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CEBU BIONIC BUILDERS SUPPLY, HELD: Under Article 1305 of the Civil

INC. and LYDIA SIA, Petitioners, v. Code, "[a] contract is a meeting of minds between two
DEVELOPMENT BANK OF THE PHILIPPINES, persons whereby one binds himself, with respect to the
JOSE TO CHIP, PATRICIO YAP and ROGER other, to give something or to render some service."A
BALILA, Respondents. contract undergoes three distinct stages preparation or
negotiation, its perfection, and finally, its
FACTS: Spouses Robles entered into a consummation.Negotiation begins from the time the
mortgage contract with the DBP to create the State prospective contracting parties manifest their interest in
Theatre Building in Talisay, Cebu. Upon completion, the contract and ends at the moment of agreement of the
Rudy Robles executed a contract of lease in favour of parties.The perfection or birth of the contract takes place
Cebu Bionic Builders Supply. However, the spouses when the parties agree upon the essential elements of the
defaulted on their obligation to pay and DBP contract.The last stage is the consummation of the
extrajudicially foreclosed the mortgage. DBP sent a contract wherein the parties fulfill or perform the terms
letter to Cebu Bionic that if they were interested in agreed upon in the contract, culminating in the
leasing the facilities, they would have to pay DBP. extinguishment thereof
However, nothing came from these correspondences.
In the case at bar, there was no concurrence
DBP then invited parties to bid on the of offer and acceptancevis-visthe terms of the proposed
property. Initially, Cebu Bionic submitted their interest lease agreement.In fact, after the reply of petitioners
in bidding, but the price that they gave was insufficient. counsel dated July 7, 1987, there was no indication that
DBP then awarded the auction to Respondents To Chip, the parties undertook any other action to pursue the
Yap and Balila. In response to several demand letters by execution of the intended lease contract.Petitioners even
the Respondents, Cebu Bionic filed a petition for admitted that they merely waited for DBP to present the
preliminary injunction, cancellation of deed of sale and contract to them, despite being instructed to come to the
specific performance against DBP. Petitioners then bank for the execution of the same.
related that, without their knowledge, DBP sold the
subject properties to respondents To Chip, Yap DBP cannot, therefore, be accused of
andBalila.The sale was claimed to be simulated and violating the rights of petitioners when it offered the
fictitious, as DBP still received rentals from petitioners subject properties for sale, and eventually sold the same
until March 1991.By acquiring the subject properties, to respondents To Chip, Yap and Balila, without first
petitioners contended that DBP was deemed to have notifying petitioners.Neither were the said respondents
assumed the contract of lease executed between them bound by any right of first refusal in favor of
and Rudy Robles. They alleged that the original leases petitioners.Consequently, the sale of the subject
clause of the Right of First Option to Buy should be properties to respondents was valid.Petitioners claim for
upheld. rescission was properly dismissed.

The trial court granted their complaint. The Respondents To Chip, Yap and Balila argue
Court of Appeals similarly upheld the decision of the that the instant petition should be dismissed outright as
trial court. Cebu Bionic filed a motion for entry of the verification and certification of non-forum shopping
judgment, but Respondents filed a motion for was executed only by petitioner Lydia Sia in her
reconsideration on the ground that they relied on the personal capacity, without the participation of Cebu
friend of their lawyer to personally file the MR, but Bionic.
apparently did not. The court granted their MR, and
reversed their judgment before. Thus, the petitioners file
the case before the Supreme Court.
The Court is not persuaded.
ISSUES:
Except for the powers which are expressly
Was a contract of lease between petitioners conferred on it by the Corporation Code and those that
and DBP? are implied by or are incidental to its existence, a
If in the affirmative, did this contract corporation has no powers. It exercises its powers
contain a right of first refusal in favor of petitioners? through its board of directors and/or its duly authorized
Are respondents To Chip, Yap and Balila officers and agents. Thus, its power to sue and be sued
likewise bound by such right of first refusal? in any court is lodged with the board of directors that
exercises its corporate powers.[53] Physical acts, like
the signing of documents, can be performed only by inscribed as entry no. 9115OCT 0-381 on August
natural persons duly authorized for the purpose by 10,1960. Consequently, Transfer Certificate No. T-
corporate by-laws or by a specific act of the board of 4304 was issued in favour of the buyers covering Lots
directors.[54]
No. 1 and 4.

