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Citibank vs. Chua Case Digest



We reiterate the previous admonitions of this Court against "precipitate orders of default as these have the effect of denying the litigant the chance to be heard. While there are instances, to be sure, when a party may be properly defaulted, these should be the exceptions rather than the rule and should be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with the orders of the court. Absent such a showing, the party must be given every reasonable opportunity to present his side and to refute the evidence of the adverse party in deference to due process of law". 



Facts: 

Sps. Velez filed a case for specific performance with damages against Citibank. During the pre-trial conference, counsel for petitioner bank appeared, presenting a special power of attorney executed by Citibank officer Florencia Tarriela in favor of petitioner bank's counsel, the J.P. Garcia & Associates, to represent and bind petitioner bank at the pre-trial conference. The counsel for the private respondents orally moved to declare petitioner bank as in default on the ground that the special power of attorney was not executed by the Board of Directors of Citibank.

Petitioner bank was then required to file a written opposition to this oral motion to declare it as in default. In said opposition petitioner bank attached another special power of attorney made by William W. Ferguson, Vice President and highest ranking officer of Citibank, Philippines, constituting and appointing the J.P. Garcia & Associates to represent and bind the bank at the pre-trial conference and/or trial of the case. Respondent judge denied private respondents' oral motion to declare petitioner bank as in default and set the continuation of the pre-trial conference.

On the scheduled pre-trial conference, private respondents reiterated their oral motion to declare petitioner bank as in default. Petitioner bank again its opposition thereto, stating as follows:

". . . While it has been the practice of Citibank to appoint its counsels as its attorney-in-fact in civil cases because it considers said counsels equivalent to a Citibank employee, yet, in order to avoid further arguments on the matter, the defendant Citibank will secure another power of attorney from Mr. William W. Ferguson in favor of its employee/s who will represent the defendant Citibank in the pre-trial conferences of this case."

In compliance with the above promise, petitioner bank submitted a special power of attorney executed by William W. Ferguson in favor of Citibank employees to represent and bind Citibank on the pre-trial conference of the case.

Respondent judge, however, issued an order declaring petitioner bank as in default. It reasoned out that "Defendant-bank, although a foreign corporation, is bound by Philippine laws when doing and conducting business in the Philippines, and its corporate powers could only be exercised by its Board of Directors (Sec. 23, B.P. Blg. 68). The Special Power of Attorney executed by Mr. William W. Ferguson in favor of the alleged Citibank employees (Roberto Reyes, Nemesio Solomon, Aimee Yu and Tomas Yap), assuming the same to be a delegable authority, to represent the defendant in the pre-trial conference, made no mention of J.P. Garcia & Associates as one of the employees of the defendant. It stands to reason therefore, that the defendant-bank has no proper representation during the pre-trial conference.

Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary injunction and/or temporary restraining order with the Court of Appeals. The Court of Appeals dismissed the petition.


Issue:

Was the petitioner bank's counsel validly authorized to represent petitioner bank during the pre-trial?


Held:

Yes.

Although as a general rule, all corporate powers are to be exercised by the board of directors, exceptions are made where the Code provides otherwise.

Section 25 of said Code provides that the directors of the corporation shall elect its corporate officers, and further provides as follows:

"SEC. 25. Corporate officers; quorum. — . . . The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and by the by-laws of the corporation . . ."

Furthermore, Section 47 of the same Code enumerates what may be contained in the by-laws, among which is a provision for the "qualifications, duties and compensation of directors or trustees, officers and employees".

Taking all the above provisions of law together, it is clear that corporate powers may be directly conferred upon corporate officers or agents by statute, the articles of incorporation, the by-laws or by resolution or other act of the board of directors. In addition, an officer who is not a director may also appoint other agents when so authorized by the by-laws or by the board of directors. Such are referred to as express powers. There are also powers incidental to express powers conferred. It is a fundamental principle in the law of agency that every delegation of authority, whether general or special, carries with it, unless the contrary be expressed, implied authority to do all of those acts, naturally and ordinarily done in such cases, which are reasonably necessary and proper to be done in order to carry into effect the main authority conferred.

Since the by-laws are a source of authority for corporate officers and agents of the corporation, a resolution of the Board of Directors of Citibank appointing an attorney in fact to represent and bind it during the pre-trial conference of the case at bar is not necessary because its by-laws allow its officers, the Executing Officer and the Secretary Pro-Tem, to execute a power of attorney to a designated bank officer, William W. Ferguson in this case, clothing him with authority to direct and manage corporate affairs.

Since the general power of attorney granted to Ferguson allows him to delegate his powers in whole or in part, there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia & Associates and later, of the bank's employees, constitutes a valid delegation of Ferguson's express power to represent petitioner bank in the pre-trial conference in the lower court.

From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending this case. It even acceded to private respondent's insistence on the question of proper representation during the pre-trial by presenting not just one, but three, special powers of attorney. Initially, the special power of attorney was executed by Florencia Tarriela in favor of J.P. Garcia & Associates, petitioner bank's counsel. Private respondents insisted that this was not proper authority required by law. To avoid further argument, a second special power of attorney was presented by petitioner bank, executed by William W. Fersugon, the highest ranking officer of Citibank in the Philippines, in favor of its counsel J.P. Garcia & Associates. But since the authority to delegate of William A. Fersugon in favor of an agent is limited to bank employees, another special power of attorney from Wiliam W. Fersugon in favor of the Citibank employees was presented. But the respondent trial court judge disregarded all these and issued the assailed default order. There is nothing to show that petitioner bank "miserably failed to oblige"; on the contrary, three special powers of attorney manifest prudence and diligence on petitioner bank's part.

In fact, there was no need for the third power of attorney because we believe that the second power of attorney was sufficient under the by-law provision authorizing Fersugon to delegate any of his functions to any one or more employees of the petitioner bank. A reasonable interpretation of this provision would include an appointment of a legal counsel to represent the bank in court, for, under the circumstances, such legal counsel can be considered, and in fact was considered by the petitioner bank, an employee for a special purpose. Furthermore, Fersugon, who heads the Philippine office thousands of miles away from its main office in the United States, must be understood to have sufficient powers to act promptly in order to protect the interests of his principal.

We reiterate the previous admonitions of this Court against "precipitate orders of default as these have the effect of denying the litigant the chance to be heard. While there are instances, to be sure, when a party may be properly defaulted, these should be the exceptions rather than the rule and should be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with the orders of the court. Absent such a showing, the party must be given every reasonable opportunity to present his side and to refute the evidence of the adverse party in deference to due process of law".

Considering further that petitioner bank has a meritorious defense and that the amount in contest is substantial, the litigants should be allowed to settle their claims on the arena of the court based on a trial on the merits rather than on mere technicalities. (Citibank vs. Chua, G.R. No. 102300. March 17, 1993)

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