CORPORATE NAME
gunning mix.
41. Republic Planters Bank v. Court of Appeals
GR 93073, December 21, 1992
Campos, Jr., J.:
Facts:
Canlas and Yamaguchi were officers of Worldwide Garment
Manufacturing. By virtue of a Board Resolution the two were
authorized to apply for credit facilities with Planters Bank.
Nine PNs were issued in the name of Worldwide.
On December 220, 1982, Worldwide changed its corporate
name to Pinch.
The notes were not paid upon maturity, this prompted the
bank to file an action for recovery which was originally
brought against Worldwide but was after amended to Pinch.
The CA ruled that change of corporate name extinguished
the corporate personality of the original corporation.
Issue:
Whether or not a change in corporate name extinguishes the
personality of the original corporation
Held:
NO. a change in corporate name does not make it a new
corporation and does not affect its properties, rights and
liabilities.
42. Industrial Refractories Corporation v. Court of
Appeals
GR 122174, October 3, 2002
Austria- Martinex, J.:
Facts:
Refractories Corporation of the Philippines (RCP) was
organized on October 1976. On June 1977, it registered its
corporate and business name with the Bureau of Domestic
Trade.
Industrial Refractories Corp. of the Philippines (IRCP) on the
other hand, was incorporated on August 1979 originally
under the name "Synclaire Manufacturing Corporation". It
amended its Articles of Incorporation on August 1985 to
change its corporate name to "Industrial Refractories Corp. of
the Philippines".
Both RCP and IRCP were the only local supplier of monolithic
RCP filed with the SEC a petition to compel IRCP to change its
corporate name.
The SEC decided in favor of RCP.
SEC En Banc modified the appealed decision, IRCP was
ordered to delete or drop from its corporate name only the
word "Refractories". IRCP elevated the decision to the Court
of Appeals which then rendered the decision, denying to give
due course the petition filed by IRCP, it ruled that the
corporate names of IRCP and RCP are confusingly or
deceptively similar, and that RCP has established its prior
right to use the word "Refractories" as its corporate name.
Issue:
Whether the corporate names of IRCP and RCP are
confusingly similar.
Held:
YES. Refractories Corporation of the Philippines (RCP) is
confusingly similar with Industrial Refractories Corporation of
the Philippines (IRCP). Being the prior registrant, the RCP has
acquired the right to use the word Refractories as part of its
corporate name.
43. PC Javier &Sons Inc. v. Court of Appeals
G.R. No. 129552. June 29, 2005
Chico- Nazario, J.:
Facts:
PC Javier & Sons applied with First Summa Bank for a loan
accommodation under the Industrial Guarantee Loan Fund
(IGLF).
The corporation through Pablo Javier was advised that its
loan application was approved and that the same shall be
forwarded to the Central Bank for processing.
The CB released the loan.
To secure the loan, Javier executed CM over some machinery
in favor of the bank. In the meantime, the bank changed its
name to PAIC Savings and Mortgage Bank Inc.
Thereafter, the corporation failed to pay; this prompted the
Bank to move for the extrajudicial foreclosure of the
mortgages.
PC Javier filed an action to restrain the extrajudicial
foreclosure on the ground that it First Summa and PAIC Bank
are separate entities.
Issue:
Whether the debtor should be formally notified of the
corporate creditors change of name
Held:
NO. There is no such requirement under the law or any
regulation ordering a bank that changes its corporate name
to formally notify all its debtors. This being the case, the
court cannot impose on the bank that changes its corporate
name to notify its debtors of such change absent any law,
circular or regulation requiring it. Formal notification is
therefore discretionary on the bank.
RESIDENCE AND NATIONALITY OF A CORPORATION
44. Hyatt Elevators and Escalator Corp. v. Goldstar
Elevators
GR NO. 161026 October 24, 2005
Panganiban, J.:
Facts:
HYATT is a domestic corporation with address at the 6 th Floor,
Dao I Condominium, Salcedo St., Legaspi Village, Makati, as
stated in its Articles of Incorporation.
HYATT filed a Complaint for unfair trade practices and
damages against LG Industrial Systems Co. Ltd. (LGISC) and
LG International Corporation (LGIC) in RTC Mandaluyong,
alleging among others, that LGISC and LGIC, in the middle of
negotiations, terminated the proposal to the prejudice of
HYATT.
In the course of the proceedings, HYATT filed a motion for
leave of court to substitute LGISC to LG OTIS, it alleged that
subsequent to the filing of the complaint, it learned that
LGISC transferred all its organization, assets and goodwill, as
a consequence of a joint venture agreement with Otis
Elevator Company of the USA, to LG Otis Elevator Company
(LG OTIS, for brevity). It was further alleged that GOLDSTAR
was being utilized by LG OTIS and LGIC in perpetrating their
unlawful and unjustified acts against HYATT, because
GOLDSTAR is being managed and operated by the same
Korean officers of defendants LG-OTIS Elevator Company and
LG International Corporation. GOLDSTAR filed for a MTD on
the ground that the venue was improperly laid.
Issue:
Whether the venue was improper
Held:
YES. The residence of a corporation is the place where its
principal office is located, as stated in its Articles of
Incorporation even though the corporation has closed its
office therein and relocated to another place.
45. Unchuan v. Lozada
GR NO 172671 April 16, 2009
Quisumbing, J.:
Facts:
Sisters Anita and Peregrina who were based in the US sold to
their nephew Antonio several parcel of lots which were
located in the Philippines. Dr. Lozada, their brother who was
an American citizen agreed to advance the purchase price for
Antonio.
Antonio and Dr. Lozada agreed that said subject properties
would be the capital of Damasa Corporation. According to
their agreement, Antonio and Dr. Lozada are to hold 60% and
40% of the shares in said corporation, respectively.
The Deed of Sale was later notarized and authenticated and
was sent to Antonio in the Philippines. Upon receipt of said
documents, Antonio recorded the sale with the RD.
Pending registration of the deed, Unchuan caused the
annotation of adverse claim on the lots. Marissa claimed that
Anita donated an undivided share in the lots to her; she
likewise raised the issue that it was Dr. Lozada an American
citizen who paid for said lots and that Antonio was merely a
dummy of the former.
The court declare Antonio to be the absolute owner of the
subject properties.
On Motion for Reconsideration, the court reversed and
cancelled the titles in Antonios name.
Issue:
Whether the sale violated the public policy prohibiting aliens
from owning lands
Held:
NO. the sale to a foreigner of parcels of lands does not violate
the public policy prohibiting aliens from owning lands in the
Philippines when the foreigner advanced the money for the
payment thereof but at no point were the lots registered in
his name nor was it contemplated that the lots be under his
control for they are actually to be included as capital of a
private corporation to be formed with a Filipino individual
who will own 60% of the corporation with the foreigner
holding 40% thereof. Under RA 7042, a corporation organized
under the laws of the Philippines of which at least 60% of the
outstanding capital stock and entitled to vote is owned and
held by citizens of the Philippines, is considered a Philippine
national. As such, the corporation ,ay acquire disposable
lands in the Philippines.
CORPORATION BY ESTOPPEL
46. Pioneer Surety & Insurance Corporation v. Court of
Appeals
GR NO 84197 July 28, 1989
Gutierrez, Jr. J.:
Facts:
Japan Domestic Airlines (JDA) and Jacob Lim entered into a
contract of sale of 2 aircraft DC-3A for US$ 109,000.
Petitioner executed a surety bond in favor of JDA on behalf of
Lim as principal in the name of Southern Airlines.
Border Machinery & Heavy Equipments Corp, Francisco and
Modesto Cervantes, Costancio Maglana contributed funds to
the endeavor and guaranteed the obligation
Issue:
Whether or not a partnership is formed when funds were
invested in a corporation that was not created.
Held:
NO. Where someone convinced other parties to contribute
funds for the formation of a corporation which was never
formed, there is no partnership among them, and the latter
cannot be held liable to share in the losses of the proposed
corporation.
