As the owner of a lot in Sampaloc, Manila, the petitioner entered into a Contract of Lease with St. John Berchman School of Manila for the period June 2005 to May 2006; upon the expiration of the lease contract, the petitioner, thru its president, Dr. Virgilio C. Del Castillo, sent another contract of lease for the period June 2006 to May 2007 for its signature, but despite several follow ups, the respondent failed to return the contract of lease, thus in a board meeting in December, 2007, the petitioner informed the respondent that it is not renewing the lease anymore, and on March 6, 2008, Del Castillo, the president, demanded the payment of back rentals with a request to vacate the leased property. Despite demand, the respondent refused to vacate, hence, it filed a complaint for Ejectment with Damages against the respondent. The latter denied the allegations, insisting that there was a 10-year contract of lease between it and the petitioner, and the one-year lease contract was made only to correspond to the advance rentals it paid to the petitioner when it encountered financial difficulties, and the 10-year lease still subsists.
The Metropolitan Trial Court dismissed the complaint for lack of a valid demand letter. It ruled that the demand letter was legally non-existent for failure of petitioner to show that Del Castillo was duly authorized by the Board to issue the same. The MeTC stressed that a demand letter is a jurisdictional requirement the absence of which opens the case susceptible to dismissal.
The RTC on appeal, reversed the MeTC ruling. The RTC ruled that the issuance of the demand letter dated March 5, 2008 was done by Del Castillo in the usual course of business and that the issuance of the same was ratified by petitioner when it passed the Board Resolution dated May 13, 2008 authorizing Del Castillo to file a case against respondent.
The CA, however, reinstated the MeTC ruling. It also noted that the verification certification on no forum shopping of the complaint sined bt Del Castillo did not contain the board resolution authorizing him to file the complaint.
The Issue:
Whether or not a demand letter signed by the president of a corporation when not supported by a board resolution is defective, rendering the complaint for ejectment premature for lack of a demand letter.
The Ruling:
The Petition is meritorious.
| The president of a corporation may sign the verification and certification of non-forum shopping. |
A corporation exercises its powers and transacts its business through its board of directors or trustees. Accordingly, unless authorized by the board of directors or trustees, corporate officers and agents cannot exercise any corporate power pertaining to the corporation. A board resolution expressly authorizing the officers and agents is therefore required.However, in filing a suit, jurisprudence has allowed the president of a corporation to sign the verification and the certification of non-forum shopping even without a board resolution as said officer is presumed to have sufficient knowledge to swear to the truth of the allegations stated in the complaint or petition.
In view of the foregoing jurisprudential exception, the CA gravely erred in dismissing the Complaint on the mere failure of petitioner to present a copy of the Board Resolution dated May 13, 2008. With or without the said Board Resolution, Del Castillo, as the President of petitioner, was authorized to sign the verification and the certification of non-forum shopping.
| All the essential requisites of an unlawful detainer are present. |
Now, as to whether respondent may be validly ejected from the subject property, the Court rules in the affirmative.
To justify an action for unlawful detainer, the following essential requisites must concur:
| (1) | the fact of lease by virtue of an implied or expressed contract; |
| (2) | the expiration or termination of the possessor’s right to hold possession; |
| (3) | withholding of the possession of the land or building after the expiration or the termination of the right to possession by the lessee; |
| (4) | written demand upon lessee to pay the rental or comply with the terms of the lease and vacate the premises; |
| (5) | the action must be filed within one (1) year from date of last demand received by the lessee. |
In this case, requisites 1, 2, 3, and 5 have been duly established. It is undisputed that a Contract of Lease was entered into by petitioner with St. John, which contract was later assigned to respondent; that respondent failed to pay the monthly rentals; that non-payment of the monthly rentals is a ground for the termination of the Contract of Lease; that respondent continued to possess the subject property despite the termination of the Contract of Lease; and that the Complaint was filed within one (1) year from March 5, 2008 or the date of the last demand received by respondent. Thus, the only question to be resolved is whether there was a valid written demand upon respondent to pay the unpaid rentals and vacate the subject property.
On March 5, 2008, Del Castillo wrote a demand letter to respondent requiring the latter to pay the unpaid rentals in the amount of P604,936.35 and to vacate the subject property. Respondent, however, contends that said demand letter had no legal effect because it was issued without an express authority from the Board in the form of a board resolution. Respondent harps on the fact that Del Castillo was authorized by the Board to institute the instant case only on May 13, 2008 or two months after the demand letter dated March 5, 2008 was issued.
The Court does not agree with the reasoning of respondent.
In People’s Aircargo and Warehousing Co., Inc. v. Court of Appeals, the Court laid down an exception to the general rule that no person, not even its officers, can validly bind a corporation without an express authority from the board of directors. In that case, the Court sustained the authority of the president to bind the corporation for the reason that the president has the power to perform acts within the scope of his or her usual duties. The Court explained that:
Being a juridical entity, a corporation may act through its board of directors, which exercises almost all corporate powers, lays down all corporate business policies and is responsible for the efficiency of management, as provided in Section 23 of the Corporation Code of the Philippines:
SEC. 23. The Board of Directors or Trustees. — Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees x x x.
