BS SAVINGS BANK V.

SIA
FACTS: A petition for certiorari filed by petitioner corp.
BS Savings Bank was denied by the court of Appeals
on the ground that the Certification on anti-foru
shopping incorporated in the petition was signed not
by the duly authori!ed representative of the petitioner"
as re#uired under Supree Court Circular $o. %&-'("
but by its counsel" in contravention of said circular. A
)otion for *econsideration was subse#uently filed by
the petitioner corp. attached to it was a BA Savings
Bank Corporate Secretary+s Certificate authori!ing the
petitioner+s lawyers to represent it in any action or
proceeding before any court" tribunal or agency, and
to sign" e-ecute and deliver the Certificate of $on-
foru Shopping" aong others. The )otion for
*econsideration was denied by the Court of Appeals
on the ground that Supree Court *evised Circular
$o. %&-'( .re#uires that it is the petitioner" not the
counsel" who ust certify under oath to all of the facts
and undertakings re#uired therein./ 0ence" this
appeal.
1SS23: 4hether Supree Court *evised Circular $o.
%&-'( allows a corporation to authori!e its counsel to
e-ecute a certificate of non-foru shopping for and on
its behalf.
*251$6: A corporation" such as the petitioner" has
no powers e-cept those e-pressly conferred on it by
the Corporation Code and those that are iplied by or
are incidental to its e-istence. 1n turn" a corporation
e-ercises said powers through its board of directors
and7or its duly authori!ed officers and agents.
8hysical acts" like the signing of docuents" can be
perfored only by natural persons duly authori!ed for
the purpose by corporate bylaws or by a specific act
of the board of directors. .All acts within the powers
of a corporation ay be perfored by agents of its
selection, and" e-cept so far as liitations or
restrictions which ay be iposed by special charter"
by-law" or statutory provisions" the sae general
principles of law which govern the relation of agency
for a natural person govern the officer or agent of a
corporation" of whatever status or rank" in respect to
his power to act for the corporation, and agents once
appointed" or ebers acting in their stead" are
sub9ect to the sae rules" liabilities and incapacities
as are agents of individuals and private persons./
1n the present case" the corporation+s board of
directors issued a *esolution specifically authori!ing
its lawyers .to act as their agents in any action or
proceeding before the Supree Court" the Court of
Appeals" or any other tribunal or agency:,; and to
sign" e-ecute and deliver in connection therewith the
necessary pleadings" otions" verification" affidavit of
erit" certificate of non-foru shopping and other
instruents necessary for such action and
proceeding./ The *esolution was sufficient to vest
such persons with the authority to bind the
corporation and was specific enough as to the acts
they were epowered to do.
1n the case of natural persons" Circular %&-'( re#uires
the parties theselves to sign the certificate of non-
foru shopping. 0owever" such re#uireent cannot
be iposed on artificial persons" like corporations" for
the siple reason that they cannot personally do the
task theselves. As already stated" corporations act
only through their officers and duly authori!ed agents.
1n fact" physical actions" like the signing and the
delivery of docuents" ay be perfored" on behalf
of the corporate entity" only by specifically authori!ed
individuals.
1t is noteworthy that the Circular does not re#uire
corporate officers to sign the certificate. )ore
iportant" there is no prohibition against authori!ing
agents to do so.
1n fact" not only was BA Savings Bank authori!ed to
nae an agent to sign the certificate, it also e-ercised
its appointing authority reasonably well. For who else
knows of the circustances re#uired in the Certificate
but its own retained counsel. 1ts regular officers" like
its board chairan and president" ay not even know
the details re#uired therein.
Madrigal & Company, Inc. vs. Zamora
Facts 8etitioner and *i!al Ceent Co were sister
copanies. Both were owned by the sae
stockholders. *espondent 5abor 2nion <)adrigal
3ployees 2nion= sought for the renewal of their
CBA with the petitioner which included a deand for
wage increase and other econoic benefits.
0owever" petitioner re#uested for deferent in the
negotiations.
8etitioner reduced its capital stock on two
occasions. Such was effected through the distribution
of the arketable securities owned by the petitioner to
its stockholders in e-change for their shares in an
e#uivalent aount in the corporation.
8etitioner>s failure to negotiate with the labor
union regarding their CBA propted the latter to file a
coplaint for 258. 8etitioner answered alleging that it
has ceased operating teporarily because of the
stockholders> desire to phase out the operations of
)adrigal ? Co due to lack of business incentives and
prospects and in order to prevent further losses it has
to reduce its capital stock and effect retrenchent. 5A
rendered a decision in favor of the labor union. $5*C
affired the said decision.
