G.R. No.

108905; October 23, 1997

GRACE CHRISTIAN HIGH SCHOOL, petitioner vs. CA, GRACE
VILLAGE ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and
ERNESTO L. GO, respondents
MENDOZA, J.:
FACTS:
Grace Christian High School is an educational institution at the Grace
Village in Quezon City. Grace Village Association, Inc. is an
organization of lot and/or building owners, lessees and residents, while
Alejandro G. Beltran and Ernesto L. Go were its president and chairman
of the committee on election when this suit was brought.

cannot forestall a later challenge to its validity. Neither can it attain

validity through acquiescence because, if it is contrary to law, it is beyond
the power of the members of the association to waive its invalidity.
It is more accurate to say that the members merely tolerated the schools
representative and tolerance cannot be considered ratification. Nor can
the school claim a vested right to sit in the board on the basis of
practice. Practice, no matter how long continued, cannot give rise to
any vested right if it is contrary to law. CA decision AFFIRMED.

For fifteen years from 1975 until 1989 the schools representative had
been recognized as a permanent director of the association. But on
February 13, 1990, the school, through its principal James Tan, received
notice from the associations committee on election that the latter was
reexamining (actually, reconsidering) the right of the schools
representative to continue as an unelected member of the board.

G.R. No. L-4591; April 11, 1979

JOHN GOKONGWEI, JR., petitioner vs. SECURITIES AND
EXCHANGE COMMISSION, et al., respondents
ANTONIO, J.:
FACTS:
In 1976, John Gokongwei, Jr., as stockholder of San Miguel Corporation,
filed with the Securities and Exchange Commission (SEC) a petition for
"declaration of nullity of amended by-laws, cancellation of certificate of
filing of amended by-laws, injunction and damages with prayer for a
preliminary injunction" against the majority of the members of the Board
of Directors and San Miguel Corporation.

As the board denied the schools request to be allowed representation

without election, it brought an action for mandamus in the Home
Insurance and Guaranty Corporation. Its action was dismissed by the
hearing officer whose decision was subsequently affirmed by the appeals
board. CA affirmed. Hence this petition for review, contending:
1. The school has already acquired a vested right to a permanent seat in
the Board of Directors of Grace Village Association;
2. The amended By-laws of the Association drafted and promulgated by a
Committee on December 20, 1975 is valid and binding; and
3. The Practice of tolerating the automatic inclusion of the school as a
permanent member of the Board of Directors without the benefit of
election is allowed under the law.

Gokongwei alleged that individual respondents amended the bylaws of

the corporation, basing their authority to do so on a resolution of the
stockholders. It was contended that according to section 22 of the
Corporation Law and Article VIII of the by-laws of the corporation, the
power to amend, modify, repeal or adopt new by-laws may be delegated
to the Board of Directors only by the affirmative vote of stockholders
representing not less than 2/3 of the subscribed and paid up capital stock
of the corporation, which 2/3 should have been computed on the basis of
the capitalization at the time of the amendment. Since the amendment
was based on the 1961 authorization, Gokongwei contended that the
Board acted without authority and in usurpation of the power of the
stockholders.

ISSUE:
Whether the schools representative has the right to sit in the board of
directors of Grace Village Association, Inc. as a permanent member. NO
HELD:
NO. It appears that the opinion of the Securities and Exchange
Commission on the validity of this provision was sought by the
association, which is: the practice of allowing unelected members in the
board was contrary to the existing by-laws of the association and to 92
of the Corporation Code (B.P. Blg. 68).

Gokongwei claimed that prior to the questioned amendment, he had all

the qualifications to be a director of SMC, being a Substantial
stockholder thereof; that as a stockholder, Gokongwei had acquired rights
inherent in stock ownership, such as the rights to vote and to be voted
upon in the election of directors; and that in amending the by-laws,
respondents purposely provided for his disqualification and deprived him
of his vested right hence the amended by-laws are null and void.

The association contended that the basis of the petition

for mandamus was merely a proposed by-laws which has not yet been
approved by competent authority nor registered with the SEC or
HIGC. It argued that the by-laws which was registered with the SEC on
January 16, 1969 should prevail. In reply, the school maintained that the
amended by-laws is valid and binding and that the association was
estopped from questioning the by-laws.

