ARTURO C.

CALUBAD vs RICARCEN DEVELOPMENT CORPORATION

G.R. No. 202364, August 30, 2017
Third Division
Facts:

Respondent Ricarcen Development Corporation (Ricarcen) was a domestic corporation engaged in

renting out real estate. It was the registered owner of a parcel of land located at 53 Linaw St., Sta. Mesa
Heights, Quezon City. On October 15, 2001, Marilyn, acting on Ricarcen's behalf as its president, took
out a loan from Calubad. This loan was secured by a real estate mortgage over Ricarcen's Quezon
City property covered by TCT No. RT-84937 (166018).

To prove her authority to execute the mortgage contracts in Ricarcen's behalf, Marilyn presented
Calubad with a Board Resolution empowering her to borrow money and use the Quezon City property
as collateral for the loans. Marilyn also presented two (2) Secretary's Certificates. Sometime in 2003,
after Ricarcen failed to pay its loan, Calubad initiated extrajudicial foreclosure proceedings on the real
estate mortgage. The Regional Trial Court granted Ricarcen's complaint and annulled the mortgage
contracts. The Court held that Marilyn failed to present a special power of attorney as evidence of her
authority from Ricarcen.

Issue:

Whether or not Ricarcen Development Corporation is estopped from denying or disowning the authority
of Marilyn R. Soliman, its former President, from entering into a contract of loan and mortgage with
Arturo C. Calubad.

Ruling:

As a corporation, Ricarcen exercises its powers and conducts its business through its board of
directors. However, the board of directors may validly delegate its functions and powers to its officers
or agents. The authority to bind the corporation is derived from law, its corporate by-laws, or directly
from the board of directors, either expressly or impliedly by habit, custom or acquiescence in the general
course of business.
The general principles of agency govern the relationship between a corporation and its representatives.
Article 1317 of the Civil Code similarly provides that the principal must delegate the necessary authority
before anyone can act on his or her behalf. Nonetheless, law and jurisprudence recognize actual
authority and apparent authority as the two (2) types of authorities conferred upon a corporate officer
or agent in dealing with third persons. Actual authority can either be express or implied. Express actual
authority refers to the power delegated to the agent by the corporation, while an agent's implied
authority can be measured by his or her prior acts which have been ratified by the corporation or whose
benefits have been accepted by the corporation.

On the other hand, apparent authority is based on the principle of estoppel. The doctrine of apparent
authority provides that even if no actual authority has been conferred on an agent, his or her acts, as
long as they are within his or her apparent scope of authority, bind the principal. However, the principal's
liability is limited to third persons who are reasonably led to believe that the agent was authorized to
act for the principal due to the principal's conduct. Apparent authority is determined by the acts of the
principal and not by the acts of the agent. Thus, it is incumbent upon Calubad to prove how Ricarcen
's acts led him to believe that Marilyn was duly authorized to represent it.

As the former president of Ricarcen, it was within Marilyn's scope of authority to act for and enter into
contracts in Ricarcen's behalf. Her broad authority from Ricarcen can be seen with how the corporate
secretary entrusted her with blank yet signed sheets of paper to be used at her discretion. She also
had possession of the owner's duplicate copy of the land title covering the property mortgaged to
Calubad, further proving her authority from Ricarcen.
 MAGALLANES WATERCRAFT ASSOCIATION, INC., AS REPRESENTED BY ITS BOARD OF
TRUSTEES, NAMELY: EDILBERTO M. BAJAO, GERARDO O. PLAZA, ISABELITA MULIG,
EDNA ABEJAY, MARCELO DONAN, NENITA O. VARQUEZ, MERLYN ALVAREZ, EDNA
EXCLAMADOR, AND CESAR MONSON, Petitioner, v. MARGARITO C. AUGUIS AND
DIOSCORO C. BASNIG, Respondents. G.R. No. 211485, May 30, 2016

Facts:

