On 10 September 1973, YKS, through Henry Yao, wrote a letter 9 to PWCC as a follow-up to the letter of 15 August 1973; YKS insisted on the delivery of 45,030 bags of white cement. 10

On 12 September 1973, Henry Yao sent a letter (Exhibit "G") to PWCC calling the latter's attention to the statement of delivery dated 24 August 1973, particularly the price change from P23.30 to P24.30 per 94 lbs. bag net FOB Asturias, Cebu. 11

On 2 November 1973, YKS sent a telegram (Exhibit "C") 12 to PWCC insisting on the full compliance with the terms of Exhibit "A" and informing the latter that it is exercising the option therein stipulated.

On 3 November 1973, YKS sent to PWCC a letter (Exhibit "D") as a follow-up to the 2 November 1973 telegram, but this was returned to sender as unclaimed. 13

As of 7 December 1973, PWCC had delivered only 9,775 bags of white cement.

On 9 February 1974, YKS wrote PWCC a letter (Exhibit "H") requesting, for the last time, compliance by the latter with its obligation under
Exhibit "A". 14

On 27 February 1974, PWCC sent an answer (Exhibit "7") to the aforementioned letter of 9 February 1974; PWCC reiterated the unenforceability of Exhibit "A". 15

On 4 March 1974, YKS filed with the then Court of First Instance of Leyte a complaint for Specific Performance with Damages against PWCC. The complaint 16 was based on Exhibit "A" and was docketed as Civil Case No. 5064.

In its Answer with Counterclaim 17 filed on 1 July 1974, PWCC denied under oath the material averments in the complaint and alleged that: (a) YKS "has no legal personality to sue having no legal personality even by fiction to represent itself;" (b) Mr. Maglana, its President and Chairman, was lured into signing Exhibit "A"; (c) such signing was subject to the condition that Exhibit "A" be approved by the Board of Directors of PWCC, as corporate commitments are made through it; (d) the latter disapproved it, hence Exhibit "A" was never consummated and is not enforceable against PWCC; (e) it agreed to sell 10,000 bags of white cement, not under Exhibit "A", but under a separate contract prepared by the Board; (f) the rejection by the Board of Exhibit "A" was made known to YKS through various letters sent to it, copies of which were attached to the Answer as Annexes 1, 2 and 3; 18 (g) YKS knew, per Delivery Order 19 and Official Receipt 20 issued by PWCC, that only 10;000 bags were sold to it without any terms or conditions, at P24.30 per bag FOB Asturias, Cebu; (h) YKS is solely to blame for the failure to take complete delivery of 10,000 bags for it did not send its boat or truck to PWCC's plant; and (i) YKS has, therefore, no cause of action.

In its Counterclaim, PWCC asks for moral damages in the amount of not less than P10,000.00, exemplary damages in the sum of P500,000.00 and attorney's fees in the sum of P10,000.00.

On 24 July 1974, YKS filed its Answer to the Counterclaim. 21

Issues having been joined, the trial court conducted a pre-trial. 22 On that occasion, the parties admitted that according to the By-Laws of PWCC, the Chairman of the Board, who is also the President of the corporation, "has the power to execute and sign, for and in behalf of the corporation, all contracts or agreements which the corporation enters into," subject to the qualification that "all the president's actuations, prior to and after he had signed and executed said contracts, shall be given to the board of directors of defendant Corporation." Furthermore, it was likewise stated for the record "that the corporation is a semi-subsidiary of the government because of the NIDC participation in the same, and that all contracts of the corporation should meet the approval of the NIDC and/or the PNB Board because of an exposure and financial involvement of around P10 million therein. 23

During the trial, PWCC presented evidence to prove that Exhibit "A" is not binding upon it because Mr. Maglana was not authorized to make the offer and sign the contract in behalf of the corporation. Per its By-Laws (Exhibit "8"), only the Board of Directors has the power . . . (7) To enter into (sic) agreement or contract of any kind with any person in the name and for and in behalf of the corporation through its President, subject only to the declared objects and purpose of the corporation and the existing provisions of law. 24 Among the powers of the President is "to operate and conduct the business of the corporation according to his own judgment and discretion, whenever the same is not expressly limited by such orders, directives or resolutions." 25 Per standard practice of the corporation, contracts should first pass through the marketing and intelligence unit before they are finalized. Because of its interest in the PWCC, the NIDC, through its comptroller, goes over contracts involving funds of and white cement produced by the PWCC. Finally, among the duties of its legal counsel is to review proposed contracts before they are submitted to the Board. While the president. may be tasked with the preparation of a contract, it must first pass through the legal counsel and the comptroller of the corporation. 26

On 20 November 1975, after trial on the merits, the court handed down its decision in favor of herein petitioner, the dispositive portion of which reads:

In disregarding PWCC's theory, the trial court interpreted the provision of the By-Laws — granting its Board of Directors the power to enter into an agreement or contract of any kind with any person through the President, — to mean that the latter may enter into such contract or agreement at any time and that the same is not subject to the ratification of the board of directors but "subject only to the declared objects and purpose of the corporation and existing laws." It then concluded:

