MEMO FOR: JAIC/RCT/JBC

FROM: DSC
SUBJECT: Whether a resident agent can be cited for indirect
contempt

In the case of Luzviminda Visayan v. NLRC 1, the Supreme Court

interpreted Sec. 23 of the Corporation Code as being clear that “a corporation
can act only through its board of directors.”

Section 23 provides as follows:

“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 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.
xxx xxx xxx”

However, a corporation, like a natural person who may authorize another

to do certain acts for and in his behalf, through its board of directors, may legally
delegate some of its functions and powers to its officers, committees or agents
appointed by it. In the absence of an authority from the board of directors, no
person, not even the officers of the corporation, can validly bind the corporation. 2

A corporate officer's power as an agent of the corporation must therefore

be sought from the statute, the charter, the by-laws, or in a delegation of authority
to such officer, from the acts of the board of directors, formally expressed or
implied from a habit or custom of doing business. 3

Under the rules of agency, an agent of the corporation cannot bind the
corporation if his acts are beyond the scope of his authority as determined by the
Board of Directors. Corollarily, the agent has no personal liability to a third person
if he acts within the scope of his authority.

It is submitted therefore that the issue of whether the Resident Agent of

Ferrero Asia Limited (Singapore Branch) can be cited for indirect contempt of
court will depend upon the scope of the Resident Agent’s authority to act for
Ferrero.

1
G.R. No. 69999, April 30, 1991
2
Campos, Comments on the Corporation Code
3
Vicente vs. Geraldez, L-32473, 53 SCRA 210
 In the case of Smith, Bell and Co., Inc. v. Court of Appeals 4, the Supreme
Court held that the Collecting Agent of an insurance company cannot be made
solidarily liable to pay insurance proceeds to the insured because the liability is
solely imputed against the principal and not to the agent who merely acted within
the scope of his authority on behalf of the principal. Thus, if the principal does not
want to pay, the assets of the agent who acted within the scope of his authority
cannot be subject to a writ of execution in favor of the insured so that his
insurance claims can be satisfied. Thus, in the cited case, the Supreme Court
said:

“An adjustment and settlement agent is no different from any

other agent from the point of view of his responsibility (sic), for he
also acts in a representative capacity. Whenever he adjusts or
settles a claim, he does it in behalf of his principal, and his action is
binding not upon himself but upon his principal. And here again, the
ordinary rule of agency applies.5”

Under the Corporation Code, the resident agent’s authority is merely to

receive summons and other legal processes. Section 128 of the Corporation
Code provides that:

Sec. 128. Resident agent; service of process. - The

Securities and Exchange Commission shall require as a condition
precedent to the issuance of the license to transact business in the
Philippines by any foreign corporation that such corporation file with
the Securities and Exchange Commission a written power of
attorney designating some person who must be a resident of the
Philippines, on whom any summons and other legal processes may
be served in all actions or other legal proceedings against such
corporation, and consenting that service upon such resident agent
shall be admitted and held as valid as if served upon the duly
authorized officers of the foreign corporation at its home office.

xxx xxx xxx

Therefore, while the Writ of Preliminary Mandatory Injunction provides that

Ferrero, its representatives, agents and all persons acting in its behalf are being
enjoined from implementing the Notice of Non-Renewal, if the resident agent has
no authority from Ferrero to implement such Notice of Non-Renewal, then such
resident agent cannot be held in contempt of court because he has no authority
to commit acts in furtherance of or in the enforcement of the Notice of Non-
Renewal.

4
G.R. No. 110668, February 6, 1997
5
Cited by the Supreme Court from the case of Salonga vs. Warner, Barnes & Co., Ltd., 88 Phil. 125 (1951)
 This is because the Resident Agent is not a real party in interest in the
contemplated indirect contempt proceeding which is a separate proceeding
which will pass upon the issue of whether or not those enjoined from committing
acts in furtherance of or in the enforcement of the Notice of Non-Renewal had
been complying with such order.

Section 2 of Rule 3 of the Rules of Court defines a real party in interest as

follows:

“Sec. 2. Parties in interest. – A real party in interest is the

party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted
or defended in the name of the real party in interest.”

The liability for indirect contempt, therefore, lies with the Board of
Directors of Ferrero and all its officers, agents, representatives and all persons
acting on its behalf who have in their power to commit the acts in furtherance of
or in the enforcement of the Notice of Non-Renewal.

In the case of People v. Concepcion, 6 the Supreme Court held that a

command prohibiting the corporation to do something is a command prohibiting
the directors to do that which is prohibited, to wit:

“As to the remaining counts, the defendant insists that the

command that a corporation shall not do a certain act is not a
command that the directors shall not do the act. A corporation,
however, is a mere conception of the legislative mind. It exists only
on paper through the command of the legislature that its mental
conception shall be clothed with power. All its power resides in the
directors. Inanimate and incapable of thought, action or neglect, it
cannot hear or obey the voice of the legislature except through its
directors. It can neither act nor omit to act except through them.
Hence a command addressed to a corporation would be idle and
vain unless the legislature in directing the corporate body, acting
wholly by its directors, to do a thing required or not to do a thing
prohibited, meant that the directors should not make or cause the
corporation to do what was forbidden, or omit to do what was
directed. We think, as the appellate division held, that when the
corporation itself is forbidden to do an act, the prohibitions extends
to the board of directors and to each director, separately and
individually.”

6
G.R. No. L-18535, August 15, 1922