Development Bank of the Philippines vs. Spouses Francisco Ong and Leticia Ong

A contract of sale is not perfected where the buyer's written offer to purchase is merely "noted" by a branch manager rather than "approved," and where the assurance of acceptance comes from a mere bank clerk without authority to bind the bank. The mere encashment of a deposit check does not prove perfection of a contract of sale when the governing written offer expressly states that the deposit does not bind the bank until approval by higher authorities.

The Development Bank of the Philippines (DBP) is a government banking institution that had acquired a foreclosed asset formerly owned by Enrique Abada, located at Corrales Extension, Cagayan de Oro City, covered by TCT No. T-4786. The respondents, Spouses Francisco and Leticia Ong, sought to purchase this property on a negotiated sale basis. The bank's own written offer form contained an express condition that any deposit accompanying an offer "does not bind the DBP to the offer until after my/our receipt of its approval by the higher authorities of the bank," establishing the internal approval process as a condition precedent to any binding agreement.

On May 25, 1988, respondent Francisco Ong, with the conformity of his wife Leticia Ong, addressed a written offer to the Development Bank of the Philippines (DBP) through its branch manager at Cagayan de Oro City to purchase a foreclosed property formerly owned by Enrique Abada under TCT No. T-4786. The offer proposed a purchase price of ₱136,000.00 with a downpayment of ₱14,000.00 and the balance payable in cash upon ejection of occupants. The written offer expressly stated that the deposit "does not bind the DBP to the offer until after my/our receipt of its approval by the higher authorities of the bank," and that the bank could consider higher offers from third-party buyers. The offer was "NOTED" by the branch head, Jose Z. Lagrito, and Official Receipt No. 3081947 was issued for the ₱14,000.00 deposit.

In a letter dated October 21, 1988, Lagrito informed the respondents that the bank had received an offer from another interested third-party buyer at the same price and term, but more advantageous because the buyer would assume responsibility for ejecting occupants. The respondents were given three days to match the offer. In a written offer dated October 28, 1988, the respondents matched the second buyer's offer by assuming responsibility at their own expense for the ejection of squatters or occupants.

On April 7, 1989, a conference was held between the respondents, their counsel, and the bank, where the respondents were informed why the sale could not be awarded to them. Thereafter, in a letter dated September 6, 1990, the respondents were notified that the property would instead be offered for public bidding on September 24, 1990.

Feeling aggrieved, the respondents filed a complaint for breach of contract and/or specific performance with the Regional Trial Court at Cagayan de Oro City, docketed as Civil Case No. 90-422 and raffled to Branch 23. After pre-trial, the parties agreed to submit the case for judgment based on the pleadings. The trial court initially dismissed the complaint on April 25, 1995, finding no perfected contract of sale. However, upon the respondents' motion for reconsideration, the trial court vacated its judgment and set the case for reception of evidence.

In his testimony, respondent Francisco Ong gave the respondents' version of the transaction. According to him, he and his wife went to the bank branch and looked for Roy Palasan, a bank clerk, telling him they were interested in buying two lots. Palasan spoke with Lagrito, the branch manager, then returned and informed the spouses that the branch manager agreed to sell the property to them. Palasan told them they would be required to pay ten percent of the purchase price as downpayment and that a cash payment would entitle them to a ten percent discount. The respondents were required to sign a bank form expressing their firm offer, but when they queried about the statement requiring approval of higher authorities, Palasan told them the documents were only for formality purposes and assured them that the branch manager had already agreed to sell the property.

The respondents rested their case after presenting their evidence. The petitioner no longer adduced any evidence but formally offered its documentary exhibits. The trial court then rendered a new decision on September 26, 1996, in favor of the respondents, ordering the petitioner to execute a final deed of sale at the original price of ₱136,000.00, accept the balance of the purchase price, pay moral damages of ₱30,000.00, refund ₱10,000.00 in actual litigation expenses, and pay attorney's fees of ₱20,000.00. The Court of Appeals affirmed in toto on March 5, 1999, and denied reconsideration on July 19, 2000.

