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 Saño
for the preparation of a feasibility study. Saño 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 Saño's offer, as another company priced a similar proposal at only P15,000.
However, Punsalan preferred Saño'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 Saño a
letter confirming their agreement. Accordingly, Saño 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, Saño 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 Saño. 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. Saño 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,
Saño 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, Saño 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 Saño 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 Saño 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 Saño 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 Saño in the full amount
of P400,000, representing payment of Saño 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, Saño 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. The
enforceability of contracts under Article 1403(2) is ratified "by the acceptance
of benefits under them" under Article 1405.