RAMIREZ VS ORIENTALIST
COURT OF APPEALS
Facts:
Orientalist Company was engaged in the business of maintaining and conducting a
theatre in the city of Manila for the exhibition of cinematographic films. engaged in
the business of marketing films for a manufacturer or manufacturers, there engaged
in the production or distribution of cinematographic material. In this enterprise the
plaintiff was represented in the city of Manila by his son, Jose Ramirez. The directors
of the Orientalist Company became apprised of the fact that the plaintiff in Paris had
control of the agencies for two different marks of films, namely, the “Eclair Films”
and the “Milano Films;” and negotiations were begun with said officials of the
Orientalist Company by Jose Ramirez, as agent of the plaintiff. The defendant Ramon
J. Fernandez, one of the directors of the Orientalist Company and also its treasure,
was chiefly active in this matter. Ramon J. Fernandez had an informal conference
with all the members of the company’s board of directors except one, and with
approval of those with whom he had communicated, addressed a letter to Jose
Ramirez, in Manila, accepting the offer contained in the memorandum the exclusive
agency of the Eclair films and Milano films. In due time the films began to arrive in
Manila, it appears that the Orientalist Company was without funds to meet these
obligations. Action was instituted by the plaintiff to Orientalist Company, and Ramon
J. Fernandez for sum of money.
Issue:
WON the Orientalist Co. is liable for the acts of its treasurer, Fernandez?
Held:
Yes. It will be observed that Ramon J. Fernandez was the particular officer and
member of the board of directors who was most active in the effort to secure the
films for the corporation. The negotiations were conducted by him with the
knowledge and consent of other members of the board; and the contract was made
with their prior approval. In the light of all the circumstances of the case, we are of
the opinion that the contracts in question were thus inferentially approved by the
company’s board of directors and that the company is bound unless the subsequent
failure of the stockholders to approve said contracts had the effect of abrogating the
liability thus created.
BOYER – ROXAS VS.
211 SCRA 470 (1992)
FACTS OF THE CASE
When Eugenia V. Roxas died, her heirs formed a corporation under the name and style
of Heirs of Eugenia V. Roxas, Inc. using her estate as the capital of the corporation, the
private respondent herein. It was primarily engaged in agriculture business, however
it amended its purpose to enable it to engage in resort and restaurant business.
Petitioners are stockholders of the corporation and two of the heirs of Eugenia. By
tolerance, they were allowed to occupy some of the properties of the corporation as
their residence. However, the board of directors of the corporation passed a resolution
evicting the petitioners from the property of the corporation because the same will be
needed for expansion.
At the RTC, private respondent presented its evidence averring that the subject
premises are owned by the corporation. Petitioners failed to present their evidence
due to alleged negligence of their counsel. RTC handed a decision in favor of private
respondent.
Petitioners appealed to the Court of Appeals but the latter denied the petition and
affirmed the ruling of the RTC. Hence, they appealed to the Supreme Court. In their
appeal, petitioners argues that the CA made a mistake in upholding the decision of the
RTC, and that their occupancy of the subject premises should be respected because
they own an aliquot part of the corporation as stockholders, and that the veil of
corporate fiction must be pierced by virtue thereof.
ISSUE
1. Whether petitioner’s contention were correct as regards the piercing of the
corporate veil.
2. Whether petitioners were correct in their contention that they should be respected
as regards their occupancy since they own an aliquot part of the corporation.
RULING
1.Petitioner’s contention to pierce the veil of corporate fiction is untenable. As aptly
held by the court: “..The separate personality of a corporation may ONLY be
disregarded when the corporation is used as a cloak or cover for fraud or illegality, or to
work injustice, or when necessary to achieve equity or when necessary for the protection
of creditors.”
2. As regards petitioners contention that they should be respected on their occupancy
by virtue of an aliquot part they own on the corporation as stockholders, it also fails to
hold water. The court held that “properties owned by a corporation are owned by it as
an entity separate and distinct from its members. While shares of stocks are personal
property, they do not represent property of the corporation. A share of stock only typifies
an aliquot part of the corporation’s property, or the right to share in its proceeds to that
extent when distributed according to law and equity, but its holder is not the owner of
any part of the capital of the corporation. Nor is he entitled to the possession of any
definite portion of its property or assets. The holder is not a co-owner or a tenant in
common of the corporate property.”