47. People v. Garcia
GR NO. 117010 April 18, 1997
Puno, J.:
Facts:
Complainants in this case applied to a recruitment
corporation named Ricorn Philippine International Shipping
Lines, Inc. Garcia and Botero represented themselves as
president and vice-president of the corporation.
After the complainants sent the required documents for their
respective job applications, they returned to the purported
main office of the corporation but they discovered that Ricorn
abandoned its office.
After further investigation, they found out that Ricorn was not
registered in SEC and was not also licensed in DOLE.
During trial, accused Garcia testified that he knew that the
group representing Ricorn was not registered ion SEC and
DOLE.
Issue:
Whether or not a person representing himself as a
corporation can be liable as a general partner.
Held:
YES. The persons who illegally recruited workers for overseas
employment by representing themselves to be officer of a
corporation which they knew had not been incorporated are
liable as general partners for all debts, liabilities and
damages incurred or arising as a result thereof.
48. Lozano v. Delos Santos
GR NO. 125221 June 19, 1997
Puno, J.:
Facts:
Lozano alleged that he was the president of the Kapatirang
Mabalacat-Angeles Jeepney Drivers' Association, Inc.
(KAMAJDA) while respondent Anda was the president of the
Samahang Angeles-Mabalacat Jeepney Operators' and
Drivers' Association, Inc. (SAMAJODA).
Upon the request of the Sangguniang Bayan of Mabalacat,
Pampanga, Lozano and Anda agreed to consolidate their
respective associations and form the Unified Mabalacat-
Angeles Jeepney Operators' and Drivers' Association, Inc.
(UMAJODA); they also agreed to elect one set of officers who
shall be given the sole authority to collect the daily dues
from the members of the consolidated association.
Elections were held on October 29, 1995 and both petitioner
and private respondent ran for presidency.
Petitioner won; private respondent protested and, alleging
fraud, refused to recognize the results of the election;
private respondent also refused to abide by their agreement
and continued collecting the dues from the members of his
association despite several demands to desist. Petitioner
was thus constrained to file the complaint to restrain private
respondent from collecting the dues.
Private respondent moved to dismiss the complaint for lack
of jurisdiction, claiming that jurisdiction was lodged with the
Securities and Exchange Commission (SEC).
Issue:
Whether or not the case is classified as an intra-corporate
controversy thus falling within the jurisdiction of the SEC?
Whether or not the proposed consolidated corporation may
be considered a corporation by estoppel
Held:
THE SEC HAS NO JURISDICTION OVER THE COMPLAINT. There
is no intracorporate nor partnership relation between
petitioner and private respondent. The controversy between
them arose out of their plan to consolidate their respective
jeepney drivers' and operators' associations into a single
common association. This unified association was, however,
still a proposal. The KAMAJDA and SAMAJODA to which
petitioner and private respondent belong are duly registered
with the SEC, but these associations are two separate
entities. It is between members of separate and distinct
associations. Petitioner and private respondent have no
intracorporate relation much less do they have an
intracorporate dispute. The SEC therefore has no jurisdiction
over the complaint.
NO. The doctrine of corporation by estoppel advanced by
private respondent cannot override jurisdictional
requirements. Jurisdiction is fixed by law and is not subject
to the agreement of the parties. It cannot be acquired
through or waived, enlarged or diminished by, any act or
omission of the parties; neither can it be conferred by the
acquiescence of the court. Corporation by estoppel is
founded on principles of equity and is designed to prevent
injustice and unfairness. It applies when persons assume to
form a corporation and exercise corporate functions and
enter into business relations with third persons. Where there
is no third person involved and the conflict arises only among
those assuming the form of a corporation, who therefore
know that it has not been registered, there is no corporation
by estoppel.
49. Lim Tong Lim v. Philippine Fishing Gear Industries
GR NO. 136448 November 3, 1999
Panganiban, J.:
Facts:
On behalf of "Ocean Quest Fishing Corporation," Antonio
Chua and Peter Yao entered into a Contract, for the purchase
of fishing nets from the Philippine Fishing Gear Industries,
Inc. (PFGI). They claimed that they were engaged in a
business venture with Lim Tong Lim, who however was not a
signatory to the agreement.
The buyers, however, failed to pay for the fishing nets and
the floats; hence, PFGI filed a collection suit against Chua,
Yao and Lim Tong Lim with a prayer for a writ of preliminary
attachment. The suit was brought against the three in their
capacities as general partners, on the allegation that "Ocean
Quest Fishing Corporation" was a nonexistent corporation as
shown by a Certification from the SEC.
The lower court issued a Writ of Preliminary Attachment,
which the sheriff enforced by attaching the fishing nets on
board F/B Lourdes which was then docked at the Fisheries
Port, Navotas, Metro Manila. Lim Tong Lim, on the other hand,
filed an Answer with Counterclaim and Crossclaim and moved
for the lifting of the Writ of Attachment.
Lim argues, among others, that under the doctrine of
corporation by estoppel, liability can be imputed only to Chua
and Yao, and not to him.
Issue:
Whether Lim should be held jointly liable with Chua and Yao.
Held:
In the first instance, an unincorporated association, which
represented itself to be a corporation, will be estopped from
denying its corporate capacity in a suit against it by a third
person who relied in good faith on such representation. It
cannot allege lack of personality to be sued to evade its
responsibility for a contract it entered into and by virtue of
which it received advantages and benefits. On the other
hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and
received benefits from it, may be barred from denying its
corporate existence in a suit brought against the alleged
corporation. In such case, all those who benefited from the
transaction made by the ostensible corporation, despite
knowledge of its legal defects, may be held liable for
contracts they impliedly assented to or took advantage of.
There is no dispute that PFGI is entitled to be paid for the
nets it sold. The only question here is whether Lim should be
held jointly liable with Chua and Yao. Lim contests such
liability, insisting that only those who dealt in the name of
the ostensible corporation should be held liable. Although
technically it is true that Lim did not directly act on behalf of
the corporation; however, having reaped the benefits of the
contract entered into by persons with whom he previously
had an existing relationship, he is deemed to be part of said
association and is covered by the scope of the doctrine of
corporation by estoppel.
DE FACTO CORPORATION
50. Sawadjaan v. Court of Appeals
GR NO. 141735 June 8, 2005
Chico- Nazario, J.:
Facts:
Sappari K. Sawadjaan was among the first employees of the
Philippine Amanah Bank (PAB) when it was created. He rose
through the ranks, working his way up from his initial
designation as security guard.
In February 1988, while still designated as
appraiser/investigator, Sawadjaan was assigned to inspect
the properties offered as collaterals by Compressed Air
Machineries and Equipment Corporation (CAMEC) for a credit
line of Five Million Pesos secure by REM over the latters
poperties. On the basis of his Inspection and Appraisal
Report, the PAB granted the loan application.
In the meantime, Sawadjaan was promoted to Loans Analyst
I.
In January 1990, Congress passed Republic Act 6848 creating
the AIIBP and repealing P.D. No. 264 (which created the PAB).
By virtue of which all assets, liabilities and capital accounts of
the PAB were transferred to the AIIBP, and the existing
personnel of the PAB were to continue to discharge their
functions unless discharged. In the ensuing reorganization,
Sawadjaan was among the personnel retained by the AIIBP.
When CAMEC failed to pay despite the given extension, the
bank, now referred to as the AIIBP, discovered that TCT No.
N-130671 was spurious, the property described therein non-
existent, and that the property covered by TCT No. C-52576
had a prior existing mortgage in favor of one Divina Pablico.
The Board of Directors of the AIIBP created an Investigating
Committee to look into the CAMEC transaction. They found
petitioner guilty of conduct prejudicial to the best interest of
the service. The board suspended the petitioner, prompting
the latter to appeal the decision citing AIIBPs lack of legal
standing to sue since it was not able to file its by-laws within
the prescribed period.
Issue:
Whether a corporation which failed to file its by-laws within
the prescribed period ipso facto lose its power as such
Held:
NO. At the very least, by its failure to submit its by-laws on
time, the AIIBP may be considered a de facto corporation
whose right to exercise corporate powers may not be
inquired into collaterally in any private suit to which such
corporations may be a party. Moreover, a corporation which
has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such. The SEC Rules on
Suspension/Revocation of the Certificate of Registration of
Corporations, details the procedures and remedies that may
be availed of before an order of revocation can be issued.
