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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
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.
Cebu Country Club Inc., v. Elizagaque
G.R. No. 160273
January 18, 2008


Cebu Country Club is a domestic corporation operating as a non-profit and non-stock private membership club.
Sometime in 1987, San Miguel Corporation, a special company proprietary of CCCI, designated Ricardo
Elizagaque, its senior vice-president and operations manager for the Visayas and Mindanao, as a special non-
proprietary member. In 1996, Elizagaque filed an application for proprietary membership. He purchased a share for
Php3 million. Unknown to Elizagaque, however, was that the club had amended their by-laws in which a unanimous
vote of the directors is required before an applicant may be admitted. This amendment was not reflected in the
application form Elizagaque filled up. The Board adopted a black ball system in which the directors would drop a
white ball when they approve of the applicant and a black one if they do not. During the voting, there was one black
ball, which means the unanimous decision was not satisfied.

On August 1, 1997, Elizagaque received a letter from CCCI’s corporate secretary, informing him that the board
disapproved his application for proprietary membership. Elizagaque, through Edmundo Misa, wrote a letter of
reconsideration, but no reply came. They wrote two more times, but CCCI still did not reply. On December 1998,
Elizagaque filed a complaint for damages against CCCI.

Is Elizagaque entitled to payment of damages?

Yes. The Court cited Articles 19 and 21 of the Civil Code in its decision.

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of
some illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article
19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held

It was shown that Elizagaque’s letters remained unanswered and he was not even made aware of the club’s new
rules. In defense of the failure to print a new application form with the amendments added, CCCI said that it was not
able to print the updated form because of economic reasons. Being an exclusive golf club, it is unbelievable that the
club would not be able to pay for printing costs of the updated application forms.

The Court found that CCCI violated the rules governing human relations and is thus liable for damages pursuant to
Article 19 in relation to Article 21 of the Civil Code.
Valle Verde Country Club, Inc. v. Africa
G.R. No. 151969, September 4, 2009, (Brion, J.)

FACTS: In 1996, during the Annual Stockholders’ Meeting of Valle Verde Country Club, Inc. (VVCC),
Villaluna, Dinglasan, Makalintal, Ortigas III, Salta, Santiago, Jr., Dee, Sunico, and Gamboa were elected
as members of the VVCC Board of Directors. From 1997 to 2001, the requisite quorum for the holding of
the stockholders’ meeting could not be obtained. Consequently, the above-named directors continued to
serve in the VVCC Board in a hold-over capacity.

In 1998, Dinglasan resigned from his position. He was replaced by Roxas who was elected by the board
still constituting a quorum. A year later, Makalintal also resigned and was replaced by Jose Ramirez in
2001. Ramirez was elected by the remaining members of the Board.

Africa, a member of VVCC, questioned the election of Roxas and Ramirez with the SEC and the RTC,
respectively. Before the RTC, Africa alleged that a year after Makalintal’s election as member of the
VVCC Board in 1996, his term – as well as those of the other members of the VVCC Board – should be
considered to have already expired. According to him, for the members to exercise the authority to fill in
vacancies in the board of directors, that there should be an unexpired term during which the successor-
member shall serve. Further, that the resulting vacancy should have been filled by the stockholders in a
regular or special meeting called for that purpose, and not by the remaining members of the VVCC
Board, as was done in this case.

The RTC and the SEC ruled in favor of Africa. VVCC filed a petition for review on certiorari.

ISSUE: Whether or not the remaining directors of the corporation’s Board, still constituting a quorum,
can elect another director to fill in a vacancy caused by the resignation of a hold-over director.

RULING: Petition DENIED. Under Section 29 of the Corporation Code, a vacancy occurring in the
board of directors caused by the expiration of a member’s term shall be filled by the corporation’s
stockholders. As the vacancy in this case was caused by Makalintal’s resignation, not by the expiration of
his term, VVCC insists that the board rightfully appointed Ramirez to fill in the vacancy.

The holdover period is not part of the term of office of a member of the board of directors. In several
cases, we have defined "term" as the time during which the officer may claim to hold the office as of
right, and fixes the interval after which the several incumbents shall succeed one another. The term of
office is not affected by the holdover.

Section 23 of the Corporation Code declares that the term of the members of the board of directors shall
be only for one year; their term expires one year after election to the office. After the lapse of one year
from his election, Makalintal’s term of office is deemed to have already expired. With the expiration of
Makalintal’s term of office, a vacancy resulted which, by the terms of Section 29, must be filled by the
stockholders of VVCC in a regular or special meeting called for the purpose. His resignation as a
holdover director did not change the nature of the vacancy; the vacancy due to the expiration of
Makalintal’s term had been created long before his resignation.