G.R. No. L-18287; G.R. No. L-18155 – 117 Phil. 586 – 7 SCRA 577 – Mercantile Law – Corporation Law – Corporate Liability – Estoppel
In 1956, Trinidad Francisco obtained a P400k loan from the Government Service Insurance System (GSIS). She secured the loan with a parcel of land. In 1959 however, due to some difficulties, Trinidad incurred huge arrears. This prompted GSIS to foreclose the property. But then, Trinidad’s father, Atty. Vicente Francisco, wrote a letter to GSIS offering that he pay P30k off the loan and then allow GSIS to administer the mortgaged property instead of foreclosing it; that thereafter, GSIS shall receive rents from the tenants of the land until the arrears are paid and the account is made current or up to date (because the total of the monthly rents is bigger than the monthly loan payments supposed to be paid by Trinidad to GSIS).
GSIS, through its general manager Rodolfo Andal, responded with a letter which states that the GSIS Board had accepted Vicente’s offer. But GSIS for some reason did not take over the property. Nevertheless, the Franciscos collected rents and turned them over to GSIS.
Then in 1960, GSIS demanded Francisco to pay off the loan. Vicente then reminded GSIS that the agreement in 1959 which is actually a compromise is binding upon GSIS. GSIS then averred that the letter sent to Vicente in response to his offer was sent in error because Andal’s secretary sent the poorly worded response without Andal’s knowledge.
ISSUE: Whether or not a corporation like GSIS is bound by the acts of its officers acting in their apparent authority.
HELD: Yes. A third party transacting with a corporation cannot be expected to know what occurs within a corporation, its meetings, without any external manifestations from the corporation. In the case at bar, the response by GSIS to Vicente by way of a telegram, is within the apparent authority of Andal. If there are any irregularities in the telegraph i.e., the sending of the secretary without the authority of Andal, Vicente is not expected to know it because the telegram on its face is clear as to the acceptance. Vicente cannot therefore be faulted for relying on the telegram; that GSIS accepted his offer. Hence, GSIS cannot now ask Francisco to suddenly pay off the debt. If a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against anyone who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said “if the corporation permits” this means the same as “if the thing is permitted” by the directing power of the corporation.
GSIS cannot also deny that it has knowledge of the acceptance. A corporation cannot see, or know, anything except through its officers. Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. Andal is presumed to have knowledge of the acceptance because it was his office which sent it to Vicente. Knowledge of Andal, an officer of GSIS, is deemed knowledge of GSIS.
At any rate, even if the compromise agreement is void because of the “unauthorized” telegram, GSIS’s silence and acceptance of the subsequent remittances of the Franciscos ratified the compromise agreement.
