Ramirez v. Orientalist Co. and Fernandez

Ramirez v. Orientalist Co. and Fernandez (1918) – Street, J. Concept: Control and Management of Corporation FACTS: Orientalist Company (Orientalist for brevity) exhibited films in a theatre in Manila. Plaintiff JF Ramirez, a resident of Paris and represented in Manila by his son Jose Ramirez, was engaged in business of marketing films for manufacturers and in the production or distribution of cinematographic material. In 1913, there were negotiations between the officials of Orientalist and Jose Ramirez, as agent of JF Ramirez, for the exclusive agency of two films in the hands of Orientalist. Jose Ramirez placed a formal offer stating in detail the terms upon which Ramirez would undertake to supply from Paris the films. The board of directors approved and accepted the offer. The most important portion of the two letters of acceptance written by Fernandez to Ramirez is in the following terms: “These communications were signed in the following form, in which it will be noted the separate signature of RJ Fernandez, as an individual, is placed somewhat below and to the left of the signature of the Orientalist Company, as signed by RJ Fernandez, in the capacity of treasurer: THE ORIENTALIST COMPANY, By RJ Fernandez Treasurer. RJ Fernandez” The record showed that JF Ramirez himself procured the films upon his own responsibility. Thus, the only contracting parties in this case are JF Ramirez (first party), and Orientalist with RJ Fernandez (second party). The films arrived in Manila but Orientalist had no funds to meet its obligations. Hence, the first few drafts were accepted in the name of Orientalist by its president B Hernandez, and were taken up by him with his own funds. As the drafts had been paid by Hernandez, he treated the films as his own property, and they never came into the actual possession of Orientalist as owner at all. Hernandez rented the films to Orientalist and they were exhibited by it in the Oriental Theater under an arrangement made between him and the theater’s manager. Several remittances of films from Paris arrived. All of the drafts accompanying these films were drawn upon the Orientalist Company; and all were accepted in the name of Orientalist by its president, B Hernandez, except the last which was accepted by Hernandez individually. None of the drafts thus accepted were taken up by the drawee or by Hernandez when they fell due; and it was finally necessary for Ramirez to take them up as dishonoured by non-payment. Ramirez instituted an action against Orientalist and RJ Fernandez. Upon application of Ramirez, the films were sold and the amount realized from the sale was applied to the satisfaction of the plaintiff’s claim. Judgment was given for the balance due to Ramiez. Orientalist was declared to be a principal debtor and Fernandez was declared to be subsidiarily liable as guarantor. Defendants appealed. The Court noted that the action is primarily founded upon the liability created by the two acceptance letters. ISSUES: 1. WON Fernandez’s actions bound the company . 2. WON the company is still liable, assuming that the company was able to deny the authority of Fernandez. 3. What is the character of liability assumed by Fernandez? HELD: 1. YES. The corporation was not able to deny the genuineness and due execution of the contracts in question and the authority of Fernandez to bind the Orientalist Company. Sec. 103 of the Code of Civil Procedure requires that the Answer setting up the defense of lack of authority of an officer of a corporation to bind it by a contract should be verified and the denial contemplated must be specific. In this case, the failure of the corporation to make any issue in its answer with regard to the authority of Fernandez to bind it, and particularly its failure to deny specifically under oath the genuineness and due execution of the contracts sued upon, have the effect of eliminating the question of his authority from the case. Whether a particular officer actually possesses the authority which he assumes to exercise is frequently known to very, very few and the proof of it usually is not readily accessible to the

stranger who deals with the corporation on the faith of the ostensible authority exercised by some of the corporate officers. 2.

YES. If a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority and thus holds him out to the public as possessing power to do those acts, the corporation will, as against anyone who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said “if the corporation permits” this means the same as “if the thing is permitted by the directing power of the corporation.” The stockholders adopted a resolution to the effect that the agencies of the two films should be accepted if the corporation could obtain the money with which to meet the expenditure involved, and to this end appointed a committee to apply to the bank for a credit. An attempt to obtain credit was made, but failed. Another special meeting of stockholders was held and a resolution was passed to the effect that the company should pay to Hernandez, Fernandez, Monroy and Papa an amount equal to 10% of their outlay in importing the films, said payment to be made in shares of the company. At the time this meeting was held three shipments of the film had already been received in Manila. Therefore, the body was then cognizant that the offer had already been accepted in the name of Orientalist Company and that the films which were then expected to arrive were being imported by virtue of such acceptance.

3. In affixing his signature to the contracts, Fernandez was a guarantor. From the testimony of both Ramirez and Fernandez, the Court was convinced that the responsibility of the later was that of a guarantor. Fernandez said that his name was signed as a guaranty that the contract would be approved by the corporation, while Ramirez said that the name was put on the contract for the purpose of guaranteeing its performance. The Court believed that the latter was the real intention of the parties.