THIRD DIVISION
INTER-ASIA
INVESTMENTS
INDUSTRIES, INC.,
Petitioner,
G.R.
No.
125778
June 10, 2003
-versus-
COURT OF APPEALS
AND ASIA INDUSTRIES, INC.,
Respondents.
D E C I S I O N
CARPIO-MORALES,
J.:chanroblesvirtuallawlibrary
The present Petition for
Review on Certiorari assails the Court of Appeals' decision[1]
of January 25, 1996 and resolution[2]
of July 11, 1996.
The material facts of
the case are as follows:chanrobles virtual law library
On September 1, 1978,
Inter-Asia Industries, Inc. (petitioner), by a Stock Purchase Agreement[3]
(the Agreement), sold to Asia Industries, Inc. (private respondent) for
and in consideration of the sum of P19,500,000.00 all its right, title
and interest in and to all the outstanding shares of stock of FARMACOR,
INC. (FARMACOR).[4]
The Agreement was signed by Leonides P. Gonzales and Jesus J. Vergara,
presidents of petitioner and private respondent, respectively.[5]
Under paragraph 7 of
the Agreement, petitioner as seller made warranties and representations
among which were "(iv.) [t]he audited financial statements of FARMACOR
at and for the year ended December 31, 1977. and the audited
financial
statements of FARMACOR as of September 30, 1978 being prepared by
S[ycip,]
G[orres,] V[elayo and Co.]. fairly present or will present the
financial
position of FARMACOR and the results of its operations as of said
respective
dates; said financial statements show or will show all liabilities and
commitments of FARMACOR, direct or contingent, as of said respective
dates."; and "(v.) [t]he Minimum Guaranteed Net Worth of FARMACOR as of
September 30, 1978 shall be Twelve Million Pesos (P12,000,000.00)."[6]
The Agreement was later
amended with respect to the "Closing Date," originally set up at 10:00
a.m. of September 30, 1978, which was moved to October 31, 1978, and to
the mode of payment of the purchase price.[7]
The Agreement, as amended,
provided that pending submission by SGV of FARMACOR’s audited financial
statements as of October 31, 1978, private respondent may retain the
sum
of P7,500,000.00 out of the stipulated purchase price of
P19,500,000.00;
that from this retained amount of P7,500,000.00, private respondent may
deduct any shortfall on the Minimum Guaranteed Net Worth of
P12,000,000.00;[8]
and that if the amount retained is not sufficient to make up for the
deficiency
in the Minimum Guaranteed Net Worth, petitioner shall pay the
difference
within 5 days from date of receipt of the audited financial statements.[9]chanrobles virtual law library
Respondent paid petitioner
a total amount of P 12,000,000.00: P5,000,000.00 upon the signing
of the Agreement, and P7,000,000.00 on November 2, 1978.[10]
From the STATEMENT OF
INCOME AND DEFICIT attached to the financial report[11]
dated November 28, 1978 submitted by SGV, it appears that FARMACOR had,
for the ten months ended October 31, 1978, a deficit of P11,244,225.00.[12]
Since the stockholder’s equity amounted to P10,000,000.00, FARMACOR had
a net worth deficiency of P1,244,225.00. The guaranteed net worth
shortfall
thus amounted to P13,244,225.00 after adding the net worth deficiency
of
P1,244,225.00 to the Minimum Guaranteed Net Worth of P12,000,000.00.cralaw:red
The adjusted contract
price, therefore, amounted to P6,225,775.00 which is the difference
between
the contract price of P19,500,000.00 and the shortfall in the
guaranteed
net worth of P13,224,225.00. Private respondent having already paid
petitioner
P12,000,000.00, it was entitled to a refund of P5,744,225.00.cralaw:red
Petitioner thereafter
proposed, by letter[13]
of January 24, 1980, signed by its president, that private respondent’s
claim for refund be reduced to P4,093,993.00, it promising to pay the
cost
of the Northern Cotabato Industries, Inc. (NOCOSII) superstructures in
the amount of P759,570.00. To the proposal respondent agreed.
Petitioner,
however, weiched on its promise. Petitioner’s total liability thus
stood
at P4,853,503.00 (P4,093,993.00 plus P759,570.00)[14]
exclusive of interest.[15]chanrobles virtual law library
On April 5, 1983, private
respondent filed a complaint[16]
against petitioner with the Regional Trial Court of Makati, one of two
causes of action of which was for the recovery of above-said amount of
P4,853,503.00[17]
plus interest.cralaw:red
Denying private respondent’s
claim, petitioner countered that private respondent failed to pay the
balance
of the purchase price and accordingly set up a counterclaim.cralaw:red
Finding for private
respondent, the trial court rendered on November 27, 1991 a Decision,[18]
the dispositive portion of which reads:
WHEREFORE,
judgment is rendered in favor of plaintiff and against defendant (a)
ordering
the latter to pay to the former the sum of P4,853,503.00[19]
plus interest thereon at the legal rate from the filing of the
complaint
until fully paid, the sum of P30,000.00 as attorney’s fees and the
costs
of suit; and (b) dismissing the counterclaim.
