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1. Aquila Riosa v.

Tabaco La Suerte Aquiles claims that the transfer of the property was done through fraud,
GR. No. 203786, Oct. 23, 2013 misrepresentation, and deed. Meanwhile, La Suerte claims to have obtained the
property from Aquiles on Dec. 7, 1990 and that they simply allowed Aquiles to
remain in possession of the property.
Doctrine: It is the board of directors or trustees which exercises among all the
corporate powers in a corporation, as provided under Sec. 23 of the Corporation RTC ruled in favor of Aquiles, citing the lack of consent upon his signing of
Code. Sec. 36 also provides that the power to purchase the real property is vested in the instrument of sale.
the board of directors of trustees. While a corporation may appoint agents to
CA reversed the RTC decision, holding that the tax declarations and realty
negotiate, the final say will have to be with the board, whose approval will finalize
tax payments made by Aquiles were not conclusive evidence of ownership.
the transactions. A corporation can only exercise its powers and transact its business
through its board of directors and through its officers and agents when authorized by Issue: W/N there was a perfected and valid contract of sale for the subject
a board resolution or its by-laws. As held in AF Realty & Development v. Dieselman property between Aquiles and La Suerte through its CEO, Sia Ko Pio? NO.
Freight Services, Co., absent any valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not Held:
in the course of or connected with the performance of the authorized duties of such
The elements of a contract of sale are: consent, determine subject matter,
director, are held not binding on the corporation.
and a price certain in moey or its equivalent. There is no clear and convincing
Recit-Ready Summary: Aquiles filed a Complaint for Annulment of a Deed and evidence that Aquiles definitely sold the subject property to La Suerte, nor was there
Absolute Sale against a TCT that was also transferred in Tabaco La Suerte’s name. evidence that La Suerte authorized its CEO, Sia Ko Pio, to negotiate and conclude a
He alleged that there was merely a loan transaction between him and Sia Ko Pio, and purchase of the property. His narration in open court is clear that he did not intend to
not a sale transaction between him and Aquiles and La Suerte, which La Suerte transfer ownership of his property.
insists was what took place. Aquiles was made to sign a document that he thought
The transactions involving the loan were between Aquiles and Sia Ko Pio,
was a mere acknowledgement of the loan transaction between him and Sia Ko Pio.
La Suerte insists that there was a sale transaction of the said lot with Sia Ko Pio and not between the parties. It was a transaction where Aquiles was the borrower,
being its representative/agent. The Court ruled in this case that there was no evidence while Siao Ko Pio was the lender. It was not one where Aquiles was a vendor and La
that the company allowed Sia Ko Pio to be its agent or representative, even if he Suerte was the vendee. There is also no basis for holding that the persona lloan of
Aquiles from Sia Ko Pio was the consideration for the sale of his property in favor of
were the company’s CEO. There was no board resolution showing such delegation of
La Suerte.
authority.
The alleged deed of sale bearing his signature bears no evidentiary value as
Facts:
there was no consent from him. He was not aware that the said document was an
On Feb. 26, 2002, Aquiles Riosa filed his Complaint for instrument of sale.
Annulment/Declaration of Nullity of Deed and Absolute Sale and Transfer
Certificate of Title, Reconveyance and Damages against Tabaco La Suerte. Aquiles His daughter had also spent Php300,000.00 for the renovation of the
alleged that he was the owner and in actual possession of a 52-square meter improvements, which is higher than the loan. La Suerte also did not ask him to
transfer the possession earlier.
commercial lot situated in Tabaco City. He acquired the said property through a deed
of cession and quitclaim from his parents. Since then, he had declared the property in CA should not have favorably considered the validity of the deed of
his name and has been paying the realty tax on the said property. His daughter even absolute sale absent any written authority from La Suerte’s board of drectors for Sia
renovated the commercial building. Ko Pio to negotiate and purchase Aquiles property on its behalf and to use its money
to pay the purchase price. When Siao Ko Pio’s son was presented as an officer of La
He obtained loans from Sia Ko Pio in the amount of Php50,000.00. Sia Ko
Suerte, he admitted that he could not find the records of the corporation of any board
Pio then asked for a photocopy of the deed of cession and quitclaim as a security for
resolution authorizing his father to purchase the disputed property.
the payment of loans. Sia Ko Pio presented to him a document which was said to be
a receipt, but Aquiles failed to read the document. Still, he signed the said document. It is the board of directors or trustees which exercises among all the
Later on, he received a letter from La Suerte that the subject lot was already corporate powers in a corporation, as provided under Sec. 23 of the Corporation
registered in its name. Code. Sec. 36 also provides that the power to purchase the real property is vested in

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the board of directors of trustees. While a corporation may appoint agents to Atrium Management Corporation filed an action for collection of the
negotiate, the final say will have to be with the board, whose approval will finalize proceeds of the proceeds of four postdated checks in the total amount of Php2M. Hi-
the transactions. A corporation can only exercise its powers and transact its business Cement through its corporate signatories issued checks in favor of E.t. Henry and Co
through its board of directors and through its officers and agents when authorized by as payee. E.T. Henry and Co endorsed the 4 checks to Atrium Management for
a board resolution or its by-laws. As held in AF Realty & Development v. Dieselman valuable consideration. However, the said checks were dishonored for “payment
Freight Services, Co., absent any valid delegation/authorization, the rule is that the stopped”.
declarations of an individual director relating to the affairs of the corporation, but not
in the course of or connected with the performance of the authorized duties of such It was said that Enrique Tan of E.T. Henry approached Atrium for financial
director, are held not binding on the corporation. assistance, offering to discount 4 RCBC checks in the amount of Php2M, which were
issued by Hi-Cement in favor of E.T. Henry. Atrium agreed, provided that it be
In the present case, Sia Ko Pio has no authority from its Board of Directors allowed to confirm with Hi-Cement the fact that the two checks were confirmed by
to enter into a contract of sale of Aquiles’ property. IT is clear that the loan was a Hi-Cement. Carlos Syquia identified two letters issued by Hi-Cement and confirmed
personal loan from Sia Ko Pio, and not a transaction between Aquiles and La Suerte. the issuance of the four checks.
There is no evidence that Sia Ko Pio was clothed with authority to use his personal
fund for the benefit of La Suerte. Trial Court ordered the Spouses De Leon, E.T. Henry, and Hi-Cement to
jointly and severally pay the amount of Php2M.

2. Atrium Management Corp v. CA CA modified the decision absolving Hi-Cement Corporation from liability
GR. No. 109491, Feb. 28, 2001 and dismissed the complaint against them. Lourdes de Leon was not authorized to
issue the check in favor of E.T. Henry, and that the issuance of the checks by de
Leon and de las Alas were ultra vires acts, and that the said checks were not issued
Doctrine: An ultra vires act is one committed outside the object for which a for valuable consideration.
corporation is created as defined by the law of its organization and therefore beyond
Issues:
the power conferred upon it by law. he term “ultra vires” is “distinguished from an
illegal act for the former is merely voidable which may be enforced by performance, 1. W/N the issuance of the checks was an ultra vires act? NO.
ratification, or estoppel, while the latter is void and cannot be validated.” 2. W/N de Leon is personally liable for the checks issued as corporate
officers and authorized signatories of the checks? YES.
Personal liability of a corporate director, trustee or officer along with the corporation
may so validly attach only when: Held:
1. He assents: 1. Hi-Cement issued the 4 checks to extend financial assistance to E.T. Henry, and
a. to a patently unlawful act of the corporation not as payment of the balance of the Php30M cost of hydro oil delivered by E.T.
b. for bad faith or gross negligence in directing its affairs Henry to Hi-Cement. Hi-Cement, however, maintains that the checks were not
c. for conflict of interest, resulting in damages to the corporation, its issued for consideration, and that the Lourdes and E.T. Henry were engaged in a
stockholders or other persons; “kiting operation” to raise funds for E.T. Henry. However, the Court finds that
2. He consents to the issuance of watered down stocks or who, having there was not enough evidence to show this. Lourdes de Leon was the treasurer
knowledge thereof, does not forthwith file with the corporate secretary his of the corporation and was authorized to sign the checks for the corporations. In
written objection thereto; fact, at the time it was issued, there were sufficient funds in the bank to cover
3. He agrees to hold himself personally and solidarily liable with the payment.
corporation; or
4. He is made, by a specific provision of law, to personally answer for his The Court rules that there is basis to rule that the act of issuing the checks was well
corporate action. within the ambit of a valid corporate act, for it was for securing a loan to finance the
activities of the corporation, hence, not an ultra vires act.
Recit-Ready Summary: <I don’t think I still need one given that the case is really
short haha> An ultra vires act is one committed outside the object for which a corporation is
created as defined by the law of its organization and therefore beyond the power
Facts: conferred upon it by law. he term “ultra vires” is “distinguished from an illegal act
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for the former is merely voidable which may be enforced by performance, correctness of the allegations in the petition. The President also signed the complaint
ratification, or estoppel, while the latter is void and cannot be validated.” before the CTA at the inception of the judicial claim for refund or tax credit.
2. Personal liability of a corporate director, trustee or officer along with the Facts:
corporation may so validly attach only when:
a. He assents: Cagayan Valley Corp is a duly-licensed retailer of medicine and other
i.to a patently unlawful act of the corporation pharmaceutical products. It granted 20% sales discounts to qualified senior citizens
ii.for bad faith or gross negligence in directing its affairs on purchases of medicine, pursuant to RA 7432. It also treated the 20% sales
iii.for conflict of interest, resulting in damages to the corporation, its discounts granted to qualified senior citizens as deductions from the gross sales in
stockholders or other persons; order to arrive at the net sales, instead of treating them as tax credit as provided
b. He consents to the issuance of watered down stocks or who, having knowledge under Sec. 4 of RA 7432.
thereof, does not forthwith file with the corporate secretary his written Petitioner filed with the BIR a claim for tax refund/tax credit of the full
objection thereto; amount of the 20% sales discount it granted to senior citizens. BIR’s inaction
c. He agrees to hold himself personally and solidarily liable with the corporation; prompted petitioner to file a petition for review before the CTA.
or
d. He is made, by a specific provision of law, to personally answer for his CTA dismissed the petition, sustaining that the 20% sales discount should
corporate action. be treated as tax credit, and not as deductions from the gross sales. The CTA
ratiocinated that on matters of tax credit claim, the government applies the amount
In he current case, Lourdes de Leon and Antonio de las Alas as treasurer and Chairman determined to be reimbursable after proper verification against any sum that may be
of Hi-Cement were authorized to issue the checks. However, de Leon was negligent due and collectible from the taxpayer. However, if no tax has been paid or if no
when she signed the confirmation letter requested by Yap of Atrium and Henry of amount is due and collectible from the taxpayer, then a tax credit is unavailing.
E.T. Henry for the rediscounting of the crossed checks issued in favor of E.T. Henry. Moreover, it held that before allowing recovery for claims for a refund or tax credit,
They were strictly endorsed for deposit only to the payee’s account, and not to be it must first be established that there was an actual collection and receipt by the
further negotiated. The confirmation letter also contained that the checks were in government of the tax sought to be recovered. In the instant case, the CTA found that
payment of the hydro oil. Hence, she may be held personally liable. petitioner did not pay any tax by virtue of its net loss position in 1995.
3. Cagayan Valley Drug Corp v. CIR CA dismissed the petition on procedural grounds as the person who signed
GR. No. 151413, Feb. 13, 2008 the verification and certification of absence of forum shopping failed to adduce proof
that he was duly authorized by the board of directors to do so. CA found no
sufficient proof to show that Concepcion was duly authorized by the Board of
Doctrine: For juridical persons, the authorized signatory can be someone who has Directors of petitioner.
been authorized by the corporation through a board resolution. It can also be any
officer provide that the person is in a position where he can verify the truthfulness Issue: W/N petitioner’s president can sign the subject verification and
and correctness of the allegations in the petition. certification sans the approval of its Board of Directors?

