Abacus Real Estate Development Center, Inc. vs. The Manila Banking Corporation

A bank placed under receivership loses the authority of its officers to transact business involving the bank's assets, and the appointed receiver has only powers of administration—not disposition—so that neither the bank's officers nor the receiver can validly grant or ratify an option to purchase the bank's property.

Manila Banking Corporation owned a 1,435-square meter parcel of land along Gil Puyat Avenue Extension, Makati City, covered by TCT No. 132935, where it had begun constructing a 14-storey building but could not finish due to financial difficulties. On May 22, 1987, the Central Bank ordered Manila Bank's closure and placed it under receivership, appointing Feliciano Miranda, Jr. as Receiver. The bank contested the legality of its closure before the proper court. On November 11, 1988, the Central Bank, via Monetary Board Resolution No. 505, ordered the bank's liquidation and designated Atty. Renan V. Santos as Liquidator; however, liquidation was held in abeyance pending the outcome of the closure litigation, and Atty. Santos's designation was amended on December 22, 1988 to that of Statutory Receiver. During this period, the bank's acting president, the late Vicente G. Puyat, sought investors to finance completion of the building.

Manila Banking Corporation owned a 1,435-square meter parcel of land along Gil Puyat Avenue Extension, Makati City, covered by TCT No. 132935, where it had begun constructing a 14-storey building. Financial difficulties prevented completion. On May 22, 1987, the Central Bank ordered the bank's closure and placed it under receivership. The bank contested the legality of the closure in court. On November 11, 1988, the Central Bank, through Monetary Board Resolution No. 505, ordered the bank's liquidation and designated Atty. Renan V. Santos as Liquidator, but liquidation was held in abeyance pending the closure litigation, and Atty. Santos's designation was amended to Statutory Receiver on December 22, 1988.

In the interim, the bank's acting president, the late Vicente G. Puyat, sought investors to finance completion of the building. On August 18, 1989, a group of investors represented by Calixto Y. Laureano (the "Laureano group") wrote Puyat offering to lease the building for ten years, advance the cost to complete construction with the advanced cost amortized and offset against rental payments, and in consideration thereof, to be granted an "exclusive option to purchase" the building and lot. Because no disposition of assets could be made due to the pending litigation over the closure, an arrangement was devised whereby the property would first be leased to Manila Equities Corporation (MEQCO), a wholly-owned subsidiary of Manila Bank, which would then sublease to the Laureano group. In a letter dated August 30, 1989, Puyat accepted the Laureano group's offer and granted an "exclusive option to purchase" the lot and building for ₱150,000,000. On October 31, 1989, the building was leased to MEQCO for ten years, and on March 1, 1990, MEQCO subleased the property to Abacus Real Estate Development Center, Inc., a corporation formed by the Laureano group for that purpose, under terms identical to the Manila Bank–MEQCO lease.

The Laureano group was unable to finish the building due to the economic crisis following the failed December 1989 coup attempt. It then offered its rights in Abacus and the "exclusive option to purchase" to Benjamin Bitanga for ₱20,500,000. Bitanga alleged that, because of the substantial amount involved, he first spoke with Atty. Renan Santos, the Central Bank-appointed receiver, who verbally approved his entry into Abacus and his take-over of the sublease and option to purchase during a lunch meeting. On March 30, 1990, the Laureano group transferred and assigned to Bitanga all of its rights in Abacus and the "exclusive option to purchase." On September 16, 1994, Abacus sent a letter to Manila Bank expressing its desire to exercise the "exclusive option to purchase," but Manila Bank refused to honor it.

On November 10, 1995, Abacus filed a complaint for specific performance and damages against Manila Bank and/or the Estate of Vicente G. Puyat in the RTC of Makati, Branch 59, docketed as Civil Case No. 96-1638, praying that Manila Bank be ordered to sell, transfer, and convey the land and building for ₱150,000,000 free from all liens and encumbrances, plus damages and attorney's fees. After pre-trial, both parties submitted the case for summary judgment. The trial court, in its decision dated May 27, 1999, rendered judgment for Abacus, ordering Manila Bank to sell the property at ₱150,000,000 and to pay ₱2,000,000 in attorney's fees. Manila Bank's motion for reconsideration was denied on August 17, 1999. Manila Bank appealed to the Court of Appeals, which reversed the RTC decision on May 26, 2003. Abacus's motion for reconsideration was denied on February 17, 2004.