There is no showing that such a procedure has been initiated
in this case.
BOARD OF DIRECTORS
51. Gokongwie v. SEC
GR NO. L- 45911 April 11, 1979
Antonio, J.:
Facts:
John Gokongwei Jr., as stockholder of San Miguel Corporation,
filed with the SEC a petition for "declaration of nullity of
amended by-laws, cancellation of certificate of filing of
amended by-laws, injunction and damages with prayer for a
preliminary injunction" against the majority of the members
of the Board of Directors and San Miguel Corporation as an
unwilling petitioner.
Gokongwei alleged that the Board amended the bylaws of
the corporation, prescribing additional qualifications for its
directors, that no person shall qualify or be eligible for
nomination if he is engaged in any business which competes
with that of the Corporation.
The board based their authority to do so on a resolution of
the stockholders. It was contended that according to section
22 of the Corporation Law and Article VIII of the by-laws of
the corporation, the power to amend, modify, repeal or adopt
new by-laws may be delegated to the Board of Directors only
by the affirmative vote of stockholders representing not less
than 2/3 of the subscribed and paid up capital stock of the
corporation, which 2/3 should have been computed on the
basis of the capitalization at the time of the amendment.
Since the amendment was based on the 1961 authorization,
Gokongwei contended that the Board acted without authority
and in usurpation of the power of the stockholders.
Gokongwei claimed that prior to the questioned amendment,
he had all the qualifications to be a director of the
corporation, being a substantial stockholder thereof; that as
a stockholder, Gokongwei had acquired rights inherent in
stock ownership, such as the rights to vote and to be voted
upon in the election of directors; and that in amending the
by-laws, Soriano, et. al. purposely provided for Gokongwei's
disqualification and deprived him of his vested right as afore-
mentioned, hence the amended by-laws are null and void.
As additional causes of action, it was alleged that
corporations have no inherent power to disqualify a
stockholder from being elected as a director and, therefore,
the questioned act is ultra vires and void.
Issue:
Whether the corporation has the power to provide for the
(additional) qualifications of its directors
Held:
YES. It is recognized by all authorities that "every corporation
has the inherent power to adopt by-laws 'for its internal
government, and to regulate the conduct and prescribe the
rights and duties of its members towards itself and among
themselves in reference to the management of its affairs.'" In
this jurisdiction under section 21 of the Corporation Law, a
corporation may prescribe in its by-laws "the qualifications,
duties and compensation of directors, officers and
employees." This must necessarily refer to a qualification in
addition to that specified by section 30 of the Corporation
Law, which provides that "every director must own in his
right at least one share of the capital stock of the stock
corporation of which he is a director." Any person "who buys
stock in a corporation does so with the knowledge that its
affairs are dominated by a majority of the stockholders and
that he impliedly contracts that the will of the majority shall
govern in all matters within the limits of the act of
incorporation and lawfully enacted by-laws and not forbidden
by law." To this extent, therefore, the stockholder may be
considered to have "parted with his personal right or
privilege to regulate the disposition of his property which he
has invested in the capital stock of the corporation, and
surrendered it to the will of the majority of his fellow
incorporators. It cannot therefore be justly said that the
contract, express or implied, between the corporation and
the stockholders is infringed by any act of the former which is
authorized by a majority." Pursuant to section 18 of the
Corporation Law, any corporation may amend its articles of
incorporation by a vote or written assent of the stockholders
representing at least two-thirds of the subscribed capital
stock of the corporation. If the amendment changes,
diminishes or restricts the rights of the existing shareholders,
then the dissenting minority has only one right, viz.: "to
object thereto in writing and demand payment for his share."
Under section 22 of the same law, the owners of the majority
of the subscribed capital stock may amend or repeal any by-
law or adopt new by-laws. It cannot be said, therefore, that
Gokongwei has a vested right to be elected director, in the
face of the fact that the law at the time such right as
stockholder was acquired contained the prescription that the
corporate charter and the by-law shall be subject to
amendment, alteration and modification.
Note:
A corporation is authorized to prescribe qualifications of its
directors; such is not invalid, provided, however that before
such nominee is disqualified, he should be given due process
to show that he is not covered by such disqualification. A
director stands in fiduciary relation to the corporation and its
stockholders. The disqualification of a competition from being
elected to the board of directors is a reasonable exercise of
corporate authority. Sound principles of corporate
management counsel against sharing sensitive information
with a director whose fiduciary duty to loyalty may require
that he discloses this information to a competitive rival.
52. Sales v. SEC
GR NO L-54330 January 13, 1989
Cortes, J.:
Facts:
State Investment House, Inc. (formerly State Financing
Center, Inc.) entered into a sales agreement with Sipalay
Mining whereby the latter sold to the former 200,000,000
common shares of its capital stock in the amount of
P2,600,000.00. The sales agreement between Sipalay Mining
and State Investment contained the following terms and
conditions:
2. That the stockbroker shall not sell more than 1,000,000
shares per buyer, to the extent practicable;
3. In the event you decide to make a public offering [of]
additional shares in the future, whether with Sipalay Mining
and Exploration Corporation or any other corporation
organized by Sipalay Mining Exploration Corporation, you
hereby grant us a right of first refusal to undertake the same;
4. The Corporation shall as soon as practicable after the
offering period of our shares, apply for listing in the Stock
Exchange in accordance with the rules and regulations of the
Securities and Exchange Commission. The timing of the date
of listing shall be mutually decided by us.
5. That State Financing Center, Inc. shall issue a voting trust
in favor of the Board of Directors of Sipalay Mining
Exploration Corporation which shall only be good up to the
time the sale to the public of said shares has been effected.
The 200,000,000 shares of stock of Sipalay Mining, covered
by ten certificates of stock, were delivered to State
Investment. Subsequently, the restriction on the sale of the
shares was modified by allowing sale in blocks of 5,000,000
shares per buyer.
On December 1975, State Investment requested Sipalay
Mining to transfer the 200,000,000 shares to Anselmo
Trinidad & Co., Inc. (hereinafter referred to as ATCO), to which
it had sold the shares. Sipalay Mining complied with this
request. During the time that ATCO held the shares, it voted
them in the stockholders' meetings of Sipalay Mining.
Some two and a half years later, ATCO in turn sold
198,500,000 of the shares to respondent VULCAN. Sipalay
Mining was requested by ATCO to transfer the 198,500,000
shares to the name of VULCAN.
Eight days prior to the scheduled annual stockholders'
meeting of Sipalay Mining, petitioners filed before the SEC a
petition to nullify the sale of the shares to VULCAN, with a
prayer for the issuance of a writ of preliminary injunction to
enjoin VULCAN from voting the shares.
Issue:
Whether the transferee of the shares can be deprived of his
right to vote due to the fact that the transferor has violated a
condition in the sales agreement it entered when it acquired
the subject shares?
Held:
NO, THE BUYERS RIGHT TO VOTE THE SHARE IS A RIGHT
INHERENT TO OWNERSHIP. Where the corporation sold its
share to an investment house on the condition that the same
shall be sold to the public through stockbrokers in block of 1
million shares per buyer and the condition was not fulfilled,
the sale is nevertheless valid unless set aside by a
competent court. Thus, the buyer, as a stockholder, cannot
be deprived of his right to vote his shares as it is a right
inherent to ownership. The stockholder may be deprived of
the right to vote only upon clear showing of its lawful denial
under the articles of incorporation or by- laws of the
corporation.
Further issues relating to the directive of the board of
directors of the issuing corporation to issue a stock certificate
in favor of the buyer are questions of policy or management
and are left solely to the honest decision of officers and
directors of a corporation, and so long as they act in good
faith, their orders are not reviewable by the courts.
53. Pena v. Court of Appeals
GR NO 91478 February 7, 1991
Gancayco, J.:
Facts:
PAMBUSCO mortgaged the subject properties to the DBP. For
failure to pay its obligation, the mortgage was foreclosed and
was sold to Pena.