SEC, Andres M. Soriano, Jr. and Jose M. Soriano filed their comment,
alleging that the petition is without merit: (1) that in Gokongweis
interest, he is engaged in business competitive and antagonistic to that of
SMC, it appearing that the owns and controls a greater portion of his
SMC stock thru the Universal Robina Corporation and the Consolidated
Foods Corporation, (2) that the amended by law were adopted to preserve
and protect respondent SMC from the clear and present danger that
business competitors (3) that by laws are valid and binding since a
corporation has the inherent right and duty to preserve and protect itself.

The members of the Association by an affirmative vote of the majority at

any regular or special meeting called for the purpose, may alter, amend,
change or adopt any new by-laws. This provision of the by-laws actually
implements 22 of the Corporation Law (Act No. 1459). The proposed
amendment to the by-laws was never approved by the majority of the
members of the association as required by these provisions of the law and
by-laws.

ISSUE:
Whether the amended by-laws of SMC of disqualifying a competitor
from nomination or election to the Board of Directors of SMC are valid
and reasonable. YES

The present Corporation Code (B.P. Blg. 68), which took effect on May
1, 1980, provides: 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 to be elected from among the holders of stocks, or
where there is no stock, from among the members of the corporation, who
shall hold office for one (1) year and until their successors are elected
and qualified.

HELD:
YES. The validity or reasonableness of a by-law of a corporation in
purely a question of law. This rule is subject, however, to the limitation
that where the reasonableness of a by-law is a mere matter of judgment,
and one upon which reasonable minds must necessarily differ, a court
would not be warranted in substituting its judgment instead of the
judgment of those who are authorized to make by-laws and who have
exercised their authority.

These provisions of the former and present corporation law leave no

room for doubt as to their meaning: the board of directors of corporations
must be elected from among the stockholders or members. There is no
reason at all for the schools representative to be given a seat in the
board. Since the provision in question is contrary to law, the fact that for
fifteen years it has not been questioned or challenged but, on the contrary,
appears to have been implemented by the members of the association

It is recognized by authorities that 'every corporation has the inherent

power to adopt by-laws 'for its internal government, and to regulate the
conduct and prescribe the rights and duties of its members towards itself
and among themselves in reference to the management of its affairs. In
this jurisdiction, under section 21 of the Corporation Law, a corporation

may prescribe in its by-laws "the qualifications, duties and compensation

of directors, officers and employees... "This must necessarily refer to a
qualification in addition to that specified by section 30 of the Corporation
Law, which provides that "every director must own in his right at least
one share of the capital stock of the stock corporation of which he is a
director... "

The trial court declared the Contract unenforceable or simulated but

awarded P60,000 on the ground that no one should be unjustly enriched
at the expense of another (Article 2142, Civil Code). CA ruled in favor of
its validity and enforceability, on the ground of Punsalans apparent
authority to enter into the disputed agreement.

There is no vested right for a stockholder to be elected as director. Any

person "who buys stock in a corporation does so with the knowledge that
its affairs are dominated by a majority of the stockholders and that he
impliedly contracts that the will of the majority shall govern in all matters
within the limits of the act of incorporation and lawfully enacted by-laws
and not forbidden by law." Under section 22 of the same law, the owners
of the majority of the subscribed capital stock may amend or repeal any
by-law or adopt new by-laws. It cannot be said, therefore, that
Gokongwei has a vested right to be elected director.

ISSUE:
Whether Punsalan, as president of Peoples Aircargo, had apparent
authority to bind it to the contract. YES
HELD:
YES. 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.

Although in the strict and technical sense, directors of a private

corporation are not regarded as trustees, there cannot be any doubt that
their character is that of a fiduciary insofar as the corporation and the
stockholders as a body are concerned. An amendment which renders
ineligible, or if elected, subjects to removal, a director if he be also a
director in a corporation whose business is in competition with or is
antagonistic to the other corporation is valid. This is based upon the
principle that where the director is so employed in the service of a rival
company, he cannot serve both, but must betray one or the other. It is also
well established that corporate officers "are not permitted to use their
position of trust and confidence to further their private interests."

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. 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.

The doctrine of "corporate opportunity" is precisely a recognition by the

courts that the fiduciary standards could not be upheld where the
fiduciary was acting for two entities with competing interests. This
doctrine rests fundamentally on the unfairness, in particular
circumstances, of an officer or director taking advantage of an
opportunity for his own personal profit when the interest of the
corporation justly calls for protection.

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. Peoples
Aircagro had previously allowed its president to enter into the First
Contract with Sao without a board resolution expressly authorizing him;
thus, it had clothed its president with apparent authority to execute the
subject contract.

