MONTELIBANO ET AL vs.BACOLOD-MURCIA MILLING CO., INC.

G.R. No. L-15092

May 18, 1962

FACTS: Montelibano et al. are sugar planters adhered to the Bacolod-Murcia Milling Co., Incs sugar
central mill under identical milling contracts originally executed in 1919. In 1936, it was proposed to
execute amended milling contracts, increasing the planters share of the manufactured sugar, besides
other concessions. To this effect, a printed Amended Milling Contract form was drawn up.

The Board of Directors of 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 on
August 10, 1936.

The printed Amended Milling Contract was signed by the Appellants on September 10, 1936, but a copy
of the resolution was not attached to the printed contract until April 17, 1937.

In 1953, the appellants initiated an action, contending that 3 Negros sugar centrals had already granted
increased participation to their planters, and that under paragraph 9 of the resolution of August 20,
1936, the appellee had become obligated to grant similar concessions to the appellants herein.

The Bacolod-Murcia Milling Co., inc., resisted the claim, urging that the resolution in question was 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: Was the act of the BOD ultra vires?

HELD: NO (The Bacolod-Murcia Milling Co., Inc. is ordered to pay appellants the increase of participation
in the milled sugar in accordance with paragraph 9 of the Resolution of August 20, 1936.)
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.

Xx It is a well-known rule of law that questions of policy or of management are left solely to the honest
decision of officers and directors of a corporation, and the court is without authority to substitute its
judgment 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 reviewable by the courts.

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It must be remembered that the controverted resolution was adopted by appellee corporation as a
supplement to, or further amendment of, the proposed milling contract, and that it was approved on
August 20, 1936, twenty-one days prior to the signing by appellants on September 10, of the Amended
Milling Contract itself; so that when the Milling Contract was executed, the concessions granted by the
disputed resolution had been already incorporated into its terms.