RAMIREZ VS ORIENTALIST
COURT OF APPEALS
Facts:
Orientalist Company was engaged in the business of maintaining and conducting a
theatre in the city of Manila for the exhibition of cinematographic films. engaged in
the business of marketing films for a manufacturer or manufacturers, there engaged
in the production or distribution of cinematographic material. In this enterprise the
plaintiff was represented in the city of Manila by his son, Jose Ramirez. The directors
of the Orientalist Company became apprised of the fact that the plaintiff in Paris had
control of the agencies for two different marks of films, namely, the “Eclair Films” and
the “Milano Films;” and negotiations were begun with said officials of the Orientalist
Company by Jose Ramirez, as agent of the plaintiff. The defendant Ramon J.
Fernandez, one of the directors of the Orientalist Company and also its treasure, was
chiefly active in this matter. Ramon J. Fernandez had an informal conference with all
the members of the company’s board of directors except one, and with approval of
those with whom he had communicated, addressed a letter to Jose Ramirez, in Manila,
accepting the offer contained in the memorandum the exclusive agency of
the Eclair films and Milano films. In due time the films began to arrive in Manila, it
appears that the Orientalist Company was without funds to meet these obligations.
Action was instituted by the plaintiff to Orientalist Company, and Ramon J. Fernandez
for sum of money.
Issue:
WON the Orientalist Co. is liable for the acts of its treasurer, Fernandez?
Held:
Yes. It will be observed that Ramon J. Fernandez was the particular officer and
member of the board of directors who was most active in the effort to secure the films
for the corporation. The negotiations were conducted by him with the knowledge and
consent of other members of the board; and the contract was made with their prior
approval. In the light of all the circumstances of the case, we are of the opinion that
the contracts in question were thus inferentially approved by the company’s board of
directors and that the company is bound unless the subsequent failure of the
stockholders to approve said contracts had the effect of abrogating the liability thus
created.
BOYER – ROXAS VS.
211 SCRA 470 (1992)
FACTS OF THE CASE
When Eugenia V. Roxas died, her heirs formed a corporation under the name and style
of Heirs of Eugenia V. Roxas, Inc. using her estate as the capital of the corporation, the
private respondent herein. It was primarily engaged in agriculture business, however
it amended its purpose to enable it to engage in resort and restaurant business.
Petitioners are stockholders of the corporation and two of the heirs of Eugenia. By
tolerance, they were allowed to occupy some of the properties of the corporation as
their residence. However, the board of directors of the corporation passed a resolution
evicting the petitioners from the property of the corporation because the same will be
needed for expansion.
At the RTC, private respondent presented its evidence averring that the subject
premises are owned by the corporation. Petitioners failed to present their evidence
due to alleged negligence of their counsel. RTC handed a decision in favor of private
respondent.
Petitioners appealed to the Court of Appeals but the latter denied the petition and
affirmed the ruling of the RTC. Hence, they appealed to the Supreme Court. In their
appeal, petitioners argues that the CA made a mistake in upholding the decision of the
RTC, and that their occupancy of the subject premises should be respected because
they own an aliquot part of the corporation as stockholders, and that the veil of
corporate fiction must be pierced by virtue thereof.
ISSUE
1. Whether petitioner’s contention were correct as regards the piercing of the
corporate veil.
2. Whether petitioners were correct in their contention that they should be respected
as regards their occupancy since they own an aliquot part of the corporation.
RULING
1.Petitioner’s contention to pierce the veil of corporate fiction is untenable. As aptly
held by the court: “..The separate personality of a corporation may ONLY be
disregarded when the corporation is used as a cloak or cover for fraud or illegality, or to
work injustice, or when necessary to achieve equity or when necessary for the protection
of creditors.”
2. As regards petitioners contention that they should be respected on their occupancy
by virtue of an aliquot part they own on the corporation as stockholders, it also fails to
hold water. The court held that “properties owned by a corporation are owned by it as
an entity separate and distinct from its members. While shares of stocks are personal
property, they do not represent property of the corporation. A share of stock only typifies
an aliquot part of the corporation’s property, or the right to share in its proceeds to that
extent when distributed according to law and equity, but its holder is not the owner of
any part of the capital of the corporation. Nor is he entitled to the possession of any
definite portion of its property or assets. The holder is not a co-owner or a tenant in
common of the corporate property.”
WOODCHILD HOLDINGS, INC. vs ROXAS ELECTRIC AND CONSTRUCTION COMPANY,
INC.
FACTS
- Roxas Electric and Construction Company, Inc. (RECCI) authorized its President
Roberto B. Roxas through a resolution to sell a parcel of land owned by the
corporation, and to execute, sign and deliver for and on behalf of the company.
- Petitioner Woodchild Holdings, Inc. (WHI) through its President Jonathan Y. Dy,
offered to buy the land from RECCI.
- The offer to purchase stated that it is made on the representation and warranty of
the OWNER/SELLER, that he holds a good and registrable title to the property, which
shall be conveyed CLEAR and FREE of all liens and encumbrances, and that in the event
that the right of way is insufficient for the buyer’s purpose, the seller agrees to sell
additional square meter from his current adjacent property to allow the buyer full
access and full use of the property.
- Roxas accepted the offer and indicated his acceptance on Page 2 of the Deed.
- The sale was consummated.
- WHI subsequently entered into a construction agreement with Wimbeco Builder’s
Inc. (WBI) for the construction of a warehouse, and a lease agreement with Poderosa
Leather Goods Company, Inc. with a condition that the warehouse be ready by April 1,
1992.
- The building was finished and Poderosa became the lessee.
- WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a
portion of the property over which WHI had been granted a right of way. Roxas
promised to look into the matter. Dy and Roxas discussed the need of the WHI to buy
a 500-square-meter portion the adjacent lot as provided for in the deed of absolute
sale. However, Roxas died soon thereafter.
- WHI wrote the RECCI, reiterating its verbal requests to purchase a portion of the said
lot as provided for in the deed of absolute sale, and complained about the latter’s
failureto eject the squatters within the three-month period agreed upon in the said
deed. - RECCI rejected the demand of WHI, so WHI filed a case for Specific Performance
and Damages in the RTC of Makati.
RTC - in favor of WHI.
CA - reversed the RTC decision and dismissed the complaint. The CA ruled that, under
the resolution of the Board of Directors of the RECCI, Roxas was merely authorized to
sell the first lot, but not to grant right of way in favor of the WHI over a portion of the
second lot, or to grant an option to the petitioner to buy a portion thereof.
ISSUE –
WON respondent is bound by the provisions of the deed of sale granting to the
petitioner the beneficial use and right of way over the adjacent lot of the lot they
previously bought. WON such provision is enforceable.
HELD
SC –
We agree with respondent. Judgment of CA affirmed with modification. - A
corporation is a juridical person separate and distinct from its stockholders or
members. Accordingly, the property of the corporation is not the property of its
stockholders or members and may not be sold by the stockholders or members
without express authorization from the corporation’s board of directors.
- Indubitably, a corporation may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents
in the normal course of business. The general principles of agency govern the relation
between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law.
- Generally, the acts of the corporate officers within the scope of their authority are
binding on the corporation. However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly, or is estopped from denying them.
