SUPREME COURT

FIRST DIVISION
MIGUELA R. VILLANUEVA, RICHARD R.
VILLANUEVA, and MERCEDITA
VILLANUEVA-TIRADOS,
Petitioners,
-versus- G.R. No. 114870
May 26, 1995
COURT OF APPEALS, CENTRAL BANK OF
THE PHILIPPINES, ILDEFONSO C. ONG,
and PHILIPPINE VETERANS BANK,
Respondents.
x---------------------------------------------------x
DECISION
DAVIDE, JR., J.:
Do petitioners have a better right than private respondent
Ildefonso Ong to purchase from the Philippine Veterans Bank
(PVB) the two
parcels of land described as Lot No. 210-D-1 and Lot No. 210-D-2
situated at Muntinglupa, Metro Manila, containing an area of 529
and 300 square meters, respectively? This is the principal legal
issue raised in this petition. chanroblespublishingcompany

In its Decision of 27 January 1994 in CA-G.R. CV No. 35890,[1] the

Court of Appeals held for Ong, while the trial court, Branch 39 of
the Regional Trial Court (RTC) of Manila, ruled for the petitioners
in its joint decision of 31 October 1991 in Civil Case No. 87-
42550[2] and Sp. Proc. No. 85-32311.[3]
The operative antecedent facts are set forth in the challenged
decision as follows:chanroblespublishingcompany

The disputed lots were originally owned by the spouses Celestino

Villanueva and Miguela Villanueva, acquired by the latter during
her husband’s sojourn in the United States since 1968. Sometime
in 1975, Miguela Villanueva sought the help of one Jose Viudez,
the then Officer-in-Charge of the PVB branch in Makati if she could
obtain a loan from said bank. Jose Viudez told Miguela Villanueva
to surrender the titles of said lots as collaterals. And to further
facilitate a bigger loan, Viudez, in connivance with one Andres
Sebastian, swayed Miguela Villanueva to execute a deed of sale
covering the two (2) disputed lots, which she did but without the
signature of her husband Celestino. Miguela Villanueva, however,
never got the loan she was expecting. Subsequent attempts to
contact Jose Viudez proved futile, until Miguela Villanueva
thereafter found out that new titles over the two (2) lots were
already issued in the name of the PVB. It appeared upon inquiry
from the Registry of Deeds that the original titles of these lots
were canceled and new ones were issued to Jose Viudez, which in
turn were again canceled and new titles issued in favor of Andres
Sebastian, until finally new titles were issued in the name of PNB
[should be PVB] after the lots were foreclosed for failure to pay
the loan granted in the name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from the PVB
after being informed that the lots were about to be sold at
auction. The PVB told her that she can redeem the lots for the
price of P110,416.00. Negotiations for the repurchase of the lots
nevertheless
were stalled by the filing of liquidation proceedings against the
PVB on August of 1985. chanroblespublishingcompany

Plaintiff-appellant [Ong] on the other hand expounds on his claim

over the disputed lots in this manner:
“In October 1984, plaintiff-appellant offered to purchase two
pieces of land that had been acquired by PVB through
foreclosure. To back-up plaintiff-appellant’s offer he
deposited the sum of P10,000.00.
In 23 November 1984, while appellant was still abroad, PVB
approved his subject offer under Board Resolution No.
10901-84. Among the conditions imposed by PVB is that:
‘The purchase price shall be P110,000.00 (less deposit of
P10,000.00) payable in cash within fifteen (15) days from
receipt of approval of the offer.’
In mid-April 1985, appellant returned to the country. He
immediately verified the status of his offer with the PVB, now
under the control of CB, where he was informed that the
same had already been approved. On 16 April 1985,
appellant formally informed CB of his desire to pay the
subject balance provided the bank should execute in his
favor the corresponding deed of conveyance. The letter was
not answered.
Plaintiff-appellant sent follow-up letters that went unheeded,
the last of which was on 21 May 1987. On 26 May 1987,
appellant’s payment for the balance of the subject properties
were accepted by CB under Official Receipt #0816. chanroblespublishingcompany

