Corpo Digest

Montelibano vs Bacolod-Murcia Milling (1962) Facts: Plaintiffs-appellants, Alfredo Montelibano, Alejandro Montelibano, and the Limited co-partnership Gonzaga and Company, had been and are sugar planters adhered to the defendant-appellee’s sugar central mill under identical milling contracts. Originally executed in 1919, said contracts were stipulated to be in force for 30 years starting with the 1920-21 crop, and provided that the resulting product should be divided in the ratio of 45% for the mill and 55% for the planters. Sometime in 1936, it was proposed to execute amended milling contracts, increasing the planters’ share to 60% of the manufactured sugar and resulting molasses, besides other concessions, but extending the operation of the milling contract from the original 30 years to 45 years. The Board of Directors of the appellee Bacolod-Murcia Milling Co., Inc., adopted a resolution granting further concessions to the planters over and above those contained in the printed Amended Milling Contract. The appellants initiated the present action, contending that three Negros sugar centrals with a total annual production exceeding one-third of the production of all the sugar central mills in the province, had already granted increased participation (of 62.5%) to their planters, and that under the resolution the appellee had become obligated to grant similar concessions to the plaintiffs. The appellee Bacolod-Murcia Milling Co., inc., resisted the claim, and defended by urging that the stipulations contained in the resolution were made without consideration; that the resolution in question was, therefore, null and void ab initio, being in effect a donation that was ultra vires and beyond the powers of the corporate directors to adopt. Issue: WON the board resolution is an ultra vires act and in effect a donation from the board of directors? Held: No. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As the resolution in question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or decrease the profits of the central, the court has no authority to review them. Whether the business of a corporation should be operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein.

Philippine Realty and Holding Corp. vs. Ley Const. and Dev. Corp./Ley Cons. and Dev. Corp. vs. Philippine Realty and Holding Corp., G.R. No. 165548/G.R. No. 167879. June 13, 2011 Agency; doctrine of apparent authority. (J. Abad) The Court finds that the signature of Abcede is sufficient to bind PRHC. As its construction manager, his very act of signing a letter embodying the P 36 million escalation agreement produced legal effect, even if there was a blank space for a higher officer of PHRC to indicate approval thereof. At the very least, he indicated authority to make such representation on behalf of PRHC. On direct examination, Abcede admitted that, as the construction manager, he represented PRHC in running its affairs with regard to the execution of the aforesaid projects. Abcede had signed, on behalf of PRHC, other documents that were almost identical to the questioned letter-agreement. PRHC does not question the validity of these agreements; it thereby effectively admits that this individual had actual authority to sign on its behalf with respect to these construction projects.

Atrium Management vs Ca Corporation Law – Ultra Vires Act – Liability of Corporate Officers In 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and Antonio De Las Alas (its Chairman, now deceased) issued four postdated checks to E.T. Henry and Co. The checks amount to P2 million. The checks are crossed checks and are only made payable to E.T. Henry’s account. However, E.T. Henry still indorsed the checks to Atrium Management Corporation (AMC). AMC then made sure that the checks were validly issued by requesting E.T. Henry to get some confirmation from Atrium. Interestingly, De Leon confirmed the checks and advised that the checks are okay to be rediscounted by AMC notwithstanding the fact that the checks are crossed checks payable to no other accounts but that of E.T. Henry. So when AMC

presented the check, it was dishonored because Hi-Cement stopped payment. Eventually, AMC sued Hi-Cement, E.T. Henry, and De Leon. The trial court ruled in favor of AMC and made all the respondents liable. On appeal, Hi-Cement averred that De Leon’s act in signing the check was ultra vires hence De Leon should be personally liable for the check. De Leon, on the other hand, insisted that the checks were authorized by the corporation. ISSUE: Whether or not De Leon’s act of signing the check constitutes an ultra vires act hence making her personally liable. HELD: No, the act is not ultra vires but De Leon is still personally liable. The act is not ultra vires because the act of issuing the checks was well within the ambit of a valid corporate act. De Leon as treasurer is authorized to sign checks. When the checks were issued, Hi-Cement has sufficient funds to cover the P2 million. As a rule, there are four instances that will make a corporate director, trustee or officer along (although not necessarily) with the corporation personally liable to certain obligations. They are: He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons; He consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; He agrees to hold himself personally and solidarily liable with the corporation; or He is made, by a specific provision of law, to personally answer for his corporate action. In the case at bar, De Leon is negligent. She was aware that the checks were only payable to E.T. Henry’s account yet she sent a confirmation to Atrium to the effect that the checks can be negotiated to them (Atrium) by E.T. Henry. Therefore, she may be held personally liable along with E.T. Henry (but not with Hi-Cement where she is an officer).

Rural Bank of Milaor vs. Francisca Ocfemia et. al G.R. No 137686, February 8, 2000 FACTS: Several parcels of land were mortgaged by the respondents during the lifetime of the respondent’s grandparents to the Rural bank of Milaor as shown by the Deed of Real Estate Mortgage and the Promissory Note. Spouses Felicisimo Ocfemia and Juanita Ocfemia, one of the respondents, were not able to redeem the mortgaged properties consisting of seven parcels of land and so the mortgage was foreclosed and thereafter ownership was transferred to the petitioner bank. Out of the seven parcels of land that were foreclosed, five of them are in the possession of the respondents because these five parcels of land were sold by the petitioner bank to the respondents as evidenced by a Deed of Sale. However, the five parcels of land cannot be transferred in the name of the parents of Merife Nino, one of the respondents, because there is a need to have the document of sale registered. The Register of deeds, however, said that the document of sale cannot be registered without the board resolution of the petitioner bank confirming both the Deed of sale and the authority of the bank manager, Fe S. Tena, to enter such transaction. The petitioner bank refused her request for a board resolution and made many alibis. Respondents initiated the present proceedings so that they could transfer to their names the subject five parcel of land and subsequently mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother.