WOODCHILD HOLDINGS, INC. vs ROXAS ELECTRIC AND CONSTRUCTION COMPANY,
INC.
FACTS
- Roxas Electric and Construction Company, Inc. (RECCI) authorized its President
Roberto B. Roxas through a resolution to sell a parcel of land owned by the
corporation, and to execute, sign and deliver for and on behalf of the company.
- Petitioner Woodchild Holdings, Inc. (WHI) through its President Jonathan Y. Dy,
offered to buy the land from RECCI.
- The offer to purchase stated that it is made on the representation and warranty of
the OWNER/SELLER, that he holds a good and registrable title to the property, which
shall be conveyed CLEAR and FREE of all liens and encumbrances, and that in the event
that the right of way is insufficient for the buyer’s purpose, the seller agrees to sell
additional square meter from his current adjacent property to allow the buyer full
access and full use of the property.
- Roxas accepted the offer and indicated his acceptance on Page 2 of the Deed.
- The sale was consummated.
- WHI subsequently entered into a construction agreement with Wimbeco Builder’s
Inc. (WBI) for the construction of a warehouse, and a lease agreement with Poderosa
Leather Goods Company, Inc. with a condition that the warehouse be ready by April 1,
1992.
- The building was finished and Poderosa became the lessee.
- WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a
portion of the property over which WHI had been granted a right of way. Roxas
promised to look into the matter. Dy and Roxas discussed the need of the WHI to buy
a 500-square-meter portion the adjacent lot as provided for in the deed of absolute
sale. However, Roxas died soon thereafter.
- WHI wrote the RECCI, reiterating its verbal requests to purchase a portion of the said
lot as provided for in the deed of absolute sale, and complained about the latter’s
failureto eject the squatters within the three-month period agreed upon in the said
deed. - RECCI rejected the demand of WHI, so WHI filed a case for Specific Performance
and Damages in the RTC of Makati.
RTC - in favor of WHI.
CA - reversed the RTC decision and dismissed the complaint. The CA ruled that, under
the resolution of the Board of Directors of the RECCI, Roxas was merely authorized to
sell the first lot, but not to grant right of way in favor of the WHI over a portion of the
second lot, or to grant an option to the petitioner to buy a portion thereof.
ISSUE –
WON respondent is bound by the provisions of the deed of sale granting to the
petitioner the beneficial use and right of way over the adjacent lot of the lot they
previously bought. WON such provision is enforceable.
HELD
SC –
We agree with respondent. Judgment of CA affirmed with modification. - A
corporation is a juridical person separate and distinct from its stockholders or
members. Accordingly, the property of the corporation is not the property of its
stockholders or members and may not be sold by the stockholders or members
without express authorization from the corporation’s board of directors.
- Indubitably, a corporation may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or
agents in the normal course of business. The general principles of agency govern the
relation between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law.
- Generally, the acts of the corporate officers within the scope of their authority are
binding on the corporation. However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority cannot bind the
corporation unless it has ratified such acts expressly or tacitly, or is estopped from
denying them.
- In this case, the respondent denied authorizing its then president Roberto B. Roxas
to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien
or burden thereon. The petitioner was thus burdened to prove that the respondent
so authorized Roxas to sell the same and to create a lien thereon.
- Evidently, Roxas was not specifically authorized under the said resolution to grant a
right of way in favor of the petitioner on a portion of the second lot or to agree to
sell to the petitioner a portion thereof.
- For the principle of apparent authority to apply, the petitioner was burdened to
prove the following: (a) the acts of the respondent justifying belief in the agency by
the petitioner; (b) knowledge thereof by the respondent which is sought to be held;
and, (c) reliance thereon by the petitioner consistent with ordinary care and
prudence.[34] In this case, there is no evidence on record of specific acts made by
the respondent[35] showing or indicating that it had full knowledge of any
representations made by Roxas to the petitioner that the respondent had authorized
him to grant to the respondent an option to buy a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085, or to create a burden or lien thereon, or that the
respondent allowed him to do so.
YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees,
vs.
"KONG LI PO," defendant-appellant.
December 3, 1924, OSTRAND, J.:
FACTS:
 The defendant is a domestic corporation organized in accordance with the
laws of the Philippine Islands and engaged in the publication of a Chinese
newspaper styled Kong Li Po. Its articles of incorporation and by-laws are in
the usual form and provide for a board of directors and for other officers
among them a president whose duty it is to "sign all contracts and other
instruments of writing." No special provision is made for a business or
general manager.
