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Lee vs. Court of Appeals Department II.

Department II. In the same certification, it is stated that the DBP, from 1987 until 1989, had handled s account which included ALFA's assets
[GR 93695, 4 February 1992] pursuant to a management agreement by and between the DBP and APT. Hence, there is evidence on record that at the time of the service of
summons on ALFA through Lee and Lacdao on 21 August 1987, the voting trust agreement in question was not yet terminated so that the legal
Facts: On 15 November 1985, a complainant for sum of money was filed by the International Corporate Bank, Inc. against Sacoba Manufacturing title to the stocks of ALFA, then, still belonged to the DBP.
Corp., Pablo Gonzales Jr., and Tomas Gonzales who, in turn, filed a third party complaint against Alfa Integrated Textile Mills (ALFA), Ramon C.
Lee (ALFA's president) and Antonio DM. Lacdao (ALFA's vice president) on 17 March 1986. On 17 September 1987, Lee and Lacdao filed a 3. It is a basic principle in Corporation Law that a corporation has a personality separate and distinct from the officers or members who compose
motion to dismiss the third party complaint which the Regional Trial Court of Makati, Branch 58 denied in an Order dated 27 June 1988. On 18 it. Thus, the role on service of processes on a corporation enumerates the representatives of a corporation who can validly receive court processes
July 1988, Lee and Lacdao filed their answer to the third party complaint. Meanwhile, on 12 July 1988, the trial issued an order requiring the on its behalf. Not every stockholder or officer can bind the corporation considering the existence of a corporate entity separate from those who
issuance of an alias summons upon ALFA through the DBP as a consequence of Lee and Lacdao's letter informing the court that the summons compose it. The rationale of the rule is that service must be made on a representative so integrated with the corporation sued as to make it a
for ALFA was erroneously served upon them considering that the management of ALFA had been transferred to the DBP. In a manifestation priori supposable that he will realize his responsibilities and know what he should do with any legal papers served on him. Herein, Lee and Lacdao
dated 22 July 1988, the DBP claimed that it was not authorized to receive summons on behalf of ALFA since the DBP had not taken over the do not fall under any of the enumerated officers. The service of summons upon ALFA, through Lee and Lacdao, therefore, is not valid. To rule
company which has a separate and distinct corporate personality and existence. On 4 August 1988, the trial court issued an order advising Sacoba otherwise will contravene the general principle that a corporation can only be bound by such acts which are within the scope of the officer's or
Manufacturing, et. al. to take the appropriate steps to serve the summons to ALFA. On 16 August 1988, Sacoba Manufacturing, et. al. filed a agent's authority.
Manifestation and Motion for the Declaration of Proper Service of Summons which the trial court granted on 17 August 1988.