Iss!" 47$ petitioner>s reduction of its capital stock is
9ustified.
#"ld SC held that it was shown in the petitioner
copany>s financial records that it had been aking
substantial profits in its operation fro ('@%-('@A. 1ts
(
act of reducing its capital stock was done to its
responsibility to evade its responsibility towards the
eployees. The dividends received by the copany
are corporate earnings arising fro corporate
investent.B The petitioner copany had entered
such earnings in its financial stateents as profits"
which it would not have done if they were not in fact
profits.
SC further held that it is incorrect to say that
such profits C in the for of dividends C are beyond
the reach of the petitioner>s creditors since the
petitioner had received the as copensation for its
anageent services in favor of the copanies it
anaged as a shareholder thereof. As such
shareholder" the dividends paid to it were its own
oney" which ay then be available for wage
increents. 1t is not a case of a corporation
distributing dividends in favor of its stockholders" in
which case" such dividends would be the absolute
property of the stockholders and hence" out of reach
by creditors of the corporation. 0ere" the petitioner
was acting as stockholder itself" and in that case" the
right to a share in such dividends" by way of salary
increases" ay not be denied its eployees.
Capital reduction was nothing but a
preature and plain distribution of corporate assets to
obviate a 9ust sharing to labor of the vast profits
obtained by its 9oint efforts with capital through the
years.
$%NA VS. CA &dig"st"d 'y m.pr"s(!ito )*+*,-.
Facts
8apanga Bus Co. <8A)B2SCD= was the original
owner of E parcel of lots which were ortgaged to
the Fevelopent Bank of the 8hilippines. This
ortgage was foreclosed and in the foreclosure sale"
the said properties were awarded to 8etitioner 8ena
as the highest bidder. A certificate of sale was issued
in her favor.
The Board of Firectors of 8A)B2SCD" through E out
of its A directors" resolved to assign its right of
redeption over said lots and authori!ed one of its
ebers" Atty. Goa#uin Briones to /"0"c!t" and
sign a 1""d o2 Assignm"nt 2or and in '"3al2 o2
$AMB4SC5 in 2avor o2 any int"r"st"d party.6
Conse#uently" Briones e-ecuted a Feed of
Assignent of 8A)B2SCD+s redeption right over
the sub9ect lots in favor of )arcelino 3nri#ue!" who
then redeeed the said properties. A day after the
certificate of redeption was issued in his favor"
3nri#ue! e-ecuted a Feed of Absolute Sale of the
sub9ect properties in favor of spouses *ising T. Hap
and Catalina 5ugue.
8ena wrote then the Sheriff notifying hi that the
redeption ade by )arcelino 3nri#ue! was not
valid as it was ade under a void deed of
assignent. 8ena re#uested the recall of said
redeption and a restraint on any registration of
transaction regarding the lots in #uestion" which the
CF1 granted. 8ena then asked for the e-ecution of a
deed of a final sale in her favor on the ground that the
one <(= year period of redeption has long elapsed
without any valid redeption having been e-ercised"
hence" she will refuse to receive the redeption
oney.
1n the eantie" the 5and *egistration Coission
registered the sub9ect lots in the nae of spouses
Hap" who then filed a coplaint for recovery of
possession of said land fro 8etitioner 8ena.
Iss!" 4hether or not the *esolution of the BDF of
8A)B2SCD assigning its right of *edeption is
valid.
7!ling : $o.
(= There was no #uoru to validly transact
business since under Section I of the
aended by-laws of the 8A)B2SCD" at
least I ebers ust be present to
constitute a #uoru in a special eeting of
the BDF of 8A)B2SCD.
%= Section IJ of the Corporation 5aw provides
that the sale or disposition of all and7or
substantially all properties of the corporation
re#uires" in addition to a proper board
*esolution" the affirative votes of the
stockholders holding at least %7E of the
voting power in the corporation in a eeting
duly called for that purpose. The #uestioned
*esolution failed to coply with said
re#uireent of the law.
E= Also" at the tie of the passage of the
#uestioned *esolution" 8A)B2SCD was
insolvent. 1ts only reaining asset was its
right of redeption over the sub9ect
properties. Since the disposition of said
redeption right of 8A)B2SCD by virtue of
the #uestioned *esolution was not approved
by the re#uired nuber of Stockholders
under the law" the said *esolution" as well
as the ortgaged assignent assigning to
3nri#ue! the said right of redeption" is null
and void.
