G.R. Nos. 145817, 145822, 162562; October 19, 2011
Case Parties/Title:

G.R. No. 145817 : URBAN BANK, INC., Petitioner, vs. MAGDALENO M. PEÑA, Respondent.
G.R. No. 145822: DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners, vs. MAGDALENO M. PEÑA, Respondent.
G.R. No. 162562: MAGDALENO M. PEÑA, Petitioner, vs. URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR., CORAZON BEJASA, and ARTURO MANUEL, JR., Respondents.

FACTS

The consolidated petitions originated from a case for payment of services and reimbursement of costs filed by Atty. Magdaleno Peña against Urban Bank, Inc. and several of its officers and directors. Peña, a former officer of Isabel Sugar Company, Inc. (ISCI), rendered services for Urban Bank related to the clearing of unauthorized sub-tenants from a Pasay City property (the Pasay property) that ISCI had contracted to sell to the bank. His services involved filing ejectment suits, defending against counter-suits, settling with tenants for ₱1.5 million (which he advanced), and incurring security and other costs totaling approximately ₱1.5 million. Peña claimed that in a telephone conversation, Urban Bank President Teodoro Borlongan orally agreed to pay him an agent’s fee of 10% of the property’s value (₱240,000,000), or ₱24,000,000. The Regional Trial Court (RTC) of Bago City ruled in favor of Peña, finding an oral contract of agency and awarding him ₱24,000,000 as agent’s fee plus ₱4,500,000 in costs and damages, for a total of ₱28,500,000. The RTC also held Urban Bank and the individual bank officers and directors solidarily liable and granted execution pending appeal. This led to the levy and sale of assets (corporate and personal, including conjugal properties) with declared values of at least ₱181 million to satisfy the ₱28.5 million award, despite Urban Bank and some officers filing supersedeas bonds totaling ₱80 million to stay execution. The Court of Appeals (CA) modified the RTC decision, ruling that no contract of agency existed and that Peña should be compensated based on the principle against unjust enrichment, reducing the total award to ₱3,000,000. The petitions before the Supreme Court involve: (1) Urban Bank and the De Leon Group (G.R. Nos. 145817 & 145822) challenging the propriety of execution pending appeal; and (2) Peña (G.R. No. 162562) assailing the CA’s decision on the substantive merits of his claim.

ISSUE

1. What is the legal basis for an award in favor of Peña for the services he rendered to Urban Bank? Should it be based on an oral contract of agency, the principle against unjust enrichment, or another basis? How much should the award be?
2. Are the officers and directors of Urban Bank liable in their personal capacities for the amount claimed by Peña?
3. What are the effects of the answers to the above questions on the results of the execution pending appeal that occurred?

RULING

1. Legal Basis and Amount of Award: The Supreme Court held that there was no valid oral contract of agency between Peña and Urban Bank. The alleged agreement lacked the requisite express or implied acceptance by the bank’s Board of Directors, as corporate acts require board approval. The authority of President Borlongan alone was insufficient to bind the corporation to such a significant contract. Therefore, Peña’s compensation cannot be based on the alleged 10% agency fee. Instead, the proper basis is the principle against unjust enrichment under Article 22 of the Civil Code. Urban Bank benefited from Peña’s services in clearing the property, which facilitated the bank’s acquisition. Peña is entitled to reimbursement for actual expenses he advanced (₱1.5 million for settlements and approximately ₱1.5 million for other costs) and reasonable compensation for his services. The Court fixed the total award at ₱3,000,000, consistent with the CA’s finding, as sufficient and equitable recompense, thereby modifying the RTC’s excessive award of ₱28,500,000.
2. Personal Liability of Officers and Directors: The officers and directors of Urban Bank are not personally and solidarily liable with the corporation. Corporate directors and officers are generally not personally liable for corporate obligations unless they acted with bad faith or gross negligence. No evidence was presented that the individual respondents acted in such manner or that they personally guaranteed the alleged contract. Their inclusion in the suit and the holding of solidary liability by the RTC was erroneous. The liability solely belongs to Urban Bank as a corporate entity.
3. Effects on Execution Pending Appeal: The execution pending appeal was improperly granted by the RTC. Good reasons for execution pending appeal, such as imminent insolvency or risk of absconding, were absent. Urban Bank had substantial assets and net worth, and supersedeas bonds were filed. The execution led to the levy and sale of properties vastly disproportionate to the award. Consequently:
The execution sales of properties (both corporate and personal) are annulled.
The Register of Deeds must cancel all certificates of title issued to the buyers (e.g., Unimega Group, Spouses Chua) and reinstate the previous titles.
All levied personal and conjugal properties of the individual officers must be returned.
The Sheriff must return the ₱28.5 million paid by Peña from the execution sales to the buyers. Peña must then return this amount to the Sheriff, who will deliver it to Urban Bank.
* Urban Bank must pay Peña the final award of ₱3,000,000, with legal interest from the finality of judgment until full payment.
* The supersedeas bonds filed by Urban Bank and the officers are released and cancelled.
The Supreme Court emphasized the need to correct the injustices from the disproportionate execution and the erroneous imposition of personal liability, restoring the parties to their rightful positions under law and equity.