Petitioner Magallanes Watercraft Association, Inc. (MWAI) is a local association of motorized banca
owners and operators ferrying cargoes and passengers from Magallanes, Agusan del Norte, to Butuan
City and back. Respondents Margarito C. Auguis (Auguis) and Dioscoro C. Basnig (Basnig) were
members and officers of MWAI - vice-president and secretary, respectively.3

The Board of Trustees (Board) of MWAI passed Resolution No. 1, Series of 2003, and thereafter issued
Memorandum No. 001 suspending the rights and privileges of Auguis and Basnig as members of the
association for thirty (30) days for their refusal to pay their membership dues and berthing fees because
of their pending oral complaint and demand for financial audit of the association funds.4

In spite of the suspension of their privileges as members, Auguis and Basnig still failed to settle their
obligations with MWAI. For said reason, the latter issued Memorandum No. 002, Series of 2004,
suspending their rights and privileges for another thirty (30) days.5

Respondents filed an action for damages and attorney's fees with a prayer for the issuance of a writ of
preliminary injunction before the RTC. The trial court ordered Auguis and Basnig to pay their unpaid
accounts. It, nonetheless, required MWAI to pay them actual damages and attorney's fees.6

Aggrieved, MWAI appealed before the CA. The CA affirmed the decision of the RTC.According to the
appellate court, the RTC correctly held that MWAI was guilty of an ultra vires act.� The CA noted that
neither MWAI's Articles of Incorporation nor its By-Laws7 contained any provision that expressly and/or
impliedly vested power or authority upon its Board to recommend the imposition of disciplinary
sanctions on its delinquent officers and/or members. It further noted that MWAI lacked the authority to
suspend the right of the respondents to operate their bancas, which was granted through a Certificate
of Public Convenience. Hence, the CA concluded that MWAI acted beyond the scope of its powers
when it suspended the rights of Auguis and Basnig as members of MWAI to berth on the seaport of
Magallanes and operate their bancas.

Issue:

Whether or not petitioner was guilty of an ultra vires act when it suspended respondents' berthing rights
because its by-laws obliged Auguis and Basnig as members to: (1) obey and comply with the by�laws,
rules and regulations that may be promulgated by the association from time to time; and (2) to pay its
membership dues and other assessments.

Ruling:

The petition is meritorious.

Corporate powers include implied and incidental powers

If the suspension of rights and privileges of members is not among the corporate powers granted to
MWAI, then the same is an ultra vires act which exposes MWAI to possible liability.

Section 45 of the Corporation Code provides for the powers possessed by a corporation, to wit:

Sec. 45. Ultra vires acts of corporations. - No corporation under this Code shall possess or
exercise any corporate powers except those conferred by this Code or by its articles of
incorporation and except such as are necessary or incidental to the exercise of the powers so
conferred.

From a reading of the said provision, it is clear that a corporation has: (1) express powers, which are
bestowed upon by law or its articles of incorporation; and (2) necessary or incidental powers to the
exercise of those expressly conferred. An act which cannot fall under a corporation's express or
necessary or incidental powers is an ultra vires act.

A corporation may exercise its powers only within those definitions. Corporate acts that are outside
those express definitions under the law or articles of incorporation or those "committed outside the
object for which a corporation is created" are ultra vires.

The CA concluded that the suspension by MWAI of respondents' rights as members for their failure to
settle membership dues was an ultra vires act as MWAFs articles of incorporation and by-laws were
bereft of any provision that expressly and impliedly vested power or authority upon its Board to
recommend the imposition of disciplinary actions on its delinquent officers and/or members.

The Court disagrees.

Under Section 3(a) and Section 3(c) Article V of MWAI's By-Laws, its members are bound "[t]o obey
and comply with the by-laws, rules and regulations that may be promulgated by the association from
time to time" and "[t]o pay membership dues and other assessments of the association."13 Thus, the
respondents were obligated to pay the membership dues of which they were delinquent. MWAI could
not be faulted in suspending the rights and privileges of its delinquent members.

The fact alone that neither the articles of incorporation nor the by laws of MWAI granted its Board the
authority to discipline members does not make the suspension of the rights and privileges of the
respondents ultra vires.

