Soler vs. Court of Appeals

A perfected oral contract exists when parties agree on the service to be rendered and the compensation, even without formal board approval, if the corporate officer possessed apparent authority; alternatively, compensation is due under quantum meruit when a party accepts and retains the benefits of services rendered with knowledge that compensation was expected.

Jazmin Soler, a licensed interior designer, was approached in November 1986 by Nida Lopez, the branch manager of COMBANK, to design the renovation of the bank's Ermita branch. Despite initial hesitation due to a tight deadline for a December 1986 board meeting, Soler accepted the engagement upon Lopez's assurance of a P10,000 professional fee. Soler hired subcontractors, paid them a total of P15,000, and submitted the completed designs by the deadline, which Lopez approved. When Soler demanded payment, Lopez refused, claiming the designs did not conform to bank policy and no agreement existed, subsequently refusing to return the submitted blueprints.

• The Engagement: In November 1986, Nida Lopez, manager of COMBANK's Ermita Branch, requested petitioner Jazmin Soler to design the renovation of the branch offices. Petitioner initially hesitated due to prior commitments and the short deadline set for December 1986, but acceded after Lopez insisted and assured her of compensation. Petitioner explicitly stated her professional fee was P10,000, to which Lopez agreed.
• Performance of Services: During their meeting, Lopez provided the specifications for the renovation, which included a conference room, new carpeting and wallpaper, bookshelves, a clerical area, kitchen improvements, ceiling changes, and teller booth renovation. Petitioner requested the building blueprints, which Lopez supplied. Petitioner then hired an engineer and several architects, paying them a total of P15,000 from her own funds, and coordinated with suppliers for quotations. The designs were completed and submitted to Lopez by December 1986, and Lopez expressed satisfaction with the work.
• Refusal to Pay: Repeated demands for payment were ignored by Lopez. In February 1987, the parties encountered each other at a concert, where Lopez stated petitioner was not entitled to payment because the designs did not conform to the bank's standard policy and no agreement existed between them. Subsequent demand letters from petitioner's lawyers in May and June 1987 seeking payment or the return of the blueprints were likewise ignored.

• Existence of Perfected Contract: Petitioner argued that the Court of Appeals erred in ruling there was no perfected contract, insisting that the element of consent was present.
• Nature of the Engagement: Petitioner maintained that the Court of Appeals erred in characterizing the transaction as a mere invitation to present a proposal or participate in a bid.
• Knowledge of Approval Process: Petitioner asserted that the Court of Appeals erred in ruling that she knew her proposal was still subject to bidding and the approval of the bank's board of directors.
• Reversal of Trial Court: Petitioner argued that the Court of Appeals erred in reversing the trial court's factual findings and decision.

• Absence of Contract: Respondent countered that no contract existed between COMBANK and petitioner.
• Mere Invitation to Bid: Respondent argued that Lopez merely invited petitioner to participate in a bid for the renovation of the branch.
• Lack of Board Approval: Respondent maintained that any proposal was still subject to the approval of COMBANK's head office, which was never obtained.

• Perfected Contract: Whether a perfected contract existed between petitioner and respondents.
• Apparent Authority: Whether Nida Lopez, as branch manager, had the authority to bind the bank in the transaction.

• Perfected Contract: A perfected oral contract was established, the three stages of a contract—generation, perfection, and consummation—having been completed. Generation commenced during the November 1986 meeting where renovation details were discussed; perfection occurred upon the agreement on the P10,000 fee and the submission deadline; and consummation was achieved when the designs were delivered.
• Apparent Authority: The bank was estopped from denying the branch manager's authority. By permitting the manager to act within apparent authority—providing specifications, supplying blueprints, and setting deadlines—the corporation held her out as possessing such power, binding it against good-faith third parties. Alternatively, payment was warranted under quantum meruit, the bank having accepted and retained the designs for its board presentation, thereby preventing unjust enrichment.

• Apparent Authority (Agency by Estoppel) — Defined as the authority a corporation knowingly permits its officer or agent to exercise, holding them out to the public as possessing such power. Applied to hold the bank estopped from denying the branch manager's authority to engage the petitioner, as the manager provided specifications and blueprints and set deadlines, leading the petitioner to reasonably believe in her authority.
• Quantum Meruit — A device to prevent undue enrichment based on the equitable postulate that it is unjust to retain a benefit without paying for it; requires acceptance of benefits under circumstances reasonably notifying the recipient that compensation is expected. Applied as an alternative basis for payment, the bank having retained and utilized the submitted designs for its board presentation without compensating the petitioner.

• "It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority."
• "The doctrine of quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it."

• ABS-CBN Broadcasting Corporation v. Court of Appeals, 301 SCRA 572 (1999) — Followed for the requisites of a valid contract under Article 1318 of the Civil Code.
• Toyota Shaw, Inc. v. Court of Appeals, 314 Phil. 201 (1995) — Followed for the three stages of a contract: generation, perfection, and consummation.
• Rural Bank of Milaor (Camarines Sur) v. Ocfemenia, G.R. No. 137687 (2000); People's Aircargo and Warehousing Co. Inc. v. Court of Appeals, 357 Phil. 850 (1998) — Followed for the doctrine of apparent authority and agency by estoppel.
• Traders Royal Bank Employees Union-Independent v. NLRC, 336 Phil. 705 (1997) — Followed for the principle of quantum meruit.

• Article 1318, Civil Code — Prescribes the requisites of a contract: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established. Applied to determine that all elements were present, establishing a perfected oral contract between the parties.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ.