Case Summary (G.R. No. 102300)
Key Dates
September 4, 1985–March 11, 1986: Daily check‐purchase arrangement between the bank and Velez.
March 14, 1986: Velez filed a complaint for specific performance and damages (Civil Case No. CEB-4751).
August 19, 1986: Citibank filed criminal complaints for bouncing checks and estafa.
April 28, 1988: Fiscal recommended filing of information.
March 30, 1990: Pre-trial set; Citibank filed its brief belatedly and presented special powers of attorney.
May 2, 1990: Continuation of pre-trial; renewed motions on authority to appear.
August 15, 1990: Trial court declared Citibank in default.
June 26, 1991: Court of Appeals dismissed Citibank’s petition for relief.
March 17, 1993: Supreme Court decision. Applicable Law: 1987 Philippine Constitution; Corporation Code of the Philippines; Rules of Court; Civil Code.
Facts of the Transaction
Private respondents alleged that Citibank agreed to purchase their checks daily—issuing manager’s checks in return—and that this arrangement continued until March 11, 1986, when Citibank allegedly refused to honor check exchanges totaling ₱3,095,000. Citibank proposed restructuring the indebtedness; respondents issued a ₱75,000 check in good faith, which was refused, prompting their suit for specific performance and damages.
Bank’s Version of Events
Citibank contended that Velez engaged in a deceptive scheme: he deposited unfunded personal checks as if they were cash, secured manager’s checks, and used proceeds to cover prior checks with other banks. On March 11, 1986, he withdrew ₱3,244,000 against unfunded checks totaling ₱3,095,000 and absconded, causing those checks to bounce. Citibank filed criminal charges under Batas Pambansa Blg. 22 and estafa provisions.
Procedural History
During pre-trial, Citibank counsel presented successive special powers of attorney (by Florencia Tarriela, then William W. Ferguson, then Ferguson’s delegates among bank employees) to establish authority to represent the bank. The trial court declared Citibank in default for lack of proper representation. The Court of Appeals affirmed, holding (1) no board resolution authorized the attorney-in-fact, (2) by-laws were unapproved by the SEC, and (3) presented powers of attorney failed to satisfy special authority requirements. Citibank then sought certiorari relief to set aside the default.
Issue One: Necessity of Board Resolution for Representation
Whether Citibank’s board of directors must adopt a formal resolution to empower an agent or attorney-in-fact to represent the bank in court proceedings.
Issue Two: Validity and Effectivity of Foreign Corporation By-Laws
Whether Citibank’s by-laws—adopted under foreign jurisdiction but filed with the Philippine SEC—are valid and can serve as the basis for delegating authority to officers and agents.
Analysis on Delegation of Corporate Powers
Under Sections 23, 25, and 47 of the Corporation Code, corporate powers are generally vested in the board but may be delegated by statute, by‐laws, articles of incorporation, or board resolution. Agent’s implied and incidental powers accompany express authority. Citibank’s by-laws expressly empower its Executing Officer and Secretary Pro‐Tem to execute a general power of attorney in the Philippines, and further to delegate that power to bank officers. Paragraph XXI of the general power granted to William W. Ferguson expressly authorizes him to “substitute or delegate this Power of Attorney … in favor of such one or more employees of the Bank,” making board resolution unnecessary for each delegation.
Analysis on Foreign Corporation By-Laws
Section 46 of the Corporation Code requires domestic corporations to file by-laws with the SEC for effectiveness. Section 125–126 mandates foreign corporations to submit certified articles of incorporation and by-laws as a condition for licensure. SEC issuance of a business license constitutes implicit approval of those by-laws. Consequently, Citibank’s by-laws, having been filed and deemed compliant by the SEC, are valid in the Philippines and may serve as a basis for delegating corporate powers.
Authority of Attorneys-in-Fact and Compliance with Procedural Rules
Rule 138, Section 23 of the Rules of Court requires written authority for an attorney to bind a client in litigation, including pre-trial compromise powers. Citibank presented:
• A special power of attorney by Florencia Tarriela to J.P. Garcia & Associates;
• A subsequen
Case Syllabus (G.R. No. 102300)
Facts of the Case
- Petitioner Citibank, N.A. is a foreign commercial banking corporation licensed in the Philippines.
- Spouses Cresencio and Zenaida Velez, long-time clients, filed Civil Case No. CEB-4751 for specific performance and damages on March 14, 1986 before RTC Cebu, Branch 10.
- Private respondents alleged a daily arrangement (Sept. 4, 1985–Mar. 11, 1986) under which Citibank “purchased” their checks in exchange for manager’s checks, up to a P5,000,000 credit line.
- On March 11, 1986 they presented six checks totaling P3,095,000; Citibank refused further “purchases” and proposed restructuring over 30 months with interest.
- Respondents tendered a P75,000 check “as good faith,” which Citibank refused, demanding full payment.
- Citibank’s version: Cresencio Velez gifted the bank a scheme of depositing unfunded personal checks (Sept. 4, 1985–Mar. 11, 1986), withdrawing larger sums by manager’s checks, then disappearing with bank funds when the March 11 checks bounced.
- On August 19, 1986 Citibank filed criminal complaints for violation of Batas Pambansa Blg. 22 (bouncing checks) and six counts of estafa (RPC Art. 315(2)(d)).
- Investigating fiscal recommended information on April 28, 1988; Citibank answered respondents’ complaint on June 13, 1989.
- RTC pre-trial set March 30, 1990. Citibank filed its pre-trial brief that same day and presented a special power of attorney (POA) by officer Florencia Tarriela to J.P. Garcia & Associates.
- Private respondents orally moved to declare Citibank in default for lack of board-authorized representation. Citibank opposed, attaching a second POA by William W. Ferguson (Vice President).
- On April 23, 1990 the RTC denied the motion; continuation set May 2, 1990. Respondents renewed their objection. Citibank promised, then on May 23, 1990 filed a third POA by Ferguson in favor of four bank employees.
- On August 15, 1990 RTC Branch 10 declared Citibank in default, citing lack of board resolution, non-approval of by-laws by SEC, and improper representation under Rule 20, Sec. 2.
- Citibank’s motion for reconsideration (Oct. 1, 1990) was denied (Dec. 10, 1990). Citibank then petitioned the Court of Appeals.
- On June 26, 1991 the CA dismissed Citibank’s petition: no board resolution for counsel’s POA, by-laws unapproved by SEC, and absence of special POA to compromise under Civil Code Art. 1878(3) and Rule 20(1)(a).
Issues Presented
- Whe