On 12 September 1988, Lee and Lacdao filed a motion for reconsideration submitting that the Rule 14, section 13 of the Revised Rules of Court G.R. No. 93695 February 4, 1992
is not applicable since they were no longer officers of ALFA and Sacoba Manufacturing, et. al. should have availed of another mode of service Lessons Applicable: Voting Trust Agreements (Corporate Law)
under Rule 14, Section 16 of the said Rules, i.e., through publication to effect proper service upon ALFA. On 2 January 1989, the trial court upheld
the validity of the service of summons on ALFA through Lee and Lacdao, thus, denying the latter's motion for reconsideration and requiring ALFA FACTS:
to file its answer through Lee and Lacdao as its corporate officers. On 19 January 1989, a second motion for reconsideration was filed by Lee
and Lacdao reiterating their stand that by virtue of the voting trust agreement they ceased to be officers and directors of ALFA, hence, they could  November 15, 1985: a complaint for a sum of money was filed by the International Corporate Bank, Inc. (ICB) against
no longer receive summons or any court processes for or on behalf of ALFA. In support of their second motion for reconsideration, Lee and the private respondents
Lacdao attached thereto a copy of the voting trust agreement between all the stockholders of ALFA (Lee and Lacdao included), on the one hand,
and the DBP, on the other hand, whereby the management and control of ALFA became vested upon the DBP. On 25 April 1989, the trial court  March 17, 1986: private respondents, in turn, filed a 3rd-party complaint against ALFA and ICB
reversed itself by setting aside its previous Order dated 2 January 1989 and declared that service upon Lee and Lacdao who were no longer
corporate officers of ALFA cannot be considered as proper service of summons on ALFA. On 15 May 1989, Sacoba Manufacturing, et. al. moved
for a reconsideration of the Order which was affirmed by the court in is Order dated 14 August 1989 denying Sacoba Manufacturing, et. al.'s  September 17, 1987: petitioners filed a motion to dismiss the third party complaint - denied
motion for reconsideration.
 July 12, 1988: trial court issued an order requiring the issuance of an alias summons upon ALFA through the DBP
On 18 September 1989, a petition for certiorari was belatedly submitted by Sacoba Manufacturing, et. al. before the Court of Appeals which,
nonetheless, resolved to give due course thereto on 21 September 1989. On 17 October 1989, the trial court, not having been notified of the
pending petition for certiorari with the appellate court issued an Order declaring as final the Order dated 25 April 1989. Sacoba Manufacturing, et.
 consequence of the petitioner's letter that ALFA management was transferred to DBP
al. in the said Order were required to take positive steps in prosecuting the third party complaint in order that the court would not be constrained
to dismiss the same for failure to prosecute. Subsequently, on 25 October 1989 Sacoba Manufacturing, et. al. filed a motion for reconsideration  July 22, 1988: DBP claimed that it was not authorized to receive summons on behalf of ALFA
on which the trial court took no further action. On 19 March 1990, after Lee and Lacdao filed their answer to Sacoba Manufacturing, et. al.'s
petition for certiorari, the appellate court rendered its decision, setting aside the orders of trial court judge dated 25 April 1989 and 14 August  August 4, 1988: trial court issued an order advising the private respondents to take the appropriate steps to serve the
1989. On 11 April 1990, Lee and Lacdao moved for a reconsideration of the decision of the appellate court which resolved to deny the same on summons to ALFA
10 May 1990. Lee and Lacdao filed the petition for certiorari. In the meantime, the appellate court inadvertently made an entry of judgment on 16
July 1990 erroneously applying the rule that the period during which a motion for reconsideration has been pending must be deducted from the
15-day period to appeal. However, in its Resolution dated 3 January 1991, the appellate court set aside the aforestated entry of judgment after  September 12, 1988: petitioners filed a motion for reconsideration submitting that Rule 14, section 13 of the Revised
further considering that the rule it relied on applies to appeals from decisions of the Regional Trial Courts to the Court of Appeals, not to appeals Rules of Court is not applicable since they were no longer officers of ALFA and that the private respondents should have
from its decision to the Supreme Court pursuant to the Supreme Court's ruling in the case of Refractories Corporation of the Philippines v. availed of another mode of service under Rule 14, Section 16 of the said Rules, i.e., through publication to effect proper
Intermediate Appellate Court, 176 SCRA 539 [1989]. service upon ALFA - denied

Issue:  January 19, 1989: 2nd motion for reconsideration was filed by the petitioners reiterating their stand that by virtue of
1. Whether the execution of the voting trust agreement by Lee and Lacdao whereby all their shares to the corporation have the voting trust agreement they ceased to be officers and directors of ALFA
been transferred to the trustee deprives the stockholder of their positions as directors of the corporation.
2. Whether the five-year period of the voting trust agreement in question had lapsed in 1986 so that the legal title to the  attached a copy of the voting trust agreement between all the stockholders of ALFA and the DBP whereby the
stocks covered by the said voting trust agreement ipso facto reverted to Lee and Lacdao as beneficial owners pursuant to the 6th management and control of ALFA became vested upon the DBP
paragraph of section 59 of the new Corporation Code.
3. Whether there was proper service of summons on ALFA through Lee and Lacdao, to bind ALFA.  April 25, 1989: trial court reversed itself by setting aside its previous Order dated January 2, 1989 and declared that
Held: service upon the petitioners who were no longer corporate officers of ALFA cannot be considered as proper service of
summons on ALFA
1. Lee and Lacdao, by virtue of the voting trust agreement executed in 1981 disposed of all their shares through assignment and delivery in favor
of the DBP, as trustee. Consequently, Lee and Lacdao ceased to own at least one share standing in their names on the books of ALFA as required  October 17, 1989: trial court (NOT notified of the petition for certiorari) declared final its decision on April 25, 1989
under Section 23 of the new Corporation Code. They also ceased to have anything to do with the management of the enterprise. Lee and Lacdao
ceased to be directors. Hence, the transfer of their shares to the DBP created vacancies in their respective positions as directors of ALFA. The ISSUE: W/N the voting trust agreement is valid despite being contrary to the general principle that a corporation can only be
transfer of shares from the stockholders of ALFA to the DBP is the essence of the subject voting trust agreement. Considering that the voting trust
bound by such acts which are within the scope of its officers' or agents' authority
agreement between ALFA and the DBP transferred legal ownership of the stocks covered by the agreement to the DBP as trustee, the latter
because the stockholder of record with respect to the said shares of stocks. In the absence of a showing that the DBP had caused to be transferred
in their names one share of stock for the purpose of qualifying as directors of ALFA, Lee and Lacdao can no longer be deemed to have retained
HELD:
their status as officers of ALFA which was the case before the execution of the subject voting trust agreement. There is no dispute from the
records that DBP has taken over full control and management of the firm.  voting trust

