People's Aircargo vs CA

People's Aircargo and Warehousing Co. Inc. vs. Court of Appeals [GR 117847, 7 October 1998] Facts: People's Aircargo and Warehousing Co. Inc. (PAWCI) is a domestic corporation, which was organized in the middle of 1986 to operate a customs bonded warehouse at the old Manila International Airport in Pasay City. To obtain a license for the corporation from the Bureau of Customs, Antonio Punsalan Jr., the corporation president, solicited a proposal from Stefani Saño for the preparation of a feasibility study. Saño submitted a letter-proposal dated 17 October 1986 ("First Contract") to Punsalan, for the project feasibility study (market, technical, and financial feasibility) and preparation of pertinent documentation requirements for the application, worth P350,000. Initially, Cheng Yong, the majority stockholder of PAWCI, objected to Saño's offer, as another company priced a similar proposal at only P15,000. However, Punsalan preferred Saño's services because of the latter's membership in the task force, which was supervising the transition of the Bureau of Customs from the Marcos government to the Aquino Administration. On 17 October 1986, PAWCI, through Punsalan, sent Saño a letter confirming their agreement. Accordingly, Saño prepared a feasibility study for PAWCI which eventually paid him the balance of the contract price, although not according to the schedule agreed upon. On 4 December 1986, upon Punsalan's request, Saño sent PAWCI another letter-proposal ("Second Contract") formalizing its proposal for consultancy services in the amount of P400,000. On 10 January 1987, Andy Villaceren, vice president of PAWCI, received the operations manual prepared by Saño. PAWCI submitted said operations manual to the Bureau of Customs in connection with the former's application to operate a bonded warehouse; thereafter, in May 1987, the Bureau issued to it a license to operate, enabling it to become one of the three public customs bonded warehouses at the international airport. Saño also conducted, in the third week of January 1987 in the warehouse of PAWCI, a three-day training seminar for the latter's employees. On 25 March 1987, Saño joined the Bureau of Customs as special assistant to then Commissioner Alex Padilla, a position he held until he became technical assistant to then Commissioner Miriam Defensor-Santiago on 7 March 1988. Meanwhile, Punsalan sold his shares in PAWCI and resigned as its president in 1987. On 9 February 1988, Saño filed a collection suit against PAWCI. He alleged that he had prepared an operations manual for PAWCI, conducted a seminar-workshop for its employees and delivered to it a computer program; but that, despite demand, PAWCI refused to pay him for his services. PAWCI, in its answer, denied that Saño had prepared an operations manual and a computer program or conducted a seminarworkshop for its employees. It further alleged that the letter-agreement was signed by Punsalan without authority, in collusion with Saño in order to unlawfully get some money from PAWCI, and despite his knowledge that a group of employees of the company had been commissioned by the board of directors to prepare an

operations manual. The Regional Trial Court (RTC) of Pasay City, Branch 110, rendered a Decision dated 26 October 1990 declared the Second Contract unenforceable or simulated. However, since Saño had actually prepared the operations manual and conducted a training seminar for PAWCI and its employees, the trial court awarded P60,000 to the former, on the ground that no one should be unjustly enriched at the expense of another (Article 2142, Civil Code). The trial Court determined the amount "in light of the evidence presented by defendant on the usual charges made by a leading consultancy firm on similar services." Upon appeal, and on 28 February 1994, the appellate court modified the decision of the trial court, and declared the Second Contract valid and binding on PAWCI, which was held liable to Saño in the full amount of P400,000, representing payment of Saño services in preparing the manual of operations and in the conduct of a seminar for PAWCI. As no new ground was raised by PAWCI, reconsideration of the decision was denied in the Resolution promulgated on 28 October 1994. PAWCI filed the Petition for Review. Issue:

Whether a single instance where the corporation had previously allowed its president to enter into a contract with another without a board resolution expressly authorizing him, has clothed its president with apparent authority to execute the subject contract.

Held: Apparent authority is derived not merely from practice. Its existence 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, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer with the power to bind the corporation. Herein, PAWCI, through its president Antonio Punsalan Jr., entered into the First Contract without first securing board approval. Despite such lack of board approval, PAWCI did not object to or repudiate said contract, thus "clothing" its president with the power to bind the corporation. The grant of apparent authority to Punsalan is evident in the testimony of Yong — senior vice president, treasurer and major stockholder of PAWCI. The First Contract was consummated, implemented and paid without a hitch. Hence, Sano should not be faulted for believing that Punsalan's conformity to the contract in dispute was also binding on petitioner. It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority.