The Board of Directors of PAMBUSCO, through three out of its
five directors, resolved to assign its right of redemption over
the said properties and authorized one of its members, Atty.
Briones to execute and sign a Deed of Assignment for and in
behalf of PAMBUSCO. The remaining asset of the corporation
was the right to redeem the foreclosed parcels of land.
Under the by laws of PAMBUSCO, to constitute a quorum in a
special meeting of the Board, at least four members must be
present.
Consequently, Briones executed executed a Deed of
Assignment in favor of Enriquez. The latter redeemed the
properties and sold the same in favor of Spouses Yap.
The Yaps wrote Pena asking for the payment of the back
rentals.
Despite the foregoing, Pena remained in possession of the
lots prompting the Yaps to file an action in court.
Issue:
Whether or not the board resolution authorizing the
assignment of the right to redeem the properties is valid
Held:
NO. three out of five directors of the board of directors
present in a special meeting do not constitute a quorum to
validly transact business when its by- kaws require at least
four members to constitute a quorum. Under Section 25 of
the Corporation Code, the articles of incorporation or by-laws
may fix a greater number than the majority of the number of
directors to constitute a quorum. Any number less than the
number provided in the articles or by- laws cannot constitute
a quorum; any act therein would not bind the corporation; all
the attending directors could do is to adjourn.
Further, where the remaining asset of a corporation was its
right to redeem the parcels of land that were foreclosed, the
assignment of the right to redeem requires in addition to a
proper board resolution, the affirmative votes of the
stockholders representing at least 2/3 of the outstanding
capital stock. There having been no stockholders approval
the redemption madde by the assignee is invalid.
54. Visayan v. NLRC
GR NO 69999 April 30, 1991
Paras, J.:
Facts:
Upon organization of private respondent Fujiyama Hotel &
Restaurant, Inc., in which Rivera holds majority interest; it
immediately opened a Japanese establishment, known as
Fujiyama Hotel & Restaurant. In order to fully offer an
authentic Japanese cuisine and traditional Japanese style of
service, private respondent hired the services of Isamu
Akasako as its chef and restaurant supervisor.
In June, 1980, Lourdes Jureidini and Milagros Tsuchiya,
allegedly pretending to be stockholders of the corporation,
filed a case against Rivera and Akasako to wrest control over
the establishment.
The court issued a writ of preliminary mandatory injunction
transferring possession of all the assets of the company and
the management thereof to Jureidini and Tsuchiya.
Upon assuming management, Jureidini and Tsuchiya replaced
almost all of the existing employees with new ones, majority
of whom are the present petitioners in the instant case.
In the meantime, Rivera and the rest of the stockholders
elevated the civil case to the Supreme Court through a
petition for certiorari assailing the ground for the issuance of
the writ of preliminary mandatory injunction by the lower
court.
The SC issued a writ of preliminary injunction to enjoin
enforcement of the writ of preliminary mandatory injunction
issued by the lower court. Pursuant to the above-quoted
resolution, Rivera and Akasako regained control and
management of Fujiyama Hotel & Restaurant, Inc.
Immediately upon assumption of the management of the
corporation, Rivera et al., refused to recognize as employees
of the corporation all persons that were hired by Jureidini and
Tsuchiya during the one-year period that the latter had
operated the company and reinstated the employees
previously hired by them. This gave rise to the filing of the
present case by the dismissed employees hired by Jureidini
and Tsuchiya (some of whom had allegedly been hired by
Rivera and Akasako even before Jureidini and Tsuchiya
assumed management of the corporation) against Fujiyama
Hotel & Restaurant, Inc. for illegal dismissal.
Issue:
whether or not there is privity of contract between
petitioners and private respondent as to establish an
employer-employee relationship between the parties.
Held:
NO PRIVITY OF CONTRACT, THE HIRING OF EMPLOYEES BY
THOSE WHO TOOK OVER THE COMPANY DOES NOT BIND THE
LATTER.
Where two parties forcibly took over the management of the
corporation by virtue of a writ of preliminary injunction issued
on the basis of their claim that they were stockholders, their
hiring of new employees to replace the original employees
cannot bint the corporation, as the act was done without
authority from the board. The claim of illegal dismissal by the
new employees is without merit as they were not hired by
the corporation or its duly authorized officers of agents.
55. Lee v. Court of Appeals
GR NO 93695 February 4, 1992
Gutierrez, Jr. J.:
Facts
On November 1985, filed a complaint for a sum of money
against Sacoba Manufacturing Corp who, in turn, filed a third
party complaint against ALFA and the petitioners.
IN the course of the proceedings, Lee and Lacdao informed
the court that by virtue of the voting trust agreement they
ceased to be officers and directors of ALFA, hence, they could
no longer receive summons or any court processes for or on
behalf of ALFA.; that management of ALFA had been
transferred to DBP.
The DBP, on the other hand, claimed that it was not
authorized to receive summons on behalf of ALFA since the
DBP had not taken over the company which has a separate
and distinct corporate personality and existence.
The trial court issued an order advising Sacoba
Manufacturing, et. al. to take the appropriate steps to serve
the summons to ALFA. Sacoba Manufacturing, et. al. filed a
Manifestation and Motion for the Declaration of Proper
Service of Summons which the trial court granted.
Issue:
whether or not there was proper service of summons ALFA
through the petitioners as president and vice-president,
allegedly, of the subject corporation after the execution of a
voting trust agreement between ALFA and DBP.
Held:
NO. Any director who ceases to be the owner of at least 1
share of the capital stock of the corporation of which he is a
director shall thereby cease to be a director. Since a director
who executes a VTA over all his shares ceases to be a
stockholder of record in the books of the corporation and
cease to be a director, he cannot be served with summons
intended for the corporation.
56. Citibank N.A. v. Chua
GR NO 102300 March 17, 1993
Facts:
Citibank is a foreign commercial banking corporation duly
licensed to do business in the Philippines. Spouses Cresencio
and Zenaida Velez, were good clients of the bank.
They filed a complaint for specific performance and damages
against the bank.
On the date of the pre-trial conference, counsel for petitioner
bank appeared, presented a special power of attorney
executed by Citibank officer Florencia Tarriela in favor of
petitioner bank's counsel, the J.P. Garcia & Associates,
authorizing it to represent and bind petitioner bank at the
pre-trial conference of the case.
The by-laws of the bank grant to its Executing Officer and
Secretary Pro-Tem the power to delegate to a Citibank officer,
in this case Ferguson, the authority to represent and defend
the bank and its interests.
In spite of this SPA, counsel for private respondents orally
moved to declare petitioner bank in default on the ground
that the SPA was not executed by the Board of Directors of
Citibank. Petitioner bank was then required to file a written
opposition to this oral motion to declare it in default. In said
opposition petitioner bank attached another SPA 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.
Issue:
Whether a board resolution is necessary for its legal counsel
or Citibank employees to act as its attorney-in-fact in the
case because petitioner bank's by-laws grant to its Executing
Officer and Secretary Pro-Tem the power to delegate to a
Citibank officer, in this case William W. Ferguson, the
authority to represent and defend the bank and its interests.
Held:
NO. In the corporate hierarchy, there are three levels of
control:
1 the board of directors, which is responsible for corporate
policies and the general management of the business affairs
of the corporation;
2 the officers, who in theory execute the policies laid down
by the board, but in practice often have wide latitude in
determining the course of business operations; and
3 the stockholders who have the residual power over
fundamental corporate changes, like amendments of the
articles of incorporation.
However, just as a natural person may authorize another to
do certain acts in his behalf, so may the board of directors of
a corporation validly delegate some of its functions to
individual officers or agents appointed by it. It is clear that
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.
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.
57. Grace Christian Highschool v. Court of Appeals
GR NO. 108905 October 23, 1997
Mendoza, J.:
Facts:
Grace Christian High School is an educational. Grace Village
Association, Inc., on the other hand, is an organization of lot
and/or building owners, lessees and residents at Grace
Village.