 Sometime in 1919, C. C./T. C. Chen was appointed general business manager
of the newspaper.
 Dec 1919, Chen entered into an agreement with the plaintiffs by which the
latter bound themselves to do the necessary printing for the newspaper for
the sum of P580 per month.
 Under this agreement the plaintiffs worked for the defendant from January
1, 1920, until January 31, 1921, when they were discharged by the new
manager, Tan Tian Hong, who had been appointed in the meantime, C. C.
Chen having left for China. The letter of dismissal stated no special reasons
for the discharge of the plaintiffs.
 The plaintiffs thereupon brought the present action alleging, among other
things, in the complaint that their contract of employment was for a term of
three years from the first day of January, 1920; that in the case of their
discharge by the defendant without just cause before the expiration of the
term of the contract, they were to receive full pay for the remaining portion
of the term; that they had been so discharged without just cause and
therefore asked judgment for damages in the sum of P20,880.
 Included in its 5 special defenses , Kong Li Po states that C. C. Chen, the
person whose name appears to have been signed to the contract of
employment was not authorized by the defendant to execute such a
contract in its behalf. Other defenses include delayed printing, failure to
correct errors, neglect and refusal to print.
 At the trial of the case the plaintiffs presented in evidence Exhibit A which
purports to be a contract between Chen and the plaintiffs and which
provides that in the event the plaintiffs should be discharged without cause
before the expirations of the term of three years from January 1, 1920, they
would be given full pay for the unexpired portion of the term "even if the
said paper has to fall into bankruptcy." The contract is signed by the
plaintiffs and also bears the signature "C. C. Chen, manager of Kong Li Po."
The authenticity of the latter signature is questioned by the defendant, but
the court below found that the evidence upon this point preponderate in
favor of the plaintiffs and there appears to be no sufficient reason to disturb
this finding.
 Trial Court found in favour of petitioners saying contract had been impliedly
ratified by the defendant. Kong Li Po appeals saying that contract was not
signed by C.C. Chen and in any event C. C. Chen had no power or authority to
bind the defendant corporation by such contract; and that there was no
ratification of the contract by the corporation.
ISSUE: WON Chen [the general manger] had the power to bind the corporation by a
contract of the character indicated – NO. Only valid by a reasonable and usual
contract of employment
RATIO:
Procedure/Evidence
The contract supposedly attached with the complaint was a translation. As this
translation may be considered a copy and as the defendant failed to deny its
authenticity under oath, it will perhaps be said that under section 103 of the Code of
Civil Procedure the omission to so deny it constitutes an admission of the
genuineness and due execution of the document as well as of the agent's authority
to bind the defendant. (Merchant vs. International Banking Corporation, 6 Phil., 314.)
However the court ruled that this case was an exception since evidence was
presented by plaintiff on the execution of the document. [Plaintiff waived]
Chen’s Authority
It is conceded that Chen had no express authority to do so, but the evidence is
conclusive that he, at the time the contract was entered into, was in effect the
general business manager of the newspaper Kong Li Po and that he, as such, had
charge of the printing of the paper, and the plaintiff maintain that he, as such general
business manager, had implied authority to employ them on the terms stated and
that the defendant corporation is bound by his action.
The general rule is that the power to bind a corporation by contract lies with its
board of directors or trustees, but this power may either expressly or impliedly be
delegated to other officers or agents of the corporation, and it is well settled that
except where the authority of employing servants and agent is expressly vested in
the board of directors or trustees, an officer or agent who has general control and
management of the corporation's business, or a specific part thereof, may bind the
corporation by the employment of such agent and employees as are usual and
necessary in the conduct of such business. But the contracts of employment must be
reasonable.
Chen, as general manager of the Kong Li Po, had implied authority to bind the
defendant corporation by a reasonable and usual contract of employment with the
plaintiffs, but we do not think that the contract here in question can be so
considered. Not only is the term of employment unusually long, but the conditions
are otherwise so onerous to the defendant that the possibility of the corporation
being thrown into insolvency thereby is expressly contemplated in the same
contract.
Neither do we think that the contention that the corporation impliedly ratified the
contract is supported by the evidence. The contention is based principally on the fact
that Te Kim Hua, the president of the corporation for the year 1920, admitted on the
witness stand that he saw the plaintiffs work as printers in the office of the
newspaper. He denied, however, any knowledge of the existence of the contract and
asserted that it was never presented neither to him nor to the board of directors.