On 17 September 1987, plaintiff-appellant through his

counsel, sent a letter to CB demanding for the latter to
execute the corresponding deed of conveyance in favor of
appellant. CB did not bother to answer the same. Hence, the
instant case.
While appellant’s action for specific performance against CB
was pending, Miguela Villanueva and her children filed their
claims with the liquidation court.” (Appellant’s Brief, pp. 3-4).
[4]
From the pleadings, the following additional or amplificatory facts
are established:
The efforts of Miguela Villanueva to reacquire the property
began on 8 June 1983 when she offered to purchase the lots
for P60,000.00 with a 20% downpayment and the balance
payable in five years on a quarterly amortization basis.[5]
Her offer not having been accepted,[6] Miguela Villanueva
increased her bid to P70,000.00. It was only at this time that she
disclosed to the bank her private transactions with Jose Viudez.[7]
After this and her subsequent offers were rejected,[8] Miguela sent
her sealed bid of P110,417.00 pursuant to the written advice of
the vice president of the PVB.[9]
The PVB was placed under receivership pursuant to Monetary
Board (MB) Resolution No. 334 dated 3 April 1985 and later, under
liquidation pursuant to MB Resolution No. 612 dated 7 June 1985.
Afterwards, a petition for liquidation was filed with the RTC of
Manila, which was docketed as Sp. Proc. No. 85-32311 and
assigned to Branch 39 of the said court. chanroblespublishingcompany

On 26 May 1987, Ong tendered the sum of P100,000.00

representing the balance of the purchase price of the litigated
lots.[10] An employee of the PVB received the amount conditioned
upon approval by the Central Bank liquidator.[11] Ong’s demand
for a deed of conveyance having gone unheeded, he filed on 23
October 1987 with the RTC of Manila an action for specific
performance against the Central Bank.[12] It was raffled to Branch
47 thereof. Upon learning that the PVB had been placed under
liquidation, the presiding judge of Branch 47 ordered the transfer
of the case to Branch 39, the liquidation court.[13]
On 15 June 1989, then Presiding Judge Enrique B. Inting issued an
order allowing the purchase of the two lots at the price of
P150,000.00.[14] The Central Bank liquidator of the PVB moved for
the reconsideration of the order asserting that it is contrary to law
as the disposal of the lots should be made through public auction.
[15] chanroblespublishingcompany
On 26 July 1989, Miguela Villanueva filed her claim with the
liquidation court. She averred, among others, that she is the
lawful and registered owner of the subject lots which were
mortgaged in favor of the PVB thru the falsification committed by
Jose Viudez, the manager of the PVB Makati Branch, in collusion
with Andres Sebastian; that upon discovering this fraudulent
transaction, she offered to purchase the property from the bank;
and that she reported the matter to the PC/INP Criminal
Investigation Service Command, Camp Crame, and after
investigation, the CIS officer recommended the filing of a
complaint for estafa through falsification of public documents
against Jose Viudez and Andres Sebastian. She then asked that
the lots be excluded from the assets of the PVB and be conveyed
back to her.[16] Later, in view of the death of her husband, she
amended her claim to include her children, herein petitioners
Mercedita Villanueva-Tirados and Richard Villanueva.[17]
On 31 October 1991, the trial court rendered judgment[18] holding
that while the board resolution approving Ong’s offer may have
created in his favor a vested right which may be enforced against
the PVB at the time or against the liquidator after the bank was
placed under liquidation proceedings, the said right was no longer
enforceable, as he failed to exercise it within the prescribed 15-
day period. As to Miguela’s claim, the court ruled that the
principle of estoppel bars from questioning the transaction with
Viudez and the subsequent transactions because she was a co-
participant thereto, though only with respect to her undivided
one-half (½) conjugal share in the disputed lots and her one-third
(1/3) hereditary share in the estate of her husband.
Nevertheless, the trial court allowed her to purchase the lots if
only to restore their status as conjugal properties. It further held
that by reason of estoppel, the transactions having been
perpetrated by a responsible officer of the PVB, and for reasons of
equity, the PVB should not be allowed to charge interest on the
price of the lots; hence, the purchase price should be the PVB’s
claim as of 29 August 1984 when it considered the sealed bids,
i.e., P110,416.20, which should be borne by Miguela Villanueva
alone.chanroblespublishingcompany

