CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS L.

VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD DIVISION, MANILA, HON. LEONARDO B. CANARES, Judge of Regional, Trial Court of Cebu, Branch 10, and SPOUSES CRESENCIO AND ZENAIDA VELEZ, respondents. March 17, 1993, J. Campos FACTS: Citibank NA, petitioner is a foreign commercial banking corporation duly licensed to do business in the Philippines. Private respondents, spouses Cresencio and Zenaida Velez, were good clients of petitioner bank's branch in Cebu until they filed a complaint for specific performance and damages against it in a civil case before the RTC of Cebu. Spouses Velez claimed that they had an arrangement with Citibank for credit lines and the bank allegedly refused to continue with the arrangement even after repeated demands. The bank proposed a restructuring agreement but they said the bank did not comply with the agreement. Citibank has a different version of their relationship. Crescencio Velez would deposit his unfunded personal checks with his current account with Citibank asking the bank officer to credit checks as if they were cash deposits at the same time assuring them that the personal checks were fully funded. [Velez was a trusted client already because of past transactions] He would then withdraw sums of money by way of managers check and deposit them to his various current accounts in other banks to cover his previously deposited unfunded personal checks with Citibank. This deceptive and criminal scheme he did every banking day without fail from September 4, 1985 up to March 11, 1986. For the last time, he deposited personal checks totalling P3.095M and withdrew P3.244 from Citibank. Instead of depositing proceeds like what he used to do, he ran away with the money and the personal checks bounced. Citibank filed a criminal complaint against Spouses Velez for violation of Bouncing Checks Law and estafa under Art 315 par 2(d) The date of the pre-trial conference, counsel for Citibank appeared, presenting a special power of attorney (SPA 1) executed by Citibank officer Florencia Tarriela in favor of Citibank's counsel, the J.P. Garcia & Associates, to represent and bind Citibank at the pre-trial conference. Counsel for spouses Velez orally moved to declare Citibank as in default on the ground that the SPA was not executed by the Board of Directors of Citibank. In its opposition to declare it in default, Citibank attached another SPA (SPA 2) made by William W. Ferguson, Vice President and highest ranking officer of Citibank, Philippines, constituting and appointing the J.P. Garcia & Associates to represent and bind the BANK at the pre-trial conference and/or trial of the case of "Cresencio Velez, et al. vs. Citibank, N.A.". RTC judge denied spouses' oral motion to declare bank as in default. On the scheduled pre-trial conference, spouses reiterated their oral motion to declare bank in default for its failure to appear thru authorized agent and documents not according to requirement of the law. In its opposition Citibank promised to secure another SPA (SPA 3) from Mr. William W. Ferguson in favour of Citibank employees to represent and bind Citibank in pre-trial conference. Respondent judge issued order declaring Citibank as in default. It found that Citibank, although a foreign corp., is bound by Phil. laws when doing and conducting business in the Phils. and its corporate powers could only be exercised by its BoD. The SPA 3 executed by Mr. William W. Ferguson in favour of Citibank employees made no mention of J.P. Garcia & Assoc as one of the employees. Citibank has no proper representation in the pre-trial conference for purposes of Rules of Court. Court of Appeals also dismissed Citibanks petition for certiorari, prohibition and mandamus because Citibank did not present BoD reso for appointing Atty Neri as its atty-in-fact. Also, it said that its By-Laws were not approved by SEC as required in Sec 46. ISSUES: 1. WON BoD Reso is always necessary for granting authority to an agent to represent the corpo in court cases. - NO 2. WON by-laws of the petitioner foreign corporation which has previously been granted a license to do business in the Philippines, are effective in this jurisdiction - YES RATIO: ON GRANTING AUTHORITY In the corporate hierarchy, there are three levels of control: o the board of directors, which is responsible for corporate policies and the general management of the business affairs of the corporation; o the officers, who in theory execute the policies laid down by the board, but in practice often have wide latitude in determining the course of business operations; and o the stockholders who have the residual power over fundamental corporate changes, like amendments of the articles of incorporation.

