CIVPRO – RULE 18 –
The respondent
G.R. No. 170606 November 23, 2007
LCK INDUSTRIES INC., CHIKO LIM and ELIZABETH T. LIM, Petitioners,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
filed by petitioners LCK Industries Inc. (LCK), Chiko Lim and Elizabeth Lim, seeking the reversal and
the setting aside of the Decision1 dated 1 April 2005 and the Resolution2 dated 29 November 2005
of the Court of Appeals in CA-G.R. CV No. 73944. The appellate court, in its assailed Decision and
Resolution, reversed the Decision3 of the Regional Trial Court (RTC) of Quezon City, Branch 81, dated
3 September 2001, in Civil Case No. Q-98-33835, which found respondent Planters Development
Bank (respondent bank) liable for the amount of ₱1,856,416.67, representing overpayment.
Petitioner LCK is a domestic corporation duly organized and existing as such under Philippine laws.4
Respondent bank is a banking institution duly authorized to engage in banking business under
Philippine laws.5
On 1 September 1995, petitioner LCK obtained a loan from the respondent bank in the amount of
₱3,000,000.00 as evidenced by two promissory notes.6
As a security for the loan obligation, petitioners-spouses Chiko and Elizabeth Lim executed a Real
Estate Mortgage over a parcel of land covered by Transfer Certificate of Title (TCT) No. T-138623,
registered under their names and located at Quezon City, with an area of 68 square meters (Quezon
City property).7 Later on, to secure the same obligation, another Real Estate Mortgage was executed
over another parcel of land covered by TCT No. T-62773, also registered under the names of the
petitioner-spouses, with an area of 71 square meters located at Baguio City (Baguio City property).8
Subsequently, petitioner LCK incurred default in its payment; thus, making the obligation due and
demandable. Several demands were thereafter made by the respondent bank to no avail.9 On 13
October 1997, a final letter-demand was sent by respondent bank to petitioner LCK asking for the
payment of its obligation in the amount of ₱2,962,500.00. Such final demand notwithstanding,
petitioner LCK failed or refused to pay its obligation.
Consequently, respondent bank caused the extrajudicial foreclosure of the Baguio City property
which was sold at the public auction for ₱2,625,000.00 as shown in the Certificate of Sale10 dated
29 January 1998. Since the proceeds of the foreclosed Baguio City property were not enough to
satisfy the entire loan obligation which amounted to ₱2,962,500.00, respondent bank further
caused the extrajudicial foreclosure of the Quezon City property. As evidenced by the Certificate of
Sale11 dated 18 March 1998, signed by Notary Public Atty. Allene Anigan (Atty. Anigan), the
foreclosed Quezon City property was sold at a public auction for ₱2,231,416.67.
bank was the highest bidder on both occasions.
Prior to the auction sale of the Quezon City property on 18 March 1998, petitioners, on 12 March
1998, filed with the RTC of Quezon City, Branch 81, an action for Annulment of the Foreclosure of
Mortgage and Auction Sale of the Quezon City property with Restraining Order/Preliminary
Injunction and with Damages against respondent bank and Atty. Anigan.12 The case was docketed
as Civil Case No. Q-98-33835.
In their Complaint,13 petitioners alleged that respondent bank failed to comply with the posting and
publication requirements as well as with the filing of the Petition for the Extrajudicial Foreclosure
of the Real Estate Mortgage with the Clerk of Court as required by Act No. 3135.14 Petitioners prayed
for the issuance of temporary restraining order (TRO) in order to enjoin the respondent bank from
conducting the auction sale, and in the alternative, to enjoin the Registry of Deeds of Quezon City
from transferring the ownership of the Quezon City property to the purchaser at the auction sale.
In its Answer with the Opposition to the Prayer for the Issuance of Temporary Restraining Order
(TRO), respondent bank averred that it had fully observed the posting and publication requirements
of Act No. 3135. It insisted that the filing of the Petition for Extrajudicial Foreclosure of the Mortgage
Property with the Notary Public was sanctioned by the same statute. Respondent bank thus prayed
for the dismissal of petitioners’ complaint for lack of merit.15
For failure of the counsels for both petitioners and respondent bank to appear in the scheduled
hearing for the issuance of temporary restraining order, the RTC, in an Order dated 15 May 1998,
deemed the prayer for TRO abandoned.16
Thereafter, the RTC conducted a pre-trial conference. In the Pre-Trial Order17 dated 8 September
2000, the parties made the following admissions and stipulations:
(1) the real estate mortgage executed by the plaintiffs in favor of the defendant bank covers the
loan obligation in the total amount of ₱3,000,000.00;
(2) there were two promissory notes executed by the plaintiffs: one for ₱2,700,000.00 and
another for ₱300,000.00;
(3) a demand letter dated 13 October 1997 was sent to petitioner LCK by respondent bank stating
that the remaining balance of petitioner LCK’s loan obligation was ₱2,962,500.00 as of 13 October
1997;
(4) a Notice of Auction Sale by Notary Public was made by the respondent bank in foreclosing the
Baguio City property, and in the Certificate of Sale issued by the Notary Public, the respondent
bank bid ₱2,625,000.00 for the property;
(5) the respondent bank also foreclosed the real estate mortgage over the petitioners’ Quezon
City property on 18 March 1998 and said defendant bank bid ₱2,231,416.67 for the property;
(6) the foreclosure of petitioners’ Quezon City property was made by a notary public;
(7) the petition for foreclosure was not included in the raffle of judicial notice;
(8) the petitioners failed to fully pay their loan obligation as of 13 October 1997 in the amount of
₱962,500.00; and
 (9) despite the demands, petitioners failed to pay their due obligations.
The court further defined the issues as follows:
(1) whether or not the petition was filed with the Office of the Clerk of Court;
(2) whether or not the extra-judicial foreclosure of real estate mortgage by defendant bank was
made in accordance with the provisions of Act 3135, as amended; and
(3) whether or not the parties are entitled to their respective claims for attorney’s fees and
damages.18
The parties were given 15 days from receipt of the Pre-Trial Order to make amendments or
corrections thereon.
On 18 April 2001, the parties agreed to submit the case for the decision of the RTC based on the
stipulations and admissions made at the pre-trial conference. The parties further manifested that
they were waiving their respective claims for attorney’s fees. On the same day, the RTC required
the parties to submit their respective memoranda.19
In their Memorandum,20 petitioners, aside from reiterating issues previously raised in their
Complaint, further claimed that there was an overpayment of the loan obligation by ₱1,856,416.67.
As shown in the letter-demand dated 13 October 1997 received by petitioner LCK, its outstanding
loan obligation amounted to ₱2,962,500.00. The Baguio City property was purchased by respondent
bank at the public auction for ₱2,625,000.00, while the Quezon City property was purchased for
₱2,231,416.67.
For its part, respondent bank maintained in its Memorandum21 that the complaint filed by
petitioners is devoid of merit. It further asseverated that petitioners’ claim for overpayment was
not among the issues submitted for the resolution of the RTC. It is clear from the Pre-Trial Order
that the issues to be resolved are limited to whether the petition for the foreclosure of the real
estate mortgage was filed before the Clerk of Court and whether or not the extrajudicial foreclosure
of real estate mortgage was made by the respondent bank in accordance with the provisions of Act
No. 3135. For failure of petitioners to promptly raise the alleged overpayment, the RTC is now
barred from adjudicating this issue.
On 3 September 2001, the RTC rendered its Decision22 declaring the foreclosure and the auction
sale of the Quezon City property legal and valid, but ordered respondent bank to return the
overpayment made by petitioners in the amount of ₱1,856,416.67. The dispositive portion of the
RTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the extra-judicial foreclosure and auction sale of the Quezon City property of
plaintiffs LCK Industries, Inc., Chiko Lim and Elizabeth Lim subject of this case legal and valid;
2. Ordering defendant Planters Development Bank to pay to plaintiffs the amount of
₱1,856,416.67 representing overpayment;
3. Dismissing plaintiffs’ claim for attorney’s fees and other litigation expenses;
4. Dismissing the case against defendant Atty. Allene M. Anigan; and
5. Dismissing the counterclaims of defendants Planters Development Bank and Atty. Arlene M.
Anigan.23
For lack of merit, the Motion for Reconsideration filed by the respondent bank was denied by the
RTC in its Order dated 3 December 2001.24
Aggrieved, respondent bank elevated the matter to the Court of Appeals by assailing the portion of
the RTC Decision ordering it to pay petitioners the amount of ₱1,856,416.67 representing the
alleged overpayment. The respondent bank’s appeal was docketed as CA-G.R. CV No. 73944.25
On 1 April 2005, the Court of Appeals granted the appeal of the respondent bank and partially
reversed the RTC Decision insofar as it ordered respondent bank to pay the overpaid amount of
₱1,856,416.67 to petitioners. In deleting the award of overpayment, the appellate court
emphasized that the primary purpose of pre-trial is to make certain that all issues necessary for the
disposition of the case are properly raised in order to prevent the element of surprise. Since the
alleged overpayment was only raised by the petitioners long after the pre-trial conference, the court
a quo cannot dispose of such issue without depriving the respondent bank of its right to due
process.26
The Motion for Reconsideration filed by petitioners was denied by the Court of Appeals in its
Resolution27 dated 29 November 2005.