The dispositive portion of the decision of the trial court reads as

follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June
15, 1989 under the caption Civil Case No. 87-42550
entitled “Ildefonso Ong vs. Central Bank of the Phils.,
et al.;
2. Dismissing the claim of Ildefonso Ong over the two
parcels of land originally covered by TCT No. 438073
and 366364 in the names of Miguela Villanueva and
Celestino Villanueva, respectively which are now
covered by TCT No. 115631 and 115632 in the name
of the PVB;
3. Declaring the Deed of Absolute Sale bearing the
signature of Miguela Villanueva and the falsified
signature of Celestino [sic] Viudez under date May 6,
1975 and all transactions and related documents
executed thereafter referring to the two lots covered
by the above stated titles as null and void;
4. Ordering the Register of Deeds of Makati which has
jurisdiction over the two parcels of land in question
to re-instate in his land records, TCT No. 438073 in
the name of Miguela Villanueva and TCT No. 366364
in the name of Celestino Villanueva who were the
registered owners thereof, and to cancel all
subsequent titles emanating therefrom; and
5. Ordering the Liquidator to reconvey the two lots
described in TCT No. 115631 and 115632 and
executing the corresponding deed of conveyance of
the said lots upon the payment of One Hundred Ten
Thousand Four Hundred Sixteen and 20/100
(P110,416.20) Pesos without interest and less the
amount deposited by the claimant, Miguela
Villanueva in connection with the bidding where she
had participated and conducted by the PVB on
August 29, 1984. chanroblespublishingcompany
 Cost against Ildefonso Ong and the PVB.
SO ORDERED.[19]
Only Ong appealed the Decision to the Court of Appeals. The
appeal was docketed as CA-G.R. CV No. 35890. In its decision of
27 January 1994, the Court of Appeals reversed the decision of
the trial court and ruled as follows:
WHEREFORE, premises considered, the assailed decision is
hereby REVERSED and SET ASIDE, and a new one entered
ordering the disputed lots be awarded in favor of plaintiff-
appellant Ildefonso Ong upon defendant-appellee Central
Bank’s execution of the corresponding deed of sale in his
favor.[20]
chanroblespublishingcompany

In support thereof, the Court of Appeals declared that Ong’s

failure to pay the balance within the prescribed period was
excusable because the PVB neither notified him of the approval of
his bid nor answered his letters manifesting his readiness to pay
the balance, for which reason he could not have known when to
reckon the 15-day period prescribed under its resolution. It went
further to suggest that the Central Bank was in estoppel because
it accepted Ong’s late payment of the balance. As to the
petitioners’ claim, the Court of Appeals stated:
The conclusion reached by the lower court favorable to
Miguela Villanueva is, as aptly pointed out by plaintiff-
appellant, indeed confusing. While the lower court’s decision
declared Miguela Villanueva as estopped from recovering
her proportionate share and interest in the two (2) disputed
lots for being a “co-participant” in the fraudulent scheme
perpetrated by Jose Viudez and Andres Sebastian — a factual
finding which We conform to and which Miguela Villanueva
does not controvert in this appeal by not filing her appellee’s
brief, yet it ordered the reconveyance of the disputed lots to
Miguela Villanueva as the victorious party upon her payment
of P110,416.20. Would not estoppel defeat the claim of the
party estopped? If so, which in fact must be so, would it not
then be absurd or even defiant for the lower court to finally
entitle Miguela Villanueva to the
 disputed lots after having been precluded from assailing
their subsequent conveyance in favor of Jose Viudez by
reason of her own negligence and/or complicity therein? The
intended punitive effect of estoppel would merely be a dud if
this Court leaves the lower court’s conclusion unrectified.[21]
chanroblespublishingcompany

Their Motion for Reconsideration[22] having been denied,[23] the

petitioners filed this petition for review on certiorari.[24]
Subsequently, the respondent Central Bank apprised this Court
that the PVB was no longer under receivership or liquidation and
that the PVB has been back in operation since 3 August 1992. It
then prayed that it be dropped from this case or at least be
substituted by the PVB, which is the real party in interest.[25]
In its Manifestation and Entry of Appearance, the PVB declared
that it submits to the jurisdiction of this Court and that it has no
objection to its inclusion as a party respondent in this case in lieu
of the Central Bank.[26] The petitioners did not object to the
substitution.[27]
Later, in its Comment dated 10 October 1994, the PVB stated that
it “submits to and shall abide by whatever judgment this
Honorable Supreme Tribunal may announce as to whom said
lands may be awarded without any touch of preference in favor of
one or the other party litigant in the instant case.”[28]
In support of their contention that the Court of Appeals gravely
erred in holding that Ong is better entitled to purchase the
disputed lots, the petitioners maintain that Ong is a disqualified
bidder, his bid of P110,000.00 being lower than the starting price
of P110,417.00 and his deposit of P10,000.00 being less than the
required 10% of the bid price; that Ong failed to pay the balance
of the price within the 15-day period from notice of the approval
of his bid; and that his offer of payment is ineffective since it was
conditioned on PVB’s execution of the deed of absolute sale in his
favor.
On the other hand, Ong submits that his offer, though lower than
Miguela Villanueva’s bid by P417.00, is much better, as the same
is payable in cash, while Villanueva’s bid is payable in installment;
that his payment could not be said to have been made after the
expiration
of the 15-day period because this period has not even started to
run, there being no notice yet of the approval of his offer; and
that he has a legal right to compel the PVB or its liquidator to
execute the corresponding deed of conveyance. chanroblespublishingcompany

