9.10 Case Digests

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  VIOLETA TUDTUD BANATE, MARY MELGRID M. CORTEL, BONIFACIO CORTEL, ROSENDO MAGLASANG, and PATROCINIA MONILAR, versus PHILIPPINE COUNTRYSIDE RURAL BANK (LILOAN, CEBU), INC. and TEOFILO SOON, JR. GR 163825 July 13, 2010 DOCTRINE OF APPARENT AUTHORITY On July 22, 1997, petitioner spouses Rosendo Maglasang and Patrocinia Monilar (spouses Maglasang) obtained a loan from PCRB for P1,070,000.00. The subject loan was evidenced by a promissory note and was payable on January 18, 1998. To secure the payment of the subject loan, the spouses Maglasang executed, in favor of PCRB a real estate mortgage over their property, Lot 12868-H-3-C, including the house constructed thereon (collectively referred to as subject properties), owned by petitioners Mary Melgrid and Bonifacio Cortel (spouses Cortel), the spouses Maglasang’s daughter and son-in-law, respectively. Aside from the subject loan, the spouses Maglasang obtained two other loans from PCRB which were covered by separate promissory notes and secured by mortgages on their other properties. Sometime in November 1997 (before the subject loan became due), the spouses Maglasang and the spouses Cortel asked PCRB’s permission to sell the subject properties. They likewise requested that the subject properties be released from the mortgage since the two other loans were adequately secured by the other mortgages. The spouses Maglasang and the spouses Cortel claimed that the PCRB, acting through its Branch Manager, Pancrasio Mondigo, verbally agreed to their request but required first the full payment of the subject loan. The spouses Maglasang and the spouses Cortel thereafter sold to petitioner Violeta Banate the subject properties for P1,750,000.00. The spouses Magsalang and the spouses Cortel used the amount to pay the subject loan with PCRB. After settling the subject loan, PCRB gave the owner’s duplicate certificate of title of Lot 12868-H-3-C to Banate, who was able to secure a new title in her name. The title, however, carried the mortgage lien in favor of PCRB, prompting the petitioners to request from PCRB a Deed of Release of Mortgage. As PCRB refused to comply with the petitioners’ request, the petitioners instituted an action for specific performance before the RTC to compel PCRB to execute the release deed. The petitioners additionally sought payment of damages from PCRB, which, they claimed, caused the publication of a news report stating that they “surreptitiously” caused the transfer of ownership of Lot 12868-H-3-C. The petitioners considered the news report false and malicious, as PCRB knew of the sale of the subject properties and, in fact, consented thereto. PCRB countered the petitioners’ allegations by invoking the cross-collateral stipulation in the mortgage deed which states: 1.   That as security for the payment of the loan or advance in principal sum of one million seventy thousand pesos only (P1,070,000.00) and such other loans or advances already obtained, or still to be obtained by the MORTGAGOR(s) as MAKER(s), CO-MAKER(s) or GUARANTOR(s) from the MORTGAGEE plus interest at the rate of _____ per annum and penalty and litigation charges payable on the dates mentioned in the corresponding promissory notes, the MORTGAGOR(s) hereby transfer(s) and convey(s) to MORTGAGEE by way of first mortgage the parcel(s) of land described hereunder, together with the improvements now existing for which may hereafter be made thereon, of which MORTGAGOR(s) represent(s) and warrant(s) that MORTGAGOR(s) is/are the absolute owner(s) and that the same is/are free from all liens and encumbrances; Accordingly, PCRB claimed that full payment of the three loans, obtained by the spouses Maglasang, was necessary before any of the mortgages could be released; the settlement of the subject loan merely constituted partial payment of the total obligation. Thus, the payment does not authorize the release of the subject properties from the mortgage lien.  PCRB considered Banate as a buyer in bad faith as she was fully aware of the existing mortgage in its favor when she purchased the subject properties from the spouses Maglasang and the spouses Cortel. It explained that it allowed the release of the owner’s duplicate certificate of title to Banate only to enable her to annotate the sale. PCRB claimed that the release of the title should not indicate the corresponding release of the subject properties from the mortgage constituted thereon. The RTC ruled in favor of the petitioners. It noted that the petitioners, as “necessitous men,” could not have bargained on equal footing with PCRB in executing the mortgage, and concluded that it was a contract of adhesion. On appeal, the CA reversed the RTC’s decision.  