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GOKONGWEI vs SEC the Annual Meeting" is likewise unreasonable and oppressive.

It was,
11 April 1979, GR No L-45911 therefore, prayed that the amended by-laws be declared null and void
and the certificate of filing thereof be cancelled, and that Soriano, et. al.
FACTS be made to pay damages, in specified amounts, to Gokongwei.

[SEC Case 1375] On 22 October 1976, John Gokongwei Jr., as On October 1976, in connection with the same case, Gokongwei filed
stockholder of San Miguel Corporation, filed with the Securities and with the Securities and Exchange Commission an "Urgent Motion for
Exchange Commission (SEC) a petition for "declaration of nullity of Production and Inspection of Documents", alleging that the Secretary of
amended by-laws, cancellation of certificate of filing of amended by- the corporation refused to allow him to inspect its records despite
laws, injunction and damages with prayer for a preliminary injunction" request made by Gokongwei for production of certain documents
against the majority of the members of the Board of Directors and San enumerated in the request, and that the corporation had been
Miguel Corporation as an unwilling petitioner. (SH v. BOD) attempting to suppress information from its stockholders despite a
negative reply by the SEC to its query regarding their authority to do so.
As a first cause of action, Gokongwei alleged that on September 1976, The motion was opposed by Soriano, et. al. The Corporation, Soriano,
individual respondents amended the by bylaws of the corporation, et. al. filed their answer, and their opposition to the petition, respectively.
basing their authority to do so on a resolution of the stockholders
adopted on March 1961, when the outstanding capital stock (OCS) of Meanwhile, on December 1976, while the petition was yet to be heard,
the corporation was only P70,139.740.00, divided into 5,513,974 the corporation issued a notice of special stockholders' meeting for the
common shares at P10.00 per share and 150,000 preferred shares at purpose of "ratification and confirmation of the amendment to the By-
P100.00 per share. laws", setting such meeting for 10 February 1977. This prompted
Gokongwei to ask the SEC for a summary judgment insofar as the first
At the time of the amendment, the outstanding and paid up shares cause of action is concerned, for the alleged reason that by calling a
totaled 30,127,043, with a total par value of P301,270,430.00. It was special stockholders' meeting for the aforesaid purpose, Soriano, et. al.
contended that according to Section 22 of the Corporation Law and admitted the invalidity of the amendments of 18 September 1976.
Article VIII of the by-laws of the corporation, the power to amend,
modify, repeal or adopt new by-laws may be delegated to the Board of The motion for summary judgment was opposed by Soriano, et. al.
Directors only by the affirmative vote of stockholders representing not Pending action on the motion, Gokongwei filed an "Urgent Motion for
less than 2/3 of the subscribed and paid up capital stock of the the Issuance of a Temporary Restraining Order", praying that pending
corporation, which 2/3 should have been computed on the basis of the the determination of Gokongwei's application for the issuance of a
capitalization at the time of the amendment. preliminary injunction and or Gokongwei's motion for summary
judgment, a temporary restraining order (TRO) be issued, restraining
Since the amendment was based on the 1961 authorization, Soriano, et. al. from holding the special stockholders' meeting as
Gokongwei contended that the Board acted without authority and in scheduled. This motion was duly opposed by Soriano, et. al.
usurpation of the power of the stockholders.
On 10 February 1977, Cremation issued an order denying the motion
As a second cause of action, it was alleged that the authority granted for issuance of temporary restraining order. After receipt of the order of
in 1961 had already been exercised in 1962 and 1963, after which the denial, Soriano, et. al. conducted the special stockholders' meeting
authority of the Board ceased to exist. wherein the amendments to the by-laws were ratified. On 14 February
1977, Gokongwei filed a consolidated motion for contempt and for
As a third cause of action, Gokongwei averred that the membership of nullification of the special stockholders' meeting. A motion for
the Board of Directors had changed since the authority was given in reconsideration of the order denying Gokongwei's motion for summary
1961, there being 6 new directors. judgment was filed by Gokongwei before the SEC on 10 March 1977.

