Doctrine of Estoppel or Ratification public as possessing the power to do those acts, and thus,

the corporation will, as against anyone who has in good

Sps. Lipat vs. Pacific Banking Corp.,
1. faith dealt with it through such agent, be estopped from
denying the agent’s authority.
402 SCRA 339 (2003)
Important People:
Facts: Petitioner spouses Lipat owned Bela’s Export Petitioner- People’s Aircargo and Warehousing Co. Inc.
Trading (BET) a single proprietorship engaged in the Respondent- Court of Appeals; Stefani C. Saño
manufacture of garments for domestic and foreign
consumption. The spouses by virtue of an SPA appointed Facts: Petitioner is a domestic corporation, which was
and authorized their daughter to obtain loan from organized in the middle of 1986 to operate a customs
respondent Pacific Bank. A loan was secured and as bonded warehouse at the old Manila International
security therefore a REM was executed over the property Airport in Pasay City.
of the spouses. Sometime after, BET was incorporated
into a family corporation named Bela’s Export Respondent was solicited by the petitioner’s president to
Corporation (BEC) and the loan was restructured in its submit a proposal of a feasibility for obtaining a license at
name. Subsequent loans were obtained in behalf of BEC the Bureau of Customs.
all secured by the previous REM. BEC defaulted in its
payments which led to the foreclosure and sale of the Consequently, their agreement was consummated and
mortgaged property. The spouses moved to annul the sale private was respondent able to submit a feasibility study,
alleging that BEC is a distinct and separate personality an operations manual, and conducted a seminar.
from them and that the REM was executed only to secure
BET’s loan. Both trial court and CA ruled to pierce the However, petitioner refused to pay private respondent
corporate veil to hold petitioner spouses liable for BEC’s contending that its president was not authorized by the
obligations. board to enter into the said agreement. Thus, a collection
was filed and the RTC ruled that petitioner should pay an
Issue: Whether or not the doctrine of piercing the veil of amount of Php 60,000.00 and that the second contract
corporate fiction is applicable in this case. was unenforceable. Aggrieved by the decision, private
respondent appealed to the CA that the amount be raised
Ruling: YES. to Php 400,000.00. CA reversed the decision of the RTC
contending that the petitioner had clothed its president
We find that the evidence on record demolishes, rather with apparent authority to enter into the disputed
than buttresses, petitioners’ contention that BET and BEC agreement. As it had also become the practice of the
are separate business entities. Note that Estelita Lipat petitioner-corporation to allow its president to negotiate
admitted that she and her husband, Alfredo, were the and execute contracts necessary to secure its license as a
owners of BET and were two of the incorporators and customs bonded warehouse without prior board approval,
majority stockholders of BEC. It is also undisputed that the board itself, by its acts and through acquiescence,
Estelita Lipat executed a special power of attorney in favor practically laid aside the normal requirement of prior
of her daughter, Teresita, to obtain loans and credit lines express approval. Hence, the case was elevated to the
from Pacific Bank on her behalf. Incidentally, Teresita Supreme Court.
was designated as executive-vice president and general
manager of both BET and BEC, respectively. Issue: Whether or not petitioner is estopped
notwithstanding the lack of any board authority since it
It could not have been coincidental that BET and BEC are was the purported ‘practice’ to allow the president to enter
so intertwined with each other in terms of ownership, into contracts of said nature
business purpose, and management. Apparently, BET
and BEC are one and the same and the latter is a conduit Ruling:
of and merely succeeded the former. Petitioners’ attempt Yes. Contracts entered into by a corporate president
to isolate themselves from and hide behind the corporate without express prior board approval bind the
personality of BEC so as to evade their liabilities to Pacific corporation, when such officer’s apparent authority is
Bank is precisely what the classical doctrine of piercing established and these contracts are ratified by the
the veil of corporate entity seeks to prevent and remedy. corporation.
It is familiar doctrine that if a corporation knowingly
In our view, BEC is a mere continuation and successor of permits one of its officers, or any other agent, to act within
BET and petitioners cannot evade their obligations in the the scope of an apparent authority, it holds him out to the
mortgage contract secured under the name of BEC on the public as possessing the power to do those acts, and thus,
pretext that it was signed for the benefit and under the the corporation will, as against anyone who has in good
name of BET. We are thus constrained to rule that the faith dealt with it through such agent, be estopped from
Court of Appeals did not err when it applied the denying the agent’s authority.
instrumentality doctrine in piercing the corporate veil of Petitioner had previously allowed its president to enter
BEC. into the First Contract with private respondent without a
board resolution expressly authorizing him; thus, it had
2. People’s Aircargo and clothed its president with apparent authority to execute
Warehousing Co., Inv. Vs. Court of the subject contract.
Appeals, 297 SCRA 170 October 7, 1998
Doctrine: Contracts entered into by a corporate
president without express prior board approval bind the
corporation, when such officer’s apparent authority is
established and these contracts are ratified by the
corporation.

