Wednesday, March 21, 2012

Mendezona vs. Philippine Sugar Estates Development Co. [GR No.13659, March 22, 1921]

Facts: The plaintiff send a letter to the manager of defendant proposing to rent on shares, as tenant of Hacienda de Bucal, owned by the defendant. The defendant Board of Directors(BOD) denied his proposition. The plaintiff then sent a proposition to the President of the defendant company, Miguel Garcia Grande, suggesting a contract be entered into with Manuel de Garay instead of him. The BOD thru a resolution agreed on the rental of shares with Mr. de Garay. The contract entered of rental of shares between defendant company and Mr. de Garay contained a provso, which provides that: “ (e) The general tenant cannot transfer, or cede to another person this contract of rental, on shares, without the permission of the company.” Despite the proviso, plaintiff and defendant de Garay executed a contract, whereby the latter will delivered to former the direction and management to be performed on the hacienda and the latter acknowledged himself as a mere subordinate of the former, with the right to receive only 10% of the profits which belong to the tenant. A new president of defendant company was appointed which inspected the hacienda and made a report to the BOD that plaintiff is usurping the power of the Mr. de Garay. The BOD adopted in their resolution the rescission of rental contract. 

Thereafter plaintiff filed an action in the CFI for recovery of damages against the defendant company arising from the breach of the contract. Plaintiff claims that the rental contract on shares was in reality entered into between him and the defendant corporation not with Mr de Garay. In support to his claims he alleged attitude of the president Grande and of the manager Jose Ma. Suarez in consenting to the contract of partnership executed between the him and the defendant Mr de Garay, in which contract Mr de Garay was recognized as a mere subordinate of plaintiff. The CFI absolved the defendant company. Hence, this petition. 

Issue: Whether or not contention of plaintiff has merit when it claims that the act of the president and manager in consenting to agreement between him and Mr. de Garay binds the corporation despite a contrary resolution was adopted by the BOD. 

Held: NO. With respect to this, it should be noted, in the first place, that the contract of partnership between Mendezona and De Garay contains no indication that said Garay was a fictitious tenant; on the contrary, it is stated therein that in order to effect the rental contract which De Garay had executed with the defendant corporation, he and Mendezona associated themselves, and in order that Mendezona might supervise the work on the field, De Garay gave him ample powers and recognized himself as a subordinate of Mendezona. It here expressly appears that the real tenant was De Garay, and that Mendezona was a mere subordinate. That De Garay recognized Mendezona as technician is perfectly compatible with the proposition that De Garay was the real tenant, for although Mendezona was the one to superintend the work in the field, nevertheless, it appears in the same contract, that Mendezona was a mere agent of De Garay and that the latter was the tenant. The fact that De Garay was the subordinate of Mendezona because of the nature of the work which each had to do does not prove that De Garay was not the tenant; and the fact that the company permitted the services of Mendezona on the hacienda does not prevent this conclusion, for it is proved that said company, having no confidence that Mendezona would fulfill his obligations to whom it would have to make advances in great sums, it did not like to deal with him but with Manuel de Garay, who, according to its information, was a person of responsibility. 

In the second place, it is hard to believe that said officers of the corporation, if they had any intervention in this contract between Mendezona and De Garay, should have made it to be understood that the real tenant was Mendezona and not De Garay, because the letter Exhibit L signed by president Garcia, addressed to manager Suarez, read by Mendezona and approved by Manuel de Garay, clearly states that the hacienda was to be delivered to Manuel de Garay as tenant. These two officers of the corporation had full knowledge that the board of directors did not like to contract with Mendezona and if it adjudicated the rental contract to De Garay, it was merely because of the good information which the company received as to him which was furnished by the manager himself, and which must have brought to their knowledge the fact that the board of directors wanted to contract with De Garay and not with Mendezona; and therefore it can not be believed that, as they acted contrary to the will of the board of directors, they had made it understood that Mendezona was the real, and De Garay the fictitious, tenant. But supposing that they had acted against the will of the board, then their conduct does not bind the corporation, because "The declarations of an individual director relating to the affairs of the corporation, but not made in the course of, or connected with, the performance of the authorized duties of such director, are held not binding on the corporation. So, false statements made by a single director, for the purpose of defrauding the creditors of the corporation, including the corporation itself, could not affect or bind it." (2 Thompson, paragraph 1073.) "The general rule is that officers of corporations acting within the scope of their authority may bind the corporation in the same way and to the same extent as if they were the agents of natural persons, unless the charter or by-laws otherwise provide. They cannot, in general, bind the corporation by acts in excess of the authority with which they are clothed unless such acts are ratified . . . ." (2 Thompson, paragraph 1408.) Under these well-settled principles of law, whatever be the nature of the acts performed by president Garcia Grande and manager Suarez, they can not prejudice the corporation in the sense that it is estopped to deny that they ever contracted with Mendezona, because said officers, in executing such acts, acted outside of their sphere of action and contrary to the resolution of the board of directors of the defendant corporation, the terms of which are so clear and explicit as not to leave any doubt that they wanted to enter into a contract with Manuel de Garay and not with Secundino Mendezona. 

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