The only exception to this rule is when acts are necessary and incidental to carry out a corporation's
purposes, and to the exercise of powers conferred by the Corporation Code and under a corporation's
articles of incorporation. xxx

Based on the foregoing, MWAI can properly impose sanctions on Auguis and Basnig for being
delinquent members considering that the payment of membership dues enables MWAI to discharge its
duties and functions enumerated under its charter. Moreover, respondents were obligated by the by-
laws of the association to pay said dues. The suspension of their rights and privileges is not an ultra
vires act as it is reasonably necessary or proper in order to further the interest and welfare of MWAI.
Y-I LEISURE PHILIPPINES, INC., YATS INTERNATIONAL LTD. AND Y-I CLUBS AND RESORTS,
INC., Petitioners, v. JAMES YU, Respondent. G.R. No. 207161, September 08, 2015

Facts:

Respondent Yu, a businessman interested in purchasing golf and country club shares, bought 500 golf
and 150 country club shares from Mt. Arayat Development Co. Inc. (MADCI) a real estate development
corporation.

However, upon full payment of the shares to MADCI, Yu visited the supposed site of the golf and
country club and discovered that it was non-existent. He filed with the RTC a complaint for collection of
sum of money and damages with prayer for preliminary attachment against MADCI and its president
Rogelio Sangil (Sangil) to recover his payment for the purchase of golf and country club shares.

In its Answer, MADCI claimed that it was Sangil who defrauded Yu. It invoked the Memorandum of
Agreement (MOA) entered into by MADCI, Sangil and petitioner Yats International Ltd. (YIL). Under the
MOA, Sangil undertook to redeem MADCI proprietary shares sold to third persons or settle in full all
their claims for refund of payments. Thus, it was MADCI's position that Sangil should be ultimately liable
to refund the payment for shares purchased.

After the pre-trial, Yu filed an Amended Complaint, wherein he also impleaded petitioner YIL, Y-I
Leisure Phils., Inc. (YILPI) and Y-I Club & Resorts, Inc. (YICRI). According to Yu, he discovered in the
Registry of Deeds of Pampanga that, substantially, all the assets of MADCI, consisting of one hundred
twenty (120) hectares of land located in Magalang, Pampanga, were sold to YIL, YILPI and YICRI. The
transfer was done in fraud of MADCI's creditors, and without the required approval of its stockholders
and board of directors under Section 40 of the Corporation Code.

RTC Ruling - because MADCI did not deny its contractual obligation with Yu, it must be liable for the
return of his payments. However, it exonerated YIL, YILPI and YICRI from liability because they were
not part of the transactions between MADCI and Sangil, on one hand and Yu, on the other hand.

CA Ruling - partly granted the appeals and modified the RTC decision by holding YIL and its companies,
YILPI and YICRI, jointly and severally, liable for the satisfaction of Yu's claim.

Now, petitioners counter that they did not assume such liabilities because the transfer of assets was
not committed in fraud of the MADCI's creditors.

Issues:

1. Whether or not the transfer of all or substantially all the assets of a corporation under Section
40 of the Corporation Code carries with it the assumption of corporate liabilities?
2. Whether or not the petitioner indeed became a continuation of MADCI's business?

Ruling:

1. Yes. While the Corporation Code allows the transfer of all or substantially all of the assets of a
corporation, the transfer should not prejudice the creditors of the assignor corporation.

Under the business-enterprise transfer, the petitioners have consequently inherited the liabilities of
MADCI because they acquired all the assets of the latter corporation. The continuity of MADCI's land
developments is now in the hands of the petitioners, with all its assets and liabilities. There is absolutely
no certainty that Yu can still claim its refund from MADCI with the latter losing all its assets. To allow
an assignor to transfer all its business, properties and assets without the consent of its creditors will
place the assignor's assets beyond the reach of its creditors. Thus, the only way for Yu to recover his
money would be to assert his claim against the petitioners as transferees of the assets.