- In this case, the respondent denied authorizing its then president Roberto B. Roxas
to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien
or burden thereon. The petitioner was thus burdened to prove that the respondent
so authorized Roxas to sell the same and to create a lien thereon.
- Evidently, Roxas was not specifically authorized under the said resolution to grant a
right of way in favor of the petitioner on a portion of the second lot or to agree to sell
to the petitioner a portion thereof.
- For the principle of apparent authority to apply, the petitioner was burdened to prove
the following: (a) the acts of the respondent justifying belief in the agency by the
petitioner; (b) knowledge thereof by the respondent which is sought to be held; and,
(c) reliance thereon by the petitioner consistent with ordinary care and prudence.[34]
In this case, there is no evidence on record of specific acts made by the respondent[35]
showing or indicating that it had full knowledge of any representations made by Roxas
to the petitioner that the respondent had authorized him to grant to the respondent
an option to buy a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, or to create
a burden or lien thereon, or that the respondent allowed him to do so.
YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees, found that the evidence upon this point preponderate in favor of the
vs. plaintiffs and there appears to be no sufficient reason to disturb this finding.
"KONG LI PO," defendant-appellant.  Trial Court found in favour of petitioners saying contract had been impliedly
ratified by the defendant. Kong Li Po appeals saying that contract was not
December 3, 1924, OSTRAND, J.: signed by C.C. Chen and in any event C. C. Chen had no power or authority to
bind the defendant corporation by such contract; and that there was no
FACTS: ratification of the contract by the corporation.

ISSUE: WON Chen [the general manger] had the power to bind the corporation by a
 The defendant is a domestic corporation organized in accordance with the
contract of the character indicated – NO. Only valid by a reasonable and usual contract
laws of the Philippine Islands and engaged in the publication of a Chinese
of employment
newspaper styled Kong Li Po. Its articles of incorporation and by-laws are in
the usual form and provide for a board of directors and for other officers
among them a president whose duty it is to "sign all contracts and other RATIO:
instruments of writing." No special provision is made for a business or general
manager. Procedure/Evidence
 Sometime in 1919, C. C./T. C. Chen was appointed general business manager
of the newspaper. The contract supposedly attached with the complaint was a translation. As this
 Dec 1919, Chen entered into an agreement with the plaintiffs by which the translation may be considered a copy and as the defendant failed to deny its
latter bound themselves to do the necessary printing for the newspaper for authenticity under oath, it will perhaps be said that under section 103 of the Code of
the sum of P580 per month. Civil Procedure the omission to so deny it constitutes an admission of the
 Under this agreement the plaintiffs worked for the defendant from January genuineness and due execution of the document as well as of the agent's authority
1, 1920, until January 31, 1921, when they were discharged by the new to bind the defendant. (Merchant vs. International Banking Corporation, 6 Phil., 314.)
manager, Tan Tian Hong, who had been appointed in the meantime, C. C. However the court ruled that this case was an exception since evidence was presented
Chen having left for China. The letter of dismissal stated no special reasons by plaintiff on the execution of the document. [Plaintiff waived]
for the discharge of the plaintiffs.
 The plaintiffs thereupon brought the present action alleging, among other Chen’s Authority
things, in the complaint that their contract of employment was for a term of
three years from the first day of January, 1920; that in the case of their
It is conceded that Chen had no express authority to do so, but the evidence is
discharge by the defendant without just cause before the expiration of the
conclusive that he, at the time the contract was entered into, was in effect the general
term of the contract, they were to receive full pay for the remaining portion
business manager of the newspaper Kong Li Po and that he, as such, had charge of the
of the term; that they had been so discharged without just cause and
printing of the paper, and the plaintiff maintain that he, as such general business
therefore asked judgment for damages in the sum of P20,880.
manager, had implied authority to employ them on the terms stated and that the
 Included in its 5 special defenses , Kong Li Po states that C. C. Chen, the person defendant corporation is bound by his action.
whose name appears to have been signed to the contract of employment was
not authorized by the defendant to execute such a contract in its behalf.
Other defenses include delayed printing, failure to correct errors, neglect and The general rule is that the power to bind a corporation by contract lies with its board
refusal to print. of directors or trustees, but this power may either expressly or impliedly be delegated
to other officers or agents of the corporation, and it is well settled that except where
 At the trial of the case the plaintiffs presented in evidence Exhibit A which
the authority of employing servants and agent is expressly vested in the board of
purports to be a contract between Chen and the plaintiffs and which provides
directors or trustees, an officer or agent who has general control and management of
that in the event the plaintiffs should be discharged without cause before the
the corporation's business, or a specific part thereof, may bind the corporation by the
expirations of the term of three years from January 1, 1920, they would be
employment of such agent and employees as are usual and necessary in the conduct
given full pay for the unexpired portion of the term "even if the said paper
of such business. But the contracts of employment must be reasonable.
has to fall into bankruptcy." The contract is signed by the plaintiffs and also
bears the signature "C. C. Chen, manager of Kong Li Po." The authenticity of
the latter signature is questioned by the defendant, but the court below
Chen, as general manager of the Kong Li Po, had implied authority to bind the
defendant corporation by a reasonable and usual contract of employment with the
plaintiffs, but we do not think that the contract here in question can be so considered.
Not only is the term of employment unusually long, but the conditions are otherwise
so onerous to the defendant that the possibility of the corporation being thrown into
insolvency thereby is expressly contemplated in the same contract.
Neither do we think that the contention that the corporation impliedly ratified the
contract is supported by the evidence. The contention is based principally on the fact
that Te Kim Hua, the president of the corporation for the year 1920, admitted on the
witness stand that he saw the plaintiffs work as printers in the office of the newspaper.
He denied, however, any knowledge of the existence of the contract and asserted that
it was never presented neither to him nor to the board of directors. Before a contract
can be ratified knowledge of its existence must, of course, be brought home to the
parties who have authority to ratify it or circumstances must be shown from which
such knowledge may be presumed. No such knowledge or circumstances have been
shown here. That the president of the corporation saw the plaintiffs working in its
office is of little significance; there were other printers working there at that time and
as the president had nothing to do with their employment, it was hardly to be
expected that be would inquire into the terms of their contracts. Moreover, a
ratification by him would have been of no avail; in order to validate a contract, a
ratification by the board of directors was necessary. The fact that the president was
required by the by-laws to sign the documents evidencing contracts of the
corporation, does not mean that he had power to make the contracts.
In his decision his Honor, the learned judge of the court below appears to have placed
some weight on a notice inserted in the January 14th issue of the Kong Li Po by T. C.
Chen and which, in translation, reads as follows: To Whom It May Concern:
Announcement is hereby given that thereafter all contracts, agreements and receipts
are considered to be null and void unless duly signed by T. C. Chen, General Manager
of this paper. This is signed by Chen. This notice led the plaintiffs to think that Chen
had authority to make the contract. It may further be observed that the notice confers
no special powers, but is, in effect, only an assertion by Chen that he would recognize
no contracts, agreements, and receipts not duty signed by him. It may be presumed
that the contracts, agreements, and receipts were such as were ordinarily made in the
course of the business of managing the newspaper. There is no evidence to show that
the notice was ever brought to the attention of the officers of the defendant
corporation.