Recit-Ready Summary: Cagayan Valley Corp filed a claim for tax refund/tax credit Held:
after it erroneously treated the 20% sales discounts as deductions from gross sales
With respect to a juridical person, Sec. 4, Rule 7 on verification and Sec. 5, Rule 7
and not as tax credit, which is in contrast with what was provided by law. The CTA
on certification against forum shopping are silent as to who the authorized signatory
dismissed the petition, prompting petitioner to file with the CA for an appeal. CA
dismissed the petition to review as it was the President who signed the certification should be. Said rules do not indicate if the submission of a board resolution
of absence of forum shopping without any board resolution. The Supreme Court authorizing the officer or representative is necessary.
ruled that petitioner substantially complied with Secs. 4 and 5, Rule 7 of the 1997 It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code,
Revised Rules on Civil Procedure. The requisite board resolution has been clearly enunciates that all corporate powers are exercised, all business conducted,
submitted, albeit belatedly by petitioner. The Court also applied the ruling in Lepanto and all properties controlled by the board of directors. A corporation has a separate
with the rationale that the President is in a position to verify the truthfulness and and distinct personality from its directors and officers and can only exercise its
corporate powers through the board of directors. Thus, it is clear that an individual
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corporate officer cannot solely exercise any corporate power pertaining to the should not be allowed to prevail where it would defeat the ends of justice or work a
corporation without authority from the board of directors. legal wrong.
In a slew of cases, however, the Court has recognized the authority of some Recit-Ready Summary: <the case is short enough I think>
corporate officers to sign the verification and certification against forum shopping. In
sum, the Court has held that the following officials or employees of the company can Facts:
sign the verification and certification without need of a board resolution: (1) the Mindoro Sugar Company is a corporation on July 30, 1917. One of its
Chairperson of the Board of Directors, (2) the President of a corporation, (3) the principal purposes was to acquire and exercise the franchise granted by Act. No.
General Manager or Acting General Manager, (4) Personnel Officer, and (5) an 2720 to George Fairchild, to substitute the organized corporation, Mindoro
Employment Specialist in a labor case. Company, and to acquire all its rights.
While the above cases do not provide a complete listing of authorized signatories to The Philippine Trust Company is another domestic corporation engaged in
the verification and certification required by the rules, the determination of the the business of acquiring by purchasing, subscribing and to invest, hold, sell or
sufficiency of the authority was done on a case to case basis. The rationale applied in dispose of stocks, bonds, mortgages and other securities or any interest in either of
the foregoing cases is to justify the authority of corporate officers or representatives any obligation or evidence of indebtedness of any other corporation.
of the corporation to sign the verification or certificate against forum shopping, being
“in a position to verify the truthfulness and correctness of the allegations in the On Nov. 17, 1917, the Board of Directors of Philippine Trust Company
petition.” adopted a resolution authorizing its president to purchase at par of the bonds in the
value of Php3M that the Mindoro Sugar Company was about to issue and to resell
In Philippine Airlines v. Flight Attendants and Stewards Association of the them at a price not less than par, and to guarantee to the PNB the payment of the
Philippines, we ruled that only individuals vested with authority by a valid board indebtedness to said bank by the Mindoro Sugar Company or Charles Wench and
resolution may sign the certificate of non- forum shopping on behalf of a Horace Havemeyer up to Php2M.
corporation. The action can be dismissed if the certification was submitted
unaccompanied by proof of the signatory’s authority. We believe that appending the The Mindoro Sugar Company executed in favor of the PTC the deed of
board resolution to the complaint or petition is the better procedure to obviate any trust, transferring all of its property to it in consideration of the bonds it had issued
question on the authority of the signatory to the verification and certification. The for Php3M. PTC then sold thirteen bonds to Ramon Diaz. The 4 bond which are the
required submission of the board resolution is grounded on the basic precept that subject of the litigation are included in those 13 sold.
corporate powers are exercised by the board of directors, and not solely by an officer
of the corporation. Hence, the power to sue and be sued in any court or quasi-judicial Philippine Trust Company paid the appellant, upon presentation of the
tribunal is necessarily lodged with the said board. coupons, the stipulated interest from date of maturity until July 1, 1928, when it
stopped payments. It alleged that it did not deem itself bound to pay such interest or
In the current case, the Court ruled that petitioner substantially complied with Secs. 4 to redeem the obligation because the guarantee given for the bonds was illegal and
and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure. The requisite board void.
resolution has been submitted, albeit belatedly by petitioner. The Court also applied
the ruling in Lepanto with the rationale that the President is in a position to verify the Issue: W/N the Philippine Trust Company acquired the bonds in question and
truthfulness and correctness of the allegations in the petition. The President also whether it bound itself legally and acted within its corporate powers in
signed the complaint before the CTA at the inception of the judicial claim for refund guaranteeing them? YES.
or tax credit.
Held:
4. Carlos v. Mindoro Sugar Co.
The Philippine Trust Company was organized as a trust corporation with
GR. No. 36207, Oct. 26, 1932
full power to acquire personal property, such as the bonds in question. It was given
implied power to guarantee them in order to place them upon the market. It is not
Doctrine: When a contract is not on its face necessarily beyond the scope of the ultra vires for a corporation to enter into contracts of guaranty or suretyship when it
power of the corporation by which it was made, it will, in the absence of proof to the does so in the legitimate furtherance of its purposes and business. And it is well
settled that where a corporation acquires commercial paper or bonds in the legitimate
contrary, be presumed to be valid. Corporations are presumed to contract within their
transaction of its business it may sell them, and in furtherance of such a sale it may,
powers. The doctrine of ultra vires, when invoked for or against a corporation,
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in order to make them the more readily marketable, indorse or guarantee their to the lack of consent and that Aviles did not have the proper authority from the
payment. Board of Directors to buy a property in their stead as there was no Board Resolution.
The CA reversed. The Court overturned the decision of the CA, affirming the
The President of PTC was expressly authorized to purchase all or some of decision of the trial court that by virtue of Sec. 23 and Sec. 36 of the Corporation
the bonds and to guarantee them. Thus, it may be inferred that the subsequent Code, the Board Resolution allowing Aviles to transact and buy the property in the
purchasers of the bonds relied on the belief that they were acquiring securities from stead of Bukal Enterprises is needed. Absent such board resolution, the said
PTC. transaction cannot take place.
The doctrine of ultra vires has been declared to be entirely the creation of Facts:
the courts and is of comparatively modern origin. The defense is by some courts
regarded as an ungracious and odious one, to be sustained only where the most Spouses Firme are the registered owners of a parcel land located in Quezon
persuasive considerations of public policy are involved, and there are numerous City. De Castro, the Vice-President of Bukal Enterprises, authorized his friend,
decisions and dicta to the effect that the plea should not as a general rule prevail Teodoro Aviles to negotiate the purchase of the property.
whether interposed for or against the corporation, where it will not advance justice
but on the contrary will accomplish a legal wrong. On March 28, 1995, Bukal Enterprises field a complaint for specific
performance and damages as the spouses Firme reneged on their agreement to sell
When a contract is not on its face necessarily beyond the scope of the power the property. Aviles testified that De Castro authorized him to negotiate on behalf of
of the corporation by which it was made, it will, in the absence of proof to the Bukal Entprise for the purchase of the Property. The first draft was rejected by the
contrary, be presumed to be valid. Corporations are presumed to contract within their spouses, the second was almost approved, except that some stipulations had to be
powers. The doctrine of ultra vires, when invoked for or against a corporation, revised. The corporation settled with the informal settlers on the property for them to
should not be allowed to prevail where it would defeat the ends of justice or work a leave the property, and later on, constructed a fence around the area. However, later
legal wrong. on, the spouses Firme did not accept the offer to pay the purchase price, and had
even requested that Bukal Enterprises vacate their property.
Guaranties of payment of bonds taken by a loan and trust company in the
ordinary course of its business, made in connection with their sale, are not ultra vires, Dr. Firme, the witness of the spouses, testified that Aviles offered to buy the
and are binding. property of the spouses Firme, but they did not accept as they were reserving the
property for their six children. They were surprised when they found out the
squatters voluntarily demolished their shanties. Still, they sent a letter to
5. Firme v. Bukal Enterprises and Development Corp. Bukal demanding the removal of the bunkers and their employees. Two days later,
GR. No. 146608, Oct. 23, 2003 they received the letter from Bukal demanding that they sell the property.
Trial Court dismissed the complaint made by Bukal Enterprises, ruling that
Doctrine: Sec. 23 provides that it is the board of directors or trustees which there was no perfected contract of sale. Furthermore, Aviles had no valid authority to
exercises almost all the corporate powers in a corporation. Sec. 36 provides that the bind Bukal Enterprises in the sale transaction. Under Secs. 23 and 36, the corporate
power to purchase real property is listed as a corporate power. Hence, the power to power to purchase a specific property is exercised by the Board of Directors of the
purchase real property is vested in the board of directors or trustees. While a corporation. Without an authorization from the Board of Directors, Aviles could not
corporation may appoint agents to negotiate for the purchase of real property needed. validly finalize the purchase of the Property on behalf of Bukal Enterprises.
by the corporation, the final say will have to be with the board, whose approval will
finalize the transaction. A corporation can only exercise its powers and transact its CA reversed the decision of the trial court. The CA held that the lack of a
business through its board of directors and through its officers and agents when board resolution was cured when Bukal Enterprises filed the complaint for the
authorized by a board resolution or its by-law. enforcement of the sale.

Recit-Ready Summary: Bukal Enterprises filed a Complaint against Spouses Firme Issue: W/N CA erred in finding that there was a perfected contract of sale
after the latter did not sell their property. The VP of Bukal had authorized Aviles, a between the Spouses Firme and Bukal Enterprises? YES.
real estate agent, to negotiate with the spouses over a parcel of property which the
Held:
spouses owned in Quezon City. Spouses Firme denied having agreed to selling their
property to Aviles or to Bukal Enterprises. Trial Court dismissed the complaint due

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There was no consent on the part of the Spouses firme. Aviles merely
showed one draft of the deed of sale, which was the Third Draft. Dr. Firme was firm Doctrine: Questions of policy or of management are left solely to the honest
on his testimonies. On the other hand, Aviles gave conflicting testimonies. The first decision of officers and directors of a corporation, and the court is without authority
and second drafts contained the same stipulations, which was in contrast to what he to substitute its judgment of the board of directors; the board is the business manager
said. of the corporation, and so long as it acts in good faith its orders are not reviewable by
the courts.
There was also no approval from the Board of Directors of Bukal as would
finalize any transaction with the Spouses Firme. Aviles did not have the proper Facts:
authority to negotiate for Bukal Enterprises. There was no Board Resolution
authorizing Aviles to negotiate and purchase the Property on behalf of Bukal Montelibano et al. are sugar planters adhered to the Bacolod-Murcia Milling Co.,
Enterprises. Inc’s sugar central mill under identical milling contracts originally executed in 1919.
In the 1919 original contract, it was stipulated to be in force for 30 years starting
Sec. 23 provides that it is the board of directors or trustees which exercises with the 1920-21 crop, and provided that the resulting product should be divided in
almost all the corporate powers in a corporation. Sec. 36 provides that the power to the ratio of 45% for the mill and 55% for the planters.
purchase real property is listed as a corporate power. Hence, the power to purchase
real property is vested in the board of directors or trustees. While a corporation may In 1936, it was proposed to execute amended milling contracts, increasing the
appoint agents to negotiate for the purchase of real property needed. by the planters’ share to 60% of the manufactured sugar and resulting molasses, besides
corporation, the final say will have to be with the board, whose approval will finalize other concessions, but extending the operation of the milling contract from the
the transaction. A corporation can only exercise its powers and transact its business original 30 years to 45 years. To this effect, a printed Amended Milling Contract
through its board of directors and through its officers and agents when authorized by form was drawn up.
a board resolution or its by-law. The Board of Directors of Bacolod-Murcia Milling Co., Inc. adopted
In this case, Aviles, who negotiated the purchase of the Property, is neither a resolution granting further concessions to the planters over and above those
an officer of Bukal Enterprises nor a member of the Board of Directors of Bukal contained in the printed Amended Milling Contract on August 10, 1936.
Enterprises. There is no Board Resolution authorizing Aviles to negotiate and The printed Amended Milling Contract was signed by the Appellants on September
purchase the Property for Bukal Enterprises. There is also no evidence to prove that 10, 1936, but a copy of the resolution was not attached to the printed contract until
Bukal Enterprises approved whatever transaction Aviles made with the Spouses April 17, 1937.
Firme. In fact, the president of Bukal Enterprises did not sign any of the deeds of sale
presented to the Spouses Firme. Even De Castro admitted that he had never met the In 1953, The appellants initiated the present action, contending that three Negros
Spouses Firme. Considering all these circumstances, it is highly improbable for sugar centrals with a total annual production exceeding one-third of the production of
Aviles to finalize any contract of sale with the Spouses Firme. all the sugar central mills in the province, had already granted increased participation
(of 62.5%)to their planters, and that under the resolution the appellee had become
Furthermore, in the Complaint filed by Bukal, it was Aviles who signed the obligated to grant similar concessions to the plaintiffs.
verification and certification of non-forum shoping, which was not accompanied by
any proof that Bukal Enterprises authorized Aviles to file the complaint on behalf of The Bacolod-Murcia Milling Co., inc., resisted the claim, urging that
Bukal Enterprises. The power of a corporation to sue and be sued is exercised by the the resolution in question was null and void ab initio, being in effect a donation that
board of directors. The purpose of verification is to secure an assurance that the was ultra vires and beyond the powers of the corporate directors to adopt.
allegations in the pleading are true and correct and that it is filed in good faith. True,
this requirement is procedural and not jurisdictional. However, the trial court should Issue: Was the act of the BOD ultra vires? NO
have ordered the correction of the complaint since Aviles was neither an officer of
Held:
Bukal Enterprises nor authorized by its Board of Directors to act on behalf of Bukal
Enterprises. 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
6. MONTELIBANO ET AL vs.BACOLOD-MURCIA MILLING
of August 20, 1936.)
CO., INC.
GR. No. L-15092 May 18, 1962

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As the resolution in question was passed in good faith by the board of directors, it is have been filled by the stockholders in a regular or special meeting called for that
valid and binding, and whether or not it will cause losses or decrease the profits of purpose, and not by the remaining members of the VVCC Board, as was done in this
the central, the court has no authority to review them. case.
Xx It is a well-known rule of law that questions of policy or of management are left The RTC and the SEC ruled in favor of Africa. VVCC filed a petition for review
solely to the honest decision of officers and directors of a corporation, and the court on certiorari.
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 Issue: Whether or not the remaining directors of the corporation’s Board, still
are not reviewable by the courts. constituting a quorum, can elect another director to fill in a vacancy caused by the
resignation of a hold-over director. NO
__
Held:
It must be remembered that the controverted resolution was adopted by appellee
corporation as a supplement to, or further amendment of, the proposed milling Petition DENIED. Under Section 29 of the Corporation Code, a vacancy occurring in
contract, and that it was approved on August 20, 1936, twenty-one days prior to the the board of directors caused by the expiration of a member’s term shall be filled by
signing by appellants on September 10, of the Amended Milling Contract itself; so the corporation’s stockholders. As the vacancy in this case was caused by
that when the Milling Contract was executed, the concessions granted by the Makalintal’s resignation, not by the expiration of his term, VVCC insists that the
disputed resolution had been already incorporated into its terms. board rightfully appointed Ramirez to fill in the vacancy.