It likewise interpreted the provision on the power of the president to "operate and conduct the business of the corporation according to the orders, directives or resolutions of the board of directors and according to his own judgment and discretion whenever the same is not expressly limited by such orders, directives and resolutions," to mean that the president can operate and conduct the business of the corporation according to his own judgment and discretion as long as it is not expressly limited by the orders, directives or resolutions of the board of directors. 29 The trial court found no evidence that the board had set a prior limitation upon the exercise of such judgment and discretion; it further ruled that the By-Laws, does not require that Exhibit "A" be approved by the Board of Directors. Finally, in the light of the Chairman's power to "execute and sign for and in behalf of the corporation all contracts or agreements which the corporation may enter into" (Exhibit "I-1"), it concluded that Mr. Maglana merely followed the By-Laws "presumably both as president and chairman of the board thereof." 30 Hence, Exhibit "A" was validly entered into by Maglana and thus binds the corporation.

The trial court, however, ruled that the option to sell is not valid because it is not supported by any consideration distinct from the price; it was exercised before compliance with the original contract by PWCC; and the repudiation of the original contract by PWCC was deemed a withdrawal of the option before acceptance by the petitioner.

Both parties appealed from the said decision to the respondent Court of Appeals before which petitioner presented the following Assignment of Errors:

while the private respondent cited the following errors:

In its decision 33 promulgated on 21 December 1979, the respondent Court reversed the decision of the trial court, thus:

Such conclusion is based on its findings, to wit:

Its motion for reconsideration having been denied by the respondent Court in its resolution 35 dated 15 April 1980, petitioner filed the instant petition based on the following grounds:

We gave due course 37 to the petition after private respondent filed its Comment 38 and required the parties to submit simultaneously their Memoranda, which the parties subsequently complied with. 39

Before going any further, this Court must first resolve an issue which, although raised in the Answer of private respondent, was neither pursued in its appeal before the respondent Court nor in its Comment and Memorandum in this case. It also eluded the attention of the trial court and the respondent Court. The issue, which is of paramount importance, concerns the lack of capacity of plaintiff/petitioner to sue. In the caption of both the complaint and the instant petition, the plaintiff and the petitioner, respectively, is:

and is described in the body thereof as "a business concern of single proprietorship owned and operated by Yao Ka Sin." 41 In the body of the petition, it is described as "a single proprietorship business concern." 42 It also appears that, as gathered from the decision of the trial court, no Yao Ka Sin testified. Instead, one Henry Yao took the witness stand and testified that he is the "manager of Yao Ka Sin Trading" and "it was in representation of the plaintiff" that he signed Exhibit "A" 43 Under Section 1, Rule 3 of the Rules of Court, only natural or juridical persons or entities authorized by law may be parties in a civil action. In Juasing Hardware vs. Mendoza, 44 this Court held that a single proprietorship is neither a natural person nor a juridical person under Article 44 of the Civil Code; it is not an entity authorized by law to bring suit in court:

Accordingly, the proper party plaintiff/petitioner should be YAO KA SIN. 46

The complaint then should have been amended to implead Yao Ka Sin as plaintiff in substitution of Yao Ka Sin Trading. However, it is now too late in the history of this case to dismiss this petition and, in effect, nullify all proceedings had before the trial court and the respondent Court on the sole ground of petitioner's lack of capacity to sue. Considering that private respondent did not pursue this issue before the respondent Court and this Court; that, as We held in Juasing, the defect is merely formal and not substantial, and an amendment to cure such defect is expressly authorized by Section 4, Rule 10 of the Rules of Court which provides that "[a] defect in the designation of the parties may be summarily corrected at any stage of the action provided no prejudice is caused thereby to the adverse party;" and that "[a] sole proprietorship does not, of coarse, possess any juridical personality separate and apart from the personality of the owner of the enterprise and the personality of the persons acting in the name of such proprietorship," 47 We hold and declare that Yao Ka Sin should be deemed as the plaintiff in Civil Case No. 5064 and the petitioner in the instant case. As this Court stated nearly eighty (80) years ago in Alonso vs. Villamor: 48

And now to the merits of the petition.

The respondent Court correctly ruled that Exhibit "A" is not binding upon the private respondent. Mr. Maglana, its President and Chairman, was not empowered to execute it. Petitioner, on the other hand, maintains that it is a valid contract because the Maglana has the power to enter into contracts for the corporation as implied from the following provisions of the By-Laws of private respondent:

And even admitting, for the sake of argument, that Mr. Maglana was not so authorized under the By-Laws, the private respondent, pursuant to the doctrine laid down by this Court in Francisco vs. Government Service Insurance
System 49 and Board of Liquidators vs. Kalaw, 50 is still bound by his act for clothing him with apparent authority.

We are not persuaded.