SO ORDERED.chanrobles virtual law library
On appeal to the Court
of Appeals, petitioner raised the following errors: THE TRIAL COURT
ERRED
IN HOLDING THE DEFENDANT LIABLE UNDER THE FIRST CAUSE OF ACTION PLEADED
BY THE PLAINTIFF.
THE TRIAL COURT
ERRED
IN AWARDING ATTORNEY’S FEES AND IN DISMISSING THE COUNTERCLAIM.
THE TRIAL COURT
ERRED
IN RENDERING JUDGMENT IN FAVOR OF THE PLAINTIFF, THE ALLEGED BREACH OF
WARRANTIES AND REPRESENTATION NOT HAVING BEEN SHOWN, MUCH LESS
ESTABLISHED
BY THE PLAINTIFF.[20]
By Decision of January
25, 1996, the Court of Appeals affirmed the trial court’s decision.
Petitioner’s
motion for reconsideration of the decision having been denied by the
Court
of Appeals by Resolution of July 11, 1996, the present petition for
review
on certiorari was filed, assigning the following errors:
I
THE RESPONDENT COURT
ERRED IN NOT HOLDING THAT THE LETTER OF THE PRESIDENT OF THE PETITIONER
IS NOT BINDING ON THE PETITIONER BEING ULTRA VIRES.
II
THE LETTER CAN NOT
BE
AN ADMISSION AND WAIVER OF THE PETITIONER AS A CORPORATION.
III
THE RESPONDENT COURT
ERRED IN NOT DECLARING THAT THERE IS NO BREACH OF WARRANTIES AND
REPRESENTATION
AS ALLEGED BY THE PRIVATE RESPONDENT.
IV
THE RESPONDENT COURT
ERRED IN ORDERING THE PETITIONER TO PAY ATTORNEY’S FEES AND IN
SUSTAINING
THE DISMISSAL OF THE COUNTERCLAIM.[18]
(Underscoring in the original)
Petitioner argues that
the January 24, 1980 letter-proposal (for the reduction of private
respondent’s
claim for refund upon petitioner’s promise to pay the cost of NOCOSII
superstructures
in the amount of P759,570.00) which was signed by its president has no
legal force and effect against it as it was not authorized by its board
of directors, it citing the Corporation Law which provides that unless
the act of the president is authorized by the board of directors, the
same
is not binding on it.cralaw:red
This Court is not persuaded.cralaw:red
The January 24, 1980
letter signed by petitioner’s president is valid and binding. The case
of People’s Aircargo and Warehousing Co., Inc. v. Court of Appeals[19]
instructs:
The general rule is
that, in the absence of authority from the board of directors, no
person,
not even its officers, can validly bind a corporation. A corporation is
a juridical person, separate and distinct from its stockholders and
members,
"having x x x powers, attributes and properties expressly authorized by
law or incident to its existence."
Being a juridical entity,
a corporation may act through its board of directors, which exercises
almost
all corporate powers, lays down all corporate business policies and is
responsible for the efficiency of management, as provided in Section 23
of the Corporation Code of the Philippines:chanrobles virtual law library
Sec. 23.
The
Board of Directors or Trustees. - Unless otherwise provided in this
Code,
the corporate powers of all corporations formed under this Code shall
be
exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees
x
x x.
Under this provision,
the
power and responsibility to decide whether the corporation should enter
into a contract that will bind the corporation is lodged in the board,
subject to the articles of incorporation, bylaws, or relevant
provisions
of law. However, just as a natural person may authorize another
to
do certain acts for and on his behalf, the board of directors may
validly
delegate some of its functions and powers to officers, committees or
agents.
The authority of such individuals to bind the corporation is generally
derived from law, corporate bylaws or authorization from the board,
either
expressly or impliedly by habit, custom or acquiescence in the general
course of business, viz:
A corporate
officer or agent may represent and bind the corporation in transactions
with third persons to the extent that [the] authority to do so has been
conferred upon him, and this includes powers as, in the usual course of
the particular business, are incidental to, or may be implied from, the
powers intentionally conferred, powers added by custom and usage, as
usually
pertaining to the particular officer or agent, and such apparent powers
as the corporation has caused person dealing with the officer or agent
to believe that it has conferred.
x
x x
[A]pparent
authority
is derived not merely from practice. Its existence may be ascertained
through
(1) the general manner in which the corporation holds out an officer or
agent as having the power to act or, in other words the apparent
authority
to act in general, with which it clothes him; or (2) the acquiescence
in
his acts of a particular nature, with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers. It requires
presentation of evidence of similar act(s) executed either in its favor
or in favor of other parties. It is not the quantity of similar acts
which
establishes apparent authority, but the vesting of a corporate officer
with power to bind the corporation.chanrobles virtual law library
x
x x (Emphasis and underscoring supplied)
As correctly argued by
private respondent, an officer of a corporation who is authorized to
purchase
the stock of another corporation has the implied power to perform all
other
obligations arising therefrom, such as payment of the shares of stock.