Held: The judgment appealed from is reversed and the defendant corporation is
absolved from the complaint.
Concurring (Street)
There must be a limit somewhat upon the authority of a manager with respect to the
duration of contracts which he makes for the corporation, and my eye has fallen upon
no decision in which contract for the period of three years, or longer, has been upheld
on the bare fact that the contract was made by a manager, though there are case in
which contracts for the period of only one year have been sustained.
But no presumption of law can be indulged in that, because as person acts as such a
manager, he has the power to bind his principal to contracts of an extraordinary
nature, and of such a character as would involved the corporation in enormous
obligations and for long periods of time.
Dissenting (Malcolm)
Defendant corporation held T. C. Chen out to the public as the business manager of
the newspaper Kong Li Po and clothes him with apparent authority to bind the
corporation. The president of the corporation admitted as much on the witness stand,
while public announcement was made [Notice].
The action of the business manager was thus ratified by his superior officers and they
are now in estoppel to deny such ratification. As held in the case of Macke vs.
Camps ([1907], 7 Phil., 553), one who clothes another with apparent authority as his
agent and holds him out to the public as such, cannot be permitted to deny the
authority of such person to act as his agent in good faith and in the honest belief that
he is what he appears to be. Unless the contrary appears, the authority of an agent
must be presumed to include all the necessary and usual means of carrying his agency
into effect.
Dealing with corporations the public at large is bound to rely to a large extent upon
outward appearances. If a man is found acting for a corporation with the external
indicia of authority, any person, not having notice of want of authority, may usually
rely upon those appearances; and if it be found that the directors had permitted the
agent to exercise that authority and thereby held him out as a person competent to
bind the corporation, or had acquiesced in a contract and retained the benefit
supposed to have been conferred by it, the corporation will be bound,
notwithstanding the actual authority may never have been granted. The public is not
supposed nor required to know the transactions which happen around the table where
the corporate board of directors or the stockholders are from time to time convoked.
Whether as particular officer actually possesses the authority which he assumes to
exercise is frequently known to very few, and the proof of it usually is not readily
accessible to the stranger who deals with the corporation on the faith of the ostensible
authority exercised by some of the corporate officers. It is therefore reasonable, in a
case where an officer of a corporation has made a contract in its name, that the
corporation should be required, if it denies his authority, to state such defense in its
answer. [Merchant vs. International Banking Corporation, supra, and other cases ]
[G.R. No. 126006. January 29, 2004]
LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN, petitioners, vs. COURT OF APPEALS
(Seventeenth Division) and ALLIED BANKING CORP., respondents
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by the Lapulapu
Foundation, Inc. and Elias Q. Tan seeking to reverse and set aside the Decision[1] dated
June 26, 1996 of the Court of Appeals (CA) in CA-G.R. CV No. 37162 ordering the
petitioners, jointly and solidarily, to pay the respondent Allied Banking Corporation the
amount of P493,566.61 plus interests and other charges. Likewise, sought to be
reversed and set aside is the appellate courts Resolution dated August 19, 1996
denying the petitioners motion for reconsideration.
The case stemmed from the following facts:
Sometime in 1977, petitioner Elias Q. Tan, then President of the co-petitioner
Lapulapu Foundation, Inc., obtained four loans from the respondent Allied Banking
Corporation covered by four promissory notes in the amounts of P100,000 each. The
details of the promissory notes are as follows:
P/N No. Date of P/N Maturity Date Amount as of 1/23/79
BD No. 504 Nov. 7, 1977 Feb. 5, 1978 P123,377.76
BD No. 621 Nov. 28, 1977 Mar. 28, 1978 P123,411.10
BD No. 716 Dec. 12, 1977 Apr. 11, 1978 P122,322.21
BD No. 839 Jan. 5, 1978 May 5, 1978 P120,455.54[2]
As of January 23, 1979, the entire obligation amounted to P493,566.61 and
despite demands made on them by the respondent Bank, the petitioners failed to pay
the same. The respondent Bank was constrained to file with the Regional Trial Court
of Cebu City, Branch 15, a complaint seeking payment by the petitioners, jointly and
solidarily, of the sum of P493,566.61 representing their loan obligation, exclusive of
interests, penalty charges, attorneys fees and costs.
In its answer to the complaint, the petitioner Foundation denied incurring
indebtedness from the respondent Bank alleging that the loans were obtained by
petitioner Tan in his personal capacity, for his own use and benefit and on the strength
of the personal information he furnished the respondent Bank. The petitioner
Foundation maintained that it never authorized petitioner Tan to co-sign in his capacity
as its President any promissory note and that the respondent Bank fully knew that the
loans contracted were made in petitioner Tans personal capacity and for his own use
and that the petitioner Foundation never benefited, directly or indirectly, therefrom.
The petitioner Foundation then interposed a cross-claim against petitioner Tan
alleging that he, having exceeded his authority, should be solely liable for said loans,
and a counterclaim against the respondent Bank for damages and attorneys fees.
For his part, petitioner Tan admitted that he contracted the loans from the
respondent Bank in his personal capacity. The parties, however, agreed that the loans
were to be paid from the proceeds of petitioner Tans shares of common stocks in the
Lapulapu Industries Corporation, a real estate firm. The loans were covered by
promissory notes which were automatically renewable (rolled-over) every year at an
amount including unpaid interests, until such time as petitioner Tan was able to pay
the same from the proceeds of his aforesaid shares.
According to petitioner Tan, the respondent Banks employee required him to
affix two signatures on every promissory note, assuring him that the loan documents
would be filled out in accordance with their agreement. However, after he signed and
delivered the loan documents to the respondent Bank, these were filled out in a
manner not in accord with their agreement, such that the petitioner Foundation was
included as party thereto. Further, prior to its filing of the complaint, the respondent
Bank made no demand on him.
After due trial, the court a quo rendered judgment the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing evidences [sic], arguments and considerations,
this court hereby finds the preponderance of evidence in favor of the plaintiff and
hereby renders judgment as follows:
1. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc. [the petitioners
herein] to pay jointly and solidarily to the plaintiff Allied Banking Corporation [the
respondent herein] the amount of P493,566.61 as principal obligation for the four
promissory notes, including all other charges included in the same, with interest at 14%
per annum, computed from January 24, 1979, until the same are fully paid, plus 2%
service charges and 1% monthly penalty charges.
2. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly
and solidarily, attorneys fees in the equivalent amount of 25% of the total amount due
from the defendants on the promissory notes, including all charges;
3. Requiring the defendants Elias Q. Tan and Lapulapu Foundation, Inc., to pay jointly
and solidarily litigation expenses of P1,000.00 plus costs of the suit.[3]
 On appeal, the CA affirmed with modification the judgment of the court a quo by
deleting the award of attorneys fees in favor of the respondent Bank for being without
basis.
The appellate court disbelieved petitioner Tans claim that the loans were his
personal loans as the promissory notes evidencing them showed upon their faces that
these were obligations of the petitioner Foundation, as contracted by petitioner Tan
himself in his official and personal character. Applying the parol evidence rule, the CA
likewise rejected petitioner Tans assertion that there was an unwritten agreement
between him and the respondent Bank that he would pay the loans from the proceeds
of his shares of stocks in the Lapulapu Industries Corp.