Under this provision, the power and the responsibility to decide whether the corporation should enter into a contract that will bind the corporation is lodged in the board, subject to the articles of incorporation, by-laws, or relevant provisions of law. However, just as a natural person may authorize another to do certain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to officers, committees or agents. The authority of such individuals to bind the corporation is generally derived from law, corporate by laws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of business, viz.:
A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that [the] authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred.
Accordingly, the appellate court ruled in this case that the authority to act for and to bind a corporation may be presumed from acts of recognition in other instances, wherein the power was in fact exercised without any objection from its board or shareholders. Petitioner had previously allowed its president to enter into the First Contract with private respondent without a board resolution expressly authorizing him; thus, it had clothed its president with apparent authority to execute the subject contract.
Petitioner rebuts, arguing that a single isolated agreement prior to the subject contract does not constitute corporate practice, which Webster defines as ‘frequent or customary action.’ It cites Board of Liquidators v. Kalaw, in which the practice of NACOCO allowing its general manager to negotiate and execute contract in its copra trading activities for and on its behalf, without prior board approval, was inferred from sixty contracts — not one, as in the present case — previously entered into by the corporation without such board resolution.
Petitioner’s argument is not persuasive. Apparent authority is derived not merely from practice. Its existence may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer with the power to bind the corporation.
x x x x
Inasmuch as a corporate president is often given general supervision and control over corporate operations, the strict rule that said officer has no inherent power to act for the corporation is slowly giving way to the realization that such officer has certain limited powers in the transaction of the usual and ordinary business of the corporation. In the absence of a charter or by[-]law provision to the contrary, the president is presumed to have the authority to act within the domain of the general objectives of its business and within the scope of his or her usual duties.
Hence, it has been held in other jurisdictions that the president of a corporation possesses the power to enter into a contract for the corporation, when the ‘conduct on the part of both the president and the corporation [shows] that he had been in the habit of acting in similar matters on behalf of the company and that the company had authorized him so to act and had recognized, approved and ratified his former and similar actions.’
Furthermore, a party dealing with the president of a corporation is entitled to assume that he has the authority to enter, on behalf of the corporation, into contracts that are within the scope of the powers of said corporation and that do not violate any statute or rule on public policy.
In this case, the issuance of the demand letter dated March 5, 2008 to collect the payment of unpaid rentals from respondent and to demand the latter to vacate the subject property was done in the ordinary course of business, and thus, within the scope of the powers of Del Castillo. In fact, it was his duty as President to manage the affairs of petitioner, which included the collection of receivables. Article IV, Section 2 of the By-laws of petitioner expressly states that the President has the power to:
x x x x
b. Exercise general [supervision], control and direction of the business and affairs of the Colegio;
x x x x
e. Execute in behalf of the Colegio, bonds, mortgages, and all other contracts and agreements which the Colegio may enter into;
x x x x
j. Exercise or perform such other duties as are incident to his office or such powers and duties as the Board may from time to time [prescribe].
Accordingly, even without a board resolution, Del Castillo had the power and authority to issue the demand letter dated March 5, 2008.
In any case, even if, for the sake of argument, Del Castillo acted beyond the scope of his authority in issuing the demand letter dated March 5, 2008, the subsequent issuance of the Board Resolution dated May 13, 2008 cured any defect possibly arising therefrom as it was a clear indication that the Board agreed to, consented to, acquiesced in, or ratified the issuance of the said demand letter.
All told, the Court agrees with the findings of the RTC that all the requisites of an unlawful detainer were present in the instant case, and thus, petitioner was entitled to the possession of the subject property.
However, as to the amount of reasonable compensation for the use of the subject property, the Court finds that the amount should be P55,000.00 per month as stipulated in the Contract of Lease, not just P50,000.00 as awarded by the RTC.
In addition, the award of actual damages shall earn interest at the rate of 12% per annum from March 5, 2008, the date of extrajudicial demand, to June 30, 2013. From July 1, 2013 until full satisfaction of the monetary award, the rate of interest shall be six percent (6%).
WHEREFORE, the Petition is hereby GRANTED. The assailed June 13, 2013 Decision and the April 7, 2014 Resolution of the Court of Appeals in CA-G.R. SP No. 114856 are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 11, dated May 13, 2010 is hereby REINSTATED and AFFIRMED with MODIFICATION that the amount of reasonable compensation for the use of the subject property be increased to P55,000.00 as stipulated in the Contract of Lease. In addition, the award of actual damages shall earn interest at the rate of 12% per annum from March 5, 2008, the date of extrajudicial demand, to June 30, 2013. From July 1, 2013 until full satisfaction of the monetary award, the rate of interest shall be six percent (6%) per annum.
SO ORDERED.
DEL CASTILLO, J.:[*]
Jardeleza, Tijam, and Gesmundo,[**] JJ., concur.
Leonardo-De Castro, J., on official leave.
G.R. No. 212034, July 2, 2018, COLEGIO MEDICO-FARMACEUTICO DE FILIPINAS, INC., PETITIONER, V. LILY LIM AND ALL PERSONS CLAIMING UNDER HER, RESPONDENT.
Citations omitted.