Corpo Digest

Centralized Management Authority Philippine Airlines v. FASAP People’s Aircargo v. CA Facts: People’s Aircargo Aircargo is a domestic corporation organized to operate a customs bonded warehouse. To obtain a license for the corporation from the Bureau of Customs, Punsalan, its President, solicited a proposal from Sano for the preparation of a feasibility study. study. Sano submitted a letter proposal to Punsalan of the terms and conditions of the contract, amounting to P!","""."". Punsalan sent a letter to Sano con#rming to their agreement. Accordingly, Sano prepared the feasibility study. study. Sano was paid in full.  Thereafter,  Thereafter, a $nd contract contract was entered entered into for consultancy consultancy ser%ices. ser%ices. &ence, the Bureau of Customs issued a license to People’s Aircargo. Sano was not paid for this $nd contract. &ence, he #led a collection collection case against the corporation. 'eanwhile, Punsalan sold his shares in People’s Aircargo andresigned as president.

People’s Aircargo denied that there were consultancy consultancy ser%ices rendered rendered by Sano. Sano. (t alleged that the $nd contract entered into between him and Punsalan was without authority. authority. )TC )TC ad*udged in fa%or of Sano. CA a+rmed. &ence, this this petition.

Issue: hether or not the Punsalan had apparent authority to bind People’s Aircargo to the $nd contract.

Held: -es. The general rule is that, in the absence of authority from the Bo, no person, not e%en its o+cers, can %alidly bind a corporation. corporation. A corporation corporation is a *uridical person, separate and distinct from its stoc/holders and members, ha%ing powers,

attributes and properties e0pressly authrized by law or or incident to its e0istence. e0istence. Being a  *uridical entity, entity, a corporation corporation may act through its Bo, which e0ercises almost all corporate powers, lays down all corporate business policies and is responsible for the e+ciency of management as is under Sec. $ of the Corporation Code.

 The power and and responsibility responsibility to decide decide whether the corporation should enter into a contract that will bind the corporation is lodged in the board, sub*ect to Ao(, by laws, or rele%ant rele%ant pro%isions of law. law. &owe%er, *ust as a natural person may authorize another to do certain acts for and on his behalf, the Bo may %alidly delegate some of its functions and powers to o+cers, committees or agents. The authority authority of such such indi%iduals indi%iduals to bind the corporation is generally deri%ed from law, corporate by laws or authorization from the board, either e0pressly or impliedly by habit, custom or ac1uiescence in the general course of business. (n the case at bar, since the corporation had pre%iously allowed Punsalan to enter into the #rst contract with Sano without a board resolution e0pressly authorizing him, thus, it had clothed its president with apparent authority to e0ecute the sub*ect $nd contract.

(f a corporation /nowingly permits one of its o+cers, 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 corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.

San uan Structural v. CA Facts: (n 2343, San 5uan Structural and Steel 6abricators, (nc. 7San 5uan8 alleged that it entered into a contract of sale with 'otorich

Sales Corporation 7'otorich8 through the latter’s treasurer, 9enita :ruenberg. The sub*ect of the sale was a parcel of land owned by 'otorich. San 5uan ad%anced P2""/ to 9enita as earnest money.

;n the day agreed upon on which 9enita was supposed to deli%er the title of the land to 'otorich, 9enita did not show up. 9enita and 'otorich did not heed the subse1uent demand of San 5uan to comply with the contract hence San 5uan sued 'otorich. 'otorich, in its defense, argued that it is not bound by the acts of its treasurer, 9enita, since her act in contracting with San 5uan was not authorized by the corporate board.

it is true that 9enita and her husband own 34= of the capital stoc/s of 'otorich. The corporate %eil can only be pierced if the corporate #ction is merely used by the incorporators to shield themsel%es against liability for fraud, illegality or ine1uity committed on third persons. (t is incumbent upon San 5uan to pro%e that 9enita or her husband is merely using 'otorich to defraud San 5uan. (n this case howe%er, San 5uan utterly failed to establish that 'otorich was formed, or that it is operated, for the purpose of shielding any alleged fraudulent or illegal acti%ities of its o+cers or stoc/holders< or that the said %eil was used to conceal fraud, illegality or ine1uity at the e0pense of third persons li/e San 5uan.