Further, the CA found that demand had been made by the respondent Bank on
the petitioners prior to the filing of the complaint a quo. It noted that the two letters
of demand dated January 3, 1979[4] and January 30, 1979[5] asking settlement of the
obligation were sent by the respondent Bank. These were received by the petitioners
as shown by the registry return cards[6] presented during trial in the court a quo.
Finally, like the court a quo, the CA applied the doctrine of piercing the veil of
corporate entity in holding the petitioners jointly and solidarily liable. The evidence
showed that petitioner Tan had represented himself as the President of the petitioner
Foundation, opened savings and current accounts in its behalf, and signed the loan
documents for and in behalf of the latter. The CA, likewise, found that the petitioner
Foundation had allowed petitioner Tan to act as though he had the authority to
contract the loans in its behalf. On the other hand, petitioner Tan could not escape
liability as he had used the petitioner Foundation for his benefit.
Aggrieved, the petitioners now come to the Court alleging that:
I. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE LOANS
SUBJECT MATTER OF THE INSTANT PETITION ARE ALREADY DUE AND
DEMANDABLE DESPITE ABSENCE OF PRIOR DEMAND.
II. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE PAROL
EVIDENCE RULE AND THE DOCTRINE OF PIERCING THE VEIL OF
CORPORATE ENTITY AS BASIS FOR ADJUDGING JOINT AND SOLIDARY
LIABILITY ON THE PART OF PETITIONERS ELIAS Q. TAN AND LAPULAPU
FOUNDATION, INC.[7]
The petitioners assail the appellate courts finding that the loans had become due
and demandable in view of the two demand letters sent to them by the respondent
Bank. The petitioners insist that there was no prior demand as they vigorously deny
receiving those letters. According to petitioner Tan, the signatures on the registry
return cards were not his.
The petitioners denial of receipt of the demand letters was rightfully given scant
consideration by the CA as it held:
Exhibits R and S are two letters of demand, respectively dated January 3, 1979 and
January 30, 1979, asking settlement of the obligations covered by the promissory
notes. The first letter was written by Ben Tio Peng Seng, Vice-President of the bank,
and addressed to Lapulapu Foundation, Inc., attention of Mr. Elias Q. Tan, President,
while the second was a final demand written by the appellees counsel, addressed to
both defendants-appellants, and giving them five (5) days from receipt within which
to settle or judicial action would be instituted against them. Both letters were duly
received by the defendants, as shown by the registry return cards, marked as Exhibits
R-2 and S-1, respectively. The allegation of Tan that he does not know who signed the
said registry return receipts merits scant consideration, for there is no showing that
the addresses thereon were wrong. Hence, the disputable presumption that a letter
duly directed and mailed was received in the regular course of mail (per par. V, Section
3, Rule 131 of the Revised Rules on Evidence) still holds.[8]
There is no dispute that the promissory notes had already matured. However, the
petitioners insist that the loans had not become due and demandable as they deny
receipt of the respondent Banks demand letters. When presented the registry return
cards during the trial, petitioner Tan claimed that he did not recognize the signatures
thereon. The petitioners allegation and denial are self-serving. They cannot prevail
over the registry return cards which constitute documentary evidence and which enjoy
the presumption that, absent clear and convincing evidence to the contrary, these
were regularly issued by the postal officials in the performance of their official duty
and that they acted in good faith.[9] Further, as the CA correctly opined, mails are
presumed to have been properly delivered and received by the addressee in the
regular course of the mail.[10] As the CA noted, there is no showing that the addresses
on the registry return cards were wrong. It is the petitioners burden to overcome the
presumptions by sufficient evidence, and other than their barefaced denial, the
petitioners failed to support their claim that they did not receive the demand letters;
therefore, no prior demand was made on them by the respondent Bank.
Having established that the loans had become due and demandable, the Court
shall now resolve the issue of whether the CA correctly held the petitioners jointly and
solidarily liable therefor.
In disclaiming any liability for the loans, the petitioner Foundation maintains that
these were contracted by petitioner Tan in his personal capacity and that it did not
benefit therefrom. On the other hand, while admitting that the loans were his personal
obligation, petitioner Tan avers that he had an unwritten agreement with the
respondent Bank that these loans would be renewed on a year-to-year basis and paid
from the proceeds of his shares of stock in the Lapulapu Industries Corp.
These contentions are untenable.
The Court particularly finds as incredulous petitioner Tans allegation that he was
made to sign blank loan documents and that the phrase IN MY OFFICIAL/PERSONAL
CAPACITY was superimposed by the respondent Banks employee despite petitioner
Tans protestation. The Court is hard pressed to believe that a businessman of names of the corporation, and signed the application form as well as the necessary
petitioner Tans stature could have been so careless as to sign blank loan documents. specimen signature cards (Exhibits A, B and C) twice, for himself and for the
foundation. He submitted a notarized Secretarys Certificate (Exhibit G) from the
In contrast, as found by the CA, the promissory notes[11] clearly showed upon corporation, attesting that he has been authorized, inter alia, to sign for and in behalf
their faces that they are the obligation of the petitioner Foundation, as contracted by of the Lapulapu Foundation any and all checks, drafts or other orders with respect to
petitioner Tan in his official and personal capacity.[12] Moreover, the application for the bank; to transact business with the Bank, negotiate loans, agreements,
credit accommodation,[13] the signature cards of the two accounts in the name of obligations, promissory notes and other commercial documents; and to initially obtain
petitioner Foundation,[14] as well as New Current Account Record,[15] all accompanying a loan for P100,000.00 from any bank (Exhibits G-1 and G-2). Under these
the promissory notes, were signed by petitioner Tan for and in the name of the circumstances, the defendant corporation is liable for the transactions entered into by
petitioner Foundation.[16]These documentary evidence unequivocally and categorically Tan on its behalf.[20]
establish that the loans were solidarily contracted by the petitioner Foundation and
petitioner Tan.
Per its Secretarys Certificate, the petitioner Foundation had given its President,
As a corollary, the parol evidence rule likewise constrains this Court to reject petitioner Tan, ostensible and apparent authority to inter alia deal with the respondent
petitioner Tans claim regarding the purported unwritten agreement between him and Bank. Accordingly, the petitioner Foundation is estopped from questioning petitioner
the respondent Bank on the payment of the obligation. Section 9, Rule 130 of the of Tans authority to obtain the subject loans from the respondent Bank. It is a familiar
the Revised Rules of Court provides that [w]hen the terms of an agreement have been doctrine that if a corporation knowingly permits one of its officers, or any other agent,
reduced to writing, it is to be considered as containing all the terms agreed upon and to act within the scope of an apparent authority, it holds him out to the public as
there can be, between the parties and their successors-in-interest, no evidence of such possessing the power to do those acts; and thus, the corporation will, as against
terms other than the contents of the written agreement.[17] anyone who has in good faith dealt with it through such agent, be estopped from
denying the agents authority.[21]
In this case, the promissory notes are the law between the petitioners and the
respondent Bank. These promissory notes contained maturity dates as follows: In fine, there is no cogent reason to deviate from the CAs ruling that the
February 5, 1978, March 28, 1978, April 11, 1978 and May 5, 1978, respectively. That these petitioners are jointly and solidarily liable for the loans contracted with the respondent
notes were to be paid on these dates is clear and explicit. Nowhere was it stated Bank.
therein that they would be renewed on a year-to-year basis or rolled-over annually until
WHEREFORE, premises considered, the petition is DENIED and the Decision
paid from the proceeds of petitioner Tans shares in the Lapulapu Industries Corp.
dated June 26, 1996 and Resolution dated August 19, 1996 of the Court of Appeals in
Accordingly, this purported unwritten agreement could not be made to vary or
CA-G.R. CV No. 37162 are AFFIRMED in toto.
contradict the terms and conditions in the promissory notes.