On December 1975, a committee of the board of directors
prepared a draft of an amendment to the by-laws, providing
that GRACE CHRISTIAN HIGH SCHOOL representative is a
permanent Director of the ASSOCIATION." This draft was
never presented to the general membership for approval. For
15 years, Grace Christian High School was given a permanent
seat in the board of directors of the association.
After some time, the association's committee on election
informed James Tan, principal of the school, that "it was the
sentiment that all directors should be elected by members of
the association." For this reason, Tan was told that "the
proposal to make the Grace Christian High School
representative as a permanent director of the association,
although previously tolerated in the past elections should be
re-examined."
Issue:
Whether or not provision in the by- laws allowing a director to
hold the position perpetually is valid.
Held:
NO. The BOD of Corporations must be elected from among
the stockholders or members. Since the provision is contrary
to law, the fact that for 15 years it has not been questioned
cannot forestall a later challenge to its validity.
58. Naguiat v. NLRC
G.R. No. 116123. March 13, 1997
Panganiban, J.:
Facts:
CFTI held a concessionaires contract with the Army Air Force
Exchange Services (AAFES) for the operation of taxi services
within Clark Air Base. Sergio Naguiat was CFTIs president
while Antolin Naguiat was its VP. The Naguiats were actively
engaged in the management of CFTI.
Clark Air Base was not spared from the phase out of the US
Military bases in the country, as a result, the AAFES was
dissolved and employees were terminated.
The AAFES Taxi Drivers Association (UNION for brevity) and
CFTI negotiated as regards separation benefits for the
displaced employees. An agreement was reached, however
some of the employees refused to accept the same, they
disaffiliated from the Union and joined the National
Organization of Workingmen (NOWM).
NOWM filed a complaint against AAFES, Sergio, Antolin and
Sergio F. Naguiat Enterprises.
The enterprise was impleaded on the ground that both CFTI
and Naguiat Enterprises were "close family corporations"
owned by the Naguiat family
Issue:
Whether the corporate officers of CFTI can be held solidarily
liable for corporate debts
Held:
YES. Stockholders who are actively engaged in the
management or operation of the business and affairs of a
close corporation shall be personally liable for the corporate
torts unless the corporation has obtained reasonably
adequate liability insurance coverage.
59. Yao Ka Sin Trading v. Court of Appeals
GR NO
Facts:
60. Benguet Electric Cooperative, Inc. v. NLRC
GR NO
Facts:
Cosalan was the General manager of Benguet Electric
Cooperative, Inc. (BENECO).
BENECO, through Casalan received COA Audit Report stating
the financial status and irregularities in the utilization of
funds released by the National Electrification Administration
(NEA) to BENECO.
Heving been made aware of the serious financial condition of
BENECO, Casalan implemented remedial measures.
The members of the Board reacted by adopting a series of
resolutions. The resolutions adopted abolished the housing
allowance of Casalan and reduced his salary, among others.
Another resolution was adopted, removing Casalan as
General Manager. Despite such, he continued to work as a
GM in the belief that he could be suspended or removed only
by duly authorized officials of NEA.
Casalan requested BENECO to release his salary, the latter
denied the request. This prompted Casalan to challenge the
validity of the board resolutions with the NLlRC.
LA held both BENECO and its board members to be jointly
and severally liable.
Issue:
Whether the members of BOD are liable
Held:
YES.
GR: the board members of the corporation who in good faith
purport to act for and in behalf of the corporation within the
lawful scope of their authority do not become liable for the
consequences of their acts.
EXP: when the directors abolished the benefits and
eventually dismissed in bad faith and without procedural due
process the GM who tried to implement remedial measures to
solve the serious financial condition of the corporation.
61. Metropolitan bank and Trust Company v. Quilts & All Inc.
GR NO.
Facts:
de los Santos the then Corporate Secretary of Quilts issued a
Secretary's Certificate which certified that in a special
meeting of the Board of Directors its President, Dizon was
authorized and empowered to mortgage in favor of
Metrobank, a property belonging to Quilts. On the basis of
the Secretary's Certificate, Metrobank restructured Dizon's
existing personal loan, which was secured by a mortgaged
over the personal property of Dizon and of the corporation.
More than a year later, Metrobank received a letter from Atty.
Villanueva, Quilt's counsel offering an amount for the
cancellation of the mortgage on the property owned by Quilts
because, allegedly, "Mr. & Mrs. Senen Dizon had left the
Philippines, leaving several creditors." Metrobank refused the
offer since the amount offered did not approximate the
appraised value of the mortgaged property.
Atty. Trinidad, Quilt's new counsel wrote Metrobank
reiterating the mortgage cancellation. In addition, counsel
claimed that the alleged April 7, 1987 special meeting could
not have taken place for lack of the requisite number of
directors present to constitute a quorum since the Chairman
and 2 other members of the Board of Directors were aboard
on that date.
Issue:
Whether or not the loan may be annulled
Held:
NO. A mortgage on corporate property accepted by a bank as
basis for restructuring a personal loan cannot be annulled
even though it could not have been authorized by the board
of directors for lack of quorum where the bank relied on the
secretarys certificate attesting to the existence of a board
resolution approving the mortgage.
62. Lopez Realty Inc. v. Fontecha
GR NO
Facts:
Lopez Realty, Inc., is a corporation engaged in real estate
business, petitioner Gonzales is one of its majority
shareholders.
Sometime in 1978, Lopez submitted a proposal relative to the
the reduction of employees with provision for their gratuity
pay. The proposal was deliberated upon and approved in a
special meeting of the board of directors. It appears that
petitioner corporation approved two (2) resolutions providing
for the gratuity pay of its employees.
Private respondents were the retained employees of the
Corporation. In a letter, the private respondents requested
for the full payment of their gratuity pay. Their request was
granted in a special meeting held. At that, time, however,
Gonzales was still abroad. Allegedly, while she was still out of
the country, she sent a cablegram to the corporation,
objecting to certain matters taken up by the board in her
absence, such as the sale of some of the assets of the
corporation. Upon her return, she filed a derivative suit with
the SEC against majority shareholder Lopez.
Notwithstanding the "corporate squabble" between Gonzales
and Lopez, the first two (2) installments of the gratuity pay of
the private respondents were paid by the corporation. Also,
the corporation had prepared the cash vouchers and checks
for the third installments of gratuity pay of said private
respondents.
For some reason, said vouchers were cancelled by Gonzales.
Likewise, the first, second and third installments of gratuity
pay of the rest of private respondents were prepared but
cancelled by Gonzales. Despite private respondents'
repeated demands for their gratuity pay, corporation refused
to pay the same.
Issue:
Whether the corporation is bound to grant its employees
gratuity pay despite the lack of notice to a board director
during the meeting wherein the said resolution was passed
Held:
YES. As a general rule, a corporation through its board of
directors should act in the manner and within the formalities
prescribed by its charter or by the general law. Thus,
directors must act as a body in a meeting called pursuant to
the law or corporations by- laws, otherwise any action may
be questioned by any objecting stockholder. However, an
action of the board of directors during a meeting, which was
illegal for lack of notice may be ratified either expressly, by
the action of the directors in subsequent legal meeting or
impliedly by the corporations subsequent course of conduct.
Thus, a director who was not notified of a board meeting is
precluded from questioning the validity of the resolution
granting gratuity pay to employee approved at that meeting
if she later on acquiesced to it by signing the vouchers for
the payment of the gratuity pay.
63. Premium Marble Resources Inc. v. Court of Appeals
GR NO
Facts:
Premium Marble Resources, Inc. (PREMIUM for brevity),
assisted by Atty. Dumadag as counsel, filed an action for
damages against International Corporate Bank (ICB).
Meantime, the same corporation, i.e., PREMIUM, but this time
represented by Siguion Reyna, Montecillio and Ongsiako Law
Office as counsel, filed a motion to dismiss (MTD) on the
ground that the filing of the case was without authority from
its duly constituted board of directors as shown by the
excerpt of the minutes of PREMIUMs board of directors
meeting. In its opposition to the MTD, PREMIUM thru Atty.