Islamic 1ir"ctorat" o2 t3" $3ils. V. CA
Facts: The sub9ect of this petition for
review is the Fecision of the public respondent Court
of Appeals" dated Dctober %&" (''I" setting aside the
portion of the Fecision of the Securities and
3-change Coission <S3C" for short= in S3C Case
$o. IJ(% which declared null and void the sale of two
<%= parcels of land in Kue!on City covered by the
Feed of Absolute Sale entered into by and between
private respondent 1glesia $i Cristo <1$C" for short=
and the 1slaic Firectorate of the 8hilippines" 1nc."
Carpi!o 6roup" <1F8" for short=.
%
8etitioner 1F8-Taano 6roup alleges that
soetie in ('@(" 1slaic leaders of all )usli a9or
tribal groups in the 8hilippines headed by Fean Cesar
Adib )a9ul organi!ed and incorporated the 1S5A)1C
F1*3CTD*AT3 DF T03 80151881$3S <1F8=" the
priary purpose of which is to establish an 1slaic
Center in Kue!on City for the construction of a
B)os#ue <prayer place=" )adrasah <Arabic School="
and other religious infrastructuresB so as to facilitate
the effective practice of 1slaic faith in the area.
1n ('@%" after the purchase of the land by the 5ibyan
governent in the nae of 1F8" )artial 5aw was
declared by the late 8resident Ferdinand )arcos.
)ost of the ebers of the ('@( Board of Trustees
like Senators )aintal Taano" Salipada 8endatun"
Ahad Alonto" and Congressan Al-*ashid 5ucan
flew to the )iddle 3ast to escape political
persecution. Thereafter" two )usli groups sprung"
the Carpi!o 6roup" headed by 3ngineer Farouk
Carpi!o" and the Abbas 6roup" led by )rs. Lorayda
Taano and Atty. Firdaussi Abbas. Both groups
claied to be the legitiate 1F8.
4ithout having been properly elected as new
ebers of the Board of Trustee of 1F8" the Carpi!o
6roup caused to be signed an alleged Board
*esolution of the 1F8" authori!ing the sale of the
sub9ect two parcels of land to the private respondent
1$C for a consideration.
1ssue: 4hether or not the Carpi!o group had a right to
sell the two parcel of land to 1$CM
0eld: The Carpi!o group had no right to sell the
property. 8reises considered" all acts carried out by
the Carpi!o Board" particularly the sale of the
Tandang Sora property" allegedly in the nae of the
1F8" have to be struck down for having been done
without the consent of the 1F8 thru a legitiate Board
of Trustees.
1n S3C Case $o. IJ(%" the S3C in effect
ade the une#uivocal finding that the 1F8-Carpi!o
6roup is a bogus Board of Trustees. Conse#uently"
the Carpi!o 6roup is bereft of any authority
whatsoever to bind 1F8 in any kind of transaction
including the sale or disposition of 1F property.
The Carpi!o 6roup-1$C sale is further deeed null
and void ab initio because of the Carpi!o 6roup>s
failure to coply with Section IJ of the Corporation
Code pertaining to the disposition of all or
substantially all assets of the corporation:
Sec. IJ. Sale or other disposition of assets. C
Sub9ect to the provisions of e-isting laws on illegal
cobinations and onopolies" a corporation ay" by
a a9ority vote of its board of directors or trustees"
sell" lease" e-change" ortgage" pledge or otherwise
dispose of all or substantially all of its property and
assets" including its goodwill" upon ters and
conditions and for such consideration" which ay be
oney" stocks" bonds or other instruents for the
payent of oney or other property or consideration"
as its board of directors or trustees ay dee
e-pedient" when authori!ed by the vote of the
stockholders representing at least two-thirds <%7E= of
the outstanding capital stock, or in case of non-stock
corporation" by the vote of at least two-thirds <%7E= of
the ebers" in a stockholders> or ebers> eeting
duly called for the purpose. 4ritten notice of the
proposed action and of the tie and place of the
eeting shall be addressed to each stockholder or
eber at his place of residence as shown on the
books of the corporation and deposited to the
addressee in the post office with postage prepaid" or
served personally: 8rovided" That any dissenting
stockholder ay e-ercise his appraisal right under the
conditions provided in this Code.
A sale or other disposition shall be deeed to cover
substantially all the corporate property and assets if
thereby the corporation would be rendered incapable
of continuing the business or accoplishing the
purpose for which it was incorporated.
The Tandang Sora property" it appears fro the
records" constitutes the only property of the 1F8.