7. Valle Verde Country Club, Inc. v. Africa The holdover period is not part of the term of office of a member of the board of
G.R. No. 151969, September 4, 2009, (Brion, J.) directors. In several cases, we have defined "term" as the time during which the
officer may claim to hold the office as of right, and fixes the interval after which the
several incumbents shall succeed one another. The term of office is not affected by
Doctrine: The term of office is not affected by the holdover. It is fixed by statute and
the holdover. It is fixed by statute and it does not change simply because the office
it does not change simply because the office may have become vacant, nor because
may have become vacant, nor because the incumbent holds over in office beyond the
the incumbent holds over in office beyond the end of the term due to the fact that a
end of the term due to the fact that a successor has not been elected and has failed to
successor has not been elected and has failed to qualify.
qualify. “Tenure” is the term during which the incumbent actualy holds office.
Facts:
Section 23 of the Corporation Code declares that the term of the members of the
In 1996, during the Annual Stockholders’ Meeting of Valle Verde Country Club, Inc. board of directors shall be only for one year; their term expires one year after
(VVCC), Villaluna, Dinglasan, Makalintal, Ortigas III, Salta, Santiago, Jr., Dee, election to the office. After the lapse of one year from his election, Makalintal’s term
Sunico, and Gamboa were elected as members of the VVCC Board of Directors. of office is deemed to have already expired. With the expiration of Makalintal’s term
From 1997 to 2001, the requisite quorum for the holding of the stockholders’ of office, a vacancy resulted which, by the terms of Section 29, must be filled by the
meeting could not be obtained. Consequently, the above-named directors continued stockholders of VVCC in a regular or special meeting called for the purpose. His
to serve in the VVCC Board in a hold-over capacity. resignation as a holdover director did not change the nature of the vacancy; the
vacancy due to the expiration of Makalintal’s term had been created long before his
In 1998, Dinglasan resigned from his position. He was replaced by Roxas who was resignation. The underlying policy of the Corporation Code is that the business and
elected by the board still constituting a quorum. A year later, Makalintal also affairs of a corporation must be governed by a board of directors whose members
resigned and was replaced by Jose Ramirez in 2001. Ramirez was elected by the have stood for election, and who have actually been elected by the stockholders, on
remaining members of the Board. an annual basis. Only in that way can the directors' continued accountability to
shareholders, and the legitimacy of their decisions that bind the corporation's
Africa, a member of VVCC, questioned the election of Roxas and Ramirez with the stockholders, be assured. The shareholder vote is critical to the theory that
SEC and the RTC, respectively. Before the RTC, Africa alleged that a year after legitimizes the exercise of power by the directors or officers over properties that they
Makalintal’s election as member of the VVCC Board in 1996, his term – as well as do not own. (Delegated power of the board of directors). The vacancy caused by
those of the other members of the VVCC Board – should be considered to have Makalintal’s leaving lies with the VVCC’s stockholders, not the remaining members
already expired. According to him, for the members to exercise the authority to fill in of its board of directors
vacancies in the board of directors, that there should be an unexpired term during
which the successor-member shall serve. Further, that the resulting vacancy should
7
8. NECTARINA S. RANIEL and MA. VICTORIA R. PAG-ONG vs. Petitioners filed a case with the SEC, which held that the removal of petitioners was
PAUL JOCHICO, JOHN STEFFENS and SURYA VIRIYA valid. Appeal made to the CA, which affirmed the SEC decision.
G.R. No. 153413 March 1, 2007
Issue: Whether or not the removal of Pag-Ong and Raniel by the Board of Directors
is proper? YES.
Doctrine: A corporation exercises its powers through its board of directors and/or its
duly authorized officers and agents, except in instances where the Corporation Code Held: The SC ruled in favor of Jochico.
requires stockholders approval for certain specific acts.
A corporation exercises its powers through its board of directors and/or its duly
Facts: authorized officers and agents, except in instances where the Corporation Code
requires stockholders approval for certain specific acts.
Nectarina Raniel and Victoria Pag-ong, are 2 out of the 5 directors of Nephro
Systems Dialysis Center. Raniel was Corporate Secretary, Treasurer, and Based on Section 23 of the Corporation Code which provides:
Administrator of the Dialysis Clinic. Petitioners questioned respondents’ plan to
enter into a joint venture with the Butuan Doctors’ Hospital and College. SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this
Respondents allegedly tried to compel them to waive and assign their shares with Code, the corporate powers of all corporations formed under this Code shall be
Nephro but petitioners refused. exercised, all business conducted and all property of such corporations controlled
and held by the board of directors or trustees x x x.
Raniel sought an indefinite leave of absence. Paul Jochico disapproved the request,
but Raniel nonetheless stopped reporting for work. When asked for an explanation A corporations board of directors is understood to be that body which (1) exercises
for her absence, Raniel expressed her sentiments over the disapproval of leave, and all powers provided for under the Corporation Code; (2) conducts all business of the
the joint venture with Butuan. (Note: Without Raniel, holding three important corporation; and (3) controls and holds all property of the corporation. Its members
positions, the company’s operations were disrupted. Such also warranted loss of have been characterized as trustees or directors clothed with a fiduciary character.
the Board’s confidence in her. – SC) Moreover, the directors may appoint officers and agents and as incident to this power
of appointment, they may discharge those appointed.
Jochico issued a Notice of Special Board Meeting. Petitioners were notified, but
they did not attend. The board passed several resolutions ratifying the disapproval In this case, petitioner Raniel was removed as a corporate officer through the
of Raniel’s request for leave, dismissing her as Administrator of Nephro, resolution of Nephro's Board of Directors adopted in a special meeting on February
declaring the position of Corporate Secretary vacant. 2, 1998. As correctly ruled by the SEC, petitioners' removal was a valid exercise of
the powers of Nephro's Board of Directors, viz.:
Otelio Jochico was appointed as the new Corporate Secretary, and a Special
Stockholders’ Meeting was held. Again, petitioners did not attend. The In the instant complaint, do respondents have sufficient grounds to cause the removal
stockholders that were present removed the petitioners as directors of Nephro. of Raniel from her positions as Corporate Secretary, Treasurer and Administrator of
(Raniel could have explained herself during these meetings, but she chose not to the Dialysis Clinic? Based on the facts proven during the hearing of this case, the
attend. – SC) answer is in the affirmative.

Side-note: the ownership of the outstanding capital stock is distributed in this Raniel's letter of January 26, 1998 speaks for itself. Her request for an indefinite
manner; leave, immediately effective yet without prior notice, reveals a disregard of the
Jochico – 200 Shares critical responsibilities pertaining to the sensitive positions she held in the
Steffens – 100 Shares corporation. Prior to her hasty departure, Raniel did not make a proper turn-over of
Viriya – 100 Shares her duties and had to be expressly requested to hand over documents and records,
Raniel – 25 Shares including keys to the office and the cabinets.
Pag-ong – 75 Shares
xxxx
= 500 Shares
2/3 of OCS is 333.33 Shares Since Raniel occupied all three positions in Nephro, it is not difficult to foresee the
400 Shares voted for petitioners’ removal disruption that her immediate and indefinite absence can inflict on the operations of
the company. By leaving abruptly, Raniel abandoned the positions she is now trying

8
to reclaim. Raniel's actuation has been sufficiently proven to warrant loss of the distributed as follows (see above). A two-thirds vote of Nephro's outstanding capital
Board's confidence. stock would be 333.33 shares, and during the Stockholders' Special Meeting held on
February 16, 1998, 400 shares voted for petitioners' removal. Said number of votes is
The SEC also correctly concluded that petitioner Raniel was removed as an officer of more than enough to oust petitioners from their respective positions as members of
Nephro in compliance with established procedure, thus: the board, with or without cause.
The resolutions of the Board dismissing complainant Raniel from her various 9. PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG,
positions in Nephro are valid. Notwithstanding the absence of complainants from the STEPHEN CO, JAMES TAN, JUDITH TAN, ERNESTO TANCHI
meeting, a quorum was validly constituted. x x x. JR., EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR.,
xxxx EDUARDO P. LIZARES and GRACE CHRISTIAN HIGH
SCHOOL vs. PAUL SYCIP and MERRITTO LIM
Based on its articles of incorporation, Nephro has five directors two of the positions G.R. No. 153468 August 17, 2006
were occupied by complainants and the remaining three are held by respondents.
This being the case, the presence of all three respondents in the Special Meeting of Doctrine: For stock corporations, the “quorum” referred to in Section 52 of the
the Board on February 2, 1998 established a quorum for the conduct of business. The Corporation Code is based on the number of outstanding voting stocks. For nonstock
unanimous resolutions carried by the Board during such meeting are therefore valid corporations, only those who are actual, living members with voting rights shall be
and binding against complainants. counted in determining the existence of a quorum during members’ meetings. Dead
members shall not be counted.
Petitioners Raniel and Pag-ong's removal as members of Nephro's Board of Directors
was likewise valid. Facts:
Only stockholders or members have the power to remove the directors or trustees Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational
elected by them, as laid down in Section 28 of the Corporation Code, which provides corporation with fifteen (15) regular members, who also constitute the board of
in part: trustees. During the annual members’ meeting held on April 6, 1998, there were
only eleven (11) living member-trustees, as four (4) had already died. Out of the
SEC. 28. Removal of directors or trustees. -- Any director or trustee of a
eleven, seven (7) attended the meeting through their respective proxies. The meeting
corporation may be removed from office by a vote of the stockholders holding or
was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty.
representing at least two-thirds (2/3) of the outstanding capital stock, or if the
Antonio C. Pacis, who argued that there was no quorum. In the meeting,
corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted
the members entitled to vote: Provided, that such removal shall take place either to replace the four deceased member-trustees. 

at a regular meeting of the corporation or at a special meeting called for the
purpose, and in either case, after previous notice to stockholders or members of When the controversy reached the Securities and Exchange Commission (SEC), Tan
the corporation of the intention to propose such removal at the meeting. A special et al. maintained that the deceased member-trustees should not be counted in the
meeting of the stockholders or members of a corporation for the purpose of computation of the quorum because, upon their death, members automatically lost all
removal of directors or trustees or any of them, must be called by the secretary on their rights (including the right to vote) and interests in the corporation. 

order of the president or on the written demand of the stockholders representing
or holding at least a majority of the outstanding capital stock, or if it be a non- SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and
stock corporation, on the written demand of a majority of the members entitled to void for lack of quorum. She held that the basis for determining the quorum in a
vote. x x x Notice of the time and place of such meeting, as well as of the meeting of members should be their number as specified in the articles of
intention to propose such removal, must be given by publication or by written incorporation, not simply the number of living members.
notice as prescribed in this Code. x x x Removal may be with or without cause:
Issue: Whether or not in NON-STOCK corporations, dead members should still be
Provided, That removal without cause may not be used to deprive minority
counted in determination of quorum for purpose of conducting the Annual Members
stockholders or members of the right of representation to which they may be
Meeting. NO
entitled under Section 24 of this Code. (Emphasis supplied)
Held:
Petitioners do not dispute that the stockholders' meeting was held in accordance with
Nephro's By-Laws. The ownership of Nephro's outstanding capital stock is The Right to Vote in Nonstock Corporations
9
In nonstock corporations, the voting rights attach to membership. Members vote as But, while a majority of the remaining corporate members were present, however,
persons, in accordance with the law and the bylaws of the corporation. Each member the “election” of the four trustees cannot be legally upheld for the obvious reason
shall be entitled to one vote unless so limited, broadened, or denied in the articles of that it was held in an annual meeting of the members, not of the board of
incorporation or bylaws. We hold that when the principle for determining the trustees. We are not unmindful of the fact that the members of GCHS themselves
quorum for stock corporations is applied by analogy to nonstock corporations, only also constitute the trustees, but we cannot ignore the GCHS bylaw provision, which
those who are actual members with voting rights should be counted. specifically prescribes that vacancies in the board must be filled up by the remaining
trustees. In other words, these remaining member-trustees must sit as a board in
Under Section 52 of the Corporation Code, the majority of the members representing order to validly elect the new ones. Thus, petition was partly granted. The assailed
the actual number of voting rights, not the number or numerical constant that may Resolutions of the Court of Appeals are hereby reversed and set aside. The remaining
originally be specified in the articles of incorporation, constitutes the quorum. members of the board of trustees of GCHS may convene and fill up the vacancies in
Section 25 of the Code specifically provides that a majority of the directors or the board by sitting as a board.
trustees, as fixed in the articles of incorporation, shall constitute a quorum for the 10. PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG,
transaction of corporate business (unless the articles of incorporation or the bylaws STEPHEN CO, JAMES TAN, JUDITH TAN, ERNESTO TANCHI
provide for a greater majority). If the intention of the lawmakers was to base the JR., EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR.,
quorum in the meetings of stockholders or members on their absolute number as EDUARDO P. LIZARES and GRACE 10. CHRISTIAN HIGH
fixed in the articles of incorporation, it would have expressly specified so. SCHOOL vs. PAUL SYCIP and MERRITTO LIM
Otherwise, the only logical conclusion is that the legislature did not have that G.R. No. 153468 August 17, 2006
intention.
Effect of the Death of a Member or Shareholder Doctrine: For stock corporations, the “quorum” referred to in Section 52 of the
Corporation Code is based on the number of outstanding voting stocks. For nonstock
In stock corporations, shareholders may generally transfer their shares. Thus, on the corporations, only those who are actual, living members with voting rights shall be
death of a shareholder, the executor or administrator duly appointed by the Court is counted in determining the existence of a quorum during members’ meetings. Dead
vested with the legal title to the stock and entitled to vote it. Until a settlement and members shall not be counted.
division of the estate is effected, the stocks of the decedent are held by the
administrator or executor. Facts:

On the other hand, membership in and all rights arising from a nonstock corporation Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational
are personal and non-transferable, unless the articles of incorporation or the bylaws corporation with fifteen (15) regular members, who also constitute the board of
of the corporation provide otherwise. In other words, the determination of whether or trustees. During the annual members’ meeting held on April 6, 1998, there were
not dead members are entitled to exercise their voting rights (through their executor only eleven (11) living member-trustees, as four (4) had already died. Out of the
or administrator), depends on those articles of incorporation or bylaws. eleven, seven (7) attended the meeting through their respective proxies. The meeting
was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty.
Under the By-Laws of GCHS, membership in the corporation shall, among others, be Antonio C. Pacis, who argued that there was no quorum. In the meeting,
terminated by the death of the member. Section 91 of the Corporation Code further Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted
provides that termination extinguishes all the rights of a member of the corporation, to replace the four deceased member-trustees. 

unless otherwise provided in the articles of incorporation or the bylaws.
When the controversy reached the Securities and Exchange Commission (SEC), Tan
Applying Section 91 to the present case, we hold that dead members who are et al. maintained that the deceased member-trustees should not be counted in the
dropped from the membership roster in the manner and for the cause provided for in computation of the quorum because, upon their death, members automatically lost all
the By-Laws of GCHS are not to be counted in determining the requisite vote in their rights (including the right to vote) and interests in the corporation. 

corporate matters or the requisite quorum for the annual members meeting. With 11
remaining members, the quorum in the present case should be 6. Therefore, there SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and
being a quorum, the annual members meeting, conducted with six members present, void for lack of quorum. She held that the basis for determining the quorum in a
was valid. meeting of members should be their number as specified in the articles of
incorporation, not simply the number of living members.