Indeed, access by a competitor to confidential information regarding

marketing strategies and pricing policies of San Miguel Corporation
would subject the latter to a competitive disadvantage and unjustly enrich
the competitor. The Constitution and the law prohibit combinations in
restraint of trade or unfair competition in section 2 of Article XIV.
Gokongwei is allowed to examine the books and records of San Miguel
International, Inc. but the petition is DISMISSED, insofar as it assails the
validity of the amended by-laws.

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 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.

G.R. No. 117847; October 7, 1998

PEOPLES AIRCARGO AND WAREHOUSING CO.
INC., petitioner vs. CA and STEFANI SAO, respondents.
PANGANIBAN, J.:
FACTS:
Peoples Aircargo and Warehousing Co., Inc. operates a customs bonded
warehouse at the old Manila International Airport in Pasay City. To obtain
a license from the Bureau of Customs, Antonio Punsalan Jr., the
corporation president, solicited a proposal from Stefani Sao for the
preparation of a feasibility study: professional engineering consultancy
services. The Bureau issued a license to operate. Sao joined the Bureau
as special assistant to then Commissioner Alex Padilla. Meanwhile,
Punsalan sold his shares in Peoples Aircargo and resigned as its president
in 1987.

In the case at bar, Peoples Aircargo, through its president Antonio

Punsalan Jr., entered into the First Contract without first securing
board approval. Despite such lack of board approval, it did not object to
or repudiate said contract, thus clothing its president with the power to
bind the corporation.
Hence, Sao should not be faulted for believing that Punsalans
conformity to the contract in dispute was also binding on Peoples
Aircargo. 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.

Sao filed a collection suit against Peoples Aircargo. He alleged that he

had prepared an operations manual, conducted a seminar-workshop for its
employees and delivered to it a computer program; but that, despite
demand, Peoples Cargo refused to pay him for his services.

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. The president of a corporation is presumed to act for the
general objectives of the same. A corporation, by accepting benefits of a
transaction entered into without authority, has ratified the agreement and
is, therefore, bound by it. Petition DENIED.

Peoples Aircargo denied the claim and further alleged that the letteragreement was signed by Punsalan without authority, in collusion with
Sao in order to unlawfully get some money, 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.

In the context of P.D. No. 902-A, corporate officers are those officers of a
corporation who are given that character either by the Corporation Code
or by the corporations by-laws. Section 25 of the Corporation Code
specifically enumerated who are these corporate officers, to wit: (1)
president; (2) secretary; (3) treasurer; and (4) such other officers as may
be provided for in the by-laws. Conformably with Section 25, a position
must be expressly mentioned in the by-laws in order to be considered as a
corporate office.

MARC II MARKETING, INC. and LUCILA V. JOSON, petitioners

vs. ALFREDO M. JOSON, respondent
PEREZ, J.:
FACTS:
Marc II Marketing, Inc. is primarily engaged in buying household
appliances and products and other items. It took over the business
operations of Marc Marketing, Inc. which was made non-operational
following its incorporation and registration with the Securities and
Exchange Commission (SEC). Lucila V. Joson is the President and
majority stockholder.

A careful perusal of the corporations by-laws explicitly reveal that the

position
of
General
Manager
was
not
among
those
enumerated. Paragraph 2, Section 1, Article IV empowered its B.O.D. to
appoint such other officers as it may determine necessary or proper. It is
by virtue of this enabling provision that made the position of General
Manager a corporate office.

Alfredo M. Joson was the General Manager, incorporator, director and

stockholder. In the Management Contract with Alfredo, he shall be
entitled to 30% of its net income for his work as General Manager. He
will also be granted 30% of its net profit to compensate for the possible
loss of opportunity to work overseas.

not specifically mentioned in the roster of corporate officers in its

corporate by-laws. The enabling clause cannot make such position a
corporate office. Unless and until the corporations by-laws is amended,
such position cannot be considered as a corporate office within the realm
of Section 25 of the Corporation Code. This is to safeguard the
constitutionally enshrined right of every employee to security of
tenure. Jurisdiction properly belongs with the Labor Arbiter and not with
the RTC.

Pursuant to Section 1, Article IV of the corporations by-laws, its

corporate officers are as follows: Chairman, President, one or more VicePresident(s), Treasurer and Secretary. Its Board of Directors, however,
may, from time to time, appoint such other officers as it may determine to
be necessary or proper.