By allowing its president to sign the Agreement on its behalf,
petitioner
clothed him with apparent capacity to perform all acts which are
expressly,
impliedly and inherently stated therein.[21]
Petitioner further argues
that when the Agreement was executed on September 1, 1978, its
financial
statements were extensively examined and accepted as correct by private
respondent, hence, it cannot later be disproved "by resorting to some
scheme
such as future financial auditing;"[22]
and that it should not be bound by the SGV Report because it is
self-serving
and biased, SGV having been hired solely by private respondent, and the
alleged shortfall of FARMACOR occurred only after the execution of the
Agreement.cralaw:red
This Court is not persuaded
either.cralaw:red
The pertinent provisions
of the Agreement read:
7.
Warranties and Representations - (a) SELLER warrants and represents as
follows:
x
x x
(iv)
The audited financial statements of FARMACOR as at and for the year
ended
December 31, 1977 and the audited financial statements of FARMACOR as
at
September 30, 1978 being prepared by SGV pursuant to paragraph 6(b)
fairly
present or will present the financial position of FARMACOR and the
results
of its operations as of said respective dates; said financial
statements
show or will show all liabilities and commitments of FARMACOR, direct
or
contingent, as of said respective dates; and the receivables set forth
in said financial statements are fully due and collectible, free and
clear
of any set-offs, defenses, claims and other impediments to their
collectibility.chanrobles virtual law library
(v)
The Minimum Guaranteed Net Worth of FARMACOR as of September 30, 1978
shall
be Twelve Million Pesos (P12,000,000.00), Philippine Currency.
x
x x (Underscoring in the original; emphasis
supplied)[23]
True, private
respondent
accepted as correct the financial statements submitted to it when the
Agreement
was executed on September 1, 1978. But petitioner expressly
warranted
that the SGV Reports "fairly present or will present the financial
position
of FARMACOR." By such warranty, petitioner is estopped from claiming
that
the SGV Reports are self-serving and biased.
As to the claim that
the shortfall occurred after the execution of the Agreement, the
declaration
of Emmanuel de Asis, supervisor in the Accounting Division of SGV and
head
of the team which conducted the auditing of FARMACOR, that the period
covered
by the audit was from January to October 1978 shows that the period
before
the Agreement was entered into (on September 1, 1978) was covered.[24]chanrobles virtual law library
As to petitioner’s assigned
error on the award of attorney’s fees which, it argues, is bereft of
factual,
legal and equitable justification, this Court finds the same well-taken.cralaw:red
On the matter of attorney’s
fees, it is an accepted doctrine that the award thereof as an item of
damages
is the exception rather than the rule, and counsel’s fees are not to be
awarded every time a party wins a suit. The power of the court to
award attorney’s fees under Article 2208 of the Civil Code demands
factual,
legal and equitable justification, without which the award is a
conclusion
without a premise, its basis being improperly left to speculation and
conjecture.
In all events, the court must explicitly state in the text of the
decision,
and not only in the decretal portion thereof, the legal reason for the
award of attorney’s fees.[25]x
x
x (Emphasis and underscoring supplied; citations omitted)
WHEREFORE, the instant
petition is PARTLY GRANTED. The assailed decision of the Court of
Appeals affirming that of the trial court is modified in that the award
of attorney’s fees in favor of private respondent is deleted. The
decision
is affirmed in other respects.cralaw:red
SO ORDERED.cralaw:red
Puno, J., (Chairman), Panganiban,
Sandoval-Gutierrez, and Corona, JJ.,
concur.
____________________________
Endnotes:
[1]
Rollo at 29-42.
[2]
Id. at 44-45.
[3]
Records at 9-23.
[4]
Id. at 10-11.
[5]
Id. at 22.
[6]
Id. at 16-17.chanrobles virtual law library
[7]
Exhibits "G-1", "G-2", G-3"; Records at 586-593.
[8]
Ibid.chanrobles virtual law library
[9]
Records at 12.
[10]
Rollo, at 12 and 82.
[11]
Records at 322-327.
[12]
Id. at 324-325.chanrobles virtual law library
[13]
Exhibit "G-6"; Records at 598-604.chanrobles virtual law library
[14]
P4,853,503.00 is the amount prayed for in the complaint but it is noted
that the total amount of these figures is P4,853,563.00.
[15]
Id. at 13; Records at 4.chanrobles virtual law library
[16]
Records at 1-25.
[17]
See footnote 14.
[18]
Id. at 757-760.chanrobles virtual law library
[19]
See footnote 14. Plaintiff did not move to reconsider the amount
adjudged
to it.
[20]
Rollo at 14.chanrobles virtual law library
[18]
Id at 15.chanrobles virtual law library
[19]
297 SCRA 170 (1998).
[21]
Rollo at 92-93.chanrobles virtual law library
[22]
Id. at 21.chanrobles virtual law library
[23]
Records at 17-18.chanrobles virtual law library
[24]
Transcript of Stenographic Notes, July 27, 1988 at 5.
[25]
Central Azucarera de Bais v. CA, 188 SCRA 328 (1990). |