There is no doubt that the approval of Ong’s offer constitutes an

acceptance, the effect of which is to perfect the contract of sale
upon notice thereof to Ong.[29] The peculiar circumstances in this
case, however, pose a legal obstacle to his claim of a better right
and deny support to the conclusion of the Court of Appeals.
Ong did not receive any notice of the approval of his offer. It was
only sometime in mid-April 1985 when he returned from the
United States and inquired about the status of his bid that he
came to know of the approval.
It must be recalled that the PVB was placed under receivership
pursuant to the MB Resolution of 3 April 1985 after a finding that
it was insolvent, illiquid, and could not operate profitably, and that
its continuance in business would involve probable loss to its
depositors and creditors. The PVB was then prohibited from doing
business in the Philippines, and the receiver appointed was
directed to “immediately take charge of its assets and liabilities,
as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors, exercising all
the powers necessary for these purposes.”
Under Article 1323 of the Civil Code, an offer becomes ineffective
upon the death, civil interdiction, insanity, or insolvency of either
party before acceptance is conveyed. The reason for this is that:
The contract is not perfected except by the concurrence of
two wills which exist and continue until the moment that
they occur. The contract is not yet perfected at any time
before acceptance is conveyed; hence, the disappearance of
either party or his loss of capacity before perfection prevents
the contractual tie from being formed.[30]
It has been said that where upon the insolvency of a bank a
receiver therefor is appointed, the assets of the bank pass beyond
its control
into the possession and control of the receiver whose duty it is to
administer to assets for the benefit of the creditors of the bank.[31]
Thus, the appointment of a receiver operates to suspend the
authority of the bank and of its directors and officers over its
property and effects, such authority being reposed in the
receiver, and in this respect, the receivership is equivalent to an
injunction to restrain the bank officers from intermeddling with
the property of the bank in any way.[32] chanroblespublishingcompany

Section 29 of the Central Bank Act, as amended, provides thus:

SEC. 29. Proceedings upon insolvency. — Whenever, upon
examination by the head of the appropriate supervising or
examining department or his examiners or agents into the
condition of any bank or non-bank financial intermediary
performing quasi-banking functions, it shall be disclosed that
the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department
head concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the
statements of the department head to be true, forbid the
institution to do business in the Philippines and designate an
official of the Central Bank or a person of recognized
competence in banking or finance as receiver to immediately
take charge of its assets and liabilities, as expeditiously as
possible collect and gather all the assets and administer the
same for the benefit of its creditors exercising all the powers
necessary for these purposes.
xxx
The assets of an institution under receivership or liquidation
shall be deemed in custodia legis in the hands of the
receiver or liquidator and shall, from the moment of such
receivership or liquidation, be exempt from any order or
garnishment, levy, attachment, or execution.
In a nutshell, the insolvency of a bank and the consequent
appointment of a receiver restrict the bank’s capacity to act,
especially in relation to its property. Applying Article 1323 of the
Civil Code,
Ong’s offer to purchase the subject lots became ineffective
because the PVB became insolvent before the bank’s acceptance
of the offer came to his knowledge. Hence, the purported contract
of sale between them did not reach the stage of perfection.
Corollarily, he cannot invoke the resolution of the bank approving
his bid as basis for his alleged right to buy the disputed
properties.chanroblespublishingcompany

Nor may the acceptance by an employee of the PVB of Ong’s

payment of P100,000.00 benefit him since the receipt of the
payment was made subject to the approval by the Central Bank
liquidator of the PVB thus:
Payment for the purchase of the former property of Andres
Sebastian per approved BR No. 10902-84 dated 11/13/84,
subject to the approval of CB liquidator.[33] chanroblespublishingcompany