Before a contract can be ratified knowledge of its existence must, of course, be
brought home to the parties who have authority to ratify it or circumstances must be
shown from which such knowledge may be presumed. No such knowledge or
circumstances have been shown here. That the president of the corporation saw the
plaintiffs working in its office is of little significance; there were other printers
working there at that time and as the president had nothing to do with their
employment, it was hardly to be expected that be would inquire into the terms of
their contracts. Moreover, a ratification by him would have been of no avail; in order
to validate a contract, a ratification by the board of directors was necessary. The
fact that the president was required by the by-laws to sign the documents evidencing
contracts of the corporation, does not mean that he had power to make the
contracts.
In his decision his Honor, the learned judge of the court below appears to have
placed some weight on a notice inserted in the January 14th issue of the Kong Li Po by
T. C. Chen and which, in translation, reads as follows: To Whom It May Concern:
Announcement is hereby given that thereafter all contracts, agreements and receipts
are considered to be null and void unless duly signed by T. C. Chen, General Manager
of this paper. This is signed by Chen. This notice led the plaintiffs to think that Chen
had authority to make the contract. It may further be observed that the notice
confers no special powers, but is, in effect, only an assertion by Chen that he would
recognize no contracts, agreements, and receipts not duty signed by him. It may be
presumed that the contracts, agreements, and receipts were such as were ordinarily
made in the course of the business of managing the newspaper. There is no evidence
to show that the notice was ever brought to the attention of the officers of the
defendant corporation.
Held: The judgment appealed from is reversed and the defendant corporation is
absolved from the complaint.
Concurring (Street)
There must be a limit somewhat upon the authority of a manager with respect to the
duration of contracts which he makes for the corporation, and my eye has fallen
upon no decision in which contract for the period of three years, or longer, has been
upheld on the bare fact that the contract was made by a manager, though there are
case in which contracts for the period of only one year have been sustained.
But no presumption of law can be indulged in that, because as person acts as such a
manager, he has the power to bind his principal to contracts of an extraordinary
nature, and of such a character as would involved the corporation in enormous
obligations and for long periods of time.
Dissenting (Malcolm)
Defendant corporation held T. C. Chen out to the public as the business manager of
the newspaper Kong Li Po and clothes him with apparent authority to bind the
corporation. The president of the corporation admitted as much on the witness
stand, while public announcement was made [Notice].
The action of the business manager was thus ratified by his superior officers and they
are now in estoppel to deny such ratification. As held in the case of Macke vs.
Camps ([1907], 7 Phil., 553), one who clothes another with apparent authority as his
agent and holds him out to the public as such, cannot be permitted to deny the
authority of such person to act as his agent in good faith and in the honest belief that
he is what he appears to be. Unless the contrary appears, the authority of an agent
must be presumed to include all the necessary and usual means of carrying his
agency into effect.
Dealing with corporations the public at large is bound to rely to a large extent upon
outward appearances. If a man is found acting for a corporation with the external
indicia of authority, any person, not having notice of want of authority, may usually
rely upon those appearances; and if it be found that the directors had permitted the
agent to exercise that authority and thereby held him out as a person competent to
bind the corporation, or had acquiesced in a contract and retained the benefit
supposed to have been conferred by it, the corporation will be bound,
notwithstanding the actual authority may never have been granted. The public is not
supposed nor required to know the transactions which happen around the table
where the corporate board of directors or the stockholders are from time to time
convoked. Whether as particular officer actually possesses the authority which he
assumes to exercise is frequently known to very few, and the proof of it usually is not
readily accessible to the stranger who deals with the corporation on the faith of the
ostensible authority exercised by some of the corporate officers. It is therefore
reasonable, in a case where an officer of a corporation has made a contract in its
name, that the corporation should be required, if it denies his authority, to state such
defense in its answer. [Merchant vs. International Banking Corporation, supra, and
other cases ]
 [G.R. No. 126006. January 29, 2004]
LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN, petitioners, vs. COURT OF APPEALS
(Seventeenth Division) and ALLIED BANKING CORP., respondents
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by the Lapulapu
Foundation, Inc. and Elias Q. Tan seeking to reverse and set aside the Decision[1] dated
June 26, 1996 of the Court of Appeals (CA) in CA-G.R. CV No. 37162 ordering the
petitioners, jointly and solidarily, to pay the respondent Allied Banking Corporation the
amount of P493,566.61 plus interests and other charges. Likewise, sought to be
reversed and set aside is the appellate courts Resolution dated August 19, 1996
denying the petitioners motion for reconsideration.