ISSUE: May the Board of Directors of a rural banking corporation be compelled to confirm a deed of absolute sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking corporation?

HELD: YES. The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes. If the bank management believed that it had title to the property, it should have taken measured to prevent the infringement and

invasion of title thereto and possession thereof. Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena even though such agent is abusing her authority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank. The bank is estopped from questioning the authority of the bank to enter into contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; 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.

Zuellig vs nlrc (change of corpo name)

PRIVATE respondent Ronaldo V. San Miguel was employed as a checker/customs representative of Zeta Brokerage Corp. (Zeta) since Dec. 15, 1985. In January 1994, he and other employees of Zeta were informed that Zeta would cease operations and that all affected employees, including him, would be separated from the service effective March 31, 1994. He reluctantly accepted separation pay subject to the outstanding offer to be hired for his former position by the petitioner. Petitioner Zuellig Freight and Cargo Systems contended that San Miguel’s termination from Zeta had been for a cause authorized by the Labor Code. Zeta, its predecessor-in-interest, had complied with the requirements for termination due to the cessation of business operations. Did this contention find merit? Advertisement The Supreme Court ruling: No.

The unanimous conclusions of the Court of Appeals (CA), the National Labor Relations Commission (NLRC) and the Labor Arbiter, being in accord with law, were not tainted with any abuse of discretion, least of all grave, on the part of the NLRC. The amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of the former as a corporation. For sure, the Corporation Code defined and delineated the different modes of dissolving a corporation, and amendment of the articles of incorporation was not one of such modes. The effect of the change of name was not a change of the corporate being, for, as well stated in Philippine First Insurance Co., Inc. v. Hartigan, No. L86370, July 31, 1970, 34 SCRA 252, 266, citing Pacific Bank v. De Ro, 37 Cal. 538: “The changing of the name of a corporation is no more the creation of a corporation than the changing of the name of a natural person is begetting of a natural person. The act, in both cases, would seem to be what the language which we use to designate it imports – a change of name, and not a change of being.” xxx In short, Zeta and petitioner remained one and the same corporation. The change of name did not give petitioner the license to terminate employees of Zeta like San Miguel without just or authorized cause. The situation was not similar to that of an enterprise buying the business of another company where the purchasing company had no obligation to rehire terminated employees of the latter. Petitioner, despite its new name, was the mere continuation of Zeta’s corporate being, and still held the obligation to honor all of Zeta’s obligations, one of which was to respect San Miguel’s security of tenure. The dismissal of San Miguel from employment on the pretext that petitioner, being a different corporation, had no obligation to accept him as its employee, was illegal and ineffectual (Zuellig Freight and Cargo Systems vs. National Labor Relations Commission and Ronaldo V. San Miguel, G.R. No. 157900, July 22, 2013).

Fleischer v. Botica Nolasco Co. (1925) G.R. No. L-23241

March 14, 1925

Lessons Applicable: Right of First Refusal (Corporate Law) FACTS: March 13, 1923: Manuel Gonzales made a written statement to the Botica Nolasco, Inc., requesting that 5 shares of stock sold by him to Henry Fleischer be noted transferred to Fleischer's name He also acknowledged in said written statement the preferential right of the corporation to buy said five shares June 14, 1923: he withdraw and cancelled his written statement of March 13, 1923 Nolasco replied that his letter of June 14th was of no effect, and that the shares in question had been registered in the name of the Botica Nolasco, Inc., November 15, 1923: Fleischer filed an amended complaint against the Botica Nolasco, Inc., alleging that he became the owner of 5 shares of fully paid stock of Botica Nolasco Co (Nolasco) by purchase from their original owner, Manuel Gonzalez Despite repeated demands, Nolasco refused to register said shares in his name in the books of the corporation caused him damages amounting to P500 Nolasco's defense: article 12 of its by-laws: it had preferential right to buy the shares at the par value of P100/share, plus P90 as dividends corresponding to the year 1922 offer was refused by Fleischer Trial Court: favored Fleischer and ordered the shared be registered ISSUE: W/N article 12 of Nolasco's by-laws is in conflict with Act No. 1459 (Corporation Law), especially with section 35 (Now Sec. 63) HELD: Affirmed. mandamus will lie to compel the officers of the corporation to transfer said stock upon the books of the corporation

Section 13, paragraph 7, above-quoted, empowers a corporation to make bylaws, not inconsistent with any existing law, for the transferring of its stock. section 35 of Act No. 1459 (now Sec. 63) contemplates no restriction as to whom they may be transferred or sold It does not suggest that any discrimination may be created by the corporation in favor or against a certain purchaser. The holder of shares, as owner of personal property, is at liberty, under said section, to dispose of them in favor of whomsoever he pleases, without any other limitation in this respect, than the general provisions of law GR: the by-laws of a corporation are valid if they are reasonable and calculated to carry into effect the objects of the corporation, and are not contradictory to the general policy of the laws of the land A by-law cannot take away or abridge the substantial rights of stockholder. Under a statute authorizing by- laws for the transfer of stock, a corporation can do no more than prescribe a general mode of transfer on the corporate books and cannot justify an unreasonable restriction upon the right of sale. by-law cannot operate to defeat his rights as a purchaser who obtained them in good faith and for a valuable consideration.