 %asuma v. Heirs o& $e 'illa San 5uan raised the issue that 9enita was actually the wife of the President of 'otorich< that 9enita and her husband owns 34= of the corporation’s capital stoc/s< that as such, it is a close corporation and that ma/es 9enita and the President as principal stoc/holders who do not need any authorization from the corporate board< that in this case, the corporate %eil may be properly pierced.

ISS!": hether or not San 5uan is correct.

H"#$: 9o. 'otorich is right in in%o/ing that it is not bound by the acts of 9enita because her act in entering into a contract with San  5uan was not authorized by the board of directors of 'otorich. 9enita is howe%er ordered to return the P2""/.

 There is no merit in the contention that the corporate %eil should be pierced e%en though

(oodchild Holdings v. )o*as "lectric  %ao +a Sin ,rading v. CA Facts: (n 23>, Constancio 'aglana, president of Prime hite Cement Corporation, sent an o?er letter to -ao @a Sin  Trading. The o?er states that Prime hite is willing to sell !,""" bags of cement at P$." per bag. The o?er letter was recei%ed by -ao @a Sin’s manager, &enry -ao. -ao accepted the letter and pursuant to the letter, he sent a chec/ in the amount of P$,"""."" e1ui%alent to the %alue of 2",""" bags of cement. &owe%er, the Board of irectors of Prime hite re*ected the o?er letter sent by 'aglana but it considered  -ao’s acceptance letter as a new contract o?er hence the Board sent a letter to -ao telling him that Prime hite is instead willing to sell only 2",""" bags to -ao @a Sin and that he has ten days to reply< that if no reply is made by -ao then they will consider it as an acceptance and that thereafter Prime hite shall deposit the P$/ chec/ in its account and then deli%er the cements to -ao @a Sin. &enry -ao ne%er replied.

ater, -ao @a Sin sued Prime hite to compel the latter to comply with what -ao @a Sin considered as the true contract, i.e., !,""" bags at P$." per bag. Prime hite in its defense a%erred that although 'aglana is empowered to sign contracts in behalf of Prime hite, such contracts are still sub*ect to appro%al by Prime hite’s Board, and then it still re1uires further appro%al by the 9ational (n%estment and e%elopment Corporation 79(C8, a go%ernment owned and controlled corporation because Prime hite is a subsidiary of 9(C.

&enry -ao asserts that the letter from 'aglana is a binding contract because it was made under the apparent authority of 'aglana. The trial court ruled in fa%or of -ao @a Sin. The Court of Appeals re%ersed the trial court.

ISS!": hether or not the president of a corporation is clothed with apparent authority to enter into binding contracts with third persons without the authority of the Board.

H"#$: 9o. The Board may enter into contracts through the president. The president may only enter into contracts upon authority of the Board. &ence, any agreement signed by the president is sub*ect to appro%al by the Board. nli/e a general manager 7li/e the case of 6rancisco %s :S(S8, the president has no apparent authority to enter into binding contracts with third persons. 6urther, if indeed the byDlaws of Prime hite did pro%ide 'aglana with apparent authority, this was not pro%en by  -ao @a Sin.

As a rule, apparent authority may result from 728 the general manner, by which the corporation holds out an o+cer or agent as ha%ing power to act or, in other words, the apparent authority with which it clothes him to act in general or 7$8 ac1uiescence in his acts of a particular nature, with actual or constructi%e /nowledge thereof, whether within or without the scope of his ordinary powers. These are not present in this case.

Also, the subse1uent letter by Prime hite to  -ao @a Sin is binding because -ao @a Sin’s failure to respond constitutes an acceptance, per stated in the letter itself E which was not contested by &enry -ao during trial.

-usiness udgment$irectors’ / 01cers #ia2ility Monteli2ano v. -acolod3Murcia Facts: Plainti?sDappellants, Alfredo 'ontelibano, Ale*andro 'ontelibano, and the imited coDpartnership :onzaga and Company, had been and are sugar planters adhered to the defendantDappelleeFs sugar central mill under identical milling contracts.  The contracts were stipulated to be in force for " years and that the resulting product should be di%ided in the ratio of != for the mill and !!= for the planters. (t was later proposed to e0ecute amended milling contracts, increasing the plantersF share to G"= of the manufactured sugar and resulting molasses, besides other concessions, but e0tending the operation of the milling contract from the original " years to ! years.