It is familiar doctrine that if a corporation knowingly

permits one of its officers, or any other agent, to act within
the scope of an apparent authority, it holds him out to the
 3. J. Antonio Aguenza vs. 4. DBP vs. Sps. Francisco and Leticia
Metropolitan Bank & Trust Company, Ong, 460 SCRA 170 June 15, 2005
Vitaliado P. Arrieta, Lilia Perez, and IAC
271 SCRA 1 April 7, 1997 Doctrine: It is familiar doctrine that if a corporation
knowingly permits one of its officers, or any other agent,
Doctrine: Ratification can never be made on the part to do acts within the scope of an apparent authority, and
of the corporation by the same persons who wrongfully thus holds him out to the public as possessing power to
assume the power to make the contract, but the do those acts, the corporation will, as against anyone
ratification must be by the officer as governing body who has in good faith dealt with the corporation through
having authority to make such contract. In the absence such agent, be estopped from denying his authority; and
of such ratification or authority, such admission does not where it is said: if a corporation permits this means the
bind the corporation. same as ‘if the thing is permitted by the directing power
of the corporation.’
Important People:
Petitioner- J. Antonio Aguenza Important People:
Respondent-Metropolitan Bank and Trust Co., Vitaliado Petitioner- Development Bank of the Philippines
P. Arrieta, Lilia Perez, and the Intermediate Appellate Respondent- Spouses Francisco Ong and Leticia Ong
Court
Facts: Petitioner’s foreclosed asset, formerly owned by
Facts: Petitioner is a president of Intertrade wherein one Enrique Abada under TCT No. T-4786 and located at
together with respondent Arrieta has entered to a Corrales Extension, Cagayan de Oro City is the subject of
Continuing Surety Agreement with respondent this controversy.
Metropolitan Bank and Trust Co. pursuant to an
authority from the Board. Respondent offered to purchase the same through the
branch manager wherein the latter marked the written
Private respondent Arrieta and Perez who is a bookkeeper offer as “noted”.
of Intertrade was defaulted by the Metropolitan Bank and
Trust Co. for failure to pay pursuant to a promissory note Another buyer also manifested intent to purchase the said
that they have jointly executed. Thus, a case was filed. property. Thus, petitioner informed the respondent to
match the second offer pursuant to the best interest of the
Petitioner was impleaded by Metropolitan Bank and Trust bank.
Co. pursuant to the Continuing Surety Agreement.
Consequently, the petitioner informed the respondent
The RTC ruled in favour of the petitioner but was reversed that the sale could not be awarded to them in view that it
by the CA citing Intertrade’s admission of its corporate shall be offered for public bidding.
liability being admission also that the signatories signed
the note in a representative capacity and that the Respondent filed a case with the RTC for breach of
suretyship is both retrospective and prospective in its contract in the purchase of said property. The RTC
operation. Its wording covers all obligations of Intertrade initially dismissed the petition citing that there was no
existing as of its date as well as those that may exist meeting of the minds between the parties but reversed
thereafter. Hence, its coverage extends to the promissory upon motion for reconsideration by the respondent
note. relying on the latter’s testimony that a bank clerk has
informed them that the sale has already been approved.
Issue: Whether or not the petitioner is liable pursuant to The said decision was affirmed in toto by the CA. Hence,
the Continuing Surety Agreement in relation to the loan the case is elevated to the Supreme Court.
obtained by private respondents as evidenced by a
promissory note Issue: Whether or not petitioner is liable on the breach
of contract against respondent relying merely on the
Ruling:No. Intertrade has a distinct personality separate testimony that the bank clerk has informed the latter that
from its members. The corporation transacts its business the sale has already been approved
only through its officers or agents. Whatever authority
these officers or agents may have is derived from the Ruling: No. A clerk is not among the bank officers upon
Board of Directors or other governing body unless whom such putative authority may be reposed by a third
conferred by the charter of the corporation. An officer’s party. The very circumstance that the offer to purchase
power as an agent of the corporation must be sought from was merely “NOTED,” by the branch manager and not
the statute, charter, the by-laws, as in a delegation of “approved,” is a clear indication that there is no perfected
authority to such officer, or the acts of the Board of contract of sale to speak of.
Directors formally expressed or implied from a habit or
custom of doing business. There is, thus, no legal basis to bind petitioner into any
valid contract of sale with the respondents, given the
The only document to evidence the subject transaction absolute absence of any approval or consent by any
was the promissory note dated March 21, 1978 signed by responsible officer of petitioner bank. And because there
private respondents Arrieta and Lilia Perez. There is no is no perfected contract of sale between the parties,
indication in said document as to what capacity the two respondents’ action for breach of contract and/or specific
signatories had in affixing their signatures thereon. The performance is simply without any leg to stand on and
present obligation incurred in subject contract of loan, as must therefore fall.
secured by the Arrieta and Perez promissory note, is not
the obligation of the corporation and petitioner Aguenza,
but the individual and personal obligation of private
respondents Arrieta and Lilia Perez.
 5. Koji Yasuma vs. Heirs of Cecilio S. and Release, one Felix Aranda, assigned and conveyed all
De Villa and East Cordillera Mining his rights and interests at Hanil-Gonzales Construction &
Development Phils. Corporation (HGCDP) in favor of
Corporation, 499 SCRA 466 August 22, 2006 Horacio Abrante. Under the same Deed, it appears that
HGCDP assumed the obligations of Inland. Westmont’s
Doctrine: The general principles of agency govern the Account Officer, Lionel Calo, Jr. (Calo), signed for its
relation between the corporation and its officers or conformity to the deed. Inland was subsequently served
agents—when authorized, their acts bind the with a Notice of Sheriff’s Sale foreclosing the real estate
corporation, otherwise, their acts cannot bind it. The mortgages over its real properties prompting it to file a
corporation may ratify—expressly or impliedly—the complaint for injunction against the Westmont. In its
unauthorized acts of its corporate officers. In the absence answer, Westmont underscored that it had no knowledge,
of a special power of attorney in favour of the much less did it give its conformity to the alleged
corporation’s president, no valid mortgage could be assignment of the obligation. The trial court found that
executed by him. Westmont ratified the act of Calo. It accordingly rendered
judgment in favor of Inland. On appeal, the appellate
Important People: court affirmed the trial court’s decision insofar as it finds
Petitioner- Koji Yasuma Westmont to have ratified the Deed of Assignment.
Respondent- Heirs of Cecilio S. De Villa and East
Cordillera Mining Corporation

