First Philippine International Bank and Mercurio Rivera vs. CA, Ejercito (in 14.
14. CA affirmed the decision but eliminated/reduced damages awarded by RTC.
substitution of Demetria) and Janolo
G.R. No. 115849 24 January 1996
FACTS:
1. Producer Bank of the Philippines (now First Phil) acquired 6 parcels of land (101
hc) in Laguna. These were originally owned by BYME and they were mortgaged
to the bank. The bank was under gov’t-appointed conservatorship by the
Central Bank since 1984.
2. In August 1987, Demetria and Janolo initiated negotiations for the purchase of
the property. Price negotiations were done mostly through letters with Rivera,
the Manager of the Property Mgt Dept of the bank.
o Aug 30: D&J offered 3.5m;
o Sept 1: Bank made a 5.5m counter-offer;
o Sept 17: D&J offered 4.25m;
o Sept 28: Meeting bet. D&J and bank senior VP who wanted 5.5m price.
o Sept 30: D&J accepted the 5.5m counter-offer; *perfected*
3. In October 1987, the new Acting Conservator (Encarnacion) sent the buyers a
letter to inform them that a committee is studying their proposal.
4. The respondents later sought compliance with the alleged perfected contract
of sale and tendered their payment.
5. Meanwhile, the bank advertised the parcels of land to any interested buyer. It
refused to receive both the payment and the letter.
6. Respondents demanded the execution of the documents on their perfected
agreement. The letter was received by the Manager and it was forwarded to the
Acting Conservator.
7. They again sent another demand but it was instead directed to the Acting
Conservator. No reply.
8. Respondents sent a final demand for compliance. In its reply dated May 1988,
the Acting Conservator repudiated the authority of the Manager in making the
counter-offer of 5.5M as basis of its non-compliance and refusal to accept the
tender of payment.
9. 1st case: Respondents filed an action for specific performance with damages
against the bank, the Manager and the Acting Conservator.
10. Henry Co filed a motion to intervene, alleging that he had substantial interest in
resisting the complaint because he owned 80% of the bank’s outstanding
shares. Denied.
11. Ejercito substituted Demetria upon assignment of rights.
12. RTC held that there was a perfected contract of sale.
13. 2nd case: During the pendency of the CA proceedings, Henry Co and other
stockholders purportedly filed a derivative suit with the RTC to declare the
sale an unenforceable. Respondents filed a Motion for Leave of Court to Dismiss
the Case without Prejudice on the ground of forum shopping. The motion is still
pending at the time this SC decision was made.
ISSUES & RATIO:
Both the second case and the present case should be dismissed for forum-shopping.
 Requisites of forum-shopping:
1. Identity of parties;
2. Identity of rights asserted and relief prayed for;
3. The identity is such that any judgment rendered in one action will amount
to res judicata in another action;
 The first case was filed by the buyers against the sellers to enforce a perfected
sale. The second case involves majority stockholders (in representation of the
bank) who sought to render the sale unenforceable. The objective of the
stockholders is the same as the seller bank in trying to escape from the
obligation to sell the property to the buyers.
 The stockholders represent the same interest and entity as the bank.
o They are not suing in their personal capacities since they have no direct
interest in the matter.
o A derivative suit is instituted by stockholders whenever the officials of the
corporation refuses to sue or are the ones to be sued. The stockholder is
regarded a nominal party while the corporation is the real party in int.
o Henry tried to deny that it was a derivative suit on the ground that it was
not filed by the minority shareholders. The fact that it was filed by the
majority affirms that they represent the bank.
 The corporate fiction should be disregarded. Shareholders cannot be allowed to
trifle with court processes where the corporation was not remiss in defending
itself. Otherwise, corps would use their shareholders to circumvent the rules.
 Victronics vs. RTC: The rule on forum-shopping does not extend 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.
o Not applicable in the case at bar. By praying for affirming reliefs and
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. (I don’t recall the case
mentioning their counter-claims. Anyway, yan sabi ni SC.)