10
Issue: Whether or not in NON-STOCK corporations, dead members should still be Applying Section 91 to the present case, we hold that dead members who are
counted in determination of quorum for purpose of conducting the Annual Members dropped from the membership roster in the manner and for the cause provided for in
Meeting. NO the By-Laws of GCHS are not to be counted in determining the requisite vote in
corporate matters or the requisite quorum for the annual members meeting. With 11
Held: remaining members, the quorum in the present case should be 6. Therefore, there
The Right to Vote in Nonstock Corporations being a quorum, the annual members meeting, conducted with six members present,
was valid.
In nonstock corporations, the voting rights attach to membership. Members vote as
persons, in accordance with the law and the bylaws of the corporation. Each member But, while a majority of the remaining corporate members were present, however,
shall be entitled to one vote unless so limited, broadened, or denied in the articles of the “election” of the four trustees cannot be legally upheld for the obvious reason
incorporation or bylaws. We hold that when the principle for determining the that it was held in an annual meeting of the members, not of the board of
quorum for stock corporations is applied by analogy to nonstock corporations, only trustees. We are not unmindful of the fact that the members of GCHS themselves
those who are actual members with voting rights should be counted. also constitute the trustees, but we cannot ignore the GCHS bylaw provision, which
specifically prescribes that vacancies in the board must be filled up by the remaining
Under Section 52 of the Corporation Code, the majority of the members representing trustees. In other words, these remaining member-trustees must sit as a board in
the actual number of voting rights, not the number or numerical constant that may order to validly elect the new ones. Thus, petition was partly granted. The assailed
originally be specified in the articles of incorporation, constitutes the quorum. Resolutions of the Court of Appeals are hereby reversed and set aside. The remaining
members of the board of trustees of GCHS may convene and fill up the vacancies in
Section 25 of the Code specifically provides that a majority of the directors or the board by sitting as a board.
trustees, as fixed in the articles of incorporation, shall constitute a quorum for the
transaction of corporate business (unless the articles of incorporation or the bylaws 11. Rural Bank of Milaor v. Ocfemia
provide for a greater majority). If the intention of the lawmakers was to base the G.R. No. 137686, February 8, 2000
quorum in the meetings of stockholders or members on their absolute number as
fixed in the articles of incorporation, it would have expressly specified so.
Otherwise, the only logical conclusion is that the legislature did not have that Doctrine: If a corporation knowingly permits one of its officers or any other agent to
intention. act within the scope of an apparent authority, it holds the agent out to the public as
possessing the power to do those acts; thus, the corporation will, as against anyone
Effect of the Death of a Member or Shareholder who has in good faith dealt with it through such agent, be estopped from denying the
agent's authority.
In stock corporations, shareholders may generally transfer their shares. Thus, on the
death of a shareholder, the executor or administrator duly appointed by the Court is Facts: Marife Niño filed this petition to have Rural Bank issue the necessary
vested with the legal title to the stock and entitled to vote it. Until a settlement and paperwork for 5 parcels of land in Bombon, Camarines Sur to be transferred to their
division of the estate is effected, the stocks of the decedent are held by the family’s name. Her grandparents (Ocfemia’s) mortgaged 7 parcels of their land to
administrator or executor. Rural Bank of Milaor. They failed to redeem these properties so it was foreclosed
and subsequently owned by Rural Bank. Out of the 7, 5 were sold to the parents of
On the other hand, membership in and all rights arising from a nonstock corporation
Marife as evidenced by the Deed of Sale executed in Jan. 1988. Despite possessing
are personal and non-transferable, unless the articles of incorporation or the bylaws
these lands, it was still not transferred in the name of Marife’s parents as the
of the corporation provide otherwise. In other words, the determination of whether or
Assessor’s Office stated that the document of sale must be registered with the
not dead members are entitled to exercise their voting rights (through their executor
Registry of Deeds of Camarines Sur.
or administrator), depends on those articles of incorporation or bylaws.
Marife Niño then went to the bank, showed to if the Deed of Sale, the tax declaration
Under the By-Laws of GCHS, membership in the corporation shall, among others, be
and receipt of tax payments and requested the Bank for a board resolution so that the
terminated by the death of the member. Section 91 of the Corporation Code further
property can be transferred to the Ocfemia’s. She was told that the bank had a new
provides that termination extinguishes all the rights of a member of the corporation,
manager and it had no record of the sale. The bank asked her to bring a copy of the
unless otherwise provided in the articles of incorporation or the bylaws. deed of sale, receipt of payment, and to get an authority from her parents and other
respondents. Despite compliance, the bank still decided that the board resolution
would still not be given to her as the bank had no records from the old manager.
11
Because of this, Marife brought the matter to her lawyer and the latter wrote a Corporate transactions would speedily come to a standstill were every person dealing
demand letter to Rural Bank. The Bank still refused saying that they had no records with a corporation held duty-bound to disbelieve every act of its responsible officers,
of the sale. Hence, this petition. RTC and CA sided with Marife. no matter how regular they should appear on their face.
Issue: May the board of directors of the bank be compelled to confirm the deed of In the case of Ramirez vs. Orientalist Co, the Court stated that in passing upon the
absolute sale executed by a bank manager without prior authority of their board of liability of a corporation in cases of this kind it is always well to keep in mind the
directors? (YES) situation as it presents itself to the third party with whom the contract is made.
Naturally he can have little or no information as to what occurs in corporate
Held: meetings; and he must necessarily rely upon the external manifestation of corporate
The bank is estopped from questioning the authority of the bank manager to enter consent.
into the contract of sale. If a corporation knowingly permits one of its officers or any Court act
other agent to act within the scope of an apparent authority, it holds the agent out to
the public as possessing the power to do those acts; thus, the corporation will, as The Deed named Fe S. Tena as the representative of the bank. The bank however,
against anyone who has in good faith dealt with it through such agent, be estopped failed to specifically deny under oath the allegations in that contract. In fact, it filed
from denying the agent's authority. no answer at all, for which reason it was declared in default.
The bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena Basis: Sec. 8 of the Rules of Court → the genuineness and due execution of
(the old bank manager) to enter into binding contracts. After the execution of the the instrument shall be deemed admitted unless the adverse party, under
Deed of Sale, the Ocfemia’s occupied the properties in dispute and paid the real oath, specifically denies them, and sets forth what he claims to be the facts.
estate taxes due thereon. If the bank management believed that it had title to the
property, it should have taken some measures to prevent the infringement or invasion Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale.
of its title thereto and possession thereof. When Marife went to the bank to ask for Accordingly, it has a clear legal duty to issue the board resolution sought by
the board resolution, she was merely told to bring the receipts. The bank failed to respondent's.
categorically declare that Tena had no authority. Extra Notes (in case sir asks)
Tena had previously transacted business on behalf of the bank, and the latter had The Ocfemia’s are interested in having the properties transferred to their names
acknowledged her authority. A bank is liable to innocent third persons where because their mother and co-petitioner, Francisca Ocfemia, is very sickly and they
representation is made in the course of its normal business by an agent like Manager want to mortgage the property for the medical expenses of Francisca Ocfemia.
Tena, even though such agent is abusing her authority. Clearly, persons dealing with
her could not be blamed for believing that she was authorized to transact business for The illness of Francisca Ocfemia began after her husband died and her suffering
and on behalf of the bank. from arthritis and pulmonary disease. Marife O. Niño declared that her mother is
now in serious condition and they could not have her hospitalized for treatment as
Jurisprudence provides that where similar acts have been approved by the directors they do not have any money and this is causing the family sleepless nights and
as a matter of general practice, custom, and policy, the general manager may bind the mental anguish, thinking that their mother may die because they could not submit her
company without formal authorization of the board of directors. Authority to act for for medication as they do not have money.
and bind a corporation may be presumed from acts of recognition in other instances
where the power was in fact exercised. 12. Western Institute of Technology v. Salas
G.R. No. 113032, August 21, 1997
When, in the usual course of business of a corporation, an officer has been allowed
in his official capacity to manage its affairs, his authority to represent the corporation
may be implied from the manner in which he has been permitted by the directors to Doctrine: Generally, directors or trustees are not entitled to salary or other
manage its business. compensation when they perform nothing more than the usual and ordinary duties of
Ratio their office. This rule is founded upon a presumption that directors/trustees render
service gratuitously, and that the return upon their shares adequately furnishes the
motives for service, without compensation.

12
The Exception is when members of the board may receive compensation, in addition Under the foregoing section, there are only two (2) ways by which members of the
to reasonable per diems, when they render services to the corporation in a capacity board can be granted compensation apart from reasonable per diems:
other than as directors/trustees.
(1) when there is a provision in the by-laws fixing their compensation; and
(Basis: the phrase “as such directors” under Sec. 30 of the Corporation Code which
prohibits the compensation of directors) (2) when the stockholders representing a majority of the outstanding capital stock at
a regular or special stockholders’ meeting agree to give it to them.
Facts: Private respondents (Salas people) are the majority and controlling members
of the Board of Trustees of Western Institute of Technology, Inc. (WIT), a stock The phrase “as such directors” is not without significance for it delimits the scope
corporation engaged in the operation, among others, of an educational institution. of the prohibition to compensation given to them for services performed purely in
Petitioners are the minority stockholders of WIT. According to them, a Special their capacity as directors or trustees. The unambiguous implication is that members
Board Meeting was held on June 1, 1986 to discuss the possible implementation of of the board may receive compensation, in addition to reasonable per diems, when
Art. III, Sec. 6 of the Amended ByLaws of WIT on compensation of all officers of they render services to the corporation in a capacity other than as directors/trustees.
the corporation. In the case at bench, Resolution No. 48, s. 1986 granted monthly compensation to
In said meeting, the Board of Trustees passed Resolution No. 48, s. 1986, granting private respondents not in their capacity as members of the board, but rather as
monthly compensation to the private respondents as corporate officers retroactive officers of the corporation, more particularly as Chairman, Vice-Chairman, Treasurer
June 1, 1985. (see other notes for more details) and Secretary of WIT.

On March 1991, petitioners filed a complaint against respondents before the Office There is no argument that directors or trustees, as the case may be, are not entitled to
of the City Prosecutor of Iloilo, as a result of which two (2) separate criminal salary or other compensation when they perform nothing more than the usual and
informations were filed: (1) falsification of a public document and (2) estafa under ordinary duties of their office. This rule is founded upon a presumption that
Article 315, par. 1(b) were filed in the RTC of Iloilo City. (see other notes for more directors/trustees render service gratuitously, and that the return upon their shares
details) adequately furnishes the motives for service, without compensation.

RTC acquitted the accused. Their motion of recon was denied, hence this petition. The prohibition with respect to granting compensation to corporate directors/trustees
Petitioners maintain that this grant of compensation to respondents is prohibited as such under Section 30 is not violated in this particular case.
under Section 30 of the Corporation Code. Thus, respondents are obliged to return Regarding the Criminal Case
these amounts to the corporation with interest.
On Falsification: This Court finds that under the Eleventh Article (Exh. ‘3-D-1’) of
Issue: Are the respondents not allowed to have compensation based on Sec. 30 of the the Articles of Incorporation (Exh. ‘3-B’) of the Panay Educational Institution, Inc.,
Corporation Code? (No because it must be qualified – in what capacity do they now the Western Institute of Technology, Inc., the officers of the corporation shall
receive such compensation) receive such compensation as the Board of Directors may provide. These Articles of
Held: Incorporation was adopted on May 17, 1957 (Exh. ‘3-E’). The Officers of the
corporation and their corresponding duties are enumerated and stated in Sections 1,
We cannot sustain the petitioners. The pertinent section of the Corporation Code 2, 3 and 4 of Art. III of the Amended By-Laws of the Corporation (Exh. ‘4-A’)
provides: which was adopted on May 31, 1957. According to Sec. 6, Art. III of the same By-
Laws, all officers shall receive such compensation as may be fixed by the Board of
“Sec. 30. Compensation of directors.—In the absence of any provision in Directors.
the by-laws fixing their compensation, the directors shall not receive any
compensation, as such directors, except for reasonable per diems: Provided, On Estafa: it is perceived by this Court that the receipt and the holding of the money
however, That any such compensation (other than per diems) may be granted by the accused as salary on basis of the authority granted by the Articles and By-
to directors by the vote of the stockholders representing at least a majority of Laws of the corporation are not tainted with abuse of confidence. The money they
the outstanding capital stock at a regular or special stockholders’ meeting. In received belongs to them and cannot be said to have been converted and/or
no case shall the total yearly compensation of directors, as such directors, misappropriated by them.
exceed ten (10%) percent of the net income before income tax of the
corporation during the preceding year.” [Italics ours] Extra Notes:

13
Resolution → On the motion of Soleded Tubilleja, which was seconded by Richard Section 31 makes a Personal liability of corporate Doctrine of the
Salas, the Officers of the Corporation be granted monthly compensation for services director personally directors, trustees or officers Piercing of the
rendered as follows: liable for attaches only when: Corporate Veil
corporate debts if: applies only when
 Chairman—P9,000.00/month corporate fiction is
 Vice Chairman—P3,500.00/month used to:
 Corporate Treasurer—P3,500.00/month
 Corporate Secretary—P3,500.00/month (1) he willfully and (1) they assent to a patently unlawful (1) defeat public
knowingly votes for act of the corporation, or when they convenience
retroactive June 1, 1985 and 10% of the net profits shall be distributed equally
or assents to are guilty of bad faith or gross (2) justify wrong
among the 10 members of the Board of Trustees. This shall amend and supersede
patently unlawful negligence in directing its affairs, or (3) protect fraud, or
any previous resolution.
acts of the when there is a conflict of interest (4) defend crime
Criminal Case corporation resulting in damages to the
corporation, its stockholders or other
 The charge for falsification of public document was anchored on the private (2) he is guilty of persons;
respondents’ submission of WIT’s income statement for the fiscal year 1985- gross negligence or
1986 with the Securities and Exchange Commission (SEC) reflecting therein the bad faith in (2) they consent to the issuance of
disbursement of corporate funds for the compensation of private respondents directing the affairs watered-down stocks or when,
based on Resolution No. 4, series of 1986, making it appear that the same was of the corporation. having knowledge of such issuance,
passed by the board on March 30, 1986, when in truth, the same was actually do not forthwith file with the
passed on June 1, 1986, a date not covered by the corporation’s fiscal year 1985- corporate secretary their written
1986 (beginning May 1, 1985 and ending April 30, 1986). objection;
 herein accused, knowing fully well that they have no sufficient, lawful authority (3) they agree to hold themselves
to disburse—let alone violate applicable laws and jurisprudence, disbursed the personally and solidarily liable with
funds of the corporation by effecting payment of their retroactive salaries in the the corporation; or
amount of P186,470.00 and subsequently paying themselves every 15th and
30th of the month starting June 15, 1986 until the present, in the amount of (4) they are made by specific
P19,500.00 per month, as if the same were their own, and when herein accused provision of law personally
were informed of the illegality of these disbursements by the minority answerable for their corporate action.
stockholders by way of objections made in an annual stockholders’ meeting held
on June 14, 1986 and every year thereafter, they refused, and still refuse, to
rectify the same to the damage and prejudice of the corporation (and its Facts: The National Federation of Labor Unions (NAFLU) and Mariveles Apparel
stockholders) in the total sum of P1,453,970.79 as of November 15, 1991. Corporation Labor Union (MACLU) (collectively, complainants), on behalf of all of
MAC’s rank and file employees, filed a complaint against MAC for illegal dismissal
brought about by its illegal closure of business.
13. Carag v. NLRC
G.R. No. 147590, April 2, 2007 On July 8, 1993, without notice of any kind filed in accordance with pertinent
provisions of the Labor Code, MAC ceased operations with the intention of
completely closing its shop or factory. MAC alleged that notice was given through a
Doctrine: Article 212(e) of the Labor Code does not state that corporate officers are letter which contained their intent to close operations. At the time of closure,
personally liable for the unpaid salaries or separation pay of employees of the employees who have rendered one to two weeks work were not paid their
corporation. The liability of corporate officers for corporate debts remains governed corresponding salaries/wages as well as other benefits due.
by Section 31 of the Corporation Code.
Complainant’s Argument

