Yao Ka Sin Trading v CA

G.R. No. 53820. June 15, 1992

Art. 1317 – No one may contract in the name of another without authority.

Facts:

·         Constancio B. Maglana, President and Chairman of the Board of PWCC, submitted a letter-offer to YKS, to wit:

(a)     To deliver 45,000 bags of white cement;

(b)     At YKS option: a) P24.30 per 94 Ibs. bag net, FOB Cebu City; and b) P23.30 per 94 Ibs. bag net, FOB Asturias Cebu;

(c)     With downpayment of P243k, et al.

·         But 23 days after the signing of the confirmation of the said letter, PWCC Board disapproved the same as evidenced on the minutes of their meeting.

·         PWCC informed YKS of the disapproval of the letter-offer. But it issued the corresponding Delivery Order of 10,000 bags of cement at P24.30, and Official Receipt for the payment of the same in the amount of P243,000.00, which YKS accepted without protest.

·         Then, a series of correspondence ensued between the parties: YKS demanding the delivery of the balance 35,000 bags of cement as per letter-offer; while PWCC insisting on the full compliance with the terms thereof and informing the latter that it is exercising the option therein stipulated.

·         YKS filed a complaint against PWCC, on the basis of the aforesaid letter-offer, as accepted by YKS, as a contract that binds the PWCC.

·         The CFI Leyte ruled in favor of YKS, but reversed by the CA on the ground that the said letter-offer is not binding upon it because Mr. Maglana was not authorized to make the offer and sign the contract in behalf of the corporation as the Board rejected the same.

Issue:

          WoN Mr. Maglana, the PWCC President and Chairman, was empowered to execute the contract for the corporation as implied from its  By-Laws.

Held:

          No, the Court holds that Mr. Maglana was not so authorized under the By-Laws of PWCC to enter into contracts for the corporation independently of the Board of Directors.

          "ARTICLE 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party."

          In the case at bar, the letter-offer was effectively disapproved and rejected by the Board of Directors which, at the same time, considered the amount of P243,000.00 received by Maglana as payment for 10,000 bags of white 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 within 10 days, otherwise it will return the latter’s payment in check of P243k.

          Thus, judgment appealed is AFFIRMED.