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Control and Management of Corporation agent, as the validity of the signature is thereby directly attacked, the denial must be

RAMIREZ v. ORIENTALIST CO. AND FERNANDEZ (1918) under oath.” (Barrett Mining v. Tappan, 2 Colo. 124).
Street, J. 2. The reason for this is that the public is not supposed nor required to know the
transactions which happen around the table where the corporate board of directors or
Orientalist Co. accepted Ramirez’s offer to obtain the sole agency of certain films under his the stockholders are from time to time convoked. Whether a particular officer actually
control, with Fernandez signing separately as individual and as Orientalist’s treasurer. possesses the authority which he assumes to exercise is frequently known to very few,
Ramirez was not paid, so he went after Orientalist and Fernandez. Now Orientalist claims and the proof of it usually is not readily accessible to the stranger who deals with the
that Fernandez had no authority to bind it, since such authority had been withheld by the corporation on the faith of the ostensible authority exercised by some of the corporate
stockholders. The Court held otherwise, because a) Orientalist failed to specifically deny the officers. It is therefore reasonable, in a case where an officer of a corporation has made
due execution of contracts and Fernandez’s authority; b) the contracts were inferentially a contract in its name, that the corporation should be required, if it denies his authority,
approved by the company's board of directors; and c) the failure of the stockholders to to state such defense in its answer. This is for plaintiff to be apprised of the fact that the
approve said contracts did not abrogate the liability thus created. agent's authority is contested; and he is given an opportunity to adduce evidence
showing either that the authority existed or that the contract was ratified and approved.
3. If a written instrument, the foundation of the suit, is not denied upon oath, it shall be
DOCTRINE The functions of stockholders of a corporation are of a limited nature. The theory deemed to be admitted (constructive admission).
of a corporation is that the stockholders may have all the profits but shall turn over the 4. Of course the Court has authority to permit the answer of the defendant to be amended,
complete management of the enterprise to their representatives and agents, called directors. if justice so requires. But even a judgment on the merits will make Orientalist liable.

FACTS B. Contracts were inferentially approved by the board of directors


1. Orientalist Co. was engaged in the business of maintaining and conducting a theatre in 1. Section 28 of (then) Corporation Law: corporate power shall be exercised, and all
Manila for film exhibition. It became known to its directors that plaintiff J. F. Ramirez in corporate business conducted by the board of directors.
Paris had control of the agencies for two different marks of films, the "Eclair Films" and 2. The fact that the power to make corporate contract is thus vested in the board
the "Milano Films". Negotiations began between Orientalist’s officials and Jose does not signify that a formal vote of the board must always be taken before
Ramirez, plaintiff’s son and agent, for the purpose of placing the exclusive agency of contractual liability can be fixed upon a corporation; for the board can create
these films in Orientalist’s hands. liability, like an individual, by other means than by a formal expression of its will.
2. Jose Ramirez sent respondent Fernandez, treasurer of Orientalist, an offer. Fernandez 3. The authority of the subordinate agent of a corporation often depends upon the course
had an informal conference with all the members of the company's board of directors of dealings which the company or its director have sanctioned. It may be established
except one, and with approval of those with whom he had communicated, addressed a sometimes without reference to official record of the proceedings of the board, by proof
letter to Jose Ramirez, accepting the offer (July 30, 1913). Fernandez signed separately of the usage which the company had permitted to grow up in business, and of the
as individual and as Orientalist’s treasurer. acquiescence of the board charged with the duty of supervising and controlling the
3. A stockholders’ meeting was then convoked (Sept. 18), upon which Fernandez company's business. (Gair vs. Columbia Rice Packing, 124 La. 194).
informed those present of the offer in question, its urgency and potential benefits, and 4. It is a fair inference from the minutes of the stockholders meeting, that the body was
the terms upon which the films could be procured. Stockholders adopted a resolution cognizant that the offer had already been accepted in Orientalist’s name. Four members
to the effect that the agencies of said films should be accepted if the corporation could of the board of directors therein present were aware of this fact, as the letter accepting
obtain the money with which to meet the expenditure involved. the offer had been sent with their knowledge and consent.
4. The films arrived, but Orientalist failed to pay J. F. Ramirez. The latter filed a collection 5. Fernandez was the particular officer and member of the board of directors who was
suit. Trial court declared Orientalist as principal debtor, with Fernandez as guarantor most active in the effort to secure the films for the corporation. The negotiations were
and hence, subsidiarily liable. Hence this appeal, with Orientalist Co. and Fernandez conducted by him with the knowledge and consent of other members of the board; and
insisting the other is liable for the whole. the contract was made with their prior approval.
6. And after Fernandez had departed from the country, said board proceeded to take the
ISSUE with HOLDING steps necessary to utilize the films1. It even caused the publication of announcements
WON Orientalist and Ramirez are liable. YES. in newspapers to the effect that Orientalist was importing films.
7. The functions of the stockholders of a corporation are of a limited nature. The
Orientalist is liable. theory of a corporation is that the stockholders may have all the profits but shall
A. Failure to specifically deny the due execution of contracts & Fernandez’s authority turn over the complete management of the enterprise to their representatives and
1. Orientalist claims that Fernandez had no authority to bind it, because such authority agents, called directors. It is settled that contract between a corporation and third
had been withheld by the stockholders. But the corporation failed to deny the due person must be made by the director and not by the stockholders.
execution of the contracts under oath, as prescribed in Sec. 103 of Code of Civil
Procedure (then). Settled is the rule that “if the principal would deny the authority of the

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Resolution conferring powers on Ocampo, manager of the Oriental Theater, namely: (6) Not to deliver any film for rent without first receiving rental therefor or the guaranty for payment thereof.
“(1) To rent a box for the films in the "Kneeler Building." xxx (7) To buy a book and cards for indexing the names of the films. xxx
(4) To be in charge of the films and of the renting of the same. (10) Upon the motion of Mr. Ocampo, it was decided to give ample powers to Acuña to enter into
(5) To advertise in the different newspapers that Company is importing films to be exhibited in Cine Oriental. agreements with cinematograph proprietors in the provinces for the purpose of renting films.
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On Fernandez’s liability: In the testimonies of both Ramirez and Fernandez, it is evident that
the responsibility of the latter was intended to be that of guarantor. Oral evidence is
admissible to show the character in which the signature was affixed.

Judgment appealed from is affirmed.

DIGESTER: Gen Leal