Limketkai Sons Milling v. CA [G.R. No. 118509. December 1, 1995.

]
Third Division, Melo (J): 4 concur

Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine Islands
(BPI) as its trustee to manage, administer, and sell its real estate property. One such piece of
property placed under trust was the disputed lot, a 33,056-sq.ms. lot at Barrio Bagong Ilog, Pasig
(TCT 493122). On 23 June 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPI to sell the lot for P1,000.00 per sq.m. This arrangement was concurred in by the
owners of the Philippine Remnants. Broker Revilla contacted Alfonso Lim of Limketkai Sons Milling
(LSM) who agreed to buy the land. On 8 July 1988, LSM’s officials and Revilla were given permission
to enter and view the property they were buying (by Rolando V. Aromin, BPI Assistant Vice-President).
On 9 July 1988, Revilla formally informed BPI that he had procured a buyer, LSM. On 11 July 1988,
LSM’s officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were
entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. LSM asked that the price
of P1,000.00 per sq.m. be reduced to P900.00 while Albano stated the price to be P1,100.00. The
parties finally agreed that the lot would be sold at P1,000.00 per sq.m. to be paid in cash. Since the
authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at this
juncture that there is no dispute over LSM’s being the first comer and the buyer to be first served.
Notwithstanding the final agreement to pay P1,000.00 per sq.m. on a cash basis, Alfonso Lim asked if
it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for
payment on terms because in previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved, then the price shall be paid in
cash. It was Albano who dictated the terms under which the installment payment may be approved,
and acting thereon, Alfonso Lim, on the same date, 11 July 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days. 2 or 3
days later, LSM learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI on 18
July 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment was refused
because Albano stated that the authority to sell that particular piece of property in Pasig had been
withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also
refused to receive payment.

An action for specific performance with damages was thereupon filed on 25 August 1988 by LSM
against BPI with the RTC Pasig (Branch 151). In the course of the trial, BPI informed the trial court
that it had sold the property under litigation to National Book Store (NBS) on 14 July 1989. The
complaint was thus amended to include NBS. On 10 June 1991, the trial court rendered judgment in
favor of LSM; holding that there was a perfected contract between LSM and BPI, and thus declared the
Deed of Sale involving the lot in Pasig in the name of BPI and in favor of NBS as null and void;
ordered the Register of Deeds of the Province of Rizal to cancel the TCT which may have been issued
in favor of NBS by virtue of the said deed; ordered BPI upon receipt by it from LSM of the sum of
P33,056,000,00 to execute a Deed of Sale in favor of the latter of the said property at the price of
P1,000.00 per sq.m. and in default thereof, the Clerk of Court is directed to execute the deed dated
14 July 1989; ordered the Register of Deeds of Pasig, upon registration of the said deed, whether
executed by BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel
said TCT 493122 and to issue, in lieu thereof, another transfer certificate of title in the name of LSM;
ordered BPI and NBS to pay in solidum to LSM the sums of P10,000,000.00 as actual and
consequential damages and P150,000.00 as attorney’s fees and litigation expenses, both with interest
at 12% per annum from date of judgment; on the cross-claim by the bank against NBS, ordered NBS
to indemnify the bank of whatever BPI shall have paid to LSM; dismissed the counterclaim of both BPI
and NBS against LSM and the cross-claim of NBS against BPI; with costs against BPI and NBS.

Upon elevation of the case to the Court of Appeals, the decision of the trial court was reversed and the
complaint dismissed on 12 August 1994. It was held that no contract of sale was perfected because
there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. Hence,
the petition.

The Supreme Court reversed and set aside the questioned judgment of the Court of Appeals, and
reinstated the 10 June 1991 judgment of Branch 151 of the RTC of The National Capital Judicial
Region stationed in Pasig, Metro Manila except for the award of P10,000,000.00 damages, which was
deleted.

