[G.R. No. 117847.

October 7, 1998]
PEOPLES AIRCARGO AND WAREHOUSING CO. INC., petitioner, vs. COURT OF APPEALS and STEFANI SAO, respondents.
Contracts entered into by a corporate president without express prior board approval bind the corporation, when such officers apparent authority is
established and when these contracts are ratified by the corporation.

Facts:
Petitioner is a domestic corporation, which was organized 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
private respondent for the preparation of a feasibility study. Private respondent submitted a letter-proposal (First Contract hereafter) to Punsalan, which
states that the services will be provided for a fee of P350,000.00.
Initially, Cheng Yong, the majority stockholder of petitioner, objected to private respondents offer, as another company priced a similar proposal at
only P15,000.However, Punsalan preferred private respondents services because of the latters membership in the task force, which was supervising the
transition of the Bureau of Customs from the Marcos government to the Aquino administration.
Petitioner, through Punsalan, sent private respondent a letter, confirming their agreement. Accordingly, private respondent prepared a feasibility
study for petitioner which eventually paid him the balance of the contract price, although not according to the schedule agreed upon.
Upon Punsalans request, private respondent sent petitioner another letter-proposal (Second Contract hereafter) worth P400,000.
Andy Villaceren, vice president of petitioner, received the operations manual prepared by private respondent. Petitioner submitted said operations
manual to the Bureau of Customs in connection with the formers application to operate a bonded warehouse; thereafter, 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. Private respondent also conducted, in
the warehouse of petitioner, a three-day training seminar for the latters employees.
Private respondent 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. Meanwhile, Punsalan sold his shares in petitioner-corporation and resigned as its
president in 1987.
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, denied that private respondent had prepared an operations manual and a computer program or conducted a seminar-workshop for its
employees. It further alleged that the letter-agreement was signed by Punsalan without authority, in collusion with [private respondent] in order to
unlawfully get some money from [petitioner], 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.
RTC- declared the Second Contract unenforceable or simulated. However, since private respondent had actually prepared the operations
manual and conducted a training seminar for petitioner 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).
CA- reversed; ruled in favor of the validity and enforceability of the second contract; that the president of petitioner-corporation had entered
into the First Contract, which was similar to the Second Contract. Thus, petitioner had clothed its president with apparent authority to enter into the
disputed agreement. As it had also become the practice of the petitioner-corporation to allow its president to negotiate and execute contracts necessary
to secure its license as a customs bonded warehouse without prior board approval, the board itself, by its acts and through acquiescence, practically laid
aside the normal requirement of prior express approval.
ISSUE: WON, the president of the petitioner-corporation had apparent authority to bind petitioner to the Second Contract
HELD: NO!
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 of the Philippines:
SEC. 23. The Board of Directors or Trustees. -- Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code
shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees x x x.
Under this provision, the power and the responsibility to decide whether the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of incorporation, bylaws, or relevant provisions of law . However, just as a natural
person may authorize another to do certain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to
officers, committees or agents. The authority of such individuals to bind the corporation is generally derived from law, corporate bylaws or authorization
from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of business, viz.: [25]
A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that the authority to do so has been
conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular
business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has
conferred.
Accordingly, the appellate court ruled in this case that the authority to act for and to bind a corporation may be presumed from acts of recognition
in other instances, wherein the power was in fact exercised without any objection from its board or shareholders. Petitioner had previously allowed its
president to enter into the First Contract with private respondent without a board resolution expressly authorizing him; thus, it had clothed its president
with apparent authority to execute the subject contract.
Petitioners argument is not persuasive. 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.
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. Testifying on the First Contract, he said:[29]
A: Mr. [Punsalan] told me that he prefer[s] Mr. Sao because Mr. Sao is very influential with the Collector of Customs[s]. Because the Collector of
Custom[s] will be the one to approve our project study and I objected to that, sir. And I said it [was an exorbitant] price. And Mr. Punsalan he is
the [p]resident, so he [gets] his way.
Q: And so did the company eventually pay this P350,000.00 to Mr. Sao?
A: Yes, sir.
The First Contract was consummated, implemented and paid without a hitch.
Hence, private respondent should not be faulted for believing that Punsalans 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 agents authority.
Inasmuch as a corporate president is often given general supervision and control over corporate operations, the strict rule that said officer has no
inherent power to act for the corporation is slowly giving way to the realization that such officer has certain limited powers in the transaction of the usual
and ordinary business of the corporation. In the absence of a charter or bylaw provision to the contrary, the president is presumed to have the authority
to act within the domain of the general objectives of its business and within the scope of his or her usual duties.
Hence, it has been held in other jurisdictions that the president of a corporation possesses the power to enter into a contract for the corporation,
when the conduct on the part of both the president and the corporation [shows] that he had been in the habit of acting in similar matters on behalf of the
company and that the company had authorized him so to act and had recognized, approved and ratified his former and similar actions. Furthermore, a
party dealing with the president of a corporation is entitled to assume that he has the authority to enter, on behalf of the corporation, into contracts that
are within the scope of the powers of said corporation and that do not violate any statute or rule on public policy.