The Management Contract executed between Alfredo and Lucila has no

binding effect on the corporation for having been executed way before its
incorporation, pursuant to Section 19 of the Corporation Code. Logically,
there is no corporation to speak of prior to an entitys incorporation. And
no contract entered into before incorporation can bind the corporation.

Per an undated Secretarys Certificate, the corporations B.O.D conducted

a meeting where Alfredo was appointed as one of its corporate officers
with the designation or title of General Manager to function as a
managing director with other duties and responsibilities that the B.O.D.
may provide and authorize.

Lucila acted in bad faith and with malice in effecting the dismissal. The
corporation is jointly and solidarily liable with Lucila. It is proper to still
remand the records to the Labor Arbiter to determine the proper
computation of separation pay.

The corporation decided to stop and cease its operations, as evidenced by

an Affidavit of Non-Operation, due to poor sales collection aggravated by
the inefficient management of its affairs. Alfredo was apprised of the
termination of his services since his services as G.M. would no longer be
necessary for the winding up of its affairs.

G.R. No. 159795; July 30, 2004

SPOUSES ROBERTO & EVELYN DAVID and COORDINATED
GROUP, INC., petitioners vs. CONSTRUCTION INDUSTRY AND
ARBITRATION COMMISSION and SPS. NARCISO & AIDA
QUIAMBAO, respondents
PUNO, J.:
FACTS:
COORDINATED GROUP, INC. (CGI) is a corporation engaged in the
construction business, with ROBERTO and EVELYN DAVID as its
President and Treasurer, respectively. In 1997, NARCISO and AIDA
QUIAMBAO engaged the services of CGI to design and construct a fivestorey concrete office/residential building on their land in Tondo, Manila.

Feeling aggrieved, Alfredo filed a Complaint for Reinstatement and

Money Claim before the Labor Arbiter. He averred that Lucila dismissed
him from his employment due to the feeling of hatred she harbored
towards his family, rooted in the filing by Lucilas estranged husband,
Alfredos brother, of a Petition for Declaration of Nullity of their
Marriage.
The Labor Arbiter ruled in favor of Alfredo. It declared the dismissal as
illegal. NLRC reversed and ruled in favor of the corporation and Lucila
by giving credence to the Secretarys Certificate, thus the case is a purely
intra-corporate controversy. CA declared that Labor Arbiter has
jurisdiction and remanded the case to the NLRC to determine monetary
award. M.R. denied. Hence, the petition.

The completion of the construction was extended upon agreement of the

parties. It appears, however, that spouses David failed to follow the
specifications and plans as previously agreed upon. Spouses Quiambao
demanded the correction of the errors but to no avail. The former
rescinded the contract after paying 74.84% of the cost of construction.
They then engaged the services of another contractor, RRA and
Associates, to inspect the project and assess the actual accomplishment in
the construction of the building. It was found that CGI revised and
deviated from the structural plan of the building without notice or
approval.

ISSUE:
Whether Alfredo as General Manager of the corporation is a corporate
officer. NO
HELD:
NO. He is a mere employee with high position. When the person
dismissed or terminated is a corporate officer, the case automatically falls
within the province of the RTC. The dismissal of a corporate officer is
always regarded as a corporate act and/or an intra-corporate controversy.
Under Section 5 of Presidential Decree No. 902-A, intra-corporate
controversies are those controversies arising out of intra-corporate or
partnership relations, between and among stockholders; between any or
all of them and the corporation; and between such corporation and
the State insofar as it concerns their individual franchise or right to exist
as such entity. It also includes controversies in the election or
appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations.

Spouses Quiambao filed a case for breach of contract in RTC Manila. The
parties agreed to submit the case for arbitration to the CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION (CIAC). The arbitrator
rendered judgment against CGI and spouses David. CA affirmed. Hence,
this petition for review on certiorari.
ISSUE:
Whether Spouses David can be held jointly and severally liable with CGI
in the payment of the arbitral award even if they are merely its corporate
officers. YES

Accordingly, in determining whether the SEC (now the RTC) has

jurisdiction over the controversy, the status or relationship of the parties
and the nature of the question that is the subject of their controversy must
be taken into consideration.

HELD:
YES. At first glance, the issue may appear to be a question of law as it
would call for application of the law on the separate liability of a
corporation. However, the law can be applied only after establishing a

factual basis, i.e., whether spouses David as corporate officers were

grossly negligent in ordering the revisions on the construction plan
without the knowledge and consent of spouses Quiambao.