2. The 6th paragraph of section 59 of the new Corporation Code reads that "Unless expressly renewed, all rights granted in a voting trust
agreement shall automatically expire at the end of the agreed period, and the voting trust certificates as well as the certificates of stock in the
name of the trustee or trustees shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of the transferors."
However, it is manifestly clear from the terms of the voting trust agreement between ALFA and the DBP that the duration of the agreement is
 trust created by an agreement between a group of the stockholders of a corporation and the trustee or by a group of
contingent upon the fulfillment of certain obligations of ALFA with the DBP. Had the five-year period of the voting trust agreement expired in 1986,
identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of
the DBP would not have transferred an its rights, titles and interests in ALFA "effective June 30, 1986" to the national government through the
Asset Privatization Trust (APT) as attested to in a Certification dated 24 January 1989 of the Vice President of the DBP's Special Accounts
years, or for a period contingent upon a certain event, or until the agreement is terminated, control over the stock

owned by such stockholders, either for certain purposes or for all purposes, is to be lodged in the trustee, either with or

without a reservation to the owners, or persons designated by them, of the power to direct how such control shall be

used (Ballentine's Law Dictionary)

 Sec. 59. Voting Trusts — One or more stockholders of a stock corporation may create a voting trust for the purpose of

conferring upon a trustee or trustees the right to vote and other rights pertaining to the share for a period rights

pertaining to the shares for a period not exceeding 5 years at any one time: Provided, that in the case of a voting trust

specifically required as a condition in a loan agreement, said voting trust may be for a period exceeding 5 years but

shall automatically expire upon full payment of the loan. A voting trust agreement must be in writing and notarized, and

shall specify the terms and conditions thereof. A certified copy of such agreement shall be filed with the corporation and

with the Securities and Exchange Commission; otherwise, said agreement is ineffective and unenforceable. The

certificate or certificates of stock covered by the voting trust agreement shall be cancelled and new ones shall be issued

in the name of the trustee or trustees stating that they are issued pursuant to said agreement. In the books of the

corporation, it shall be noted that the transfer in the name of the trustee or trustees is made pursuant to said voting

trust agreement.

Rosita Peña vs Court of Appeals (1991)

193 SCRA 717 – Business Organization – Corporation Law – By-laws are binding – Board resolutions may be questioned by third

persons – Board Meetings – Quorum

 In 1962, the Pampanga Bus Company (PAMBUSCO) took out a loan from the Development Bank of the Philippines (DBP). PAMBUSCO

used the parcels of land it owned to secure the loan.

 In October 1974, due to PAMBUSCO’s nonpayment, DBP foreclosed the parcels of land. Rosita Peña was the highest bidder.

 Meanwhile, in November 1974, the Board of Directors of PAMBUSCO had a meeting. The meeting was attended by only 3 out of the

5 Directors. In the said meeting, the Board, through a resolution, authorized one of the directors, Atty. Joaquin Briones, to assign

the properties of PAMBUSCO.


 Pursuant to the resolution, Briones assigned PAMBUSCO’s assets to Marcelino Enriquez. Enriquez, knowing that the properties were duly called for the purpose by the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the

previously mortgaged and foreclosed, exercised PAMBUSCO’s right to redeem. So in August 1975, he redeemed the said properties corporation.

and thereafter he sold them to Rising Yap.  Further still, the Supreme Court discovers a few other anomalies with PAMBUSCO. One is that PAMBUSCO has been inactive since

 Yap then registered the properties under his name. He then demanded Peña to vacate the properties. Peña refused to do and so 1949 as per the records provided by the Securities and Exchange Commission. Its general information sheet with the SEC has not

Yap filed a complaint. been updated regularly even. And the three directors present were not even listed as current directors of PAMBUSCO.

