METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS. QUILTS & ALL, INC., RESPONDENT.

The petition for review before us was filed under Rule 45 of the Revised
Rules of Court and seeks to set aside the decision of the Court of Appeals in
CA-G.R. SP No. 18666 (Annex “L”, pp. 98-104, Rollo) dated November
27, 1989, which disposed:

WHEREFORE, judgment is hereby rendered giving due course to the
petition and declaring that the Honorable respondent court is without
jurisdiction to pass upon the issue against defendants Senen B. Dizon and
Relita P. de los Santos anent the authority of Senen B. Dizon to enter into the
mortgage contract as this falls within the original and exclusive jurisdiction
of the Securities and Exchange Commission, and ordering the suspension of
further proceedings in Civil Case No. 5570 until said issue shall have been
resolved by the Securities and Exchange Commission. Without pronouncement as to costs. (p. 103, Rollo)

On April 7, 1987, Relita P. de los Santos (de los Santos) then
Corporate Secretary issued a Secretary’s Certificate (Annex “A”, p.
31, Rollo) which certified that in a special meeting of the Board of Directors
of Quilts and All, Inc. (Quilts) its President, Mr. Senen B. Dizon (Dizon) was
authorized and empowered to mortgage in favor of Metrobank, a property
belonging to Quilts.

On the basis of this Secretary’s Certificate, Metrobank
restructured Dizon’s existing personal loan in the amount of P700,000.00
(Comment, p. 121, Rollo), secured by his house and lot at Angeles City and the
property owned by Quilts covered by Transfer Certificate of Title No. 74172
(Annex “B”, p. 32, Rollo). Aside from the mortgage lien, the Secretary’s Certificate was likewise
annotated on TCT No. 74172 on April 10, 1977.

On July 7, 1988, more than a year later, Metrobank received a
letter from Atty. Cesar Villanueva, Quilt’s counsel (Annex “D”, p.
35, Rollo) offering the amount of P200,000.00 for the cancellation of the
mortgage on the property owned by Quilts because, allegedly, “Mr. &
Mrs. Senen Dizon had left the Philippines, leaving several creditors.”
Metrobank refused the offer since the amount offered did not approximate the
appraised value of the mortgage property. (Petition, p.10, Rollo)

On October 4, 1988, Atty. Ranel L. Trinidad, Quilt’s new counsel
wrote Metrobank. (Annex “C”,
p. 33, Rollo), reiterating the mortgage cancellation. In addition, counsel claimed that the alleged April 7, 1987
special meeting could not have taken place for lack of the requisite number of
directors present to constitute a quorum since the Chairman and 2 other members
of the Board of Directors were abroad on that date.

On October 20, 1988, Quilts filed a complaint against Metrobank,
Dizon and de los Santos for annulment and cancellation of mortgage (CC 5570,
RTC?Br. 58, Angeles City) (Annex “E”, p. 37, Rollo). On December 12, 1988, Metrobank moved to
dismiss the complaint based on 1) lack of jurisdiction and 2) failure to state
a cause of action. Judge Reynaldo B.
Daway, granted the motion on February 9, 1989. (Annex “G”, p. 51, Rollo).

However, on August 4, 1989, upon Quilt’s motion, Judge Daway
issued an Order (Annex “J”, p. 73, Rollo) reconsidering and setting
aside the dismissal order because the grounds relied upon by Metrobank
“did not appear to be indubitable”, and deferred the determination of
the motion until the trial.

Metrobank filed an original petition for certiorari,
prohibition or mandamus, contesting the reinstatement of the complaint
and in the process reiterating as grounds lack of jurisdiction on the part of
the trial court and failure of Quilt’s complaint to state a cause of
action. The Court of Appeals upheld the
jurisdiction of the lower Court only with respect to Metrobank. It dismissed the case against Dizon and de
los Santos, since the issue of whether or not these two persons had committed ultra
vires acts is an intra-corporate matter which falls within the original
and exclusive jurisdiction of the Securities and Exchange Commission (SEC)
pursuant to Section 5 of Presidential Decree 902-A, as amended. Pending the outcome of the case that would
be filed in the SEC, however, the Court of Appeals directed the suspension of
the proceedings against Metrobank. The
appellate court also stated that paragraph 10 of Quilt’s complaint was
sufficient basis for Quilt’s case against Metrobank.

Hence, the instant petition in which the central and key issue is
whether or not Quilt’s complaint sufficiently states a cause of action against
Metrobank.

Pertinent allegations of Quilt’s complaint are quoted below:

4. That sometime on 7 April
1987, defendant Relita P. Delos Santos issued and signed a secretary’s
certificate certifying that she was the incumbent corporate secretary of
plaintiff corporation and that a special meeting of the Board of Directors
thereof was held on the same date at its principal office and that a resolution
was passed and approved authorizing and empowering Senen B. Dizon, the then
president of plaintiff corporation as the latter’s attorney-in-fact, to
mortgage in favor of defendant Metropolitan Bank & Trust Company-Dau Branch
the plaintiff corporation’s real property located at the Riverside Subd.,
Angeles City, covered by Transfer Certificate of Title No. 74172, Registry of
Deeds of Angeles City, containing an area of 823 square meters, as security for
the loan of SEVEN HUNDRED THOUSAND (P700,000.00) Philippine Pesos obtained by
Mr. Senen B. Dizon in his personal capacity from the said bank, with full power
and authority for Mr. Senen B. Dizon to sign, execute, acknowledge and deliver,
for and in behalf of the plaintiff corporation relating to the said loan. A machine copy of the said secretary’s
certificate is hereto attached as Annex “B” hereof;

