107.

LOPEZ REALTY vs. FLORENTINA FONTECHA

GR No. 76801, Aug 11, 1995
FACTS
Lopez Realty, Inc., is a corporation engaged in real estate business, while petitioner Asuncion Lopez Gonzales is one
of its majority shareholders.

On August 17, 1981, except for Asuncion Lopez Gonzales who was then abroad, the remaining members of the Board
of Directors, namely: Rosendo de Leon, Benjamin Bernardino, and Leo Rivera, convened a special meeting and passed a
resolution which reads:

"Resolved, as it is hereby resolved that the gratuity (pay) of the employees be given as follows:
(a) Those who will be laid off be given the full amount of gratuity;

Those who will be retained will receive 25% of their gratuity (pay) due on
(b) September 1, 1981, and another 25% on January 1, 1982, and 50% to be retained
by the office in the meantime." (Italics supplied).

Private respondents were the retained employees of petitioner corporation. In a letter, dated August 31, 1981,
private respondents requested for the full payment of their gratuity pay. Their request was granted in a special meeting held
on September 1, 1981. "Notwithstanding the "corporate squabble" between petitioner Asuncion Lopez Gonzales and Arturo
Lopez, the first two (2) installments of the gratuity pay of private respondents Florentina Fontecha, Mila Refuezo, Marcial
Mamaril and Perfecto Bautista were paid by petitioner corporation. Also, petitioner corporation had prepared the cash
vouchers and checks for the third installments of gratuity pay of said private respondents (Florentina Fontecha, Mila
Refuerzo, Marcial Mamaril and Perfecto Bautista). For some reason, said vouchers were cancelled by petitioner Asuncion
Lopez Gonzales. Likewise, the first, second and third installments of gratuity pay of the rest of private respondents,
particularly, Edward Mamaril, Marissa Pascual and Allan Pimentel, were prepared but cancelled by petitioner Asuncion Lopez
Gonzales. Despite private respondents' repeated demands for their gratuity pay, petitioner corporation refused to pay the
same.[4]

Petitioners contend that the board resolutions passed on August 17, 1981 and September 1, 1981, granting gratuity
pay to their retained employees, are ultra vires on the ground that petitioner Asuncion Lopez Gonzales was not duly notified
of the said special meetings. They aver, further, that said board resolutions were not ratified by the stockholders of the
corporation pursuant to Section 28 1/2 of the Corporation Law (Section 40 of the Corporation Code). They also insist that the
gratuity pay must be given only to the retiring employees, to the exclusion of the retained employees or those who
voluntarily resigned from their posts.

ISSUE
Whether or not public respondent acted with grave abuse of discretion in holding that private respondents are
entitled to receive their gratuity pay under the assailed board resolutions dated August 17, 1981 and September 1, 1981.

RULING

The general rule is that a corporation, through its board of directors, should act in the manner and within the
formalities, if any, 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 the corporation's by-laws, otherwise, any action taken therein may be questioned by any objecting
director or shareholder. Be that as it may, jurisprudence[16] tells us that 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 corporation's subsequent course of conduct.

. In 2 Fletcher, Cyclopedia of the Law of Private Corporations (Perm. Ed.) sec. 429, at page 290, it is stated:
`Thus, acts of directors at a meeting which was illegal because of want of notice may be ratified by the directors at a
subsequent legal meeting, or by the corporation's course of conduct . . .'

"Fletcher, supra, further states in sec. 762, at page 1073-1074:`Ratification by directors may be by an express resolution or
vote to that effect, or it may be implied from adoption of the act, acceptance or acquiescence. Ratification may be effected
by a resolution or vote of the board of directors expressly ratifying previous acts either of corporate officers or agents; but it
is not necessary, ordinarily, to show a meeting and formal action by the board of directors in order to establish a ratification.'

