TABLE OF CONTENTS o She was told she could withdraw her money any
time.
Onapal v. CA 1 o She did not know anything about the business
FPIB v. CA 2 and did not understand the risks involved.
Onapal v. CA / Ish
February 1, 1993
ONAPAL PHILIPPINES COMMODITIES, INC., petitioner, vs. THE
HONORABLE COURT OF APPEALS and SUSAN
CHUA, respondents.
CAMPOS, JR., J.
SUMMARY: Susan Chua entered into Trading Contracts with
ONAPAL. She initially invested P500,000 and was guaranteed that
she could withdraw her investment any time. Later, Chua was made
to give additional deposits. As she did not really know much about
the business, she decided to withdraw her investments, but
ONAPALs officer Diaz told her that she could not do so as some
accounts were hanging on the transactions. She brought suit
before the RTC to recover her investments. The RTC ruled that the
Trading Contract on futures is a specie of gambling and therefore
null and void. ONAPAL was ordered to refund the amounts invested
by Chua. CA and SC affirmed.
DOCTRINE: The term "futures" has grown out of those purely
speculative transactions in which there are nominal contracts to sell
for future delivery, but where in fact no delivery is intended or
executed. The nominal seller does not have or expect to have a
stock of merchandise he purports to sell nor does the nominal
buyer expect to receive it or to pay for the price. Instead of that, a
percentage or margin is paid, which is increased or diminished as
the market rates go up and down, and accounted for to the buyer.
This is simple speculation, gambling or wagering on prices within a
given time; it is not buying and selling and is illegal as against
public policy.
FACTS:
Petitioner ONAPAL Philippines Commodities, Inc., a duly
organized and existing corporation, was licensed as
commission merchant/broker by the SEC, to engage in
commodity futures trading in Cebu City under Certificate of
Registration No. CEB-182.
On April 27, 1983, petitioner and private respondent
Susan Chua concluded a "Trading Contract".
o Like all customers of the petitioner, private
respondent was furnished regularly with
"Commodities Daily Quotations" showing daily
movements of prices of commodity futures traded
and of market reports indicating the volume of
trade in different future exchanges in Hongkong,
Tokyo and other centers.
o Every time a customer enters into a trading
transaction with petitioner as broker, the trading
order is communicated by telex to its principal,
Frankwell Enterprises of Hongkong.
o If the transaction, either buying or selling
commodity futures, is consummated by the
principal, the petitioner issues a document known
as "Confirmation of Contract and Balance Sheet"
to the customer.
o An order of a customer of the petitioner is
supposed to be transmitted from Cebu to
petitioner's office in Manila.
o From Manila, it should be forwarded to Hongkong
and from there, transmitted to the Commodity
Futures Exchange in Japan.
According to private respondent Chua, ONAPALs Account
Executive Elizabeth Diaz invited her to invest in the
commodity futures trading by depositing P500,000.
Initially, Chua made a profit of P20,480 in three days.
Later, she was made to deposit P300,000 to pay the
difference in prices.
Chua then realized that she was actually engaged in
gambling.
This prompted her to ask for the withdrawal of her
investment, but Diaz refused to let her do so.
Chua then filed a collection suit before the RTC to recover
her investments.
RTC: Trading Contract is actually a specie of gambling.
Null and void.
CA: Affirmed.
Hence, this petition.
ONAPAL contends that the Trading Contract is a
commodity futures contract within the contemplation of 2
of the Revised Securities Act.
Also, it is covered by the Revised Rules and Regulations
on Commodity Futures Trading issued by the SEC:
"Commodity Futures Contract" shall refer to an agreement to buy
at a price established at the floor of the exchange.
"Futures Commission Merchant/Broker" shall refer to a corporatio
Commission Merchant/Broker and is engaged in soliciting or in a
delivery on or subject to the rules of the contract market and that,
any money, securities or property (or extends credit in lieu thereo
may result therefrom.
