People's Aircargo and Warehousing Co. Inc. vs.

Court of Appeals
[GR 117847, 7 October 1998]
Facts:
People's Aircargo and Warehousing Co. Inc. (PAWCI) is a domestic
corporation, which was organized in the middle of 1986 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
Stefani Sao for the preparation of a feasibility study. Sao submitted a
letter-proposal dated 17 October 1986 ("First Contract") to Punsalan, for the
project feasibility study (market, technical, and financial feasibility) and
preparation of pertinent documentation requirements for the application,
worth P350,000.
Initially, Cheng Yong, the majority stockholder of PAWCI, objected to Sao's
offer, as another company priced a similar proposal at only
P15,000. However, Punsalan preferred Sao's services because of the
latter's membership in the task force, which was supervising the transition
of the Bureau of Customs from the Marcos government to the Aquino
Administration. On 17 October 1986, PAWCI, through Punsalan, sent Sao a
letter confirming their agreement.
Accordingly, Sao prepared a feasibility study for PAWCI which eventually
paid him the balance of the contract price, although not according to the
schedule agreed upon. On 4 December 1986, upon Punsalan's request,
Sao sent PAWCI another letter-proposal ("Second Contract") formalizing its
proposal for consultancy services in the amount of P400,000. On 10 January
1987, Andy Villaceren, vice president of PAWCI, received the operations
manual prepared by Sao. PAWCI submitted said operations manual to the
Bureau of Customs in connection with the former's application to operate a
bonded warehouse; thereafter, in May 1987, 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. Sao also conducted, in the
third week of January 1987 in the warehouse of PAWCI, a three-day training
seminar for the latter's employees.
On 25 March 1987, Sao 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 on 7
March 1988. Meanwhile, Punsalan sold his shares in PAWCI and resigned as
its president in 1987. On 9 February 1988, Sao filed a collection suit
against PAWCI. He alleged that he had prepared an operations manual for
PAWCI, conducted a seminar-workshop for its employees and delivered to it
a computer program; but that, despite demand, PAWCI refused to pay him
for his services. PAWCI, in its answer, denied that Sao had prepared an
operations manual and a computer program or conducted a seminarworkshop for its employees.
It further alleged that the letter-agreement was signed by Punsalan without
authority, in collusion with Sao in order to unlawfully get some money
from PAWCI, 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. The Regional Trial Court (RTC) of Pasay City, Branch
110, rendered a Decision dated 26 October 1990 declared the Second
Contract unenforceable or simulated. However, since Sao had actually
prepared the operations manual and conducted a training seminar for
PAWCI 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).
The trial Court determined the amount "in light of the evidence presented
by defendant on the usual charges made by a leading consultancy firm on
similar services." Upon appeal, and on 28 February 1994, the appellate
court modified the decision of the trial court, and declared the Second
Contract valid and binding on PAWCI, which was held liable to Sao in the
full amount of P400,000, representing payment of Sao services in
preparing the manual of operations and in the conduct of a seminar for
PAWCI. As no new ground was raised by PAWCI, reconsideration of the
decision was denied in the Resolution promulgated on 28 October 1994.
PAWCI filed the Petition for Review.
Issue:

Whether a single instance where the corporation had previously

allowed its president to enter into a contract with another without
a board resolution expressly authorizing him, has clothed its
president with apparent authority to execute the subject contract.

Held:
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. Herein, PAWCI, through its president Antonio Punsalan Jr.,
entered into the First Contract without first securing board approval.
Despite such lack of board approval, PAWCI 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 PAWCI.
The First Contract was consummated, implemented and paid without a
hitch. Hence, Sano should not be faulted for believing that Punsalan's
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 agent's authority.

Furthermore, Sao prepared an operations manual and conducted a

seminar for the employees of PAWCI in accordance with their contract.
PAWCI accepted the operations manual, submitted it to the Bureau of
Customs and allowed the seminar for its employees. As a result of its
aforementioned actions, PAWCI was given by the Bureau of Customs a
license to operate a bonded warehouse. Granting arguendo then that the
Second Contract was outside the usual powers of the president, PAWCI's
ratification of said contract and acceptance of benefits have made it
binding, nonetheless.

prepared such manual operations and at the same time alleged that the
letter-agreement was signed by Punsalan without authority and as such
unenforceable. It alleges that the disputed contract was not authorized by
its board of directors.

The enforceability of contracts under Article 1403(2) is ratified "by the

acceptance of benefits under them" under Article 1405.

Facts:

Yes, the Second Contract is binding and enforceable. 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.

Petitioner is a domestic corporation organized in 1986 to operate a customs

bonded warehouse at the old Manila International Airport (MIA). To obtain a
license from the Bureau of Customs, Antonio Punsalan, Jr., the corporation
president, solicited a proposal from private respondent Stefani Sano for the
preparation of a feasibility study. Sano submitted a letter proposal dated
October 17, 1986 (First Contract) to Punsalan regarding his request for
professional engineering consultancy services which services are offered in
the amount of P350,000.00.

However, 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.

People's Aircargo and Warehousing Co. Inc. vs. Court of Appeals

[GR 117847, 7 October 1998]

Initially, Cheng Yang, the majority stockholder of petitioner, objected to said

offer as another company can provide for the same service at a lower price.
However, Punsalan preferred Sanos services because of latters
membership in the task force, which task force was supervising the
transition of the Bureau from the Marcos to the Aquino government.
Petitioner, through Punsalan, thereafter confirmed the contract.
On December 4, 1986, upon Punsalans request, private respondent sent
petitioner another letter-proposal (Second Contract) which offers the same
service already at P400,000.00 instead of the previous P350,000.00 offer.
On January 10, 1987, Andy Villaceren, vice-president of petitioner, received
the operations manual prepared by Sano and which manual operations was
submitted by petitioner to the Bureau in compliance for its application to
operate a bonded warehouse. Thereafter, in May 1987, the Bureau issued
to it a license to operate. Private respondent also conducted in the third
week of January 1987 in the warehouse of petitioner, a three-day training
seminar for the petitioners employees.
On February 9, 1988, 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, on its part, denied that Sano had

Issue:

Whether or not the Second Contract signed by Punsalan is

enforceable and binding against petitioner.

Held:

Thus private respondent shall not be faulted for believing that Punsalans
conformity to the contract in dispute was also binding on petitioner. 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.
Furthermore, private respondent prepared an operations manual and
conducted a seminar for the employees of petitioner in accordance with
their contract. Petitioner accepted the operations manual, submitted it to
the Bureau of Customs and allowed the seminar for its employees. As a
result of its aforementioned actions, petitioner was given by the Bureau of
Customs a license to operate a bonded warehouse.
Granting arguendo then that the Second Contract was outside the usual
powers of the president, petitioner's ratification of said contract and
acceptance of benefits have made it binding, nonetheless. The
enforceability of contracts under Article 1403(2) is ratified "by the
acceptance of benefits under them" under Article 1405.