0ence" its sale to a third-party is a sale or disposition
of all the corporate property and assets of 1F8 falling
s#uarely within the conteplation of the foregoing
section. For the sale to be valid" the a9ority vote of
the legitiate Board of Trustees" concurred in by the
vote of at least %7E of the bona fide ebers of the
corporation should have been obtained. These twin
re#uireents were not et as the Carpi!o 6roup
which voted to sell the Tandang Sora property was a
fake Board of Trustees" and those whose naes and
signatures were affi-ed by the Carpi!o 6roup
together with the sha Board *esolution authori!ing
the negotiation for the sale were" fro all indications"
not bona fide ebers of the 1F8 as they were ade
to appear to be. Apparently" there are only fifteen <(A=
official ebers of the petitioner corporation including
the eight <&= ebers of the Board of Trustees.
Furtherore" the Court observes that the 1$C bought
the #uestioned property fro the Carpi!o 6roup
without even seeing the owner>s duplicate copy of the
titles covering the property. This is very strange
considering that the sub9ect lot is a large piece of real
property in Kue!on City worth illions" and that under
the Torrens Syste of *egistration" the iniu
re#uireent for one to be a good faith buyer for value
is that the vendee at least sees the owner>s duplicate
copy of the title and relies upon the sae. I( The
private respondent" presuably knowledgeable on
the aforesaid workings of the Torrens Syste" did not
take heed of this and nevertheless went through with
the sale with undue haste. The une-plained
eagerness of 1$C to buy this valuable piece of land in
Kue!on City without even being presented with the
owner>s copy of the titles casts very serious doubt on
the rightfulness of its position as vendee in the
transaction.
1A84 vs. S%C and 1iamat!l $3ilippin"s9al Islamia
Inc.
E
,+: SC7A ;++ &$o<"r to d"ny pr"9"mptiv" rig3ts.
Facts
The Articles of 1ncorporation of respondent Gaiatul
8hilippine-Al 1slaia" 1nc. <originally Nailol 1sla
1nstitute" 1nc.= were filed with the S3C and approved
with an authori!ed capital stock of 8%JJ"JJJ divided
into %J"JJJ shares at a par value of 8(J.JJ each. Df
the authori!ed capital stock" &"JA& shares worth
8&J"A&J were subscribed and fully paid for. 0erein
petitioner Fatu Tagoranao Benito subscribed to IOJ
shares. 5ater the capital stock was increased fro
%JJ"JJJ to () 8((J"'&J worth of shares were
subse#uently issued by the corporation fro the
unissued portion of the authori!ed capital stock. Fro
the increased capital stock of 8(")" 8(OJ"JJJ.JJ
worth of shares were subscribed by )rs. Fatia A.
*aos" )rs. Tarhata A. 5ucan and )rs. )oki-in
Alonto. 0ence" petitioner Fatu Tagoranao filed with
respondent S3C a petition alleging that the additional
issue <worth 8((J"'&J.JJ= of previously subscribed
shares of the corporation was ade in violation of his
pre-eptive right to said additional issue and that the
increase in the authori!ed capital stock of the
corporation fro was illegal considering that the
stockholders of record were not notified of the
eeting wherein the proposed increase was in the
agenda.
The Coission en banc affired the decision of the
S3C declaring that there is a valid issuance of
unissued shares and it was not sub9ect to the pre-
eptive rights of stockholders" including the
petitioner. 0ence" this petition for review was filed.
1ssues: 47$ the increase in the capital stock and the
issuance of shares without the consent of the
stockholders is validM
0eld:
The #uestioned issuance of the unsubscribed portion
of the capital stock worth is > not invalid even if
assuing that it was ade without notice to the
stockholders as claied by petitioner. The power to
issue shares of stocks in a corporation is lodged in
the board of directors and no stockholders> eeting is
necessary to consider it because additional issuance
of shares of stocks does not need approval of the
stockholders. The by-laws of the corporation itself
states that >the Board of Trustees shall" in accordance
with law" provide for the issue and transfer of shares
of stock of the 1nstitute and shall prescribe the for of
the certificate of stock of the 1nstitute.
8etitioner bewails the fact that in view of the lack of
notice to hi of such subse#uent issuance" he was
not able to e-ercise his right of pre-eption over the
unissued shares. 0owever" the general rule is that
pre-eptive right is recogni!ed only with respect to
new issue of shares" and not with respect to
additional issues of originally authori!ed shares. This
is on the theory that when a corporation at its
inception offers its first shares" it is presued to have
offered all of those which it is authori!ed to issue. An
original subscriber is deeed to have taken his
shares knowing that they for a definite proportionate
part of the whole nuber of authori!ed shares. 4hen
the shares left unsubscribed are later re-offered" he
cannot therefore clai a dilution of interest.
