G.R. No.

109491      February 28, 2001

ATRIUM MANAGEMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, E.T. HENRY AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE
LEON, JR., AND HI-CEMENT CORPORATION, respondents.

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G.R. No. 121794      February 28, 2001

LOURDES M. DE LEON, petitioner,
vs.
COURT OF APPEALS, ATRIUM MANAGEMENT CORPORATION, AND HI-CEMENT
CORPORATION, respondents.

Fact: Hi-Cement Corporation, through its president and treasurer, issued checks in favor of E.T. Henry
Co. Inc., as payee. The latter subsequently endorsed the check to Atrium Management Corp.. However,
upon presentment for payment, the check was dishonored. Hence, petitioner filed an action for
collection against Hi-Cement Corp and E.T. Henry and Co. Inc. The trial court rendered its decision
holding the treasurer and president of Hi-Cement Corp solidarily liable with the corporation against
petitioner. On appeal, the CA absolved Hi-Cement from liability and ruled that the treasurer was not
authorized to issue the subject checks and the issuance of the same by the president and treasurer is an
ultra vires act.

Issue: Whether the issuance of the check is an ultra vires act

Held: NO. the court held that there is basis to rule that the act of issuing the checks was well within the
ambit od a valid corporate act, for it was for securing a loan to finance the activities of the corporation,
hence, not an ultra vires act. “ An ultra vires act is one committed outside the object for which a
corporation is created as defined by the law of its organization and therefore beyond the power
conferred upon it by law”. The term “ultra vires” is distinguished from an illegal act for the former is
merely voidable which may be enforced by performace, ratification, or estoppel, while the latter is void
and cannot be validated.”

[G.R. No. 111448. January 16, 2002.]

AF REALTY & DEVELOPMENT, INC. and ZENAIDA R. RANULLO, Petitioners, v.

DIESELMAN FREIGHT SERVICES, CO., MANUEL C. CRUZ, JR. and MIDAS
DEVELOPMENT CORPORATION, Respondents.

Facts: Dieselman Freight Co. owns a parcel of land in Pasig City. Subsequently, Manuel C. Cruz, Jr., a
member of its board of directors, issued a letter denominated as ‘Authority to Sell Real
Estate” to Cristeta Polintan to look for a buyer and negotiate the sale of said lot.
Notably, Cruz has no authority from Dieselman to sell the subject lot. The lot was
offered to AF Realty & Development, Inc. which accepted the same and issued a check
in favor of Dieselman as partial payment. Dieselman’s president received the check but
subsequently terminated the offer and demanded the return of its title and other
documents. Claiming that there was a perfected contract of sale between them, AF
Realty filed with a complaint for specific performance against Dieselman and Cruz, Jr. In
its answer, Dieselman alleged that there was no meeting of the minds between the
parties in the sale of the property and that it did not authorize any person to enter into
such transaction on its behalf. After trial, the lower court rendered the challenged
Decision holding that the acts of Cruz, Jr. bound Dieselman. On appeal, the Court of
Appeals reversed the judgment and held that since Cruz, Jr. was not authorized in
writing by Dieselman to sell the subject property to AF Realty, the sale was not
perfected.

Issue: Whether the Board of Director is authorized to sell the corporation’s property
without written authority

Ruling: No. Section 23 of the Corporation Code expressly provides that the corporate
powers of all corporations shall be exercised by the board of directors. Just as a natural
person may authorize another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its functions to individual officers or
agents appointed by it. Thus, contracts or acts of a corporation must be made either by
the board of directors or by a corporate agent duly authorized by the board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or connected
with, the performance of authorized duties of such director, are held not binding on the
corporation.

Further, the law on agency applies. Considering that respondent Cruz, Jr. Cristeta
Polintan and Felicisima Ranullo were not authorized by respondent Dieselman to sell its
lot, the supposed contract is void. Being a void contract, it is not susceptible of
ratification by clear mandate of Article 1409 of the Civil Code.

G.R. No. 125778. June 10, 2003

INTER-ASIA INVESTMENTS INDUSTRIES, INC.,, Petitioner, vs.

COURT OF APPEALS and ASIA INDUSTRIES, INC., Respondents.

DECISION

Facts:

Ruling: The January 24, 1980 letter signed by petitioners president is

valid and binding. The case of Peoples Aircargo and Warehousing
Co., Inc. v. Court of Appeals19  instructs:
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 x
x x 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 of
the Philippines:

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 x x x.

Under this provision, the power and responsibility to decide whether

the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of
incorporation, bylaws, or relevant provisions of law. However, just
as a natural person may authorize another to do certain acts
for and on his behalf, the board of directors may validly
delegate some of its functions and powers to officers,
committees or agents. The authority of such individuals to
bind the corporation is generally derived from law, corporate
bylaws or authorization from the board, either expressly or
impliedly by habit, custom or acquiescence in the general
course of business, viz:

A corporate officer or agent may represent and bind the corporation

in transactions with third persons to the extent that [the] authority
to do so has been conferred upon him, and this includes powers as,
in the usual course of the particular business, are incidental to, or
may be implied from, the powers intentionally conferred, powers
added by custom and usage, as usually pertaining to the particular
officer or agent, and such apparent powers as the corporation has
caused person dealing with the officer or agent to believe that it has
conferred.

xxx

[A]pparent 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, within or beyond the scope of his
ordinary powers.
It requires presentation of evidence of similar act(s) execute
d 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 power to bind the corporation.

x x x (Emphasis and underscoring supplied)

As correctly argued by private respondent, an officer of a

corporation who is authorized to purchase the stock of another
corporation has the implied power to perform all other obligations
arising therefrom, such as payment of the shares of stock. By
allowing its president to sign the Agreement on its behalf, petitioner
clothed him with apparent capacity to perform all acts which are
expressly, impliedly and inherently stated therein.21