 Res judicata: A decision in the first case directing the enforcement of the
contract would conflict with a possible decision in the second case that would
render the contract unenforceable.
Manager Rivera had authority to entertain offers as a sort of intermediary between
the buyers and the bank. The parties clearly intended a sale.
 He testified as to the procedure:
 1. The acquired assets are turned over to him.
2. He was instructed to advertise acquired assets. So, he publishes an inter-
office memo to all branches concerning the assets for sale.
3. He conveys and accepts the offers. They are later presented to the
Committee, including information on the original loan, the bid price during
foreclosure, the bank’s total claim, the appraisal value and other relevant
information.
4. The committee evaluates the proposed sale which is submitted to the
Convservator for final approval.
5. Once approved, the deed of sale is executed and signed by the
Conservator.
 The counter-offer price was determined by the Past Due Committee and
approved by Romey, the previous conservator.
o Two committee members testified that the offers were not discussed. The
said members also admit that they seldom attend meetings in the first
place.
 Doctrine of Ostensible Authority: As against one who dealt in good faith, a
corporation cannot deny the authority of an officer it permitted to do acts
within the scope of an apparent authority and held him out to the public as
possessing powers to do those acts.
o Here, the bank placed the Manager in a position of authority to accept
offers and negotiate sales.
 Doctrine of Apparent Authority: 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,
o Here, Rivera was in charge of the acquired assets; suggested an amount
for the initial offer; received their offers/letters; confirmed the bank’s
final price; arranged meetings; Lastly, the advertisements referred to
Rivera as the acting officer in charge of the transactions.
 Actual limited authority is immaterial. Moreover, D&J had no notice of his actual
authority although their group of lawyers previously represented the bank.
 The bank repudiated his authority only 7 months later. Further, this was raised
only during appeal.
There was a perfected contract of sale.
 Requisites: (1) Consent; (2) Object; (3) Cause;
 The object clearly refers to the parcels of land.
 There was consent given Rivera’s authority.
 There was an agreed cause between the parties.
 D&J’s 4.25m counter-offer did not extinguish the bank’s 5.5m offer since J’s
later letter accepted the 5.5m. Even assuming it was extinguished, the 5.5m
was repeated and revived during their meeting with the VP.
 The matter of its extinguishment was raised only during its appeal.
The contract of sale is enforceable.
 The bank tried to invoke the statute of frauds considering there is no note,
memorandum, or writing subscribed by the bank to evidence the contract.
 However, the statute of frauds is inapplicable because it failed to object to oral
testimony proving the bank’s counter-offer. (There were testimonies about the
meeting, including the reiteration of the 5.5m offer. Some of which even
included Atty. Fajardo, BYME’s counsel.)Thus, it waved any defects of the
contract.
Encarnacion, as Acting Conservator, cannot repudiate the perfected contract.
 At the time of perfection and thereafter, Romey did not repudiate the contract
of sale. Neither did Encarnacion repudiate the contract itself. He merely denied
Rivera’s authority months after perfection of the contract.
 Section 28-A Central Bank Act: [The conservator] 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.
 The Central Bank Act gives vast powers to a bank conservator for the
preservation of assets, reorganization of its management and restoration of
its viability. Such powers, however, cannot extend to post-facto repudiation
of perfected transactions. Otherwise, they would infringe the non-impairment
clause in the Constitution.
 Sect 28-A merely gives him power to revoke defective contracts such as those
that are void, voidable, unenforceable or rescissible.
 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.
 Otherwise, a failing bank can become solvent at the expense of third parties
who had their dealings revoked.
Other matters:
 The bank argues that the counter-offer was no determined by the past due
committee and Romey. SC says they should have presented Romey himself as
he was in the best position to establish their argument. Such suppression gives
rise to a presumption that his testimony would’ve been adverse.
 The bank probably wants to sell it at higher price considering the increase in
land value.