Facts: Deceased respondent obtained loans from ISSUE: Whether or not Westmont Bank ratified the Deed
petitioner evidenced by three promissory notes where of Assignment.
the first two were cancelled. The loans were initially
secured by a mortgage in a property owned by East HELD: The general rule remains that, in the absence of
Cordillera Mining Corporation wherein the deceased was authority from the board of directors, no person, not even
a president. A collection case was filed against its officers, can validly bind a corporation. If a
respondent for failure to pay the said obligation. The corporation, however, consciously lets one of its officers,
or any other agent, to act within the scope of an apparent
RTC rendered decision in favour of the petitioner but authority, it will be estopped from denying such officer’s
was reversed by CA citing that the mortgage was null and authority.The records show that Calo was the one
void for lack of authority from the corporation. Hence, assigned to transact on petitioner’s behalf respecting the
the case is elevated at the Supreme Court. loan transactions and arrangements of Inland as well as
those of Hanil-Gonzales and Abrantes. Since it conducted
Issue: Whether or not the corporation is liable to the said business through Calo, who is an Account Officer, it is
mortgage together with the deceased respondent presumed that he had authority to sign for the bank in the
Deed of Assignment. Unmistakably, the
Ruling: No. There was no showing that respondent Court’s directive in Yao Ka Sin Trading is that a
corporation ever authorized de Villa to obtain the loans on corporation should first prove by clear evidence that its
its behalf. The notes did not show that de Villa acted on corporate officer is not in fact authorized to act on its
behalf of the corporation. Actually, the corporation would behalf before the burden of evidence shifts to the other
not have figured in the transaction at all had it not been party to prove, by previous specific acts, that an officer
for its admission that it received the amount of P1.3 was clothed by the corporation with apparent authority.
million. As could be gleaned from the promissory notes, it In the present petitions, Westmont Bank failed to
was a stranger to the transaction. discharge its primary burden of proving that Calo was not
authorized to bind it, as it did not present proof that Calo
Respondent corporation could not have ratified the act of was unauthorized. It did not present, much less cite, any
de Villa because there was no proof that it knew that he Resolution from its Board of Directors or its Charter or
took out a loan on its behalf. As stated earlier, ratification By-laws from which the Court could reasonably infer that
is a voluntary choice that is knowingly made. The he indeed had no authority to sign in its behalf or bind it
corporation could not have ratified an act it had no in the Deed of Assignment.
knowledge of.

