blind justice. This Court cannot just gloss over private respondents submission that, while the subject properties may currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more than P 3.5 million. That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in land values. To rule in
[54]

favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition. WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against petitioners. SO ORDERED.
64.