GR 159624; (July, 2009) (Digest)
G.R. No. 159624 ; July 17, 2009
CEBU MACTAN MEMBERS CENTER, INC., Petitioner, vs. MASAHIRO TSUKAHARA, Respondent.
FACTS
Petitioner Cebu Mactan Members Center, Inc. (CMMCI), through its President and Chairman Mitsumasa Sugimoto, obtained two loans from respondent Masahiro Tsukahara: one for ₱6.5 million in February 1994, evidenced by seven postdated checks, and another for ₱10 million in April 1994, evidenced by a promissory note signed by Sugimoto in his corporate and personal capacities. The checks were dishonored upon presentment. Tsukahara filed a collection case against CMMCI and Sugimoto, alleging the loans were used for corporate resort improvements and that Sugimoto had the authority to borrow for the corporation.
CMMCI denied liability, contending the loans were Sugimoto’s personal obligations. It argued that corporate loans require a board resolution, and no such resolution authorized these transactions. The Regional Trial Court ruled in favor of Tsukahara, holding CMMCI and Sugimoto jointly and severally liable. The Court of Appeals affirmed the decision.
ISSUE
Whether the Court of Appeals erred in holding CMMCI liable for the loans contracted by its President without a board resolution.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. The general rule under the Corporation Code is that corporate powers are exercised by the board of directors, and officers cannot bind the corporation without proper authority. However, this authority can be derived from corporate by-laws, which act as the fundamental internal law of the corporation.
In this case, CMMCI’s by-laws expressly granted its President the power “to sign, endorse, and deliver all… promissory notes” and “to borrow money for the corporation by any legal means whatsoever.” The Court held that these explicit provisions in the by-laws sufficiently authorized Sugimoto to enter into the loan agreements on behalf of CMMCI. Requiring a separate board resolution would render the by-law provisions superfluous. The corporation is bound by its own by-laws and is estopped from denying the President’s authority derived therefrom. Consequently, the loans obtained by Sugimoto are valid corporate obligations, making CMMCI liable for their payment.