G.R. No. 91436 , May 24, 1993
METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. QUILTS & ALL, INC., respondent.

FACTS

On April 7, 1987, Relita P. de los Santos, Corporate Secretary of Quilts & All, Inc. (Quilts), issued a Secretary’s Certificate certifying that in a special board meeting, the company’s President, Senen B. Dizon, was authorized to mortgage a corporate property in favor of Metropolitan Bank & Trust Company (Metrobank) to secure Dizon’s personal loan of P700,000. Based on this certificate, Metrobank restructured Dizon’s loan and annotated the mortgage lien on the title. Over a year later, Quilts, through counsel, demanded the mortgage’s cancellation, claiming the board meeting could not have had a quorum as several directors were abroad. Metrobank refused. Quilts filed a complaint for annulment and cancellation of mortgage against Metrobank, Dizon, and de los Santos. The Regional Trial Court initially dismissed the case but later reinstated it. Metrobank’s petition to the Court of Appeals resulted in a ruling that the issue against Dizon and de los Santos regarding ultra vires acts was within the exclusive jurisdiction of the Securities and Exchange Commission (SEC), and proceedings against Metrobank were suspended pending the SEC’s resolution. Metrobank elevated the case to the Supreme Court.

ISSUE

Whether or not Quilts’ complaint sufficiently states a cause of action against Metrobank.

RULING

No. The Supreme Court granted Metrobank’s petition and dismissed the civil case against it. The Court held that the complaint, particularly its Paragraph 10 which alleged damages from “illegal acts,” merely stated legal conclusions and not ultimate facts. The complaint lacked allegations that Metrobank had prior knowledge of, or could have discovered through due diligence, any falsity in the Secretary’s Certificate. It also failed to allege specific overt acts showing Metrobank conspired to defraud Quilts. Metrobank was justified in relying on the Secretary’s Certificate in good faith, under the presumption that the ordinary course of business was followed and that the Corporate Secretary regularly performed her duties. The Court of Appeals’ decision was modified, dismissing the case against Metrobank.
Separate Opinions:
Justice Davide, Jr., dissenting (with Justice Feliciano concurring), voted to deny the petition. He argued that the complaint’s allegations adequately stated a cause of action, as Metrobank acted with undue haste in accepting the mortgage based solely on a Secretary’s Certificate without a supporting board resolution or a special power of attorney in a public document, which is required to convey real rights. He maintained that a person dealing with an agent is put upon inquiry as to the agent’s authority, and the trial court did not commit grave abuse of discretion in denying the motion to dismiss.