• Parol Evidence Rule: Petitioner argued that the respondents' introduction of parol evidence to prove the alleged meeting of minds between the parties was not sanctioned by Rule 130, Section 9 of the Rules of Court, considering that there was no written contract executed by the parties, but merely unilateral written communications constituting offers and counter-offers.
• Insufficient Quantum of Proof: Petitioner maintained that the quantum of proof was wanting to prove the alleged perfection of the contract of sale, which rested solely on the uncorroborated oral testimony of respondent Francisco Ong.
• Burden of Proof: Petitioner argued that the burden of proving perfection of the contract of sale rested with the respondents, and that the non-objection to the introduction of parol evidence did not automatically ripen the testimony into truth, as its credibility and weight remained subject to judicial scrutiny.
• Prior Opposition: Petitioner contended that it had already interposed its defenses when it filed a memorandum attaching documentary evidence and declarations in its pleadings on the non-perfection of the contract when the case was submitted for judgment on the pleadings.

N/A — The decision does not separately recount the respondents' arguments on appeal beyond their position that a perfected contract of sale existed based on the assurance of bank personnel and the encashment of their deposit check.

• Perfection of Contract of Sale: Whether a perfected contract of sale existed between the petitioner and the respondents such that the Court could compel the petitioner to issue a board resolution approving the sale and execute the final deed of sale, or hold the petitioner liable for breach thereof.
• Binding Effect of Bank Clerk's Representation: Whether the representation of Roy Palasan, a mere bank clerk, that the branch manager had approved the sale, could bind the petitioner bank to a contract of sale with the respondents.
• Effect of Encashment of Deposit Check: Whether the encashment of the check representing the ₱14,000.00 deposit constituted proof of perfection of a contract of sale.

• Perfection of Contract of Sale: No. There was no perfected contract of sale between the parties because the respondents' offer to purchase was merely "NOTED" by the branch manager, not "approved," and no responsible bank officer of the petitioner ever accepted the offer. Without a perfected contract of sale, there could be no cause of action for specific performance or breach thereof.
• Binding Effect of Bank Clerk's Representation: No. The representation of Roy Palasan, a mere clerk at the petitioner's Cagayan de Oro City branch, that the manager had already approved the sale, even if true, cannot bind the petitioner bank, it being obvious that such a clerk is not among the bank officers upon whom such putative authority may be reposed by a third party.
• Effect of Encashment of Deposit Check: No. The encashment of the check representing the ₱14,000.00 deposit cannot be considered proof of perfection of a contract of sale, because the very documents signed by the respondents as their offer to purchase unmistakably state that the deposit shall only form part of the purchase price if the offer is approved, and that the deposit does not bind the bank until approval by higher authorities.

• Perfection of Contract of Sale: The Court reasoned that the trial court's ruling that a perfected contract of sale existed was premised on three factual findings: (1) that the respondents made a downpayment in a check that was subsequently encashed by the bank; (2) that the respondents' sister-in-law entered into the same arrangement and was able to buy the property; and (3) that the petitioner never presented any witness to rebut the respondents' testimony. The Court, however, found that the transaction between the respondents and the petitioner was limited to Palasan, one of the clerks of the petitioner's branch, and that Lagrito, the branch manager, had no personal or direct communication with the respondents to express his alleged consent to the sale. The Court emphasized that the signature of branch manager Lagrito appearing below the typewritten word "NOTED" at the bottom of the respondents' offer to purchase could not, by any stretch of imagination, be taken to mean approval of the supposed sale. Quite the contrary, the very circumstance that the offer was merely "NOTED" and not "approved" was a clear indication that there was no perfected contract of sale.
• Binding Effect of Bank Clerk's Representation: The Court distinguished the case from Rural Bank of Milaor vs. Ocfemia, where the branch manager himself approved the sale for and in behalf of the bank. In the present case, there was absolutely no approval whatsoever by any responsible bank officer of the petitioner. The Court held that a mere bank clerk like Palasan was not among the bank officers upon whom such putative authority could be reposed by a third party, and thus there was no legal basis to bind the petitioner into any valid contract of sale with the respondents.
• Effect of Encashment of Deposit Check: The Court rejected the Court of Appeals' view that the encashment of the deposit check indicated perfection of the contract of sale. The Court noted that the very documents signed by the respondents as their offer to purchase unmistakably stated that the deposit shall only form part of the purchase price if the offer to purchase is approved, and that the deposit does not bind the bank until approval by higher authorities. Although the official receipt termed the amount as a "downpayment," the written offers of the respondents unequivocally and invariably spoke of such amount as a "deposit." Since there was never any approval or acceptance by the higher authorities of the petitioner of the respondents' offer to purchase, the encashment of the check could not in any way represent partial payment of any purchase price. The Court also found that any independent transaction between the petitioner and another third party, like the one involving the respondents' sister, was irrelevant and immaterial to the respondents' own transaction.