SO ORDERED.
Evidence of a prior or contemporaneous verbal agreement is generally not
admissible to vary, contradict or defeat the operation of a valid contract.[18] While parol
evidence is admissible to explain the meaning of written contracts, it cannot serve the
purpose of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in writing, unless there has been fraud or mistake.[19] No
such allegation had been made by the petitioners in this case.
Finally, the appellate court did not err in holding the petitioners jointly and
solidarily liable as it applied the doctrine of piercing the veil of corporate entity. The
petitioner Foundation asserts that it has a personality separate and distinct from that
of its President, petitioner Tan, and that it cannot be held solidarily liable for the loans
of the latter.
The Court agrees with the CA that the petitioners cannot hide behind the
corporate veil under the following circumstances:

The evidence shows that Tan has been representing himself as the President of
Lapulapu Foundation, Inc. He opened a savings account and a current account in the
Lapu-Lapu Foundation vs CA Case Digest in favor of the Bank for being without basis. Tan and the foundation filed the petition
Lapu-Lapu Foundation vs. Court of Appeals for review on certiorari.
[GR 126006, 29 January 2004]
Issue:
Facts: Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc., 1. Whether Tan and the foundation should be held jointly and solidarily
obtained four loans from Allied Banking Corporation covered by four promissory notes liable.
in the amounts of P100,000 each. As of 23 January 1979, the entire obligation 2. Whether the foundation gave Tan an apparent authority to deal with
amounted to P493,566.61 and despite demands made on them by the Bank, Tan and the Bank.
the foundation failed to pay the same. The Bank was constrained to file with the
Held:
Regional Trial Court of Cebu City, Branch 15, a complaint seeking payment by Tan and
the foundation, jointly and solidarily, of the sum of P493,566.61 representing their loan
1. The appellate court did not err in holding Tan and the foundation jointly and solidarily
obligation, exclusive of interests, penalty charges, attorney’s fees and costs. In its
liable as it applied the doctrine of piercing the veil of corporate entity. Tan and the
answer to the complaint, the Foundation denied incurring indebtedness from the Bank
foundation cannot hide behind the corporate veil under the following circumstances:
alleging that the loans were obtained by Tan in his personal capacity, for his own use
"The evidence shows that Tan has been representing himself as the President of
and benefit and on the strength of the personal information he furnished the Bank.
Lapulapu Foundation, Inc. He opened a savings account and a current account in the
The Foundation maintained that it never authorized Tan to co-sign in his capacity as its
names of the corporation, and signed the application form as well as the necessary
President any promissory note and that the Bank fully knew that the loans contracted
specimen signature cards twice, for himself and for the foundation. He submitted a
were made in Tan’s personal capacity and for his own use and that the Foundation
notarized Secretary’s Certificate from the corporation, attesting that he has been
never benefited, directly or indirectly, therefrom.
authorized, inter alia, to sign for and in behalf of the Lapulapu Foundation any and all
checks, drafts or other orders with respect to the bank; to transact business with the
The Foundation then interposed a cross-claim against Tan alleging that he, having
Bank, negotiate loans, agreements, obligations, promissory notes and other
exceeded his authority, should be solely liable for said loans, and a counterclaim
commercial documents; and to initially obtain a loan for P100,000.00 from any bank.
against the Bank for damages and attorney’s fees. For his part, Tan admitted that he
Under these circumstances, the foundation is liable for the transactions entered into
contracted the loans from the Bank in his personal capacity. The parties, however,
by Tan on its behalf.
agreed that the loans were to be paid from the proceeds of Tan’s shares of common
2. Per its Secretary’s Certificate, the Foundation had given its President, Tan, ostensible
stocks in the Lapulapu Industries Corporation, a real estate firm. The loans were
and apparent authority to inter alia deal with the Bank. Accordingly, the Foundation is
covered by promissory notes which were automatically renewable (“rolled-over”)
estopped from questioning Tan’s authority to obtain the subject loans from the
every year at an amount including unpaid interests, until such time as Tan was able to
respondent Bank. It is a familiar doctrine that if a corporation knowingly permits one
pay the same from the proceeds of his aforesaid shares. According to Tan, the Bank’s
of its officers, or any other agent, to act within the scope of an apparent authority, it
employee required him to affix two signatures on every promissory note, assuring him
holds him out to the public as possessing the power to do those acts; and thus, the
that the loan documents would be filled out in accordance with their agreement.
corporation will, as against anyone who has in good faith dealt with it through such
However, after he signed and delivered the loan documents to the Bank, these were
agent, be estopped from denying the agent’s authority.
filled out in a manner not in accord with their agreement, such that the Foundation
was included as party thereto. Further, prior to its filing of the complaint, the Bank
made no demand on him.

After due trial, the court rendered judgment (1) requiring Tan and the Foundation to
pay jointly and solidarily to the Bank the amount of P493,566.61 as principal obligation
for the four promissory notes, including all other charges included in the same, with
interest at 14% per annum, computed from 24 January 1979, until the same are fully
paid, plus 2% service charges and 1% monthly penalty charges; (2) requiring Tan and the
Foundation to pay jointly and solidarily, attorney’s fees in the equivalent amount of
25% of the total amount due from them on the promissory notes, including all charges;
and (3) requiring Tan and the Foundation to pay jointly and solidarily litigation
expenses of P1,000.00 plus costs of the suit. On appeal, the CA affirmed with
modification the judgment of the court a quo by deleting the award of attorney’s fees
G.R. No. L-18805 August 14, 1967
THE BOARD OF LIQUIDATORS1 representing THE GOVERNMENT OF THE REPUBLIC OF
THE PHILIPPINES, plaintiff-appellant,
vs.
HEIRS OF MAXIMO M. KALAW,2 JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO
GARCIA,3 and LEONOR MOLL, defendants-appellees.
SANCHEZ, J.:
The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit
governmental organization avowedly for the protection, preservation and
development of the coconut industry in the Philippines. General manager and board
chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro Garcia were
members of the Board; defendant Leonor Moll became director only on December 22,
1947.
An unhappy chain of events conspired to deter NACOCO from fulfilling some contracts
entered. Nature supervened. Four devastating typhoons visited the Philippines: the
first in October, the second and third in November, and the fourth in December, 1947.
Coconut trees throughout the country suffered extensive damage. Copra production
decreased. Prices spiralled. Warehouses were destroyed. Cash requirements doubled.
