Corporate President's Authority to Sign Demand Letters and Verification in Unlawful Detainer

The Supreme Court recently clarified the extent of a corporate president's authority to act on behalf of a corporation without a board resolution. In Colegio Medico-Farmaceutico de Filipinas, Inc. v. Lily Lim (G.R. No. 212034, July 2, 2018), the Court ruled that a corporate president may validly issue a demand letter and sign the verification and certification of non-forum shopping even without express board authorization. The ruling is significant for corporations and their officers, as it defines the boundaries of presumed authority in ordinary business transactions and litigation.

The Case: A Lease Dispute and a Question of Authority

The case began as an unlawful detainer complaint filed by Colegio Medico-Farmaceutico de Filipinas, Inc. against Lily Lim, who occupied a building owned by the corporation in Sampaloc, Manila. The corporation's president, Dr. Virgilio C. Del Castillo, issued a demand letter on March 5, 2008, requiring Lim to pay unpaid rentals and vacate the property. The corporation later passed a Board Resolution on May 13, 2008, authorizing Del Castillo to file the ejectment case.

The Metropolitan Trial Court dismissed the complaint, ruling that the demand letter was invalid because Del Castillo lacked board authorization. The Regional Trial Court reversed, but the Court of Appeals reinstated the dismissal, holding that the corporation's failure to attach the Board Resolution to its complaint was a fatal defect.

The Issue: When Does a President Need Board Approval?

The central question was whether Del Castillo, as corporate president, needed a board resolution to (1) issue a demand letter and (2) sign the verification and certification of non-forum shopping in the ejectment complaint.

The Ruling: Presumed Authority Within Usual Duties

The Supreme Court ruled in favor of the corporation, reversing the Court of Appeals. The Court held that a corporate president is presumed to have authority to act within the domain of the corporation's general objectives and within the scope of his or her usual duties, absent a contrary charter or by-law provision.

On signing verification and certification of non-forum shopping. The Court cited established jurisprudence allowing a corporate president to sign these documents without a board resolution. The president is presumed to have sufficient knowledge to swear to the truth of the allegations in the complaint or petition. The Court of Appeals therefore erred in dismissing the complaint solely for failure to attach the Board Resolution.

On issuing the demand letter. The Court applied the exception laid down in People's Aircargo and Warehousing Co., Inc. v. Court of Appeals (351 Phil. 850 [1998]). While Section 23 of the Corporation Code vests corporate powers in the board of directors, the board may delegate functions to officers. A corporate president often has general supervision and control over operations, and the strict rule that such officer has no inherent power to act is giving way to the recognition of limited powers in transacting the usual and ordinary business of the corporation.

In this case, issuing a demand letter to collect unpaid rentals was within the ordinary course of business and within Del Castillo's duties as president. The corporation's By-laws expressly gave the President power to exercise general supervision, control, and direction of the business, and to execute contracts on behalf of the corporation. Even assuming Del Castillo acted beyond his authority, the subsequent Board Resolution dated May 13, 2008 ratified his earlier act.

Practical Takeaways

• A corporate president may sign verification and certification of non-forum shopping without a board resolution. This is a settled exception to the general rule requiring board authorization for corporate acts.

• Demand letters issued by a corporate president in the ordinary course of business are generally valid. Collecting receivables is a usual duty of a president, so no board resolution is required for such routine acts.

• Check the corporation's by-laws. The Court emphasized that the president's authority is presumed "in the absence of a charter or by-law provision to the contrary." If by-laws restrict the president's powers, those restrictions prevail.

• Ratification cures prior defects. Even an unauthorized act by a corporate officer may be validated if the board subsequently ratifies it, as occurred when the Board Resolution authorized the filing of the case.

• In unlawful detainer cases, all requisites must be present. These include a lease contract, expiration of the right to possess, withholding of possession, a written demand, and filing within one year from the last demand.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.