 In her defense, Peña averred that Yap acquired no legal title over the property because the board resolution issued by PAMBUSCO
Case Digest: Peña v. CA
ROSITA PEÑA petitioner, vs. THE COURT OF APPEALS, SPOUSES RISING T. YAP and CATALINA YAP, PAMPANGA BUS CO., INC.,
in November 1974 was void because the resolution was issued without a quorum; that there was no quorum because under the by- JESUS DOMINGO, JOAQUIN BRIONES, SALVADOR BERNARDEZ, MARCELINO ENRIQUEZ and EDGARDO A. ZABAT, respondents.

laws of PAMBUSCO, a quorum requires the presence of 4 out of 5 directors and yet the meeting was only attended by three directors. G.R. No. 91478 February 7, 1991
GANCAYCO, J.:
Thus, the authority granted to Briones to assign the properties was void; that the subsequent assignment by Briones to Enriquez
Antecedents facts:

was void; that Enriquez acquired no title and hence thus Yap acquired no title. PAMPANGA BUS CO., INC. (PAMBUSCO) is the owner of the three lots in dispute. PAMBUSCO mortgaged the lots to the Development Bank
of the Philippines (DBP), which were later on foreclosed.
 Yap insisted that Peña has no legal standing to question the board resolution because she was not a stockholder.
Rosita Peña was awarded the lots in a foreclosure sale for being the highest bidder. The certificate of sale was later issued to her and
registered in her name.

ISSUE: Whether or not the board resolution is valid. Subsequently, the Board of Directors of PAMBUSCO, through three out of its five directors, issued a resolution to assign its right of redemption
over the lots in favor of any interested party. The right of redemption was later on assigned to Marcelino Enriquez, who redeemed the property.
HELD: No, the board resolution is void.
Enriquez then sold the lots to spouses Rising T. Yap and Catalina Lugue-Yap.

The by-laws are the laws of the corporation. PAMBUSCO’s by-laws provide that a quorum consists of at least four directors. The Meanwhile, a case involving the validity of the sale to the spouses Yap was pending, and despite the protestations of Peña as to validity of the
PAMBUSCO's assignment of the right of redemption, the lots were somehow registered in the name of spouses Yap. Despite the registration of
meeting was attended by only three directors did not comply with the required quorum. Thus, the three directors were not able to the lots to spouses Yap, Peña retained possession of the property.

Main Case:
come up with a valid resolution which could bind the corporation.
Spouses Yap sought to recover the possession of the lots from Peña. The latter countered that she is now the legitimate owner of the subject
 Anent the issue of Peña being a third person, she can question the board resolution. The resolution here is likened to a contract. lands for having purchased the same in a foreclosure proceeding instituted by the DBP against PAMBUSCO and no valid redemption having
been effected within the period provided by law.
Under the law, a person who is not a party obliged principally or subsidiarity in a contract may exercise an action for nullity of the
The defense was that since the deed of assignment executed by PAMBUSCO in favor of Enriquez was void ab initio for being an ultra vires act
of its board of directors and for being without any valuable consideration, it could not have had any legal effect.
contract if he or she is prejudiced in his or her rights with respect to one of the contracting parties, and can show the detriment
(It should be noted that the by-laws of PAMBUSCO provide that four out of five directors must be present in a special meeting of the board to
which would positively result to him or her from the contract in which he or she had no intervention. constitute a quorum, and that the corporation has already ceased to operate.)

CFI ruled in favor of Petitioner Peña, but the same was overturned by the CA.

Issue: W/N there Peña is entitled to the lots.


Other findings:
Ruling: Yes.
 Furthermore, the sale of the properties of PAMBUSCO did not comply with the procedure laid down by the Corporation Law. Under
The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the corporation. They are in effect,
written, into the charter. In this sense they become part of the fundamental law of the corporation with which the corporation and its directors
the law, the sale or disposition of an and/or substantially all properties of the corporation requires, in addition to a proper board and officers must comply.

resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation in a Apparently, only three (3) out of five (5) members of the board of directors of respondent PAMBUSCO convened by virtue of a prior notice of a
special meeting. There was no quorum to validly transact business since it is required under its by-laws that at least four (4) members must be
present to constitute a quorum in a special meeting of the board of directors.
meeting duly called for that purpose. No doubt, the questioned resolution was not confirmed at a subsequent stockholders meeting
Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of the corporation may fix a greater number
than the majority of the number of board members to constitute the quorum necessary for the valid transaction of business. Any number less
than the number provided in the articles or by-laws therein cannot constitute a quorum and any act therein would not bind the corporation; all
that the attending directors could do is to adjourn.