Deprivation of export facilities increased the time necessary to accumulate shiploads
of copra. Quick turnovers became impossible, financing a problem.
The buyers threatened damage suits. All the settlements sum up to P1,343,274.52.
NACOCO, represented by the Board of Liquidators, seeks to recover the above sum of
P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and
directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with
negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code);
and defendant board members, including Kalaw, with bad faith and/or breach of trust
for having approved the contracts without prior approval of the Board.
The lower court came out with a judgment dismissing the complaint. Hence, plaintiff
appealed direct to this Court. Plaintiff levelled a major attack on the lower court's
holding that Kalaw justifiedly entered into the controverted contracts without the
prior approval of the corporation's directorate. Plaintiff leans heavily on NACOCO's
corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst the duties of
the general manager, the obligation: "(b) To perform or execute on behalf of the
Corporation upon prior approval of the Board, all contracts necessary and essential to
the proper accomplishment for which the Corporation was organized.”
ISSUE: Whether or not the acts of the respondent as General Manager without prior
approval of the Board are valid corporate acts.
HELD:
Not of de minimis importance in a proper approach to the problem at hand, is the
nature of a general manager's position in the corporate structure. A rule that has
gained acceptance through the years is that a corporate officer "intrusted with the
general management and control of its business, has implied authority to make any
contract or do any other act which is necessary or appropriate to the conduct of the
ordinary business of the corporation. As such officer, "he may, without any special
authority from the Board of Directors perform all acts of an ordinary nature, which by
usage or necessity are incident to his office, and may bind the corporation by contracts
in matters arising in the usual course of business.
Settled jurisprudence has it that where similar acts have been approved by the
directors as a matter of general practice, custom, and policy, the general manager may
bind the company without formal authorization of the board of directors. In varying
language, existence of such authority is established, by proof of the course of business,
the usage and practices of the company and by the knowledge which the board of
directors has, or must be presumed to have, of acts and doings of its subordinates in
and about the affairs of the corporation.
In the case at bar, the practice of the corporation has been to allow its general
manager to negotiate and execute contracts in its copra trading activities for and in
NACOCO's behalf without prior board approval. If the by-laws were to be literally
followed, the board should give its stamp of prior approval on all corporate contracts.
But that board itself, by its acts and through acquiescence, practically laid aside the by-
law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts.
Viewed in the light of the entire record, the judgment under review must be, as it is
hereby, affirmed.
G.R. No.176897 December 11, 2013 !
ADVANCE PAPER CORPORATION and GEORGE HAW, in his capacity as President
of Advance Paper Corporation, Petitioners,
vs.
ARMA TRADERS CORPORATION, MANUEL TING, CHENG GUI and BENJAMIN NG,
Respondents. !
x-------------------------------------------------x !
ANTONIO TAN and UY SENG KEE WILLY, Respondents. !
FACTS: !
Advance Paper is a domestic corporation engaged in the business of producing,
printing, manufacturing, distributing and selling of various paper products where
George Haw is President and his wife, Connie Haw is the General Manager. Arma
Traders is also a domestic corporation engaged in the wholesale and distribution of
school and office supplies, and novelty products where Antonio Tan (Tan) was
formerly the President while respondent Uy Seng Kee Willy (Uy) is the Treasurer of
Arma Traders. They represented Arma Traders when dealing with its supplier, Advance
Paper, for about 14 years. Manuel Ting, Cheng Gui and Benjamin Ng worked for Arma
Traders as Vice-President, General Manager and Corporate Secretary, respectively.
From September to December 1994, Arma traders purchased, on credit, notebooks
another paper products amounting to 7.5 million from Advance Paper. Because of
Arma Trader’s good relations with Advanced Paper, Uy and Tan were able to obtain
loans from Advanced Paper amounting to 7.7 million in order to pay their obligation to
other suppliers. Tan and Uy issued 82 postdated checks payable to cash or to Advance
Paper with an aggregate amount of 15. 1 million pesos. !
Advance Paper presented the checks to drawee bank but were dishonoured either
because "insufficiency of funds" or "account closed”. Arma Traders failed to settle its
account with Advance Paper. On December 29, 1994, the petitioners filed a complaint
for collection of sum of money with application for preliminary attachment against
Arma Traders, Tan, Uy, Ting, Gui, and Ng.
Claims of the Petitioner: The petitioners claimed that the respondents fraudulently
issued the postdated checks as payment for the purchases and loan transactions
knowing that they did not have sufficient funds with the drawee banks. Arma Traders
led the petitioners to believe that Tan and Uy had the authority to obtain loans since
the respondents left the active and sole management of the company to Tan and Uy
since 1984. In fact, Ng
testified that Arma Traders’ stockholders and board of directors never conducted a
meeting from 1984 to 1995. Therefore, if the respondents’ position will be sustained,
they will have the absurd power to question all the business transactions of Arma
Traders. Citing Lipat v. Pacific Banking Corporation, the petitioners said that if a
corporation knowingly permits
one of its officers 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; 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.
Claims of the Respondent: the loan transactions were ultra vires because the board of
directors of Arma Traders did not issue a board resolution authorising Tan and Uy to
obtain
the loans from Advance Paper. They claimed that the borrowing of money must be
done only with the prior approval of the board of directors because without the
approval, the corporate officers are acting in excess of their authority of ultra vires.
When the acts of the corporate officers are ultra vires, the corporation is not liable
for whatever acts that these officers committed in excess of their authority. Further,
the respondents claimed that Advance Paper failed to verify Tan and Uy’s authority to
transact business with them. Hence, Advance Paper should suffer the consequences.
RTC Ruling: The RTC ruled that the purchases on credit and loans were sufficiently
proven by the petitioners. Hence, the RTC ordered Arma Traders to pay Advance Paper
the sum of P15,321,798.25 with interest, and P1,500,000.00 for attorney’s fees, plus the
cost of the suit. RTC dismissed the complaint against Tan, Uy, Ting, Gui and Ng due to
the lack of evidence showing that they bound themselves, either jointly or solidarily,
with Arma Traders for the payment of its account.
CA Ruling: RTC ruling was set aside. The CA held that the petitioners failed to prove by
preponderance of evidence the existence of the purchases on credit and loans based
on the following:
1. Arma Traders was not liable for the loan in the absence of a board resolution
authorizing Tan and Uy to obtain the loan from Advance Paper. The authority to sign
the checks is different from the required authority to contract a loan.
2. The CA also held that the petitioners presented incompetent and inadmissible
evidence to prove the purchases on credit since the sales invoices were hearsay.
identification of the sales invoices was not an exception to the hearsay rule.
3. Petitioners failed to satisfactorily rebut the badges of fraud.
ISSUE:
Whether Arma Traders is liable to pay the loans applying the doctrine of apparent
authority?
RULING:

Arma Traders is liable to pay the loans on the basis of the doctrine of apparent
authority.

The doctrine of apparent authority provides that a corporation will be estopped from
denying the agent’s authority if it knowingly permits one of its officers or any other
agent to act within the scope of an apparent authority, and it holds him out to the
public as possessing the power to do those acts. The doctrine of apparent authority
does not apply if the principal did not commit any acts or conduct which a third party
knew and relied upon in good faith as a result of the exercise of reasonable prudence.