Petitioners are now before this Court via a Petition for Review on Certiorari,28 under Rule 45 of the
Revised Rules of Court, assailing the Court of Appeals Decision and raising the following issues as
grounds:
I.
WHETHER OR NOT THE EXCESS AMOUNT OF ₱1,893,916.67 WHICH THE RESPONDENT BANK
ACQUIRED FROM THE AUCTION SALE OF THE PETITIONERS’ PROPERTIES SHALL BE RETURNED TO
THEM.
II.
WHETHER OR NOT THE ISSUE OF OVERPAYMENT WAS RAISED BY THE PARTIES AND INCLUDED IN
THE PRE-TRIAL ORDER.29
The petition centers on the claim propounded by petitioners that there was an overpayment of the
loan obligation in the amount of ₱1,856,416.67. Petitioners insist they are entitled to the
reimbursement of the overpaid amount invoking the elementary principle of in rem verso30 in
human relations and the rule on the disposition of the proceeds of the sale providing that the
balance or the residue after deducting the cost of the sale and the payment of the mortgage debt
due, shall be paid to the junior encumbrancers, and in the absence of junior encumbrancers, to the
mortgagor or his duly authorized representative.31
On the other hand, respondent bank counters that the question of overpayment, not being included
in the issues stipulated in Pre-Trial Order dated 8 September 2000, and totally unrelated therein,
cannot be considered by the RTC. The belated ventilation of the alleged overpayment precluded the
RTC from ruling on the matter in consonance with the primordial purpose of the pre-trial conference
which is to delineate the issues necessary for the disposition of the case. 32
The conduct of pre-trial in civil actions has been mandatory as early as 1 January 1964 upon the
effectivity of the Revised Rules of Court.33 Pre-trial is a procedural device intended to clarify and
limit the basic issues between the parties34 and to take the trial of cases out of the realm of surprise
and maneuvering.35
Pre-trial is an answer to the clarion call for the speedy disposition of cases. Hailed as the most
important procedural innovation in Anglo-Saxon justice in the nineteenth century,36 pre-trial is a
device intended to clarify and limit the basic issues between the parties.37 It thus paves the way for
a less cluttered trial and resolution of the case.38 Pre-trial seeks to achieve the following:
(a) The possibility of an amicable settlement or of a submission to alternative modes of dispute
resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;
(d) The possibility of obtaining stipulations or admissions of facts and of documents to avoid
unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of issues to a commissioner;
(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of dismissing
the action should a valid ground therefor be found to exist;
(h) The advisability or necessity of suspending the proceedings; and
(i) Such other matters as may aid in the prompt disposition of the action.39
The purpose of entering into a stipulation of facts is to expedite trial and to relieve the parties and
the court as well of the costs of proving facts which will not be disputed on trial and the truth of
which can be ascertained by reasonable inquiry. Its main objective is to simplify, abbreviate and
expedite the trial, or totally dispense with it.40
The parties themselves or their representative with written authority from them are required to
attend in order to arrive at a possible amicable settlement, to submit to alternative modes of
dispute resolution, and to enter into stipulations or admissions of facts and documents. All of the
matters taken up during the pre-trial, including the stipulation of facts and the admissions made by
the parties, are required to be recorded in a pre-trial order.41
Thus, Section 7, Rule 18 of the Revised Rules of Court provides:
SEC. 7. Record of pre-trial. – The proceedings in the pre-trial shall be recorded. Upon the termination
thereof, the court shall issue an order which shall recite in detail the matters taken up in the
conference, the action taken thereon, the amendments allowed to the pleadings, and the
agreements or admissions made by the parties as to any of the matters considered. Should the
action proceed to trial, the order shall explicitly define and limit the issues to be tried. The contents
of the order shall control the subsequent course of the action, unless modified before trial to
prevent manifest injustice.
In the Pre-Trial Order dated 8 September 2000, the RTC defined the issues as follows: (1) whether
or not the petition was filed with the Office of the Clerk of Court; (2) whether or not the extrajudicial
foreclosure of real estate mortgage by defendant bank was made in accordance with the provisions
of Act No. 3135; and (3) whether or not the parties are entitled to their respective claims for
attorney’s fees and damages.
Based on the admissions and stipulations during the pre-trial conference and the issues defined by
the court a quo as embodied in the Pre-Trial Order, the parties agreed to submit the case for the
resolution of the RTC. Both petitioners and respondent also manifested that they would forego their
respective claims for attorney’s fees, leaving solely the issue of the validity of the foreclosure of
mortgage and auction sale for the RTC’s disposition. However, in petitioners’ Memorandum filed
after the case was submitted for resolution, petitioners raised the question of overpayment, a new
issue that was included neither in their Complaint nor in the issues defined in the Pre-Trial Order
issued by the RTC.
Generally, pre-trial is primarily intended to make certain that all issues necessary to the disposition
of a case are properly raised. Thus, to obviate the element of surprise, parties are expected to
disclose at the pre-trial conference all issues of law and fact they intend to raise at the trial. 42
However, in cases in which the issue may involve privileged or impeaching matters,43 or if the issues
are impliedly included therein or may be inferable therefrom by necessary implication to be integral
parts of the pre-trial order as much as those that are expressly stipulated, the general rule will not
apply.44 Thus, in Velasco v. Apostol,45 this Court highlighted the aforesaid exception and ruled in this
wise:
A pre-trial order is not meant to be a detailed catalogue of each and every issue that is to be or may
be taken up during the trial. Issues that are impliedly included therein or may be inferable therefrom
by necessary implication are as much integral parts of the pre-trial order as those that are expressly
stipulated.
In fact, it would be absurd and inexplicable for the respondent company to knowingly disregard or
deliberately abandon the issue of non-payment of the premium on the policy considering that it is
the very core of its defense. Correspondingly, We cannot but perceive here an undesirable resort
to technicalities to evade an issue determinative of a defense duly averred. (Emphasis supplied).
The case at bar falls under this particular exception. Upon scrupulous examination of the Pre-Trial
Order dated 8 September 2000, it can be deduced that the parties stipulated that the remaining
sum of petitioner LCK’s obligation as of 13 October 1997 was ₱2,962,500.00. In the same Pre-Trial
Order, the parties likewise stipulated that the Baguio City property was sold at the public auction
for ₱2,625,000.00 and the Quezon City property for ₱2,231,416.67. On both occasions, respondent
bank emerged as the highest bidder. By applying simple mathematical operation, the mortgaged
properties were purchased by the respondent at the public auctions for ₱4,856,416.67; thus, after
deducting therefrom the balance of petitioner LCK’s obligation in the amount of ₱2,962,500.00, an
excess in the sum of ₱1,893,916.67 remains.
Needless to say, the fact of overpayment, though not expressly included in the issues raised in the
Pre-Trial Order dated 8 September 2000, can be evidently inferred from the stipulations and
admissions made by the parties therein. Even only upon plain reading of the said Pre-Trial Order, it
can be readily discerned that there was an overpayment.
The pertinent provisions of the Revised Rules of Court on extrajudicial foreclosure sale provide:
Rule 39. SEC. 21. Judgment obligee as purchaser. – When the purchaser is the judgment obligee,
and no third-party claim has been filed, he need not pay the amount of the bid if it does not exceed
the amount of the judgment. If it does, he shall pay only the excess.
Rule 68. SEC. 4. Disposition of proceeds of sale.- The amount realized from the foreclosure sale of
the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing
the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt
due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained
by the court, or if there be no such encumbrancers or there be a balance or residue after payment
to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it.
(Emphasis supplied.)
The renowned jurist Florenz Regalado, in Sulit v. Court of Appeals,46 underscored the obligation of
the mortgagee with respect to the surplus money resulting from a foreclosure sale of the mortgaged
property:
The application of the proceeds from the sale of the mortgaged property to the mortgagor’s
obligation is an act of payment, not payment by dation; hence, it is the mortgagee’s duty to return
any surplus in the selling price to the mortgagor. Perforce, a mortgagee who exercises the power of
sale contained in a mortgage is considered a custodian of the fund, and, being bound to apply it
properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee
is not strictly considered a trustee in a purely equitable sense, but as far as concerns the
unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity
of redemption.1âwphi1
Commenting on the theory that a mortgagee, when he sells under a power, cannot be considered
otherwise than as a trustee, the vice-chancellor in Robertson v. Norris (1 Giff. 421) observed: "That
expression is to be understood in this sense: that with the power being given to enable him to
recover the mortgage money, the court requires that he shall exercise the power of sale in a
provident way, with a due regard to the rights and interests of the mortgagor in the surplus money
to be produced by the sale. (Emphasis supplied.)
Petitioner LCK’s obligation with the respondent bank was already fully satisfied after the mortgaged
properties were sold at the public auction for more than the amount of petitioner LCK’s remaining
debt with the respondent bank. As the custodian of the proceeds from the foreclosure sale,
respondent bank has no legal right whatsoever to retain the excess of the bid price in the sum of
₱1,893,916.67, and is under clear obligation to return the same to petitioners.