In the case at bench, it was established that petitioner corporation did not issue any resolution revoking nor nullifying
the board resolutions granting gratuity pay to private respondents. Instead, they paid the gratuity pay, particularly, the first
two (2) installments thereof, of private respondents Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto
Bautista.
 Despite the alleged lack of notice to petitioner Asuncion Lopez Gonzales at that time the assailed resolutions were
passed, we can glean from the records that she was aware of the corporation's obligation under the said resolutions. More
importantly, she acquiesced thereto. As pointed out by private respondents, petitioner Asuncion Lopez Gonzales affixed her
signature on Cash Voucher Nos. 81-10-510 and 81-10-506, both dated October 15, 1981, evidencing the 2nd installment of the
gratuity pay of private respondents Mila Refuerzo and Florentina Fontecha.

Assuming, arguendo, that there was no notice given to Asuncion Lopez Gonzales during the special meetings held on
August 17, 1981 and September 1, 1981, it is erroneous to state that the resolutions passed by the board during the said
meetings were ultra vires.

In legal parlance, "ultra vires" act refers to one which is not within the corporate powers conferred by the
Corporation Code or articles of incorporation or not necessary or incidental in the exercise of the powers so conferred. The
assailed resolutions before us cover a subject which concerns the benefit and welfare of the company's employees. To stress,
providing gratuity pay for its employees is one of the express powers of the corporation under the Corporation Code, hence,
petitioners cannot invoke the doctrine of ultra vires to avoid any liability arising from the issuance the subject resolutions.

108.
PREMIUM MARBLE RESOURCES, INC. vs. CA
G.R. No. 96551, November 4, 1996
Facts:
Premium Marble Resources, assisted by Atty. Dumadag as counsel, filed an action for damages against respondent
bank on the ground that the latter allowed the checks issued to petitioner to be deposited to the account of the former
officer of Premium and that respondent bank refused to restitute the value of the checks to the prejudice of Premium.
Meantime, the same corporation Premium but this time represented by Siguion Reyna, Montecillo and Ongsiako Law Office as
counsel, moved to dismiss on the ground that the filing of the case was without authority from its duly constituted board of
directors. Premium thru Atty. Dumadag opposed contending that based on the Articles of Incorporation the persons who
signed the board resolution are not majority stockholders. On the other hand, Siguion Reyna law firm asserted that it is the
general information sheet filed with the SEC that is the best evidence to show who the stockholders of a corporation are. The
lower court and CA both ruled to dismiss the case.

Issue:
Whether or not the filing of the case for damages against private respondent was authorized by a duly constituted
Board of Directors of the petitioner corporation.

Ruling:
NO.
While the Minutes of the Meeting of the Board on April 1, 1982 states that the newly elected officers for the year
1982 were Oscar Gan, Mario Zavalla, Aderito Yujuico and Rodolfo Millare, petitioner failed to show proof that this election
was reported to the SEC. In fact, the last entry in their General Information Sheet with the SEC, as of 1986 appears to be the
set of officers elected in March 1981 who were Saturnino G. Belen, Jr., Alberto C. Nograles and Jose L.R. Reyes. These
officers presented a Resolution dated July 30, 1986, to show that Premium did not authorize the filing in its behalf of any suit
against the private respondent International Corporate Bank.

We agree with the finding of public respondent Court of Appeals, that “in the absence of /any board resolution from
its board of directors the [sic] authority to act for and in behalf of the corporation, the present action must necessarily fail.
The power of the corporation to sue and be sued in any court is lodged with the board of directors that exercises its
corporate powers. The claim, therefore, of petitioners as represented by Atty. Dumadag, that Zaballa, et al., are the
incumbent officers of Premium has not been fully substantiated. In the absence of an authority from the board of directors,
no person, not even the officers of the corporation, can validly bind the corporation.

By the express mandate of the Corporation Code (Section 26), all corporations duly organized pursuant thereto are
required to submit within the period therein stated (30 days) to the Securities and Exchange Commission the names,
nationalities and residences of the directors, trustees and officers elected.