Moreover, the agent’s acts or conduct must have produced a change of position to the
third party’s detriment.

A corporate officer or agent may represent and bind the corporation in transactions
with third persons to the extent that [the] authority to do so has been conferred upon
him, and this includes powers as, in the usual course of the particular business, are
incidental to, or may be implied from, the powers intentionally conferred, powers
added by custom and usage, as usually pertaining to the particular officer or agent,
and such apparent powers
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
Topic: Labor dispute v intra-corporate dispute
FACTS
Cosare filed a complaint against the respondents for constructive dismissal, illegal
suspension, and monetary claims with the NLRC.
Cosare's claims:
1. He was first hired by respondent Arevalo (President of respondent
Broadcom Asia) as a salesman, when the latter was still selling broadcast
equipment to television networks and production houses.
2. When Arevalo set up Broadcom in December 2000 to continue his business,
Cosare was named an incorporator of Broadcom. He was assigned 100
shares of stock with par value of P1.00 per share. Later, in October of 2001
Cosare was promoted to AVP for Sales and Head of Technical Coordination.
3. In March 23, 2009, Cosare sent a confidential memo to Arevalo to inform
him of the anomalies being committed by Alex Abiog (VP for Sales, Cosare’s
immediate supervisor).
4. Arevalo failed to act on the said information.
5. In March 25, 2009, Cosare was called for a meeting by Arevalo where he
was asked to resign in exchange for "financial assistance" of P300k. When
he refused to comply, Arevalo sent him a memo charging him of serious
misconduct and willful breach of trust on March 30, 2009. He was given 48
hours from the date of the memo within which to present his explanation
on the charges.
6. On March 31, 2009, Cosare was suspended from having access to company
files and records and precluded from reporting for work. On April 1, 2009, he
was totally barred from entering the company premises.
7. He tried to furnish the company with a Memo where he addressed and
denied the accusations against him. The respondents refused to receive the
memo on the ground of late filing, hence, Cosare served a copy of the same
by registered mail. On April 3, 2009, he filed a labor complaint against the
respondents.
Respondents' claims:
1. Cosare was neither illegally suspended nor dismissed from employment. He
abandoned his job by continually failing to report for work beginning April 1,
2009, prompting them to issue on April 14 a memo accusing Cosare of
absence without leave beginning April 1.
2. Cosare committed the ff acts inimical to the interests of Broadcom:
 he failed to sell any broadcast equipment since 2007
 he attempted to sell a camera sourced from a competitor
 he made an unauthorized request in Broadcom's name for its
principal, Panasonic USA, to issue an invitation for Cosare's friend,
Alex Paredes, to attend the National Association of Broadcasters'
Conference in Las Vegas.
Labor Arbiter dismissed the complaint on the ground of Cosare's failure to establish
that he was dismissed from employment. NLRC ruled in favor of Cosare, finding the
respondents guilty of constructive illegal dismissal, on the conclusion that he was
constructively dismissed when he was asked to resign from his employment.
Respondents appealed to the CA. During the pendency of their appeal, they raised a
new argument, stating that the case involved an intra-corporate controversy which
was within the jurisdiction of the RTC, and not of the LA. They argued that the case
involved a complaint against a corporation filed by a stockholder, who, at the same
time, was a corporate officer. CA granted the respondents' petition and dismissed
the labor complain for lack of jurisdiction. It ruled that the case involved an intra-
corporate controversy which, pursuant to PD 902-A was within the exclusive
jurisdiction of the RTC. The CA reasoned that Cosare was a stockholder of Broadcom
and he was listed as one of its directors. He also held the position of AVP for Sales
which was listed as a corporate office, and which was allowed by Broadcom’s by-
laws, and under Sec. 25 of the Corporation Code (see Note*). The respondents were
also able to present substantial evidence that Cosare held a corporate office through
the General Information Sheet they submitted to the SEC on October of 2009.
Hence, this petition.
ISSUES
1. WON the case instituted by Cosare was an intra-corporate dispute that was within
the original jurisdiction of the RTC, and not of the LAs;
2. WON Cosare was constructively and illegally dismissed from employment by the
respondents
RULING
1. It is not an intra-corporate dispute, hence, it is the Labor Arbiter, not the regular
courts which has the original jurisdiction over the subject controversy.
An intra-corporate controversy, which falls within the jurisdiction of regular courts,
pertains to disputes that involve any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the corporation,
partnership or association and the state in so far as its franchise, permit or license to
operate is concerned; (3) between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates, themselves. Settled jurisprudence, however, qualifies that
when the dispute involves a charge of illegal dismissal, the action may fall under the
jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes
and claims for damages arising from employer-employee relations as provided in
Article 217 of the Labor Code. Consistent with this jurisprudence, the mere fact that
Cosare was a stockholder and an officer of Broadcom at the time the subject
controversy developed failed to necessarily make the case an intra-corporate
dispute.
In Matling Industrial and Commercial Corporation v. Coros, it was explained that “the
determination of whether the dismissed officer was a regular employee or corporate
officer unravels the conundrum" of whether a complaint for illegal dismissal is
cognizable by the LA or by the RTC. "In case of the regular employee, the LA has
jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate. Applying
the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for
being its AVP for Sales, was not a "corporate officer" as the term is defined by law.
Corporate officers are those officers of the corporation who are given that character
by the Corporation Code or by the corporation’s by-laws. Xxx (Real v Sangu
Philippines, Inc., citing Eastern Telecommunications Philippines, Inc.)
There are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely: (1)
the creation of the position is under the corporation’s charter or by-laws; and (2) the
election of the officer is by the directors or stockholders. It is only when the officer
claiming to have been illegally dismissed is classified as such corporate officer that
the issue is deemed an intra-corporate dispute which falls within the jurisdiction of
the trial courts.
The respondents referred to Section 1, Article IV of the Broadcom's by-laws (See
Note*) to support their argument that Cosare was a corporate officer. The Court
disagrees. As may be gleaned from the aforequoted provision, the only officers who
are specifically listed, and thus with offices that are created under Broadcom’s by-
laws are the following: the President, Vice-President, Treasurer and Secretary.
Although a blanket authority provides for the Board’s appointment of such other
officers as it may deem necessary and proper, the respondents failed to sufficiently
establish that the position of AVP for Sales was created by virtue of an act of
Broadcom’s board, and that Cosare was specifically elected or appointed to such
position by the directors. No board resolutions to establish such facts form part of
the case records. Further, it was held in Marc II Marketing, Inc. v. Joson that an
enabling clause in a corporation’s by-laws empowering its board of directors to
create additional officers, even with the subsequent passage of a board resolution to
that effect, cannot make such position a corporate office. The board of directors has
no power to create other corporate offices without first amending the corporate by-
laws so as to include therein the newly created corporate office.
Moreover, the General Information Sheets which provided that Cosare was an
"officer" of Broadcom was misplaced. The said documents could neither govern nor
establish the nature of the office held by Cosare and his appointment thereto.