The case stemmed from the following facts:
Sometime in 1977, petitioner Elias Q. Tan, then President of the co-petitioner
Lapulapu Foundation, Inc., obtained four loans from the respondent Allied Banking
Corporation covered by four promissory notes in the amounts of P100,000 each. The
details of the promissory notes are as follows:
P/N No. Date of P/N Maturity Date Amount as of 1/23/79
BD No. 504 Nov. 7, 1977 Feb. 5, 1978 P123,377.76
BD No. 621 Nov. 28, 1977 Mar. 28, 1978 P123,411.10
BD No. 716 Dec. 12, 1977 Apr. 11, 1978 P122,322.21
BD No. 839 Jan. 5, 1978 May 5, 1978 P120,455.54[2]
As of January 23, 1979, the entire obligation amounted to P493,566.61 and
despite demands made on them by the respondent Bank, the petitioners failed to pay
the same. The respondent Bank was constrained to file with the Regional Trial Court
of Cebu City, Branch 15, a complaint seeking payment by the petitioners, jointly and
solidarily, of the sum of P493,566.61 representing their loan obligation, exclusive of
interests, penalty charges, attorneys fees and costs.
In its answer to the complaint, the petitioner Foundation denied incurring
indebtedness from the respondent Bank alleging that the loans were obtained by
petitioner Tan in his personal capacity, for his own use and benefit and on the strength
of the personal information he furnished the respondent Bank. The petitioner
Foundation maintained that it never authorized petitioner Tan to co-sign in his capacity
as its President any promissory note and that the respondent Bank fully knew that the
loans contracted were made in petitioner Tans personal capacity and for his own use
and that the petitioner Foundation never benefited, directly or indirectly, therefrom.
The petitioner Foundation then interposed a cross-claim against petitioner Tan
alleging that he, having exceeded his authority, should be solely liable for said loans,
and a counterclaim against the respondent Bank for damages and attorneys fees.
For his part, petitioner Tan admitted that he contracted the loans from the
respondent Bank in his personal capacity. The parties, however, agreed that the loans
were to be paid from the proceeds of petitioner Tans shares of common stocks in the
Lapulapu Industries Corporation, a real estate firm. The loans were covered by
promissory notes which were automatically renewable (rolled-over) every year at an
amount including unpaid interests, until such time as petitioner Tan was able to pay
the same from the proceeds of his aforesaid shares.
According to petitioner Tan, the respondent Banks employee required him to
affix two signatures on every promissory note, assuring him that the loan documents
would be filled out in accordance with their agreement. However, after he signed and
delivered the loan documents to the respondent Bank, these were filled out in a
manner not in accord with their agreement, such that the petitioner Foundation was
included as party thereto. Further, prior to its filing of the complaint, the respondent
Bank made no demand on him.
After due trial, the court a quo rendered judgment the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing evidences [sic], arguments and considerations,
this court hereby finds the preponderance of evidence in favor of the plaintiff and
hereby renders judgment as follows:
1. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc. [the
petitioners herein] to pay jointly and solidarily to the plaintiff Allied Banking
Corporation [the respondent herein] the amount of P493,566.61 as principal
obligation for the four promissory notes, including all other charges included in the
same, with interest at 14% per annum, computed from January 24, 1979, until the
same are fully paid, plus 2% service charges and 1% monthly penalty charges.
2. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly
and solidarily, attorneys fees in the equivalent amount of 25% of the total amount due
from the defendants on the promissory notes, including all charges;
3. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly
and solidarily litigation expenses of P1,000.00 plus costs of the suit.[3]
 On appeal, the CA affirmed with modification the judgment of the court a quo by
deleting the award of attorneys fees in favor of the respondent Bank for being without
basis.
The appellate court disbelieved petitioner Tans claim that the loans were his
personal loans as the promissory notes evidencing them showed upon their faces that
these were obligations of the petitioner Foundation, as contracted by petitioner Tan
himself in his official and personal character. Applying the parol evidence rule, the CA
likewise rejected petitioner Tans assertion that there was an unwritten agreement
between him and the respondent Bank that he would pay the loans from the proceeds
of his shares of stocks in the Lapulapu Industries Corp.