See Sec 23, 25, and 47 of the Corpo code. It is clear that corporate powers may be directly conferred upon corporate officers or agents by statute, the articles of incorporation, the by-laws or by resolution or other act of the board of directors. In addition, an officer who is not a director may also appoint other agents when so authorized by the by-laws or by the board of directors. Such are referred to as express powers. There are also powers incidental to express powers conferred. It is a fundamental principle in the law of agency that every delegation of authority, whether general or special, carries with it, unless the contrary be expressed, implied authority to do all of those acts, naturally and ordinarily done in such cases, which are reasonably necessary and proper to be done in order to carry into effect the main authority conferred. Since the by-laws are a source of authority for corporate officers and agents of the corporation, a resolution of the Board of Directors of Citibank appointing an attorney in fact to represent and bind it during the pre-trial conference of the case at bar is not necessary because its by-laws allow its officers, the Executing Officer and the Secretary Pro-Tem, ** to execute a power of attorney to a designated bank officer, William W. Ferguson in this case, clothing him with authority to direct and manage corporate affairs. Since Paragraph XXI of the general power of attorney, specifically allows Ferguson to delegate his powers in whole or in part, there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia & Associates and later, of the bank's employees, constitutes a valid delegation of Ferguson's express power to represent petitioner bank in the pre-trial conference in the lower court.

ON BY-LAWS The Court of Appeals relied on Sec 46 [Adoption of By-Laws] of the Corporation Code to support its conclusion that the by-laws in question are without effect because they were not approved by the SEC. A careful reading of the provision would show that a corporation can submit its by-laws, prior to incorporation, or within one month after receipt of official notice of the issuance of its certificate of incorporation by the SEC. Said provision also starts with the phrase "Every corporation formed under this Code", which can only refer to corporations incorporated in the Philippines. Sec 125 of the same Code requires that a foreign corporation applying for a license to transact business in the Philippines must submit, among other documents, to the SEC, a copy of its articles of incorporation and by-laws, certified in accordance with law. Unless these documents are submitted, the application cannot be acted upon by the SEC. Therefore Citibanks by-laws though origination from a foreign jurisdiction are valid and effective in the Philippines. In pursuance of the authority granted to him by petitioner bank's by-laws, its Executing Officer appointed William W. Ferguson, a resident of the Philippines, as its Attorney-in-Fact empowering the latter, among other things, to represent petitioner bank in court cases. In turn, William W. Ferguson executed a power of attorney in favor of J.P. Garcia & Associates (petitioner bank's counsel) to represent petitioner bank in the pre-trial conference before the lower court. This act of delegation is explicity authorized by paragraph XXI of his own appointment,

On validity of SPA Under Rule 138, Section 23 of the Rules of Court, an attorney has authority to bind his client in any case by an agreement in relation thereto made in writing, and this authority would include taking appeals and all matters of ordinary judicial procedure. But he cannot, without special authority, compromise his client's litigation or receive anything in discharge of a client's claim but the full amount in cash. The special powers of attorney separately executed by Florencia Tarriela and William W. Ferguson granted to J.P. Garcia & Associates are very explicit in their terms as to the counsel's authority in the case at bar. It is also error on the part of the Court of Appeals to state that the power of attorney given to the four (4) Citibank employees is not a special power of attorney as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. The power of attorney granted to petitioner bank's employees should be considered a special power of attorney granting, conferring and delegating authorities and binding the Bank in the Pre-Trial Conference and/or Trial of the case. From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending this case. It even acceded to private respondent's insistence on the question of proper representation during the pre-trial by presenting not just one, but three, special powers of attorney. In fact, there was no need for the third power of attorney because we believe that the second power of attorney was sufficient under the by-law provision authorizing Fersugon to delegate any of his functions to any one or more employees of the petitioner bank. A reasonable interpretation of this provision would include an appointment of a legal counsel to represent the bank in court, for, under the circumstances, such legal counsel can be considered, and in fact was considered by the petitioner bank, an employee for a special purpose. Furthermore, Fersugon, who heads the Philippine office thousands of miles away from its main office in the United States, must be understood to have sufficient powers to act promptly in order to protect the interests of his principal. HELD: The litigants should be allowed to settle their claims on the arena of the court based on a trial on the merits rather than on mere technicalities. Petition by Citibank granted. CA ruling set aside. Case remanded.