Although Cosare could indeed be classified as an officer as provided in the General
Information Sheets, his position could only be deemed a regular office, and not a
corporate office as it is defined under the Corporation Code.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the
case’s filing did not necessarily make the action an intra- corporate controversy. Time
and again, the Court has ruled that in determining the existence of an intra-
corporate dispute, the (1) status or relationship of the parties and (2) the nature of
the question that is the subject of the controversy must be taken into account.
Considering that the pending dispute particularly relates to Cosare’s rights and
obligations as a regular officer of Broadcom, instead of as a stockholder of the
corporation, the controversy cannot be deemed intra-corporate. This is consistent
with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142, to wit:
Under the nature of the controversy test, the incidents of that relationship must also
be considered for the purpose of ascertaining whether the controversy itself is intra-
corporate. The controversy must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the parties’
correlative rights and obligations under the Corporation Code and the internal and
intra-corporate regulatory rules of the corporation. If the relationship and its
incidents are merely incidental to the controversy or if there will still be conflict even
if the relationship does not exist, then no intra-corporate controversy exists.
It is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare
solely on the ground that the dispute was an intra-corporate controversy within the
jurisdiction of the regular courts.
2. There was constructive and illegal dismissal.
"Constructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the employee leaving the latter with
no other option but to quit." (The University of the Immaculate Conception v. NLRC,
citing La Rosa v. Ambassador Hotel)
The test of constructive dismissal is whether a reasonable person in the employee’s
position would have felt compelled to give up his position under the circumstances.
xxx (Dimagan v. Dacworks United, Incorporated)
In this case, the respondents were already resolute on a severance of their working
relationship with Cosare. The fact that no further investigation and final disposition
appeared to have been made by the respondents on Cosare’s case only negated the
claim that they actually intended to first look into the matter before making a final
determination as to the guilt or innocence of their employee. This also manifested
from the fact that even before Cosare was required to present his side on the
charges of serious misconduct and willful breach of trust, he was summoned to
Arevalo’s office and was asked to tender his immediate resignation in exchange for
financial assistance.

The clear intent of the respondents to find fault in Cosare was also manifested by
their persistent accusation that Cosare abandoned his post, allegedly signified by his
failure to report to work or file a leave of absence beginning April 1, 2009. As the
records clearly indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The charge of abandonment was inconsistent with this
imposed suspension. Cosare’s failure to report to work beginning April 1, 2009 was
neither voluntary nor indicative of an intention to sever his employment with
Broadcom. It was illogical to be requiring him to report for work, and imputing fault
when he failed to do so after he was specifically denied access to all of the company’s
assets.

PETITION GRANTED. NLRC DECISION REINSTATED.

*Note:
(from Broadcom’s By-Laws)
ARTICLE IV. OFFICER

Section 1. Election / Appointment – Immediately after their election, the Board of

Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.

The Board may, from time to time, appoint such other officers as it may determine to
be necessary or proper. Any two (2) or more compatible positions may be held
concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.

Case Digest: Grace Christian High School v.
CA
GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs. THE COURT OF
APPEALS, GRACE VILLAGE ASSOCIATION, INC., ALEJANDRO G.
BELTRAN, and ERNESTO L. GO, respondents.
G.R. No. 108905 October 23, 1997
MENDOZA, J.:
Petitioner Grace Christian High School is an educational institution located at
the Grace Village in Quezon City, while Private respondent Grace Village
Association, Inc. ["Association'] is an organization of lot and/or building
owners, lessees and residents at Grace Village.
The original 1968 by-laws provide that the Board of Directors, composed of
eleven (11) members, shall serve for one (1) year until their successors are
duly elected and have qualified.
On 20 December 1975, a committee of the board of directors prepared a
draft of an amendment to the
by-laws which provides that "GRACE CHRISTIAN HIGH SCHOOL
representative is a permanent
Director of the ASSOCIATION."
However, this draft was never presented to the general membership for
approval. Nevertheless, from 1975 to 1990, petitioner was given a permanent
seat in the board of directors of the association.
On 13 February 1990, the association's committee on election sought to
change the by-laws and informed the Petitioner's school principal "the
proposal to make the Grace Christian High School representative as a
permanent director of the association, although previously tolerated in the
past elections should be reexamined."
Following this advice, notices were sent to the members of the association
that the provision on election of directors of the 1968 by-laws of the
association would be observed. Petitioner requested the chairman of the
election committee to change the notice to honor the 1975 by-laws provision,
but was denied.
The school then brought suit for mandamus in the Home Insurance and
Guaranty Corporation (HIGC) to compel the board of directors to recognize
its right to a permanent seat in the board.
Meanwhile, the opinion of the SEC was sought by the association, and SEC
rendered an opinion to the effect that the practice of allowing unelected
members in the board was contrary to the existing by-laws of the association
and to §92 of the Corporation Code (B.P. Blg. 68). This was adopted by the
association in its Answer in the mandamus filed with the HIGC.
The HIGC hearing officer ruled in favor of the association, which decision
was affirmed by the HIGC Appeals Board and the Court of Appeals.
Issue: W/N the 1975 provision giving the petitioner a permanent board seat
was valid.
Ruling: No.
Section 23 of the Corporation Code (and its predecessor Section 28 and 29
of the Corporation Law) leaves no room for doubt that the Board of Directors
of a Corporation must be elected from among the stockholders or members.
There may be corporations in which there are unelected members in the
board but it is clear that in these instances, the unelected members sit as ex
officio members, i.e., by virtue of and for as long as they hold a particular
office (e.g. whoever is the Archbishop of Manila is considered a member of
the board of Cardinal Santos Memorial Hospital, Inc.)
But in the case of petitioner, there is no reason at all for its representative to
be given a seat in the board. Nor does petitioner claim a right to such seat by
virtue of an office held. In fact it was not given such seat in the beginning. It
was only in 1975 that a proposed amendment to the by-laws sought to give it
one.
Since the provision in question is contrary to law, the fact that it has gone
unchallenged for fifteen years cannot forestall a later challenge to its validity.
Neither can it attain validity through acquiescence because, if it is contrary to
law, it is beyond the power of the members of the association to waive its
invalidity.
It is more accurate to say that the members merely tolerated petitioner's
representative and tolerance cannot be considered ratification.
Nor can petitioner claim a vested right to sit in the board on the basis of
"practice." Practice, no matter how long continued, cannot give rise to any
vested right if it is contrary to law.
HELD: No. The Corporation Code is clear when it provides that
members of the board of a corporation must be elected by the
stockholders (stock corporation) or the members (non-stock
corporation). Admittedly, there are corporations who allow some of
their directors to sit in the board without being elected – but such
practice cannot prevail over provisions of law. Practice, no matter
how long continued, cannot give rise to any vested right if it is
contrary to law. Further, there is no reason as to why a
representative from GCHS should be given an automatic seat. It
should therefore go through the process of election. It cannot also
be argued that the draft of the by-laws in 1975 was ratified when
GCHS was allowed to take its seat for 15 years without an election.
In the first place, the proposal was merely a draft and even if passed
and approved by the general membership, it cannot be given effect
because it is void and contrary to the law. GCHS’ seat in the
corporate board is at best merely tolerated by GVAI.