14
The complainants pray that they be allowed to implead Atty. Antonio Carag and Mr. The CA found that Carag and David, as the most ranking officers of MAC, had a
Armando David, owners and responsible officers of respondent company, to assure direct hand at the time in the illegal dismissal of MAC's employees. The failure of
the satisfaction of the judgment, should a decision favorable to them be rendered. Carag and David to observe the notice requirement in closing the company shows
They say that since the corporation is no longer existing, they will not be able to malice and bad faith, which justifies their solidary liability with MAC.
enforce the reliefs they have prayed for in their complaint.
Issue: Whether they could be held personally liable for the company (NO)
Under Art. 212 (c) of the Labor Code, it states that an "Employer includes any
person acting in the interest of an employer, directly or indirectly. It does not, Held:
however, include any labor organization or any of its officers or agents except when GR: It is a basic principle in law that corporations have personality distinct and
acting as employer." In pursuance of their argument, they present several separate from the stockholders. This concept is known as corporate fiction.
jurisprudence: Normally, officers acting for and in behalf of a corporation are not held personally
 The provision was culled from Section 2, Republic Act 602, the Minimum liable for the obligation of the corporation. In instances where corporate officers
Wage Act. If the employer is an artificial person, it must have an officer dismissed employees in bad faith or wantonly violate labor standard laws or when
who can be presumed to be the employer, being "the person acting in the the company had already ceased operations and there is no way by which a judgment
interest of the employer." The corporation is the employer, only in the in favor of employees could be satisfied, corporate officers can be held jointly and
technical sense. severally liable with the company.
 Where the employer-corporation is no longer existing and unable to satisfy EX: when is a director personally liable for the debts of the corporation?
the judgment in favor of the employee, the officer should be held liable for
acting on behalf of the corporation. The rule is that a director is not personally liable for the debts of the corporation,
 This is the policy of the law. If it were otherwise, corporate employers which has a separate legal personality of its own. Section 31 of the Corporation Code
would have devious ways to evade paying backwages. lays down the exceptions to the rule, as follows:
 If no definite proof exists as to who is the responsible officer, the president
Liability of directors, trustees or officers. - Directors or trustees who
of the corporation who can be deemed to be its chief operation officer shall
wilfully and knowingly vote for or assent to patently unlawful acts of the
be presumed to be the responsible officer. In Republic Act 602, for
corporation or who are guilty of gross negligence or bad faith in directing
example, criminal responsibility is with the "manager" or in his default, the
the affairs of the corporation or acquire any personal or pecuniary interest in
person acting as such.
conflict with their duty as such directors or trustees shall be liable jointly
Respondent’s Argument (MAC) and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
The respondents on the other hand by way of controversion maintain that the present
complaint was filed prematurely. The respondents deny having totally closed and Section 31 makes a director personally liable for corporate debts if:
insist that respondent company is only on a temporary shut-down occasioned by the
(1) he wilfully and knowingly votes for or assents to patently unlawful acts of the
pending labor unrest. There being no permanent closure any claim for separation pay
corporation
must not be given due course.
(2) he is guilty of gross negligence or bad faith in directing the affairs of the
They opposed the impleader of Atty. Antonio C. Carag and Mr. Armando David
corporation.
saying that they are not the owners of Mariveles Apparel Corporation and they are
only minority stockholders holding qualifying shares. MAC is actually owned by a Complainants did not: (1) Allege in their complaint nor did they present evidence
consortium of banks. Carag and David own shares in MAC only to qualify them to that Carag wilfully and knowingly voted for or assented to any patently unlawful act
serve as MAC’s officers. Piercing the veil of corporate fiction cannot be done in the of MAC or (2) Allege or present evidence that Carag is guilty of gross negligence or
present case for such remedy can only be availed of in case of closed or family bad faith in directing the affairs of MAC. These were also not present in the Labor
owned corporations. Arbiter’s decision.
The LA granted the motion to implead Carag and David. NLRC agreed. To hold a director personally liable for debts of the corporation, and thus pierce the
veil of corporate fiction, the bad faith or wrongdoing of the director must be
established clearly and convincingly. Bad faith is never presumed. Bad faith does not
15
connote bad judgment or negligence. Bad faith imports a dishonest purpose. Bad We have already ruled in McLeod v. NLRC and Spouses Santos v. NLRC that Article
faith means breach of a known duty through some ill motive or interest. Bad faith 212(e) of the Labor Code, by itself, does not make a corporate officer personally
partakes of the nature of fraud. liable for the debts of the corporation. The governing law on personal liability of
directors for debts of the corporation is still Section 31 of the Corporation Code.
Neither does bad faith arise automatically just because a corporation fails to comply
with the notice requirement of labor laws on company closure or dismissal of Personal liability of corporate directors, trustees or officers attaches only when:
employees. The failure to give notice is not an unlawful act because the law does not
define such failure as unlawful. Such failure to give notice is a violation of (1) they assent to a patently unlawful act of the corporation, or when they are guilty
procedural due process but does not amount to an unlawful or criminal act. Such of bad faith or gross negligence in directing its affairs, or when there is a conflict of
procedural defect is called illegal dismissal because it fails to comply with interest resulting in damages to the corporation, its stockholders or other persons;
mandatory procedural requirements, but it is not illegal in the sense that it constitutes (2) they consent to the issuance of watered down stocks or when, having knowledge
an unlawful or criminal act. of such issuance, do not forthwith file with the corporate secretary their written
On a criminal act objection;

For a wrongdoing to make a director personally liable for debts of the corporation, (3) they agree to hold themselves personally and solidarily liable with the
the wrongdoing approved or assented to by the director must be a patently unlawful corporation; or
act. Mere failure to comply with the notice requirement of labor laws on company (4) they are made by specific provision of law personally answerable for their
closure or dismissal of employees does not amount to a patently unlawful act. corporate action.
Patently unlawful acts are those declared unlawful by law which imposes penalties
for commission of such unlawful acts. There must be a law declaring the act Thus, the rule is still that the doctrine of piercing the corporate veil applies only
unlawful and penalizing the act. when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime. In the absence of malice, bad faith, or a specific
Complainants did not allege or prove, and Arbiter Ortiguerra did not make any provision of law making a corporate officer liable, such corporate officer cannot be
finding, that Carag approved or assented to any patently unlawful act to which the made personally liable for corporate liabilities. Neither Article 212[e] nor Article 273
law attaches a penalty for its commission. On this score alone, Carag cannot be held (now 272) of the Labor Code expressly makes any corporate officer personally liable
personally liable for the separation pay of complainants. for the debts of the corporation.
Sec. 31 of the Corp. Code prevails over the Labor Code Thus, it was error for Arbiter Ortiguerra (LA), the NLRC, and the Court of Appeals
This leaves us with Arbiter Ortiguerra's assertion that "when the company had to hold Carag personally liable for the separation pay owed by MAC to complainants
already ceased operations and there is no way by which a judgment in favor of based alone on Article 212(e) of the Labor Code. Article 212(e) does not state that
employees could be satisfied, corporate officers can be held jointly and severally corporate officers are personally liable for the unpaid salaries or separation pay of
liable with the company." This assertion echoes the complainants' claim that Carag is employees of the corporation. The liability of corporate officers for corporate debts
personally liable for MAC's debts to complainants "on the basis of Article 212(e) of remains governed by Section 31 of the Corporation Code.
the Labor Code, as amended," which says On the closure of business
'Employer' includes any person acting in the interest of an employer, The respondents described the cessation of operations in its premises as a temporary
directly or indirectly. The term shall not include any labor organization shut-down. While such posturing may have been initially true, it is not so anymore.
or any of its officers or agents except when acting as employer. (Emphasis The cessation of operations has clearly exceeded the six months period fixed in
supplied) Article 286 of the Labor Code. The temporary shutdown has ripened into a closure or
Indeed, complainants seek to hold Carag personally liable for the debts of MAC cessation of operations for causes not due to serious business losses or financial
based solely on Article 212(e) of the Labor Code. This is the specific legal ground reverses.
cited by complainants, and used by Arbiter Ortiguerra, in holding Carag personally 14. Cosare v. Broadcom Asia, Inc
liable for the debts of MAC. G.R. No. 201298, February 5, 2014

16
exchange for "financial assistance" in the amount of ₱300,000.00. Cosare refused to
Doctrine: Jurisdiction of intra-corporate disputes fall exclusively with the RTC comply with the directive, as signified in a letter which he sent to Arevalo.
It is only when the officer claiming to have been illegally dismissed is classified as a Cosare received from Broadcom’s Manager for Finance and Administration, a memo
corporate officer that the issue is deemed an intra-corporate dispute which falls signed by Arevalo, charging him of serious misconduct and willful breach of trust.
within the jurisdiction of the trial courts.
Cosare was given forty-eight (48) hours from the date of the memo within which to
The determination of whether the dismissed officer was a regular employee or present his explanation on the charges. He was also "suspended from having access
corporate officer unravels the conundrum of whether a complaint for illegal to any and all company files/records and use of company assets effective
dismissal is cognizable by the LA or by the RTC. In case of the regular employee, immediately." He was totally barred from entering the company premises, and was
the LA has jurisdiction; otherwise, the RTC exercises the legal authority to told to merely wait outside the office building for further instructions. When no such
adjudicate. instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of
the officials of Barangay San Antonio, Pasig City, and had the incident reported in
Definition of Corporate Officers the barangay blotter.
"‘Corporate officers’ in the context of Presidential Decree No. 902-A are those Cosare filed the subject labor complaint, claiming that he was constructively
officers of the corporation who are given that character by the Corporation Code or dismissed from employment by the respondents. He further argued that he was
by the corporation’s by-laws. illegally suspended, as he placed no serious and imminent threat to the life or
property of his employer and co-employees.
 Sec. 25 Corp Code – the president, secretary and the treasurer
 Corporation’s by-laws – There are two circumstances which must concur The respondents argued that Cosare was neither illegally suspended nor dismissed
in order for an individual to be considered a corporate officer, as against an from employment. They also contended that Cosare committed the following acts
ordinary employee or officer, namely: inimical to the interests of Broadcom.
(1) the creation of the position is under the corporation’s charter or by-laws; and LA ruled for the company. NLRC reversed finding illegal dismissal. CA dismissed
the complaint on the ground of lack of jurisdiction as it deemed the case as one
(2) the election of the officer is by the directors or stockholders.
involving intra-corporate controversy. Such are within the exclusive jurisdiction of
But note that even if the by-laws allow for the creation of new positions, the board the RTC according to PD 902-A. Motion for Recon was denied, hence this case.
of directors has no power to create other corporate offices without first amending the
Issue: Whether the case instituted by Cosare was an intra-corporate dispute that was
corporate by-laws so as to include therein the newly created corporate office.
within the original jurisdiction of the RTC. (NO)
Facts: Cosare claimed that sometime in April 1993, he was employed as a salesman
Held: Contrary to the ruling of the CA, it is the LA, and not the regular courts, which
by Arevalo, who was then in the business of selling broadcast equipment needed by
has the original jurisdiction over the subject controversy.
television networks and production houses.
An intra-corporate controversy, which falls within the jurisdiction of regular courts,
In December 2000, Arevalo set up the company Broadcom, Cosare was named an
has been regarded in its broad sense to pertain to disputes that involve any of the
incorporator of Broadcom, having been assigned 100 shares of stock with par value
following relationships:
of ₱1.00 per share. In October 2001, Cosare was promoted to the position of
Assistant Vice President for Sales (AVP for Sales) and Head of the Technical (1) between the corporation, partnership or association and the public;
Coordination.
(2) between the corporation, partnership or association and the state in so far as its
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice franchise, permit or license to operate is concerned;
President for Sales and thus, became Cosare’s immediate superior.
(3) between the corporation, partnership or association and its stockholders, partners,
On March 23, 2009, Cosare sent a confidential memo to Arevalo to inform him of members or officers; and
anomalies which were allegedly being committed by Abiog against the company.
Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead (4) among the stockholders, partners or associates, themselves
called for a meeting by Arevalo wherein he was asked to tender his resignation in
17
Settled jurisprudence, however, qualifies that when the dispute involves a charge of Section 1. Election / Appointment – Immediately after their election, the
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose Board of Directors shall formally organize by electing the President, the Vice-
jurisdiction, as a rule, falls termination disputes and claims for damages arising from President, the Treasurer, and the Secretary at said meeting.
employer-employee relations as provided in Article 217 of the Labor Code.
The Board may, from time to time, appoint such other officers as it may
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and determine to be necessary or proper.
an officer of Broadcom at the time the subject controversy developed failed to
necessarily make the case an intra-corporate dispute. The determination of whether What SC says → Although a blanket authority provides for the Board’s
the dismissed officer was a regular employee or corporate officer unravels the appointment of such other officers as it may deem necessary and proper, the
conundrum of whether a complaint for illegal dismissal is cognizable by the LA or respondents failed to sufficiently establish that the position of AVP for Sales was
by the RTC. In case of the regular employee, the LA has jurisdiction; otherwise, the created by virtue of an act of Broadcom’s board, and that Cosare was specifically
RTC exercises the legal authority to adjudicate. elected or appointed to such position by the directors. No board resolutions to
establish such facts form part of the case records.
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  Case law states that: an enabling clause in a corporation’s by-laws empowering
for being its AVP for Sales, was not a "corporate officer" as the term is defined by its board of directors to create additional officers, even with the subsequent
law. 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
"‘Corporate officers’ in the context of Presidential Decree No. 902-A are those offices without first amending the corporate by-laws so as to include therein the
officers of the corporation who are given that character by the Corporation Code or newly created corporate office.
by the corporation’s by-laws. There are three specific officers whom a corporation
must have under Section 25 of the Corporation Code. These are the president, To allow the creation of a corporate officer position by a simple inclusion in the
secretary and the treasurer. The number of officers is not limited to these three. A corporate by-laws of an enabling clause empowering the board of directors to do so
corporation may have such other officers as may be provided for by its by-laws like, can result in the circumvention of that constitutionally well-protected right of every
but not limited to, the vice-president, cashier, auditor or general manager. The employee to security of tenure.
number of corporate officers is thus limited by law and by the corporation’s by-laws.
 In this case: The CA’s heavy reliance on the contents of the General
On Corporate Offices Information Sheets41, which were submitted by the respondents during the
An "office" is created by the charter of the corporation and the officer is elected by appeal proceedings and which plainly provided that Cosare was an "officer" of
the directors and stockholders. An "employee" usually occupies no office and Broadcom, was clearly misplaced. The said documents could neither govern nor
generally is employed not by action of the directors or stockholders but by the establish the nature of the office held by Cosare and his appointment thereto.
managing officer of the corporation who also determines the compensation to be paid The mere fact that Cosare was a stockholder of Broadcom at the time of the case’s
to such employee.
filing did not necessarily make the action an intra- corporate controversy. "Not all
There are two circumstances which must concur in order for an individual to be conflicts between the stockholders and the corporation are classified as intra-
considered a corporate officer, as against an ordinary employee or officer, namely: corporate controversies.
(1) the creation of the position is under the corporation’s charter or by-laws; and (2) Illegal Dismissal
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 It is clear from the cited circumstances that the respondents already rejected Cosare’s
officer that the issue is deemed an intra-corporate dispute which falls within the continued involvement with the company. Even their refusal to accept the
jurisdiction of the trial courts. explanation which Cosare tried to tender on April 2, 2009 further evidenced the
resolve to deny Cosare of the opportunity to be heard prior to any decision on the
Basis by CA for ruling that there was intra-corporate dispute→ Under Article IV termination of his employment.
of Broadcom’s by-laws, it states that:

15. Advanced Paper Corporation v. Arma Traders Corporation


18
G.R. No.176897, December 11, 2013 stated that their company needed the loan to settle its obligations to other suppliers
because its own collectibles did not arrive on time.