In any case, this Court would not allow respondent bank to hide behind the cloak of procedural
technicalities in order to evade its obligation to return the excess of the bid price, for such an act
constitutes a violation of the elementary principle of unjust enrichment in human relations.
Under the principle of unjust enrichment - nemo cum alterius detrimento locupletari potest - no
person shall be allowed to enrich himself unjustly at the expense of others.47 This principle of equity
has been enshrined in our Civil Code, Article 22 of which provides:
Art. 22. Every person who through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal ground,
shall return the same to him.
We have held that there is unjust enrichment when a person unjustly retains a benefit to the loss
of another, or when a person retains the money or property of another against the fundamental
principles of justice, equity and good conscience.48
Equity, as the complement of legal jurisdiction, seeks to reach and complete justice where courts of
law, through the inflexibility of their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so. Equity regards the spirit and not the letter, the
intent and not the form, the substance rather than the circumstance, as it is variously expressed by
different courts.49
It is the policy of the Court to afford party-litigants the amplest opportunity to enable them to have
their cases justly determined, free from constraints of technicalities. Since the rules of procedures
are mere tools designed to facilitate the attainment of justice, it is well recognized that this Court is
empowered to suspend its operation, or except a particular case from its operation, when the rigid
application thereof tends to frustrate rather promote the ends of justice.50
Court litigations are primarily for search of truth, and a liberal interpretation of the rules by which
both parties are given the fullest opportunity to adduce proofs is the best way to ferret such truth.
The dispensation of justice and vindication of legitimate grievances should not be barred by
technicalities.51
Given the foregoing discussion, this Court finds the respondent bank liable not only for retaining
the excess of the bid price or the surplus money in the sum of ₱1,893,916.67, but also for paying
the interest thereon at the rate of 6% per annum from the time of the filing of the complaint until
finality of judgment. Once the judgment becomes final and executory, the interest of 12% per
annum, should be imposed, to be computed from the time the judgment becomes final and
executory until fully satisfied.52
WHEREFORE, premises considered, the instant Petition is GRANTED. The Court of Appeals Decision
dated 1 April 2005 and its Resolution dated 29 November 2005 in CA-G.R. CV No. 73944 are hereby
REVERSED. Respondent Planters Development Bank is ORDERED to return to the petitioners LCK
Industries Inc., Chiko Lim and Elizabeth Lim, the sum of ₱1,893,916.67 with interest computed at
6% per annum from the time of the filing of the complaint until its full payment before finality of
judgment. Thereafter, if the amount adjudged remains unpaid, the interest rate shall be 12% per
annum computed from the time the judgment became final and executory until fully satisfied. Costs
against respondent Planters Development Bank.
SO ORDERED.
CIVPRO – RULE 18 – EFFECT OF FAILURE TO APPEAR
G.R. No. 103185 January 22, 1993
CONRADO CALALANG, petitioner,
vs.
THE COURT OF APPEALS and FILIPINAS MANUFACTURERS BANK, respondents.
CAMPOS, JR., J.:
This is a petition for review on certiorari seeking to annul the
decision ** of the Court of Appeals which set aside the order of dismissal issued by the lower court,
*** in Civil Case No. 36907 entitled "Filipinas Manufacturers Bank, plaintiff, versus Hugo Arca,
Conrado Calalang, Rio Arturo R. Salceda and Acropolis Trading Corporation, defendants".
The antecedent facts, as culled from the records, are as follows:
On April 29, 1980, respondent Filipinas Manufacturers Bank filed a complaint for collection of a sum
of money1 against petitioner Conrado Calalang and 3 other defendants namely, Hugo M. Arca, Rio
Arturo Salceda and the Acropolis Trading Corporation with the Court of First Instance of Rizal, 7th
Judicial District, Branch 36, Makati under Judge Segundo M. Zosa.
Petitioner, after having been served with summons on May 19, 1980, filed a Motion to Dismiss on
June 2, 1980. The other summoned defendant, Hugo M. Arca, filed a Motion for Bill of Particulars
on June 5, 1980. The two other defendants namely, the Acropolis Trading Corporation and Rio
Arturo Salceda were also summoned but only a clerk-employee of the Acropolis Trading Corporation
received the summons while Arturo R. Salceda was no longer residing at his given address.
Over a year after, the Motion for Bill of Particulars was granted on August 24, 1981 by Judge Zosa.
Meanwhile, the Motion to Dismiss filed by petitioner Calalang was left unresolved. The last pleading
filed regarding the Motion to Dismiss was the reply of petitioner Calalang to the opposition to the
motion to dismiss by respondent bank which was filed on August 5, 1980.
On August 10, 1981, Batas Pambansa Blg. 129 (The Judiciary Reorganization Act) was passed by the
Batasang Pambansa and subsequently approved by then President Marcos on August 14, 1981.
On November 27, 1981, defendant Arca filed a Motion to Dismiss which necessitated the filing of
various pleadings in relation thereto by respondent bank herein, and defendant Arca.
On May 25, 1983, a hearing was scheduled under Judge Florentino Dela Peña of the Makati Regional
Trial Court, Branch 134. But then, the case was transferred to the Makati Regional Trial Court,
Branch 150, presided over by Judge Benigno M. Puno who, on August 8, 1985, issued an Order to
wit:
After a careful and thorough study of the defendant Calalang's (petitioner herein) motion to
dismiss, dated May 31, 1980 and the Counter Manifestation and motion to dismiss dated
November 25, 1981, filed by defendant Arca, together with the plaintiff's opposition, defendant
movants' replies or rejoinder, the Court finds that the matters relied upon by said movants for
the dismissal of the Complaint are evidentiary in character, the truth or veracity of which are
better determined at the hearing on the merits and, therefore, said motions are DENIED for lack
of merit.
WHEREFORE, defendants are hereby ordered to file their answers to the Complaint within the
reglementary period.
SO ORDERED.2
On October 3, 1986, Gella Reyes Vergara Alcala and Associates entered its appearance as counsel
for respondent bank.
On October 30, 1985, defendant Arca filed his answer with compulsory counterclaim to the
complaint which was received by respondent bank 's former counsel, Emerito M. Salva and
Associates on November 4, 1985.
It appears that this case has been set several times for pre-trial (November 29, 1985, January 29,
1986, May 12,1986, November 19, 1986, January 14, 1987 and February 27, 1987). For the first two
scheduled hearings, respondent bank's counsel failed to appear causing the dismissal without
prejudice of the case which was nevertheless set aside upon respondent bank's motion for
reconsideration of the dismissal. The November 19, 1986 hearing was transferred to January 14,
1987 upon agreement by both counsels. For the last two scheduled dates counsel for the defendant
Hugo Arca failed to appear.
Judge Benigno M. Puno was replaced by Judge Federico Y. Alikpala, Jr. as the presiding judge of the
Makati Regional Trial Court, Branch 150 who, on March 6, 1987, issued an Order, quoted hereunder
as follows:
The records of this case show that among the defendants herein are: (a) Rio Arturo R. Salceda;
and (b) Acropolis Trading Corporation. The Sheriff's Return, dated June 4, 1980 (Records Page 33)
show the following report on the service of summons thereto:
As to defendant Acropolis Trading Corporation: "Served upon the defendant thru Miss BETH
REYES, Clerk-employee, employed thereat, who signed for the receipt thereof.
As to defendant Rio Arturo Salceda: "Not serve (sic), defendant is not residing at the given
address, occupant is Leonito Acuron.
The Court hereby informs the plaintiff that it shall not consider defendant Acropolis Trading
Corporation as having been properly brought under the jurisdiction of this Court in view of the
improper service of summons on said corporation (Sec. 13 of Rule 14, Revised Rules of Court).
In view of the foregoing, plaintiff is hereby directed to inform the Court, within ten (10) days from
its receipt hereof, what steps plaintiff intends to take with respect to the said two defendants so
that the Court will know whether plaintiff is still interested in the prosecution and/or outcome of
this case.
 With respect to defendants Conrado T. Calalang, the latter had filed a motion to dismiss which,
however, was denied by the Court per Order dated August 8, 1985. The records of this case do
not, however, show whether a copy of the said Order was transmitted to, or received by, counsel
for the said defendant. In any event, said defendant had not filed any motion for the
reconsideration of the said Order, nor had said defendant filed his answer in this case. Let,
therefore, a copy of the Order dated August 8, 1985 be sent to the defendant Conrado T. Calalang,
through his counsel of record, Attys. N.J. Quisumbing & Associates of the Lawyers' Inn.
Inasmuch as it would appear that the setting of this case for pre-trial was premature, since issues
herein do not appear to have been really joined, the pre-trial conference scheduled in this case
for April 8, 1987 is cancelled until further assignment or until any of the parties herein shall make
the appropriate steps in connection therewith.
xxx xxx xxx3
The above Order was received by petitioner's counsel on March 13, 1987.4
On March 17, 1987, respondent bank, in response to the Order dated March 6, 1987, filed a
manifestation stating that:
1. It is very much interested in prosecuting the complaint against the defendants Acropolis
Trading and Salceda;
2. Pursuant to this, counsel has requested the Credit Investigation Department of plaintiff to
verify the correct address of said defendants including all necessary facts for the proper service
of summons on them;
3. Upon verification, plaintiff will then move for the issuance of Alias Summons on the said
defendants.5
Thereafter, on March 24, 1987, petitioner Calalang moved to dismiss the complaint on the ground
that respondent bank failed to prosecute the case for an unreasonable length of time.6
On April 3, 1987, the trial court issued another Order, to wit:
Before this Court is plaintiff's "Manifestation" filed on March 18, 1987 stating that plaintiff is
interested in prosecuting its complaint against defendants Acropolis Trading and Rio Arturo R.