The petition was disissed for lack of erit.
$#I=I$$IN% 874S8 C5M$AN>, Filipina vs.
MA7CIAN5 7IV%7A
G.7. No. =9,?;@,
Aan!ary +?, ,?+:
FAC8S Cooperativa $aval Filipina is a corporation
duly organi!ed under the laws of the 8hilippines.
*espondent *ivera is a subscriber of the capital
stocks of such corporation. 1n the course of tie the
copany becae insolvent and went into the hands
of the 8hilippine Trust Copany" as assignee in
bankruptcy. This action was instituted to recover one-
half of the stock subscription ade by the respondent"
which adittedly has never been paid. *espondent
did not pay said subscription on the ground that in a
eeting of the stockholders" a resolution was adopted
to the effect that the capital should be reduced by
AJP and the subscribers released fro the obligation
to pay any unpaid balance of their subscription in
e-cess of AJ per centu of the sae.
ISS4% 47$ *espondent is liable for the unpaid
balance of his subscription.
#%=1 *espondent is liable. The resolution relied
upon by the respondent was without effect.
1t is established doctrine that subscription to
the capital of a corporation constitute a find to which
creditors have a right to look for satisfaction of their
clais and that the assignee in insolvency can
aintain an action upon any unpaid stock
subscription in order to reali!e assets for the payent
of its debts. A corporation has no power to release an
original subscriber to its capital stock fro the
obligation of paying for his shares" without a valuable
consideration for such release, and as against
creditors a reduction of the capital stock can take
place only in the anner an under the conditions
prescribed by the statute or the charter or the articles
of incorporation. )oreover" strict copliance with the
statutory regulations is necessary
B5MAN %NVI75NM%N8A= 1%V%=5$M%N8
C57$57A8I5N, p"tition"rs,
vs.
#5N. C5478 5F A$$%A=S and NI=CA7 >.
FAAI=AN, r"spond"nts. (Power to purchase own
shares)
FACTS:
I
*espondent $ilcar H. Fa9ilan offered in writing to
resign as 8resident and )eber of the Board of
Firectors of petitioner" Boan 3nvironental
Fevelopent Corporation <B3F3CD=" and to sell to
the copany all his shares" rights" and interests
therein for 8 EJJ"JJJ plus the transfer to hi of the
copany>s 1su!u pick-up truck which he had been
using.
0owever" B3F3CD paid only 8AJ"JJJ on Guly (A"
('&I and another 8AJ"JJJ on August E(" ('&I and
defaulted in paying the balance of 8%JJ"JJJ.
Dn April EJ" ('&A" Fa9ilan filed a coplaint in the
*egional Trial Court of )akati for collection of that
balance fro B3F3CD.
1n an order dated Septeber '" ('&A" the trial court"
through Gudge Ansberto 8aredes" disissed the
coplaint for lack of 9urisdiction. 1t ruled that the
controversy arose out of intracorporate relations"
hence" the Securities and 3-change Coission has
original and e-clusive 9urisdiction to hear and decide
it.
1SS23:
4hether or not a suit brought by a withdrawing
stockholder against the corporation to enforce
payent of the balance due on the consideration
<evidenced by a corporate proissory note= for the
surrender of his shares of stock and interests in the
corporation" involves an intra-corporate dispute.
*251$6:
This case involves an intra-corporate controversy
because the parties are a stockholder and the
corporation. As correctly observed by the trial court"
the perfection of the agreeent to sell Fa9ilan>s
participation and interests in B3F3CD and the
e-ecution of the proissory note for payent of the
price of the sale did not reove the dispute fro the
coverage of Section A<b= of 8.F. $o. 'J%" as
aended" for both the said agreeent <Anne- C= and
the proissory note <Anne- F= arose fro intra-
corporate relations. 1ndeed" all the signatories of both
docuents were stockholders of the corporation at
the tie of signing the sae. 1t was an intra-corporate
transaction" hence" this suit is an intra-corporate
controversy.