Further, the CA found that demand had been made by the respondent Bank on
the petitioners prior to the filing of the complaint a quo. It noted that the two letters
of demand dated January 3, 1979[4] and January 30, 1979[5] asking settlement of the
obligation were sent by the respondent Bank. These were received by the petitioners
as shown by the registry return cards[6] presented during trial in the court a quo.
Finally, like the court a quo, the CA applied the doctrine of piercing the veil of
corporate entity in holding the petitioners jointly and solidarily liable. The evidence
showed that petitioner Tan had represented himself as the President of the petitioner
Foundation, opened savings and current accounts in its behalf, and signed the loan
documents for and in behalf of the latter. The CA, likewise, found that the petitioner
Foundation had allowed petitioner Tan to act as though he had the authority to
contract the loans in its behalf. On the other hand, petitioner Tan could not escape
liability as he had used the petitioner Foundation for his benefit.
Aggrieved, the petitioners now come to the Court alleging that:
I. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE LOANS
SUBJECT MATTER OF THE INSTANT PETITION ARE ALREADY DUE AND
DEMANDABLE DESPITE ABSENCE OF PRIOR DEMAND.
II. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE PAROL
EVIDENCE RULE AND THE DOCTRINE OF PIERCING THE VEIL OF
CORPORATE ENTITY AS BASIS FOR ADJUDGING JOINT AND SOLIDARY
LIABILITY ON THE PART OF PETITIONERS ELIAS Q. TAN AND LAPULAPU
FOUNDATION, INC.[7]
The petitioners assail the appellate courts finding that the loans had become due
and demandable in view of the two demand letters sent to them by the respondent
Bank. The petitioners insist that there was no prior demand as they vigorously deny
receiving those letters. According to petitioner Tan, the signatures on the registry
return cards were not his.
The petitioners denial of receipt of the demand letters was rightfully given scant
consideration by the CA as it held:
Exhibits R and S are two letters of demand, respectively dated January 3, 1979 and
January 30, 1979, asking settlement of the obligations covered by the promissory
notes. The first letter was written by Ben Tio Peng Seng, Vice-President of the bank,
and addressed to Lapulapu Foundation, Inc., attention of Mr. Elias Q. Tan, President,
while the second was a final demand written by the appellees counsel, addressed to
both defendants-appellants, and giving them five (5) days from receipt within which
to settle or judicial action would be instituted against them. Both letters were duly
received by the defendants, as shown by the registry return cards, marked as Exhibits
R-2 and S-1, respectively. The allegation of Tan that he does not know who signed the
said registry return receipts merits scant consideration, for there is no showing that
the addresses thereon were wrong. Hence, the disputable presumption that a letter
duly directed and mailed was received in the regular course of mail (per par. V,
Section 3, Rule 131 of the Revised Rules on Evidence) still holds.[8]
There is no dispute that the promissory notes had already matured. However, the
petitioners insist that the loans had not become due and demandable as they deny
receipt of the respondent Banks demand letters. When presented the registry return
cards during the trial, petitioner Tan claimed that he did not recognize the signatures
thereon. The petitioners allegation and denial are self-serving. They cannot prevail
over the registry return cards which constitute documentary evidence and which enjoy
the presumption that, absent clear and convincing evidence to the contrary, these
were regularly issued by the postal officials in the performance of their official duty
and that they acted in good faith.[9] Further, as the CA correctly opined, mails are
presumed to have been properly delivered and received by the addressee in the
regular course of the mail.[10] As the CA noted, there is no showing that the addresses
on the registry return cards were wrong. It is the petitioners burden to overcome the
presumptions by sufficient evidence, and other than their barefaced denial, the
petitioners failed to support their claim that they did not receive the demand letters;
therefore, no prior demand was made on them by the respondent Bank.
Having established that the loans had become due and demandable, the Court
shall now resolve the issue of whether the CA correctly held the petitioners jointly and
solidarily liable therefor.
In disclaiming any liability for the loans, the petitioner Foundation maintains that
these were contracted by petitioner Tan in his personal capacity and that it did not
benefit therefrom. On the other hand, while admitting that the loans were his personal
obligation, petitioner Tan avers that he had an unwritten agreement with the
respondent Bank that these loans would be renewed on a year-to-year basis and paid
from the proceeds of his shares of stock in the Lapulapu Industries Corp.
These contentions are untenable.