 The Board of irectors of the appellee BacolodD'urcia 'illing Co., (nc., adopted a resolution granting further concessions to the planters o%er and abo%e those contained in the printed Amended 'illing Contract. Appellants signed and e0ecuted the printed Amended 'illing Contract but a copy of the resolution was not attached to the printed contract.

(n 23!, the appellants initiated the present action, contending that three 9egros sugar centrals had already granted increased participation to their planters, and that under paragraph 3 of the abo%ementioned resolution, the appellee had become obligated to grant similar concessions to the plainti?s 7appellants herein8. &owe%er, the appellee BacolodD'urcia 'illing Co., inc., resisted the claim, and defended by urging that the stipulations contained in the resolution were made without consideration< that the resolution in 1uestion was, therefore, null and %oid ab initio, being in e?ect a donation that was ultra %ires and beyond the powers of the corporate directors to adopt. After trial, the court below rendered  *udgment upholding the stand of the defendant 'illing company, and dismissed the complaint. Thereupon, plainti?s duly appealed to this Court.

As the resolution in 1uestion was passed in good faith by the board of directors, it is %alid and binding, and whether or not it will cause losses or decrease the pro#ts of the central, the court has no authority to re%iew them. (t is a wellD/nown rule of law that 1uestions of policy or of management are left solely to the honest decision of o+cers and directors of a corporation, and the court is without authority to substitute its *udgment of the board of directors< the board is the business manager of the corporation, and so long as it acts in good faith its orders are not re%iewable by the courts. &ence, the appellee BacolodD'urcia 'illing Company is, under the terms of its )esolution, duty bound to grant similar increases to plainti?sD appellants herein.

,ramat v. CA Sanchez v. )epu2lic Premium Mar2le v. CA

Issue: hether or not the resolution is %alid and binding between the corporation and planters.

Miscellaneous ,opics Filipinas Port v. 4o

Held:  The Supreme Court held in the a+rmati%e. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended 'illing Contract for the purpose of ma/ing its terms more acceptable to the other contracting parties. The rule is that H (t is a 1uestion, therefore, in each case of the logical relation of the act to the corporate purpose e0pressed in the charter. (f that act is one which is lawful in itself, and not otherwise prohibited, is done for the purpose of ser%ing corporate ends, and is reasonably tributary to the promotion of those ends, in a substantial, and not in a remote and fanciful sense, it may fairly be considered within charter powers. The test to be applied is whether the act in 1uestion is in direct and immediate furtherance of the corporationFs business, fairly incident to the e0press powers and reasonably necessary to their e0ercise. (f so, the corporation has the power to do it< otherwise, not.

Facts: Sept  233$I Jliodoro C. Cruz, 6ilport’s president from 23G4D2332, wrote a letter to the corporation’s B; 1uestioning the creation and election of the following positions with a monthly remuneration of P2,"!"."" each. Cruz re1uested the board to ta/e necessary actionKactions to reco%er from those elected to the aforementioned positions the salaries they ha%e recei%ed.  5un  233I Cruz, purportedly in representation of 6ilport and its stoc/holders, among which is herein coDpetitioner 'indanao Terminal and Bro/erage Ser%ices, (nc. 7'interbro8, #led with the SJC a deri%ati%e suit against 6ilportFs B; for acts of mismanagement detrimental to the interest of the corporation and its shareholders at large. Cruz prayed that the B; be made to pay 6ilport, *ointly and se%erally, the sums of money %ariedly representing the damages incurred as a result of the creation of the o+cesKpositions complained of and the

aggregate amount of the 1uestioned increased salaries. )TCI B; ha%e the power to create positions not in the byDlaws and can increase salaries. But Jdgar C. Trinidad under the third and fourth causes of action to restore to the corporation the total amount of salaries he recei%ed as assistant %ice president for corporate planning< and li/ewise ordering 6ortunato L. de Castro and Arsenio opez Chua under the fourth cause of action to restore to the corporation the salaries they each recei%ed as special assistants respecti%ely to the president and board chairman. (n case of insol%ency of any or all of them, the members of the board who created their positions are subsidiarily liable. AppealedI creation of the positions merely for accommodation purposes D :)A9TJ