1. Broker given authority to sell and not merely to look for a buyer
BPI as trustee of the property of Philippine Remnant Co. authorized a licensed broker, Pedro Revilla, to
sell the lot for P1,000.00 per sq.m. Philippine Remnants confirmed the authority to sell of Revilla and
the price at which he may sell the lot. LSM and Revilla agreed on the former buying the property. BPI
Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property.
BPI was formally informed about the broker having procured a buyer. At the start of the transactions,
Revilla by himself already had full authority to sell the disputed lot. The note dated 23 June 1988
states, “this will serve as your authority to sell on an as is, where is basis the property located at Pasig
Blvd., Bagong Ilog.” Thus, the authority given to Revilla was to sell and not merely to look for a buyer.
Revilla testified that at the time he perfected the agreement to sell the litigated property, he was
acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up
the sale of the land, Revilla saw it fit to bring BPI officials into the transaction.

2. BPI Vice Presidents have authority to sell

The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.
If BPI could give the authority to sell to a licensed broker, there is no reason to doubt the authority to
sell of the two BPI Vice-Presidents whose precise job in the Bank was to manage and administer real
estate property. Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly
supervised the BPI Real Property Management Unit. He had been in the Real Estate Division since
1985 and was the head supervising officer of real estate matters. He had been with the BPI Trust
Department since 1968 and had been involved in the handling of properties of beneficial owners since
1975. He was in charge of Torrens titles, lease contracts, problems of tenants, insurance policies,
installment receivables, management fees, quitclaims, and other matters involving real estate
transactions. His immediate superior, Vice-President Merlin Albano had been with the Real Estate
Division for only 1 week but he was present and joined in the discussions with LSM. There is nothing
to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla brought the
brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural
manner on the transaction before him with not the slightest indication that he was acting ultra vires.
This shows that BPI held Aromin out to the public as the officer routinely handling real estate
transactions and, as Trust Officer, entering into contracts to sell trust properties. Further, it must be
noted that the authority to buy and sell this particular trust property was later withdrawn from Trust
Officer Aromin and his entire unit. If Aromin did not have any authority to act as alleged, there was no
need to withdraw authority which he never possessed. Everything in the record points to the full
authority of Aromin to bind the bank, except for the self-serving memoranda or letters later produced
by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was dismissed after he
testified in this case. But, of course, Aromin’s alleged inefficiency is not proof that he was not fully
clothed with authority to bind BPI.

3. Trust Committee does not have to pass on regular transactions

On the allegation that sales of trust property need the approval of a Trust Committee made up of top
bank officials, it appears from the record that this trust committee meets rather infrequently and it
does not have to pass on regular transactions.

4. Bank liable to innocent third persons where representation is made in course of its
business even if agent abused his authority
In Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs. Court of
Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND 752,
204 NW 818, 40 ALR 1021), it was stated that “a banking corporation is liable to innocent third
persons where the representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is secretly abusing his
authority and attempting to perpetrate a fraud upon his principal or some other person for his own
ultimate benefit.” In the present case, the position and title of Aromin alone, not to mention the
testimony and documentary evidence about his work, leave no doubt that he had full authority to act
for BPI in the questioned transaction. There is no allegation of fraud, nor is there the least indication
that Aromin was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared
that a top official of the bank was personally interested in the sale of the Pasig property and did not
like Aromin’s testimony. Aromin was charged with poor performance but his dismissal was only
sometime after he testified in court. More than 2 long years after the disputed transaction, he was still
Assistant Vice-President of BPI.

5. Meeting of the minds on the price; Manner of payment

Asst. Vice-President Aromin admitted that there was a meeting of the minds between the buyer and
the bank in respect to the price of P1,000.00 per sq.m. The requirements in the payment of the
purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the
authority given to broker Revilla specified cash payment, the possibility of paying on terms was
referred to the Trust Committee but with the mutual agreement that “if the proposed payment on
terms will not be approved by our Trust Committee, Limketkai should pay in cash, the amount was no
longer subject to the approval or disapproval of the Committee, it is only on the terms.” The record
shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because LSM
took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials.
Immediately upon learning that payment on terms was frozen and/or denied, Limketkai exercised his
right within the period given to him and tendered payment in full. The BPI rejected the payment.

