GR 148444; (July, 2008) (Digest)
G.R. No. 148444; July 14, 2008
ASSOCIATED BANK (now UNITED OVERSEAS BANK [PHILS.]), Petitioner, vs. SPOUSES RAFAEL and MONALIZA PRONSTROLLER, Respondents.
FACTS
Petitioner Associated Bank acquired a property via foreclosure. While its right to possess the property was pending final resolution in the Supreme Court (G.R. No. 109672), it advertised the property for sale. Respondents offered to buy it for ₱7.5 million. Petitioner, through its Vice-President and Corporate Secretary, Atty. Jose Soluta, accepted. The parties executed a Letter-Agreement on March 18, 1993, requiring a 10% down payment and the balance to be placed in escrow within 90 days. Respondents paid the down payment.
Before the 90-day deadline, respondents, citing the pending case, requested to pay the balance only upon a final Supreme Court decision. Atty. Soluta referred this to the bank’s committee, which deferred action. After the payment deadline lapsed, Atty. Soluta and respondents executed another Letter-Agreement on July 14, 1993, modifying the terms to allow payment upon a final Supreme Court order. Later, new bank management discovered the default and the second agreement. The bank’s committee disapproved the extension, declared respondents in breach, rescinded the contract, and forfeited the deposit.
ISSUE
Whether the bank is bound by the second Letter-Agreement (July 14, 1993) executed by its Vice-President, Atty. Soluta, thereby precluding the bank from unilaterally rescinding the contract and forfeiting the deposit.
RULING
Yes, the bank is bound. The Supreme Court affirmed the Court of Appeals’ decision ordering specific performance. The legal logic rests on the doctrine of apparent authority and the bank’s ratification. Atty. Soluta, as Vice-President, Corporate Secretary, and Board Member, was a high-ranking officer who initially negotiated and executed the first agreement on the bank’s behalf. His position and prior actions clothed him with apparent authority to act on the matter, leading respondents to believe in good faith that he could grant the extension. The bank is estopped from denying this authority after having held him out as such.
Furthermore, the bank ratified the second agreement through the subsequent acts of its new officer, Atty. Dayday. When presented with the July 14 agreement, Atty. Dayday did not immediately repudiate it but instead called it a “mistake,” and the bank later engaged in negotiations for a new payment scheme. This conduct constituted an acknowledgment of the existing agreement and a waiver of the right to insist on the original deadline. The bank’s eventual unilateral rescission and forfeiture, after respondents had relied on the modified terms, were unjustified. The contract remained valid and enforceable under the terms of the July 14, 1993 agreement.