• Timeliness of Respondent's Appeal: Petitioner argued that respondent bank's appeal to the Court of Appeals was filed out of time. Petitioner contended that respondent received the RTC decision on June 22, 1999, giving it until July 7, 1999 to appeal or move for reconsideration. Since respondent allegedly filed its Motion for Reconsideration only on July 7, 1999—the last day of the appeal period—it had only one remaining day to appeal after receiving the denial on August 23, 1999, making its August 25, 1999 appeal late by one day.
• Binding Effect of the Option to Purchase: Petitioner insisted that the "exclusive option to purchase" granted by Vicente G. Puyat, then acting president of Manila Bank, was binding upon the bank.
• Ratification by the Receiver: Petitioner asseverated that the "exclusive option to purchase" was ratified by Manila Bank's receiver, Atty. Renan Santos, during a lunch meeting with Benjamin Bitanga in March 1990.
• Inconsistency in the Records: Petitioner contested the CA's finding on the mailing date, arguing that if respondent truly mailed its Motion for Reconsideration on July 6, 1999 and then personally furnished the trial court with a copy the next day, the rollo should have contained two copies of the motion.

• Timeliness of Appeal: Respondent alleged that it sent the trial court a copy of its Motion for Reconsideration on July 6, 1999 through registered mail, with two days still remaining in the appeal period. Respondent thus claimed that its appeal filed on August 25, 1999—two days after receiving the order denying its Motion for Reconsideration—was within the reglementary period.
• Lack of Authority of Bank Officers: Respondent consistently maintained that Vicente G. Puyat had no authority to act for and represent Manila Bank, the latter having been placed under receivership by the Central Bank at the time the "exclusive option to purchase" was granted.

• Timeliness of Appeal: Whether respondent bank's appeal to the Court of Appeals was filed on time.
• Validity of the Option to Purchase: Whether petitioner Abacus acquired the right to purchase the lot and building in question.

• Timeliness of Appeal: Yes. The appellate court's factual finding that respondent filed its Motion for Reconsideration by registered mail on July 6, 1999 was supported by substantial evidence and is binding upon the Supreme Court.
• Validity of the Option to Purchase: No. The "exclusive option to purchase" granted by Vicente G. Puyat was unenforceable against Manila Bank because the bank was under receivership at the time, suspending the authority of its officers over its assets. The receiver likewise could not ratify the option, as granting an option to purchase is an act of strict ownership, not administration.

• Timeliness of Appeal: The issue raised by petitioner concerned the correctness of the Court of Appeals' factual finding as to the precise date respondent filed its Motion for Reconsideration. The Supreme Court declined to review this factual determination, it being beyond the Court's province to analyze or weigh evidence supportive of such a finding. The CA's conclusion was supported by substantial evidence: the file copy of the motion bore the annotation "Registry Receipt No. 1633 Makati P.O. 7-6-99"; respondent's manifestation filed on July 7, 1999 stated that the motion was mailed the previous day; registry return cards indicated mailing on July 6, 1999; and the certification issued by the Branch Clerk of Court was deemed inconsequential because it was based only on the docket book without reference to the original records already with the CA. The Court has consistently held that findings of the CA and lower courts are accorded great weight, if not binding, save for the most compelling and cogent reasons, none of which were present here. Accordingly, the CA's factual conclusion that respondent's appeal was filed on time was affirmed.

• Validity of the Option to Purchase: Manila Bank was indisputably under receivership pursuant to Central Bank MB Resolution No. 505 dated May 22, 1987, at the time Vicente G. Puyat granted the "exclusive option to purchase." Citing Villanueva vs. Court of Appeals, the Court affirmed that the appointment of a receiver operates to suspend the authority of the bank and its directors and officers over its property and effects, such authority being reposed in the receiver. Puyat, as acting president, was therefore without authority to grant the option. Petitioner's claim that the option was ratified by the receiver, Atty. Renan Santos, during a lunch meeting was likewise rejected. While a contract unenforceable for lack of authority may be ratified by the person in whose name it was executed, Section 29 of the Central Bank Act (R.A. No. 265, as amended) provides that the receiver's duty is to "administer the same for the benefit of its creditors." Granting or approving an "exclusive option to purchase" is not an act of administration but an act of strict ownership involving the disposition of bank property. Section 30 of the New Central Bank Act (R.A. No. 7653) expressly provides that the receiver "shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution." The receiver's so-called "approval" thus amounted to no approval at all. Neither Puyat nor the receiver had authority to bind Manila Bank under the option, and the bank could not be compelled to sell the property to Abacus.

• Receivership suspends authority of bank officers — The appointment of a receiver over a bank operates to suspend the authority of the bank and its directors and officers over its property and effects, such authority being reposed in the receiver. Receivership is equivalent to an injunction restraining bank officers from intermeddling with the bank's property. Applied here: Vicente G. Puyat, as acting president of Manila Bank, was stripped of authority to transact business involving the bank's assets once the bank was placed under receivership, rendering the "exclusive option to purchase" he granted unenforceable against the bank.