Fa9ilan>s offer to resign as president and director
Beffective as soon as y shares and interests thereto
<sic= are sold and fully paidB <Anne- A-(" p. %E'"
*ollo= iplied that he would reain a stockholder until
his shares and interests were fully paid for" for one
cannot be a director or president of a corporation
unless he is also a stockholder thereof. The fact that
he was replaced as president of the corporation did
not necessaryily ean that he ceased to be a
stockholder considering how the corporation failed to
coplete payent of the consideration for the
purchase of his shares of stock and interests in the
goodwill of the business. There has been no actual
transfer of his shares to the corporation. 1n the books
of the corporation he is still a stockholder.
Fa9ilan>s suit against the corporation to enforce the
latter>s proissory note or copel the corporation to
pay for his shareholdings is cogni!able by the S3C
alone which shall deterine whether such payent
will not constitute a distribution of corporate assets to
a stockholder in preference over creditors of the
corporation. The S3C has e-clusive supervision"
control and regulatory 9urisdiction to investigate
whether the corporation has unrestricted retained
earnings to cover the payent for the shares" and
whether the purchase is for a legitiate corporate
purpose as provided in Sections I( and (%% of the
Corporation Code" which reads as follows:
S3C. I(. Power to acquire own shares.CA stock
corporation shall have the power to purchase or
ac#uire its own shares for a legitiate corporate
purpose or purposes" including but not liited to the
following cases: Provided" That the corporation has
unrestricted retained earnings in its books to cover
the shares to be purchased or ac#uired,
(. To eliinate fractional shares arising out of stock
dividends,
%. To collect or coproise an indebtedness to the
corporation" arising out of unpaid subscription" in a
delin#uency sale" and to purchase delin#uent shares
sold during said sale, and
E. To pay dissenting or withdrawing stockholders
entitled to payent for their shares under the
provisions of this Code"
Sec. (%. Corporate liquidation. ...
--- --- ---
3-cept by decrease of capital stock and as otherwise
allowed by this Code" no corporation shall distribute
any of its assets or property e-cept upon lawful
dissolution and after payent of all its debts and
liabilities" <@@a" &'a" (Oa=.
These provisions of the Corporation Code should be
deeed written into the agreeent between the
corporation and the stockholders even if there is no
e-press reference to the in the proissory note.
The principle is well settled that an e-isting law enters
into and fors part of a valid contract without need for
the parties> e-pressly aking reference to it <5akas ng
)anggagawang )akabayan vs. Abiera" EO SC*A
IE@=.
The re#uireent of unrestricted retained earnings to
cover the shares is based on the trust fund doctrine
which eans that the capital stock" property and other
assets of a corporation are regarded as e#uity in trust
for the payent of corporate creditors. The reason is
that creditors of a corporation are preferred over the
stockholders in the distribution of corporate assets.
There can be no distribution of assets aong the
stockholders without first paying corporate creditors.
0ence" any disposition of corporate funds to the
pre9udice of creditors is null and void. BCreditors of a
corporation have the right to assue that so long as
there are outstanding debts and liabilities" the board
of directors will not use the assets of the corporation
to purchase its own stock ...B<Steinberg vs. Qelasco"
A% 8hil. 'AE.=
1" la 7ama, "t al. vs Ma9ao S!gar C"ntral, "t
al.
A
Facts:
The inority stockholders <petitioners= sued
defendant corporation and its directors <respondents=
for investing in another corporation <8hilippine Fiber=.
The petitioners contend that the investent was
ade without the re#uisite board resolution
authori!ed by two-thirds <%7E= of the voting power of
the stockholders" contrary to the provision of the then
Corporation 5aw <sec. (@ R=. *espondents
eanwhile contended that such investent was later
ratified by the board of directors in later resolutions
and that" <citing legal authorities like 8rofessor
Sulpicio 6uevarra= since 8hilippine Fiber was also
engaged in the anufacture of sugar bags which
defendant corporation is also engaged in" the
investent is legitiate.
1ssue:
1s the investent by a corporation in another
corporation without the re#uisite board resolution and
affirative vote of the stockholders illegalM
*uling:
$o. 1t is not prohibited for a corporation to invest in
shares of another corporation even if such investent
is not authori!ed by two-thirds <%7E= of the voting
power of the stockholders if the purpose of the
investent is not foreign to the purpose of the
corporation.
Sec. (@ R of the old Corporation 5aw provided that"
.$o corporation - - - shall invest its fund in any other
corporation or business" or for any other purpose
other than the main purpose for which it was
organized" unless its board of directors has been so
authori!ed in a resolution by the affirative vote of
stockholders - - - two-thirds of the voting power on
such proposal at a stockholders+ eeting called for
the purposeS/
The rule is that: if the investent is in pursuance of
the corporate purpose" it does not need the approval
of the stockholders. But when the purchase of shares
is done solely for investent and not to accoplish
the purpose of the corporation" the vote of approval of
the stockholders is necessary.
