Title
Development Bank of the Philippines vs. Spouses Ong
Case
G.R. No. 144661
Decision Date
Jun 15, 2005
Dispute over foreclosed property sale; no perfected contract as DBP's higher authorities did not approve respondents' offer, despite deposit and branch manager's notation.
foreclosed property
legal battle
contract of sale

Case Summary (G.R. No. 144661)

Factual Background

On May 25, 1988, respondent Francisco Ong, with the conformity of his wife Leticia Ong, addressed a written offer to DBP through its branch manager in Cagayan de Oro City to purchase the subject property on a negotiated sale basis. The offer fixed the purchase price at P136,000.00, with a downpayment of P14,000.00 and a balance of P122,000.00, payable upon ejection of the occupants. The offer expressly required respondents to deposit P14,000.00 in cash or check, while stating that the deposit and the offer would not bind DBP until respondents received DBP’s approval by higher authorities of the bank.

The offer further provided a mechanism by which DBP could favor a higher offer from a third party or from the former owner, subject to specified thresholds and deposit requirements. If DBP determined that another offer was more advantageous, it would refund respondents’ P14,000.00 deposit within three (3) working days after the determination. The branch head at the Cagayan de Oro City branch, Jose Z. Lagrito, noted the offer and Official Receipt No. 3081947 was issued for the deposit.

Subsequently, DBP informed respondents that it received another offer from a third-party buyer under the same price and term but more advantageous to the bank because the buyer would assume the expenses for the ejection of existing occupants. In a letter dated October 21, 1988, Lagrito informed respondents that they were given three (3) days to match the third-party offer; otherwise, DBP would award the property to the other buyer, and respondents would receive a refund of their deposit upon surrender of their receipt. On October 28, 1988, respondents submitted a matching written offer, agreeing to assume responsibility for the ejection of squatters or occupants, if any.

Despite these developments, on September 6, 1990, respondents were notified that the property would instead be offered for public bidding on September 24, 1990. Feeling aggrieved, respondents filed in the RTC a complaint for breach of contract and/or specific performance against DBP.

RTC Proceedings and Initial Dismissal

The complaint was docketed as Civil Case No. 90-422, raffled to the RTC Branch 23 at Cagayan de Oro City. After pre-trial, the parties agreed to submit the case for judgment based on the pleadings, and the RTC required simultaneous memoranda within thirty (30) days. Only DBP filed its memorandum.

In a decision dated April 25, 1995, the RTC dismissed the complaint, holding that there was no perfected contract of sale between the parties. Consequently, it ruled that there was no breach, since no contract existed from the beginning.

Motion for Reconsideration and Subsequent Trial on Evidence

On respondents’ motion for reconsideration, the RTC vacated its earlier judgment and proceeded to receive evidence. This time, respondents adduced evidence consisting of the testimony of respondent Francisco Ong and the documents identified through his testimony. DBP did not present evidence; it merely opted to offer documentary exhibits.

Francisco Ong testified to the transaction’s purported formation. He stated that he and his wife went to DBP’s branch, sought Roy Palasan (a bank clerk), and expressed interest in buying two lots. Palasan allegedly conferred with Lagrito. According to Ong, Palasan later informed the spouses that Lagrito agreed to sell the property, that respondents needed to pay a ten percent (10%) downpayment, and that a cash purchase would have an associated discount. Ong further testified that Palasan required respondents to sign a bank form to express their “firm offer” and that, when respondents questioned the form’s statement that approval by higher authorities was needed, Palasan allegedly assured them that the documents were only for formality and that the branch manager had already agreed to sell.

Respondents rested after their evidence.

RTC Judgment for Respondents

After the evidence was presented, the RTC rendered a second decision on September 26, 1996, ruling in favor of respondents. It ordered DBP to: (a) execute a final sale of the lot “subject matter of the contract of sale” at the original price of P136,000.00; (b) accept the balance of the purchase price from respondents; (c) pay moral damages in the amount of P30,000.00; (d) refund P10,000.00 as actual litigation expenses; and (e) pay attorneys’ fees of P20,000.00.