A special power of attorney is necessary to create or

7. Yao Ka Sin Trading vs. Court of
convey real rights over immovable property.
Furthermore, the special power of attorney must appear Appeals, 209 SCRA 763 June 15, 1992
in a public document. In the absence of a special power of
attorney in favour of de Villa as president of the Art. 1317 – No one may contract in the name of another
corporation, no valid mortgage could have been executed without authority.
by him. Since the mortgage was void, it could not be
ratified. Facts: Constancio B. Maglana, President and Chairman of
the Board of PWCC, submitted a letter-offer to YKS, to
wit:
6. Westmont Bank vs. Inland (a) To deliver 45,000 bags of white cement;
Construction and Dev. Corp., 582 SCRA (b) At YKS option: a) P24.30 per 94 Ibs. bag net, FOB
230 (2009) Cebu City; and b) P23.30 per 94 Ibs. bag net, FOB
Asturias Cebu;
If a corporation, however, consciously lets one of (c) With downpayment of P243k, et al.
its officers, or any other agent, to act within the scope of
an apparent authority, it will be estopped from denying But 23 days after the signing of the confirmation of the
such officer’s authority. said letter, PWCC Board disapproved the same as
Respondent Inland Construction and Development Corp. evidenced on the minutes of their meeting.
(Inland) obtained various loans from petitioner ·
Westmont Bank (Westmont). To secure the payment of PWCC informed YKS of the disapproval of the letter-offer.
its obligations, Inland executed Real Estate Mortgages But it issued the corresponding Delivery Order of 10,000
over three real properties and issued promissory notes in bags of cement at P24.30, and Official Receipt for the
favor of the bank. By a Deed of Assignment, Conveyance payment of the same in the amount of P243,000.00,
which YKS accepted without protest. make marginal deposits within forty-eight hours on the
eight purchase contracts in amounts equivalent to the
Then, a series of correspondence ensued between the difference between the contract price and the market
parties: YKS demanding the delivery of the balance price of the coconut oil, to compensate it for the damages
35,000 bags of cement as per letter-offer; while PWCC it suffered when it was forced to acquire coconut oil at a
insisting on the full compliance with the terms thereof higher price. IVO failed to make the prescribed marginal
and informing the latter that it is exercising the option deposits on the eight contacts, in the aggregate amount of
therein stipulated. US$391,593.62, despite written demands.

YKS filed a complaint against PWCC, on the basis of the Hence, Safic prayed that IVO be ordered to pay the sums
aforesaid letter-offer, as accepted by YKS, as a contract of US$293,500.00 and US$391,593.62, plus attorney's
that binds the PWCC. fees and litigation expenses.