=5$%Z 7%A=8>, INC., AN1 AS4NCI5N =5$%Z
G5NZA=%S vs. F=57%N8INA F5N8%C#A, %8 A=.,
AN1 8#% NA8I5NA= =AB57 7%=A8I5NS
C5MMISSI5N
FAC8S
5ope! *ealty" 1nc." is a corporation engaged in real
estate business" while petitioner Asuncion 5ope!
6on!ales is one of its a9ority shareholders. 3-cept
for Arturo F. 5ope!" the rest of the shareholders also
sit as ebers of the Board of Firectors. Arturo
5ope! subitted a proposal relative to the distribution
of certain assets of petitioner corporation aong its
three <E= ain shareholders. The proposal had three
<E= aspects" vi!: <(= the sale of assets of the copany
to pay for its obligations, <%= the transfer of certain
assets of the copany to its three <E= ain
shareholders" while soe other assets shall reain
with the copany, and <E= the reduction of employees
with provision for their gratuity pay. The proposal was
deliberated upon and approved in a special eeting
of the board of directors. 1t appears that petitioner
corporation approved two <%= resolutions providing for
the gratuity pay of its employees" viz: <a= Resolution
No. 6" Series of 19!" passed by the stockholders in a
special eeting <Sept. &" ('&J=" resolving to set
aside" twice a year" a certain su of oney for the
gratuity pay of its retiring eployees and to create a
6ratuity Fund for the said contingency, and <b=
Resolution No. 1!" Series of 19!" setting aside the
aount of 8(A@"@AJ.JJ as 6ratuity Fund covering the
period fro ('AJ up to ('&J.
3-cept for Asuncion 5ope! 6on!ales who was then
abroad" the reaining ebers of the Board of
Firectors" naely: *osendo de 5eon" Ben9ain
Bernardino" and 5eo *ivera" convened a special
eeting and passed a resolution which reads:
*esolved" as it is hereby resolved that the gratuity
<pay= of the eployees be given as follows: <Aug. (@"
('&(=
<a= Those who will be laid off be given the full aount
of gratuity,
<b= Those who will "e retained will receive #$% of
their gratuity &pay' due on Septem"er 1( 191( and
another #$% on )anuary 1( 19#( and $!% to "e
retained "y the office in the meantime*
8rivate respondents were the retained eployees of
petitioner corporation. 1n a letter" private respondents
re#uested for the full payent of their gratuity pay.
Their re#uest was granted in a special eeting held
Septeber (" ('&(. At that" tie" however" petitioner
Asuncion 5ope! 6on!ales was still abroad. Allegedly"
she sent a cablegra to the corporation" ob9ecting to
certain atters taken up by the board in her absence"
such as the sale of soe of the assets of the
corporation. 2pon her return" she flied a derivative
suit with the S3C against a9ority shareholder Arturo
F. 5ope!.
$otwithstanding the Bcorporate s#uabbleB between
petitioner Asuncion 5ope! 6on!ales and Arturo
5ope!" the first two <%= installents of the gratuity pay
of private respondents were paid by petitioner
corporation. 8etitioner corporation had prepared the
cash vouchers and checks for the third installents of
gratuity pay of said private respondents but for soe
reason" said vouchers were cancelled by petitioner
Asuncion 5ope! 6on!ales. Fespite private
respondents> repeated deands for their gratuity pay"
corporation refused to pay the sae. 5abor Arbiter
*ayundo *. Qalen!uela rendered 9udgent in favor
of private respondents.
8etitioners appealed to public respondent $ational
5abor *elations Coission. The appeal focused on
the alleged non-ratification and non-approval of the
assailed Aug. (@" ('&( and Sept. (" ('&( Board
*esolutions. 8etitioners further insisted that the
payent of the gratuity to soe of the private
respondents was a ere BistakeB on the part of
petitioner corporation since" pursuant to *esolution
$os. O ? (J <('&J=" said gratuity pay should be given
O
only upon the eployees> retireent. $5*C
disissed the appeal for lack of erit.
8etitioners contend that the % board resolutions"
granting gratuity pay to their retained eployees" are
!ltra vir"s" ground that petitioner Asuncion 5ope!