As a fourth cause of action, it was claimed that prior to the questioned [SEC Case 1423] Gokongwei alleged that, having discovered that the
amendment, Gokongwei had all the qualifications to be a director of the corporation has been investing corporate funds in other corporations
corporation, being a substantial stockholder thereof; that as a and businesses outside of the primary purpose clause of the
stockholder, Gokongwei had acquired rights inherent in stock corporation, in violation of Section 17-1/2 of the Corporation Law, he
ownership, such as the rights to vote and to be voted upon in the filed with SEC, on 20 January 1977, a petition seeking to have Andres
election of directors; and that in amending the by-laws, Soriano, et. al. M. Soriano, Jr. and Jose M. Soriano, as well as the corporation declared
purposely provided for Gokongwei's disqualification and deprived him guilty of such violation, and ordered to account for such investments
of his vested right as afore-mentioned, hence the amended by-laws are and to answer for damages.
null and void.
On 4 February 1977, motions to dismiss were filed by Soriano, et. al.,
As additional causes of action, it was alleged that corporations have to which a consolidated motion to strike and to declare Soriano, et. al.
no inherent power to disqualify a stockholder from being elected as a in default and an opposition ad abundantiorem cautelam were filed by
director and, therefore, the questioned act is ultra vires and void; that Gokongwei. Despite the fact that said motions were filed as early as 4
Andres M. Soriano, Jr. and/or Jose M. Soriano, while representing other February 1977, the Commission acted thereon only on 25 April 1977,
corporations, entered into contracts (specifically a management when it denied Soriano, et. al.'s motions to dismiss and gave them two
contract) with the corporation, which was avowed because the (2) days within which to file their answer, and set the case for hearing
questioned amendment gave the Board itself the prerogative of on April 29 and May 3, 1977. Soriano, et. al. issued notices of the annual
determining whether they or other persons are engaged in competitive stockholders' meeting, including in the Agenda thereof, the
or antagonistic business; that the portion of the amended by-laws which "reaffirmation of the authorization to the Board of Directors by the
states that in determining whether or not a person is engaged in stockholders at the meeting on 20 March 1972 to invest corporate funds
competitive business, the Board may consider such factors as business in other companies or businesses or for purposes other than the main
and family relationship, is unreasonable and oppressive and, therefore, purpose for which the Corporation has been organized, and ratification
void; and that the portion of the amended by-laws which requires that of the investments thereafter made pursuant thereto."
"all nominations for election of directors shall be submitted in writing to
the Board of Directors at least five (5) working days before the date of By reason of the foregoing, on 28 April 1977, Gokongwei filed with the
SEC an urgent motion for the issuance of a writ of preliminary injunction