Salceda; this manifestation was made as a consequence of the directives set out in the second
paragraph of the Order dated March 6, 1987.
Since the Court cannot let an unreasonable period pass for plaintiff to cause service of alias
summons on the aforesaid defendants, the Court hereby resolves that if plaintiff shall still be
unable to cause service of alias summons on the said defendants within thirty (30) days from
plaintiff's receipts hereof, then this Court will dismiss the complaint as against said defendants
and proceedings herein shall be limited to the defendants on whom summons had been served
as of the lapse of said 30-days' period.7
Thereafter, on May 8, 1987, respondent bank moved for the issuance of alias summons on
defendant Acropolis Trading Corporation through its President/Director Conrado T. Calalang or
through its director Hugo M. Arca.8
Judge Zosimo Z. Angeles of the Makati Regional Trial Court, Branch 58, to whom the case was
assigned after Judge Federico Y. Alikpala, Jr., then issued an Order, dated July 16, 1987, denying the
Motion to Dismiss filed by petitioner for lack of merit. The motion for alias summons was granted.
Entry of appearance of Atty. Crisostomo J. Danguilan as counsel for respondent bank was noted in
the same order.9
Petitioner then filed his answer only on November 10, 1987.10
On November 16, 1987, the trial court issued an Order setting the
pre-trial of the case for January 7, 1988 at 8:30 a.m.11
At the pre-trial conference, respondent bank's counsel arrived 15 minutes late or at 8:45 a.m..
However, the case had already been dismissed. Thus, in the Order of January 7, 1988, the court
declared:
For failure of plaintiff's counsel to appear inspite of notice and considering that this case has been
pending for seven (7) years, without plaintiff having taken positive steps to prosecute the same,
it is hereby DISMISSED pursuant to Section 3, Rule 17, Rules of Court. Defendants' counterclaim
is likewise dismissed.12
On January 12, 1988, counsel for the respondent bank filed a Motion for Reconsideration of the
order of dismissal citing as reason for his late arrival "the unusually heavy traffic he encountered
along Kamias Road in Quezon City, which was caused by a stalled jeepney along the main
thoroughfare."13 The motion was denied on January 26, 1988. The respondent bank appealed the
dismissal to the respondent Court. On October 25, 1991, the respondent Court promulgated the
assailed decision, the dispositive portion of which is quoted hereunder:
WHEREFORE, the Order of the court a quo dated January 9, 1988 dismissing this case and its
Order dated January 26, 1988 denying reconsideration of the first order are hereby SET ASIDE,
and this case is ordered remanded to the court of origin for further proceedings.
No pronouncement as to costs.
SO ORDERED.14
The petitioner's Motion for Reconsideration having been denied by the Court of Appeals, he filed
this instant petition with this Court alleging that the respondent Court erred in:
1.) absolving respondent bank for the delay in the pursuit of the case;
2.) declaring the January 7, 1988 pre-trial as premature;
3.) holding that respondent bank "did not entirely fail to appear;
 4.) invoking the liberal application of the rules of procedure in favor of the respondent bank;
5.) not having found abuse in the dismissal by the lower court of the case at bar, there is no basis
for the respondent court to reverse the order of dismissal.
The pre-trial conference scheduled for January 8, 1987 was not premature. A pre-trial cannot validly
be held until the last pleading has been filed, which last pleading may be the plaintiff's reply, except
where the period to file the last pleading has lapsed.15 The period to appear and file the necessary
pleading having expired on the Acropolis Trading Corporation, the lower court can direct that a pre-
trial conference be held among the answering defendants. However, though it is within the
discretion of the trial court to declare a party non-suited for non-appearance in the pre-trial
conference, such discretion must not be abused. The precipitate haste of the lower court in
declaring the respondent bank non-suited was uncalled for and deserved a second look. Considering
the fact that the counsel for the plaintiff/respondent bank did arrive for the pre-trial conference,
though a bit late and that counsel for the defendant was himself also late, the trial court should
have called the case again. An admonition to both counsels to be more prompt in appearing before
the Court as scheduled would have sufficed, instead of having dismissed the complaint outright.
Unless a party's conduct is so negligent, irresponsible, contumacious, or dilatory as to provide
substantial grounds for dismissal for non-appearance, the courts should consider lesser sanctions
which would still amount into achieving the desired end.16
Inconsiderate dismissals, even if without prejudice, do not constitute a panacea nor a solution to
the congestion of court dockets; while they lend a deceptive aura of efficiency to records of
individual judges, they merely postpone the ultimate reckoning between the parties. In the
absence of clear lack of merit or intention to delay, justice is better served by a brief continuance,
trial on the merits, and final disposition of the cases before the court.17
And there is authority that an order dismissing a plaintiff's complaint without prejudice for failure
of his counsel to appear at a pre-trial conference must be reversed as too severe a sanction to visit
on a litigant where the record is devoid of evidence reflecting the litigant's willful or flagrant
disregard for the Court's authority.18
Petitioner's contention that the respondent Court erred in absolving respondent bank for the delay
in the resolution of this case, maintaining that "the case was dismissed out of its inordinate refusal
to heed the warnings of the court", is not borne out by the records of this case. The seven-year
delay is not attributable to the respondent bank alone but to circumstances beyond its control. The
respondent Court found that:
While it is true that the case had been pending for that length of time we find that the delay is
not to be attributed entirely to the plaintiff in this case. The records show that various incidents
were raised by the defendants Calalang and Arca who filed separate pleadings and were
represented by different counsels.
Calalang filed a motion for the dismissal of the case on the ground that the plaintiff had no cause
of action against him. This necessitated the filing of an opposition from the plaintiff, a reply to
said opposition from the defendant Calalang, and a rejoinder to the said reply. The defendant
Arca, on the other hand, initially sought an extension of time to file a responsive pleading, then
filed a motion for a bill of particulars, then later also a motion to dismiss the case. After his motion
to dismiss was denied Arca filed a motion for reconsideration. In all these incidents pleadings and
counter-pleadings were filed and hearings held on the motions, which resulted in the case
dragging on for a considerable time.
The case was set for pre-trial several times when, as aforestated, the issues were not yet joined
for only Arca had initially filed his answer to the complaint. The case was ordered dismissed at
least two (2) times when the plaintiff's counsel failed to appear at these pre-trials but the
dismissals were reconsidered and the class set anew.
Another factor that contributed to the confusion in the proceedings and the delay in the case is
the fact that the case was assigned from one judge to another due probably to the judicial
reorganization that took place. The records show that there were no less than four (4) judges who
handled the case — Judges Segundo Zosa, Benigno M. Puno, Federico Alikpala, Jr., and Zosimo
Angeles.
The answer of defendant Arca to the complaint was filed only on October 30, 1985 while that of
defendant Calalang was filed only on November 10, 1987.19
Again, petitioner's contention that the fact that respondent bank had not caused service of
summons on the two other defendants, the Acropolis Trading Corporation and Rio Arturo Salceda,
for almost seven years after the complaint was filed on April 29, 1980 indicated "abuse of judicial
leniency and tolerance" is bereft of merit. Summons is issued by the clerk of court upon the filing of
the complaint. When it was informed later on by Judge Alikpala, Jr. in his Order dated March 6, 1987
that there was an improper service on defendants Acropolis Trading Corporation and Rio Arturo
Salceda, respondent bank, in compliance therewith, filed a motion for alias summons, as permitted
by the law.
Considering the judicial reorganization which took place during the pendency of this case and the
numerous instances raised by both petitioner and respondent bank as contributing to the delay,
petitioner cannot now claim that respondent bank's "abuse of judicial leniency and tolerance is the
single greatest component of this delay".20
The acts of the respondent bank do not manifest lack of interest to prosecute, in the absence of
proof that it indeed abandoned or intended to abandon its case against petitioner and the other
defendants. Admittedly there was delay in this case, but such delay, We hold, is not the delay
warranting dismissal. To be a sufficient ground for dismissal, delay must not only be lengthy but also
unnecessary and dilatory resulting in the trifling of judicial processes.
In Marahay vs. Melicor,21 the Court set forth the test for dismissal of a case due to failure to
prosecute, to wit:
While a court can dismiss a case on the ground of non prosequitur, the real test for the exercise
of such power is whether, under the circumstances, plaintiff is chargeable with want of due
diligence in failing to proceed with reasonable promptitude. In the absence of a pattern or
scheme to delay the disposition of the case or a wanton failure to observe the mandatory
requirement of the rules on the part of the plaintiff, as in the case at bar, courts should decide to
dispense with rather than wield their authority to dismiss.