Moreover, the records show that respondent PAMBUSCO ceased to operate for about 25 years prior to the board meeting. Being a dormant
corporation for several years, it was highly irregular, for a group of three (3) individuals representing themselves to be the directors of
respondent PAMBUSCO to pass a resolution disposing of the only remaining asset of the corporation in favor of a former corporate officer.

As a matter of fact, the three (3) alleged directors who attended the special meeting on November 19, 1974 were not listed as directors of
respondent PAMBUSCO in the latest general information sheet. Similarly, the latest list of stockholders of respondent PAMBUSCO on file with
the SEC does not show that the said alleged directors were among the stockholders of respondent PAMBUSCO, in contravention of the rule
requiring a director to own one (1) share in their to qualify as director of a corporation.

Further, under the Corporation Law, the sale or disposition of any and/or substantially all properties of the corporation requires, in addition to a
proper board resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation in a
meeting duly called for that purpose. This was not complied with in the case at bar.

At the time of the passage of the questioned resolution, respondent PAMBUSCO was insolvent and its only remaining asset was its right of
redemption over the subject properties. Since the disposition of said redemption right of respondent PAMBUSCO by virtue of the questioned
resolution was not approved by the required number of stockholders, the said resolution, as well as the subsequent assignment and sale, were
null and void.

Lastly, for lack of consideration, the assignment should be construed as a donation. Under Article 725 of the Civil Code, in order to be valid,
such a donation must be made in a public document and the acceptance must be made in the same or in a separate instrument. In the latter
case, the donor shall be notified of the acceptance in an authentic form and such step must be noted in both instruments. Since assignment to
Enriquez shows that there was no acceptance of the donation in the same and in a separate document, the said deed of assignment is thus
void ab initio.

Expert Travel &Tours Inc. vs CA


GR 152392, May 26, 2005
Callejo Sr. J.
Facts: Korean Air Lines (KAL) filed a complaint against Expert Travel & Tours Inc (ETI) with the RTC of Manila for collection of sum of money
plus attorney’s fees and damages. The verification and certification against non-forum shopping was signed by Atty. Mario Aguinaldo, who
indicated therein that he was the resident agent and legal counsel of KAL and had caused the preparation of the complaint. ETI moved to
dismiss the complaint on the ground that said lawyer was not authorized to execute the verification and certification against non-forum
shopping as required by Section 5 Rule 7 of the Rules of Court. KAL opposed the motion, contending that Atty. Aguinaldo was its resident agent
and was reported as such with the SEC as required by the Corporation Code of the Philippines. Also, it further alleged that Atty. Aguinaldo was
the Corporate Secretary of KAL.
At the hearing, Atty. Aguinaldo claimed that thru a resolution of KAL Board of Directors approved during a special meeting, he was authorized
to file the complaint. Thru an affidavit submitted by its general manager, it was alleged that a special teleconference was held and and in that
same teleconference the Board approved a resolution authorizing him to execute the certification against non-forum shopping and to file the
complaint. However, the general manager provided no written copy of the said resolution.

The trial court gave due credence to the claim of Atty. Aguinaldo and the general manager. ETI filed a motion for reconsideration, contending
that the court cannot take judicial notice of the said teleconference without any hearing, which was denied by the RTC. CA also denied the
appeal.

Issue: Whether or not the court can take judicial notice of the said teleconference.
Held: Things of “common knowledge” of which courts take judicial matters coming to the knowledge of men generally in the course of the
ordinary experiences of life, or they may be matters which are generally accepted by mankind as true and are capable of ready and
unquestionable determination. As the common knowledge of man ranges far and wide, a wide variety of particular facts have been judicially
noticed as being matters of common knowledge. But a court cannot take judicial notice of any fact which, in part, is dependent on the existence
or non-existence of a fact of which the court has no constructive knowledge.
In this age of modern technology, the courts may take judicial notice that business transactions may be made by individuals through
teleconferencing. Teleconferencing is interactive group communication through an electronic medium, bringing people together under one roof
even though they are separated by hundreds of miles.