The basic issues for the Court to resolve are as follows: 1. Whether the purported agreement between the petitioners and Mondigo novated the mortgage contract over the subject properties and is thus binding upon PCRB. 2. If the first issue is resolved negatively, whether Banate can demand restitution of the amount paid for the subject properties on the theory that the new agreement with Mondigo is deemed rescinded Ruling: The purported agreement did not novate the mortgage contract, particularly the cross- collateral stipulation thereon Before we resolve the issues directly posed, we first dwell on the determination of the nature of the cross-collateral stipulation in the mortgage contract. As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not limit the amount for which the mortgage may stand as security if, from the four corners of the instrument, the intent to secure future and other indebtedness can be gathered. This stipulation is valid and binding between the parties and is known as the “blanket mortgage clause” (also kno wn as the “dragnet clause).”  In the present case, the mortgage contract indisputably provides that the subject properties serve as security, not only for the payment of the subject loan, but also for “such other loans or advances alread y obtained, or still to be obtained.” The cross -collateral stipulation in the mortgage contract between the parties is thus simply a variety of a dragnet clause. After agreeing to such stipulation, the petitioners cannot insist that the subject properties be released from mortgage since the security covers not only the subject loan but the two other loans as well. The petitioners, however, claim that their agreement with Mondigo must be deemed to have novated the mortgage contract. They posit that the full payment of the subject loan extinguished their obligation arising from the mortgage contract, including the stipulated cross-collateral provision. Consequently, consistent with their theory of a novated agreement, the petitioners maintain that it devolves upon PCRB to execute the corresponding Deed of Release of Mortgage. We find the petitioners’ argument unpersuasive. Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would have dual functions –  one to extinguish an existing obligation, the other to substitute a new one in its place –  requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.[13] The second requisite is lacking in this case. Novation presupposes not only the extinguishment or modification of an existing obligation but, more importantly, the creation of a valid new obligation.  For the consequent creation of a new contractual obligation, consent of both parties is, thus, required. As a general rule, no form of words or writing is necessary to give effect to a novation. Nevertheless, where either or both parties involved are juridical entities, proof that the second contract was executed by persons with the proper authority to bind their respective principals is necessary. Doctrine of Apparent Authority The existence of apparent authority may be ascertained through: 1) the general manner in which the corporation holds out an officer or agent as having the power to act, or in other words, the apparent authority to act in general, with which it clothes him; or 2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers. Accordingly, the authority to act for and to bind a corporation may be presumed from acts of recognition in other instances when the power was exercised without any objection from its board or shareholders.[19] Notably, the petitioners’ action for specific performance is premised on the supposed actual or apparent authority of the branch manager, Mondigo, to release the subject properties from the mortgage, although the other obligations remain unpaid. In light of our discussion above, proof of the branch manager’s authority becomes indispensable to support the petitioners’ contention. The petitioners make no claim that Mondigo had actual authority from PCRB, whether express or implied. Rather, adopting the trial court’s observation, the petitioners posited that PCRB should be held liable for Mondigo’s commitment, on the basis of the latter’s apparent authority. We disagree with this position. Under the doctrine of apparent authority, acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal.[20] The principal’s liability, however, is limited only to third persons who have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none was given. In other words, apparent authority is determined only by the acts of the principal and not by the acts of the agent.[21] There can be no apparent authority of an agent without acts or conduct on the part of the principal; such acts or conduct must have been known and relied upon in good faith as a result of the exercise of reasonable prudence by a third party as claimant, and such acts or conduct must have produced a change of position to the third party’s detriment.