First Philippine International Bank v. Court of Appeals

G.R. No. 115849 (January 24, 1996)

Facts:

The case revolves around a dispute concerning the sale of six parcels of land totaling 101 hectares located in Sta. Rosa, Laguna, which were acquired by Producers Bank of the Philippines (now First Philippine International Bank) through foreclosure. The original owners of the property were BYME Investment and Development Corporation, which had mortgaged the land to the bank.

In August 1987, Demetrio Demetria and Jose Janolo expressed interest in purchasing the property and initiated negotiations with Mercurio Rivera, the Head Manager of the Property Management Department of the bank. Following a meeting, Janolo submitted a formal offer to buy the property for P3.5 million. On September 1, 1987, Rivera responded with a counter-offer of P5.5 million. Janolo then revised his offer to P4.25 million on September 17, 1987, but there was no response from the bank.

On September 28, 1987, a meeting took place between the plaintiffs and Luis Co, the Senior Vice-President of the bank, where the P5.5 million price was confirmed. Subsequently, on September 30, 1987, Janolo sent a letter accepting the bank's counter-offer of P5.5 million.

However, after the appointment of a new conservator for the bank in October 1987, the bank refused to honor the agreement, claiming that Rivera did not have the authority to sell the property. The plaintiffs made several attempts to tender payment and demanded the execution of the sale, but the bank continued to refuse, eventually advertising the property for sale to other buyers.

In May 1988, the plaintiffs filed a suit for specific performance against the bank and its officials, asserting that a perfected contract of sale existed. The bank contended that there was no valid contract due to Rivera's lack of authority and that the negotiations were merely preliminary discussions.

Legal Issues:

1. Was there a perfected contract of sale between the parties despite the absence of a formal deed of sale?
2. Did the doctrine of "apparent authority" apply to Rivera's actions?
3. Could the conservator of the bank repudiate the contract after it was deemed perfected?
4. Did the filing of a derivative suit by the bank's majority shareholders constitute forum shopping?

Arguments:

Petitioners (Bank and Rivera):

• They argued that there was no perfected contract because Rivera lacked the authority to make a binding offer. They claimed that the negotiations were merely preliminary and that the counter-offer was extinguished by Janolo's subsequent offer of P4.25 million.
• They contended that the conservator had the power to revoke any unauthorized actions taken by previous management, including the purported sale.
• They also raised the issue of forum shopping, asserting that the plaintiffs had filed multiple suits regarding the same issue.

Respondents (Ejercito, Demetria, and Janolo):

• They maintained that a perfected contract existed based on the exchange of letters and the confirmation of the price during the meeting with Co. They argued that Rivera had apparent authority to negotiate and accept offers on behalf of the bank.
• They contended that the conservator's later repudiation of Rivera's authority was ineffective since the contract was already perfected.
• They denied engaging in forum shopping, asserting that the derivative suit filed by the bank's shareholders was separate and did not involve the same parties or issues.

Court's Decision and Legal Reasoning:

The Supreme Court affirmed the decision of the Court of Appeals, which had upheld the trial court's ruling that a perfected contract of sale existed between the parties. The Court found that:

1. Perfected Contract: The exchange of letters and the confirmation of the price constituted sufficient evidence of a perfected contract. The Court emphasized that the essential elements of consent, object, and cause were present, and the bank's internal procedures did not negate the existence of a contract.

2. Apparent Authority: The Court ruled that Rivera had apparent authority to act on behalf of the bank. The bank had held Rivera out as the person authorized to negotiate the sale, and third parties dealing with him were entitled to rely on that representation.

3. Conservator's Authority: The Court held that the conservator could not unilaterally repudiate a perfected contract. The conservator's powers were limited to actions that preserved the bank's assets and did not extend to invalidating valid contracts.

4. Forum Shopping: The Court found that the filing of the derivative suit by the bank's shareholders constituted forum shopping, as it involved the same parties and issues as the original case. The Court emphasized the importance of preventing multiple actions regarding the same subject matter to avoid conflicting judgments.

Significant Legal Principles Established:

• The case reaffirmed the doctrine of apparent authority, particularly in the context of banking transactions, where banks are held accountable for the actions of their officers when they have been held out as having authority.
• It clarified the limitations of a conservator's powers in repudiating contracts that have been validly entered into by a bank's management.
• The ruling underscored the prohibition against forum shopping, emphasizing the need for litigants to avoid filing multiple actions involving the same issues in different courts.