Cebu Mactan Members Center v. Tsukahara
REITERATIONFacts
The Antecedents: Petitioner Cebu Mactan Members Center, Inc. (CMMCI), through its President and Chairman Mitsumasa Sugimoto, obtained two loans from respondent Masahiro Tsukahara: one for ₱6,500,000.00 paid through seven postdated checks, and another for ₱10,000,000.00 evidenced by a promissory note signed by Sugimoto in his capacity as CMMCI President and Chairman, and in his personal capacity. The checks were dishonored upon presentment, and CMMCI failed to pay the loans. Procedural History: Tsukahara filed a collection of sum of money case against CMMCI and Sugimoto. The Regional Trial Court (RTC) ruled in favor of Tsukahara, ordering CMMCI and Sugimoto to pay jointly and severally. Sugimoto was declared in default. The Court of Appeals affirmed the RTC decision. The Petition: CMMCI filed a petition for review, questioning the Court of Appeals' ruling that CMMCI is liable for the loans contracted by its President without a board resolution.
Issue(s)
Whether the Court of Appeals erred in holding that CMMCI is liable for the loan contracted by its President without a resolution issued by the CMMCI Board of Directors.
Ruling
The petition is denied. The Court of Appeals' Decision dated 29 July 2003 in CA-G.R. CV No. 68321 is affirmed.
Ratio Decidendi
On whether CMMCI is liable for the loan contracted by its President without a board resolution: The Court held that CMMCI is liable. Corporate powers are exercised by the board of directors, and generally, no officer can bind the corporation without board authority. However, the board may delegate powers to officers, which can be derived from law, corporate by-laws, or express or implied authorization from the board. In this case, CMMCI's by-laws expressly grant the President the power to borrow money for the company by any legal means, execute contracts, and sign checks and promissory notes on behalf of the corporation. These express powers conferred by the by-laws obviate the need for a separate board resolution to validate such transactions. The by-laws are considered the private laws of the corporation and must be given effect. Therefore, Sugimoto, as president, was authorized to enter into the loan transactions on behalf of CMMCI, making the loans valid and binding against the corporation. The corporation is estopped from denying the authority of its president in this regard.
Main Doctrine
A corporation's president, when expressly granted the power to borrow money and execute contracts and sign promissory notes on behalf of the corporation under its by-laws, can validly bind the corporation for such transactions without the need for a separate board resolution, as the by-laws themselves serve as authorization.