Case Summary (G.R. No. 177783)
Factual Background
In August 1981, Fausto C. Ignacio mortgaged two parcels of land in Cabuyao, Laguna to Home Savings Bank and Trust Company as security for a P500,000 loan. After default, the bank foreclosed and became the highest bidder at the foreclosure sale of January 26, 1983; certificates of sale were registered on February 8, 1983, and, after the one-year redemption period lapsed, title consolidated in the bank and new TCTs were issued to the bank.
Dispositions of the Foreclosed Properties
Respondent bank caused subdivision and dispositions of the foreclosed lands that had been consolidated in its name. Portions were sold to third parties by deeds of absolute sale between 1984 and 1987 for stated prices of P150,000 per lot; certain subdivision expenses were paid by petitioner, who also negotiated some of those sale transactions. Several subdivided lots remained titled in the bank's name.
Petitioner's Attempted Repurchase and Claim
Petitioner sought to repurchase the consolidated properties and tendered payments over time. He relied on a March 22, 1984 letter from Rita B. Manuel, President of Universal Properties, Inc. (UPI), the bank's disposition agent, which set terms for repurchase, and petitioner wrote handwritten notations on that letter which he asserted reflected a modified agreement reducing the price and changing the terms. Petitioner alleged that payments and receipts issued in his name evidenced performance under the repurchase agreement and that respondent bank nevertheless sold the properties to third parties without informing him.
Procedural History
Petitioner filed an action for specific performance and damages on December 27, 1989, praying for reconveyance after payment of the alleged balance of P600,000. The bank denied the allegations. For failure to appear, the bank was initially declared in default and petitioner presented evidence ex parte, and later the default was set aside upon motion. Intervening purchasers were permitted to intervene and asserted their status as innocent purchasers for value. Petitioner amended his complaint to seek, alternatively, payment of prevailing market value less any remaining obligations.
Trial Court Findings and Disposition
The RTC found in favor of petitioner, adjudging that a valid compromise or repurchase agreement existed, annulling the deeds of sale to intervenors, ordering cancellation of two TCTs issued to intervenors, directing reconveyance to petitioner upon payment of P600,000, and awarding damages and attorney’s fees. The trial court based its ruling on its conclusion that the bank had accepted petitioner's modified terms and that petitioner had made substantial payments, with reference to the March 22, 1984 letter and UPI receipts.
Court of Appeals Ruling
The CA reversed and set aside the RTC decision. The appellate court held that petitioner's handwritten notations manifested a qualified acceptance that amounted to a counter-offer; without written or otherwise proven acceptance by authorized bank officers the counter-offer was not binding, and therefore no perfected repurchase contract arose. The CA further found that receipts and other documents established petitioner acted as broker in the sale of subdivided lots rather than as purchaser exercising a perfected repurchase right, and that the sales to intervenors remained valid.
Issues Presented to the Supreme Court
Petitioner sought review under Rule 45, principally asserting that the CA committed grave abuse of discretion in reversing the RTC on multiple factual and legal findings: that a perfected repurchase contract existed, that petitioner did not act as broker, that respondent bank lacked the right to dispose of the properties, and that the intervenors were not innocent purchasers in good faith. The Supreme Court noted that allegations framed as grave abuse are proper in Rule 65 petitions but proceeded to address the controlling legal question under Rule 45: whether a contract for repurchase was perfected.
Petitioners' Contentions
Petitioner relied on the March 22, 1984 letter and the handwritten notations thereon as evidencing mutual agreement to a modified repurchase price and payment schedule. He argued that the UPI receipts—most issued in his name—demonstrated his installment payments and that the bank's receipt of such payments amounted to acceptance of his counter-proposal or constituted an implied agreement. He also maintained that execution of deeds directly to buyers was a common practice intended to save taxes and paperwork and did not negate the repurchase agreement.
