G.R. No. 190408 - Georg vs. Holy Trinity College, Inc.

Case Summary (G.R. No. 190408)

Factual Background

In 1987 Sister Teresita Medalle (Sr. Medalle) organized the Holy Trinity College Grand Chorale and Dance Company (the Group) while serving as President of respondent Holy Trinity College. The Group comprised students and performed under the school’s aegis. In 2001 the Group planned a European tour. One Edward Enriquez, who represented himself as an agent for the Group and respondent, sought petitioner’s assistance to advance payment for international airline tickets. Petitioner, who owned a travel agency in Germany, instructed her brother, Atty. Benjamin Belarmino, Jr., to negotiate on her behalf. On April 24, 2001, a six-page Memorandum of Agreement with Deed of Assignment (MOA) was executed among petitioner (as assignee), the Group (represented by Sr. Medalle and/or Enriquez) as assignor, and S.C. Roque entities as foundation-grantor for an agreed amount equivalent to P4,624,705.00. Petitioner advanced payment for the Group’s domestic and international tickets.

Procedural History

Petitioner filed an Amended Complaint on August 15, 2001 in the RTC, Branch 18, Tabaco City, seeking recovery of the principal sum under the MOA plus moral, exemplary, and actual damages, attorney’s fees, and costs. Respondent moved to dismiss on the ground that it had no cause of action against it. The trial court initially denied the motion, issued a writ of attachment against respondent on reconsideration, and pronounced an order of default against the foundation-grantor for failure to answer. After trial, the RTC rendered judgment on November 29, 2006 ordering respondent, among others, to pay petitioner jointly and severally the equivalent of DM 185,576.37 with legal interest, statutory penalties, attorney’s fees, moral and exemplary damages, and litigation expenses. Respondent appealed. The Court of Appeals rendered judgment on November 17, 2009 absolving respondent of liability. Petitioner then filed a petition for review in this Court.

Issues Presented

The central question was whether respondent was liable under the MOA executed on April 24, 2001. Subsidiary questions included whether Sr. Medalle freely and validly consented to the MOA by affixing her thumbmark while confined in hospital; whether Sr. Medalle had authority to bind respondent; whether respondent was a party to the MOA; and whether doctrines such as apparent authority or corporation by estoppel could bind respondent despite the absence of its name in the instrument.

Parties’ Contentions

Petitioner maintained that Sr. Medalle affixed her thumbmark in her capacity as President of HOLY TRINITY COLLEGE, INC., that the MOA was valid and duly executed, and that respondent was therefore liable. Petitioner also challenged the admission in evidence of a deposition of Sr. Medalle, insisting that proper certification and leave of court were lacking. Respondent contended that it was not a party to the MOA because its name did not appear therein, that Sr. Medalle lacked authority or was not the acting President when she affixed the thumbmark, and that fraud induced the thumbmark because Sr. Medalle was seriously ill and did not understand the transaction. Respondent counterclaimed for damages.

Trial Court Findings and Ruling

The RTC found that the thumbmark in the MOA was that of Sr. Medalle and that she acted as President of Holy Trinity College when she affixed it. The court found the Group to be created, controlled, and financed by the school administration and that the Group lacked separate juridical personality. The RTC concluded that respondent was deemed to have admitted the genuineness and due execution of the MOA for failure to make a specific denial under oath. The trial court applied corporation by estoppel and pierced the veil of corporate fiction to treat the school, the performing groups, and Sr. Medalle as identical for the transaction. The RTC found a breach and awarded petitioner the monetary relief stated in its dispositive portion.

Court of Appeals Ruling

The Court of Appeals reversed and absolved respondent of liability. It framed three issues: respondent’s privity to the loan and the MOA; Sr. Medalle’s capacity and authority to act for respondent; and the applicability of apparent authority or corporation by estoppel. The appellate court found no showing that Sr. Medalle participated in the negotiation and consummation of the contract. It emphasized petitioner’s reliance on representations by Enriquez and on third-party confirmations without contacting Sr. Medalle directly. The CA noted the absence of respondent’s name in the MOA and held that respondent was not a party. It also ruled that the trial court erred in treating respondent as having admitted the genuineness of the MOA because Section 8, Rule 8 of the Rules of Court renders the oath requirement inapplicable where the adverse party does not appear to be a party to the instrument. The CA credited assertions that Sr. Medalle signed under mistaken belief and while hospitalized, and it found insufficient evidence that respondent acquiesced in or benefited from any misrepresentations to justify estoppel.