ONAPAL also invokes Art. 1462 of the Civil Code, thus:
The goods which form the subject of a contract of sale may be eit
manufactured, raised or acquired by the seller after the perfection
There may be a contract of sale of goods, whose acquisition by th
History of futures contracts
In the late 1880's, trading in futures became rampant in
the purchase and sale of cotton and grain in the United
States, giving rise to unregulated trading exchanges
known as "bucket shops".
These were common in Chicago and New York City where
cotton from the South and grain from the Mid-west were
constantly traded in.
Under the rules of the trading exchanges, weekly
settlements were required if there was any difference in
the prices of the cotton between those obtaining at the
time of the contract and at the date of delivery so that
under the contract made by the purchaser, if the price of
cotton had advanced, he would have received in cash
from the seller each week the advance (increase) in price
and if cotton prices declined, the purchaser had to make
like payments to the seller. In the terminology of the
exchange, these payments are called "margins".
Where the broker represented the buyer in buying and
selling cotton for future delivery with himself extending
credit margins, and some of the transactions were closed
at a profit while the others at a loss, payments being made
of the difference in prices arising out of their rise or fall
above or below the contract price, and the facts showed
that no actual delivery of cotton was contemplated, such
contracts are of the kind commonly called "futures".
BANKING: Week 7 | 1
Futures contracts without intending delivery
The term "futures" has grown out of those purely
speculative transactions in which there are nominal
contracts to sell for future delivery, but where in fact no
delivery is intended or executed.
The nominal seller does not have or expect to have a
stock of merchandise he purports to sell nor does the
nominal buyer expect to receive it or to pay for the price.
Instead of that, a percentage or margin is paid, which is
increased or diminished as the market rates go up and
down, and accounted for to the buyer.
This is simple speculation, gambling or wagering on prices
within a given time; it is not buying and selling and is
illegal as against public policy.
ISSUE #1:
WoN the Trading Contract is a valid futures contract.
(NO)
RATIO #1:
The contract signed by private respondent purports to be
for the delivery of goods with the intention that the
difference between the price stipulated and the exchange
or market price at the time of the pretended delivery shall
be paid by the loser to the winner.
The evidence of the plaintiff tend to show that in her
transactions with the defendant, the parties never intended
to make or accept delivery of any particular commodity but
the parties merely made a speculation on the rise or fall in
the market of the contract price of the commodity, subject
of the transaction, on the pretended date of delivery so
that if the forecast was correct, one party would make a
profit, but if the forecast was wrong, one party would lose
money.
According to ONAPAL, there was proof that the parties
intended a delivery since par. 10 of the rules for
commodity trading amply provides for actual delivery of
the commodity subject of the transaction.
SC upholds the CA. Court is convinced that there was no
actual delivery intended.
o ONAPAL employees testimony is to the effect
that all the defendant's customers were mere
speculators who merely forecast the rise or fall in
the market of the commodity, subject of the
transaction, below or above the contract price on
the pretended date of delivery and, in fact, the
defendant even discourages its customers from
taking or accepting delivery of any commodity by
making it hard, if not impossible, for them to
make or accept delivery of any commodity.
o Par. 10 invoked by ONAPAL even requires the
customer to apply for the necessary licenses and
documents with the proper government agency
for the importation and exportation of any
particular commodity.
As a contract in printed form, prepared by petitioner and
served on private respondent, for the latter's signature, the
trading contract bears all the indicia of a valid trading
contract because it complies with the Rules and
Regulations on Commodity Futures Trading as prescribed
by the SEC.
BUT when the transaction which was carried out to
implement the written contract deviates from the true
import of the agreement as when no such delivery, actual
or constructive, of the commodity or goods is made, and
final settlement is made by payment and receipt of only
the difference in prices at the time of delivery from that
prevailing at the time the sale is made, the dealings in
futures become mere speculative contracts in which the
parties merely gamble on the rise or fall in prices.
The contract falls within the ambit of Art. 2018, Civil Code:
If a contract which purports to be for the delivery of goods, sec
difference between the price stipulated and the exchange or mark
to the winner, the transaction is null and void. The loser may recov
Under Article 2018, the private respondent is entitled to
refund from the petitioner what she paid.
DISPOSITION: Affirmed.