Respondent Bank and Intervenors' Contentions
Respondent bank denied any acceptance of petitioner’s modified terms and maintained it acted within its rights as owner once title consolidated in its name. The bank and intervenors contended that the March 22, 1984 letter contained definite terms which petitioner qualified; that petitioner’s notations amounted to a counter-offer which required express acceptance; and that intervenors purchased bona fide without notice of any subsisting repurchase right.
Legal Principles on Contract Formation and Corporate Authority
The Court reiterated the rule that consensual contracts, including sales, are perfected by meeting of offer and acceptance and that the offer must be certain and the acceptance absolute, citing Article 1319 of the Civil Code and controlling precedents including Palattao v. Court of Appeals and Villanueva v. Philippine National Bank. The Court also reiterated that a corporation transacts through its board or duly authorized agents and that unauthorized verbal agreements with employees or representatives do not bind the corporation, citing Section 23 of the Corporation Code and relevant jurisprudence.
Supreme Court's Analysis and Ruling
Applying those principles, the Court found
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Parties and Procedural Posture
- Heirs of Fausto C. Ignacio were substituted as petitioners following Fausto C. Ignacio's death and sought review by the Supreme Court from the Court of Appeals decision in CA-G.R. CV No. 73551.
- Home Bankers Savings and Trust Company and the intervening buyers Spouses Phillip and Thelma Rodriguez, Catherine, Reynold and Jeannette Zuniga were respondents in the underlying civil action for specific performance and damages.
- The petition was filed as a Petition for Review on Certiorari under Rule 45, Rules of Court from the CA's reversal of the Regional Trial Court, Pasig, Branch 151, Decision dated June 15, 1999.
- The Court observed that the petition framed alleged grave abuse of discretion claims more suited to Rule 65, Rules of Civil Procedure, but proceeded to resolve the substantive issue presented.
Key Factual Allegations
- In August 1981, Fausto C. Ignacio mortgaged two parcels in Cabuyao, Laguna as security for a loan of P500,000 to Home Savings Bank and Trust Company, predecessor of respondent bank.
- The mortgaged properties were covered by TCT Nos. T-8595 and T-8350 and totaled approximately 203,413 square meters.
- Following default, the bank foreclosed and became the highest bidder at a sale on January 26, 1983, with a Certificate of Sale registered on February 8, 1983, and title consolidation issued as TCT Nos. 111058 and 111059.
- Petitioner later sought to repurchase the properties and relied on a March 22, 1984 letter from Rita B. Manuel of Universal Properties, Inc. (Exhibit I) stating terms for a P950,000 selling price with a P150,000 downpayment and three installments.
- Petitioner added handwritten notations to Exhibit I reflecting a modified repurchase price of P900,000 and altered payment terms, and asserted additional verbal conditions including release of subdivided lots upon payment and continued possession.
- Respondent bank proceeded to subdivide and sell portions of the consolidated titles to third parties between 1984 and 1987, and later sold remaining parcels to the Rodriguezes and the Zunigas in August and October 1989 without notifying petitioner.
- Petitioner annotated an adverse claim on the titles on September 18, 1989, and filed suit for specific performance and damages on December 27, 1989, tendering an Ex-Parte Consignation of P235,000 as balance of the repurchase price.
- The RTC initially rendered judgment in favor of petitioner after a default, then set aside the default and judgment upon the bank's motion, admitted intervention by the buyers, and on June 15, 1999 rendered judgment ordering reconveyance upon payment of P600,000 and refunds to intervenors.
Issues Presented
- Whether the Court of Appeals committed grave abuse in reversing the trial court finding that a perfected contract to repurchase existed between petitioner and respondent bank.
- Whether petitioner acted as broker rather than buyer and whether the receipts offered proved payments in petitioner's favor.
- Whether respondent bank had the right to dispose of the properties despite petitioner's asserted repurchase agreement.
- Whether the intervenors were innocent purchasers for value in good faith and whether their purchases were voidable.
- Whether the central issue was the perfection of a repurchase contract under the applicable principles of consent and corporate authority.