[22]  In the present case, the decision of the trial court was utterly silent on the manner by which PCRB, as supposed principal, has “clothed” or “held out” its branch manager as having the power to enter into an agreement, as claimed by petitioners. No proof of the course of business, usages and practices of the bank about, or knowledge that the board had or is presumed to have of, its responsible officers’ acts regarding bank branch affairs, was ever adduced to establish the branch manager’s apparent authority to verbally alter the terms of mortgage contracts.[23] Neither was there any allegation, much less proof, that PCRB ratified Mondigo’s act or is est opped to make a contrary claim. TIMOTEO H. SARONA versus NATIONAL LABOR RELATIONS COMMISSION   G.R. No. 185280 January 18, 2012 Doctrine of Piercing the Corporate Veil FACTS: Petitioner, a security guard in Sceptre since April 1976, was asked by Sceptre’s operations manager, Karen Tan on June 2003, to submit a resignation letter as a requirement for an application in Royale and to fill up an employment application form for the said company. He was then assigned at Highlight Metal Craft Inc. from July 29 to August 8, 2003 and was later transferred to Wide Wide World Express Inc.  On September 2003, he was informed that his assignment at WWWE Inc. was withdrawn because Royale has been allegedly replaced by another security agency which he later discovered to be untrue. Nevertheless, he was once again assigned at Highlight Metal sometime in September 2003 and when he reported at Royale’s office on October 1, 2003, he w as informed that he would no longer be given any assignment as instructed by Sceptre’s general manager. He thus filed a complaint for illegal dismissal. LA Gutierrez ruled in favor of petitioner’s as he found him illegally dismissed and was not convinced by the respondent’s claim on petitioner’s abandonment.  Respondents were ordered to pay back wages computed from the day he was dismissed up to the promulgation of his decision on May 11, 2005. LA also ordered for the payment of separation pay but refused to pierce Royale’s corporate veil.   “Royale’s corporate personality is separate and distinct from that of Sceptre, a sole proprietorship owned by Roso Sabalones and later Aida Sabalones-Tan. Cannot be pierced absent clear and convincing evidence that the two agencies shared the same stockholders and incorporators and Sceptre has complete control and dominion over the finances and business affairs of Royale”  Respondents appealed to the NLRC claiming that the LA acted with grave abuse of discretion upon ruling on the illegal dismissal of petitioner. NLRC partially affirmed the LA’s decision with regard to petitioner’s illegal dismissal and separation pay but modified the amount of backwages and limited it to only 3 months of his last month salary reducing P95, 600 to P15, 600 since he worked for Royale for only 1 month and 3 days. Petitioner did not appeal to LA but raised the validity of LA’s findings on piercing Royale’s corporate personality  and computation of his separation pay and such petition was dismissed by the NLRC. Petitioner elevated NLRC’s decision to the CA on a petition for certiorari, and the CA  disagreed with the NLRC’s decision of not proceeding to review the evidence for determining if Royale is Sceptre’s  alter ego that would warrant the piercing of its corporate veil. ISSUE: 1. Whether or not Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s length of service with Sceptre  and for holding it liable for the benefits that have accrued to him arising from his employment with Sceptre. 2. Whether or not petitioner’s back wages should be limited to his salary for 3 months RULING: Corporation is an artificial being created by law. It has a personality separate and distinct from the persons composing it. But an equally well-settled principle that the corporate mask may be removed or the corporate veil pierced. The said doctrine applies to three basic areas: 1.   Defeat of public convenience as when the corporate fiction is used as a vehicle for evasion of existing obligation 2.   Fraud cases/ corporation used to justify a wrong, protect fraud or a crime 3.   Alter ego cases, a corporation is merely a farce  since it is a mere alter ego or business conduit of a person , or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. SC found reasons to reverse the decision of CA. 1.   Aida exercised control and supervision over the affairs of both agencies. She took over as early as 1999 when Roso assigned his license to operate Sceptre. She caused the registration of the business name “Sceptre Security & Detective Agence” under her name. As f ar as Royale’s concern, the respondents do not deny that she has the control and supervision of its employees including petitioner. 2.   As to fraudulent intention to warrant the piercing of the corporate veil, the manner by which the petitioner was made to resign and become an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality. Petitioner tendered his resignation on the impression that it was necessary for his continued employment. He was made to resign from Sceptre and apply with Royale only to be unceremoniously terminated shortly
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