On August 16, 1960, Mamaril, et al. sold Lots No. 1


In this case, respondents To Chip, Yap and
Balila obviously overlooked the Secretarys and 4 to Lepanto Consolidated Mining Company. The
Certificate[55] attached to the instant petition, which deed of sale covering the aforesaid property was
was executed by the Corporate Secretary of Cebu inscribed as Entry No. 9173 on TCT No. T-4304.
Bionic. Unequivocally stated therein was the fact that Subsequently, Transfer Certificate No. T-4314 was
the Board of Directors of Cebu Bionic held a special issued in the name of Lepanto Consolidated Mining
meeting on July 26, 2002 and they thereby approved a Company as owner of Lots 1 and 4.
Resolution authorizing Lydia Sia to elevate the present
case to this Court in behalf of Cebu Bionic, to wit: On February 1, 1963, unknown to Lepanto
Consolidated Mining Company, the Court of First
Whereas, the board appointed LYDIA I.
SIA to act and in behalf of the corporation to file the Instance of La Union, Second Judicial District, issued
CERTIORARI with the Supreme Court in relations to an order in Land registration Case No. N-361 entitled
the decision of the Court of Appeals dated July 5, 2002 “Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-
which reversed its own judgment earlier promulgated on In-Interest; Republic of the Philippines, Movant”
February 14, 2001 entitled CEBU BIONIC BUILDERS declaring OCT No. 0-381 of the Registry of Deeds for
SUPPLY, INC. and LYDIA SIA, (Petitioners-
the Province of La Union issued in the name of Rafel
Appellants) versus THE DEVELOPMENT BANK OF
THE PHILIPPINES, JOSE TO CHIP, PATRICIO YAP Galvez, null and void, and ordered the cancellation
and ROGER BALILA (Respondents- Appelles), thereof.
docketed CA-G.R. NO. 57216.
On October 28, 1963, Lepanto Consolidated Mining
Whereas, on mass unanimously motion of Company sold to the petitioner Lots No. 1 and 4, with
all members of directors present hereby approved the the deed being entered in TCT No. 4314 as entry No.
appointment of LYDIA I. SIA to act and sign all papers 12381. Transfer Certificate of Title No T-5710 was
in connection of CA-G.R. NO. 57216. thus issued in favour of the petitioner which starting
Resolved and it is hereby resolve to appoint
since then exercised proprietary rights over Lots No. 1
and authorized LYDIA I. SIA to sign and file with the
SUPREME COURT in connection to decision of the and 4.
Court of Appeals as above mention.[56]
In the meantime, Rafael Galvez filed his motion for
reconsideration against the order by the trial court
declaring OCT No. 0-381 null and void. The motion
SHIPSIDE INCORPORATED, petitioner, vs. THE was denied on January 25, 1965. On appeal, the court
HON. COURT OF APPEALS of Appeals ruled in favor of the Republic of the
Philippines in a resolution promulgated on August 14,
G.R. No. 143377, February 20, 2001 1973 in CA-G.R. No. 36061`-R.