Dismissal of a case for failure to prosecute is a matter addressed to the sound discretion of the
court. That discretion, however, must not be abused. Thus, courts may not enter a dismissal which
is not warranted by the circumstances of the case.22 The availability of this recourse must be
determined according to each case's procedural history, situation at the time of the dismissal and
whether, and under the circumstances of the particular case, the plaintiff is chargeable with want
of due diligence in failing to proceed with reasonable promptitude.23

. . . The desideratum of a speedy disposition of cases should not, if at all possible, result in the
precipitate loss of a party's right to present evidence and either in plaintiff's being non-suited or
the defendant's being pronounced liable under an ex-parte judgment.

. . (T)rial courts have . . the duty to dispose of controversies after trial on the merits whenever
possible. It is deemed an abuse of discretion for them, on their own motion, "to enter a dismissal
which is not warranted by the circumstances of the case" (Municipality of Dingras v. Bonoan, 85
Phil. 458-59 [1950]). While it is true that the dismissal of an action on grounds specified under
Section 3, Rule 17 of the Revised Rules of Court is addressed to their discretion (Flores v. Phil.
Alien Property Administrator, 107 Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958];
Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631,
October 19, 1966, 18 SCRA 390), such discretion must be exercised soundly with a view to the
circumstances surrounding each particular case (Vernus-Sanciangco v. Sanciangco,
L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as mitigating circumstances for
the delay, the same should be considered and dismissal denied or set aside (Rudd v. Rogerson,
15 ALR 2d 672; Cervi v. Greenwood, 147 Colo 190, 362 P. 2d 1050 [1961]), especially where the
suit appears to be meritorious and the plaintiff was not culpably negligent and no injury results
to defendant (27 C.J.S. 235-36, 15 ALR 3rd 680)." (Abinales vs. Court of First Instance of
Zamboanga City, Br. I, 70 SCRA 590, 595).

It is true that the allowance or denial of petitions for postponement and the setting aside of
orders previously issued, rest principally upon the sound discretion of the judge to whom they
are addressed, but always predicated on the consideration that more than the mere convenience
of the courts or of the parties of the case, the ends of justice and fairness would be served thereby
(Camara Vda. de Zubiri v. Zubiri, et al., L-16745, December 17, 1966). . . . .24

IN VIEW OF THE FOREGOING, the petition is DISMISSED. The decision of the Court of Appeals dated
October 25, 1991 and its Resolution of December 12, 1991 are both AFFIRMED. Costs against
petitioner.

SO ORDERED.
CIVPRO – RULE 18 – ON DEFENDANT, COMPARE WITH DEFAULT
G.R. No. 102300. March 17, 1993.
CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS L.
VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD DIVISION, MANILA, HON.
LEONARDO B. CANARES, Judge of Regional, Trial Court of Cebu, Branch 10, and SPOUSES CRESENCIO
AND ZENAIDA VELEZ, respondents.
SYLLABUS
1. COMMERCIAL LAW; PRIVATE CORPORATIONS; LEVELS OF CONTROL IN CORPORATE HIERARCHY;
BOARD OF DIRECTORS MAY VALIDLY DELEGATE SOME FUNCTIONS TO INDIVIDUAL OFFICERS OR
AGENTS. — In the corporate hierarchy, there are three levels of control: (1) the board of directors,
which is responsible for corporate policies and the general management of the business affairs of
the corporation; (2) the officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business operations; and (3) the
stockholders who have the residual power over fundamental corporate changes, like amendments
of the articles of incorporation. However, just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it.
2. ID.; ID.; HOW CORPORATE POWERS CONFERRED UPON CORPORATE OFFICERS OR AGENTS;
EXERCISE OF POWERS INCIDENTAL TO EXPRESS POWERS CONFERRED. — Corporate powers may be
directly conferred upon corporate officers or agents by statute, the articles of incorporation, the by-
laws or by resolution or other act of the board of directors. In addition, an officer who is not a
director may also appoint other agents when so authorized by the by-laws or by the board of
directors. Such are referred to as express powers. There are also powers incidental to express
powers conferred. It is a fundamental principle in the law of agency that every delegation of
authority, whether general or special, carries with it, unless the contrary be expressed, implied
authority to do all of those acts, naturally and ordinarily done in such cases, which are reasonably
necessary and proper to be done in order to carry into effect the main authority conferred. Since
the by-laws are a source of authority for corporate officers and agents of the corporation, a
resolution of the Board of Directors of Citibank appointing an attorney in fact to represent and bind
it during the pre-trial conference of the case at bar is not necessary because its by-laws allow its
officers, the Executing Officer and the Secretary Pro-Tem, to execute a power of attorney to a
designated bank officer, William W. Ferguson in this case, clothing him with authority to direct and
manage corporate affairs.
3. ID.; ID.; ADOPTION OF BY-LAWS; PROVISION OF SECTION 46 OF CORPORATION CODE REFERRING
TO EFFECTIVITY OF CORPORATE BY-LAWS APPLICABLE ONLY TO DOMESTIC CORPORATIONS. — A
corporation can submit its by-laws, prior to incorporation, or within one month after receipt of
official notice of the issuance of its certificate of incorporation by the SEC. When the third paragraph
of the above provision mentions "in all cases", it can only refer to these two options; i.e., whether
adopted prior to incorporation or within one month after incorporation, the by-laws shall be
effective only upon the approval of the SEC. But even more important, said provision starts with the
phrase "Every corporation formed under this Code", which can only refer to corporations
incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity of corporate
by-laws, applies only to domestic corporations and not to foreign corporations.
4. ID.; FOREIGN CORPORATIONS; ISSUANCE OF LICENSE TO TRANSACT BUSINESS IN THE
PHILIPPINES; REQUISITES; GRANT OF LICENSE IN EFFECT APPROVAL BY SEC OF FOREIGN
CORPORATION'S BY-LAWS. — Section 125 of the same Code requires that a foreign corporation
applying for a license to transact business in the Philippines must submit, among other documents,
to the SEC, a copy of its articles of incorporation and by-laws, certified in accordance with law.
Unless these documents are submitted, the application cannot be acted upon by the SEC. In the
following section, the Code specifies when the SEC can grant the license applied for. Section 126
provides in part: "SEC. 126. Issuance of a license. — If the Securities and Exchange Commission is
satisfied that the applicant has complied with all the requirements of this Code and other special
laws, rules and regulations, the Commission shall issue a license to the applicant to transact business
in the Philippines for the purpose or purposes specified in such license . . ." Since the SEC will grant
a license only when the foreign corporation has complied with all the requirements of law, it follows
that when it decides to issue such license, it is satisfied that the applicant's by-laws, among the other
documents, meet the legal requirements. This, in effect, is an approval of the foreign corporations
by-laws. It may not have been made in express terms, still it is clearly an approval. Therefore,
petitioner bank's by-laws, though originating from a foreign jurisdiction, are valid and effective in
the Philippines.
5. CIVIL LAW; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN POWER OF ATTORNEY
COMPREHENSIVE ENOUGH TO INCLUDE AUTHORITY TO APPEAR AT PRE-TRIAL CONFERENCE. — It
is also error on the part of the Court of Appeals to state that the power of attorney given to the four
(4) Citibank employees is not a special power of attorney as required in paragraph 3, Article 1878 of
the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the case of Tropical Homes, Inc. vs.
Villaluz, the special power of attorney executed by petitioner bank therein contained the following
pertinent terms — "to appear for and in its behalf in the above-entitled case in all circumstances
where its appearance is required and to bind it in all said instances". The court ruled that: "Although
the power of attorney in question does not specifically mention the authority of petitioner's counsel
to appear and bind the petitioner at the pre-trial conference, the terms of said power of attorney
are comprehensive enough as to include the authority to appear for the petitioner at the pre-trial
conference."
6. ID.; ID.; ID.; LEGAL COUNSEL APPOINTED TO REPRESENT BANK IN COURT PURSUANT TO BY-LAW
PROVISION CONSIDERED AN EMPLOYEE FOR A SPECIAL PURPOSE. — Attorney was sufficient under
the by-law provision authorizing Ferguson to delegate any of his functions to any one or more
employees of the petitioner bank. A reasonable interpretation of this provision would include an
appointment of a legal counsel to represent the bank in court, for, under the circumstances, such
legal counsel can be considered, and in fact was considered by the petitioner bank, an employee for
a special purpose. Furthermore, Ferguson, who heads the Philippine office thousands of miles away
from its main office in the United States, must be understood to have sufficient powers to act
promptly in order to protect the interests of his principal.
7. REMEDIAL LAW; CIVIL PROCEDURE; PRECIPITATE ORDERS OF DEFAULT FROWNED UPON BY
SUPREME COURT; REASON THEREFOR; WHEN PARTY MAY BE PROPERLY DEFAULTED. — We
reiterate the previous admonitions of this Court against "precipitate orders of default as these have
the effect of denying the litigant the chance to be heard. While there are instances, to be sure, when
a party may be properly defaulted, these should be the exceptions rather than the rule and should
be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with the orders
of the court. Absent such a showing, the party must be given every reasonable opportunity to
present his side and to refute the evidence of the adverse party in deference to due process of law".
