Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763, June 15, 1992
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Rizchelle Sampang-ManaogYao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763, June 15, 1992
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Rizchelle Sampang-ManaogYao
Ka Sin Trading vs. Court of Appeals, 209 SCRA 763, June 15, 1992
Davide, Jr., J.:
DOCTRINE: While there can be no question that Mr, Maglana was an officer—the President and Chairman—of
private respondent corporation at the time he signed Exhibit "A", the above provisions of said private
respondent's By-Laws do not in any way confer upon the President the authority to enter into contracts for the
corporation independently of the Board of Directors. That power is exclusively lodged in the latter.
Nevertheless, to expedite or facilitate the execution of the contract, only the President—and not all the
members of the Board, or so much thereof as are required for the act—shall sign it for the corporation. This is
the import of the words through the president in Exhibit "8-A" and the clear intent of the power of the chairman
"to execute and sign for and in behalf of the corporation all contracts and agreements which the corporation
may enter into" in Exhibit "1-1". Both powers presuppose a prior act of the corporation exercised through the
Board of Directors. No greater power can be implied from such express, but limited, delegated authority.
Neither can it be logically claimed that any power greater than that expressly conferred is inherent in Mr.
Maglana's position as president and chairman of the corporation.
FACTS: Assailed in this petition for review is the decision of the respondent Court of Appeals, promulgated on
21 December 1979, reversing the decision of the then Court of First Instance of Leyte dated 20 November 1975
in civil case entitled "Yao Ka Sin Trading versus Prime White Cement Corporation."
Constancio B. Maglana, President and Chairman of the Board of Prime White Cement Corporation (PWCC)
submitted a letter-offer, Exhibit A, to Yao Ka Sin Trading (YKS) of selling “Prime White Cement” in the quantity
of 45,000 bags in guaranteed monthly quantity of 15,000 bags at a minimum effective from June-August 1973
which YKS accepted.
After 23 days since signing of the letter offer, Exhibit A, the Board of Directors of PWCC disapproved the same
evidenced by the minutes of the meeting. It decided to that the 10,000 bags of white cement, which is the worth
of the Php243,000 down payment, is sold not because of the alleged letter-contract but must be understood as
a new separate contract as the letter-contract was disapproved by the Board.
After several reminders and requests from YKS, PWCC insisted that it only committed to sell 10,000 bags of
white cement. As of 7 December 1973, PWCC had delivered only 9,775 bags of white cement.
YKS filed a complaint for specific performance with damages against PWCC based on the letter-contract
presented in Court. PWCC denied the allegations stating that YKS has no legal personality to sue, Mr. Maglana
was lured into signing the document, signing was subject to the condition that it be approved by the Board of
Directors, the Board of Directors disapproved the same, thus, was never consummated and is not enforceable
against PWCC, and PWCC agreed to sell 10,000 bags not under the Exhibit-A.
After trial on the merits, the Court handed down its decision in favor of petitioner and ordered the defendant
to complete the delivery of 45,000 bags of prime white cement in addition defendant was ordered to pay moral
damages, exemplary damages, attorney’s fees, and costs of proceedings. The trial court, however, ruled that
the option to sell is not valid because it is not supported by any consideration distinct from the price; it was
exercised before compliance with the original contract by PWCC; and the repudiation of the original contract
by PWCC was deemed a withdrawal of the option before acceptance by the petitioner.
Both parties appealed from the said decision to the respondent Court of Appeals. The Court of Appeals reversed
and set aside the previous decision and plaintiff’s complaint is dismissed with costs. Plaintiff is ordered to pay
defendant corporation Php25,000 in exemplary damages, and Php10,000 in attorney’s fees. Motion for
reconsideration was denied. Petitioner filed an instant petition.
ISSUE: Whether or not Exhibit-A is legally enforceable.
RULING: No. The inevitable conclusion is that Exhibit "A" is an unenforceable contract under Article 1317 of
the Civil Code which provides as follows:
"ARTICLE 1317. No one may contract in the name of another without being authorized by the latter,
or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been executed, before it is revoked by the other contracting
party."
While there can be no question that Mr. Maglana was an officer —the President and Chairman—of private
respondent corporation at the time he signed Exhibit "A", the By-Laws do not in any way confer upon the
President the authority to enter into contracts for the corporation independently of the Board of Directors.
That power is exclusively lodged in the latter. Nevertheless, to expedite or facilitate the execution of the
contract, only the President—and not all the members of the Board, or so much thereof as are required for the
act —shall sign it for the corporation. This is the import of the words through the president in Exhibit "8-A" and
the clear intent of the power of the chairman "to execute and sign for and in behalf of the corporation all
contracts and agreements which the corporation may enter into" in Exhibit "1-1". Both powers presuppose a
prior act of the corporation exercised through the Board of Directors. No greater power can be implied from
such express, but limited, delegated authority. Neither can it be logically claimed that any power greater than
that expressly conferred is inherent in Mr. Maglana's position as president and chairman of the corporation.
Exhibit-A was effectively disapproved and rejected by the Board of Directors which, at the same time,
considered the amount of P243,000.00 received by Mr. Maglana as payment for 10,000 bags of white cement,
treated as an entirely different contract, and forthwith notified petitioner of its decision that "If within ten (10)
days from date hereof we will not hear from you but you will withdraw cement at P24.30 per bag from our
plant, then we will deposit your check of P243,000.00 dated June 7, 1973 issued by the Producers Bank of the
Philippines, per instruction of the Board." Petitioner received a copy of this notification and thereafter accepted
without any protest the Delivery Receipt covering the 10,000 bags and the Official Receipt for the P243,000.00.
The respondent Court thus correctly ruled that petitioner had in fact agreed to a new transaction involving only
10,000 bags of white cement.
The Court affirmed the judgment rendered by the Court of Appeals. Costs against petitioner.