Dumadag contended that the persons who signed the board
resolution are not directors of the corporation and were
allegedly former officers and stockholders of PREMIUM who
were dismissed for various irregularities and fraudulent acts;
On the other hand, Siguion Reyna Law firm as counsel of
PREMIUM in a rejoinder, asserted that it is the general
information sheet filed with the SEC, among others, that is
the best evidence that would show who are the stockholders
of a corporation and not the AOI since the latter does not
keep track of the many changes that take place after new
stockholders subscribe to corporate shares of stocks.
Issue:
Whether the filing of the action was with authorization from
the BOD
Held:
NO. By express mandate of the Corporation Code, all
corporations duly organized pursuant thereof are required to
file with SEC the names, nationalities and residence of the
directors and officers elected. In determining whether the
filing of an action was authorized by the board, it is the list of
directors in the latest general information sheet as siled with
the SEC which is controlling.
64. Esguerra v. Court of Appeals
GR NO
Facts;
Julieta Esguerra filed a complaint for administration of
conjugal partnership or separation of property against her
husband Vicente Esguerra, Jr. The said complaint was later
amended impleading V. Esguerra Construction Co., Inc.
(VECCI for brevity) and other family corporations as
defendants.
The parties entered into a compromise agreement which was
submitted to the court. On the basis of the said agreement,
the court rendered two partial judgments: one between
Vicente and Esguerra; and the other as between the latter
and VECCI. By virtue of said agreement, Esguerra Bldg. I was
sold and the net proceeds distributed according to the
agreement.
The controversy arose with respect to Esguerra Building II.
Esguerra started claiming one-half of the rentals of the said
building which VECCI refused. Esguerra filed a motion with
respondent court praying that VECCI be ordered to remit one-
half of the rentals to her until the same be sold.
VECCI opposed said motion. Meanwhile, Esguerra Bldg. II was
sold to Sureste Properties, Inc. Sureste relied on the
certification given by the corporate secretary that such sale
was authorized by resolution of the biard
Esguerra sought to nullify the sale on the ground that VECCI
is not the lawful and absolute owner thereof and that she has
not been notified nor consulted as to the terms and
conditions of the sale.
Issue:
Whether or not the sale may be invalidated
Held:
NO. A stockholder cannot invalidate the sale of corporate
properties for failure to comply with Section 40 of the
Corporation Code, where the buyer relied on the secretarys
certificate that the sale had been authorized by resolution of
the board of directors and of the stockholders. Being regular
on its face, a Secretarys Certificate is sufficient for a third
party to rely on. It does not have to investigate the truth of
the facts contained in such certification, otherwise business
transaction of corporations would become tortuously slow
and unnecessarily hampered.
65. Traders Royal Bank v. Court of Appeals
GR NO
Facts:
Filriters Guaranty Assurance Corporation (FILRITERS) is the
registered owner of CBCI No. D891. Under a deed of
assignment, FILRITERS transferred CBCI No. D891 to
Philippine Underwriters Finance Corporation (PHILFINANCE).
Subsequently, PHILFINANCE transferred CBCI No. D891,
which was still registered in the name of FILRITERS, to
Traders Royal Bank (TRB).
The transfer was made under a repurchase agreement
granting PHILFINANCE the right to repurchase the instrument
on or before April 27, 1981. When PHILFINANCE failed to buy
back the note on maturity date, it executed a deed of
assignment, dated April 27, 1981, conveying to TRB all its
rights and title to CBCI No. D891.
Armed with the deed of assignment, TRB then sought the
transfer and registration of CBCI No. D891 in its name before
the Security and Servicing Department of the Central Bank
(CB). Central Bank, however, refused to effect the transfer
and registration in view of an adverse claim filed by
FILRITERS.
Issue:
Whether or not the deed of assignment is valid
Held:
NO. The assignment made without authorization of the board
of directors does not bind the corporation
66. Western Institute Technology, Inc. v. Salas
GR NO 113032 August 21, 1997
Facts:
The members of the Salas family are the majority and
controlling members of the Board of Trustees of Western
Institute of Technology, Inc. (WIT, for short).
The minority stockholders of WIT held a Special Board
meeting in the principal office of WIT. In attendance were
other members of the Board.
Prior to the Special Board Meeting, copies of notice thereof
were distributed to all Board Members. In said meeting, the
Board of Trustees passed Resolution No. 48, granting monthly
compensation to the private respondents as corporate
officers.
A few years later, two (2) separate criminal informations
were filed, one for falsification of a public document and the
other for estafa were filed.
The charge for falsification was anchored on the ground that
Resolution No. 4 was passed on a date not covered by the
WIT income statement passed with the SEC.
The private respondents were acquitted of the complaints.
Petitioners however contend that private respondents should
be held civilly liable despite their acquittal. They base their
claim on the alleged illegal issuance by private respondents
of Resolution No. 48, ordering the disbursement of corporate
funds in favor of private respondents, board members of WIT.
Petitioners maintain that this grant of compensation to
private respondents is proscribed under Section 30 of the
Corporation Code. Thus, private respondents are obliged to
return these amounts to the corporation with interest.
Issue:
Whether or not the grant of additional compensation to WITs
Board of Directors as corporate officers was valid
Held:
YES. In the case at bench, Resolution No. 48, s. 1986 granted
monthly compensation to private respondents not in their
capacity as members of the board, but rather as officers of
the corporation, more particularly as Chairman, Vice-
Chairman, Treasurer and Secretary of Western Institute of
Technology.
Note:
Members of the board of directors may receive
compensation, in addition to reasonable per diems, in the
following cases:
When there is a provision in the by- laws fixing their
compensation;
When the stockholders representing at least majority of the
outstanding capital stock at a regular or special stockholders
meeting agree to give it to them; and
When they render services to the corporation in any capacity
other than as a director
67. Bitong v. Court of Appeals
GR NO123553 July 13, 1998
Facts:
Ex Libris Publishing Co., Inc was incorporated by Senator
Enrile, Cristina Ponce Enrile through Jaka Investments
Corporation (JAKA) and the Apostols. When Ex Libris suffered
financial difficulties, JAKA and the Apostols together with the
new investors restructured Ex Libris by organizing a new
corporation known as Mr. & Mrs.
Bitong as treasurer and member of the Board of Mr & Ms
company complained of the irregularities committed by
Apostol, the President and Chairperson of the Board.
She further claimed that except for the sale of the name
Philippine Inquirer to Philippine Daily Inquirer (PDI hereafter)
all other transactions and agreements entered into by Mr. &
Ms. with PDI were not supported by any bond and/or
stockholders resolution. That upon instructions of Eugenia D.
Apostol, Mr. & Ms. made several cash advances to PDI on
various occasions which was not supported by any board or
stockholders resolution, contract nor any other document.
Bitong alleged stocks were sold and endorsed in his favour
by Senator Enrile, by virtue of which he has the right to bring
such action in behalf of the corporation; records however
showed that the subject stocks were issued in favour of
Apostol by virtue of Declaration of trust and Deed of Sale
executed by JAKA.
Issue:
Whether Bitong has the capacity to initiate a derivative suit
in behalf of the corporation to assail the supposed fraudulent
acts of the private respondents
Whether or not Bitong is entitled to dividends declared by the
corporation
Held:
NO. The power to sue and be sued in any court by a
corporation is lodged in the board of directors that exercises
its corporate powers and not in the president or any officer
thereof. A derivative suit should not prosper if it is filed by a
person who is not authorized by the corporate share for
whose benefit the shares are held.
NO. The alleged endorsement of the Certificate of Stock in
the name of JAKA nor the deed of sale executed by Sen.
Enrile directly in favor of petitioner could not have legally
transferred or assigned the shares of stock in favor of
petitioner because said Certificate of Stock in the name of
JAKA was already cancelled and a new one was issued in
favor of respondent Apostol by virtue of a Declaration of Trust
and Deed of Sale. Petitioner was well aware of this trust,
being the person in charge of this documentation and being
one of the witnesses to the execution of this document.
Hence, petitioner is not entitled to dividends.