Court of Appeals Affirmance

DBP appealed to the Court of Appeals in CA-G.R. CV No. 54919. On March 5, 1999, the Court of Appeals affirmed the RTC decision in toto. Its affirmance relied on the view that the testimony of Francisco Ong was “positive and clear,” that the petitioner had not objected or rebutted it, and that the bank personnel involved—Palasan and Lagrito—had not been presented to refute the claim that the bank agreed to sell. The Court of Appeals reasoned that respondents could rely on Lagrito’s representation as branch manager, and that the sale was perfected upon Palasan and Lagrito’s communication of approval to respondents. It also pointed to the circumstance that respondents’ sister’s similar offer resulted in a consummated sale between DBP and the sister.

DBP’s motion for reconsideration was denied by the Court of Appeals in its Resolution dated July 19, 2000, prompting the petition before the Supreme Court.

Issues Raised in the Supreme Court

DBP presented grounds including: first, that respondents introduced parol evidence to prove meeting of minds without a written contract executed by the parties, because at most their writings constituted offers and counter-offers; second, that respondents’ quantum of proof was insufficient to establish perfection of the contract of sale based solely on un-corroborated oral testimony; third, that the burden of proving perfection rested on respondents and that DBP’s non-objection did not transform testimony into truth; and fourth, that DBP had opposed respondents’ theory in its memorandum and documentary submissions when the case had earlier been submitted for judgment based on the pleadings.

The Supreme Court’s Core Determination: Perfection of Contract of Sale

The Supreme Court framed the controversy at its core as whether there was a perfected contract of sale between DBP and respondents, capable of supporting an order compelling DBP to issue a board resolution approving the sale and executing a final deed, and/or supporting liability for breach. The Court emphasized that without a perfected contract of sale, there could be no cause of action for specific performance or breach.

The Court scrutinized the RTC’s shifting conclusions. It noted that the first RTC decision had held no perfected contract existed, but the second decision reversed course. The later RTC finding was anchored on facts it considered established, namely: (a) respondents made a downpayment in a check that DBP’s bank later encashed; (b) respondents’ sister allegedly bought under a similar arrangement; and (c) DBP did not present witnesses to rebut respondents’ positive testimony.

Rejection of the Lower Courts’ Reliance on Unrebutted Testimony and “Noted” Offers

The Supreme Court disagreed with the Court of Appeals and corrected the legal analysis. While it recognized the general principle that in petitions for review on certiorari it did not reweigh facts as it would in an appeal, the Court held that the legal conclusions of the lower courts were incorrect based on the facts they found and the testimony itself.

The Court observed that the transaction described by Francisco Ong showed that communication of “approval” came from Palasan, a mere bank clerk, and that Lagrito, the branch manager, had no personal or direct communication with respondents to express his consent to the sale. Thus, even assuming the existence of representations attributed to bank personnel, the Court held that there was an absence of actual approval or consent by responsible bank officers.

The Court addressed the key factual distinction relied upon by respondents and the appellate court: Lagrito’s signature or notation on the offer. It held that Lagrito only NOTED the offer. According to the Court, the “NOTED” act could not legally be taken to mean approval of the sale. Instead, the very fact that the offer was merely noted, and not approved, supported the conclusion that there was no perfected contract.

The Rural Bank of Milaor Doctrine Distinguished

The Supreme Court discussed Rural Bank of Milaor vs. Ocfemia, a mandamus case involving a similar claim that the bank manager had authority to bind the bank. In that earlier case, the Court had emphasized estoppel where the bank had failed to deny the manager’s authority and had held the bank responsible for permitting apparent authority in a manner that allowed the buyer to rely on external manifestations of corporate consent.

However, the Supreme Court distinguished Rural Bank of Milaor from the case at bar. In the earlier case, the approving officer acted for and in behalf of the bank, and the bank had, in effect, failed to deny the manager’s authority. Here, by contrast, the Court found absolutely no approval whatsoever by any responsible DBP officer. It further stated that a clerk’s assurances could not bind the bank when the person claimed to have approved was not among the officers who could confer such authority upon third parties.

The Court therefore concluded that there was no legal basis to bind DBP into a valid contract of sale in the absence of approval or acceptance by higher authorities through responsible officers. Without a perfected contract, respondents’ causes of action for breach and specific performance could not stand.

Encashment of the Deposit Was Not Evidence of Partial Payment of a Purchase Price

The Supreme Court also rejected the lower courts’ reliance on the encashment of the check for the P14,000.00 deposit as proof of perfection or partial payment of the purchase price. The Court relied on the written terms of respo

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