Thereafter, the court of Appeals, issued an Entry of


judgement, certifying that its decision dated August 14,
Facts:
1973 became final and executor on October 23, 1973.
On October 29, 1958, Original Certificate No. 0-381
On April 22, 1974, the trial court in L.R.C. Case No.
was issued in favour of Rafael Galvez, over four
N-361 is sued a writ of execution of the judgement
parcels of land.
which was served on the Register of Deeds, San
On April 11, 1960, Lots No. 1 and 4 were sold by Fernando, La Union on April 29, 1974
Rafael Galvez to Filipina Mamaril, Cleopatra Llana,
Regina Bustos, and Erlinda Balatbat, with deed of sale
On January 14, 1999, the office of the Solicitor On August 31, 1999, the trial court denied petitioner’s
General received a letter dated January 11, 1999, from motion to dismiss and on October 14, 1999, its motion
Mr. Victor Floresca, Vice-President, John Hay Poro for reconsideration was likewise turned down.
Point Development Corporation, stating that the
aforementioned orders and decision of the trial court in On October 21, 1999, petitioner instituted a petition for
L.R.C. No. N-361 have not been executed by the certiorari and prohibition with the Court of Appeals,
Register of Deeds, San Fernando, La Union despite docketed therein as CA-G.R. SP No. 55535, on the
receipt of the writ of execution. ground that the orders of the trial court denying its
motion to dismiss and its subsequent motion for
On April 21, 1999, the Office of the Solicitor General reconsideration were issued in excess of jurisdiction.
filed a complaint for the revival of judgment and
cancellation of titles before the Regional Trial Court of On Novemeber 4, 1999, the court of Appeals dismissed
the First judicial Region (Branch 26, San Fernando, La the petition in CA-G.R. SP No. 55535 on the ground
Union) docketed therein as Civil Case No., 6346 that the verification and certification in the petition,
entitled, “Republic of the Philippines, Plaintiff, vs. under the signature of Lorenzo Balbin, Jr., was made
Heirs of Rafael Galvez, represented by Teresita Tan, without authority, there being no proof therein that
Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat, Balbin was authorized to institute the petition for and
Regina Bustos, Shipside Incorporated and the Register in behalf and of petitioner.
of Deeds of La Union, defendants.”
On May 23, 2000, the Court of Appeals denied
In its complaint in Civil Case No. 6346, the Solicitor petitioner’s motion for reconsideration on the grounds
General argued that since the trial court in LRC Case that: (1) a complaint filed on behalf of a corporation
no. 361 had ruled and declared OCT No. 0381 to be can be made only if authorized by its Board of
null and void, which ruling was subsequently affirmed Directors, and in the absence thereof, the petition
by the court of appeals, the defendants-successors-in- cannot prosper and be granted due course; and (2) the
interest of Rafael Galvez have no valid title over the petitioner was unable to show that it had substantially
property covers by OCT No. 0-381, and the subsequent complied with the rule requiring proof of authority to
Torrens titles issued in their names should be institute an action or proceeding.
consequently cancelled.
In support of its petition, Shipside, Inc. asseverates
On July 22, 1999, petitioner Shipside, Inc. Filed its that:
Motion to Dismiss, based on the following grounds:
1. The honourable Court of Appeals gravely
(1) the complaint stated no cause of action because
abused its discretion in dismissing the petition
only final and executor judgements may be subject of
when it made a conclusive legal presumption
an action for revival for judgment; (2) the plaintiff is
that Mr. Balbin had no authority to sign the
not the real party-in-interest because the real property
petition despite the clarity of laws,
covered by the Torrens titles sought to be cancelled,
jurisprudence and Secretary’ certificate to the
allegedly part of Camp Wallace (Wallace Air Station),
contrary.
were under the ownership and administration of the
Bases Conversion Development Authority under RA 2. The honourable Court of Appeals abused its
No. 7227; (3) Plaintiff’s cause of action is barred by discretion when it dismissed the petition, in
prescription; (4) twenty-five years having lapsed since effect affirming the grave abuse of discretion
the issuance of the writ of execution, no action for committed by the lower court, when it refused
revival of judgment may be instituted because under to dismiss the 1999 Complaint for Revival of
Paragraph 3 of Article 1144 of the Civil Code, such a 1973 judgment, in violation of clear laws
action may be brought only within ten (10) years from and jurisprudence.
the time the judgement had been rendered.

Issues:
(1) Whether an authorization from petitioner’s certification therein. As a consequence, the
Board of Directors is still required in order for petition was dismissed by the Court of
its resident manager to institute or commence Appeals. However, subsequent to such
a legal action for and in behalf of the dismissal, petitioner filed a motion for
corporation; reconsideration, attaching to said motion a
certificate issued by its board secretary stating
(2) Whether the instant petition should be that on October 11, 1999, or ten days prior to
allowed; and the filing of the petition, Balbin had been
authorized by petitioner’s board of directors
(3) Whether the republic of the Philippines can
to file said petition.
maintain action for revival of judgment
therein.

Verification is simply intended to secure an


assurance that the allegations in the pleading
Held:
are true and correct and not the product of the
(1) Yes. The court of Appeals dismissed the imagination or a matter of speculation, and
petition for certiorari on the ground that that the pleading is filed in good faith. The
Lorenzo Balbin, the resident manager for court may order the correction of the pleading
petitioner, who was the signatory in the if verification is lacking or act on the pleading
verification and certification on non-forum although it is not verified, if the attending
shopping, failed to show proof that he was circumstances are such that strict compliance
authorized by petitioner’s board of directors with the rules may be dispensed with in order
to file such a petition. that the ends of justice may thereby be served.