When a dividend is declared, it belongs to the person who is
the substantial and beneficial owner of the stock at the time
regardless of when the distribution profit was earned.
68. Tan Wing Talk v. Makasiar
GR NO 122452 January 29, 2001
Facts:
Petitioner as director of Concord-World Properties, Inc.,
(CONCORD for brevity), filed an action for violation of BP 22
with the City Prosecutor against Vic Ang Siong .
The complaint alleged that the check issued by Vic Ang Siong
in favor of Concord was dishonored when presented for
encashment.
Vic Ang Siong sought the dismissal of the case on two
grounds: First, that petitioner had no authority to file the
case on behalf of CONCORD, the payee of the dishonored
check, since the firms board of directors had not empowered
him to act on its behalf. Second, he and CONCORD had
already agreed to amicably settle the issue after he made a
partial payment of on the dishonored check.
On March 23, 1994, the City Prosecutor dismissed the
complaint on the following grounds: (1) that petitioner
lacked the requisite authority to initiate the criminal
complaint for and on Concords behalf; and (2) that
CONCORD and Vic Ang Siong had already agreed upon the
payment of the latters balance on the dishonored check.
Issue:
Whether Tam Wing Tak has the authority to sue in behalf of
the corporation
Held:
NO. Under Section 36 of the Corporation Code, read in
relation of Section 23, it is clear that where the corporation is
an injured party, its power to sue is lodges with its board of
directors or trustees. In the absence of proof that he was
authorized or granted specific powers by the board of
directors, a minority stockholder and member of the BOD had
no such power or authority to sue on behalf of the
corporation.
69. DBP v. Court of Appeals
GR NO 126200 August 16, 2001
Kapunan, J.:
Facts:
Marinduque Mining Corporation (MMC) purchased
construction materials from Remington Industrial Sales
Corporation (RISC).
MMC failed to pay, this prompted RISC to file an action for
collection with the court.
In the meantime, MMC obtained various loan
accommodations from the PNB, as a security, the former
(MMC) executed REMs and CMs over its properties in favour
of the bank.
The Mortgage Agreement was amended it was agreed that
Marinduque mortgaged in favour of PNB all other real and
personal properties and other real rights the latter may
subsequently acquire.
For failure to settle the account, the bank extrajudicially
foreclosed the mortgaged property. PNB and DBP emerged as
the highest bidders.
PNB and DBP assigned and conveyed all their rights, interests
and participation over the foreclosed properties in favour of
Nonoc Mining, Mariculum Mining, Island Cement and APT.
Sometime in 1987, PNB and DBP pursuant to Resolution No.
50 assigned, transferred and conveyed to the National
Government thru the Asset Privatization Trust (APT) all its
rights and interest over MMC which were earlier assigned to
other corporations.
Remington impleaded as co defendants PNB, DBP and other
assignee corporations on the ground that all of them must be
treated in law as one and the same entity by disregarding the
veil of corporate fiction since all of these corporations share
the same or almost the same set of directors.
Issue:
Whether Remington, a third person may raise the issue on
interlocking directors
Held:
NO. The rule pertaining to transactions between corporation
with interlocking directors resulting in prejudice to one of the
corporation does not apply where the corporation allegedly
prejudiced is a third party, not one of the corporations with
interlocking directors. Thus, when a mortgage bank
foreclosed the mortgage on the real and personal property of
the debtor and thereafter assigned and the properties to a
corporation it formed to manage and thereafter assigned the
properties to a corporation it formed to manage the
foreclosed assets, the unpaid seller of the debtor can not
complain that the assignment is invalid simply because the
morgagee and the assignee have interlocking directors.
70. A.F. Realty & Devt Inc. v. Dieselman Freight Services
GR NO 111448 January 16, 2002
Sandoval- Gutierrez, J.:
Facts:
Manuel Cruz member of BOD of Dieselman Corporation
authorized Polintan, a real estate broker of the CNP Real
Estate Brokerage to look for a buyer of a parcel of land
registered under the name of the corporation. Cruz, however
had no authority from the corporation to sell the said
property.
In turn, Polintan authorized Noble to sell the same lot.
Noble then offered the property to A.F. Realty.
A.F. through Ranullo, a board member and the vice president
accepted the offer and issued a check payable to the order of
Dieselman. Ranullo then asked Polintan for the board
resolution of Dieselman authorizing the sale of said lot, which
the latter failed to produce; what was given was the TCT, tax
declaration and other documents.
A higher price was demanded from A.F. Realty; however it
reiterated that it is willing to pay only the balance. Because
of this, Cruz terminated the offer and demanded the return of
the title and other documents.
A.F Realty then filed a complaint for specific performance
against Dieselman and Cruz.
Meanwhile, Dieselman and Midas Development Corporation
executed a Deed of Absolute Sale over the same property.
The lower court held that the acts of Cruz bound the
corporation.
CA reversed.
Issue:
Whether the alleged sale of land to A.F. Realty bound the
corporation
Held:
NO. Contracts or acts of a corporation must be made either
by the BOD or by a corporate agent duly authorized by the
board. Absent such valid delegation/ authorization, the rule is
that the declaration of an individual director relating to the
affairs of the corporation, but not in the course of, or
connected with the performance of authorized duties of such
director, is held not binding on the corporation.
Thus, where the director was not authorized by the board to
sell corporate property, its sale is not binding on the
corporation. The sale cannot be ratified despite acceptance
by the corporation of the partial payment if what is involved
is sale of land. Considering that the officers who represented
and acted as agents in behalf of the corporation were not
authorized, the contract of sale is null and void under Article
1874 of the Civil Code. Being a void contract, it is not
susceptible of ratification.
71. Filipinas Port Services, Inc. v. Go
GR NO 161886 March 16, 2007
Garcia, J.:
Facts:
Cruz, FILPORTs president wrote a letter to the BOD
questioning the boards creation of certain positions with a
monthly remuneration and the election thereto of certain
members of the board,
Cruz requested the board to take necessary actions to
recover from those elected the salaries they have received.
However, whatever action the board took did not sit well with
Cruz.
Cruz as a response filed a derivative suit with the SEC for
alleged mismanagement of the corporation.
The derivative suit however hibernated with the SEC and was
turned over to the RTC which ruled that the creation of the
questioned positions were unnecessary.
CA reversed.
Issue:
Whether or not the creation of additional offices/ positions by
the board may be questioned in court through the filing of a
derivative suit
Held:
NO AS LONG AS THE BOD ACTS IN GOOD FAITH AND IN THE
EXERCISE OF HONEST JUDGMENT IN THE INTEREST OF THE
CORPORATION.
The determination of the necessity for additional offices and/
or positions in a corporation, if authorized under the by- laws,
is a management prerogative which the courts will not review
in the absence of any proof that such prerogative was
exercised in bad faith or with malice.
Questions of policy or of management are left solely to the
honest decision of the board as the business manager of the
corporation, and the court is without authority to substitute
its judgment for that of the board, and as long as it acts in
good faith and in the exercise of honest judgment in the
interest of the corporation, its orders are not reviewable by
the courts.
72. Associated Bank v. Spouses Pronstroller
GR NO 148444 July 14, 2008
Nachura, J.:
Facts:
Spouses Vaca failed to pay their obligation with Association
Bank which led to the foreclosure and sale of their property
with the bank as the highest bidder. The Vacas filed an action
to annul the foreclosure as well as the sale.
During the pendency of the case, the bank offered the
property for sale, Spouses Pronstroller offered to purchase
the same; the offer was made through Atty. Saluta, the
banks VP, Corporate Secretary, Board member and in- house
counsel. The offer was accepted and negotiations between
the parties ensued which resulted to a letter- agreement
between them.
The parties agreed that deposit must be made within ninety
days from the signing of the agreement.
On July 1993 or prior to the expiration of the 90-day, in view
of the pendency of the case between the spouses Vaca and
the bank involving the subject property, Spouses Pronstroller
requested that the balance of the purchase price be made
payable only upon service on them of a final decision or
resolution of this Court affirming petitioner's right to possess
the subject property. Atty. Saluta agreed through another
letter- agreement without any board resolution, thus in effect
extending the 90 day period.