8. LEGAL ETHICS; AUTHORITY OF ATTORNEYS TO BIND CLIENTS. — Under Rule 138, Section 23 of
the Rules of Court, an attorney has authority to bind his client in any case by an agreement in
relation thereto made in writing, and this authority would include taking appeals and all matters of
ordinary judicial procedure. But he cannot, without special authority, compromise his client's
litigation or receive anything in discharge of a client's claim but the full amount in cash. The special
powers of attorney separately executed by Florencia Tarriela and William W. Ferguson granted to
J.P. Garcia & Associates are very explicit in their terms as to the counsel's authority in the case at
bar.
DECISION
CAMPOS, JR., J p:
Petitioner is a foreign commercial banking corporation duly licensed to do business in the
Philippines. Private respondents, spouses Cresencio and Zenaida Velez, were good clients of
petitioner bank's branch in Cebu until March 14, 1986 when they filed a complaint for specific
performance and damages against it in Civil Case No. CEB-4751 before the Regional Trial Court of
Cebu, Branch 10.
Private respondents alleged in their complaint that the petitioner bank extended to them credit
lines sufficiently secured with real estate and chattel mortgages on equipment. They claim that
petitioner offered them special additional accommodation of Five Million Pesos (P5,000,000.00) to
be availed of in the following manner:
"a. Defendant would and did purchase check or checks from the plaintiffs by exchanging it with
defendant's manager's check on a regular daily basis as reflected in the defendant's own ledger
furnished to plaintiffs;
b. It was further agreed that on the following day, defendant CITIBANK would again purchase from
the plaintiffs, check or checks, by exchanging the same with defendant's manager's check, which
check, however, will be deposited by the plaintiffs with their other banks to cover the check or
checks previously issued by the plaintiffs mentioned above;
c. The same regular and agreed activity would be undertaken by the plaintiffs and defendant
CITIBANK herein every banking day thereafter;" 1
This arrangement started on September 4, 1985 until March 11, 1986, when private respondents
tried to exchange with petitioner bank six checks amounting to P3,095,000.00 but petitioner bank
allegedly refused to continue with the arrangement even after repeated demands. Instead,
petitioner bank suggested to private respondents that the total amount covered by the
"arrangement be restructured to thirty (30) months with prevailing interest rate on the diminishing
balance". 2 Private respondents agreed to such a proposal. Then as a sign of good faith, they issued
and delivered a check for P75,000.00 in favor of petitioner bank which was refused by the latter
demanding instead full payment of the entire amount.
For the failure of petitioner bank to comply with this restructuring agreement private respondents
sued for specific performance and damages.
Petitioner bank has a different version of the business relationship that existed between it and
private respondents. Thus:
". . . starting sometime on September 4 of 1985, he (private respondent Crescencio Velez) deposited
his unfunded personal checks with his current account with the petitioner. But prior to depositing
said checks, he would present his personal checks to a bank officer asking the latter to have his
personal checks immediately credited as if it were a cash deposit and at the same time assuring the
bank officer that his personal checks were fully funded. Having already gained the trust and
confidence of the officers of the bank because of his past transactions, the bank's officer would
always accommodate his request. After his requests are granted which is done by way of the bank
officer affixing his signature on the personal checks, private respondent Cresencio Velez would then
deposit his priorly approved personal checks to his current account and at the same time withdraw
sums of money from said current account by way of petitioner bank's manager's check. Private
respondent would then deposit petitioner bank's manager's check to his various current accounts
in other commercial banks to cover his previously deposited unfunded personal checks with
petitioner bank. Naturally, petitioner bank and its officers never discovered that his personal check
deposits were unfunded. On the contrary, it gave the petitioner bank the false impression that
private respondent's construction business was doing very well and that he was one big client who
could be trusted. This deceptive and criminal scheme he did every banking day without fail from
September 4, 1985 up to March 11, 1986. The amounts that he was depositing and withdrawing
during this period (September 4, 1985 to March 11, 1986) progressively became bigger. It started
at P46,000.00 on September 4, 1985 and on March 11, 1986 the amount of deposit and withdrawal
already reached over P3,000,000.00. At this point in time (March 11, 1986), the private respondent
Cresencio Velez presumably already feeling that sooner or later he would be caught and that he
already wanted to cash in on his evil scheme, decided to run away with petitioner's money. On
March 11, 1986, he deposited various unfunded personal checks totalling P3,095,000.00 and
requested a bank officer that the same be credited as cash and after securing the approval of said
bank officer, deposited his various personal checks in the amount of P3,095,000.00 with his current
account and at the same time withdrew the sum of P3,244,000.00 in the form of petitioner's
manager's check. Instead of using the proceeds of his withdrawals to cover his unfunded personal
checks, he ran away with petitioner bank's money. Thus, private respondent Cresencio Velez's
personal checks deposited with petitioner bank on March 11, 1986 in the total aggregate amount
of P3,095,000.00 bounced. The checks bounced after said personal checks were made the
substantial basis of his withdrawing the sum of P3,244,000.00 from his current account with
petitioner bank." 3
Subsequently, on August 19, 1986, petitioner bank filed a criminal complaint against private
respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa (six counts)
under Article 315 par. 2(d) of the Revised Penal Code. On April 28, 1988, the investigating fiscal
recommended the filing of an information against private respondents for violations of the
mentioned laws.
On June 13, 1989, petitioner bank submitted its answer to the complaint filed by private
respondents. In the Order dated February 20, 1990, the case was set for pre-trial on March 30, 1990
and petitioner bank was directed to submit its pre-trial brief at least 3 days before the pre-trial
conference. Petitioner bank only filed its pre-trial brief on March 30, 1990.
On March 30, 1990, the date of the pre-trial conference, counsel for petitioner bank appeared,
presenting a special power of attorney executed by Citibank officer Florencia Tarriela in favor of
petitioner bank's counsel, the J.P. Garcia & Associates, to represent and bind petitioner bank at the
pre-trial conference of the case at bar.
Inspite of this special power of attorney, counsel for private respondents orally moved to declare
petitioner bank as in default on the ground that the special power of attorney was not executed by
the Board of Directors of Citibank. Petitioner bank was then required to file a written opposition to
this oral motion to declare it as in default. In said opposition petitioner bank attached another
special power of attorney made by William W. Ferguson, Vice President and highest ranking officer
of Citibank, Philippines, constituting and appointing the J.P. Garcia & Associates to represent and
bind the BANK at the pre-trial conference and/or trial of the case of "Cresencio Velez, et al. vs.
Citibank, N.A.". 4 In an Order dated April 23, 1990, respondent judge denied private respondents'
oral motion to declare petitioner bank as in default and set the continuation of the pre-trial
conference for May 2, 1990.
On the scheduled pre-trial conference, private respondents reiterated, by way of asking for
reconsideration, their oral motion to declare petitioner bank as in default for its failure to appear
through an authorized agent and that the documents presented are not in accordance with the
requirements of the law. Petitioner bank again filed on May 14, 1990 its opposition thereto, stating
as follows:
". . . While it has been the practice of Citibank to appoint its counsels as its attorney-in-fact in civil
cases because it considers said counsels equivalent to a Citibank employee, yet, in order to avoid
further arguments on the matter, the defendant Citibank will secure another power of attorney
from Mr. William W. Ferguson in favor of its employee/s who will represent the defendant Citibank
in the pre-trial conferences of this case. As soon as the said special power of attorney is secured,
the defendant will present it before this Honorable Court and in pursuance therewith, the
defendant hereby makes a reservation to present such document as soon as available." 5
In compliance with the above promise, petitioner bank filed a manifestation, dated May 23, 1990,
attaching therewith a special power of attorney executed by William W. Ferguson in favor of
Citibank employees to represent and bind Citibank on the pre-trial conference of the case at bar. 6
On August 15, 1990, respondent judge issued an order declaring petitioner bank as in default. This
order, received by petitioner bank on September 27, 1990, cited the following as reason for the
declaration of default:
"Defendant-bank, although a foreign corporation, is bound by Philippine laws when doing and
conducting business in the Philippines (Sec. 129, B.P. Blg. 68), and its corporate powers could only
be exercised by its Board of Directors (Sec. 23, B.P. Blg. 68). The exercise by the Board of Directors
of such power could only be valid if it bears the approval of the majority of the Board (Sec. 25, par.
2, Corporation Code). The records does not show the requisite document. The alleged authority
(Special Power of Attorney, Annex "A") executed by Mr. William W. Ferguson in favor of the alleged
Citibank employees, assuming the same to be a delegable authority, to represent the defendant in
the pre-trial conference, made no mention of J.P. Garcia & Associates as one of the employees of
the defendant.
It stands to reason therefore, that the defendant-bank has no proper representation during the pre-
trial conference on May 2, 1990 for purposes of Sec. 2, Rule 20 of the Rules of Court." 7
On October 1, 1990, petitioner bank filed a motion for reconsideration of the above order but it was
denied on December 10, 1990.
Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary
injunction and/or temporary restraining order with the Court of Appeals. On June 26, 1991, the
Court of Appeals dismissed the petition on the following grounds:
". . . In the first place, petitioner admitted that it did not and could not present a Board resolution
from the bank's Board of Directors appointing its counsel, Atty. Julius Z. Neri, as its attorney-in-fact
to represent and bind it during the pre-trial conference of this case. This admission is contained on
pages 12 and 13 of the instant petition.