A corporation, such as petitioner, has no On the other hand, the lack of certification
power except those expressly conferred on it against forum shopping is generally incurable
by the Corporation Code and those that are by the submission thereof after filing of the
implied or incidental to its existence. In turn, petition. Section 5, Rule 45 of the 1997 Rules
a corporation exercises said powers through of Civil Procedure provides that the failure of
its board of directors and /or its duly the petitioner to submit the required
authorized officers and agents. Thus, it has documents that should accompany the
been observed that the power of a corporation petition, including the certification against
to sue and be sued in any court is lodged with forum shopping, shall be sufficient ground for
the board of directors that exercises its the dismissal thereof. The same rule applies to
corporate powers. In turn, physical acts of the certifications against forum shopping signed
corporation, like the signing of documents, by a person on behalf of a corporation which
can be performed only by natural persons are unaccompanied by proof that said
duly authorized for the purpose by the signatory is authorized to file a petition on
corporate by-laws or by a specific act of the behalf of the corporation.
board of directors to file said petition.

On October 21, 1999, when Balbin filed the


petition, there was no proof attached thereto
that Balbin was authorized to sign the
verification and non-forum shopping
from IEB from Sept 1997 until Sept 1998.

Prime Aggregates failed to settle its outstanding


obligation which stood at P90,267,854.96 and
US$211,547.12 as of Sept 15, 2000, drawing IEB to file
a petition for extra-judicial foreclosure of mortgage
before the RTC of Cebu City.

On Oct 18, 2000 a Notice of Extra-Judicial Foreclosure


and Sale scheduled on Nov 28, 2000 was issued.

This prompted the petitioner filed a complaint for


Injunction, alleging that the real estate mortgage was
null and void because Amparo and Zosa were
authorized to execute it to secure only one obligation
of Prime Aggregates.

RTC of Cebu: denied petitioners prayer for a writ of


preliminary injunction.

Petitioner filed a Motion for Reconsideration (MR) & a


Zomer Development Corp. v. Motion for Admission of a Second Amended
International Exchange Bank Complaint, although it later filed a Motion to
Withdraw Second Amended Complaint and to admit
FACTS: On August 25, 1997, the Board of Directors of Third Amended Complaint. The trial court denied
Zomer Development Company, Inc. (petitioner) petitioner’s MR.
approved a resolution authorizing it to apply for and
obtain a credit line with respondent International Petitioner assailed the trial courts orders denying its
Exchange Bank (IEB) in the amount of P60,000,000 as prayer for the issuance of a writ of preliminary
well as temporary excesses or permanent increases injunction before the CA via certiorari, alleging, that the
thereon as may be approved by IEB from time to time. real estate mortgage it executed was null and void for
being ultra vires as it was not empowered to mortgage
The Board of Directors also authorized petitioner to its properties as security for the payment of obligations
assign, pledge, or mortgage its properties as security for of third parties; and that Amparo and Zosa were
this credit line; and to secure and guarantee the term authorized to mortgage its properties to secure only a
loan and other credit facility of IDHI Prime Aggregates P60,000,000 term loan and one credit facility of Prime
Corporation (Prime Aggregates) with IEB. Aggregates.

On Aug 26, 1997, Prime Aggregates obtained a term CA: On Oct 30, 2001, it found that the trial court did
loan from IEB in the amount of P60,000,000. not committed grave abuse of discretion in denying
petitioners prayer for preliminary injunction. It brushed
On Sept 2, 1997, petitioner, through its Treasurer aside petitioners arguments that the real estate
Amparo Zosa (Amparo) and its General Manager mortgage was ultra vires and that Amparo and Zosa
Manuel Zosa, Jr. (Zosa), executed a real estate mortgage were only authorized to mortgage petitioners properties
covering 1 parcel of land (the real estate mortgage) in to secure the P60,000,000 term loan and one credit
favor of IEB to secure: facility of Prime Aggregates.