The Court particularly finds as incredulous petitioner Tans allegation that he was
made to sign blank loan documents and that the phrase IN MY OFFICIAL/PERSONAL
CAPACITY was superimposed by the respondent Banks employee despite petitioner
Tans protestation. The Court is hard pressed to believe that a businessman of names of the corporation, and signed the application form as well as the necessary
petitioner Tans stature could have been so careless as to sign blank loan documents. specimen signature cards (Exhibits A, B and C) twice, for himself and for the
foundation. He submitted a notarized Secretarys Certificate (Exhibit G) from the
In contrast, as found by the CA, the promissory notes[11] clearly showed upon corporation, attesting that he has been authorized, inter alia, to sign for and in behalf
their faces that they are the obligation of the petitioner Foundation, as contracted by of the Lapulapu Foundation any and all checks, drafts or other orders with respect to
petitioner Tan in his official and personal capacity.[12] Moreover, the application for the bank; to transact business with the Bank, negotiate loans, agreements,
credit accommodation,[13] the signature cards of the two accounts in the name of obligations, promissory notes and other commercial documents; and to initially
petitioner Foundation,[14] as well as New Current Account Record,[15] all accompanying obtain a loan for P100,000.00 from any bank (Exhibits G-1 and G-2). Under these
the promissory notes, were signed by petitioner Tan for and in the name of the circumstances, the defendant corporation is liable for the transactions entered into
petitioner Foundation.[16]These documentary evidence unequivocally and categorically by Tan on its behalf.[20]
establish that the loans were solidarily contracted by the petitioner Foundation and
petitioner Tan.
Per its Secretarys Certificate, the petitioner Foundation had given its President,
As a corollary, the parol evidence rule likewise constrains this Court to reject petitioner Tan, ostensible and apparent authority to inter alia deal with the respondent
petitioner Tans claim regarding the purported unwritten agreement between him and Bank. Accordingly, the petitioner Foundation is estopped from questioning petitioner
the respondent Bank on the payment of the obligation. Section 9, Rule 130 of the of Tans authority to obtain the subject loans from the respondent Bank. It is a familiar
the Revised Rules of Court provides that [w]hen the terms of an agreement have been doctrine that if a corporation knowingly permits one of its officers, or any other agent,
reduced to writing, it is to be considered as containing all the terms agreed upon and to act within the scope of an apparent authority, it holds him out to the public as
there can be, between the parties and their successors-in-interest, no evidence of such possessing the power to do those acts; and thus, the corporation will, as against
terms other than the contents of the written agreement.[17] anyone who has in good faith dealt with it through such agent, be estopped from
denying the agents authority.[21]
In this case, the promissory notes are the law between the petitioners and the
respondent Bank. These promissory notes contained maturity dates as follows: In fine, there is no cogent reason to deviate from the CAs ruling that the
February 5, 1978, March 28, 1978, April 11, 1978 and May 5, 1978, respectively. That these petitioners are jointly and solidarily liable for the loans contracted with the respondent
notes were to be paid on these dates is clear and explicit. Nowhere was it stated Bank.
therein that they would be renewed on a year-to-year basis or rolled-over annually until
WHEREFORE, premises considered, the petition is DENIED and the Decision
paid from the proceeds of petitioner Tans shares in the Lapulapu Industries Corp.
dated June 26, 1996 and Resolution dated August 19, 1996 of the Court of Appeals in
Accordingly, this purported unwritten agreement could not be made to vary or
CA-G.R. CV No. 37162 are AFFIRMED in toto.
contradict the terms and conditions in the promissory notes.
SO ORDERED.
Evidence of a prior or contemporaneous verbal agreement is generally not
admissible to vary, contradict or defeat the operation of a valid contract.[18] While parol
evidence is admissible to explain the meaning of written contracts, it cannot serve the
purpose of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in writing, unless there has been fraud or mistake.[19] No
such allegation had been made by the petitioners in this case.
Finally, the appellate court did not err in holding the petitioners jointly and
solidarily liable as it applied the doctrine of piercing the veil of corporate entity. The
petitioner Foundation asserts that it has a personality separate and distinct from that
of its President, petitioner Tan, and that it cannot be held solidarily liable for the loans
of the latter.