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 1


to restrain Soriano, et. al. from taking up Item 6 of the Agenda at the such right as stockholder was acquired contained the prescription
annual stockholders' meeting, requesting that the same be set for that the corporate charter and the by-law shall be subject to
hearing on 3 May 1977, the date set for the second hearing of the case amendment, alteration and modification.
on the merits. The SEC, however, cancelled the dates of hearing
originally scheduled and reset the same to May 16 and 17, 1977, or 2. Although in the strict and technical sense, directors of a private
after the scheduled annual stockholders' meeting. For the purpose of corporation are not regarded as trustees, there cannot be any doubt that
urging the Commission to act, Gokongwei filed an urgent manifestation their character is that of a fiduciary insofar as the corporation and the
on 3 May 1977, but this notwithstanding, no action has been taken up stockholders as a body are concerned. As agents entrusted with the
to the date of the filing of the instant petition. management of the corporation for the collective benefit of the
stockholders, “they occupy a fiduciary relation, and in this sense the
Gokongwei filed a petition for petition for certiorari, mandamus and relation is one of trust.”
injunction, with prayer for issuance of writ of preliminary injunction, with
the Supreme Court, alleging that there appears a deliberate and “The ordinary trust relationship of directors of a corporation and
concerted inability on the part of the SEC to act. stockholders is not a matter of statutory or technical law. It springs from
the fact that directors have the control and guidance of corporate affairs
ISSUES and property and hence of the property interests of the stockholders.
Equity recognizes that stockholders are the proprietors of the corporate
1. Whether the corporation has the power to provide for the (additional) interests and are ultimately the only beneficiaries thereof.”
qualifications of its directors.
A director is a fiduciary. Their powers are powers in trust. He who is in
2. Whether the disqualification of a competitor from being elected to the such fiduciary position cannot serve himself first and his cestuis second.
Board of Directors is a reasonable exercise of corporate authority. He cannot manipulate the affairs of his corporation to their detriment
and in disregard of the standards of common decency. He cannot by
3. Whether the SEC gravely abused its discretion in denying the intervention of a corporate entity violate the ancient precept against
Gokongwei's request for an examination of the records of San Miguel serving two masters. He cannot utilize his inside information and
International, Inc., a fully owned subsidiary of San Miguel Corporation. strategic position for his own preferment. He cannot violate rules of fair
play by doing indirectly through the corporation what he could not do so
4. Whether the SEC gravely abused its discretion in allowing the directly. He cannot violate rules of fair play by doing indirectly through
stockholders of San Miguel Corporation to ratify the investment of the corporation what he could not do so directly. He cannot use his
corporate funds in a foreign corporation. power for his personal advantage and to the detriment of the
stockholders and creditors no matter how absolute in terms that power
RULING may be and no matter how meticulous he is to satisfy technical
requirements.
1. YES. It is recognized by all authorities that “every corporation has the
inherent power to adopt by-laws ‘for its internal government, and to For that power is at all times subject to the equitable limitation that it
regulate the conduct and prescribe the rights and duties of its members may not be exercised for the aggrandizement, preference, or advantage
towards itself and among themselves in reference to the management of the fiduciary to the exclusion or detriment of the cestuis. The doctrine
of its affairs.’” In this jurisdiction under Section 21 of the Corporation of “corporate opportunity” is precisely a recognition by the courts that
Law, a corporation may prescribe in its by-laws “the qualifications, the fiduciary standards could not be upheld where the fiduciary was
duties and compensation of directors, officers and employees.” This acting for two entities with competing interests. This doctrine rests
must necessarily refer to a qualification in addition to that specified by fundamentally on the unfairness, in particular circumstances, of an
Section 30 of the Corporation Law, which provides that “every director officer or director taking advantage of an opportunity for his own
must own in his right at least one share of the capital stock of the stock personal profit when the interest of the corporation justly calls for
corporation of which he is a director.” protection. It is not denied that a member of the Board of Directors of
the San Miguel Corporation has access to sensitive and highly
Any person “who buys stock in a corporation does so with the confidential information, such as: (a) marketing strategies and pricing
knowledge that its affairs are dominated by a majority of the structure; (b) budget for expansion and diversification; (c) research and
stockholders and that he impliedly contracts that the will of the majority development; and (d) sources of funding, availability of personnel,
shall govern in all matters within the limits of the act of incorporation and proposals of mergers or tie-ups with other firms.
lawfully enacted by-laws and not forbidden by law.” To this extent,
therefore, the stockholder may be considered to have “parted with his It is obviously to prevent the creation of an opportunity for an officer or
personal right or privilege to regulate the disposition of his property director of San Miguel Corporation, who is also the officer or owner of a
which he has invested in the capital stock of the corporation, and competing corporation, from taking advantage of the information which
surrendered it to the will of the majority of his fellow incorporators. It he acquires as director to promote his individual or corporate interests
cannot therefore be justly said that the contract, express or implied, to the prejudice of San Miguel Corporation and its stockholders, that the
between the corporation and the stockholders is infringed by any act of questioned amendment of the by-laws was made. Certainly, where two
the former which is authorized by a majority.” Pursuant to Section 18 corporations are competitive in a substantial sense, it would seem
of the Corporation Law, any corporation may amend its articles of improbable, if not impossible, for the director, if he were to discharge
incorporation by a vote or written assent of the stockholders effectively his duty, to satisfy his loyalty to both corporations and place
representing at least two-thirds of the subscribed capital stock of the the performance of his corporation duties above his personal concerns.
corporation. If the amendment changes, diminishes or restricts the
rights of the existing shareholders, then the dissenting minority has The offer and assurance of Gokongwei that to avoid any possibility of
only one right, viz.: “to object thereto in writing and demand his taking unfair advantage of his position as director of San Miguel
payment for his share.” Corporation, he would absent himself from meetings at which
confidential matters would be discussed, would not detract from the
Under Section 22 of the same law, the owners of the majority of the validity and reasonableness of the by-laws involved. Apart from the
subscribed capital stock may amend or repeal any by-law or adopt new impractical result that would ensue from such arrangement, it would be
by-laws. It cannot be said, therefore, that Gokongwei has a vested right inconsistent with Gokongwei’s primary motive in running for board
to be elected director, in the face of the fact that the law at the time membership — which is to protect his investments in San Miguel