1. The payment of all loans, overdrafts, ISSUE(s):


credit lines and other credit facilities or 1. Was the Real Estate Mortgage null and void
accommodations obtained or hereinafter for being ultra vires as it was not empowered
obtained by the MORTGAGOR and/or by to mortgage its properties as security for the
IDHI Prime Aggregates Corporation payment of obligations of third parties?
(hereinafter referred to as DEBTOR) NO

xxxx 2. Were Amparo and Zosa authorized to


Prime Aggregates subsequently obtained several loans mortgage the properties to secure only a
P60,000,000 term loan and one credit facility to be a family
of Prime Aggregates? NO corporation.
The incorporators and
stockholders and the
RULING: RULED IN FAVOR OF THE membership of the
RESPONDENT COURT board of directors are
Zosa family. x x x
The Petitioner, under its By-Laws, is not
empowered to mortgage its properties as a b.
security for the payment of the obligations [Prime Aggregates]
of third parties. and of plaintiff
corporation x x x
This is on the general premise that the
properties of a corporation are regarded as c.
held in trust for the payment of corporate plaintiff and Manuel
creditors and not for the creditors of third Zosa, the General
parties. Manager, both are
directors/stockholders
However, the Petitioner is not proscribed of the plaintiff.
from mortgaging its properties as security Amparo Zosa is the
for the payment of obligations of third biggest stockholder
parties. and is the mother of
practically all the
In an opinion of the SEC, dated April 15, other stockholders of
1987, it declared that a private corporation, plaintiff. Manuel
by way of exceptions, may give a third party Zosa, Jr. is the General
mortgage: Manager and a son of
Amparo.
1. When the mortgage of
corporate d. The Corporate
assets/properties shall Secretary of plaintiff
be done in the and [Prime
furtherance of the Aggregates] are
interest of the members of the Zosa
corporation and in the family. The Corporate
usual and regular Secretary of [Prime
course of its business; Aggregates] is also
and the daughter of
Francis Zosa,
2. To secure the president of plaintiff.
debt of a
subsidiary. e. The President of
plaintiff corporation,
While admittedly, the Opinion of the Francis Zosa and the
Securities & Exchange Commission may president of
not be conclusive on the Respondent Court, [Prime Aggregates],
however, admittedly the same is of Rolando Zosa, are
persuasive effect. brothers (aside from
being common
In the present recourse, the Respondent directors of both
Court found that not only is Prime corporations.)
Aggregates a subsidiary of the Petitioner
but that the Petitioner appeared to be a The SC agrees with the Respondent Court.
family corporation:
The Petitioner’s invocations that the
a. The plaintiff appears Resolution, approved by its Board of
Directors, authorizing its Treasurer and of Directors of the Petitioner, in approving
General Manager to execute a Real Estate the Resolution, may be ascertained xxx also
Mortgage as security for the payment of the from the contemporaneous and subsequent
account of Prime Aggregates, a sister acts of the Petitioner, the Private
corporation, is not for its best interest, is a Respondent and Prime Aggregates.
puzzlement xxx.
Given the factual milieu in the present
Since when is a private corporation, going recourse, as found and declared by the
to the aid of a sister corporation, not for the Respondent Court, there can be no
best interest of both corporation? For in equivocation that, indeed the Petitioner
doing so, the 2 corporations are enhancing, conformed to and ratified, and hence, is
boosting and promoting a common interest, bound by the execution, by its Treasurer and
the interest of family having ownership of General Manager, of the Real Estate
both corporations. In the second place, Mortgage in favor of the Private respondent,
Courts are loathe to overturn decisions of with its properties used as securities for the
the management of a corporation in the payment of the credit and loan availments
conduct of its business via its Board of of Prime Aggregates from the Private
Directors x x x.x x x x Respondent on the basis of the Resolution
approved by its Board of Directors.
There is no evidence on record that the Real
Estate Mortgage was executed by the As the Supreme Court declared, ratification
Petitioner and the Private Respondent to and/or approval by the corporation of the
prejudice corporate creditors of the acts of its agents/officers may be
Petitioner or will result in the infringement ascertained through x x x the acquiescence
of the trust fund doctrine or hamper the in his acts of a particular nature, with actual