109.
TAM WING TAK vs. HON. RAMON MAKASIAR
G.R. No. 122452, January 29, 2001
Facts:
Petitioner, in his capacity as director of Concord-World Properties, Inc., a domestic corporation, filed a complaint
against Vic AngSiong with violation of BP Blg. 22 for the latter’s dishonored check worth P83,550,000.Vic AngSiong sought to
dismiss the complaint on two grounds: first, petitioner had no authority to file the case on behalf of Concord since the
corporation’s Board of Directors (BOD) did not empower him and second, Concord and Ang Siong already had an amicable
settlement and the latter already made partial payment worth P19M.City Prosecutor dismissed the complaint because of the
lacking authority from Concord’s BOD and due to the amicable settlement, however, the City Prosecutor sent its resolution to
the petitioner’s address, not through his counsel.

Note: case discussed procedural issue with regard to service of decision by City Prosecutor; court ruled that service to
the address of petitioner is valid because City Prosecutor is governed by the rules of DOJ, not the Rules of Court which
provides that service should be made through the counsel.

Chief State Prosecutor dismissed the several appeals of the petitioner’s counsel which led the latter to file a petition
for mandamus with the RTC to compel the Chief State Prosecutor to file an information charging Ang Siong with violation of
BP 22.RTC denied and dismissed the petition hence this petition.

Issue:
Whether or not petitioner can validly file a case against AngSiong even without authorization from the BOD?

Ruling:
No, the fact that Concord was the payee of the check, not the petitioner, should be considered in filing the case
against the bounced check, Since the petitioner was neither the payee not a holder of the bad check, he had neither the
personality to sue nor a cause of action against Ang Siong.

Sec. 36 of the Corporation Code read in relation to Section 23, it is clear that where a corporation is an injured party,
its power to sue is lodged with its board of directors/trustees.

In this case, petitioner failed to show that he was authorized or deputized or granted specific powers to sue AngSiong
for and on behalf of the corporation.

110.
AF Realty & Development Inc. vs. Dieselman Freight Services Co.
GR 111448, 16 January 2002

Facts:
On 10 May 1988, Manuel C. Cruz, Jr., a member of the board of directors of Dieselman Freight Services Co., issued a
letter denominated as "Authority To Sell Real Estate" to Cristeta N. Polintan, a real estate broker of the CNP Real Estate
Brokerage. Cruz, Jr. authorized Polintan "to look for a buyer/buyers and negotiate the sale" of the lot at P3,000.00 per square
meter, or a total of P6,282,000.00. Cruz, Jr. has no written authority from Dieselman to sell the lot. In turn, Cristeta
Polintan, through a letter dated 19 May 1988, authorized Felicisima ("Mimi") Noble to sell the same lot. Felicisima Noble then
offered for sale the property to AF Realty & Development, Inc. (AF Realty) at P2,500.00 per square meter. Zenaida Ranullo,
board member and vice-president of AF Realty, accepted the offer and issued a check in the amount of P300,000.00 payable
to the order of Dieselman. Polintan received the check and signed an "Acknowledgment Receipt" indicating that the amount
of P300,000.00 represents the partial payment of the property but refundable within two weeks should AF Realty disapprove
Ranullo's action on the matter. On 29 June 1988, AF Realty confirmed its intention to buy the lot. Hence, Ranullo asked
Polintan for the board resolution of Dieselman authorizing the sale of the property. However, Polintan could only give Ranullo
the original copy of TCT 39849, the tax declaration and tax receipt for the lot, and a photocopy of the Articles of
Incorporation of Dieselman.

