Donald Kwok v. Philippine Carpet Manufacturing Corp - G.R. No.

149252 April 28, 2005 FACTS: Kwok is the executive vice-president of Philippine Carpet Manufacturing Corporation. Upon resigning, he claimed that Lim, the president and chairman of the board of directors of Philippine Carpet Manufacturing Corp, made a verbal promise to give him unlimited sick leave and vacation leave benefits plus its cash conversion upon his retirement. Lim denied making any such verbal promise. Kwok demanded the cash equivalent of what he believed to be his accumulated vacation and sick leave credits which respondent corporation refused. Hence, the case. ISSUE/HELD/RATIO: Whether or not there was indeed a verbal promise made by Lim o No. The Court applied Article 1371 of the Civil Code. Respondent corporation released a memorandum which granted the Kwoks successor unlimited sick and vacation leave credits but disallowed the cash conversion thereof. The Court said that petitioner failed to prove his assertion that Lim made such verbal promise. Whether or not the verbal promise by Lim, assuming it was made, is binding upon corporation o No. Spoken words can give rise to a contract. However, the president of a corporation possesses the power to enter into a contract for the corporation when he is authorized or when it had been the habit or practice of the corporation. Otherwise, it needs ratification from the corporation. Given the companys subsequent memo, it is clear that Lim had no such authority to make the alleged promise and that the company never ratified such. It was also held by the court that even assuming there was a valid promise, the petitioner is already barred by prescription as the 3-year prescriptive period set by the Labor Code has already elapsed. RELEVANT OBLICON PROVISIONS: Art 1371: In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. Art 1115: The provisions of the present Title are understood to be without prejudice to what in this Code or in special laws is established with respect to specific cases of prescription. PREPARED BY: Jansen Santos