9/19/2018 PHILIPPINE REPORTS ANNOTATED VOLUME 046
[No. 21644. October 2, 1924]
PUA CASIM & Co., plaintiff and appellee, vs. W.
NEUMARK & Co., defendant and appellant.
1. CORPORATION; AUTHORITY OF MANAGER TO
BORROW MONEY; GENERAL RULE IN THE ABSENCE
OF EXPRESS AUTHORITY CONFERRED BY THE
BOARD OF DlRECTORS OF A CORPORATION.—The
general rule is that an officer of a corporation has no
implied power to borrow money in its behalf; but where a
general business manager of a corporation is clothed with
apparent authority to borrow and the amount borrowed
does not exceed the ordinary requirements of the business,
it has often been held that the authority is implied and
that the corporation is bound.
2. ID.; ID.; EXCEPTION TO THE GENERAL RULE.—
Where it appears that the corporation was in need of
funds to carry on its business and it does not appear that
the amount borrowed was disproportionate to the volume
of the business, the corporation will be held responsible for
any loan obtained in its behalf by an officer who, at the
same time, was president, general manager, and principal
stockholder in said corporation and was clothed with
apparent authority to do everything necessary for the
conduct of its business.
343
VOL. 46, OCTOBER 2, 1924 343
Pua Casim & Co. vs. W. Neumark & Co.
APPEAL from a judgment of the Court of First Instance of
Manila. Del Rosario, J.
The facts are stated in the opinion of the court.
Hartigan & Welch for appellant.
Recto & Cardenas for appellee.
OSTRAND, J.:
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This action is brought to recover the sum of P15,000 with
interest and costs. It is alleged in the complaint that on or
about January 20, 1922, the defendant corporation
represented by its president and principal stockholder, W.
Neumark, borrowed from the plaintiff the sum of P15,000
which was delivered to the said defendant by means of a
check drawn in favor of the defendant against the
plaintiff's account in the China Banking Corporation,
which check was deposited with the Bank of the Philippine
Islands and the amount of it credited to the defendant on
its current account.
The def endant's answer is a general denial together
with a special defense to the effect that W. Neumark had
never been authorized by the defendant corporation to
borrow money for its account from the plaintiff ,to the
amount of P15,000 and that said defendant has never
received nor made use of the sum alleged to have been so
borrowed.
The court below rendered a judgment in favor of the
plaintiff for the sum of P15,000 with legal interest from
October 30, 1922, and with the costs. From this judgment
the defendant appeals to this court.
The appellant presents two assignments of errors, viz.:
(1) That the court erred in holding the defendant
responsible for the payment of the money borrowed by
Neumark, and (2) that the court erred in giving the
plaintiff judgment for P15,000 with interest and costs.
The first assignment of error cannot be sustained. The
evidence shows that Neumark was the principal stock-
344
344 PHILIPPINE REPORTS ANNOTATED
Pua Casim & Co. vs. W. Neumark & Co.
holder, the president and the general business manager of
the defendant corporation. On behalf of the corporation he
solicited a loan from the plaintiff and, as alleged in the
complaint, was given the plaintiff's check in favor of the
corporation for the sum of P15,000, which check was
endorsed by him in his capacity as president of the
corporation and deposited to the corporation's account. It
may be true that a large part of the amount so deposited
was diverted by Neumark to his own use, but that does
not alter the fact that the money was borrowed for the
corporation and was placed in its possession.
It is conceded that Neumark was not expressly
authorized by the board of directors to borrow the money in
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question and the general rule is that a business manager or
other officer of a corporation has no implied power to
borrow money on its behalf. But much depends upon the
circumstances of each particular case and the rule stated is
subject to important exceptions. Thus, where a general
business manager of a corporation is clothed with apparent
authority to borrow and the amount borrowed does not
exceed the ordinary requirements of the business, it has
often been held that the authority is implied and that the
corporation is bound. (G. V. B. Mining Co. vs. First
National Bank of Hailey, 95 Fed., 23; Matson vs. Alley, 141
111., 284; Topeka Primary Association University of
Builders vs. Martin, 39 Kan., 750; Africa vs. Duluth News
Tribune Co., 82 Minn., 283; Rosemond vs. Northwestern
Autographic Register Co., 62 Minn., 374; Helena National
Bank vs. Rocky Mountain Telegraph Co., 20 Mont., 879;
Fensterer vs. Pressure Lighting Co., 149 N. Y. S., 49; Clark
vs. Freeport Clays etc., Co., 52 Pa. Super., 1.)
In the present case there are ample indications in the
record that the corporation was in need of funds to carry on
its business and it does not appear that the amount
borrowed was disproportionate to the volume of the
business. As president, general manager and principal
stock holder Neumark appeared, in a sense, to be almost
the
345
VOL. 46, OCTOBER 3, 1924 345
E. Macias & Co. vs. China Fire Insurance & Co.
whole corporation and was clothed with apparent authority
to do everything necessary for the .conduct of its business.
In these circumstances he must be held to have been
impliedly authorized to borrow the money here in question.
The second assignment of error is well taken; the
plaintiff admits that he has received P5,000 from the
corporation on account of the loan.
The judgment appealed from is therefore modified by
reducing the amount of the recovery to the sum of P10,000,
with interest at the legal rate from October 30, 1922, and
with the costs. So ordered.
Johnson, Street, Malcolm, Avanceña, Villamor, and
Romualdez, JJ., concur.
Judgment modified
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