On 2 August 1988, Manuel F. Cruz, Sr., president of Dieselman, acknowledged receipt of the said P300,000.00 as
"earnest money" but required AF Realty to finalize the sale at P4,000.00 per square meter. AF Realty replied that it has paid
an initial down payment of P300,000.00 and is willing to pay the balance. However, on 13 August 1988, Mr. Cruz, Sr.
terminated the offer and demanded from AF Realty the return of the title of the lot earlier delivered by Polintan. Claiming
that there was a perfected contract of sale between them, AF Realty filed with the Regional Trial Court, Branch 160, Pasig
City a complaint for specific performance (Civil Case 56278) against Dieselman and Cruz, Jr.. The complaint prayed that
Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty." In its amended complaint, AF Realty
asked for payment of P1,500,000.00 as compensatory damages; P400,000.00 as attorney's fees; and P500,000.00 as exemplary
damages. In its answer, Dieselman alleged that there was no meeting of the minds between the parties in the sale of the
property and that it did not authorize any person to enter into such transaction on its behalf. Meanwhile, on 30 July 1988,
Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale of the same property. The agreed
price was P2,800.00 per square meter. Midas delivered to Dieselman P500,000.00 as down payment and deposited the
balance of P5,300,000.00 in escrow account with the PCIBank. Constrained to protect its interest in the property, Midas filed
on 3 April 1989 a Motion for Leave to Intervene in Civil Case 56278. Midas alleged that it has purchased the property and too k
possession thereof, hence Dieselman cannot be compelled to sell and convey it to AF Realty.

The trial court granted Midas' motion. After trial, the lower court rendered the Decision holding that the acts of Cruz,
Jr. bound Dieselman in the sale of the lot to AF Realty. Consequently, the perfected contract of sale between Dieselman and
AF Realty bars Midas' intervention. The trial court also held that Midas acted in bad faith when it initially paid Dieselman
P500,000.00 even without seeing the latter's title to the property. Moreover, the notarial report of the sale was not
submitted to the Clerk of Court of the Quezon City RTC and the balance of P5,300,000.00 purportedly deposited in escrow by
Midas with a bank was not established. Dieselman was ordered to execute and deliver to AF Realty the final deed of sale of
the property covered by TCT 39849 of the Registry of Deed of Rizal, Metro Manila District II, including the improvements
thereon, and ordering Dieselman to pay AF Realty attorney's fees in the amount of P50,000.00 and to pay the costs.
Dissatisfied, all the parties appealed to the Court of Appeals. In its Decision dated 10 December 1992, the Court of Appeals
reversed the judgment of the trial court holding that since Cruz, Jr. was not authorized in writing by Dieselman to sell the
subject property to AF Realty, the sale was not perfected; and that the Deed of Absolute Sale between Dieselman and Midas
is valid, there being no bad faith on the part of the latter. The Court of Appeals then declared Dieselman and Cruz, Jr. jointly
and severally liable to AF Realty for P100,000.00 as moral damages; P100,000.00 as exemplary damages; and P100,000.00 as
attorney's fees. On 5 August 1993, the Court of Appeals, upon motions for reconsideration filed by the parties, promulgated
an Amending Decision, in the sense that only Cruz, should be made liable to pay AF Realty the damages and attorney's fees
awarded therein, plus the amount of P300,000.00 unless, in the case of the said P300,000.00, the same is still deposited with
the Court which should be restituted to AF Realty. AF Realty filed the petition for review on certiorari.

Issue:
Whether there was a perfected contract of sale involving the Dieselman real property in favor of AF Realty.

Held:
Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised
by the board of directors. 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. Thus,
contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by
the board. Absent such valid delegation/authorization, the rule is that the declarations 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, are held not binding on the corporation. Herein, Cruz has no written authority from the board of directors of
Dieselman to sell or to negotiate the sale of the lot, much less to appoint other persons for the same purpose. Cruz's lack of
such authority precludes him from conferring any authority to Polintan involving the subject realty. Necessarily, neither could
Polintan authorize Felicisima Noble. Clearly, the collective acts of Cruz, Polintan and Noble cannot bind Dieselman in the
purported contract of sale.