The protection of the creditors of the transferor corporation, and does not depend on any deceit
committed by the transferee -corporation, fraud is certainly not an element of the business enterprise
doctrine.

2. Yes, Section 40 refers to the sale, lease, exchange or disposition of all or substantially all of the
corporation's assets, including its goodwill. The sale under this provision does not contemplate
an ordinary sale of all corporate assets; the transfer must be of such degree that the transferor
corporation is rendered incapable of continuing its business or its corporate purpose.

It must be clarified, however, that not every transfer of the entire corporate assets would qualify under
Section 40. It does not apply (1) if the sale of the entire property and assets is necessary in the usual
and regular course of business of corporation, or (2) if the proceeds of the sale or other disposition of
such property and assets will be appropriated for the conduct of its remaining business. Thus, the
litmus test to determine the applicability of Section 40 would be the capacity of the corporation to
continue its business after the sale of all or substantially all its assets.

Based on these factual findings, the Court is convinced that MADCI indeed had assets consisting of
120 hectares of landholdings in Magalang, Pampanga, to be developed into a golf course, pursuant to
its primary purpose. Because of its alleged violation of the MOA, however, MADCI was made to transfer
all its assets to the petitioners. No evidence existed that MADCI subsequently acquired other lands for
its development projects. Thus, MADCI, as a real estate development corporation, was left without any
property to develop eventually rendering it incapable of continuing the business or accomplishing the
purpose for which it was incorporated. Section 40 must apply.
COLEGIO MEDICO-FARMACEUTICO DE FILIPINAS, INC., petitioner, vs. LILY LIM AND ALL
PERSONS CLAMING UNDER HER, respondent. [G.R. No. 212034. July 2, 2018.]

Facts:

Petitioner Colegio Medico Farmaceutico de Filipinas, Inc. (petitioner) is the registered owner of a
building located in Sampaloc, Manila.

On June 19, 2008, petitioner filed before the Metropolitan Trial Court (MeTC) of Manila, Branch 24, a
Complaint for Ejectment with Damages,[6] docketed as Civil Case No. 185161-CV, against respondent
Lily Lim (respondent), the President/Officer-in-charge of St. John Berchman School of Manila
Foundation (St. John). Petitioner alleged, that in June 2005, it entered into a Contract of Lease[7] for
the period June 2005 to May 2006 with respondent; that after expiration of the lease period, petitioner,
represented by its then President Dr. Virgilio C. Del Castillo (Del Castillo), sent respondent another
Contract of Lease for the period June 2006 to May 2007 for her approval; that despite several follow-
ups, respondent failed to return the Contract of Lease; that during a board meeting in December 2007,
petitioner informed respondent of the decision of the Board of Directors (Board) not to renew the
Contract of Lease; that on March 5, 2008, Del Castillo wrote a letter to respondent demanding the
payment of her back rentals and utility bills in the total amount of P604,936.35, with a request to vacate
the subject property on or before March 16, 2008; and that respondent refused to comply with the
demand.

For her part, respondent alleged that in May 2003, St. John, represented by Jean Li Yao, entered into
a 10-year Contract of Lease with petitioner; that on May 3, 2005, due to financial difficulties, the Board
of Trustees of St. John assigned the rights and interest of the school in her favor; that the assignment
of rights was with the knowledge and approval of petitioner; that to ensure advance payment of the
rentals, petitioner persuaded her to execute a one-year Contract of Lease for the period of June 2005
to May 2006, with advance payment of rentals for the said period; that the said contract was executed
with no intention of amending, repealing, or shortening the original 10-year lease; that she occupied
the subject property even after May 2006 without any objection from petitioner because, as agreed by
the parties, the term of the lease would continue until the year 2013; that she sent several letters to
petitioner for the immediate repairs of the library, the toilets of the school building, and the basketball
court; and that she suspended the payment of the rentals due to the refusal of petitioner to act on all
her letters.

Issue:

Whether or not in the absence of a charter or by-law provision to the contrary, the president is presumed
to have the authority to act within the domain of the general objectives of its business and within the
scope of his or her usual duties.