FPIB v. CA | Nice
January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly
Producers Bank of the Philippines) and MERCURIO
RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS
EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE
JANOLO, respondents.
PANGANIBAN, J.
NATURE: Rule 45 Petition
SUMMARY: Demetrio and Janolo (D&J) wanted to buy properties
from Producers Bank (now FPIB). They sent an offer to Rivera,
Manager of Property Management Dept of the Bank, who then
replied with a counter offer. D&J sent another offer, but was told in a
subsequent meeting that the banks price in the earlier counter offer
was already set. D&J then accepted the offer in a letter, but there
was no reply from the Bank. The Banks conservator, after a few
months, repudiated the authority of Rivera to deal with D&J, and
subsequently refused to execute deeds of sale over the properties.
D&J sued for specific performance, and the RTC and CA ruled in
their favor, holding that there was a perfected contract of sale. The
SC affirmed, holding that the Bank could not now repudiate the
authority of Rivera, under the doctrine of apparent authority.
Moreover, the Conservator cannot repudiate valid and binding
obligations entered into by the Bank.
DOCTRINE:
Moreover, while the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be
pointed out that such powers must be related to the
"(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the
restoration of) its viability."
Such powers, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the
non-impairment clause of the Constitution.
To rule otherwise would be to enable a failing bank to
become solvent, at the expense of third parties, by simply
getting the conservator to unilaterally revoke all previous
dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to
perfected contractual rights nor vested interests of the
third parties who had dealt with the Bank.
FACTS:
First Philippine International Bank (the Bank) was formerly
Producers Bank. Mercurio Rivera (Rivera) was Head-
Manager of the Property Management Department of the
Bank. Carlos Ejercito is the assignee of original plaintiffs-
appellees Demetrio Demetria and Jose Janolo.
Producers Bank acquired six parcels of land with a total
area of 101 hectares located at Don Jose, Sta. Rosa,
Laguna. The property used to be owned by BYME
Investment and Development Corporation which had them
mortgaged with the bank as collateral for a loan. Demetria
and Janolo (D&J) wanted to purchase the property and
thus initiated negotiations for that purpose.
August 1987: Demetria and Janolo met with Rivera. The
BANKING: Week 7 | 2
 meeting was held pursuant to D&Js plan to buy the
property. After the meeting, Janolo, following the advice of
Rivera, made a formal purchase offer to the bank through
a letter dated August 30, 1987, offering 3.5 million in cash
for the 6 properties.
On September 1, 1987, defendant Rivera made on behalf
of the bank a formal reply by letter, which informed D&J
that the bank's counter-offer is at P5.5 million for more
than 101 hectares on lot basis.
On September 17, 1987, Janolo, responding to Rivera's
reply, wrote back, amending his previous offer and now
proposing to buy the said lot at P4.250 million in cash.
There was no reply to Janolo's letter of September 17,
1987. What took place was a meeting on September 28,
1987 between the D&J and Luis Co, the Senior Vice-
President of the Bank. Rivera and the BYME lawyer
Fajardo attended the meeting as well. On September 30,
1987, Janolo sent to the bank, through Rivera, another
letter, stating that:
o Pursuant to our discussion last 28 September
1987, we are pleased to inform you that we are
accepting your offer for us to purchase the
property at Sta. Rosa, Laguna, formerly owned
by Byme Investment, for a total price of PESOS:
FIVE MILLION FIVE HUNDRED THOUSAND
(P5,500,000.00).
On October 12, 1987, the conservator of the bank (which
has been placed under conservatorship by the Central
Bank since 1984) was replaced by an Acting Conservator
in the person of Leonida T. Encarnacion. On November 4,
1987, Rivera wrote Demetria a letter, stating that D&Js
proposal to buy the properties is under study yet as of this
time by the newly created committee for submission to the
newly designated Acting Conservator of the bank.
What thereafter transpired was a series of demands by
D&J for compliance by the Bank with what D&J
considered as a perfected contract of sale, which
demands were in one form or another refused by the
bank.