In the second place, the "By-Laws" of petitioner which on its face authorizes (sic) the appointment
of an attorney-in-fact to represent it in any litigation, has not been approved by the Securities and
Exchange Commission, as required by Section 46 of the Corporation Code of the Philippines.
Apparently, the "By-Laws" in question was (sic) approved under the laws of the United States, but
there is no showing that the same was given the required imprimatur by the Securities and Exchange
Commission. Since petitioner is a foreign corporation doing business in the Philippines, it is bound
by all laws, rules and regulations applicable to domestic corporations (Sec. 129, Corporation Code).
In the third place, no special power of attorney was presented authorizing petitioner's counsel of
record, Atty. Julius Neri and/or J.P. Garcia Associates, to appear for and in behalf of petitioner during
the pre-trial.
What petitioner exhibited to the court a quo was a general power of attorney given to one William
W. Ferguson who in turn executed a power of attorney in favor of five (5) (sic) Citibank employees
to act as attorney-in-fact in Civil Case No. CEB-4751. Yet, during the pre-trial not one of said
employees appeared, except counsel who is not even a bank employee.
Furthermore, even assuming the validity of the power of attorney issued by petitioner in favor of
Ferguson as well as the power of attorney he issued to five (5) (sic) Citibank employees, said power
of attorney has not been shown to be a Special Power of Attorney precisely intended not only to
represent the bank at the pre-trial of the case on a certain date but also to enter into any
compromise as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20,
Rules of Court." 8
Hence, this instant petition.
Petitioner bank contends that no board resolution was necessary for its legal counsel, Atty. Julius Z.
Neri, or Citibank employees to act as its attorney-in-fact in the case at bar because petitioner bank's
by-laws grant to its Executing Officer and Secretary Pro-Tem the power to delegate to a Citibank
officer, in this case William W. Ferguson, the authority to represent and defend the bank and its
interests.
Furthermore, it contends that the Court of Appeals erred in holding that the by-laws of petitioner
bank cannot be given effect because it did not have the imprimatur of the Securities and Exchange
Commission (SEC) as required by Section 46 of the Corporation Code of the Philippines.
Private respondents refute both contentions. They assail the authority of petitioner bank's legal
counsel to appear at the pre-trial conference on two grounds, namely: first, that the authority did
not come from the Board of Directors which has the exclusive right to exercise corporate powers;
and second, that the authority granted to the Executing Officer in the by-laws was ineffective
because the same were not submitted to, nor approved by, the SEC.
There are thus two issues in this case. First, whether a resolution of the board of directors of a
corporation is always necessary for granting authority to an agent to represent the corporation in
court cases. And second, whether the by-laws of the petitioner foreign corporation which has
previously been granted a license to do business in the Philippines, are effective in this jurisdiction.
If the by-laws are valid and a board resolution is not necessary as petitioner bank claims, then the
declaration of default would have no basis.
In the corporate hierarchy, there are three levels of control: (1) the board of directors, which is
responsible for corporate policies and the general management of the business affairs of the
corporation; (2) the officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business operations; and (3) the
stockholders who have the residual power over fundamental corporate changes, like amendments
of the articles of incorporation. However, just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it.
Section 23 of the Corporation Code of the Philippines in part provides:
"SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees to be elected
from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and
qualified.
xxx xxx xxx" (Emphasis supplied).
Thus, although as a general rule, all corporate powers are to be exercised by the board of directors,
exceptions are made where the Code provides otherwise.
Section 25 of said Code provides that the directors of the corporation shall elect its corporate
officers, and further provides as follows:
"SEC. 25. Corporate officers; quorum. — . . . The directors or trustees and officers to be elected shall
perform the duties enjoined on them by law and by the by-laws of the corporation . . ."
Furthermore, Section 47 of the same Code enumerates what may be contained in the by-laws,
among which is a provision for the "qualifications, duties and compensation of directors or trustees,
officers and employees". (Emphasis supplied.)
Taking all the above provisions of law together, it is clear that corporate powers may be directly
conferred upon corporate officers or agents by statute, the articles of incorporation, the by-laws or
by resolution or other act of the board of directors. In addition, an officer who is not a director may
also appoint other agents when so authorized by the by-laws or by the board of directors. Such are
referred to as express powers. 9 There are also powers incidental to express powers conferred. It is
a fundamental principle in the law of agency that every delegation of authority, whether general or
special, carries with it, unless the contrary be expressed, implied authority to do all of those acts,
naturally and ordinarily done in such cases, which are reasonably necessary and proper to be done
in order to carry into effect the main authority conferred. 10
Since the by-laws are a source of authority for corporate officers and agents of the corporation, a
resolution of the Board of Directors of Citibank appointing an attorney in fact to represent and bind
it during the pre-trial conference of the case at bar is not necessary because its by-laws allow its
officers, the Executing Officer and the Secretary Pro-Tem, ** to execute a power of attorney to a
designated bank officer, William W. Ferguson in this case, clothing him with authority to direct and
manage corporate affairs. The relevant provision in the general power of attorney granted to him
are as follows:
"A. That the Executing Officer and the Secretary Pro-Tem are of full age, competent to act in the
premises, to me personally known, and that they are authorized to execute this instrument by virtue
of the powers granted to them pursuant to the By-Laws of the Bank and the laws of the United
States of America, and that the Executing Officer said that he, on the one hand, hereby revokes and
cancels any instrument of power of attorney previously executed on behalf of the Bank for use in
the PHILIPPINES, in favor of WILLIAM W. FERGUSON (hereinafter referred to as the "Attorney-in-
fact"), of legal age, a Banker, and now residing in the PHILIPPINES, and that he (the Executing
Officer), on the other hand, does hereby authorize and empower the Attorney-in-fact, acting in the
name or on behalf of the Bank, or any of its Branches, or any interest it or they may have or
represent, said revocation and authorization to be effective as of this date as follows:
xxx xxx xxx
XVII. To represent and defend the Bank and its interest before any and all judges and courts, of all
classes and jurisdictions, in any action, suit or proceeding in which the Bank may be a party or may
be interested in administrative, civil, criminal, contentious or contentious-administrative matters,
and in all kinds of lawsuits, recourses or proceedings of any kind or nature, with complete and
absolute representation of the Bank, whether as plaintiff or defendant, or as an interested party for
any reason whatsoever . . .
xxx xxx xxx
XXI. To substitute or delegate this Power of Attorney in whole or in part in favor of such one or more
employees of the Bank, as he may deem advisable, but without divesting himself of any of the
powers granted to him by this Power of Attorney; and to grant and execute in favor of any one or
more such employees, powers of attorney containing all or such authorizations, as he may deem
advisable. . . " 11
Since paragraph XXI above specifically allows Ferguson to delegate his powers in whole or in part,
there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia & Associates
and later, of the bank's employees, constitutes a valid delegation of Ferguson's express power
(under paragraph XVII above) to represent petitioner bank in the pre-trial conference in the lower
court.
This brings us to the second query: whether petitioner bank's by-laws, which constitute the basis
for Ferguson's special power of attorney in favor of petitioner bank's legal counsel are effective,
considering that petitioner bank has been previously granted a license to do business in the
Philippines.
The Court of Appeals relied on Section 46 of the Corporation Code to support its conclusion that the
by-laws in question are without effect because they were not approved by the SEC. Said section
reads as follows:
"SEC. 46. Adoption of by-laws. — Every corporation formed under this Code must, within one (1)
month after receipt of official notice of the issuance of its certificate of incorporation by the
Securities and Exchange Commission, adopt a code of by-laws for its government not inconsistent
with this Code. For the adoption of by-laws by the corporation, the affirmative vote of the
stockholders representing at least a majority of the outstanding capital stock, or of at least a
majority of the members in the case of non-stock corporations, shall be necessary. The by-laws shall
be signed by the stockholders or members voting for them and shall be kept in the principal office
of the corporation, subject to the inspection of the stockholders or members during office hours;
and a copy thereof, duly certified to by a majority of the directors or trustees and countersigned by
the secretary of the corporation, shall be filed with the Securities and Exchange Commission which
shall be attached to the original articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and filed prior
to incorporation; in such case, such by-laws shall be approved and signed by all the incorporators
and submitted to the Securities and Exchange Commission, together with the articles of
incorporation.
In all cases, by-laws shall be effective only upon the issuance by the Securities and Exchange
Commission of a certification that the by-laws are not inconsistent with this Code."
A careful reading of the above provision would show that a corporation can submit its by-laws, prior
to incorporation, or within one month after receipt of official notice of the issuance of its certificate
of incorporation by the SEC. When the third paragraph of the above provision mentions "in all
cases", it can only refer to these two options; i.e., whether adopted prior to incorporation or within
one month after incorporation, the by-laws shall be effective only upon the approval of the SEC. But
even more important, said provision starts with the phrase "Every corporation formed under this
Code", which can only refer to corporations incorporated in the Philippines. Hence, Section 46, in
so far as it refers to the effectivity of corporate by-laws, applies only to domestic corporations and
not to foreign corporations.