Ruling:

The Petition is meritorious.

The president of a corporation may sign the verification and certification of non-forum shopping.
A corporation exercises its powers and transacts its business through its board of directors or trustees.
Accordingly, unless authorized by the board of directors or trustees, corporate officers and agents
cannot exercise any corporate power pertaining to the corporation. [ A board resolution expressly
authorizing the officers and agents is therefore required. However, in filing a suit, jurisprudence has
allowed the president of a corporation to sign the verification and the certification of non-forum shopping
even without a board resolution as said officer is presumed to have sufficient knowledge to swear to
the truth of the allegations stated in the complaint or petition. In view of the foregoing jurisprudential
exception, the CA gravely erred in dismissing the Complaint on the mere failure of petitioner to present
a copy of the Board Resolution dated May 13, 2008. With or without the said Board Resolution, Del
Castillo, as the President of petitioner, was authorized to sign the verification and the certification of
non-forum shopping.

WHEREFORE, the Petition is hereby GRANTED. The assailed June 13, 2013 Decision and the April
7, 2014 Resolution of the Court of Appeals in CA-G.R. SP No. 114856 are hereby REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 11, dated May 13, 2010 is
hereby REINSTATED and AFFIRMED with MODIFICATION that the amount of reasonable
compensation for the use of the subject property be increased to P55,000.00 as stipulated in the
Contract of Lease. In addition, the award of actual damages shall earn interest at the rate of 12% per
annum from March 5, 2008, the date of extrajudicial demand, to June 30, 2013. From July 1, 2013 until
full satisfaction of the monetary award, the rate of interest shall be six percent (6%) per annum.
 BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO SENTRAL NG
PILIPINAS AND THE MONETARY BOARD, Respondents. G.R. No. 200678, June 04, 2018

Facts:

On December 11, 1991, this Court promulgated Banco Filipino Savings & Mortgage Bank v. Monetary
Board and Central Bank of the Philippines,4 which declared void the Monetary Board's order for closure
and receivership of Banco Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed
the Central Bank of the Philippines and the Monetary Board to reorganize Banco Filipino and to allow
it to resume business under the comptrollership of both the Central Bank and the Monetary Board.5

Banco Filipino subsequently filed several Complaints before the Regional Trial Court, among them a
claim for damages in the total amount of P18,800,000,000.00.6

On June 14, 1993, Congress passed Republic Act No. 7653,7 providing for the establishment and
organization of Bangko Sentral as the new monetary authority.

On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision, the Monetary Board
issued Resolution No. 427, which allowed Banco Filipino to resume its business.8

In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the help of Bangko
Sentral. In a letter dated October 9, 2003, Banco Filipino asked for financial assistance of more than
P3,000,000,000.00 through emergency loans and credit easement terms.9 In a letter10 dated
November 21, 2003, Bangko Sentral informed Banco Filipino that it should first comply with certain
conditions imposed by Republic Act No. 7653 before financial assistance could be extended. Banco
Filipino was also required to submit a rehabilitation plan approved by Bangko Sentral before emergency
loans could be granted.

Issue:

Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition
for Review without joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a
party to the case

Ruling:

A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation. Under Republic Act No. 7653,97 when the Monetary Board finds a bank
insolvent, it may "summarily and without need for prior hearing forbid the institution from doing business
in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the
banking institution."98 Before the enactment of Republic Act No. 7653, an insolvent bank under
liquidation could not sue or be sued except through its liquidator. When petitioner was placed under
receivership, the powers of its Board of Directors and its officers were suspended. Thus, its Board of
Directors could not have validly authorized its Executive Vice Presidents to file the suit on its behalf.
The Petition, not having been properly verified, is considered an unsigned pleading.124 A defect in the
certification of non-forum shopping is likewise fatal to petitioner's cause. Considering that the Petition
was filed by signatories who were not validly authorized to do so, the Petition does not produce any
legal effect.126 Being an unauthorized pleading, this Court never validly acquired jurisdiction over the
case. The Petition, therefore, must be dismissed.