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.

As a general rule, the officers of a corporation are not personally liable

for their official acts unless it is shown that they have exceeded their
authority. However, the personal liability, along with corporation, may so
validly attach when the officer assents to a patently unlawful act of the
corporation or for bad faith or gross negligence in directing its affairs.

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, within or beyond the scope of his
ordinary powers.

The facts showed that spouses David acted in bad faith. When asked
about the deviations, they defended themselves but later on admitted that
they deviated to reduce cost without approval of spouses Quiambao. The
Court will not review the factual findings of an arbitral tribunal upon the
artful allegation that such body had "misapprehended facts" and will not
pass upon issues which are, at bottom, issues of fact, no matter how
cleverly disguised they might be as "legal questions." The Court will not,
therefore, permit the parties to relitigate before it the issues of facts
previously presented and argued before the Arbitral Tribunal, save only
where a clear showing is made that the Arbitral Tribunal committed an
error so egregious and hurtful to one party as to constitute a grave abuse
of discretion resulting in lack or loss of jurisdiction. Petition
DISMISSED.

An officer of a corporation who is authorized to purchase the stock of

another corporation has the implied power to perform all other
obligations arising therefrom, such as payment of the shares of stock. By
allowing its president to sign the Agreement on its behalf, petitioner
clothed him with apparent capacity to perform all acts which are
expressly, impliedly and inherently stated therein. Decision AFFIRMED.

G.R. No. 170352; June 1, 2011

MEGAN SUGAR CORPORATION, petitioner vs. RTC IloiloDumangas Branch, NEW FRONTIER SUGAR CORP., and
EQUITABLE PCI BANK, respondents
PERALTA, J.:
FACTS:
In 1993, New Frontier Sugar Corporation (NFSC) obtained a loan from
Equitable PCI Bank (EPCIB). Said loan was secured by a real estate
mortgage over NFSCs 92-hectare land in Passi City and a chattel
mortgage over NFSCs sugar mill.

G.R. No. 125778; June 10, 2003

INTER-ASIA INVESTMENTS INDUSTRIES, INC., petitioner vs.
CA and ASIA INDUSTRIES, INC., respondents
CARPIO-MORALES, J.:
FACTS:
In 1978, Inter-Asia Industries, Inc., by a Stock Purchase Agreement, sold
to Asia Industries, Inc. for P 19.5 M all its right, title and interest in and to
all the outstanding shares of stock of FARMACOR, INC. Respondent
paid petitioner P 12 M. From the STATEMENT OF INCOME AND
DEFICIT attached to the financial report submitted by SGV, it appears
that FARMACOR had a deficit of P 11,244,225.00. Since the
stockholders equity amounted to P 10 M, FARMACOR had a net worth
deficiency of P1,244,225.00. Private respondent having already paid
petitioner P12,000,000.00, it was entitled to a refund of P5,744,225.
Petitioner proposed, by letter, signed by its president, that private
respondents claim for refund be reduced to P4,093,993.00, it promising
to pay the cost of the Northern Cotabato Industries, Inc. (NOCOSII)
superstructures in the amount of P759,570.00. To the proposal respondent
agreed. Petitioner, however, reneged on its promise.

In 2000, because of liquidity problems and continued indebtedness to

EPCIB, NFSC entered into a Memorandum of Agreement (MOA) with
Central Iloilo Milling Corporation (CIMICO), whereby the latter agreed
to take-over the operation and management of the NFSC raw sugar
factory and facilities for the period covering crop years 2000 to 2003.
In 2002, NFSC filed a complaint for specific performance and
collection against CIMICO for the latters failure to pay its obligations
under the MOA. CIMICO filed a case against NFSC for sum of money
and/or breach of contract.
Because of NFSCs failure to pay its debt, EPCIB instituted extra-judicial
foreclosure proceedings over NFSCs land and sugar mill. EPCIB was the
sole bidder and was thus able to buy the entire property and consolidate
the titles in its name. EPCIB then employed the services of Philippine
Industrial Security Agency (PISA) to help it in its effort to secure the land
and the sugar mill.