On the other hand, Section 125 of the same Code requires that a foreign corporation applying for a
license to transact business in the Philippines must submit, among other documents, to the SEC, a
copy of its articles of incorporation and by-laws, certified in accordance with law. Unless these
documents are submitted, the application cannot be acted upon by the SEC. In the following section,
the Code specifies when the SEC can grant the license applied for. Section 126 provides in part:
"SEC. 126. Issuance of a license. — If the Securities and Exchange Commission is satisfied that the
applicant has complied with all the requirements of this Code and other special laws, rules and
regulations, the Commission shall issue a license to the applicant to transact business in the
Philippines for the purpose or purposes specified in such license . . ."
Since the SEC will grant a license only when the foreign corporation has complied with all the
requirements of law, it follows that when it decides to issue such license, it is satisfied that the
applicant's by-laws, among the other documents, meet the legal requirements. This, in effect, is an
approval of the foreign corporations by-laws. It may not have been made in express terms, still it is
clearly an approval. Therefore, petitioner bank's by-laws, though originating from a foreign
jurisdiction, are valid and effective in the Philippines.
In pursuance of the authority granted to him by petitioner bank's by-laws, its Executing Officer
appointed William W. Ferguson, a resident of the Philippines, as its Attorney-in-Fact empowering
the latter, among other things, to represent petitioner bank in court cases. In turn, William W.
Ferguson executed a power of attorney in favor of J.P. Garcia & Associates (petitioner bank's
counsel) to represent petitioner bank in the pre-trial conference before the lower court. This act of
delegation is explicity authorized by paragraph XXI of his own appointment, which we have
previously cited.
It is also error for the Court of Appeals to insist that the special power of attorney, presented by
petitioner bank authorizing its counsel, Atty. Julius Neri and/or J.P. Garcia & Associates, to appear
for and in behalf of petitioner bank during the pre-trial, is not valid. The records do not sustain this
finding. We quote with approval the contention of petitioner bank as it is borne by the records, to
wit:
". . . The records of this case would show that at the start, the petitioner, thru counsel, presented a
special power of attorney executed by then Citibank Officer Florencio (sic) J. Tarriela which was
marked as Exhibit "1" in the pre-trial of this case . . . This is precisely the reason why the court
denied, in an Order dated April 23, 1990 . . . the private respondent's oral motion to declare the
defendant in fault. The said special power of attorney executed by Florencio (sic) J. Tarriela was
granted by Mr. Rafael B. Buenaventura, who was then the Senior Vice-President of Citibank and the
highest ranking office of Citibank in the Philippines. Considering that at the time of the presentation
of the said special power of attorney Rafael B. Buenaventura was no longer connected with Citibank,
the petitioner again presented another special power of attorney executed by William W. Ferguson
in favor of J.P. Garcia & Associates, . . .
Finding that the authority of William W. Ferguson to delegate his authority to act for and in behalf
of the bank in any civil suit is limited to individuals who are employees of the bank the petitioner
again on May 23, 1990 presented another special power of attorney dated May 16, 1990 wherein
William W. Ferguson appointed as attorney-in-fact the following employees of petitioner, namely:
Roberto Reyes, Nemesio Solomon, Aimee Yu and Tomas Yap. The said special power of attorney
was filed and presented by the petitioner through its Manifestation filed in the Trial Court on May
23, 1990, . . ." 12
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority to bind his client in any
case by an agreement in relation thereto made in writing, and this authority would include taking
appeals and all matters of ordinary judicial procedure. But he cannot, without special authority,
compromise his client's litigation or receive anything in discharge of a client's claim but the full
amount in cash. The special powers of attorney separately executed by Florencia Tarriela and
William W. Ferguson granted to J.P. Garcia & Associates are very explicit in their terms as to the
counsel's authority in the case at bar. We quote the relevant provisions of the special powers of
attorney showing sufficient compliance with the requirements of Section 23, Rule 138, to wit:
"That the BANK further authorized the said J.P. GARCIA & ASSOCIATES to enter into an amicable
settlement, stipulation of facts and/or compromise agreement with the party or parties involved
under such terms and conditions which the said J.P. GARCIA & ASSOCIATES may deem reasonable
(under parameters previously defined by the principal) and execute and sign said documents as may
be appropriate.
HEREBY GIVING AND GRANTING unto J.P. GARCIA & ASSOCIATES full power and authority
whatsoever requisite necessary or proper to be done in or about the premises, as fully to all intents
and purposes as the BANK might or could lawfully do or cause to be done under and by virtue of
these presents." 13
It is also error on the part of the Court of Appeals to state that the power of attorney given to the
four (4) Citibank employees is not a special power of attorney as required in paragraph 3, Article
1878 of the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the case of Tropical Homes,
Inc. vs. Villaluz, 14 the special power of attorney executed by petitioner bank therein contained the
following pertinent terms — "to appear for and in its behalf in the above-entitled case in all
circumstances where its appearance is required and to bind it in all said instances". The court ruled
that:
"Although the power of attorney in question does not specifically mention the authority of
petitioner's counsel to appear and bind the petitioner at the pre-trial conference, the terms of said
power of attorney are comprehensive enough as to include the authority to appear for the
petitioner at the pre-trial conference."
In the same manner, the power of attorney granted to petitioner bank's employees should be
considered a special power of attorney. The relevant portion reads:
"WHEREAS, the Bank is the Defendant in Civil Case No. CEB-4751, entitled "Cresencio Velez, et al.
vs. Citibank, N.A.," pending before the Regional Trial Court of Cebu City, Branch X;
bank, executed by William W. Fersugon, the highest ranking officer of Citibank in the Philippines, in
favor of its counsel J.P. Garcia & Associates. But since the authority to delegate of William A.
Fersugon in favor of an agent is limited to bank employees, another special power of attorney from
Wiliam W. Fersugon in favor of the Citibank employees was presented. But the respondent trial
court judge disregarded all these and issued the assailed default order. There is nothing to show
that petitioner bank "miserably failed to oblige"; on the contrary, three special powers of attorney
manifest prudence and diligence on petitioner bank's part.
In fact, there was no need for the third power of attorney because we believe that the second power
of attorney was sufficient under the by-law provision authorizing Fersugon to delegate any of his
functions to any one or more employees of the petitioner bank. A reasonable interpretation of this
provision would include an appointment of a legal counsel to represent the bank in court, for, under
the circumstances, such legal counsel can be considered, and in fact was considered by the
petitioner bank, an employee for a special purpose. Furthermore, Fersugon, who heads the
Philippine office thousands of miles away from its main office in the United States, must be
understood to have sufficient powers to act promptly in order to protect the interests of his
principal.
We reiterate the previous admonitions of this Court against "precipitate orders of default as these
have the effect of denying the litigant the chance to be heard. While there are instances, to be sure,
when a party may be properly defaulted, these should be the exceptions rather than the rule and
should be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with
the orders of the court. Absent such a showing, the party must be given every reasonable
opportunity to present his side and to refute the evidence of the adverse party in deference to due
process of law". 16
Considering further that petitioner bank has a meritorious defense and that the amount in contest
is substantial, the litigants should be allowed to settle their claims on the arena of the court based
on a trial on the merits rather than on mere technicalities.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The decision of the Court of
NOW, THEREFORE, under and by virtue of Article XXI of the Power of Attorney executed by the Bank
Appeals dated June 26, 1991 and its resolution denying the motion for reconsideration of petitioner
in favor of the Attorney-in-Fact (Annex "A"), which provision is quoted above, the Attorney-in-Fact
bank dated September 26, 1991 are both REVERSED and SET ASIDE. The order of default issued on
has nominated, designated and appointed, as by these presents he nominates, designates and
August 15, 1990 in Civil Case CEB-4751 of the Regional Trial Court of Cebu is ANNULLED and SET
appoints, as his substitutes and delegates, with respect to the said Power of Attorney, ROBERTO
ASIDE and the case is hereby REMANDED to the court of origin for further proceedings.
REYES, Vice President and/or NEMESIO SOLOMON, JR., Manager, AIMEE YU, Assistant Vice
President and/or TOMAS YAP, Assistant Manager (hereinafter referred to as the "DELEGATES"), all
of legal age, citizens of the Republic of the Philippines and with business address at Citibank Center, SO ORDERED.
Paseo de Roxas, Makati, Metro Manila, Philippines, the Attorney-in-Fact hereby granting, conferring
and delegating such authorities and binding the Bank in the Pre-Trial Conference and/or Trial of the
abovementioned case, pursuant to Rule 20 of the Revised Rules of Court, to the DELEGATES. The
attorney-in-Fact furthermore hereby ratifying and confirming all that the DELEGATES shall lawfully
do or cause to be done under and by virtue of these presents." 15

From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending this
case. It even acceded to private respondent's insistence on the question of proper representation
during the pre-trial by presenting not just one, but three, special powers of attorney. Initially, the
special power of attorney was executed by Florencia Tarriela in favor of J.P. Garcia & Associates,
petitioner bank's counsel. Private respondents insisted that this was not proper authority required
by law. To avoid further argument, a second special power of attorney was presented by petitioner