Doctrine: Authority Because of its good business relations with Arma Traders, Advance Paper extended
the loans. As payment for the purchases on credit and the loan transactions, Arma
A corporate officer or agent may represent and bind the corporation in transactions Traders issued 82 postdated checks payable to cash or to Advance Paper. Tan and Uy
with third persons to the extent that the authority to do so has been conferred upon were Arma Traders’ authorized bank signatories who signed and issued these checks
him; powers added by custom and usage, as usually pertaining to the particular which had the aggregate amount of ₱15,130,636.87.
officer or agent, and such apparent powers as the corporation has caused person
dealing with the officer or agent to believe that it has conferred. Advance Paper presented the checks to the drawee bank but these were dishonored
either for "insufficiency of funds" or "account closed." Despite repeated demands,
Doctrine of Apparent Authority however, Arma Traders failed to settle its account with Advance Paper.
The doctrine of apparent authority provides that a corporation will be estopped from Advance Paper filed a complaint for collection of sum of money with application for
denying the agent’s authority if it knowingly permits one of its officers or any other preliminary attachment against Arma Traders, Tan, Uy, Ting, Gui, and Ng. RTC
agent to act within the scope of an apparent authority, and it holds him out to the ordered Arma Traders to pay Advance Paper. CA reversed saying that the petitioners
public as possessing the power to do those acts. failed to prove by preponderance of evidence the existence of the purchases on credit
and loans.
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 Advance Paper claimed that the respondents fraudulently issued the postdated checks
of the exercise of reasonable prudence. as payment for the purchases and loan transactions knowing that they did not have
sufficient funds with the drawee banks. Arma Traders claimed that the loan
Apparent authority is derived not merely from practice. Its existence may be transactions were ultra vires because the board of directors of Arma Traders did not
ascertained through: issue a board resolution authorizing Tan and Uy to obtain the loans from Advance
(1) the general manner in which the corporation holds out an officer or agent Paper.
as having the power to act or, in other words the apparent authority to act in When the acts of the corporate officers are ultra vires, the corporation is not liable for
general, with which it clothes him; or whatever acts that these officers committed in excess of their authority. Further, the
(2) the acquiescence in his acts of a particular nature, with actual or respondents claimed that Advance Paper failed to verify Tan and Uy’s authority to
constructive knowledge thereof, within or beyond the scope of his ordinary transact business with them. Hence, Advance Paper should suffer the consequences.
powers. Uy and Tan
It requires presentation of evidence of similar acts executed either in its favor or in Tan did not file his Answer and was eventually declared in default. Uy claimed that
favor of other parties. It is not the quantity of similar acts which establishes apparent he and Tan have been authorized by the board of directors for the past 13 years to
authority, but the vesting of a corporate officer with the power to bind the issue checks in behalf of Arma Traders to pay its obligations with Advance Paper.
corporation. Furthermore, he admitted that Arma Traders’ checks were issued to pay its
Facts: Arma Traders is is a domestic corporation engaged in the wholesale and contractual obligations with Advance Paper.
distribution of school and office supplies, and novelty products. Respondent Antonio Advance Paper states that Arma Traders led the petitioners to believe that Tan and
Tan (Tan) was formerly the President while respondent Uy Seng Kee Willy (Uy) is Uy had the authority to obtain loans since the respondents left the active and sole
the Treasurer of Arma Traders. Petitioner Advance Paper is a domestic corporation management of the company to Tan and Uy since 1984. Citing Lipat v. Pacific
engaged in the business of producing, printing, manufacturing, distributing and Banking Corporation, Advance Paper states that if a corporation knowingly permits
selling of various paper products. one of its officers or any other agent to act within the scope of an apparent authority,
Upon the representation of Tan and Uy, Arma Traders also obtained three loans from it holds him out to the public as possessing the power to do those acts; thus, the
Advance Paper in a total of ₱7,788,796.76. The current president of Arma Trader corporation will, as against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agent’s authority.

19
Issue: Whether Arma Traders is liable to pay the loans applying the doctrine of Example: "Inasmuch as a corporate president is often given general
apparent authority. (YES) supervision and control over corporate operations, the strict rule that said
officer has no inherent power to act for the corporation is slowly giving way to
Held: The doctrine of apparent authority provides that a corporation will be estopped the realization that such officer has certain limited powers in the transaction of
from denying the agent’s authority if it knowingly permits one of its officers or any the usual and ordinary business of the corporation."
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. "In the absence of a charter or bylaw provision to the contrary, the president is
presumed to have the authority to act within the domain of the general
The doctrine of apparent authority does not apply if the principal did not commit any objectives of its business and within the scope of his or her usual duties."
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 Application in this case
produced a change of position to the third party’s detriment.
SC does not agree with the CA’s findings that Arma Traders is not liable to pay the
Under Sec. 23 of the Corporation Code, the power and responsibility to decide loans due to the lack of board resolution authorizing Tan and Uy to obtain the loans.
whether the corporation should enter into a contract that will bind the corporation is
lodged in the board, subject to the articles of incorporation, bylaws, or relevant (1) Arma Traders’ Articles of Incorporation provides that the corporation may borrow
provisions of law. However, just as a natural person who may authorize another to do or raise money to meet the financial requirements of its business by the issuance of
certain acts for and on his behalf, the board of directors may validly delegate some of bonds, promissory notes and other evidence of indebtedness. It states that Tan and Uy
its functions and powers to officers, committees or agents. are not just ordinary corporate officers and authorized bank signatories because they
are also Arma Traders’ incorporators along with respondents Ng and Ting, and Pedro
The authority of such individuals to bind the corporation is generally derived from Chao.
law, corporate bylaws or authorization from the board, either expressly or impliedly
by habit, custom or acquiescence in the general course of business: (2) the respondents, through Ng who is Arma Traders’ corporate secretary,
incorporator, stockholder and director, testified that the sole management of Arma
A corporate officer or agent may represent and bind the corporation in transactions Traders was left to Tan and Uy and that he and the other officers never dealt with the
with third persons to the extent that the authority to do so has been conferred upon business and management of Arma Traders for 14 years. He also confirmed that since
him, and this includes powers as, in the usual course of the particular business, are 1984 up to the filing of the complaint against Arma Traders, its stockholders and
incidental to, or may be implied from, the powers intentionally conferred, powers board of directors never had its meeting.
added by custom and usage, as usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has caused person dealing with the Thus, Arma Traders bestowed upon Tan and Uy broad powers by allowing them to
officer or agent to believe that it has conferred. transact with 3rd persons without the necessary written authority from its non-
performing board of directors. Arma Traders failed to take precautions to stop its
Apparent authority is derived not merely from practice. Its existence may be own corporate officers from abusing their powers. Because of its own laxity, Arma
ascertained through: Traders is now estopped from denying Tan and Uy’s authority to obtain loan from
Advance Paper.
(1) the general manner in which the corporation holds out an officer or agent
as having the power to act or, in other words the apparent authority to act in
general, with which it clothes him; or
17. THE BOARD OF LIQUIDATORS vs. HEIRS OF MAXIMO M. KALAW
(2) the acquiescence in his acts of a particular nature, with actual or G.R. No. L-18805 August 14, 1967
constructive knowledge thereof, within or beyond the scope of his ordinary
powers. Doctrine: Accepted in this jurisdiction are three methods by which a corporation may
wind up its affairs: (1) under Section 3, Rule 104, of the Rules of Court (which
It requires presentation of evidence of similar acts executed either in its favor or in superseded Section 66 of the Corporation Law), whereby, upon voluntary dissolution of
favor of other parties. It is not the quantity of similar acts which establishes apparent a corporation, the court may direct "such disposi- tion of its assets as justice requires,
authority, but the vesting of a corporate officer with the power to bind the and may appoint a receiver to collect such assets and pay the debts of the corporation";
corporation. (2) under Section 77 of the Corporation Law, whereby a corporation whose corporate
existence is terminated, "shall nevertheless be continued as a body corporate for three
20
years after the time when it would have been so dissolved, for the purpose of negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code);
prosecuting and defending suits by or against it and of enabling it gradually to settle and and defendant board members, including Kalaw, with bad faith and/or breach of trust
close its affairs, to dispose of and convey its property and to divide its capital stock, but for having approved the contracts. By Executive Order 372, dated November 24, 1950,
not for the purpose of continuing the business for which it was established"; and (3) NACOCO, together with other government-owned corporations, was abolished, and
under Section 78 of the Corporation Law, by virtue of which the corporation, within the the Board of Liquidators was entrusted with the function of settling and closing its
three-year period just mentioned, "is authorized and empowered to convey all of its affairs.
property to trustees for the benefit of members, stockholders, creditors, and others
interested," CFI-Manila: dismissed the complaint. Plaintiff was ordered to pay the heirs of Maximo
Kalaw the sum of P2,601.94 for unpaid salaries and cash deposit due the deceased
Facts: The National Coconut Corporation (NACOCO, for short) was chartered as a Kalaw from NACOCO.
non-profit governmental organization on avowedly for the protection, preservation and
development of the coconut industry in the Philippines. On August 1, 1946, Issue: Whether plaintiff Board of Liquidators has lost its legal personality to continue
NACOCO's charter was amended [Republic Act 5] to grant that corporation the with this suit since the three year period has elapsed, the Board of Liquidators may not
express power to buy and sell copra. The charter amendment was enacted to stabilize now continue with, and prosecute, the present case to its conclusion
copra prices, to serve coconut producers by securing advantageous prices for them, to
cut down to a minimum, if not altogether eliminate, the margin of middlemen, mostly Held: No, the provision should be read not as an isolated provision but in conjunction
aliens. General manager and board chairman was Maximo M. Kalaw; defendants Juan with the whole. So reading, it will be readily observed that no time limit has been tacked
Bocar and Casimiro Garcia were members of the Board; defendant Leonor Moll to the existence of the Board of Liquidators and its function of closing the affairs of the
became director only on December 22, 1947. NACOCO, after the passage of Republic various government owned corporations, including NACOCO.
Act 5, embarked on copra trading activities.
The President thought it best to do away with the boards of directors of the defunct
An unhappy chain of events conspired to deter NACOCO from fulfilling the contracts corporations; at the same time, however, the President had chosen to see to it that the
it entered into. Nature supervened. Four devastating typhoons visited the Philippines in Board of Liquidators step into the vacuum. And nowhere in the executive order was
1947. When it became clear that the contracts would be unprofitable, Kalaw submitted there any mention of the lifespan of the Board of Liquidators.
them to the board for approval. It was not until December 22, 1947 when the
membership was completed. Defendant Moll took her oath on that date. A meeting was Three methods by which corporation may wind up it its affairs:
then held. Kalaw made a full disclosure of the situation, apprised the board of the
impending heavy losses. No action was first taken on the contracts but not long 1. Voluntary dissolution, "such disposition of its assets as justice requires, and may
thereafter, that is, on January 30, 1948, the board met again with Kalaw, Bocar, Garcia appoint a receiver to collect such assets and pay the debts of the corporation;
and Moll in attendance. They unanimously approved the contracts hereinbefore
enumerated. 2. Corporate existence is terminated - "shall nevertheless be continued as a body
corporate for three years after the time when it would have been so dissolved, for the
As was to be expected, NACOCO but partially performed the contracts. The buyers purpose of prosecuting and defending suits by or against it and of enabling it gradually
threatened damage suits, some of which were settled. But one buyer, Louis Dreyfus & to settle and close its affairs, to dispose of and convey its property and to divide its
Go. (Overseas) Ltd., did in fact sue before the Court of First Instance of Manila. The capital stock, but not for the purpose of continuing the business for which it was
cases culminated in an out-of- court amicable settlement when the Kalaw management established;"
was already out.
With particular reference to the Dreyfus claims, NACOCO put up the defenses that: 3. Corporation, within the three year period just mentioned, "is authorized and
empowered to convey all of its property to trustees for the benefit of members,
(1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have stockholders, creditors, and others interested
license to do business here; and Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution of
(2) failure to deliver was due to force majeure, the typhoons. All the settlements sum up to a corporation ends its existence so that there must be statutory authority for
P1,343,274.52. prolongation of its life even for purposes of pending litigation
In this suit started in February, 1949, NACOCO seeks to recover the above sum of
P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and Board of Liquidators escapes from the operation thereof for the reason that
directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with "[o]bviously, the complete loss of plaintiff's corporate existence after the expiration of

21
the period of three (3) years for the settlement of its affairs is what impelled the filed his complaint on May 5, 1998, his cause of action based on illegal dismissal has not
President to create a Board of Liquidators, to continue the management of such matters yet accrued.
as may then be pending." CA set aside the NLRC ruling and reinstated the Labor Arbiter’s decision.

