RURAL BANK OF MILAOR v OCFEMIA

PETITIONER: Rural Bank of Milaor (CamSur)

RESPONDENTS: Francisca Ocfemia et al (her children, including Marife Nino)

SUMMARY: Pursuant to a Deed of Sale between petitioner (seller) and Marife’s parents (buyers),
the latter wanted to register said Deed to finally have the titles to the subject lands transferred to
them (respondents). The Register of Deeds told her that a Board Resolution confirming the sale
and authority of its manager should first be acquired from petitioner. The latter refused because it
allegedly had no record of the sale. SC holds for respondents : Bank is estopped from
questioning authority of its Manager.

DOCTRINE:
If a corporation knowingly permits one of its officers to act within the scope of an apparent
authority, it holds said agents out to the public as possessing the power to do those acts. Thus,
when a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority
to sell in the normal course of business, it is legally obliged to confirm the transaction by issuing a
board resolution so that the buyer may register the property in her name.

FACTS:
1. The 5 lots subject of this case were originally owned by Marife’s grandparents.
2. While said grandparents were still alive, respondents mortgaged these lands to petitioner.
3. Foreclosure, thus ownership was transferred to petitioner-Bank.
4. But the Bank then sold these lots to Marife’s parents, Renato (deceased) and Francisca.
5. But the titles were not yet transferred to the buyers because the Deed of Sale has to be
registered first with the Registry of Deeds.
6. The Register of Deeds told Marife that a Board Resolution confirming the Deed as well as
Bank manager’s authority should first be acquired from petitioner.
7. Bank repeatedly refused her request, despite compliance with Bank’s demand for
documents and other proof of the sale, because it allegedly had no record of the sale
which was handled by the previous manager, one Fe Tena.
8. Thus respondents’ Petition for Mandamus with Damages. They allege that Francisca is
very sick and that they want to mortgage the lands for her medical expenses. Sleepless
nights, mental anguish, etc.
9. RTC and CA for respondents.

ISSUE: (basically the arguments of Bank)

W/N the Board of Directors (BoD) may be compelled to confirm the Deed of Sale executed by the
Bank manager without prior authority of the BoD — YES, because of estoppel

RATIO:
1. Ms Tena, former bank manager, had previously transacted business on behalf of the
Bank where the latter had consistently acknowledged her authority. Bank is liable to
innocent third persons where representation is made in the course of its normal business
by its agent/Manager, even though such agent is abusing her authority.
2. Where similar acts have been approved by the BoD as a matter of general practice,
custom, and policy, the manager may bind the company even without formal
authorisation of the BoD.
3. Existence of such authority is established by proof of :
 ○ Course of business
○ Company usages and practices
○ Knowledge which the BoD has, or presumed to have, of acts of its subordinates
4. After execution of the Deed, respondents already took possession of the property and
even paid the real estate taxes. If Bank truly believed it had title, it should have taken
measures.
5. Policy reasons
○ Corporate transactions would be hampered where every person dealing with a
corporation would have to be duty-bound to disbelieve every act of its officers, no
matter how regular they appear.
Integrity of commercial transactions maintained by holding corporations strictly to the liability fixed
upon it by its agents in accordance with law