In the Philippines, teleconferencing and videoconferencing of members of the board of directors of private corporation is is a reality, in light of
RA 8792. The SEC issued SEC memorandum Circular No. 15, on November 30, 2001, providing the guidelines to be complied with related to
such conferences.

The Court is not convinced that one was conducted; even if there had been one, the Court is not inclined to believe that a board resolution was
duly passed specifically authorizing Atty. Aguinaldo to file the complaint and execute the required certification against non forum shopping.

Petition granted.
Western Institute of Technology, Inc. vs. Salas, 278 SCRA 216 , August 21, 1997
Corporation Law; Two ways by which members of the board can be granted compensation apart from
reasonable per diems.—There is no argument that directors or trustees, as the case may be, are not entitled
to salary or other compensation when they perform nothing more than the usual and ordinary duties of their
office. This rule is founded upon a presumption that directors/trustees render service gratuitously, and that
the return upon their shares adequately furnishes the motives for service, without compensation. Under the
foregoing section, there are only two (2) ways by which members of the board can be granted compensation
apart from reasonable per diems: (1) when there is a provision in the by-laws fixing their compensation; and
(2) when the stockholders representing a majority of the outstanding capital stock at a regular or special
stockholders’ meeting agree to give it to them.

Same; Members of the board may receive compensation, in addition to reasonable per diems, when they
render services to the corporation in a capacity other than as directors/trustees.—This proscription,
however, against granting compensation to directors/trustees of a corporation is not a sweeping rule. Worthy
of note is the clear phraseology of Section 30 which states: “x x x [T]he directors shall not receive any
compensation, as such directors, x x x.” The phrase as such directors is not without significance for it delimits
the scope of the prohibition to compensation given to them for services performed purely in their capacity
as directors or trustees. The unambiguous implication is that members of the board may receive
compensation, in addition to reasonable per diems, when they render services to the corporation in a capacity
other than as directors/trustees. 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.
Dily Dany Nacpil vs. International Broadcasting Corporation
G.R. No. 144767. March 21, 2002

Facts:

Petitioner was the Assistant General Manager for Finance/Administration and Comptroller of private respondent
Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. Upon assumption of Emiliano Templo as the IBC
President, petitioner was forced to retire. Templo refused to pay him his retirement benefits. Hence, in 1997, petitioner filed
with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits.

IBC alleged that the Labor Arbiter had no jurisdiction over the case, that the petitioner was a corporate officer who was duly
elected by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute falling within the jurisdiction
of the Securities and Exchange Commission (SEC).

Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected nor
appointed as Comptroller and Assistant Manager by the IBC's Board of Directors. He pointed out that he had actually been
appointed on January 11, 1995 by the IBC's General Manager, Ceferino Basilio.

Issue:

Whether or not the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-payment of benefits filed by
petitioner.

Held:

Dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over the case
properly belongs to the SEC, not to the NLRC. Under Presidential Decree No. 902-A (the Revised Securities Act),
Controversies in the election or appointment of directors, trustees, officers, or managers of such corporations, partnerships
or associations fall under the exclusive of the SEC. Two elements are to be considered in determining whether the SEC has
jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and (2) the nature of the question that is
the subject of their controversy. Since complainant's appointment was approved unanimously by the Board of Directors of
the corporation, he is therefore considered a corporate officer and his claim of illegal dismissal is a controversy that falls
under the jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. That the position of Comptroller is not
expressly mentioned among the officers of the IBC in the By-Laws is of no moment, because the IBC's Board of Directors is
empowered under Section 25 of the Corporation Code and under the corporation's By-Laws to appoint such other officers as
it may deem necessary.

Go to the Main Directory


[G.R. No. 145901 December 15, 2005]
EASYCALL COMMUNICATIONS PHILS., INC., Petitioner, vs. EDWARD KING, Respondent.

FACTS

Petitioner Easycall Communications Phils., Inc. was a domestic corporation primarily engaged in the business of message handling. Petitioner,
through its general manager, Malonzo, hired the services of respondent as assistant to the general manager. He was given the responsibility of
ensuring that the expansion plans outside Metro Manila and Metro Cebu were achieved at the soonest possible time. He was promoted to assistant
vice president for nationwide expansion and later appointed to the even higher position of vice president for nationwide expansion. Respondent’s
promotion was based on his performance during the six months preceding his appointment. As vice president for nationwide expansion, he
became responsible for the sales and rentals of pager units in petitioner’s expansion areas. He was also in charge of coordinating with the dealers
in these areas.

