Apex and Financing Corporation v. Crown Radio Corporation
REITERATIONFacts
The Antecedents: On December 6, 1968, Uy Han Kiat, then president of Crown Radio Corporation (Crown), executed a promissory note for P250,000.00 in favor of Apex Investment and Financing Corporation (Apex), secured by a real estate mortgage over Crown's properties. The mortgage was registered over eight years later, on May 24, 1977. Three months after execution, Uy Han Kiat left the country. On September 9, 1977, Apex initiated extrajudicial foreclosure proceedings due to alleged non-payment. Crown claimed it only learned of the note and mortgage at this time. Procedural History: Crown filed a complaint seeking to nullify the promissory note, mortgage, and notice of sale, alleging Uy Han Kiat lacked authority. The trial court issued a restraining order. Apex and Atty. Villaseca claimed Uy Han Kiat was authorized by a board resolution. After trial, the trial court declared the note, mortgage, and sale notice void as far as Crown was concerned, made the restraining order permanent, and awarded attorney's fees and litigation expenses to Crown. The Intermediate Appellate Court affirmed the decision but reduced the attorney's fees. The Petition: Petitioners Apex and Atty. Villaseca appealed to the Supreme Court, asserting the appellate court erred in discarding secondary evidence of a resolution, not finding Crown's action to escape a valid obligation, and awarding attorney's fees.
Issue(s)
Whether the Supreme Court can review the factual findings of the Intermediate Appellate Court. Whether Uy Han Kiat was authorized by Crown's board of directors to execute the promissory note and mortgage. Whether Crown ratified the promissory note and mortgage. Whether Apex is entitled to reimbursement for payments made to Equitable Banking Corporation. Whether Crown is entitled to attorney's fees.
Ruling
The Supreme Court affirmed the decision of the Intermediate Appellate Court, with the sole modification of striking out the award of attorney's fees to Crown.
Ratio Decidendi
On the review of factual findings: The Supreme Court reiterated the general rule that it is precluded from reviewing factual findings of the Intermediate Appellate Court, as only questions of law may be raised in appeals. Exceptions to this rule, such as grave abuse of discretion or misapprehension of facts, were found not to be present in this case. The Court emphasized that it generally defers to the trial court's assessment of witness credibility, especially when the appellate court affirms those findings. On the authority of Uy Han Kiat: The Court found that the existence and loss of the board resolution allegedly authorizing Uy Han Kiat to execute the loan and mortgage were not sufficiently proven. The secondary evidence presented, consisting of the testimony of two Apex employees, was deemed self-serving, biased, and inconclusive. Therefore, Uy Han Kiat was not specifically authorized by Crown's board of directors to bind the corporation to the loan and mortgage agreements. Several circumstances supported this conclusion, including the unusual nature of extending a loan on partially mortgaged property without requiring title certificates, the delayed registration of the mortgage, and Uy Han Kiat's swift departure from the country after the transactions. On ratification: The Court held that Crown was not deemed to have ratified the transactions by failing to deny acceptance or retention of benefits. Crown, as the plaintiff, was not obligated to anticipate such a defense. Apex failed to affirmatively allege ratification in its answer, which is necessary to put the issue in controversy. Crown explicitly denied ratification in its pre-trial brief and again when specifically asked by the Court. On reimbursement for payments to Equitable Banking Corporation: The Court declined to order reimbursement for payments made by Apex to Equitable Banking Corporation. This was because Apex did not clearly and categorically interpose such a claim as a counterclaim in the original action and did not make a serious effort to have the matter thoroughly ventilated. On attorney's fees: The Court found no clear and indubitable justification for the award of attorney's fees, even in the reduced amount fixed by the Intermediate Appellate Court, and thus struck it from the judgment.
Main Doctrine
A corporation is bound by acts of its president only if specifically authorized by the board of directors or by established corporate practice, custom, or policy. In the absence of such authorization, the corporation may only be bound by subsequent ratification, which must be affirmatively alleged and proven.