On November 17, 1987, D&J through a letter to Rivera
tendered a check in the amount of P5.5 million "pursuant
to (our) perfected sale agreement." D&J, in said letter,
wrote that the counter-offer dated September 1, 1987 in
the amount of P5.5 million was accepted thru the letter
dated September 30, 1987 and received by the Bank.
Hence, there was a perfected agreement. The Bank
refused to receive both the payment and the letter.
Instead, the parcels of land involved in the transaction
were advertised by the bank for sale to any interested
buyer. D&J demanded the execution by the bank of the
documents on what was considered as a "perfected
agreement."
Four months passed. Then, on May 3, 1988, D&J, through
counsel, made a final demand for compliance by the bank
with its obligations under the considered perfected
contract of sale. In a reply letter dated May 12, 1988, the
Bank through Acting Conservator Encarnacion repudiated
the authority of Rivera and claimed that his dealings with
D&J, particularly his counter-offer of P5.5 Million are
unauthorized or illegal. On that basis, the Bank justified
the refusal of the tender of payment and the non-
compliance with the obligations under what D&J
considered to be a perfected contract of sale.
D&J filed a suit for specific performance with damages
against the Bank, Rivera and Encarnacion, alleging that
the transaction with the bank was a perfected contract of
sale, The Bank took the position that there was no such
perfected sale because the Rivera is not authorized to sell
the property, and that there was no meeting of the minds
as to the price.
March 14, 1991: Henry L. Co (brother of Luis Co, SVP of
the Bank), through counsel Sycip Salazar Hernandez
and Gatmaitan, filed a motion to intervene, alleging that
as owner of 80% of the Bank's outstanding shares of
stock, he had a substantial interest in resisting the
complaint. The trial court denied the motion to intervene
on the ground that it was filed after trial had already been
concluded. MR denied. Henry Co did not appeal. (dito
nagtatapos ang kwento ng Sycip lol)
The trial court ruled in favor of D&J, declaring the
existence of a perfected contract to buy and sell over the
properties. It ordered the Bank to execute a deed of
absolute sale over the properties after receipt of the 5.5
million, and to pay actual, moral, and exemplary damages
and attorneys fees.
From the trial court's decision, the Bank, petitioner Rivera
and conservator Encarnacion appealed to the CA which
affirmed the judgment but deleted the damages.
July 11, 1992: during the pendency of the proceedings in
the CA, Henry Co and several other stockholders of the
Bank, through counsel ACCRA, filed an action
purportedly a "derivative suit" with the RTC of Makati
against Encarnacion, Demetria and Janolo "to declare any
perfected sale of the property as unenforceable." In his
answer, Janolo argued that this 2 nd case was barred
by litis pendentia by virtue of the case then pending in the
CA.
(ISSUE #4 is the important part)
ISSUE #1:
Was there forum-shopping on the part of the Bank?
(YES)
RATIO #1:
The test for determining whether a party violated the rule
against forum shopping has been laid down in the 1986
case of Buan vs. Lopez. It exists where the elements
of litis pendentia are present or where a final judgment in
one case will amount to res judicata in the other.
It is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of
reliefs sought in the two cases.
Very simply stated, the original complaint in the trial court
was filed by the buyer against the seller to enforce the
alleged perfected sale of real estate. On the other hand,
the complaint in the 2nd case seeks to declare such
purported sale involving the same real property "as
unenforceable as against the Bank". In other words, in the
2nd case, the majority stockholders, in representation of
the Bank, are seeking to accomplish what the Bank itself
failed to do in the original case in the trial court. In brief,
the objective or the relief being sought, though worded
differently, is the same, namely, to enable the Bank to
escape from the obligation to sell the property to D&J.
In the instant case, there is also identity of parties, or at
least, of interests represented. Although the plaintiffs in the
2nd case (Henry L. Co. et al.) are not name parties in the
1st case, they represent the same interest and entity,
namely, the Bank. This is the very essence of a derivative
suit, in that the stockholders have brought suit "for and in
behalf of the Producers Bank of the Philippines."