Thereafter, Malonzo reviewed the sales performance of respondent and scrutinized the status of petitioner’s Nationwide Expansion Program (NEP)
which was under respondent’s responsibility. He found that respondent’s actual sales for the period October 1992–March 1993 was 78% of his
sales commitment and 70% of his sales target. Malonzo also checked the frequency and duration of the provincial sales development visits made
by respondent for the same period to expansion areas under his jurisdiction. He discovered that the latter spent around 40% of the total number
of working days for that period in the field.

The management then confronted respondent regarding his sales performance and provincial sales development visits. A series of dialogues
between petitioner’s management and respondent ensued. He was then informed that the general manager wanted his resignation. Respondent,
however, declared that he had no intention of resigning from his position. Consequently, respondent received a notice of termination signed by
Malonzo. Aggrieved, the respondent filed a complaint for illegal dismissal with the NLRC.

Petitioner argues that since respondent was a “corporate officer,” the NLRC had no jurisdiction over the subject matter under PD 902-A.

ISSUE

Whether or not the NLRC has jurisdiction over the subject matter.

HELD

The SC held that under Section 5 of PD 902-A, the law applicable at the time this controversy arose, the SEC, not the NLRC, had original and
exclusive jurisdiction over cases involving the removal of corporate officers. Section 5(c) of PD 902-A applied to a corporate officer’s dismissal for
his dismissal was a corporate act and/or an intra-corporate controversy.

However, it had to be first established that the person removed or dismissed was a corporate officer before the removal or dismissal could
properly fall within the jurisdiction of the SEC and not the NLRC. Here, aside from its bare allegation, petitioner failed to show that respondent
was in fact a corporate officer.

“Corporate officers” in the context of PD 902-A are those officers of a corporation who are given that character either by the Corporation Code
or by the corporation’s by-laws. Under Section 25 of the Corporation Code, the “corporate officers” are the president, secretary, treasurer and
such other officers as may be provided for in the by-laws.

The burden of proof is on the party who makes the allegation. Here, petitioner merely alleged that respondent was a corporate officer. However,
it failed to prove that its by-laws provided for the office of “vice president for nationwide expansion.” Since petitioner failed to satisfy the burden
of proof that was required of it, we cannot sanction its claim that respondent was a “corporate officer” whose removal was cognizable by the SEC Easycall Communications Phils., Inc. vs. King, 478 SCRA 102 , December 15, 2005
under PD 902-A and not by the NLRC under the Labor Code. Remedial Law; Jurisdictions; Securities and Exchange Commission; National Labor Relations Commission; Under Section 5 of PD 902-A, the
law applicable at the time this controversy arose, the Securities and Exchange Commission, not the National Labor Relations Commission had
An “office” is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee original and exclusive jurisdiction over cases involving the removal of corporate officers; But it had to be first established that the person
occupies no office and generally is employed not by the action of the directors or stockholders but by the managing officer of the corporation removed or dismissed was a corporate officer before the removal or dismissal could properly fall within the jurisdiction of the Securities and
who also determines the compensation to be paid to such employee. Exchange Commission and not the National Labor Relations Commission.—Under Section 5 of PD 902A, the law applicable at the time this
controversy arose, the SEC, not the NLRC, had original and exclusive jurisdiction over cases involving the removal of corporate officers. Section
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner’s general manager, not by the board of 5(c) of PD 902-A applied to a corporate officer’s dismissal for his dismissal was a corporate act and/or an intra-corporate controversy. However,
directors of petitioner. It was also Malonzo who determined the compensation package of respondent. Thus, respondent was an employee, not it had to be first established that the person removed or dismissed was a corporate officer before the removal or dismissal could properly fall
a “corporate officer.” It is therefore correct that jurisdiction over the case was properly with the NLRC, not the SEC. within the jurisdiction of the SEC and not the NLRC. Here, aside from its bare allegation, petitioner failed to show that respondent was in fact
a corporate officer.
Petition is denied.
Same; Same; Same; Same; Under Section 25 of the Corporation Code, the “corporate officers” are the president, secretary, treasurer and
such other officers as may be provided for in the by-laws.—“Corporate officers” in the context of PD 902-A are those officers of a corporation
The High Tribunal cited Easycall Communications Philippines vs. Edward King (G.R. No. 145901, December 15, 2005) involving the who are given that character either by the Corporation Code or by the corporation’s by-laws. Under Section 25 of the Corporation Code, the
illegal dismissal of a "vice president for national expansion." In the Easycall case, the Supreme Court reiterated the distinction “corporate officers” are the president, secretary, treasurer and such other officers as may be provided for in the by-laws.
between an "office" which is created by the charter of the corporation and the "officer" as a person elected by the directors or
stockholders while, on the other hand, an employee occupies no office and generally is employed not by the action of the directors or Same; Same; Same; Same; Respondent was an employee not a “corporate officer”; Court of Appeals is correct in ruling that jurisdiction over
stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. the case was properly with the National Labor Relations Commission, not the Securities and Exchange Commission.—An “office” is created by
the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee occupies no office
and generally is employed not by the action of the directors or stockholders but by the managing officer of the corporation who also determines
the compensation to be paid to such employee. In this case, respondent was appointed vice president for nationwide expansion by Malonzo,
petitioner’s general manager, not by the board of directors of petitioner. It was also Malonzo who determined the compensation package of words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with
respondent. Thus, respondent was an employee, not a “corporate officer.” The CA was therefore correct in ruling that jurisdiction over the actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of
case was properly with the NLRC, not the SEC. similar act(s) executed either in its favor or in favor of other parties. It is not the quantity of similar acts which establishes apparent authority,
but the vesting of a corporate officer with the power to bind the corporation.