continuous business operation of the or constructive thereof, whether within or
Petitioner or that the Prime Aggregates was beyond the scope of his ordinary powers.
insolvent or incapable of paying the Private
Respondent. As it was, the Petitioner finally awoke from
its slumber when the Private Respondent
Indeed, the latter approved Prime filed its Petition for the extra-judicial
Aggregates loan availments and credit foreclosure of the Real Estate Mortgage,
facilities after its investigation of the with the Sheriff, and assailed the authority
financial capability of Prime Aggregates of its Board of Directors to approve the said
and its capacity to pay its account to the Resolution and of its Treasurer and General
Private respondent. Manager to execute the deed and brand the
xxxx said Resolution and the said deed as ultra
vires and hence, not binding on the
Under the Resolution of the Board of Petitioner, and hurried off to the
Directors, it authorized its Treasurer and Respondent Court and prayed for injunctive
General Manager to execute a Real Estate relief. Before then, the Petitioner
Mortgage over its properties as security for maintained its silence and adopted a hands
the term loan and credit facility of Prime off stance. The SC found the Petitioner’s
Aggregates. The maximum amounts of such stance grossly inequitable.
term loan and credit facility were not fixed xxx xxx xxx
in the Resolution. More, the transactions between the
Petitioner and the Private Respondent over
Hence, the Long Term Agreements and its properties are neither malum in se or
Credit Agreements executed by Prime malum prohibitum. Hence, the Petitioner
Aggregates and the Private Respondent, cannot hide behind the cloak of ultra vires
with the Petitioners properties, as collateral for a defense.
therefore, were envisaged in the terms term xxxx
loan and credit facility in the Resolution of
the Board of Directors of the Petitioner. The plea of ultra vires will not be allowed
to prevail, whether interposed for or against
The intention of the Members of the Board a corporation, when it will not advance
justice but, on the contrary, will accomplish
FACTS
a legal wrong to the prejudice of another
who acted in good faith. 1. On May 17, 1948, the Acoje Mining Company, Inc. wrote the
telegraph and money order offices at its mining camp at Sta. Cru
WHEREFORE, the petition is DISMISSED. that were living in said camp.
Costs against petitioner. 2. The Director of Posts acted on their request, and required that
pecuniary loss may be suffered by the Bureau of Posts by reason
part of the employee of the company who is assigned to take cha
071 Republic of the Phils. V Acoje Mining Co. 3. The AUTHOR:
Board of Directors of Acoje passed a resolution stating tha
(Keith Meridores)
February 23, 1963, GR No. L-18062 Company should accept full responsibility
- No notes. A simple case. for all cash received b
TOPIC: Corporate Powers; Ultra Vires Doctrine resolution be forwarded to the Bureau of Posts."
PONTENTE: BAUTISTA ANGELO, J. 4. The post office branch was opened on Oct. 13, 1949.
5. On May 11, 1954, the postmaster, an employee of Acoje, went
6. Acoje informed the Manila Post Office and upon auditing, it w
7. The post office demanded payment and filed a suit with the CF
alleging that the Board of Directors’ act in assigning a postmaste
liability was merely that of a guarantor.
8. CFI of Manila ruled in favor of the Post Office but only to the
evidence for such amount)
9. Acoje appealed to the SC.
ISSUE: RATIO:
1st Issue:
1. Whether or not the board of directors’ acts was ultra vires?
1. The claim that the resolution adopted by the board of directors
2. Whether or not its liability was that of a mere guarantor?
entertained it appearing that the same covers a subject which con
employees and their families.
HELD: 2. Here it is undisputed that the establishment of the local post of
the business of appellant company.
1. No. The act covers a subject which concerns the benefit,
3. There
convenience,
are certain
andcorporate
welfare of
acts
thethat
company’s
may be performed
employeesoutside
and th
families. There are certain corporate acts that may be performed
necessaryoutside
to promote
of thethe
scope
interest
of the
or powers
welfareexpressly
of the corporation.
conferred i
they are necessary to promote the interest or welfare of the
4. What
corporation.
is an ultra vires act? an ultra vires act is one committed o
2. No. The phraseology and the terms employed are so cleardefined
andbysweeping.
the law of its organization and therefore beyond the p
5. An ultra vires act is merely voidable. It can be enforced or vali
Here it is fair that the resolution be upheld at least on the ground

