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CITIBANK v. SEGUNDINO G. CHUA

FACTS:

Petitioner, a foreign commercial banking corporation, had a business relationship with the private respondents, spouses Cresencio and Zenaida Velez. Private respondents alleged that petitioner offered them a special accommodation of Five Million Pesos (P5,000,000.00) to be availed of through a check exchange arrangement. This arrangement started on September 4, 1985, but on March 11, 1986, petitioner refused to continue with the arrangement. Instead, petitioner suggested to restructure the total amount with a thirty-month payment plan, which private respondents agreed to. In good faith, private respondents issued a check for P75,000.00, but petitioner refused it and demanded full payment of the entire amount. Private respondents then filed a complaint for specific performance and damages. Petitioner, however, had a different version of the business relationship, alleging that private respondent Cresencio Velez deposited unfunded personal checks and deceived the bank into believing that his construction business was doing well. The amount of deposit and withdrawal progressively became bigger until private respondent ran away with petitioner's money by depositing unfunded personal checks and withdrawing funds through manager's checks. Subsequently, petitioner filed a criminal complaint against private respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa.

The case involves a petition for certiorari, prohibition, and mandamus filed by a bank against a trial court decision declaring the bank in default in a case filed against it by private respondents. The bank was directed to submit its pre-trial brief, which it only filed on the day of the pre-trial conference. The bank presented a special power of attorney executed by a Citibank officer to represent and bind the bank at the conference. However, the counsel for the private respondents orally moved to declare the bank in default on the grounds that the special power of attorney was not executed by the bank's Board of Directors. The bank filed an opposition and attached another special power of attorney made by a higher-ranking officer of the bank appointing its counsel to represent and bind the bank. The trial court denied the motion to declare the bank in default and scheduled the continuation of the pre-trial conference. During the conference, the private respondents reiterated their motion to declare the bank in default, arguing that the bank failed to appear through an authorized agent and that the documents presented did not comply with the requirements of the law. The bank filed an opposition and promised to secure another power of attorney. The bank later submitted a manifestation attaching a special power of attorney executed by another bank officer in favor of its employees to represent and bind the bank. The trial court, however, declared the bank in default, citing the lack of proper representation during the pre-trial conference. The bank filed a motion for reconsideration, which was denied. The bank then filed a petition with the Court of Appeals, which dismissed the petition on the grounds that the bank did not present a Board resolution appointing its counsel as its attorney-in-fact, the bank's by-laws were not approved by the Securities and Exchange Commission, and no special power of attorney was presented authorizing its counsel to appear for the bank during the pre-trial.

The petitioner, Citibank, NA, is a foreign corporation authorized to do business in the Philippines. In Civil Case No. CEB-4751, Citibank, through its legal counsel Atty. Julius Z. Neri, executed a power of attorney in favor of William W. Ferguson, who in turn executed a power of attorney in favor of five Citibank employees to act as attorney-in-fact. However, during the pre-trial, none of the Citibank employees appeared, except for their legal counsel. The power of attorney issued by Citibank and Ferguson was not shown to be a Special Power of Attorney for representation and compromise as required by law. Citibank argues that no board resolution was necessary for their legal counsel or employees to act as attorney-in-fact because their by-laws grant their Executing Officer and Secretary Pro-Tem the power to delegate such authority. Private respondents, on the other hand, refute this and claim that the authority of Citibank's legal counsel came from the Board of Directors and that the by-laws were ineffective because they were not submitted to and approved by the Securities and Exchange Commission (SEC). The two issues in this case are: 1) whether a board resolution is always necessary for granting authority to an agent to represent the corporation in court cases, and 2) whether the by-laws of Citibank are effective in the Philippines.

ISSUES:

  1. Whether a resolution of the board of directors is always necessary for granting authority to an agent to represent the corporation in court cases.

  2. Whether the by-laws of the petitioner foreign corporation, which has previously been granted a license to do business in the Philippines, are effective in this jurisdiction.

  3. Whether the special power of attorney in favor of J.P. Garcia & Associates and later in favor of the bank's employees constitutes a valid delegation of power.