Same; Estoppel; It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope
of an apparent authority, it holds him out to the public as possessing the power to do those acts, and thus, the corporation will, as against
anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.—Private respondent should
not be faulted for believing that Punsalan’s conformity to the contract in dispute was also binding on petitioner. It is familiar doctrine that if
a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to
the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it
through such agent, be estopped from denying the agent’s authority.

Same; Even if a certain contract is outside the usual powers of the president, the corporation’s ratification of the same and acceptance of
benefits make it binding.—Private respondent prepared an operations manual and conducted a seminar for the employees of petitioner in
accordance with their contract. Petitioner accepted the operations manual, submitted it to the Bureau of Customs and allowed the seminar
for its employees. As a result of its aforementioned actions, petitioner was given by the Bureau of Customs a license to operate a bonded
warehouse. Granting arguendo then that the Second Contract was outside the usual powers of the president, petitioner’s ratification of said
contract and acceptance of benefits have made it binding, nonetheless. The enforceability of contracts under Article 1403(2) is ratified “by
the acceptance of benefits under them” under Article 1405.

Same; In the absence of a charter or bylaw provision to the contrary, the president of a corporation is presumed to have the authority to act
within the domain of the general objectives of its business and within the scope of his or her usual duties.—Inasmuch as a corporate president
is often given general supervision and control over corporate operations, the strict rule that said officer has no inherent power to act for the
corporation is slowly giving way to the realization that such officer has certain limited powers in the transaction of the usual and ordinary
business of the corporation. In the absence of a charter or bylaw provision to the contrary, the president is presumed to have the authority to
act within the domain of the general objectives of its business and within the scope of his or her usual duties. [People’s Aircargo and
Warehousing Co., Inc. vs. Court of Appeals, 297 SCRA 170(1998)]

People’s Aircargo and Warehousing Co., Inc. vs. Court of Appeals, 297 SCRA 170 , October 07, 1998
Corporation Law; In the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation.—
The general rule is that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation.
A corporation is a juridical person, separate and distinct from its stockholders and members, “having x x x powers, attributes and properties
expressly authorized by law or incident to its existence.” Being a juridical entity, a corporation may act through its board of directors, which
exercises almost all corporate powers, lays down all corporate business policies and is responsible for the efficiency of management, as
provided in Section 23 of the Corporation Code of the Philippines.

Same; The authority of certain individuals to bind the corporation is generally derived from law, corporate bylaws or authorization from the
board, either expressly or impliedly by habit, custom or acquiescence in the general course of business.—Under Sec. 23, Corporation Code,
the power and the responsibility to decide whether the corporation should enter into a contract that will bind the corporation is lodged in the
board, subject to the articles of incorporation, bylaws, or relevant provisions of law. However, just as a natural person may authorize another
to do certain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to officers, committees
or agents. The authority of such individuals to bind the corporation is generally derived from law, corporate bylaws or authorization from the
board, either expressly or impliedly by habit, custom or acquiescence in the general course of business.

Same; It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer with the power to
bind the corporation.—Petitioner’s argument is not persuasive. Apparent authority is derived not merely from practice. Its existence may be
ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other