G.R. No. 102300 . March 17, 1993.
CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS L. VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD DIVISION, MANILA, HON. LEONARDO B. CANARES, Judge of Regional Trial Court of Cebu, Branch 10, and SPOUSES CRESENCIO AND ZENAIDA VELEZ, respondents.

FACTS

Petitioner Citibank, N.A., a foreign commercial banking corporation licensed to do business in the Philippines, was sued by private respondent spouses Cresencio and Zenaida Velez for specific performance and damages before the Regional Trial Court of Cebu. The spouses alleged that Citibank extended them a special accommodation of P5,000,000.00 through a daily check exchange arrangement, which the bank later refused to honor, and then reneged on a subsequent restructuring agreement. Citibank’s version was that the arrangement involved the accommodation of depositing unfunded personal checks with immediate credit based on assurances they were funded. During pre-trial, Citibank was represented by a law firm acting under a Special Power of Attorney executed by four Citibank employees. The trial judge declared Citibank in default for failure to appear through a duly authorized representative, holding that the power of attorney was invalid as it was not executed by the Board of Directors or a duly authorized officer. The Court of Appeals affirmed the default order. Citibank appealed, arguing that under its by-laws, its officers (the Executing Officer and Secretary Pro-Tem) had the authority to execute the power of attorney, and that the authority granted to its counsel was sufficient.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s order declaring Citibank in default for lack of a duly authorized representative at the pre-trial conference.

RULING

Yes. The Supreme Court granted the petition, reversed the Court of Appeals, and set aside the order of default. The Court ruled that:
1. A corporation’s board of directors may validly delegate some of its functions to individual officers or agents. Corporate powers can be conferred upon officers or agents by statute, articles of incorporation, by-laws, or board resolution.
2. Citibank’s by-laws, which authorized its Executing Officer and Secretary Pro-Tem to execute powers of attorney, were valid and effective in the Philippines. Section 46 of the Corporation Code, requiring SEC approval for by-laws to be effective, applies only to domestic corporations, not foreign corporations like Citibank. For foreign corporations, the SEC’s issuance of a license to transact business, upon submission of its by-laws, constitutes an approval of those by-laws.
3. The power of attorney executed by Citibank’s officers pursuant to the by-laws, authorizing specific employees to represent the bank, was comprehensive enough to include authority to appear at the pre-trial conference. The subsequent delegation by one of these attorneys-in-fact, William W. Ferguson, to the law firm J.P. Garcia & Associates was also valid. Ferguson, as the head of the Philippine office, had implied authority under the by-laws to delegate his functions to other employees, and the legal counsel could be considered an employee for this special purpose.
4. Precipitate orders of default are frowned upon and should be exceptions, allowed only in clear cases of obstinate refusal or inordinate neglect to comply with court orders. Due process requires that a party be given every reasonable opportunity to be heard, especially when, as here, the party has a meritorious defense and the amount involved is substantial.
The case was remanded to the trial court for further proceedings.