The Board of Liquidators thus became the trustee on behalf of the government. It was Issue: Whether petitioner is personally liable for the monetary awards granted in favor
an express trust. The legal interest became vested in the trustee — the Board of of respondent arising from his alleged illegal termination.
Liquidators. The beneficial interest remained with the sole stockholder — the
government. At no time had the government withdrawn the property, or the authority Held: No. Petitioner Irene Martel Francisco was not liable for the monetary awards
to continue the present suit, from the Board of Liquidators. If for this reason alone, we specified in the reinstated Labor Arbiter’s Decision.
cannot stay the hand of the Board of Liquidators from prosecuting this case to its final
conclusion. The provisions of Section 78 of the Corporation Law — the third method A corporation is a juridical entity with legal personality separate and distinct from those
of winding up corporate affairs — find application. acting for and in its behalf and, in general, from the people comprising it. The rule is
that obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities.
To hold a director or officer personally liable for corporate obligations, two requisites
18. IRENE MARTEL FRANCISCO vs. NUMERIANO MALLEN, JR. must concur: (1) complainant must allege in the complaint that the director or officer
G.R. No. 173169 September 22, 2010 assented to patently unlawful acts of the corporation, or that the officer was guilty of
gross negligence or bad faith; and (2) complainant must clearly and convincingly prove
Doctrine: The rule is that obligations incurred by the corporation, acting through its such unlawful acts, negligence or bad faith.
directors, officers and employees, are its sole liabilities. To hold a director or officer Respondent failed to allege either in his complaint or position paper that petitioner, as
personally liable for corporate obligations, two requisites must concur: (1) complainant Vice-President of VIPS Coffee Shop and Restaurant, acted in bad faith. Neither did
must allege in the complaint that the director or officer assented to patently unlawful respondent clearly and convincingly prove that petitioner, as Vice-President of VIPS
acts of the corporation, or that the officer was guilty of gross negligence or bad faith; Coffee Shop and Restaurant, acted in bad faith. In fact, there was no evidence
and (2) complainant must clearly and convincingly prove such unlawful acts, negligence whatsoever to show petitioner’s participation in respondent’s alleged illegal dismissal.
or bad faith. Clearly, the twin requisites of allegation and proof of bad faith, necessary to hold
Facts: On 5 April 1994, respondent Numeriano Mallen, Jr. was hired as a waiter for petitioner personally liable for the monetary awards to respondent, are lacking.
VIPS Coffee Shop and Restaurant, a fine dining restaurant which used to operate at the
Harrison Plaza Commercial Complex in Manila. 19. MATLING INDUSTRIAL AND COMMERCIAL CORPORATION vs.
On 30 January 1998 to 1 February 1998, respondent took an approved sick leave. RICARDO R. COROS
On 15 February 1998, respondent took a vacation leave. Thereafter, he availed of his G.R. No. 157802 October 13, 2010
paternity leave. Doctrine: Conformably with Section 25, a position must be expressly mentioned in the
On 18 April 1998, respondent suffered from tonsillitis, forcing him to take a three- By-Laws in order to be considered as a corporate office. Thus, the creation of an office
day sick leave from 18 April 1998 to 20 April 1998. However, instead of his applied pursuant to or under a By-Law enabling provision is not enough to make a position a
three-day sick leave, respondent was given three months leave. corporate office. Guerrea v. Lezama, 103 Phil. 553 (1958), the first ruling on the matter,
On 5 May 1998, respondent filed before the Department of Labor and held that the only officers of a corporation were those given that character either by the
Employment-National Capital Region (DOLE-NCR) a complaint for underpayment of Corporation Code or by the By-Laws; the rest of the corporate officers could be
wages and non-payment of holiday pay. Sometime in June 1998, respondent reported considered only as employees or subordinate officials.
back to work with a medical certificate stating he was fit to work but he was refused Facts: Ricardo R. Coros filed a complaint for illegal suspension and illegal dismissal
work. against Matling and some of its corporate officers in the NLRC after he was dismissed
Labor Arbiter Madjayran H. Ajan rendered a decision in favor of respondent as the latter’s Vice President for Finance and Administration.
declaring the dismissal of the complainant illegal.
NLRC modified the Labor Arbiter’s ruling stating that respondent’s filing of a Matling moved to dismiss the complaint, raising the ground, among others, that
complaint for illegal dismissal was premature. The memorandum directing him to avail the complaint pertained to the jurisdiction of the Securities and Exchange Commission
of his sick/vacation leave was to last from April 30, 1998 to August 1, 1998. The (SEC) due to the controversy being intra-corporate inasmuch as the respondent was a
complaint therefore filed on May 5, 1998 has no legal basis to support itself. When he corporate officer, the office of Vice President for Finance and Administration being

22
created by Matlings President pursuant to By Law No. V. The Labor Arbiter dismissed action of the directors or stockholders but by the managing officer of
the complaint. the corporation who also determines the compensation to be paid to
such employee.
On appeal, the NLRC set aside the dismissal, concluding that the respondents
complaint for illegal dismissal was properly cognizable by the LA, not by the SEC, In this case, respondent was appointed vice president for
because he was not a corporate officer by virtue of his position in Matling, albeit high nationwide expansion by Malonzo, petitioner's general manager, not
ranking and managerial, not being among the positions listed in Matlings Constitution by the board of directors of petitioner. It was also Malonzo who
and By-Laws. determined the compensation package of respondent. Thus,
respondent was an employee, not a corporate officer. The CA was therefore
The petitioners then elevated the issue to the CA by petition for certiorari correct in ruling that jurisdiction over the case was properly with the
contending that the NLRC committed grave abuse of discretion amounting to lack of NLRC, not the SEC (now the RTC).
jurisdiction in reversing the correct decision of the LA. The CA dismissed the petition
for certiorari, hence, this petition. This interpretation is the correct application of Section 25 of the Corporation
Code, which plainly states that the corporate officers are the President, Secretary,
Treasurer and such other officers as may be provided for in the By-Laws. Accordingly,
Issue: Whether or not the respondent is a corporate officer of Matling. the corporate officers in the context of PD No. 902-A are exclusively those who are
given that character either by the Corporation Code or by the corporations By-Laws.

Ruling: The respondent is not a corporate officer of Matling. A different interpretation can easily leave the way open for the Board of
Directors to circumvent the constitutionally guaranteed security of tenure of the
Section 25 of the Corporation Code provides: employee by the expedient inclusion in the By-Laws of an enabling clause on the
creation of just any corporate officer position.
Section 25. Corporate officers, quorum.--Immediately after their
election, the directors of a corporation must formally organize by the Moreover, the Board of Directors of Matling could not validly delegate the
election of a president, who shall be a director, a treasurer who may power to create a corporate office to the President, in light of Section 25 of the Corporation
or may not be a director, a secretary who shall be a resident and Code requiring the Board of Directors itself to elect the corporate officers. Verily, the
citizen of the Philippines, and such other officers as may be power to elect the corporate officers was a discretionary power that the law exclusively
provided for in the by-laws. Any two (2) or more positions may be vested in the Board of Directors, and could not be delegated to subordinate officers or
held concurrently by the same person, except that no one shall act as agents. The office of Vice President for Finance and Administration created by Matlings
president and secretary or as president and treasurer at the same President pursuant to By Law No. V was an ordinary, not a corporate, office.
time…
To emphasize, the power to create new offices and the power to appoint the
officers to occupy them vested by By-Law No. V merely allowed Matlings President to
create non-corporate offices to be occupied by ordinary employees of Matling. Such
Conformably with Section 25, a position must be expressly mentioned in the powers were incidental to the Presidents duties as the executive head of Matling to
By-Laws in order to be considered as a corporate office. Thus, the creation of an office assist him in the daily operations of the business.
pursuant to or under a By-Law enabling provision is not enough to make a position a
corporate office. Guerrea v. Lezama, the first ruling on the matter, held that the only
officers of a corporation were those given that character either by the Corporation Code or 20. ABS-CBN Broadcasting Corporation vs. Honorable
by the By-Laws; the rest of the corporate officers could be considered only as Court of Appeals
employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc. G.R. No. 128690. January 21, 1999
v. King:
Doctrine: Under the Corporation Code, unless otherwise provided by said Code,
An office is created by the charter of the corporation and the corporate powers, such as the power to enter into contracts, are exercised by the Board
officer is elected by the directors or stockholders. On the other hand, of Directors. However, the Board may delegate such powers to either an executive
an employee occupies no office and generally is employed not by the

23
committee or officials or contracted managers. The delegation, except for the executive VIVA which contained a counter-proposal covering 53 films for P35M. Viva’s Board of
committee, must be for specific purposes. Director rejected the counter-proposal because it is very firm is only wanting to sell the
package of 104 films for P60M. After the rejection of ABS-CBN and following several
Recit-Ready Summary: Viva Films offered ABS-CBN the right of first refusal to some negotiations and meetings Del Rosario and Viva’s President Teresita Cruz, in
Viva films. Vicente Del Rosario offered to Charo Santos-Concio a list of original consideration of P60 million, signed a letter of agreement dated granting RBS the
movies and reruns for P60M (30M in cash, 30M worth of TV spots). Del Rosario exclusive right to air 104 Viva-produced and/or acquired films including the fourteen
approached Eugenio Lopez III to have lunch and offer the proposal but this was also (14) films subject of the present case.
turned down. Del Rosario then offered the same proposal to RBS through Gozon and
they agreed to the proposal. The next day, Santos-Concio sent a draft to Viva offering a ABS-CBN filed a complaint for specific performance with prayer for a writ of
counterproposal which Viva did not accept. This was, however, signed by RBS. ABS- preliminary injunction and/or TRO against RBS, Viva and Del Rosario. RTC then
CBN now files a complaint for specific performance against RBS, Viva and Del Rosario. ordered the prohibition of airing the films. RBS posted a P30M counterbond to dissolve
ABS-CBN said that there was an agreement between Del Rosario and Lopez during the injunction. Later on, the trial court as well as the CA dismissed the complained
lunch of the acceptance written on a piece of napkin. This was not presented in court. saying that there was no meeting of the minds between ABS-CBN and Viva, hence,
The issue is now whether or not there was a perfected contract between Viva and ABS- there was no basis for the former’s demand. The right of first refusal has been exercised
CBN. The Court held that no, After Del Rosario met Lopez to discuss the package properly.
films, ABS-CBN, sent through Santos-Concio, counter-proposal in the form of a draft ABS-CBN argued that an agreement was made during the meeting of Lopez and Del
contract. This counter-proposal could be nothing less than the counter-offer of Lopez Rosario jotted down on a napkin, which was never produced in court. Moreover, it had
during his meeting with Del Rosario. Clearly, there was no acceptance of the offer, for it yet to fully exercise its right of first refusal since only 10 titles were chosen from the first
was met by a counter-offer which is substantially varied the terms of the offer. Del list.
Rosario did not have the authority to accept ABS-CBN’s counter-offer was best Issue/s:
evidenced by his submission of the draft contract to VIVA’s Board of Directors for the 1) W/N a contract was perfected between ABS-CBN and Viva. – NO.
latter’s approval. In any event, there was between Del Rosario and Lopez III no meeting 2) W/N moral damages maybe awarded to a corporation. – NO.
of minds.
Held:
Facts: In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement which gave 1) Contracts that are consensual in nature are perfected upon mere meeting of
ABS-CBN an exclusive right to exhibit some Viva films. The agreement states that the minds. Once there is concurrence between the offer and the acceptance
ABS-CBN shall have the right of first refusal to the next 24 Viva films for TV telecast upon the subject matter, consideration, and terms of payment a contract is
under such terms as may be agreed upon by the parties but this right shall only be produced. The offer must be certain. To convert the offer into a contract, the
exercised by ABS-CBN from the actual offer in writing. acceptance must be absolute and must not qualify the terms of the offer; it
must be plain, unequivocal, unconditional, and without variance of any sort
In 1991, Vicente Del Rosario, the executive producer of Viva offered ABS-CBN’s Vice from the proposal. A qualified acceptance, or one that involves a new
President Charo Santos-Concio a list of 3 film packages whereby ABS-CBN may proposal, constitutes a counter-offer and is a rejection of the original offer.
exercise its right of first refusal. Through a letter written by Santos-Concio, ABS-CBN Consequently, when something is desired which is not exactly what is
has ticked off only 10 titles they can purchase and one of them is “Maging Sino Ka proposed in the offer, such acceptance is not sufficient to generate consent
Man”. This is the subject film of this case. ABS-CBN did not accept the said list as per because any modification or variation from the terms of the offer annuls the
the rejection letter. offer. After Del Rosario met Lopez to discuss the package films, ABS-CBN,
sent through Santos-Concio, counter-proposal in the form of a draft contract.
Thereafter, Del Rosario offered Santos-Concio with another list of 52 original movie This counter-proposal could be nothing less than the counter-offer of Lopez
titles and 104 reruns, proposing to sell to ABS-CBN the airing rights of these movies during his meeting with Del Rosario. Clearly, there was no acceptance of the
for P60M which will be P30M in cash and another P30M worth of television spots. Del offer, for it was met by a counter-offer which is substantially varied the terms
Rosario met up with Eugenio Lopez III, the General Manager of ABS-CBN to discuss of the offer.
this package proposal but this was unsuccessful.
Under the Corporation Code, unless otherwise provided by said Code,
A few days later, Del Rosario and Graciano Gozon, Senior VP of Finance of Republic corporate powers, such as the power to enter into contracts, are exercised by
Broadcasting Corporation (RBS) discussed the terms and conditions of VIVA’s offer. A the Board of Directors. However, the Board may delegate such powers to
day after that, Santos-Concio sent the draft of the contract between ABS-CBN and either an executive committee or officials or contracted managers. The

24
delegation, except for the executive committee, must be for specific purposes.
Delegation to officers makes the latter agents of the corporation; accordingly,
the general rules of agency as to the binding effects of their acts would apply.
For such officers to be deemed fully clothed by the corporation to exercise a
power of the Board, the latter must specially authorize them to do so. That
Del Rosario did not have the authority to accept ABS-CBN’s counter-offer
was best evidenced by his submission of the draft contract to VIVA’s Board of
Directors for the latter’s approval. In any event, there was between Del
Rosario and Lopez III no meeting of minds.

2) Moral damages are in the category of an award designed to compensate the


claimant for actual injury suffered and not to impose a penalty on the
wrongdoer. The award is not meant to enrich the complainant at the expense
of the defendant, but to enable the injured party to obtain means, diversion, or
amusements that will serve to obviate the moral suffering he has undergone. It
is aimed at the restoration, within the limits of the possible, of the spiritual
status quo ante, and should be proportionate to the suffering inflicted. Trial
courts must then guard against the award of exorbitant damages; they should
exercise balanced restrained and measured objectivity to avoid suspicion that it
was due to passion, prejudice, or corruption on the part of the trial court.
The award of moral damages cannot be granted in favor of a corporation
because, being an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no senses. It cannot, therefore,
experience physical suffering and mental anguish, which can be experienced
only by one having a nervous system. The statement in People v. Manero and
Mambulao Lumber Co. v. PNB that a corporation may recover moral damages
if it “has a good reputation that is debased, resulting in social humiliation” is
an obiter dictum. On this score alone the award for damages must be set aside,
since RBS is a corporation.

