Lex Rex Ph

People’s Aircargo vs. CA Digest (1998)

If a corporation knowingly permits one of its officers or agent to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts and is estopped to deny such authority to the officer or agent. 

People’s Aircargo vs. CA on Doctrine of Apparent Authority


Aircargo wanted to operate a warehouse in the Airport. Its president, Punsalan, solicited a proposal from Sao for engineering feasibility study. Sao asked for a P350k fee. The majority stock holder at first objected, but then confirmed or consented to hire Sao.

Sao delivered the outputs and services required of him but Aircargo later on refused to pay Sao.

Aircargo ratiocinated that President Punsalan back then acted without authority and was guilty of collusion with Sao despite having knowledge that someone is already tasked to do the manual or study.

Issues and Ruling

(1) Did the contracts entered into by corporate president Punsalan without express prior board approval bind the corporation?

Yes, because the president established apparent authority when (1) he acted within the scope of his duties, and (2) the majority stockholder, Yong, who at first objected, then ratified or permitted or clothed the president with authority to execute the contract.

Aircargo previously allowed its president to enter into the First Contract with Sao without a board resolution – it had clothed its president with apparent authority.

(2) Aircargo’s rebuttal: Isolated agreement is not a corporate practice.
Supreme Court: Apparent authority is not derived merely from practice but through:

a. Testimony of Yong, a majority stockholder initialy objected but because of Sao’s familiarity with the BoC, Marcos Gov to Aquino, Aircargo confirmed the agreement on Oct. 17, 1986 hiring his services for 350k php.

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