This payment was disapproved on the ground that the subject

property was already in custodia legis, and hence, disposable only
by public auction and subject to the approval of the liquidation
court.[34]
The Court of Appeals therefore erred when it held that Ong had a
better right than the petitioners to the purchase of the disputed
lots.
Considering then that only Ong appealed the decision of the trial
court, the PVB and the Central Bank, as well as the petitioners,
are deemed to have fully and unqualifiedly accepted the
judgment, which thus became final as to them for their failure to
appeal.
WHEREFORE, the instant Petition is GRANTED and the
challenged Decision of the Court of Appeals of 27 January 1994 in
CA-G.R. CV No. 35890 is hereby SET ASIDE. The Decision of
Branch 39 of the Regional Trial Court of Manila of 31 October
1991 in Civil Case No. 87-42550 and Sp. Proc. No. 85-32311 is
hereby REINSTATED.
Respondent Philippine Veterans Bank is further directed to return
to private respondent Ildefonso C. Ong the amount of
P100,000.00. chanroblespublishingcompany

No pronouncement as to costs. chanroblespublishingcompany

SO ORDERED. chanroblespublishingcompany

Padilla, Bellosillo, and Kapunan, JJ., concur. chanroblespublishingcompany

Quiason, J., is on leave.

chanroblespublishingcompany
chanroblespublishingcompany

[1] Annex “A” of Petition; Rollo, 33-38. Per Francisco, R., J., with the concurrence
of Guingona, S., and Verzola, E., JJ. chanroblespublishingcompany

[2] Entitled, “Ildefonso C. Ong vs. Central Bank of the Philippines, et al.”
[3] Entitled, “In the Matter of the Petition for Liquidation of the Philippine
Veterans Bank, Central Bank of the Philippines, Petitioner; Miguela
Villanueva, et al., Claimants.” Annex “D” of Petition; Rollo, 63-71. Per Judge
Benjamin A.G. Vega.
[4] Rollo, 34-36. chanroblespublishingcompany

[5] Exhibit “J,” Annex “N” of Petition; Id.; 91.

[6] Exhibit “K,” Annex “O,” Id.; Id., 92.
[7] Exhibit “N,” Annex “R,” Id.; Id., 94.
[8] Exhibits “O” & “Q,” Annexes “S” & “U” of Petition; Rollo, 95, 97.
[9] Exhibit “Q.” chanroblespublishingcompany

[10] Original Records (OR), Civil Case No. 87-42550, 8.

[11] Id. chanroblespublishingcompany

[12] Id., 1.
[13] Id., 32-33.
[14] Id., 117.
[15] OR, 119.
[16] Annex “W” of Petition; Rollo, 100-103.
[17] OR, 20. chanroblespublishingcompany

[18] Id., 241 et seq.; Annex “D” of Petition; Rollo, 63-71. Per Judge Benjamin
A.G. Vega. chanroblespublishingcompany

[19] Decision of the trial court, 9; Rollo, 71.

[20] Rollo, 38. chanroblespublishingcompany

[21] Rollo, 36. chanroblespublishingcompany

[22] Annex “B” of Petition; Id., 39 et seq.

[23] Annex “C,” Id.; Id., 61-62.
[24] Id., 7 et seq. chanroblespublishingcompany

[25] Rollo, 106-107, 129-130.

[26] Id., 136-137. chanroblespublishingcompany

[27] Id. 131 et seq. chanroblespublishingcompany

[28] Id. 149. chanroblespublishingcompany

[29] Article 1475, Civil Code. Valencia vs. RFC, 103 Phil. 444 [1958]; Central
Bank of the Philippines vs. Court of Appeals, 63 SCRA 431 [1975]. chanroblespublishingcompany

[30] ARTURO M. TOLENTINO, Civil Code of the Philippines, vol. IV, 463 [1985
ed.], citing 2-I Ruggiero 283 and 5 Salvat 34-35.
[31] 10 Am Jur 2d Banks, § 764 [1963]. chanroblespublishingcompany

[32] 65 Am Jur 2d Receivers, § 146 [1963]. chanroblespublishingcompany

[33] OR, 8.chanroblespublishingcompany

[34] Memorandum of the Central Bank, 3; Id., 130. chanroblespublishingcompany