G.R. No.

L-22450 December 3, 1924

YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees, vs. "KONG LI PO,"
defendant-appellant.

FACTS:

Defendant is a domestic corporation 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."

C. C. Chen or T. C. Chen was appointed general business manager of the newspaper. He 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 as alleged in the complaint. *3 years

Plaintiff were discharged by the new manager, Tan Tian Hong. They instituted the present action
alleging that they have been discharged without just cause.

Defendant alleged that the person whose name appears to have been signed to the contract of
employment (T.C. Chen) was not authorized by the defendant to execute such a contract in its
behalf.

Trial court further found that the contract had been impliedly ratified by the defendant and
rendered judgment in favor of the plaintiffs for the sum of P13,340, with interest

ISSUE:

Whether Chen had the power to bind the corporation by a contract of the character indicated? NO

RULING:

At the time the contract was entered into, Chen was the general manager of the newspaper Kong Li
Po and plaintiff argued that he had implied authority to employ them on the terms stated and that
defendant is bound by his action.

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 not the
contract such as in this case.

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. They had no rights to presume that Chen or any other
single officer or employee of the corporation had implied authority to enter into a contract of
employment which might bring about its ruin.

2nd ISSUE:

WON the corporation impliedly ratified the contract of employment

RULING:

Te Kim Hua, the president of the corporation for 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.

Also, 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

DOCTRINE:

GENERAL RULE:

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.

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