Issues: hether or not there was mismanagement D 9; hether or not there is a proper deri%ati%e suit D -JS Held: CA A+rmed 9;. Section ! of the Corporation Code, the creation of an e0ecuti%e committee 7as powerful as the B;8 must be pro%ided for in the bylaws of the corporation 9otwithstanding the silence of 6ilport’s bylaws on the matter, we cannot rule that the creation of the e0ecuti%e committee by the board of directors is illegal or unlawful. ;ne reason is the absence of a showing as to the true nature and functions of e0ecuti%e committee But e%en assuming there was mismanagement resulting to corporate damages andKor business losses, respondents may not be held liable in the absence of a showing of bad faith in doing the acts complained of. 7Mdishonest purposeM,Msome moral obli1uityM,Mconscious doing of a wrongM, Mparta/es of the nature of fraudM8 determination of the necessity for additional o+ces andKor positions in a corporation is a management prerogati%e which courts are not wont to re%iew in the absence of any

proof that such prerogati%e was e0ercised in bad faith or with malice  -JS. Besides, the re1uisites before a deri%ati%e suit can be #led by a stoc/holderI D present a8 the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material< D a stoc/holder of 6ilport b8 he has tried to e0haust intraDcorporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea< and D he wrote a letter c8 the cause of action actually de%ol%es on the corporation, the wrongdoing or harm ha%ing been, or being caused to the corporation and not to the particular stoc/holder bringing the suit. D wrong against the stoc/holders of the corporation generally

'alle 'erde Country Clu25 Inc. v. A&rica Facts: ;n 6ebruary $>, 233G, during the Annual Stoc/holders’ 'eeting of petitioner Lalle Lerde Country Club, (nc. 7LLCC8, the LLCC Board of irectors were elected including Jduardo 'a/alintal 7'a/alintal8 among others. (n the years 233>, 2334, 2333, $""", and $""2, howe%er, the re1uisite 1uorum for the holding of the stoc/holders’ meeting could not be obtained. Conse1uently, the directors continued to ser%e in the LLCC Board in a holdDo%er capacity. ater, 'a/alintal resigned as member of the LLCC Board. &e was replaced by 5ose )amirez 7)amirez8, who was elected by the remaining members of the LLCC Board on 'arch G, $""2. )espondent Africa 7Africa8, a member of LLCC, 1uestioned the election of )amirez as members of the LLCC Board with the )egional Trial Court 7)TC8, respecti%ely. Africa claimed that a year after 'a/alintal’s election as member of the LLCC Board in 233G, his N'a/alintal’sO term E as well as those of the other members of the LLCC

Board E should be considered to ha%e already e0pired. Thus, according to Africa, the resulting %acancy should ha%e been #lled by the stoc/holders in a regular or special meeting called for that purpose, and not by the remaining members of the LLCC Board, as was done in this case. The )TC sustained Africa’s complaint.

Issue: hether the remaining directors of the corporation’s Board, still constituting a 1uorum, can elect another director to #ll in a %acancy caused by the resignation of a holdD o%er director.

)uling: 9;. hen Section $ of the Corporation Code declares that the board of  directorsQshall hold o+ce for one 728 year until their successors are elected and 1uali#ed,R we construe the pro%ision to mean that the term of the members of the board of  directors shall be only for one year< their term e0pires one year after election to the o+ce. The holdo%er period E that time from the lapse of one year from a member’s election to the Board and until his successor’s election and 1uali#cation E is not part of the director’s original term of o+ce,

nor is it a new term< the holdo%er period, howe%er, constitutes part of his tenure. Corollary, when an incumbent member of the board of directors continues to ser%e in a holdo%er capacity, it implies that the o+ce has a #0ed term, which has e0pired, and the incumbent is holding the succeeding term.

&ere, when remaining members of the LLCC Board elected )amirez to replace 'a/alintal, there was no more une0pired term to spea/ of, as 'a/alintal’s oneDyear term had already e0pired. Pursuant to law, the authority to #ll in the %acancy caused by 'a/alintal’s lea%ing lies with the LLCC’s stoc/holders, not the remaining members of its board of directors. To assume E as LLCC does E that the %acancy is caused by 'a/alintal’s resignation in 2334, not by the e0piration of his term in 233>, is both illogical and unreasonable. &is resignation as a holdo%er director did not change the nature of the %acancy< the %acancy due to the e0piration of 'a/alintal’s term had been created long before his resignation.

(estern Institute ,ech v. Salas

Appraisal )ights ,urner v. #orenzo Shipping