Since a corporation, such as the private respondent, can act only through its officers and agents, "all acts within the powers of said corporation may be performed by agents of its selection; and, except so far as limitations or restrictions may be imposed by special charter, by-law, or statutory provisions, the same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation, of whatever status or rank, in respect to his power to act for the corporation; and agents when once appointed, or members acting in their stead, are subject to the same rules, liabilities and incapacities as are agents of individuals and private persons." 51 Moreover, " . . . a corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred. 52

While there can be no question that Mr. Maglana was an officer — the President and Chairman — of private respondent corporation at the time he signed Exhibit "A", the above provisions of said private respondent's By-Laws do not in any way confer upon the President the authority to enter into contracts for the corporation independently, of the Board of Directors. That power is exclusively lodged in the latter. Nevertheless, to expedite or facilitate the execution of the contract, only the President — and not all the members of the Board, or so much thereof as are required for the act — shall sign it for the corporation. This is the import of the words through the president in Exhibit "8-A" and the clear intent of the power of the chairman "to execute and sign for and in behalf of the corporation all contracts and agreements which the corporation may enter into" in Exhibit "I-1". Both powers presuppose a prior act of the corporation exercised through the Board of Directors. No greater power can be implied from such express, but limited, delegated authority. Neither can it be logically claimed that any power greater than that expressly conferred is inherent in Mr. Maglana's position as president and chairman of the corporation.

Although there is authority "that if the president is given general control and supervision over the affairs of the corporation, it will be presumed that he has authority to make contract and do acts within the course of its ordinary business," 53 We find such inapplicable in this case. We note that the private corporation has a general manager who, under its By-Laws has, inter alia, the following powers: "(a) to have the active and direct management of the business and operation of the corporation, conducting the same accordingly to the order, directives or resolutions of the Board of Directors or of the president." It goes without saying then that Mr. Maglana did not have a direct and active and in the management of the business and operations of the corporation. Besides, no evidence was adduced to show that Mr. Maglana had, in the past, entered into contracts similar to that of Exhibit "A" either with the petitioner or with other parties.

Petitioner's last refuge then is his alternative proposition, namely, that private respondent had clothed Mr. Maglana with the apparent power to act for it and had caused persons dealing with it to believe that he was conferred with such power. The rule is of course settled that "[a]lthough an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time." 54 Also, "if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority in real, as to innocent third persons dealing in good faith with such officers or agents." 55 This "apparent authority may result from (1) the general manner, by which the corporation holds out an officer or agent as having power to act or, in other words, the apparent authority with which it clothes him to act in general or (2) acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or without the scope of his ordinary powers. 56

It was incumbent upon the petitioner to prove that indeed the private respondent had clothed Mr. Maglana with the apparent power to execute Exhibit "A" or any similar contract. This could have been easily done by evidence of similar acts executed either in its favor or in favor of other parties. Petitioner miserably failed to do that. Upon the other hand, private respondent's evidence overwhelmingly shows that no contract can be signed by the president without first being approved by the Board of Directors; such approval may only be given after the contract passes through, at least, the comptroller, who is the NIDC representative, and the legal counsel.

The cases then of Francisco vs. GSIS and Board of Liquidators vs. Kalaw are hopelessly unavailing to the petitioner. In said cases, this Court found sufficient evidence, based on the conduct and actuations of the corporations concerned, of apparent authority conferred upon the officer involved which bound the corporations on the basis of ratification. In the first case, it was established that the offer of compromise made by plaintiff in the letter, Exhibit "A", was validly accepted by the GSIS. The terms of the trial offer were clear, and over the signature of defendant's general manager Rodolfo Andal, plaintiff was informed telegraphically that her proposal had been accepted. It was sent by the GSIS Board Secretary and defendant did not disown the same. Moreover, in a letter remitting the payment of P30,000 advanced by her father, plaintiff quoted verbatim the telegram of acceptance. This was in itself notice to the corporation of the terms of the allegedly unauthorized telegram. Notwithstanding this notice, GSIS pocketed the amount and kept silent about the telegram. This Court then ruled that:

In the second case, this Court found:

The inevitable conclusion then is that Exhibit "A" is an unenforceable contract under Article 1317 of the Civil Code which provides as follows:

The second ground is based on a wrong premise. It assumes, contrary to Our conclusion above, that Exhibit "A" is a valid contract binding upon the private respondent. It was effectively disapproved and rejected by the Board of Directors which, at the same time, considered the amount of P243,000.00 received Mr. Maglana as payment for 10,000 bags of white cement, treated as an entirely different contract, and forthwith notified petitioner of its decision that "If within ten (10) days from date hereof we will not hear from you but you will withdraw cement at P24.30 per bag from our plant, then we will deposit your check of P243,000.00 dated June 7, 1973 issued by the Producers Bank of the Philippines, per instruction of the Board." 57 Petitioner received the copy of this notification and thereafter accepted without any protest the Delivery Receipt covering the 10,000 bags and the Official Receipt for the P243,000.00. The respondent Court thus correctly ruled that petitioner had in fact agreed to a new transaction involving only 10,000 bags of white cement.