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  • 209 SCRA 763 - Business Organization - Corporation Law - Liability of Officers - Apparent Authority

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    Shobs Panganiban
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    Maglana, president of Prime White Cement Corporation, sent an offer letter to Yao Ka Sin Trading to purchase 45,000 bags of cement. Yao accepted the offer. However, Prime White's Board rejected the offer and instead offered to sell 10,000 bags. When Yao did not respond, Prime White deposited Yao's payment and planned to deliver 10,000 bags. Yao sued, arguing the original offer was binding. The Court of Appeals found that as president, Maglana did not have apparent authority to enter contracts without board approval. Prime White's subsequent letter, which Yao did not contest, was found binding as its terms were not responded to.

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    Maglana, president of Prime White Cement Corporation, sent an offer letter to Yao Ka Sin Trading to purchase 45,000 bags of cement. Yao accepted the offer. However, Prime White's Board rejected the offer and instead offered to sell 10,000 bags. When Yao did not respond, Prime White deposited Yao's payment and planned to deliver 10,000 bags. Yao sued, arguing the original offer was binding. The Court of Appeals found that as president, Maglana did not have apparent authority to enter contracts without board approval. Prime White's subsequent letter, which Yao did not contest, was found binding as its terms were not responded to.

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    9 views1 page

    209 SCRA 763 - Business Organization - Corporation Law - Liability of Officers - Apparent Authority

    Uploaded by

    Shobs Panganiban
    Maglana, president of Prime White Cement Corporation, sent an offer letter to Yao Ka Sin Trading to purchase 45,000 bags of cement. Yao accepted the offer. However, Prime White's Board rejected the offer and instead offered to sell 10,000 bags. When Yao did not respond, Prime White deposited Yao's payment and planned to deliver 10,000 bags. Yao sued, arguing the original offer was binding. The Court of Appeals found that as president, Maglana did not have apparent authority to enter contracts without board approval. Prime White's subsequent letter, which Yao did not contest, was found binding as its terms were not responded to.

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    © All Rights Reserved
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    209SCRA763BusinessOrganizationCorporationLawLiabilityofOfficersApparent

    HenryYaoassertsthattheletterfromMaglanaisabindingcontractbecauseitwasmade

    Authority

    undertheapparentauthorityofMaglana.ThetrialcourtruledinfavorofYaoKaSin.The
    CourtofAppealsreversedthetrialcourt.

    In1973,ConstancioMaglana,presidentofPrimeWhiteCementCorporation,sentanoffer
    lettertoYaoKaSinTrading.TheofferstatesthatPrimeWhiteiswillingtosell45,000bags

    ISSUE:Whetherornotthepresidentofacorporationisclothedwithapparentauthorityto

    ofcementatP24.30perbag.TheofferletterwasreceivedbyYaoKaSinsmanager,Henry

    enterintobindingcontractswiththirdpersonswithouttheauthorityoftheBoard.

    Yao.Yaoacceptedtheletterandpursuanttotheletter,hesentacheckintheamountof
    P243,000.00 equivalent to the value of 10,000 bags of cement. However, the Board of

    HELD:No.TheBoardmayenterintocontractsthroughthepresident.Thepresidentmayonly

    DirectorsofPrimeWhiterejectedtheofferlettersentbyMaglanabutitconsideredYaos

    enterintocontractsuponauthorityoftheBoard.Hence,anyagreementsignedbythepresident

    acceptanceletterasanewcontractofferhencetheBoardsentalettertoYaotellinghimthat

    issubjecttoapprovalbytheBoard.Unlikeageneralmanager(likethecaseofFranciscovs

    PrimeWhiteisinsteadwillingtosellonly10,000bagstoYaoKaSinandthathehastendays

    GSIS), the president has no apparent authority to enter into binding contracts

    toreply;thatifnoreplyismadebyYaothentheywillconsideritasanacceptanceandthat

    withthirdpersons.Further,ifindeedthebylawsofPrimeWhitedidprovideMaglanawith

    thereafter Prime White shall deposit the P243k check in its account and then deliver the

    apparentauthority,thiswasnotprovenbyYaoKaSin.

    cementstoYaoKaSin.HenryYaoneverreplied.
    Asarule,apparentauthoritymayresultfrom(1)thegeneralmanner,bywhichthecorporation
    Later,YaoKaSinsuedPrimeWhitetocompelthelattertocomplywithwhatYaoKaSin

    holdsoutanofficeroragentashavingpowertoactor,inotherwords,theapparentauthority

    consideredasthetruecontract,i.e.,45,000bagsatP24.30perbag.PrimeWhiteinitsdefense

    withwhichitclotheshimtoactingeneralor(2)acquiescenceinhisactsofaparticularnature,

    averredthatalthoughMaglanaisempoweredtosigncontractsinbehalfofPrimeWhite,such

    withactualorconstructiveknowledgethereof,whetherwithinorwithoutthescopeofhis

    contractsarestillsubjecttoapprovalbyPrimeWhitesBoard,andthenitstillrequiresfurther

    ordinarypowers.Thesearenotpresentinthiscase.

    approvalbytheNationalInvestmentandDevelopmentCorporation(NIDC),agovernment
    ownedandcontrolledcorporationbecausePrimeWhiteisasubsidiaryofNIDC.

    Also,thesubsequentletterbyPrimeWhitetoYaoKaSinisbindingbecauseYaoKaSins
    failuretorespondconstitutesanacceptance,perstatedintheletteritselfwhichwasnot
    contestedbyHenryYaoduringtrial.

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