• Apparent Authority of Corporate Officers and Agents — A corporation is estopped from denying the authority of an officer or agent whom it knowingly permits to act within the scope of an apparent authority, holding such agent out to the public as possessing the power to do those acts. However, this doctrine applies only where the agent is a responsible officer upon whom a third party may reasonably repose such authority. In this case, the Court held that a mere bank clerk is not among the bank officers upon whom such putative authority may be reposed by a third party, and thus the bank could not be bound by the clerk's representation that the sale was approved.
• Perfection of Contract of Sale — A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Where a written offer expressly conditions the contract upon approval by higher authorities of the bank, the mere "noting" of the offer by a branch manager does not constitute acceptance, and no perfected contract arises absent such approval.
• Parol Evidence Rule — Under Rule 130, Section 9 of the Rules of Court, parol evidence is inadmissible to vary the terms of a written agreement. The Court noted the petitioner's argument that the respondents' introduction of parol evidence to prove the alleged meeting of minds was not sanctioned by this rule, given that there was no written contract but merely unilateral written communications constituting offers and counter-offers.

• "By no stretch of imagination, however, can the mere 'NOTING' of such an offer be taken to mean an approval of the supposed sale. Quite the contrary, the very circumstance that the offer to purchase was merely 'NOTED' by the branch manager and not 'approved', is a clear indication that there is no perfected contract of sale to speak of." — This passage articulates the core ratio decidendi: the distinction between "noting" and "approving" an offer, which determined that no contract of sale was perfected.
• "The representation of Roy Palasan, a mere clerk at petitioner's Cagayan de Oro City branch, that the manager had already approved the sale, even if true, cannot bind the petitioner bank to a contract of sale with respondents, it being obvious to us that such a clerk is not among the bank officers upon whom such putative authority may be reposed by a third party." — This passage establishes the limits of apparent authority, holding that a mere clerk cannot bind a corporation to a contract where no responsible officer has given approval.
• "It may be so that the official receipt issued therefor by the petitioner termed such deposit as a 'downpayment'. But the very written offers of the respondents unequivocably and invariably speak of such amount as 'deposit', 'above deposit', 'we are depositing the amount of ₱14,000.00'. Since there never was any approval or acceptance by the higher authorities of petitioner of respondents' offer to purchase, the encashment of the check can not in any way represent partial payment of any purchase price." — This passage explains why the encashment of the deposit check did not constitute proof of a perfected contract, emphasizing the express terms of the written offer over the terminology used in the official receipt.

• Rural Bank of Milaor vs. Ocfemia, 325 SCRA 99 (2000) — Distinguished by the Court. In that case, the branch manager himself approved the sale for and in behalf of the bank, and the bank was estopped from questioning the manager's authority. In the present case, there was no approval by any responsible bank officer, and the representation came from a mere clerk.
• Francisco vs. GSIS, 7 SCRA 577 (1963) — Cited within the quotation from Rural Bank of Milaor vs. Ocfemia regarding the doctrine that a corporation is estopped from denying the authority of an agent it holds out to the public.
• First International Bank vs. CA, 252 SCRA 259 (1996) — Cited in support of the doctrine of apparent authority and estoppel of corporations from denying the authority of their agents.
• People's Aircargo and Warehousing Co., Inc. vs. CA, 297 SCRA 170 (1998) — Cited in support of the doctrine of apparent authority and estoppel of corporations from denying the authority of their agents.

• Rule 130, Section 9, Rules of Court — The parol evidence rule, which the petitioner invoked to argue that the respondents' introduction of parol evidence to prove the alleged meeting of minds was not sanctioned, considering that there was no written contract executed by the parties but merely unilateral written communications constituting offers and counter-offers.

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

N/A — No dissenting opinions are noted in the provided text.