STOCK CORPORATION

BOYER-ROXAS and Roxas v. CA and Heirs of Eugenia V. Roxas, Inc

Facts:

When Eugenia V. Roxas died, her heirs, among them are the petitioners herein, decided to form a
corporation – Heirs of Eugenia V. Roxas, Inc. (private respondent) with the inherited properties as
capital of the corporation. At first the purpose of the corporation is for agriculture, then the Article of
Incorporation was amended, the corporation engaged in resort business – Hidden Valley Spring Resort.
During the lifetime of Eriberto Roxas (husband and father of petitioners), he was general manager of the
corporation. That the petitioners occupied some of the properties of the corporation as their residence,
and this was with the knowledge of Eufrocino Roxas, holder of biggest share.

Then the corporation passed resolution evicting the petitioners from the property of the corporation
due to the obstruction of petitioners as to the expansion and operation of the business. However,
despite several demand of corporation, petitioners failed to vacate the property, hence, corporation
filed a separate complaint against the petitioners.

RTC ruled in favour of corporation and this was affirmed by CA.

On appeal, petitioners contends that their possession of the subject properties must be respected in
view of their ownership of an aliquot portion of all the properties of the corporation being stockholder
thereof.

Issue:

WON petitioners are correct in their contention that they should be respected as regard their occupancy
since they own an aliquot part of the corporation.

Ruling:

NO. Heirs of Eugenia V. Roxas, Inc. is a bona fide corporation, having juridical personality of its own
separate from the stockholder and that the title over the subject properties are in the name of the
corporation. SC reiterates that the properties registered in the name of corporation are owned by it as
an entity separate and distinct from its members. While shares of stock constitutes personal property,
they do not represent property of the corporation. Stockholder is not entitled to the possession of any
definite portion of corporation’s property or assets and that the stockholder is not co-owner or tenant in
common of the corporate property.
EXECUTIVE, MGT. AND OTHER SPECIAL COMMITTEE

FILIPINAS PORT SERVICES, INC. v. GO

Facts:

Eliodoro C. Cruz (Cruz) was president of Filipinas Port Services, Inc. (Filport) since 1968. He lost his bid
for re-election in 1991. A year thereafter, Cruz wrote a letter to the corporation’s Board of Directors
questioning the creation of six (6) positions and the election of certain members of the board thereto. It
would seem that Cruz was unhappy with the Board’s action or actions on the matter, for a year later he
filed a petition with the Securities and Exchange Commission (SEC), joined by Mindanao Terminal and
Brokerage Services, Inc. (Minterbro) as co-petitioner, what he calls a ‘derivative suit’ supposedly in
representation of Filport and its stockholders.

Cruz contended that that the creation of an executive committee is not provided for in the by-laws and
the increase in the emoluments of several members of the board is greatly disproportionate to the
volume and character of work of said directors. Further, he questions the re-creation of the positions of
Assistant Vice President for corporate planning, operations, finance and administration and additional
positions where those holding said offices are not doing any work but earning compensation. These acts
of mismanagement according to Cruz are detrimental to the corporation and its stockholders and so the
board must account for the amounts incurred in creating these positions and made to pay damages.

RTC ruled that Filport’s Board of Directors had the power to create positions not provided for in the by-
laws and the increases in salaries are reasonable, nevertheless it ordered the directors holding the
positions of Assistant Vice President for Corporate Planning, Special Assistant to the President and
Special Assistant to the Board Chairman to refund to the corporation the salaries they have received as
such officers “considering that Filipinas Port Services is not a big corporation requiring multiple
executive positions” and that said positions “were just created for accommodation.”

CA reversed and set aside RTC’s decision.

Issue:

WON the creation of an executive committee and other offices in the corporation with corresponding
remunerations are within the powers of the Board of Directors.

Ruling:

The governing body of a corporation is its board of directors. Section 23 of the Corporation Code
explicitly provides that unless otherwise provided therein, the corporate powers of all corporations
formed under the Code shall be exercised, all business conducted and all property of the corporation
shall be controlled and held by a board of directors. Thus, with the exception only of some powers
expressly granted by law to stockholders (or members, in case of non-stock corporations), the board of
directors (or trustees, in case of non-stock corporations) has the sole authority to determine policies,
enter into contracts, and conduct the ordinary business of the corporation within the scope of its
charter, i.e., its articles of incorporation, by-laws and relevant provisions of law. Verily, the authority of
the board of directors is restricted to the management of the regular business affairs of the corporation,
unless more extensive power is expressly conferred.

The raison d’etre behind the conferment of corporate powers on the board of directors is not lost on the
Court. Indeed, the concentration in the board of the powers of control of corporate business and of
appointment of corporate officers and managers is necessary for efficiency in any large organization.
Stockholders are too numerous, scattered and unfamiliar with the business of a corporation to conduct
its business directly. And so the plan of corporate organization is for the stockholders to choose the
directors who shall control and supervise the conduct of corporate business.

In the present case, the board’s creation of the positions of Assistant Vice Presidents for Corporate
Planning, Operations, Finance and Administration, and those of the Special Assistants to the President
and the Board Chairman, was in accordance with the regular business operations of Filport as it is
authorized to do so by the corporation’s by-laws, pursuant to the Corporation Code.

Unfortunately, the bylaws of the corporation are silent as to the creation by its board of directors of an
executive committee. Under Section 35 of the Corporation Code, the creation of an executive
committee must be provided for in the bylaws of the corporation.

Notwithstanding the silence of Filport’s bylaws on the matter, we cannot rule that the creation of the
executive committee by the board of directors is illegal or unlawful. One reason is the absence of a
showing as to the true nature and functions of said executive committee considering that the “executive
committee,” referred to in Section 35 of the Corporation Code which is as powerful as the board of
directors and in effect acting for the board itself, should be distinguished from other committees which
are within the competency of the board to create at anytime and whose actions require ratification and
confirmation by the board. Another reason is that, ratiocinated by both the two (2) courts below, the
Board of Directors has the power to create positions not provided for in Filport’s bylaws since the board
is the corporation’s governing body, clearly upholding the power of its board to exercise its prerogatives
in managing the business affairs of the corporation.

As well, it may not be amiss to point out that, as testified to and admitted by petitioner Cruz
himself, it was during his incumbency as Filport president that the executive committee in question was
created, and that he was even the one who moved for the creation of the positions of the AVPs for
Operations, Finance and Administration. By his acquiescence and/or ratification of the creation of the
aforesaid offices, Cruz is virtually precluded from suing to declare such acts of the board as invalid or
illegal. And it makes no difference that he sues in behalf of himself and of the other stockholders.
Indeed, as his voice was not heard in protest when he was still Filport’s president, raising a hue and cry
only now leads to the inevitable conclusion that he did so out of spite and resentment for his non-re-
election as president of the corporation.