Lopez Realty Inc.

and Asuncion Lopez Gonzales v Fontencha et al and the NLRC Puno; August 11, 1995

Facts

Petitioner Lopez Realty is a corporation engaged in the real estate business while petitioner Lopez Gonzales was one of its shareholders. One of the members of its Board of Directors submitted a proposal relative to the distribution of the properties of the corporation to its 3 main shareholders. One of the proposals was a decrease in the number of employees with payment of gratuity pay. The proposal was debated upon and approved in a special meeting of its Board of Directors.

Except for petitioner Lopez Gonzales, who was abroad, the remaining members of the board passed a resolution as to the payment of the gratuity pay of the respondent employees. Private respondents were the retained employees of the corporation. They requested for the full payment of their gratuity pay which was approved by the Board in a special meeting. Lopez Gonzales, who was still out of the country, allegedly 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. The first 2 installments of gratuity were paid but for some reason the cash vouchers for the third installment was cancelled by Lopez Gonzales. The Labor Arbiter and NLRC ruled for respondents. Petitioners allege for the first time in its MR of the decisions of the NLRC that petitioner Lopez Gonzales was not informed of the board meetings held on the said dates. They also alleged that such resolutions were ultra vires due to lack of notice. Issue: WON the respondents are entitled to their gratuity pay. YES Ratio/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 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 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. It can also be gleaned from the evidence that petitioner Lopez Gonzales was aware of the corporations obligations under the said resolutions and even acquiesced thereto. She even affixed her signature on the cash voucher for one of the installments paid to respondents. The conduct of the petitioners after passing the board resolutions has estopped them from assailing its validity. (Side issue) Assuming that no notice was given, the petitioners cannot invoke the doctrine of ultra vires because it is applied to acts which are not within its corporate powers or not necessary or incidental to the exercise of the powers conferred. The subject here pertains to the benefits to be given to its employees, which is one of the powers given to a corporation.