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 2


Corporation. More important, such a proposed norm of conduct would binding upon it the originally unauthorized acts of its officers or
be against all accepted principles underlying a director’s duty of fidelity other agents. This is true because the questioned investment is neither
to the corporation, for the policy of the law is to encourage and enforce contrary to law, morals, public order or public policy. It is a corporate
responsible corporate management. transaction or contract which is within the corporate powers, but
which is defective from a purported failure to observe in its execution
3. YES. Pursuant to the second paragraph of Section 51 of the the requirement of the law that the investment must be authorized by
Corporation Law, "the record of all business transactions of the the affirmative vote of the stockholders holding two-thirds of the voting
corporation and minutes of any meeting shall be open to the power. This requirement is for the benefit of the stockholders. The
inspection of any director, member or stockholder of the stockholders for whose benefit the requirement was enacted may,
corporation at reasonable hours." The stockholder's right of therefore, ratify the investment and its ratification by said stockholders
inspection of the corporation's books and records is based upon their obliterates any defect which it may have had at the outset.
ownership of the assets and property of the corporation. It is, therefore,
an incident of ownership of the corporate property, whether this Besides, the investment was for the purchase of beer manufacturing
ownership or interest be termed an equitable ownership, a beneficial and marketing facilities which is apparently relevant to the corporate
ownership, or a quasi-ownership. This right is predicated upon the purpose. The mere fact that the corporation submitted the assailed
necessity of self-protection. It is generally held by majority of the investment to the stockholders for ratification at the annual meeting of
courts that where the right is granted by statute to the stockholder, it is May 1977 cannot be construed as an admission that the corporation
given to him as such and must be exercised by him with respect to had committed an ultra vires act, considering the common practice of
his interest as a stockholder and for some purpose germane corporations of periodically submitting for the ratification of their
thereto or in the interest of the corporation. In other words, the stockholders the acts of their directors, officers and managers.
inspection has to be germane to the petitioner's interest as a
stockholder, and has to be proper and lawful in character and not FINAL JUDGMENT –
inimical to the interest of the corporation.
 The Court voted unanimously to grant the petition insofar as
The "general rule that stockholders are entitled to full information as to it prays that petitioner be allowed to examine the books and
the management of the corporation and the manner of expenditure of records of San Miguel International, Inc., as specified by him.
its funds, and to inspection to obtain such information, especially where  The petition, insofar as it assails the validity of the amended
it appears that the company is being mismanaged or that it is being by-laws and the ratification of the foreign investment of
managed for the personal benefit of officers or directors or certain of the respondent corporation, for lack of necessary votes, is hereby
stockholders to the exclusion of others." While the right of a stockholder DISMISSED.
to examine the books and records of a corporation for a lawful purpose
is a matter of law, the right of such stockholder to examine the
books and records of a wholly owned subsidiary of the corporation
in which he is a stockholder is a different thing. Stockholders are
entitled to inspect the books and records of a corporation in order to
investigate the conduct of the management, determine the financial
condition of the corporation, and generally take an account of the
stewardship of the officers and directors. Herein, considering that the
foreign subsidiary is wholly owned by San Miguel Corporation and,
therefore, under its control, it would be more in accord with equity,
good faith and fair dealing to construe the statutory right of
petitioner as stockholder to inspect the books and records of the
corporation as extending to books and records of such wholly
owned subsidiary which are in the corporation's possession and
control.

4. Section 17-1/2 of the Corporation Law allows a corporation to "invest


its funds in any other corporation or business or for any purpose other
than the main purpose for which it was organized" provided
that its Board of Directors has been so authorized by the
affirmative vote of stockholders holding shares entitling them to
exercise at least two-thirds of the voting power. If the investment is
made in pursuance of the corporate purpose, it does not need the
approval of the stockholders. It is only when the purchase of shares is
done solely for investment and not to accomplish the purpose of
its incorporation that the vote of approval of the stockholders
holding shares entitling them to exercise at least two-thirds of the
voting power is necessary. As stated by the corporation, the purchase
of beer manufacturing facilities by SMC was an investment in the same
business stated as its main purpose in its Articles of Incorporation,
which is to manufacture and market beer. It appears that the original
investment was made in 1947-1948, when SMC, then San Miguel
Brewery, Inc., purchased a beer brewery in Hongkong (Hongkong
Brewery & Distillery, Ltd.) for the manufacture and marketing of San
Miguel beer thereat. Restructuring of the investment was made in 1970-
1971 thru the organization of SMI in Bermuda as a tax-free
reorganization. Assuming arguendo that the Board of Directors of SMC
had no authority to make the assailed investment, there is no question
that a corporation, like an individual, may ratify and thereby render