Private respondent filed a complaint against petitioner in RTC Makati for

the recovery of P4,853,503.00 plus interest. It was granted. CA affirmed.
Hence, the petition for review on certiorari.
Petitioner argues that the letter-proposal which was signed by its
president has no legal force and effect against it as it was not authorized
by its board of directors, it citing the Corporation Law which provides
that unless the act of the president is authorized by the board of directors,
the same is not binding on it.

CIMICO impleaded PISA and EPCIB. RTC Iloilo issued a restraining

order, directing EPCIB and PISA to desist from taking possession over
the property in dispute. Hence, CIMICO was able to continue its
possession over the property.

ISSUE:
Whether the letter of the president of the petitioner is not binding on the
petitioner, being ultra vires. NO

CIMICO and Megan Sugar Corporation (MEGAN) entered into a

MOA whereby MEGAN assumed CIMICOs rights, interests and
obligations over the property.

HELD:
NO. The letter signed by petitioners president is valid and binding. 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 x x x powers, attributes and
properties expressly authorized by law or incident to its existence.

Passi Iloilo Sugar Central, Inc. (Passi Sugar) filed with the RTC a Motion
for Intervention claiming to be the vendee of EPCIB. EPCIB filed a
Motion for Delivery/Deposit of Mill Shares/Rentals. Passi Sugar filed a
Motion to Order Deposit of Mill Share Production of MEGAN and/or
CIMICO. NFSC filed a Motion to Order Deposit of Millers Share (37%)
or the Lease Consideration under the MOA between NFSC and CIMICO.
Atty. Reuben Sabig entered as counsel for MEGAN, which several
counsels opposed. But he continued on, filing omnibus motion, etc. in
behalf of MEGAN. In the hearing, he claimed to protect the interests of
MEGAN as they were served summons and what he will do or say in
court will bind MEGAN.

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. Under
this provision, the power and responsibility to decide whether the
corporation should enter into a contract that will bind the corporation is

RTC issued an Order granting EPCIBs motion for the placement of

millers share in escrow. Aggrieved, MEGAN filed before the CA a
petition for certiorari, and argued mainly on two points; first, that the
RTC erred when it determined that MEGAN was subrogated to the
obligations of CIMICO and; second, that the RTC had no jurisdiction
over MEGAN. It was dismissed. M.R. denied. Hence, the petition.

MEGAN is already estopped from assailing the jurisdiction of the

RTC. The doctrine of estoppel is based upon the grounds of public policy,
fair dealing, good faith and justice, and its purpose is to forbid one to
speak against his own act, representations, or commitments to the injury
of one to whom they were directed and who reasonably relied thereon.
MEGAN is estopped from assailing both the authority of Atty. Sabig and
the jurisdiction of the RTC. While it is true, as claimed by MEGAN, that
Atty. Sabig said in court that he was only appearing for the hearing of
Passi Sugars motion for intervention and not for the case itself, his
subsequent acts, coupled with MEGANs inaction and negligence to
repudiate his authority, effectively bars MEGAN from assailing the
validity of the RTC proceedings under the principle of estoppel.

ISSUE:
Whether MEGAN is estopped from assailing the jurisdiction of the RTC
due to Atty. Sabigs acts. YES
HELD:
YES. MEGAN points out that its board of directors did not issue a
resolution authorizing Atty. Sabig to represent the corporation before the
RTC. It contends that Atty. Sabig was an unauthorized agent and as such
his actions should not bind the corporation. Both EPCIB and NFSC,
however, claim that MEGAN is already estopped from assailing the
authority of Atty. Sabig. They contend that Atty. Sabig had actively
participated in the proceedings before the RTC and had even filed a
number of motions asking for affirmative relief. They also point out that
Jose Concha, who was a member of the Board of Directors of MEGAN,
accompanied Atty. Sabig during the hearing. Lastly, EPCIB and NFSC
contend that all the motions, pleadings and court orders were sent to the
office of MEGAN; yet, despite the same, MEGAN never repudiated the
authority of Atty. Sabig.

MEGAN can no longer deny the authority of Atty. Sabig as they have
already clothed him with apparent authority to act in their behalf. Atty.
Sabig may not have been armed with a board resolution, but the
appearance of Concha made the parties assume that MEGAN had
knowledge of Atty. Sabigs actions.
Apparent authority, or what is sometimes referred to as the "holding out"
theory, or doctrine of ostensible agency, imposes liability, not as the
result of the reality of a contractual relationship, but rather because of the
actions of a principal or an employer in somehow misleading the public
into believing that the relationship or the authority exists.
Petition DENIED.