RAMIREZ v. ORIENTALIST CO.
and FERNANDEZ Oriental is the principal debtor while Fernandez is
Street, J. 1918 38 Phil. 634
Doctrines • According to the Corporation Law, corporate
powers shall be exercised and all corporate
business conducted by the BOD. The authority of
the subordinate agent of a corporation often
depends upon the course of dealings which the
company or its director has sanctioned. It may be
established sometimes without reference to official
record of the proceedings of the board, by proof
of the usage which the company had permitted
to grow up in business and of the acquiescence of
the board charged with the duty of supervising
and controlling the company’s business.
• In dealing with corporations, the public at large is
bound to rely upon outward appearances, and
relying on such, if it be found that the directors
permitted the agent to hold himself out as having
authority to bind or acquiesced in the contract
and accepted the benefits therefrom, the
corporation will be bound (doctrine of apparent
authority)
Summary Orientalist Company, desired to be the exclusive agent
of Ramirez for two film outfits – Éclair and Milano.
Through the active involvement and negotiations of
Ramon Fernandez, a director of the Company and also
its treasurer, with Ramirez, the Company was able to
secure an offer, the terms of which were acceptable to
the Board as well as to the stockholders. It appears that
this acceptance of the terms of the offer was decided
during an informal meeting of the board, and
conveyed to Ramirez in two letters signed only by
Fernandez, both in his individual and his capacity as
treasurer. The company was not financially capable to
comply with the obligations set forth in the agency
contract, and about this time films had already been
delivered to the company. Two stockholders meetings
were organized, the first adopted a resolution
approving the action of the board on the offer, the
second raising the contingency of the lack of funds and
the proviso that the four officers involved, including
Fernandez would continue importing the films using their
own funds. Ramirez sued Orientalist and Fernandez for
what is due on the contract. Trial Court ruled that
subsidiarily liable. On appeal the company alleged that
Fernandez, in signing, had no authority to bind the
company. The Court ruled that he did, as it was
pursuant to an agreement among the board members.
It also said that, assuming that Fernandez did not have
the authority, the company is still liable. 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.
Facts • The Orientalist Company was engaged in the
theater business in Manila. They exhibit
cinematographic films.
• Plaintiff JF Ramirez, a resident of Paris, is in the
business of marketing films for a manufacturer
engaged in production or distribution of
cinematographic materials. He was represented in
the city of Manila by his son, Jose.
• In 1913, there were negotiations between the
officials of Orientalist and Jose Ramirez, as agent of
JF Ramirez, for the exclusive agency of two marks of
films (Éclair Films and Milano Films) in the hands of
Orientalist.
• July 1913 – Jose Ramirez, as representative of his
father, placed in the hands of defendant Ramon
Fernandez (one of the directors and the treasurer of
Orientalist) an offer, stating the terms upon which
Ramirez would undertake to supply from Paris the
films.
o Offer is good until the end of July. Since it is
only about 2 days of this period remained,
Orientalist must decide quickly. Ramon
Fernandez, on July 30, had an informal
conference with all the members, except
one of Orientalist’s BOD. With the approval of
those with whom he had communicated,
addressed a letter to Jose Ramirez
accepting the offer contained in the
memorandum of July 4th for the exclusive
agency of Éclair films.
 o On August 5, he also accepted the offer of
the exclusive agency for the Milano films.
• Most material portion of the two letters of
acceptance: “We willingly accepted the offer
under the terms communicated by your father in his
letter dated at Paris on July 4th of the present year.”
o These communications were signed in the
following form:
ORIENTALIST COMPANY,
BY R.J. FERNANDEZ
Treasurer,
RJ FERNANDEZ
o Note 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 assigned by RJ
Fernandez, in the capacity of treasurer.
• The films began to arrive in Manila, and a draft for
the cost and expenses incident to each shipment
was attached to the proper bill of lading. Orientalist
Company had no funds to meet these obligations
and the first few drafts were dealt with in the
following manner:
o The drafts, upon presentment through the
bank, were accepted in the name of the
company by its president B. Hernandez, and
were taken up by the latter with his own
funds.
o Hernandez treated the films as his own
property, since he paid for the drafts.
o The films never came into the actual
possession of Orientalist as owner. Hernandez
rented the films to the Company and they
were exhibited by it in the Oriental Theater
under an arrangement between Hernandez
and the theater manager.
• Between February 17, 1914 and April 30, 1914 several
remittances of films from Paris arrived in Manila. All of
the drafts accompanying these films were drawn
upon Orientalist, and all were accepted in the
name of the company by its president, Hernandez,
except the last, which was accepted by Hernandez
individually.
o 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 himself to take them
up as dishonored by non-payment.
• JF Ramirez instituted an action against the Orientalist
Company and Ramon Fernandez.
o 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 Ramirez.
o The trial court declared Orientalist Company
as the principal debtor, and Ramon J.
Fernandez was declared to be liable
subsidiarily as guarantor. Both of the parties
defendant appealed.
o Note: The action is founded upon the liability
created by the two letters (dated July 30
and August 5), in connection with plaintiff’s
offer of July 4, 1913. The action is not based
upon the dishonored drafts which were
accepted by B. Fernandez in the name of
Orientalist Company.
Ratio/Issues I. WON Fernandez’s actions bound the company. 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 that his name was signed as a guaranty that the
the corporation on the faith of the ostensible contract would be approved by the corporation,
authority exercised by some of the corporate while Ramirez said that the name was put on the
officers. contract for the purpose of guaranteeing its
performance. The Court believed that the latter was
II. WON the company is still liable, assuming that the the real intention of the parties.
company was able to deny the authority of Fernandez.
YES. Held Judgment appealed from is affirmed.
• 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.

III. What is the character of liability assumed by

Fernandez. – That of 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