Furthermore, Saño prepared an operations manual and conducted a seminar for the employees of PAWCI in accordance with their contract. PAWCI accepted the operations manual, submitted it to the Bureau of Customs and allowed the seminar for its employees. As a result of its aforementioned actions, PAWCI was given by the Bureau of Customs a license to operate a bonded warehouse. Granting arguendo then that the Second Contract was outside the usual powers of the president, PAWCI's ratification of said contract and acceptance of benefits have made it binding, nonetheless.

prepared such manual operations and at the same time alleged that the letter-agreement was signed by Punsalan without authority and as such unenforceable. It alleges that the disputed contract was not authorized by its board of directors.

The enforceability of contracts under Article 1403(2) is ratified "by the acceptance of benefits under them" under Article 1405.

Facts:

Yes, the Second Contract is binding and enforceable. The general rule is that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. A corporation is a juridical person, separate and distinct from its stockholders and members having xxx powers, attributes and properties expressly authorized by law or incident to its existence. Being a juridical entity, a corporation may act through its board of directors, which exercises almost all corporate powers, lays down all corporate business policies and is responsible for the efficiency of management, as provided in Section 23 of the Corporation Code.

Petitioner is a domestic corporation organized in 1986 to operate a customs bonded warehouse at the old Manila International Airport (MIA). To obtain a license from the Bureau of Customs, Antonio Punsalan, Jr., the corporation president, solicited a proposal from private respondent Stefani Sano for the preparation of a feasibility study. Sano submitted a letter proposal dated October 17, 1986 (First Contract) to Punsalan regarding his request for professional engineering consultancy services which services are offered in the amount of P350,000.00.

However, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.

People's Aircargo and Warehousing Co. Inc. vs. Court of Appeals [GR 117847, 7 October 1998]

Initially, Cheng Yang, the majority stockholder of petitioner, objected to said offer as another company can provide for the same service at a lower price. However, Punsalan preferred Sano’s services because of latter’s membership in the task force, which task force was supervising the transition of the Bureau from the Marcos to the Aquino government. Petitioner, through Punsalan, thereafter confirmed the contract. On December 4, 1986, upon Punsalan’s request, private respondent sent petitioner another letter-proposal (Second Contract) which offers the same service already at P400,000.00 instead of the previous P350,000.00 offer. On January 10, 1987, Andy Villaceren, vice-president of petitioner, received the operations manual prepared by Sano and which manual operations was submitted by petitioner to the Bureau in compliance for its application to operate a bonded warehouse. Thereafter, in May 1987, the Bureau issued to it a license to operate. Private respondent also conducted in the third week of January 1987 in the warehouse of petitioner, a three-day training seminar for the petitioner’s employees. On February 9, 1988, private respondent filed a collection suit against petitioner. He alleged that he had prepared an operations manual for petitioner, conducted a seminar-workshop for its employees and delivered to it a computer program but that despite demand, petitioner refused to pay him for his services. Petitioner, on its part, denied that Sano had

Issue:

Whether or not the Second Contract signed by Punsalan is enforceable and binding against petitioner.

Held:

Thus private respondent shall not be faulted for believing that Punsalan’s conformity to the contract in dispute was also binding on petitioner. In the case at bar, petitioner, through its president Antonio Punsalan Jr., entered into the First Contract without first securing board approval. Despite such lack of board approval, petitioner did not object to or repudiate said contract, thus "clothing" its president with the power to bind the corporation. The grant of apparent authority to Punsalan is evident in the testimony of Yong — senior vice president, treasurer and major stockholder of petitioner. Furthermore, private respondent prepared an operations manual and conducted a seminar for the employees of petitioner in accordance with their contract. Petitioner accepted the operations manual, submitted it to the Bureau of Customs and allowed the seminar for its employees. As a result of its aforementioned actions, petitioner was given by the Bureau of Customs a license to operate a bonded warehouse. Granting arguendo then that the Second Contract was outside the usual powers of the president, petitioner's ratification of said contract and acceptance of benefits have made it binding, nonetheless. The enforceability of contracts under Article 1403(2) is ratified "by the acceptance of benefits under them" under Article 1405.