The Court agrees with the CA that the petitioners cannot hide behind the
corporate veil under the following circumstances:

The evidence shows that Tan has been representing himself as the President of
Lapulapu Foundation, Inc. He opened a savings account and a current account in the
Lapu-Lapu Foundation vs CA Case Digest
Lapu-Lapu Foundation vs. Court of Appeals
[GR 126006, 29 January 2004]
Facts: Sometime in 1977, Elias Q. Tan, then President of Lapulapu
Foundation, Inc., obtained four loans from Allied Banking Corporation
covered by four promissory notes in the amounts of P100,000 each. As of
23 January 1979, the entire obligation amounted to P493,566.61 and
despite demands made on them by the Bank, Tan and the foundation failed
to pay the same. The Bank was constrained to file with the Regional Trial
Court of Cebu City, Branch 15, a complaint seeking payment by Tan and
the foundation, jointly and solidarily, of the sum of P493,566.61
representing their loan obligation, exclusive of interests, penalty charges,
attorney’s fees and costs. In its answer to the complaint, the Foundation
denied incurring indebtedness from the Bank alleging that the loans were
obtained by Tan in his personal capacity, for his own use and benefit and
on the strength of the personal information he furnished the Bank. The
Foundation maintained that it never authorized Tan to co-sign in his
capacity as its President any promissory note and that the Bank fully knew
that the loans contracted were made in Tan’s personal capacity and for his
own use and that the Foundation never benefited, directly or indirectly,
therefrom.
The Foundation then interposed a cross-claim against Tan alleging that
he, having exceeded his authority, should be solely liable for said loans,
and a counterclaim against the Bank for damages and attorney’s fees. For
his part, Tan admitted that he contracted the loans from the Bank in his
personal capacity. The parties, however, agreed that the loans were to be
paid from the proceeds of Tan’s shares of common stocks in the Lapulapu
Industries Corporation, a real estate firm. The loans were covered by
promissory notes which were automatically renewable (“rolled-over”) every
year at an amount including unpaid interests, until such time as Tan was
able to pay the same from the proceeds of his aforesaid shares. According
to Tan, the Bank’s employee required him to affix two signatures on every
promissory note, assuring him that the loan documents would be filled out
in accordance with their agreement. However, after he signed and
delivered the loan documents to the Bank, these were filled out in a manner
not in accord with their agreement, such that the Foundation was included
as party thereto. Further, prior to its filing of the complaint, the Bank made
no demand on him.
After due trial, the court rendered judgment (1) requiring Tan and the
Foundation to pay jointly and solidarily to the Bank the amount of
P493,566.61 as principal obligation for the four promissory notes, including
all other charges included in the same, with interest at 14% per annum,
computed from 24 January 1979, until the same are fully paid, plus 2%
service charges and 1% monthly penalty charges; (2) requiring Tan and
the Foundation to pay jointly and solidarily, attorney’s fees in the equivalent
amount of 25% of the total amount due from them on the promissory notes,
including all charges; and (3) requiring Tan and the Foundation to pay
jointly and solidarily litigation expenses of P1,000.00 plus costs of the suit.
On appeal, the CA affirmed with modification the judgment of the court a
quo by deleting the award of attorney’s fees in favor of the Bank for being
without basis. Tan and the foundation filed the petition for review on
certiorari.
Issue:
1. Whether Tan and the foundation should be held jointly and
solidarily liable.
2. Whether the foundation gave Tan an apparent authority to
deal with the Bank.
Held:
1. The appellate court did not err in holding Tan and the foundation jointly
and solidarily liable as it applied the doctrine of piercing the veil of
corporate entity. Tan and the foundation cannot hide behind the corporate
veil under the following circumstances: "The evidence shows that Tan has
been representing himself as the President of Lapulapu Foundation, Inc.
He opened a savings account and a current account in the names of the
corporation, and signed the application form as well as the necessary
specimen signature cards twice, for himself and for the foundation. He
submitted a notarized Secretary’s Certificate from the corporation,
attesting that he has been authorized, inter alia, to sign for and in behalf of
the Lapulapu Foundation any and all checks, drafts or other orders with
respect to the bank; to transact business with the Bank, negotiate loans,
agreements, obligations, promissory notes and other commercial
documents; and to initially obtain a loan for P100,000.00 from any bank.
Under these circumstances, the foundation is liable for the transactions
entered into by Tan on its behalf.
2. Per its Secretary’s Certificate, the Foundation had given its President,
Tan, ostensible and apparent authority to inter alia deal with the Bank.
Accordingly, the Foundation is estopped from questioning Tan’s authority
to obtain the subject loans from the respondent Bank. It is a 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.