• Bank receiver's powers are limited to administration, not disposition — A bank receiver appointed under the Central Bank Act has authority only to administer the bank's assets for the benefit of creditors, including collecting and gathering assets, bringing suits, and foreclosing mortgages. The receiver may not pay or commit any act that will involve the transfer or disposition of any asset of the institution, except for administrative expenditures. Granting or approving an option to purchase is an act of strict ownership (disposition of property), not an act of administration, and is therefore beyond a receiver's powers. Applied here: Even assuming Atty. Renan Santos verbally approved the option, such approval was void for being beyond the scope of a receiver's administrative authority.

• Factual findings of the Court of Appeals are binding — Findings of the Court of Appeals and other lower courts are, as a rule, accorded great weight, if not binding upon the Supreme Court, save for the most compelling and cogent reasons. It is not the function of the Supreme Court to analyze or weigh all over again the evidence or premises supportive of a factual determination by the CA. Applied here: The CA's finding that respondent filed its Motion for Reconsideration on July 6, 1999, supported by substantial evidence, was affirmed.

• "the assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way." — This passage, quoted from Villanueva vs. Court of Appeals, articulates the foundational principle that receivership divests bank officers of authority over bank assets, the ratio decidendi for the invalidation of the option granted by Puyat.

• "Granting or approving an 'exclusive option to purchase' is not an act of administration, but an act of strict ownership, involving, as it does, the disposition of property of the bank. Not being an act of administration, the so-called 'approval' by Atty. Renan Santos amounts to no approval at all, a bank receiver not being authorized to do so on his own." — This passage distinguishes acts of administration from acts of strict ownership in the context of a bank receiver's authority, establishing that disposition of bank property falls outside the receiver's mandate.

• "It is not the function of the Court to analyze or weigh all over again the evidence or premises supportive of such factual determination." — This passage restates the doctrinal rule that the Supreme Court does not review factual findings of the Court of Appeals absent compelling exceptions, grounding the Court's refusal to disturb the CA's finding on the timeliness of the appeal.

• Villanueva vs. Court of Appeals, 244 SCRA 395 (1995) — Cited as controlling authority for the proposition that receivership suspends the authority of bank officers over the bank's property and effects, reposing such authority in the receiver. The Court found its invocation by the appellate court apropos.
• PT&T vs. Court of Appeals, 412 SCRA 263 (2003) — Cited for the rule that it is not the function of the Supreme Court to analyze or weigh evidence supportive of a factual determination by the Court of Appeals.
• Ibay vs. Court of Appeals, 212 SCRA 160 (1992) — Cited for the proposition that findings of the Court of Appeals and lower courts are accorded great weight, if not binding, upon the Supreme Court.
• Republic vs. Court of Appeals, 349 SCRA 451 (2001) — Cited for the exception that the Court may review CA factual findings only for the most compelling and cogent reasons.
• Yao Ka Sin Trading vs. CA, 209 SCRA 763 (1992) — Cited alongside Article 1317 of the Civil Code for the principle that a contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name the contract was executed.

• Section 29, Central Bank Act (R.A. No. 265, as amended by PD 72 and PD 1007) — Governs proceedings upon insolvency of a banking institution, providing that the Monetary Board may designate a Central Bank official as receiver to take charge of the bank's assets and liabilities, collect and gather all assets, and administer the same for the benefit of creditors, exercising powers including bringing suits and foreclosing mortgages. Applied to show that the receiver's authority is limited to administration for the benefit of creditors, not disposition of property.
• Section 30, New Central Bank Act (R.A. No. 7653) — Provides that the receiver shall gather and take charge of all assets and liabilities, administer the same for the benefit of creditors, and exercise general powers of a receiver, but "shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution." Applied to confirm that a bank receiver has no power to approve or ratify an option to purchase, as it involves disposition of bank assets.
• Article 1317, Civil Code — Provides that a contract unenforceable for lack of authority may be ratified by the person in whose name the contract was executed. Applied to acknowledge the possibility of ratification, but the Court held that even if the receiver attempted ratification, it was beyond his powers.
• Section 3, Rule 41, 1997 Rules of Civil Procedure — Provides that the period of appeal shall be interrupted by a timely motion for new trial or reconsideration. Applied by petitioner in arguing that respondent's appeal was filed out of time, though the Court ultimately upheld the CA's contrary factual finding.

Panganiban (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concurred.