6. Stages of the contract

The stages of a contracts are (a) preparation, conception or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth
of the contract, which is the moment when the parties come to agree on the terms of the contract;
and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in
the contract (Toyota Shaw Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

7. Ang Yu Asuncion; Stages in ordinary contracts (consensual); Real contract: delivery

required; Solemn contract: compliance with formalities prescribe by law
A contract undergoes various stages that include its negotiation or preparation, its perfection and,
finally, its consummation. Negotiation covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is concluded (perfected) The perfection
of the contract takes place upon the concurrence of the essential elements thereof. A contract which is
consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to
the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly
referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by
law, such as in a donation of real property, is essential in order to make the act valid, the prescribed
form being thereby an essential element thereof. The stage of consummation begins when the parties
perform their respective undertakings under the contract culminating in the extinguishment thereof.

8. Ang Yu Asuncion; Perfected contract of sale

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, the contract is perfected when a person, called the seller,
obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to
another, called the buyer, over which the latter agrees (Ang Yu Asuncion).

9. Stages of the contract in the present case

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to
sell the lot, followed by the authority given by BPI and confirmed by Philippine Remnants to broker
Revilla to sell the property, the offer to sell to Limketkai, the inspection of the property and the
negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for LSM, agreed to buy the disputed lot at P1,000.00 per
sq.m.. Aside from this there was the earlier agreement between LSM and the authorized broker. There
was a concurrence of offer and acceptance, on the object, and on the cause thereof.

10. Villonco Realty v. Bormaheco; Perfected contract of sale

The 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. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts.” (Art. 1475 Ibid).

11. Villonco Realty v. Bormaheco; Consent

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer” (Art. 1319, Civil Code). “An acceptance may be
express or implied” (Art. 1320, Civil Code).

12. Villonco Realty v. Bormaheco; A contract is formed if offer is accepted, whether

request for changes in terms is granted or not; Change does not amount to rejection of
offer or a counter-offer
An acceptance may contain a request for certain changes in the terms of the offer and yet be a
binding acceptance. So long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer. whether such request is granted or not, a contract is formed. (Stuart
vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts). The vendor’s
change in a phrase of the offer to purchase, which change does not essentially change the terms of
the offer, does not amount to a rejection of the offer and the tender or a counter-offer.” (Stuart vs.
Franklin Life Ins. Co., supra.)

13. Requisite form under Article 1458 merely for greater efficacy or convenience
The fact that the deed of sale still had to be signed and notarized does not mean that no contract had
already been perfected. A sale of land is valid regardless of the form it may have been entered into
(Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of
the Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does
not affect the validity and binding effect of the act between the parties. If the law requires a document
or other special form, as in the sale of real property, the contracting parties may compel each other to
observe that form, once the contract has been perfected. Their right may be exercised simultaneously
with action upon the contract (Article 1359, Civil Code).

14. Abrenica Rule: Contracts infringing the Statute of Frauds ratified when defense fails to
object or asks questions on cross-examination
In Abrenica vs. Gonda (34 Phil. 739 [1916]) it was held that contracts infringing the Statute of Frauds
are ratified when the defense fails to object, or asks questions on cross-examination. The reason for
the rule is that “if the answers of those witnesses were stricken out, the cross-examination could have
no object whatsoever and if the questions were put to the witnesses and answered by them, they
could only be taken into account by connecting them with the answers given by those witnesses on
direct examination.” Under said rule (reiterated in a number of cases, among them Talosig vs. Vda. de
Nieba, 43 SCRA 472 [1972]), even assuming that parol evidence was initially inadmissible, the same
became competent and admissible because of the cross-examination, which elicited evidence proving
the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver of the
defense of the Statute of Frauds. In the present case, counsel for respondents cross-examined
petitioner’s witnesses at length on the contract itself, the purchase price, the tender of cash payment,
the authority of Aromin and Revilla, and other details of the litigated contract.

