CITIBANK vs. Hon. Chua, Kapunan & Victor, Associate Justices of the CA; Hon.

Canares, Judge, RTC Br. 10, Cebu and Spouses Cresencio and Zenaida Velez (G.R. No. 102300, March 17, 1993) Facts: Petitioner CITIBANK is a foreign banking corporation duly licensed to do business in the Philippines. Private respondents, spouses Cresencio and Zenaida Velez were clients of the petitioners bank in Cebu. As alleged by spouses Velez: On September 4, 1985, CITIBANK and spouses Velez entered into an arrangement whereby CITIBANK extended credit lines. The petitioner CITIBANK offered the spouses special additional accommodation of P5,000,000.00 to be availed of in the following manner: a. CITIBANK would purchase checks from the spouses by exchanging it with managers check on a regular daily basis; b. That said checks will be deposited by the spouses Velez with their other banks to cover the check or checks previously issued by them; c. That said regular and agreed activity would be undertaken by the spouses Velez and CITIBANK. On March 11, 1986, when private respondents tried to exchange with petitioner bank 6 checks amounting to P3,095,000.00, petitioner bank allegedly refused to continue with the arrangement, even after repeated demands. Instead, the bank suggested that the total amount be restructured to thirty months with prevailing interest rate on the diminishing balance. Private Respondents agreed and delivered a check for P75,000.00 but was refused by the bank, demanding instead, full payment. For failure of the petitioner bank to comply with the restructuring agreement, private respondents on March 14, 1986, sued for specific performance with damages. According to CITIBANK: On September 4, 1985, Cresencio Velez deposited his unfunded personal checks with his current account with the CITIBANK. But prior to depositing said checks, he would present his personal checks to a bank officer asking that the checks be immediately credited as if it were a cash deposit and at the same time assuring that the checks are fully funded. Having already gained the trust and confidence of the bank officers because of his past transactions, the requests of Mr. Velez are always accommodated. After accommodating his request, by way of the bank officer affixing his signature on the personal checks, Mr. Velez would then deposit his priorly approved personal checks to his current account and at the same time withdraw sums of money from said account by way of the managers check. He would then deposit petitioners banks managers check to his various current accounts in other commercial banks to cover his previously deposited unfunded personal checks with petitioner bank. This deceptive and criminal scheme was done by Mr. Velez every banking day, without fail from Sept. 4, 1985 to March 11, 1986. The amounts that he was depositing and withdrawing progressed from P46,000.00 to P3,000,000.00. On March 11, 1986, he deposited various unfunded personal checks totaling P3,095,000.00 and after securing for approval, deposited the same with his current account and at the same time withdrew the sum P3,244,000.00 in the form of petitioners managers check. Instead of using the proceeds of his withdrawal to cover his unfunded personal checks, he ran away with the money. Thus, his personal checks in the amount of P3,095,000.00 bounced. Thus, on August 19, 1986, CITIBANK filed a criminal complaint for violation of BP 22 and 6 counts of estafa against private respondents. On April 28, 1988, the investigating fiscal recommended the filing of information against spouses Velez. On June 13, 1989, petitioner bank submitted its answer to the complaint filed by private respondents. In the Order dated February 20, 1990, the case was set for pre-trial on March 30, 1990. On March 30, 1990, the date of 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 of the case at bar. Counsel for 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. In Citibanks Opposition thereto, 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 of "Cresencio Velez, et al. vs. Citibank, N.A, was attached. In an Order dated April 23, 1990, respondent judge denied private respondents' oral motion to declare petitioner bank as in default and set the continuation of the pre-trial conference for May 2, 1990. On the scheduled pre-trial conference, private respondents reiterated that petitioner bank must be declared in default for its failure to appear through an authorized agent and that the documents presented are not in accordance with the requirements of the law. On August 15, 1990, respondent judge issued an order declaring petitioner bank as in default on the ground that Citibank has no proper representation during the pre-trial conference.

On October 1, 1990, petitioner bank filed a motion for reconsideration of the above order but it was denied on December 10, 1990. Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary injunction and/or temporary restraining order with the Court of Appeals. On June 26, 1991, the Court of Appeals dismissed the petition on grounds that: a. Citibank did not and could not present a Board resolution from the bank's Board of Directors appointing its counsel, Atty. Julius Z. Neri, as its attorney-in-fact to represent and bind it during the pre-trial conference; b. The "By-Laws" of petitioner which on its face authorizes the appointment of an attorney-infact to represent it in any litigation, has not been approved by the Securities and Exchange Commission, as required by Section 46 of the Corporation Code of the Philippines. Apparently, the "By-Laws" in question was approved under the laws of the United States, but there is no showing that the same was given the required imprimatur by the Securities and Exchange Commission. Since petitioner is a foreign corporation doing business in the Philippines, it is bound by all laws, rules and regulations applicable to domestic corporations (Sec. 129, Corporation Code); c. No special power of attorney was presented authorizing petitioner's counsel of record, Atty. Julius Neri and/or J.P. Garcia Associates, to appear for and in behalf of petitioner during the pre-trial. Hence, this instant petition. Issues: a. whether a resolution of the board of directors of a corporation is always necessary for granting authority to an agent to represent the corporation in court cases; b. 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 the Philippines. Held: 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. The same are called express powers, which necessarily carry implied authority, 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. Article XXI of Citibanks by-laws empowers Ferguson to further delegate the authority conferred to him, in whole or in part. Thus, 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. As to the second issue, A careful reading of Section 46 of the Corporation Code would show that a corporation can submit its by-laws, prior to incorporation, or within one month after receipt of official notice of the issuance of its certificate of incorporation by the SEC. The phrase in all cases in the third paragraph of Sec 46 can only refer to these two options; i.e., whether adopted prior to incorporation or within one month after incorporation, the by-laws shall be effective only upon the approval of the SEC. But even more important, said provision starts with the phrase "Every corporation formed under this Code", which can only refer to corporations incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity of corporate by-laws, applies only to domestic corporations and not to foreign corporations. On the other hand, Section 125 of the same Code requires that a foreign corporation applying for a license to transact business in the Philippines must submit, among other documents, to the SEC, a copy of its articles of incorporation and by-laws, certified in accordance with law. Unless these documents are submitted, the application cannot be acted upon by the SEC. In the following section, the Code specifies that the SEC can grant the license applied for after compliance with the requirements of the Corporation Code. Since the SEC will grant a license only when the foreign corporation has complied with all the requirements of law, it follows that when it decides to issue such license, it is satisfied that the applicant's by-laws, among the other documents, meet the legal requirements. This, in effect, is an approval of the foreign corporations by-laws. It may not have been made in express terms, still it is clearly an approval. Therefore, petitioner bank's by-laws, though originating from a foreign jurisdiction, are valid and effective in the Philippines. As to the Power of Attorney, the same is Special and not General, as alleged by private respondents. The Petition of Citibank is granted. The Decision of CA is set aside; the Order of Default is set aside and the case is remanded to the court of origin.