2nd Issue:
1. "A mere reading of the resolution of the Board of Directors da
claim would show that the responsibility of the defendant compa
phraseology and the terms employed are so clear and sweeping a
cash received by the Postmaster.' Here the responsibility of the d
principal."

WESTMONT BANK v. INLAND


CONSTRUCTION AND DEVELOPMENT CORP.
582 SCRA 230 (2009)

If a corporation, however, consciously lets one of its


officers, or any other agent, to act within the scope of
an apparent authority, it will be estopped from denying
such officer’s authority.
Respondent Inland Construction and Development
Corp. (Inland) obtained various loans from petitioner
Westmont Bank (Westmont). To secure the payment of cite, any Resolution from its Board of Directors or its
its obligations, Inland executed Real Estate Mortgages Charter or By-laws from which the Court could
over three real properties and issued promissory notes reasonably infer that he indeed had no authority to sign
in favor of the bank. By a Deed of Assignment, in its behalf or bind it in the Deed of Assignment.
Conveyance and Release, one Felix Aranda, assigned
and conveyed all his rights and interests at Hanil- BPI FAMILY SAVINGS V. FIRST METRO
Gonzales Construction & Development Phils. INVESTMENT (G.R. NO. 132390)
Corporation (HGCDP) in favor of Horacio Abrante. Facts:
Under the same Deed, it appears that HGCDP assumed
the obligations of Inland. Westmont’s Account Officer, Respondent FMIC an investment house, through its
Lionel Calo, Jr. (Calo), signed for its conformity to the EVP Ong, opened a current account amounting P100M
deed. Inland was subsequently served with a Notice of with petitioner’s San Francisco Del Monte branch
Sheriff’s Sale foreclosing the real estate mortgages upon the request of his friend which is a close
over its real properties prompting it to file a complaint acquaintance of said bank’s branch manager with the
for injunction against the Westmont. In its answer, latter’s aim of increasing the deposit level in his
Westmont underscored that it had no knowledge, much branch. Petitioner through its SFDM branch manager
less did it give its conformity to the alleged assignment guaranteed the payment of deposit by the FMIC with
of the obligation. The trial court found that Westmont interest on the condition that the interest is to be paid
ratified the act of Calo. It accordingly rendered in advance. An agreement was reached between the
judgment in favor of Inland. On appeal, the appellate parties and subsequently petitioner paid FMIC upon
court affirmed the trial court’s decision insofar as it clearance of the latter’s check deposit. However, on the
finds Westmont to have ratified the Deed of basis of an Authority to Debit signed by the EVP and
Assignment. Senior Manager of FMIC, petitioner transferred P80M
from FMCI’s current account to the savings account of
one Tevesteco, a stevedoring company. FMIC denied
ISSUE: having authorized the transfer of its funds claiming that
the signatures were falsified. In order to recover
Whether or not Westmont Bank ratified the Deed of immediately its deposit, FMCI issued a check payable
Assignment. to itself and drawn on its deposit but was dishonored
upon upon presentation for payment. Thus, FMIC filed
HELD: a complaint with the RTC which then ruled in their
favor. CA affirmed.
The general rule remains that, in the absence of
authority from the board of directors, no person, not Issue:
even its officers, can validly bind a corporation. If a
corporation, however, consciously lets one of its Whether petitioner was remiss in its fiduciary duty.
officers, or any other agent, to act within the scope of
an apparent authority, it will be estopped from denying Ruling: YES.
such officer’s authority.The records show that Calo
was the one assigned to transact on petitioner’s behalf Petitioner maintains that respondent should have first
respecting the loan transactions and arrangements of inquired whether the deposit of P100 Million and the
Inland as well as those of Hanil-Gonzales and fixing of the interest rate were pursuant to its
Abrantes. Since it conducted business through Calo, (petitioner’s) internal procedures. Petitioner’s stance is
who is an Account Officer, it is presumed that he had a futile attempt to evade an obligation clearly
authority to sign for the bank in the Deed of established by the intent of the parties. What transpires
Assignment. Unmistakably, the Court’s directive in in the corporate board room is entirely an internal
Yao Ka Sin Trading is that a corporation should first matter. Hence, petitioner may not impute negligence
prove by clear evidence that its corporate officer is not on the part of respondent’s representative in failing to
in fact authorized to act on its behalf before the burden find out the scope of authority of petitioner’s Branch
of evidence shifts to the other party to prove, by Manager. Indeed, the public has the right to rely on the
previous specific acts, that an officer was clothed by trustworthiness of bank managers and their acts.
the corporation with apparent authority. In the present Obviously, confidence in the banking system, which
petitions, Westmont Bank failed to discharge its necessarily includes reliance on bank managers, is vital
primary burden of proving that Calo was not in the economic life of our society.
authorized to bind it, as it did not present proof that
Calo was unauthorized. It did not present, much less Thus, we uphold the finding of both lower courts that
petitioner failed to exercise that degree of diligence
required by the nature of its obligations to its
depositors. A bank is under obligation to treat the
accounts of its depositors with meticulous care,
whether such account consists only of a few hundred
pesos or of million of pesos. Here, petitioner cannot
claim it exercised such a degree of care required of it
and must, therefore, bear the consequence.