Ultimately, what is important to consider in determining
whether forum-shopping exists or not is the vexation
caused the courts and parties-litigant by a party who asks
different courts and/or administrative agencies to rule on
the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the
different fora upon the same issue.
Hence, for violation of the rule against forum-shopping, the
BANKING: Week 7 | 3
 Petitions should be dismissed. (But the SC went on to
discuss substantive part.)
ISSUE #2 (MAIN):
Was there a perfected contract of sale between the
parties? (YES)
RATIO #2:
As to authority of Rivera
There is no dispute that the object of the transaction is that
property owned by the bank, and that the bank intended to
sell the property. It is also definite that D&J wanted to
purchase the property and it was precisely for this purpose
that they met with Rivera, Manager of the Property
Management Department of the bank.
The procedure in the sale of acquired assets as well as
the nature and scope of the authority of Rivera on the
matter is clearly delineated in the testimony of Rivera
himself:
o The procedure runs this way: Acquired assets
was turned over to me and then I published it in
the form of an inter-office memorandum
distributed to all branches that these are acquired
assets for sale. I was instructed to advertise
acquired assets for sale so on that basis, I have
to entertain offer; to accept offer, formal offer and
upon having been offered, I present it to the
Committee. I provide the Committee with
necessary information about the property such as
original loan of the borrower, bid price during the
foreclosure, total claim of the bank, the appraised
value at the time the property is being offered for
sale and then the information which are relative
to the evaluation of the bank to buy which the
Committee considers and it is the Committee that
evaluate as against the exposure of the bank and
it is also the Committee that submit to the
Conservator for final approval and once
approved, we have to execute the deed of sale
and it is the Conservator that sign the deed of
sale, sir.
From the above, it shows that D&J dealt with and talked to
the right person. They were dealing with the bank official
authorized to entertain offers, to accept offers and to
present the offer to the Committee before which the said
official is authorized to discuss information relative to price
determination. Being inherent in his authority, Rivera is the
officer from whom official information regarding the price,
as determined by the Committee and approved by the
Conservator, can be had.
As advised by Rivera, D&J made a formal offer by a letter
stating that they would buy at the price of P3.5 Million in
cash. The letter was for the attention of Rivera who was
tasked to convey and accept such offers. Considering that
Rivera was some sort of intermediary between the buyers
with their proposed buying price on one hand, and the
bank Committee, the Conservator and the bank itself with
the set price on the other, there can be no other logical
conclusion than that when Rivera informed D&J by letter
that "the bank's counter-offer is at P5.5 Million," such
counter-offer price had been approved by the Conservator
after Rivera had duly presented D&Js offer to the
Committee. Under the established facts, the price of P5.5
Million was, as clearly worded in Rivera's letter, the official
and definitive price at which the bank was selling the
property.
At any rate, the bank placed its official, Rivera, in a
position of authority to accept offers to buy and negotiate
the sale by having the offer officially acted upon by the
bank. The bank cannot turn around and later say, as it now
does, that what Rivera states as the bank's action on the
matter is not in fact so. It is a familiar doctrine, the doctrine
of ostensible authority, that if a corporation knowingly
permits one of its officers, or any other agent, to do acts
within the scope of an apparent authority, and thus holds
him out to the public as possessing power to do those
acts, the corporation will, as against anyone who has in
good faith dealt with the corporation through such agent,
he estopped from denying his authority.
From the evidence found by the CA, it is obvious that
Rivera has apparent or implied authority to act for the
Bank in the matter of selling its acquired assets.
As to the counter-offer
Bank: D&Js P4.25 million counter-offer in the letter dated
September 17, 1987 extinguished the Bank's offer of P5.5
million. Hence, there was no meeting of minds when D&J
"accepted" Rivera's earlier counter offer of P5.5 million.
SC: NO.
As found by the CA, what was "accepted" by Janolo in his
letter dated September 30, 1987 was the Bank's offer of
P5.5 million as confirmed and reiterated to Demetria and
Atty. Jose Fajardo by Rivera and Co during their meeting
on September 28, 1987. Note that the said letter of
September 30, 1987 begins with"(p)ursuant to our
discussion last 28 September 1987
Hence, assuming arguendo that the counter-offer of P4.25
million extinguished the offer of P5.5 million, Luis Co's
reiteration of the said P5.5 million price during the
September 28, 1987 meeting revived the said offer. And
by virtue of the September 30, 1987 letter accepting this
revived offer, there was a meeting of the minds, as the
acceptance in said letter was absolute and unqualified.