After some time the bank underwent reorganization and Atty.
Saluta was relieved of his responsibilities, the new
management reviewed the records of the bank and found out
that Spouses Pronstroller failed to pay the balance. The bank
through Asset Recovery and Remedial Management
Committee (ARRMC) disapproved the request of the
Pronstrollers. The latter submitted a proposal as to how the
balance will be paid but the bank disapproved.
For failure of the parties to reach an agreement, the
Pronstrollers informed the bank that they will enforce the July
1993 agreement; the bank countered that Atty. Saluta was
not authorized to sign in behalf of the bank.
Issue:
Whether the Letter Agreement signed by Atty. Saluta is
binding on the bank under the doctrine of apparent authority
Held:
YES. The doctrine of apparent authority had long been
recognized in this jurisdiction. Apparent authority is derived
not merely from practice. Its existence may be ascertained
through:
the general manner in which the corporation holds out an
officer or agent as having the power to act in general, with
which it clothes him; or
the acquiescence in his acts of a particular nature, with
actual or constructive knowledge thereof, within or beyond
the scope of his ordinary powers.
Accordingly, the authority to act for and to bind a corporation
may be presumed from acts of recognition in other instances,
wherein the power was exercised without any objection from
its board or shareholders, Undoubtedly, the bank had
previously allowed its in- house counsel to enter into the first
agreement without a board resolution expressly authorizing
him to sell corporate property; thus it had clothe him with
apparent authority to modify the same via the second letter-
agreement. Thus, the corporation is bound by the acts
entered into by its in house counsel even though he was
subsequently relieved of the position.
Naturally, the third person has little or no information as to
what occurs in corporate meetings; and he must necessarily
rely upon the external manifestations of corporate consent.
The integrity of commercial transactions can only be
maintained by holding the corporation strictly to the liability
fixed upon it by its agents in accordance with law.
73. Cebu Country Club, Inc. v. Elizagaque
GR NO 160273 January 18, 2008
Sandoval- Gutierrez, J.:
Facts:
Sometime in 1987, San Miguel Corporation, a special
company proprietary member of CCCI, designated
respondent Ricardo F. Elizagaque, its Senior Vice President
and Operations Manager for the Visayas and Mindanao, as a
special non-proprietary member. The designation was
thereafter approved by the CCCIs Board of Directors.
Elizagaque filed with CCCI an application for proprietary
membership.
After several inquiries as to the status of his application he
was informed that the Board rejected his application.
A significant amendment to CCCIs Amended By-Laws
requiring the unanimous vote of the directors present at a
special or regular meeting was not printed on the application
form respondent filled and submitted to CCCI; considering
that such amendment was introduced 20 years before
respondent filed his application. What was printed thereon
was the original provision which was silent on the required
number of votes needed for admission of an applicant as a
proprietary member. Thus, respondent was not informed as
to why his application was rejected; he does not even have
knowledge that unanimous vote of the Board members was
required.
This prompted Elizagaque to file an action for damages which
ruled and its favor. CA affirmed.
Issue:
whether in disapproving respondents application for
proprietary membership with CCCI, petitioners are liable to
respondent for damages, and if so, whether their liability is
joint and several
Held:
YES. In rejecting respondents application for proprietary
membership, we find that petitioners violated the rules
governing human relations, the basic principles to be
observed for the rightful relationship between human beings
and for the stability of social order. The trial court and the
Court of Appeals aptly held that petitioners committed fraud
and evident bad faith in disapproving respondents
applications.
The CCCI Board of Directors, under its Articles of
Incorporation, has the right to approve or disapprove an
application for proprietary membership. But such right should
not be exercised arbitrarily.
74. People v. Hermenegildo Dumlao and Emilio Lao
GR NO 168918 March 2, 2009
Chico- Nazario, J.:
Facts:
An information was filed before the Sandiganbayan charging
Dumlao and others with violation of the anti graft and
corrupt practices act. The information alleged that the
respondent being then members of the board of trustees of
GSIS entered into a contract of lease purchase with Lao
whereby GSIS agreed to sell to Lao a GSIS property.
Dumlao for his defense presented the Agreement and as well
as the minutes of the meeting. He argued that the allegedly
approved Board Resolution was not in fact approved by the
GSIS Board of Trustees, contrary to the allegations in the
information. Since the signatures of Fabian Ver, Roman Cruz,
Aber Canlas and Jacobo Clave did not appear in the minutes
of the meeting held on 23 April 1982, he said it was safe to
conclude that these people did not participate in the alleged
approval of the Lease-Purchase Agreement. This being the
case, he maintained that there was no quorum of the board
to approve the supposed resolution authorizing the sale of
the GSIS property. There being no approval by the majority of
the Board of Trustees, there can be no resolution approving
the Lease-Purchase Agreement. The unapproved resolution,
he added, proved his innocence.
The Sandiganbayan ruled that the minutes of the meeting
showed that the Board failed to approve the Lease- Purchase
agreement because only three out of the seven members
signed the minutes; that it is required that in order to validly
pass a resolution at least a majority of four of the Board of
Trustees must sign and approve the same.
Issue:
whether or not the signatures of the majority of the GSIS
board of trustees are necessary on the minutes of meeting to
give force and effect to the Board Resolution pproving the
proposed agreement by and among the GSIS and Lao.
Held:
NO. In a criminal case involving a lease-purchase agreement
allegedly disadvantageous to the government, the
Sandiganbyan erred in concluding that there was no such
agreement into and thus negating criminal liability since only
three members out of seven signed the minutes of the
meeting. The non-signing by the majority of the members of
the Board of Trustees of the said minutes does not
necessarily mean that the supposed resolution was not
approved by the Board. The signing of the minutes by all the
members of the board is not required. There is no provision in
the Corporation Code of the Philippines that requires that the
minutes of the meeting should be signed by all the members
of the board. The proper custodian of the books, minutes and
official records of a corporation is usually the corporate
secretary. Being the custodian of corporate records, the
corporate secretary has the duty to record and prepare the
minutes of the meeting. The Signature of the corporate
secretary gives the minutes of the meeting. The signature of
the corporate secretary gives the minutes of the meeting
probative value and credibility. Moreover, the entries
contained in the minutes are prima facie evidence of what
actually took place during the meeting.
75. Westmont Bank formerly Associated Citizens Bank
then United Overseas Bank, Phils. v. Inland Construction
and Development Corp.
GR NO 123650 March 23, 2009
Carpio- Morales, J.:
Facts:
Inland obtained various loans from Associated Bank now
Westmont. REMs were executed to secure the full payment of
the obligation.
Under a Deed of Assignment, Abrantes assumed the
obligations of Inland and Aranda.
The records show that Calo was the one assigned to transact
on petitioners behalf respecting the loan transactions and
arrangements of Inland as well as those of Hanil-Gonzales
and Abrantes. Since it conducted business through Calo, who
is an Account Officer, it is presumed that he had authority to
sign for the bank in the Deed of Assignment; that petitioner
sent a reply-letter which indicates that it had full and
complete knowledge of the assumption by Abrantes of
Inlands obligation. Thus, the assertion that the petitioner
cannot be faulted for its delay in repudiating the apparent
authority of Calo is similarly flawed, there being no evidence
on record that it had actually repudiated such apparent
authority. It should be noted that it was the bank which
pleaded that defense in the first place. What is extant in the
records is a reasonable certainty that the bank had ratified
the Deed of Assignment.
Issue:
Whether the bank ratified the questioned Deed of
Assignment
Held:
The general rule remains that, in the absence of authority
from the board of directors, no person, not even its officers,
can validly bind a corporation. If a corporation, however,
consciously lets one of its officers, or any other agent, to act
within the scope of an apparent authority, it will be estopped
from denying such officers authority. Where the bank
conducted business through its Account Officer, it is
presumed that the latter had authority to sign for the bank in
the Deed of Assignment. In this case, it is incumbent upon
the bank to show that its account officer is not authorized to
transact for the corporation.