G.R. No. L-14985, December 29, 1960
FRANCISCO U. BUENASEDA, petitioner, vs. BOWEN & CO., INC., and/or GEOFFREY BOWEN, respondents.

FACTS

On August 11, 1951, the Board of Directors of Bowen & Co., Inc., a domestic corporation, appointed its director, Francisco U. Buenaseda, as Managing Director and authorized him to negotiate with the Government for an ECA order of paints worth $398,000.00, with full powers to arrange financing, including the use of corporate assets. An award of P200,000 worth of ECA procurement materials was subsequently allocated to the corporation. To import these materials, a letter of credit requiring a P60,000 cash marginal deposit with the Philippine National Bank was needed. The corporation lacked the funds, so its president, Geoffrey Bowen, personally obligated himself and the corporation to pay Buenaseda 37-½% of the profits from the sale of the ECA materials if Buenaseda could provide the necessary deposit. Buenaseda secured the deposit through E.J.C. Montilla & Co., which entered into a provisional partnership contract with Bowen & Co., Inc., entitling Montilla & Co. to 50% of the profits and a second mortgage on Buenaseda’s real property as guarantee. Buenaseda also personally guaranteed the contract’s performance. The materials were imported, and from sales, the corporation realized a net profit of P22,303.98. Buenaseda claimed 37-½% (P8,363.99) based on Bowen’s promise, but the corporation refused payment. Buenaseda filed an action in the Court of First Instance of Manila, which absolved the defendants, holding that the profits were corporate property and Bowen’s “commitment” lacked Board approval. The Court of Appeals affirmed this decision.

ISSUE

Whether the agreement between Geoffrey Bowen and Francisco U. Buenaseda, promising Buenaseda 37-½% of the profits from the ECA procurement materials, is binding upon the corporation, Bowen & Co., Inc.

RULING

Yes, the agreement is binding upon the corporation. The Supreme Court reversed the Court of Appeals’ decision. The Board of Directors, composed of Geoffrey Bowen, his wife, Buenaseda, and two others, with Bowen and his wife controlling the majority of stocks, had knowledge of the agreement and did not repudiate it. Instead, the Board acquiesced in and benefited from the agreement, which constitutes an implied ratification binding the corporation even without a formal resolution. The Court cited Zamboanga Transportation Co. vs. Bachrach Motors (52 Phil. 244) and other authorities, holding that such acts of acquiescence and acceptance of benefits equate to ratification. The argument that profits are corporate assets requiring a dividend declaration or Board resolution is untenable because Buenaseda’s claim arises not as a stockholder but under a ratified agreement. The corporation, Bowen & Co., Inc., is ordered to pay Buenaseda P8,363.99 with legal interest from June 17, 1955, and 37-½% of any future profits from the remaining ECA materials. Costs are awarded against the respondent corporation.