ISSUE #3:
Was the said contract enforceable under the statute of
frauds? (YES)
RATIO #3:
Bank: Even assuming that Luis Co or Rivera did relay a
verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria
and Janolo accepted with their letter of 30 September
1987, the contract produced thereby would be
unenforceable by action there being no note,
memorandum or writing subscribed by the Bank to
evidence such contract.
SC: NO. The bank's letter of September 1, 1987 on the
official price and the plaintiffs' acceptance of the price on
September 30, 1987, are not, in themselves, formal
contracts of sale.
o They are, however, clear embodiments of the fact
that a contract of sale was perfected between the
parties, such contract being binding in whatever
form it may have been entered into. Stated
simply, the banks' letter of September 1, 1987,
taken together with plaintiffs' letter dated
September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale.
And assuming arguendo that they are not enforceable
under the statute of frauds, the statute of frauds will not
apply by reason of the failure of the Bank to object to oral
testimony proving its counter-offer of P5.5 million. Hence,
the Bank, by such utter failure to object, are deemed to
have waived any defects of the contract under the statute
of frauds, pursuant to Article 1405 of the Civil Code.
ISSUE #4 (IMPT PART accdg to reviewer):
Did the bank conservator have the unilateral power to
repudiate the authority of the bank officers and/or to
revoke the said contract? (NO)
RATIO #4:
BANKING: Week 7 | 4
 Bank: The conservator has the power to revoke or
overrule actions of the management or the board of
directors of a bank, under Section 28-A1 of the Central
Bank Act.
There is absolutely no evidence that the Conservator, at
the time the contract was perfected, actually repudiated or
overruled said contract of sale. The Bank's acting
conservator at the time, Rodolfo Romey, never objected to
the sale of the property to D&J. The letter of Conservator
Encarnacion, who took over from Romey, unilaterally
repudiated NOT the contract, but the authority of Rivera to
make a binding offer, and which unarguably came months
after the perfection of the contract.
Moreover, while the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be
pointed out that such powers must be related to the
"(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the
restoration of) its viability."
o Such powers, enormous and extensive as they
are, cannot extend to the post-
facto repudiation of perfected transactions,
otherwise they would infringe against the
non-impairment clause of the Constitution. If
the legislature itself cannot revoke an existing
valid contract, how can it delegate such non-
existent powers to the conservator under Section
28-A of said law?
Therefore, Section 28-A merely gives the conservator
power to revoke contracts that are, under existing law,
deemed to be defective i.e., void, voidable,
unenforceable or rescissible.
The conservator merely takes the place of a bank's board
of directors. What the said board cannot do such as
repudiating a contract validly entered into under the
doctrine of implied authority the conservator cannot do
either. His power is not unilateral and he cannot simply
repudiate valid obligations of the Bank. His authority would
be only to bring court actions to assail such contracts
as he has already done so in the instant case.
To rule otherwise would be to enable a failing bank to
become solvent, at the expense of third parties, by
simply getting the conservator to unilaterally revoke
all previous dealings which had one way or another or
come to be considered unfavorable to the Bank,
yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with
the Bank.
DISPOSITION
Petition DENIED. CA affirmed.

1 Whenever, on the basis of a report submitted by the appropriate supervising or

examining department, the Monetary Board finds that a bank or a non-bank financial
intermediary performing quasi-banking functions is in a state of continuing inability or
unwillingness to maintain a state of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a conservator to take
charge of the assets, liabilities, and the management of that institution, collect all
monies and debts due said institution and exercise all powers necessary to preserve
the assets of the institution, reorganize the management thereof, and restore its
viability. He shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or non-bank financial intermediary
performing quasi-banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.

BANKING: Week 7 | 5