The CFI Leyte ruled in favor of YKS, but reversed by the IVO raised the following special affirmative defenses:
CA on the ground that the said letter-offer is not binding Safic had no legal capacity to sue because it was doing
upon it because Mr. Maglana was not authorized to make business in the Philippines without the requisite license
the offer and sign the contract in behalf of the corporation or authority; the subject contracts were speculative
as the Board rejected the same. contracts entered into by IVO's then President,
Dominador Monteverde, in contravention of the
Issue: WoN Mr. Maglana, the PWCC President and prohibition by the Board of Directors against engaging in
Chairman, was empowered to execute the contract for the speculative paper trading, and despite IVO's lack of the
corporation as implied from its By-Laws. necessary license from Central Bank to engage in such
kind of trading activity.
Held: No, the Court holds that Mr. Maglana was not so
authorized under the By-Laws of PWCC to enter into ISSUE: Whether the act of Dominador Monteverde
contracts for the corporation independently of the Board binds IVO
of Directors.
"ARTICLE 1317. No one may contract in the name of HELD: No, the act of Dominador Monteverde without
another without being authorized by the latter, or unless the authorization of the Board of Directors did not bind
he has by law a right to represent him. A contract entered IVO.
into in the name of another by one who has no authority
or legal representation, or who has acted beyond his The Supreme Court ruled that Monteverde had no
powers, shall be unenforceable, unless it is ratified, blanket authority to bind IVO to any contract. He must act
expressly or impliedly, by the person on whose behalf it according to the instructions of the Board of Directors.
has been executed, before it is revoked by the other Even in instances when he was authorized to act
contracting party." according to his discretion, that discretion must not
In the case at bar, the letter-offer was effectively conflict with prior Board orders, resolutions and
disapproved and rejected by the Board of Directors which, instructions. The evidence shows that the IVO Board
at the same time, considered the amount of P243,000.00 knew nothing of the 1986 contracts and that it did not
received by Maglana as payment for 10,000 bags of white authorize Monteverde to enter into speculative contracts.
cement, treated as an entirely different contract, and
forthwith notified YKS its decision to accept the new
transaction involving only 10,000 bags of white cement Safic can not rely on the doctrine of implied agency
within 10 days, otherwise it will return the latter’s because before the controversial 1986 contracts, IVO did
payment in check of P243k. not enter into identical contracts with Safic. The basis for
Thus, judgment appealed is AFFIRMED. agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril
the authority of the agent.
8. Safic Alcan &Cie vs. Imperial
Under Article 1898 of the Civil Code, the acts of an agent
Vegetable Co., 355 SCRA 559 March 28, 2001 beyond the scope of his authority do not bind the principal
unless the latter ratifies the same expressly or impliedly.
FACTS: Petitioner Safic Alcan & Cie (hereinafter, "Safic") It also bears emphasizing that when the third person
is a French corporation engaged in the international knows that the agent was acting beyond his power or
purchase, sale and trading of coconut oil. authority, the principal can not be held liable for the acts
of the agent. If the said third person is aware of such limits
Petitioner Safic alleged that on July 1, 1986 and of authority, he is to blame, and is not entitled to recover
September 25, 1986, it placed purchase orders with IVO damages from the agent, unless the latter undertook to
for 2,000 long tons of crude coconut oil, valued at secure the principal's ratification
US$222.50 per ton to be delivered within the month of
January 1987. Private respondent, however, failed to
deliver the said coconut oil and, instead, offered a "wash
out" settlement, whereby the coconut oil subject of the
purchase contracts were to be "sold back" to IVO at the
prevailing price in the international market at the time of
wash out. Thus, IVO bound itself to pay to Safic the
difference between the said prevailing price and the
contract price of the 2,000 long tons of crude coconut oil,
which amounted to US$293,500.00. IVO failed to pay
this amount despite repeated oral and written demands.

Safic alleged that on eight occasions between April 24,

1986 and October 31, 1986, it placed purchase orders with
IVO for a total of 4,750 tons of crude coconut oil. When
IVO failed to honor its obligation under the wash out
settlement narrated above, Safic demanded that IVO