15. Written note or memorandum an exception to the unenforceability of contracts

pursuant to Statute of Frauds
Under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant to the
Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The
memorandum may be found in several writings, not necessarily in one document. The memorandum
or memoranda is/are written evidence that such a contract was entered into. Thus, the existence of a
written contract of the sale is not necessary so long as the agreement to sell real property is
evidenced by a written note or memorandum, embodying the essentials of the contract and signed by
the party charged or his agent. Such note or memorandum suffices to make the verbal agreement
enforceable, taking it out of the operation of the statute. In the present case, while there is no written
contract of sale of the Pasig property executed by BPI in favor of LSM, there are abundant notes and
memoranda extant in the records of this case evidencing the elements of a perfected contract.

16. Form of memorandum or note

No particular form of language or instrument is necessary to constitute a memorandum or note in
writing under the statute of frauds; any document or writing, formal or informal, written either for the
purpose of furnishing evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature is a sufficient memorandum or note. A
memorandum may be written as well with lead pencil as with pen and ink. It may also be filled in on a
printed form. (37 C.J.S., 653-654). The note or memorandum required by the statute of frauds need
not be contained in a single document, nor, when contained in two or more papers, need each paper
be sufficient as to contents and signature to satisfy the statute. Two or more writings properly
connected may be considered together, matters missing or uncertain in one may be supplied or
rendered certain by another, and their sufficiency will depend on whether, taken together, they meet
the requirements of the statute as to contents and the requirements of the statutes as to signature.

17. Demeanor of witnesses as factor for Court to incline to the version of the case by one
party
The demeanor of the witnesses the parties presented is one important factor that inclined the trial
court to believe in the version given by LSM because its witnesses, including hostile witness Roland V.
Aromin, an assistant vice-president of the bank, were straight forward, candid and unhesitating in
giving their respective testimonies. Upon the other hand, the witnesses of BPI were evasive, less than
candid and hesitant in giving their answers to cross examination questions. Moreover, the witnesses
for BPI and NBS contradicted each other.

18. Credibility of witnesses where the findings of the trial and appellate courts are
contrary to each other; Trial court’s findings given great respect
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and
the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of
Appeals (196 SCRA 107 [1991]) bears stressing “It is a settled principle of civil procedure that the
conclusions of the trial court regarding the credibility of witnesses are entitled to great respect from
the appellate courts because the trial court had an opportunity to observe the demeanor of witnesses
while giving testimony which may indicate their candor or lack thereof. While the Supreme Court
ordinarily does not rule on the issue of credibility of witnesses, that being a question of fact not
property raised in a petition under Rule 45, the Court has undertaken to do so in exceptional
situations where, for instance, as here, the trial court and the Court of Appeals arrived at divergent
conclusions on questions of fact and the credibility of witnesses.”

19. NBS not an innocent purchaser for value

National Bookstore (NBS) is not an innocent purchaser for value, as it acted in bad faith. NBS ignored
the notice of lis pendens annotated on the title when it bought the lot. It was the willingness and
design of NBS to buy property already sold to another party which led BPI to dishonor the contract
with LSM. It is the very nature of the deed of absolute sale between BPI and NBS which clearly
negates any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the
vendor guarantee its title to the land and recognize the right of the vendee against the vendor if the
title to the land turns out to be defective as when the land belongs to another person, the reverse is
found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title
turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under
the contract from any recourse of NBS against it should BPI’s title be found defective.

20. Enumeration of badges of fraud found in Oria v. McMicking cannot cover all indications
from 1912 to present and future
NBS simply cited the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 (1912]) in its
memorandum and argues that the enumeration there is exclusive. The decision in said case plainly
states “the following are some of the circumstances attending sales which have been denominated by
courts (as) badges of fraud.” There are innumerable situations where fraud is manifested. One
enumeration in a 1912 decision cannot possibly cover all indications of fraud from that time up to the
present and into the future.
21. Damages; Loss of profits and use of land compensated by appreciation in land value
The profits and the use of the land which were denied to LSM because of the non-compliance or
interference with a solemn obligation by BPI and NBS is somehow made up by the appreciation in land
values.