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 3


TAM WING TAK vs RAMON MAKASIAR It is not disputed in the instant case that Concord, a domestic
& ZENON DE GUIA corporation, was the payee of the bum check, not petitioner. Therefore,
29 January 2001, GR No. L-122452 it is Concord, as payee of the bounced check, which is the injured
party. Since petitioner was neither a payee nor a holder of the bad
check, he had neither the personality to sue nor a cause of action
FACTS against Vic Ang Siong. Under Section 36 of the Corporation Code,
read in relation to Section 23, it is clear that where a corporation is an
Petitioner Tam Wing Tak (a resident of Hong Kong), in his capacity as injured party, its power to sue is lodged with its board of directors or
director of Concord World Properties, Inc., a domestic corporation, trustees.
filed an affidavit complaint with the Quezon City Prosecutor's Office,
charging Vic Ang Siong with violation of B.P. Blg. 22. (the complaint Note that petitioner failed to show any proof that he was
alleged that a check for the amount of P83,550,000.00, issued by Vic authorized or deputized or granted specific powers by Concord's
Ang Siong in favor of Concord, was dishonored when presented for board of director to sue Victor And Siong for and on behalf of the firm.
encashment) Clearly, petitioner as a minority stockholder and member of the board
of directors had no such power or authority to sue on Concord's
Vic Ang Siong sought the dismissal of the case on two grounds: behalf.
(1) that petitioner had no authority to file the case on behalf of Concord,
the payee of the dishonored check, since the firm's board of directors Nor can we uphold his act as a derivative suit.
had not empowered him to act on its behalf; For a derivative suit to prosper, it is required that the minority
(2) he and Concord had already agreed to amicably settle the issue after stockholder suing for and on behalf of the corporation must allege
he made a partial payment of P19,000,000.00 on the dishonored check in his complaint that he is suing on a derivative cause of action on
behalf of the corporation and all other stockholders similarly
 March 23, 1994 – City Prosecutor dismissed the case on the situated who may wish to join him in the suit.
following grounds:
(1) that petitioner lacked the requisite authority to initiate the criminal There is no showing that petitioner has complied with the
complaint for and on Concord's behalf; foregoing requisites. It is obvious that petitioner has not shown any
(2) that Concord and Vic Ang Siong had already agreed upon the clear legal right which would warrant the overturning of the
payment of the latter's balance on the dishonored check decision of public respondents to dismiss the complaint against Vic
Ang Siong. A public prosecutor, by the nature of his office, is under
 November 8, 1994 - petitioner appealed the dismissal of his no compulsion to file a criminal information where no clear legal
complaint by the City Prosecutor to the Chief State Prosecutor. justification has been shown, and no sufficient evidence of guilt nor
- dismissed the appeal for having been filed out of time; prima facie case has been presented by the petitioner.
MR- denied
No reversible error may be attributed to the court a quo when it
Petitioner then filed a petition for mandamus with the Regional Trial dismissed petitioner's special civil action for mandamus.
Court of Quezon City to compel the Chief State Prosecutor to file or
cause the filing of an information charging Vic Ang Siong with violation Thus, the instant petition is DISMISSED for lack of merit. Costs against
of B.P. Blg. 22. petitioner.
- petition was DENIED and DISMISSED for lack of merit;
MR- denied

Hence, this petition.


Petitioner’s contention:
Respondent judge committed grave errors of law in
sustaining respondent Chief State Prosecutor whose action
flagrantly contravenes:
(1) the established rule on service of pleadings and orders
upon parties represented by counsel;
(2) the basic principle that except in private crimes, any
competent person may initiate a criminal case;
(3) the B.P. Blg. 22 requirement that arrangement for full
payment of a bounced check must be made by the drawer
with the drawee within five (5) banking days from notification
of the check's dishonor.

ISSUE

Whether the petitioner was vested with authority by Concord Inc. to


institute a criminal complaint.

RULING

NO.

The Supreme Court affirmed the dismissal of a criminal case for


violation of B.P. Blg. 22 for lack of authority of the private complainant
(petitioner).

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 4


YU FAMILY vs YUKAYGUAN FAMILY In the meantime, respondents sought the appointment of a
(WINCHESTER INDUSTRIAL SUPPLY, INC) Management Committee and the freezing of all corporate funds by the
G.R. No. 177549. June 18, 2009 trial court.