25
24. Real v Sangu Phils. Inc. ANSWER: B. SC agrees with Real. The petition has merit.
G.R. No. 168757. January 19, 2011.
CONCEPTS:
DOCTRINES:
Intra-corporate controversy
 The fact that the parties involved are the stockholders and the corporation does
not necessarily place the dispute within the ambit of the jurisdiction of the  Is one which arises between a stockholder and the corporation
SEC (now the Regional Trial Court); The better policy to be followed in  There is no distinction, qualification, nor any exemption whatsoever
determining jurisdiction over a case should be to consider concurrent factors  It is broad and covers all kinds of controversies between stockholders and
such as the status or relationship of the parties or the nature of the question that corporations
is subject of their controversy.  In determining whether there exists an intra-corporate controversy or not, the
 See also the concepts of intra-corporate controversy, two-tier test, and two-tier test is used.
corporate officer
Two-Tier Test = Relationship test + Nature of the controversy test
FACTS:
 The two-tier test determines if there is an intra-corporate controversy or not
Mr. Real (“Real”) was a Manager of Sangu Phils. Inc. (“Sangu”). Sangu fired Real  Relationship test – The existence of any of the intra-corporate relations must be
for the following reasons: present
1. He was absent a lot 1. Between the corporation, partnership or association and the public;
2. Loss of trust (because Real created another company that competes with 2. Between the corporation, partnership or association and its
Sangu. He also started giving our business proposals to the competitors of stockholders, partners, members or officers;
Sangu.) 3. Between the corporation, partnership or association and the State as
3. To cut down on operational expenses far as its franchise, permit or license to operate is concerned; and
4. Among the stockholders, partners or associates themselves.
Real filed a case with the NLRC for illegal dismissal because Sangu did not comply  Nature of the controversy test
with procedural due process when they terminated him. NLRC dismissed the petition  Under the nature of the controversy test, the incidents of that
of Real for lack of jurisdiction. relationship must also be considered for the purpose of ascertaining
whether the controversy itself is intra-corporate.
The NLRC has jurisdiction over cases involving the employer-employee  The controversy must be:
relationship, aka labor disputes. Since Real was a stock-holder and director of Sangu, 1. Rooted in the existence of an intra-corporate relationship,
the NLRC did not consider him an employee, but rather a corporate officer. The 2. Pertain to the enforcement of the parties’ correlative
NLRC concluded that the case was intra-corporate in character, so the proper rights and obligations under the corporation code and the
tribunal that has jurisdiction is the SEC, now the RTC, because it is the court that has internal and intra-corporate regulatory rules of the
jurisdiction over intra-corporate matters. The CA agreed with the NLRC so Real corporation.
brought the case to the SC.  If the relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the relationship
ISSUE: Who among the following should the SC side with? does not exist, then no intra-corporate controversy exists.
a. NLRC – since Real was an stockholder and director, he is not an employee,  The dispute among the parties be intrinsically connected with the
therefore the case is intra-corporate in nature, not a labor dispute, thus, the case regulation of the corporation. If the nature of the controversy involves
should be tried by another tribunal, the RTC. matters that are purely civil in character, necessarily, the case does not
b. Real – The NLRC should not have dismissed my case because it does have involve an intra-corporate controversy.
jurisdiction over this. Yes, I am a stock-holder and director, but I was fired as a
MANAGER, which means I was fired as an employee. This means that the case is a Corporate Officer
labor dispute cognizable by the NLRC.
 Basis - Presidential Decree No. 902-A
26
 Those officers of the corporation who are given that character by the appointive or elective corporate position which has been declared vacant by the
Corporation Code or by the corporation’s by-laws. board. Thus, this is a case of termination of employment which is a labor controversy
 There are three specific officers whom a corporation must have under Section 25 and not an intra-corporate dispute. Real’s complaint does not satisfy the nature of
of the Corporation Code. These are the president, secretary and the treasurer. controversy test.
 The number of officers is not limited to these three. A corporation may have
such other officers as may be provided for by its by-laws like, but not limited to, 3. The NLRC has jurisdiction over the case, not the RTC
the vice-president, cashier, auditor or general manager. The number of corporate
officers is thus limited by law and by the corporation’s by-laws. Since the two-tier test was not satisfied, the complaint for illegal dismissal against
Sangu is NOT intra-corporate. Rather, it is a termination dispute and, consequently,
RULING: falls under the jurisdiction of the Labor Arbiter/NLRC pursuant to Section 217 of the
Labor Code.
1. There Is No Intra-Corporate Relationship

This case fails the relationship test. The fact alone that Real is a stockholder and 25. AF Realty & Development, Inc. vs. Dieselman Freight Services, Co.
director of Sangu corporation does NOT automatically classify this case as an intra- G.R. No. 111448. January 16, 2002.
corporate controversy. Not all conflicts between the stockholders and the corporation
are classified as intra-corporate. There are other factors to consider in determining DOCTRINE:
whether the dispute involves corporate matters as to consider them as intra-corporate
controversies. Contracts or acts of a corporation must be made either by the board of directors or
by a corporate agent duly authorized by the board. Absent such valid
Below are examples of intra-corporate cases: delegation/authorization the rule is that the declarations of an individual director
1. A member of the board of directors and at the same time a corporate officer relating to the affairs of the corporation, but not in the course of, or connected with,
claims he was illegally dismissed after he was stripped of his corporate the performance of authorized duties of such director, are held NOT binding on the
position of Executive Vice-President because of loss of trust and confidence corporation.
2. A complaint for illegal dismissal by corporate officers who were not re-
elected to their respective corporate positions. FACTS:

In the above cases, the Court said that the RTC had jurisdiction over them, because Dieselman, a corporation, was selling land. Cruz was a board member of Dieselman.
they were intra-corporate in nature. The Court deemed them to be intra-corporate Cruz didn’t have any written authority (like a board resolution) from Dieselman to
because they all relate to corporate officers and their removal or non-reelection to designate anyone as an agent of Dieselman in the sale of the subject property.
their respective corporate positions. Despite this, Cruz wrote a letter titled “Authority to Sell Real Estate” to Polintan,
authorizing her to find a buyer and negotiate the sale of the lot. After, Polintan
The above cases are NOT the same as this case because here, Real is NOT a authorized Noble, through a letter, to sell the same property of Dieselman. Noble
corporate officer. There was nothing to prove that Real’s appointment was made found a buyer, AF Realty. AF Realty gave earnest money, but eventually, Cruz
pursuant to the corporation’s By-Laws. Sangu said that they appointed him pursuant ended the sale because they could not agree on the terms of payment.
to the corporation’s By-Laws but they did not give any evidence to support that
claim. Thus, the relationship test is not satisfied. AF Realty instituted a case against Dieselman saying that there was already a
perfected contract of sale. While the case was ongoing, Midas, another corporation,
2. Present controversy does not relate to intra-corporate dispute bought the land. AF Realty believes it is the true owner of the land, and that Midas is
a buyer in bad faith. Midas alleged that it validly bought the property and took
The reasons (absence, loss of trust, cut down operational expenses) given by Sangu possession of it, thus AF Realty cannot compel Midas to convey the property to AF
for dismissing Real have something to do with his being a manager and nothing with Realty.
his being a director or stockholder. Thus, when Real sought for reinstatement, he
wanted to recover his position as manager, a position which is not a corporate ISSUE: Is the agency of Cruz, Polintan, and Noble valid, such that their actions led
position. He is not trying to recover a seat in the board of directors or to any to a valid contract of sale?

27
ANSWER: No. They are not valid agents, thus their actions cannot lead to a valid DOCTRINE:
sale, even if the seller, Dielselman, may have ratified the acts of the “agents”.
Contracts or acts of a corporation must be made either by the board of directors or
RATIO: by a corporate agent duly authorized by the board. Absent such valid
delegation/authorization the rule is that the declarations of an individual director
Section 23 of the Corporation Code expressly provides that the corporate powers of relating to the affairs of the corporation, but not in the course of, or connected with,
all corporations shall be exercised by the board of directors. Just as a natural person the performance of authorized duties of such director, are held NOT binding on the
may authorize another to do certain acts in his behalf, so may the board of directors corporation.
of a corporation validly delegate some of its functions to individual officers or agents
appointed by it. Thus, contracts or acts of a corporation must be made either by the FACTS:
board of directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual Dieselman, a corporation, was selling land. Cruz was a board member of Dieselman.
director relating to the affairs of the corporation, but not in the course of, or Cruz didn’t have any written authority (like a board resolution) from Dieselman to
connected with, the performance of authorized duties of such director, are held not designate anyone as an agent of Dieselman in the sale of the subject property.
binding on the corporation. Despite this, Cruz wrote a letter titled “Authority to Sell Real Estate” to Polintan,
authorizing her to find a buyer and negotiate the sale of the lot. After, Polintan
The board of directors of Dieselman never authorized, verbally and in writing, Cruz, authorized Noble, through a letter, to sell the same property of Dieselman. Noble
to sell the property in question or to look for buyers and negotiate the sale of the found a buyer, AF Realty. AF Realty gave earnest money, but eventually, Cruz
subject property, which means he had no power to authorize anyone to sell the ended the sale because they could not agree on the terms of payment.
property. While Cristeta Polintan was actually authorized by Cruz, to look for buyers
and negotiate the sale of the property, Cruz could not confer on Polintan any AF Realty instituted a case against Dieselman saying that there was already a
authority which he himself did not have. Similarly, Noble could not have possessed perfected contract of sale. While the case was ongoing, Midas, another corporation,
authority either, being a mere extension of Polintan’s purported authority, for it is a bought the land. AF Realty believes it is the true owner of the land, and that Midas is
legal truism that a spring cannot rise higher than its source. Thus, the alleged sale of a buyer in bad faith. Midas alleged that it validly bought the property and took
the subject property was effected through persons who were absolutely without any possession of it, thus AF Realty cannot compel Midas to convey the property to AF
authority from Dieselman. Realty.

The argument that Dieselman ratified the contract by accepting the earnest money is ISSUE: Is the agency of Cruz, Polintan, and Noble valid, such that their actions led
untenable. The laws on agency provide that the sale of land through an agent without to a valid contract of sale?
any written authority is void. Considering that Cruz, Polintan and Noble were not
authorized by respondent Dieselman to sell its lot, the supposed contract is void. ANSWER: No. They are not valid agents, thus their actions cannot lead to a valid
Being a void contract, it is NOT susceptible of ratification. sale, even if the seller, Dielselman, may have ratified the acts of the “agents”.

RATIO:

Section 23 of the Corporation Code expressly provides that the corporate powers of
all corporations shall be exercised by the board of directors. Just as a natural person
may authorize another to do certain acts in his behalf, so may the board of directors
of a corporation validly delegate some of its functions to individual officers or agents
appointed by it. Thus, contracts or acts of a corporation must be made either by the
board of directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual
26. AF Realty & Development, Inc. vs. Dieselman Freight Services, Co. director relating to the affairs of the corporation, but not in the course of, or
G.R. No. 111448. January 16, 2002.

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connected with, the performance of authorized duties of such director, are held not signed by Ms. Beleno, although without proof of authority from the board of the
binding on the corporation. corporation. However, there was a belated submission of the Secretary’s Certificate.

The board of directors of Dieselman never authorized, verbally and in writing, Cruz, A perusal of the Secretary’s Certificate signed by petitioner’s Corporate Secretary
to sell the property in question or to look for buyers and negotiate the sale of the Rafael Khan and submitted to the RTC shows that not only did the corporation
subject property, which means he had no power to authorize anyone to sell the authorize Ms. Beleno to execute the required Verifications and/or Certifications of
property. While Cristeta Polintan was actually authorized by Cruz, to look for buyers Non-Forum Shopping, but it likewise ratified her act of filing the Petition with the
and negotiate the sale of the property, Cruz could not confer on Polintan any RTC.
authority which he himself did not have. Similarly, Noble could not have possessed
authority either, being a mere extension of Polintan’s purported authority, for it is a Respondent avers that the required certification of non-forum shopping should have
legal truism that a spring cannot rise higher than its source. Thus, the alleged sale of been valid at the time of the filing of the Petition which means that the belated
the subject property was effected through persons who were absolutely without any submission of the Secretary’s Certificate is immaterial. The Petition, therefore, was
authority from Dieselman. defective due to the flawed Verification and Certification of Non-Forum Shopping,
which were insufficient in form and therefore a clear violation of Section 5, Rule 7 of
The argument that Dieselman ratified the contract by accepting the earnest money is the 1997 Rules of Civil Procedure.
untenable. The laws on agency provide that the sale of land through an agent without
any written authority is void. Considering that Cruz, Polintan and Noble were not Petitioner argued that there can be no dispute that Ms. Beleno was acting within her
authorized by respondent Dieselman to sell its lot, the supposed contract is void. authority when she instituted the Petition for Refund before the RTC,
Being a void contract, it is NOT susceptible of ratification. notwithstanding that the Petition was not accompanied by a Secretary’s Certificate.
Her authority was ratified by the Board in a belated Resolution. Thus, even if she
was not authorized to execute the Verification and Certification at the time of the
27. Swedish Match Philippines, Inc. vs. Treasurer of the City of Manila filing of the Petition, the ratification by the board of directors retroactively applied to
GR. No. 181277 July 3, 2013 the date of her signing.

DOCTRINE: ISSUE: Was Ms. Beleno was authorized to file the Petition for Refund of Taxes with
the RTC?
 The power of a corporation to sue and be sued is lodged in the board of
directors, which exercises its corporate powers. It necessarily follows that “an ANSWER: YES. There was substantial compliance on the part of the petitioner.
individual corporate officer cannot solely exercise any corporate power
pertaining to the corporation without authority from the board of directors.” RATIO:
Thus, physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate The power of a corporation to sue and be sued is lodged in the board of directors,
by-laws or by a specific act of the board of directors. which exercises its corporate powers. It necessarily follows that “an individual
 As an exception to the general rule, the following officials or employees of the corporate officer cannot solely exercise any corporate power pertaining to the
company can sign the verification and certification without a board resolution: corporation without authority from the board of directors.” Thus, physical acts of the
(1) the Chairperson of the Board of Directors, (2) the President of a corporation, corporation, like the signing of documents, can be performed only by natural persons
(3) the General Manager or Acting General Manager, (4) Personnel Officer, and duly authorized for the purpose by corporate by-laws or by a specific act of the board
(5) an Employment Specialist in a labor case. This is not an exclusive list. of directors.

FACTS: Consequently, a verification signed without an authority from the board of directors
is defective. However, the requirement of verification is simply a condition affecting
Petitioner is a corporation that got into problems relating to its tax payments so it the form of the pleading and noncompliance does not necessarily render the
filed a case with the court against the Treasurer of Manila. The Petition filed with the pleading fatally defective. In fact, In a slew of cases, we have recognized the
RTC was accompanied by a Verification and Certification of Non-Forum Shopping authority of some corporate officers to sign the verification and certification against
forum shopping.

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The general rule is that without authority from the board, the unauthorized person’s
act of signing the certification of no-forum shopping is defective. The exception is
when the Court recognizes some officers to sign the certification.

The Court has held that the following officials or employees of the company can sign
the verification and certification without need of a board resolution:

(1) the Chairperson of the Board of Directors,


(2) the President of a corporation,
(3) the General Manager or Acting General Manager,
(4) Personnel Officer, and
(5) an Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized signatories to
the verification and certification required by the rules, the determination of the
sufficiency of the authority was done on a case to case basis. The rationale applied
in the foregoing cases is to justify the authority of corporate officers or
representatives of the corporation to sign the verification or certificate against
forum shopping, being “in a position to verify the truthfulness and correctness
of the allegations in the petition.”

Given the present factual circumstances, we find that the liberal jurisprudential
exception may be applied to this case. A distinction between noncompliance and
substantial compliance with the requirements of a certificate of non-forum shopping
and verification as provided in the Rules of Court must be made.

In this case, it is undisputed that the Petition filed with the RTC was accompanied by
a Verification and Certification of Non-Forum Shopping signed by Ms. Beleno,
although without proof of authority from the board. However, this Court finds that
the belated submission of the Secretary’s Certificate constitutes substantial
compliance with Sections 4 and 5, Rule 7 of the 1997 Revised Rules on Civil
Procedure.

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