G.R. No.

L-53820 June 15, 1992

YAO KA SIN TRADING, owned and operated by YAO KA SIN, petitioner, vs.
HONORABLE COURT OF APPEALS and PRIME WHITE CEMENT CORPORATION,
represented by its President-Chairman, CONSTANCIO B. MALAGNA, respondents.
Facts: In 1973, Constancio Maglana, president of Prime White Cement Corporation, sent an
offer letter to Yao Ka Sin Trading. The offer states that Prime White is willing to sell 45,000 bags
of cement at P24.30 per bag. The offer letter was received by Yao Ka Sin’s manager, Henry Yao.
Yao accepted the letter and pursuant to the letter, he sent a check in the amount of P243,000.00
equivalent to the value of 10,000 bags of cement. However, the Board of Directors of Prime
White rejected the offer letter sent by Maglana but it considered Yao’s acceptance letter as a new
contract offer hence the Board sent a letter to Yao telling him that Prime White is instead willing
to sell only 10,000 bags to Yao Ka Sin and that he has ten days to reply ; that if no reply is made
by Yao then they will consider it as an acceptance and that thereafter Prime White shall deposit
the P243k check in its account and then deliver the cements to Yao Ka Sin. Henry Yao never
replied.
Later, Yao Ka Sin sued Prime White to compel the latter to comply with what Yao Ka Sin
considered as the true contract, i.e., 45,000 bags at P24.30 per bag. Prime White in its defense
averred that although Maglana is empowered to sign contracts in behalf of Prime White, such
contracts are still subject to approval by Prime White’s Board, and then it still requires further
approval by the National Investment and Development Corporation (NIDC), a government
owned and controlled corporation because Prime White is a subsidiary of NIDC.
Henry Yao asserts that the letter from Maglana is a binding contract because it was made under
the apparent authority of Maglana. The trial court ruled in favor of Yao Ka Sin. The Court of
Appeals reversed the trial court.
Issue: Whether or not the president of a corporation is clothed with apparent authority to enter
into binding contracts with third persons without the authority of the Board.
Ruling: No. The Board may enter into contracts through the president. The president may only
enter into contracts upon authority of the Board. Hence, any agreement signed by the president
is subject to approval by the Board. Unlike a general manager (like the case of Francisco vs
GSIS), the president has no apparent authority to enter into binding contracts with third
persons. Further, if indeed the by-laws of Prime White did provide Maglana with apparent
authority, this was not proven by Yao Ka Sin.
As a rule, apparent authority may result from (1) the general manner, by which the corporation
holds out an officer or agent as having power to act or, in other words, the apparent authority
with which it clothes him to act in general or (2) acquiescence in his acts of a particular nature,
with actual or constructive knowledge thereof, whether within or without the scope of his
ordinary powers. These are not present in this case.
Also, the subsequent letter by Prime White to Yao Ka Sin is binding because Yao Ka Sin’s failure
to respond constitutes an acceptance, per stated in the letter itself – which was not contested by
Henry Yao during trial.