Standard of Review Employed by the Supreme Court

The Supreme Court recognized the general rule that findings of fact by the Court of Appeals are final and binding, citing National Power Corporation v. Diato-Bernal and other authorities. The Court enumerated recognized exceptions to that rule and found that Exception No. 7 applied because the findings of the RTC were contrary to those of the Court of Appeals. The Court therefore reviewed the factual determinations de novo to the extent necessary to resolve the conflict between the courts below.

Supreme Court’s Analysis on Consent and Admissibility of Deposition

The Court examined the contention that Sr. Medalle’s consent was vitiated by fraud under Article 1330. It sided with petitioner on key evidentiary points. First, the Court observed that the trial court had discretion to disregard the deposition of Sr. Medalle for failure to comply with deposition rules. The Court noted absence of the certification required by Section 20, Rule 23 of the Rules of Court and the lack of leave of court prior to taking the deposition, in violation of Section 1, Rule 23, because an answer had not yet been filed when the Notice of Deposition was served. The Court emphasized that noncompliance with the rules justified the trial court’s discretionary disregard of the deposition. Second, the Court held that respondent failed to prove that Sr. Medalle’s mental faculties were so impaired by stroke as to vitiate consent. The Court accepted the trial court’s finding that the MOA was read to Sr. Medalle and that she responded and affixed her thumbmark with understanding. The Court also emphasized the presumptive regularity and conclusive effect of a notarized ins

Case Syllabus (G.R. No. 190408)

Parties and Procedural Posture

Petitioner Benjie B. Georg represented by Benjamin C. Belarmino, Jr. sued for payment under a Memorandum of Agreement and for damages in the Regional Trial Court, Branch 15, Tabaco City in Civil Case No. T-2161.
Respondent Holy Trinity College, Inc. denied privity to the MOA and counterclaimed for damages.
The RTC entered judgment in favor of petitioner, holding respondent jointly and severally liable, and a writ of execution pending appeal issued and was sustained on separate review in G.R. No. 180787.
The Court of Appeals reversed the RTC and absolved respondent, prompting this petition for review to the Supreme Court.
The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the RTC decision in toto.

Key Factual Allegations

The Holy Trinity College Grand Chorale and Dance Company (the Group) was organized by Sister Teresita Medalle during her incumbency as school president and was composed of students of respondent.
On April 24, 2001, a Memorandum of Agreement with Deed of Assignment was executed by petitioner as assignee, the Group through Sr. Medalle and/or Edward Enriquez as assignor, and S.C. Roque Foundation as grantor, for the advance payment of international airline tickets amounting to P4,624,705.00.
Petitioner advanced payment for the Group’s domestic and international tickets and later alleged nonpayment and refusal by the assignor and the foundation to honor the MOA.
Sr. Medalle affixed her thumbmark on the MOA while confined at the UST Hospital following a stroke, and the MOA was notarized in Makati City.

Issues Presented

Whether respondent was a party to or bound by the MOA executed on April 24, 2001.
Whether Sr. Teresita Medalle freely and validly gave consent to the MOA or whether consent was vitiated by dolo causante or other defects under Article 1330 of the Civil Code.
Whether Sr. Medalle was authorized to bind respondent or whether apparent authority or corporation by estoppel applies.
Whether the deposition of Sr. Medalle offered by respondent was admissible given compliance with Rule 23 of the Rules of Court.

Contentions of the Parties

Petitioner contended that Sr. Medalle acted in her capacity as President of respondent, that the MOA was read to her, and that petitioner reasonably relied on her authority to bind the school.
Respondent contended that it was not named in the MOA, that Sr. Medalle lacked authority or ceased being president at the time, and that the thumbmark was secured by fraud or without consent.
Respondent also relied on a deposition of Sr. Medalle to show lack of capacity or consent, and accused petitioner of failing to exercise due diligence regarding Enriquez’s authority.

Trial Court Findings

The RTC found that the thumbmark on the MOA was Sr. Medalle’s and that she acted as President of Holy Trinity College when she affixed it.
The RTC found that the Group derived its existence, supervision, funding of costumes, hiring of trainers, and operational control from respondent and thus lacked independent juridical personality.
The RTC concluded that respondent was deemed to have admitted the genuineness and due execution of the MOA and that the doctrines of corporation by estoppel and disregarding corporate fiction applied.
The RTC found breach of contract and awarded the monetary, moral, exemplary damages, attorney’s fees, interest, and li