  4. Whether petitioner bank's by-laws, which serve as the basis for the special power of attorney, are effective.

  5. Whether the special powers of attorney executed by Florencia Tarriela, William W. Ferguson, and the four Citibank employees comply with the requirements under Rule 138, Section 23 of the Rules of Court.

  6. Whether the power of attorney granted to the four Citibank employees can be considered a special power of attorney as required by law.

RULING:

  1. A resolution of the board of directors is not always necessary for granting authority to an agent to represent the corporation in court cases. The by-laws of the corporation may allow its officers or agents to execute a power of attorney without the need for a board resolution.

  2. The by-laws of the petitioner foreign corporation are effective in this jurisdiction if they have been granted a license to do business in the Philippines. The by-laws serve as a source of authority for corporate officers and agents of the corporation.

  3. The special power of attorney in favor of J.P. Garcia & Associates and later in favor of the bank's employees is a valid delegation of power. Paragraph XXI of the appointment of the bank's Attorney-in-Fact explicitly allows Ferguson to delegate his powers in whole or in part.

  4. Petitioner bank's by-laws, originating from a foreign jurisdiction, are valid and effective in the Philippines. While Section 46 of the Corporation Code requires the approval of by-laws by the Securities and Exchange Commission (SEC), this provision only applies to domestic corporations. Foreign corporations, on the other hand, are required to submit their articles of incorporation and by-laws to the SEC when applying for a license. The issuance of the license signifies the SEC's satisfaction that the foreign corporation has complied with the requirements of the law, which includes the approval of its by-laws. Thus, petitioner bank's by-laws are valid and effective in the Philippines.

  5. Yes. The special powers of attorney executed by Florencia Tarriela, William W. Ferguson, and the four Citibank employees comply with the requirements under Rule 138, Section 23 of the Rules of Court. The powers of attorney explicitly grant authority to J.P. Garcia & Associates, petitioner bank's counsel, to enter into an amicable settlement, stipulation of facts, and/or compromise agreement and to do all acts necessary or proper in relation to the case.

  6. Yes. The power of attorney granted to the four Citibank employees can be considered a special power of attorney. Although it does not explicitly mention the authority to appear and bind the petitioner at the pre-trial conference, the terms of the power of attorney are comprehensive enough to include such authority.

PRINCIPLES:

  • 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.

  • An officer who is not a director may also appoint other agents when authorized by the by-laws or by the board of directors.

  • Delegation of authority carries with it, unless the contrary is expressed, implied authority to do acts that are reasonably necessary and proper to carry into effect the main authority conferred.

  • By-laws serve as a source of authority for corporate officers and agents of the corporation.

  • The by-laws may allow officers or agents to execute a power of attorney without the need for a board resolution.

  • A special power of attorney can be a valid delegation of power if authorized by the appointment of the attorney-in-fact.

  • Section 46 of the Corporation Code, which requires the approval of by-laws by the SEC, applies only to domestic corporations and not to foreign corporations.

  • Foreign corporations applying for a license to transact business in the Philippines must submit their articles of incorporation and by-laws to the SEC. The issuance of the license indicates the approval of the by-laws.

  • An attorney has the authority to bind his client in any case by an agreement in relation thereto made in writing.

  • The authority of an attorney includes taking appeals and all matters of ordinary judicial procedure.

  • Without special authority, an attorney cannot compromise his client's litigation or receive anything in discharge of a client's claim other than the full amount in cash.

  • A special power of attorney must be executed in writing and should contain clear and explicit terms granting the attorney-in-fact the authority to act on behalf of the client in the specific case.

  • The issuance of default orders should be the exception rather than the rule and should only be allowed in clear cases of obstinate refusal or inordinate neglect to comply with court orders. Parties must be given every reasonable opportunity to present their side and refute the evidence of the adverse party, in deference to due process of law.

  • Parties should be allowed to settle their claims on the merits of the case rather than on mere technicalities.

  • The interpretation of a provision in the by-laws of a bank authorizing the delegation of functions to bank employees should be reasonable. In this case, the appointment of a legal counsel to represent the bank in court can be considered an appointment of an employee for a special purpose.

  • A party must show clear and substantial grounds to warrant the reversal of a default order. Meritorious defense and substantial amount in contest are factors that should be considered by the court.