6on!ales was not duly notified of the said special
eetings. They aver" further" that said board
resolutions were not ratified by the stockholders of the
corporation pursuant to Section %& (7% of the
Corporation 5aw <Section IJ of the Corporation
Code=. They also insist that the gratuity pay ust be
given only to the retiring eployees" to the e-clusion
of the retained eployees or those who voluntarily
resigned fro their posts.
1SS23:
47$ private respondents are entitled to
receive their gratuity pay under the assailed board
resolutions dated Aug. (@" ('A( and Sept. (" ('&(.
035F:
The new ground of lack of notice was not
raised before the labor arbiter" hence" petitioners are
barred fro raising the sae on appeal. 1t would be
offensive to the basic rules of fair play and 9ustice to
allow petitioners to raise #uestions which have not
been passed upon by the labor arbiter and the public
respondent $5*C. 1t is well settled that #uestions not
raised in the lower courts cannot" be raised for the
first tie on appeal. 0ence" petitioners ay not
invoke any other ground" other than those it specified
at the labor arbiter level" to ipugn the validity of the
sub9ect resolutions.
4e now coe to petitioners> arguent that the
resolutions passed by the board of directors during
the special eetings on Aug. (" ('&(" and Sept. ("
('&(" were ultra vires for lack of notice.
The general rule is that a corporation" through its
board of directors" should act in the anner and
within the foralities" if any" prescribed by its charter
or by the general law. Thus" directors ust act as a
body in a eeting called pursuant to the law or the
corporation>s by-laws" otherwise" any action taken
therein ay be #uestioned by any ob9ecting director
or shareholder.
Be that as it ay" 9urisprudence tells us that an action
of the board of directors during a eeting" which was
illegal for lack of notice" ay be ratified either
e-pressly" by the action of the directors in subse#uent
legal eeting" or ipliedly" by the corporation>s
subse#uent course of conduct.
1n the case at bench" it was established that petitioner
corporation did not issue any resolution revoking nor
nullifying the board resolutions granting gratuity pay to
private respondents. 1nstead" they paid the gratuity
pay" particularly" the % installents of private
respondents.
Fespite the alleged lack of notice to petitioner
Asuncion 5ope! 6on!ales at that tie the assailed
resolutions were passed" we can glean fro the
records that s3" <as a<ar" o2 t3" corporationBs
o'ligation !nd"r t3" said r"sol!tions. )ore
iportantly" she ac#uiesced thereto. $"tition"r
As!ncion =op"C GonCal"s a22i0"d 3"r signat!r"
on Cas3 Vo!c3"rs" evidencing the %nd installent of
the gratuity pay of private respondents.
D" 3old, t3"r"2or", t3at t3" cond!ct o2 p"tition"rs
a2t"r t3" passag" o2 r"sol!tions dat"d A!g. ,;,
,?E, and S"pt. ,, ,?),, 3ad "stopp"d t3"m 2rom
assailing t3" validity o2 said 'oard r"sol!tions.
Assuing" arguendo" that there was no notice given
to Asuncion 5ope! 6on!ale! during the special
eetings" it is "rron"o!s to stat" t3at t3"
r"sol!tions pass"d 'y t3" 'oard d!ring t3" said
m""tings were !ltra vir"s. 1n legal parlance" B!ltra
vir"sF act r"2"rs to on" <3ic3 is not <it3in t3"
corporat" po<"rs con2"rr"d 'y t3" Corporation
Cod" or articl"s o2 incorporation or not n"c"ssary
or incid"ntal in t3" "0"rcis" o2 t3" po<"rs so
con2"rr"d.
The assailed resolutions before us cover a sub9ect
which concerns the benefit and welfare of the
copany>s eployees. To stress" providing grat!ity
pay 2or its "mploy""s is on" o2 t3" "0pr"ss
po<"rs o2 t3" corporation !nd"r t3" Corporation
Cod"" hence" p"tition"rs cannot invoG" t3"
doctrin" o2 !ltra vir"s to avoid any lia'ility arising
2rom t3" iss!anc" t3" s!'H"ct r"sol!tions.
4e re9ect petitioners> allegation that private
respondents" naely" )ila *efuer!o" )arissa 8ascual
and 3dward )aaril who resigned fro petitioner
corporation after the filing of the case" are precluded
fro receiving their gratuity pay. 8ursuant to board
resolutions dated Aug. (@" ('&( and Sept. (" ('&("
respectively" petitioner corporation obliged itself to
give the gratuity pay of its retained eployees.
0ence" at the tie the aforenaed private
respondents tendered their resignation" the
aforeentioned private respondents were already
entitled to receive their gratuity pay.
T2ASD$ case
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