5. That verifications made
later by the stockholders and some members of the Board of Directors of the
plaintiff corporation with the Registry of Deeds of Angeles City revealed that
the parcel of land owned by the plaintiff corporation covered by TCT No. 74172
was mortgaged in favor of the defendant Metropolitan Bank & Trust Company
to guaranty the personal obligation of defendant Senen B. Dizon in the
principal amount of P700,000.00 (see Annex “A-2” hereof);

6. That on 7 April 1987,
plaintiff corporation had for its Board of Directors five (5) members
namely: Romeo V. Rosas, Arcadio R.
Sarmiento, Jr., Romeo N. Pangilinan, Senen B. Dizon, and Relita P. Delos
Santos, and for a quorum to be had, for purposes of holding a valid meeting of
the Board of Directors, at least three (3) members thereof should be present
thereat;

7. That on 7 April 1987,
Mr. Romeo V. Rosas was in the United States of America while Mr. Arcadio R.
Sarmiento, Jr. was then in New Zealand. Mr. Romeo N. Pangilinan, although in the country on the said date, was
never informed and never attended a meeting of the plaintiff corporation’s
Board of Directors. With the absence of
three (3) of plaintiff corporation’s five (5) member Board of Directors, no
valid meeting could have been held;

8. That a perusal of the
Amended Articles of Incorporation of the plaintiff corporation, particularly
under the primary and secondary purposes for which it was created, will reveal
that the corporation can not hypothecate any of its properties to secure the
personal obligations of any of its shareholders, directors or officers. A machine copy of the plaintiff
corporation’s Amended Articles of Incorporation is hereto attached as Annexes
“C” to “C-8” for pages 1 to 9, respectively, hereof;

9. That a letter demanding
for the immediate cancellation of the real estate mortgage constituted upon TCT
No. 74172 in favor of defendant Metropolitan Bank & Trust Company have been
sent to the latter through its Dau Branch Manager and Legal Department but the
said bank failed and refused to comply with the valid demand of the plaintiff
corporation. A copy of the said letter
is hereto attached as Annexes “D” and “D-1” for pages 1 and
2, respectively, hereof;

10. That plaintiff
corporation suffered and continue to suffer actual damages as a result of the
illegal acts of defendants for which the former should be compensated in an
amount to be proved during the trial of the instant cases. (pp. 38-40 Rollo)

An examination of the complaint shows that the allegations
therein pertain mostly to the alleged ultra vires acts of Dizon
and de los Santos. Paragraph 10 of the
complaint, upon which both the trial court and the Court of Appeals premised a
case against Metrobank, merely expresses legal conclusions, and is not an
averment or allegation of ultimate facts. In the case of Alzua and Armalot vs. Johnson,
(21 Phil. 308 [1912]), we stated:

. . . neither legal conclusions, nor conclusions or inferences of
facts from facts not stated, nor incorrect inferences or conclusions from facts
stated, being admitted by a demurrer to a complaint, conclusions of this nature
in no wise aid the pleading. The
ultimate facts upon which such conclusions rest must be alleged, though merely
probative or evidential facts may be and should be omitted. (at p. 381.)

We agree with Metrobank that the complaint does not contain
allegations that Metrobank had prior knowledge of, or could have known with the
exercise of due diligence, that the recitals in the Secretary’s Certificate
were false. The complaint does not even
allege specific overt acts which show that Metrobank acted in conspiracy with
its co-defendants to defraud Quilts. In
the case of Bacolod-Murcia Milling Co., Inc. vs.
First Farmers Milling Co., Inc. [103 SCRA
436 (1981)] we stated:

. . . Granting, for the sake of argument, that, indeed, assistance
in the ‘illegal’ act was rendered, the same, however, is not supported by
well-pleaded averments of facts. Nowhere is it alleged that defendants-appellees had notice, information
or knowledge of any flaw, much less any illegality, in their co?defendants’
actuations, assuming that there was such a flaw or illegality. This absence is fatal and buoys up instead
the PNB-NIDC’s position of lack of cause of action… (at pp. 441-442.)

Although it is averred that the defendants’ acts were done in bad
faith, the Complaint does not contain any averment of facts showing that the
acts were done in the manner alleged. Such a bare statement neither establishes any right or cause of action
on the part of the plaintiff?appellant. It is a mere conclusion of law not sustained by declarations of facts,
much less admitted by defendants-appellees. It does not, therefore, aid in any wise the complaint in setting forth a
cause of action … (pp. 441-442.)

On the other hand, Metrobank cannot be faulted for relying on the
Secretary’s Certificate. It did so in
good faith, unaware of any flaw and on the presumption that the ordinary course
of business had been followed (Sec. 5-q, Rule 131, Revised Rules of Court) and
that the Corporate Secretary had regularly performed her duties.

WHEREFORE, premises considered, the herein petition is
GRANTED. The Resolution of the Court of
Appeals in CA-G.R. SP No. 18666, dated November 27, 1989 is MODIFIED in that the
Civil Case No. 5570 against Metrobank is hereby DISMISSED.

No special pronouncement is made as to costs.

SO ORDERED.

Feliciano, (Chairman), J., joins
Davide,
Jr., J., in his dissenting opinion.

Bidin and Romero, JJ., concur.

Davide, Jr. J., please see separate
opinion.