FACTS On 25 June 2004, petitioners filed a Manifestation informing the RTC of


the existence of their amicable settlement with respondents.
** Petitioner Anthony (father) is the older half-brother of respondent Respondents, however, made their own manifestation before the RTC
Joseph (father). that they were repudiating said settlement, in view of the failure of the
parties thereto to divide the remaining assets of Winchester, Inc.
Petitioners and the respondents were all stockholders of Winchester Consequently, respondents moved to have SRC Case No. 022-CEB set
Industrial Supply, Inc., a domestic corporation engaged in the operation for pre-trial.
of a general hardware and industrial supply and equipment business.
RTC - dismissed the complaint filed by the [herein respondents]. The
On 15 October 2002, respondents filed against petitioners a verified Court also hereby dismisses the [herein petitioners'] counterclaim
Complaint for Accounting, Inspection of Corporate Books and Damages because it has not been indubitably shown that the filing by the
through Embezzlement and Falsification of Corporate Records and [respondents] of the latter's complaint was done in bad faith and with
Accounts before the Cebu RTC. The said Complaint was filed by malice.
respondents, in their own behalf and as a derivative suit on behalf of
Winchester, Inc. The RTC declared that respondents failed to show that they had
complied with the essential requisites for filing a derivative suit as set
BACKGROUND forth in Rule 8 of the Interim Rules of Procedure Governing Intra-
Corporate Controversies:
Winchester, Inc. was established and incorporated on 12 September (1) He was a stockholder or member at the time the acts or
1977, with petitioner Anthony as one of the incorporators, holding 1,000 transactions subject of the action occurred and at the time the
shares of stock worth P100,000.00. Petitioner Anthony paid for the said action was filed;
shares of stock with respondent Joseph's money, thus, making the (2) He exerted all reasonable efforts, and alleges the same with
former a mere trustee of the shares for the latter. particularity in the complaint, to exhaust all remedies available
under the articles of incorporation, by-laws, laws or rules
On 14 November 1984, petitioner Anthony ceded 800 of his 1,000 governing the corporation or partnership to obtain the relief he
shares of stock in Winchester, Inc. to respondent Joseph, as well as Yu desires;
Kay Guan, Siao So Lan, and John S. Yu. Petitioner Anthony remained (3) No appraisal rights are available for the act or acts
as trustee for respondent Joseph of the 200 shares of stock in complained of;
Winchester, Inc., still in petitioner Anthony's name. (4) The suit is not a nuisance or harassment suit.

Respondents then alleged that Winchester, Inc. bought from its As to respondents' prayer for the inspection of corporate books and
incorporators, excluding petitioner Anthony, their accumulated 8,500 records, the RTC adjudged that they had likewise failed to comply with
shares in the corporation. Subsequently, Winchester, Inc. sold the same the requisites entitling them to the same. Section 2, Rule 7 of the Interim
8,500 shares to other persons, who included respondents Nancy, Rules of Procedure Governing Intra Corporate Controversies requires
Jerald, and Jill; and petitioners Rosita and Jason. Respondents further that the complaint for inspection of corporate books or records must
averred that although respondent Joseph appeared as the Secretary state that:
and Treasurer in the corporate records of Winchester, Inc., petitioners (1) The case is for the enforcement of plaintiff's right of
actually controlled and ran the said corporation as if it were their own inspection of corporate orders or records and/or to be furnished
family business. with financial statements under Sections 74 and 75 of the
Corporation Code of the Philippines;
Petitioner Rosita handled the money market placements of the (2) A demand for inspection and copying of books and records
corporation to the exclusion of respondent Joseph, the designated and/or to be furnished with financial statements made by the
Treasurer of Winchester, Inc. plaintiff upon defendant;
(3) The refusal of defendant to grant the demands of the
Petitioners were also misappropriating the funds and properties of plaintiff and the reasons given for such refusals, if any; and
Winchester, Inc. by understating the sales, charging their personal and (4) The reasons why the refusal of defendant to grant the
family expenses to the said corporation, and withdrawing stocks for their demands of the plaintiff is unjustified and illegal, stating the law
personal use without paying for the same. Respondents attached to the and jurisprudence in support thereof.
Complaint various receipts to prove the personal and family expenses
charged by petitioners to Winchester, Inc. Respondents challenged the foregoing RTC Decision before the
Court of Appeals via a Petition for Review under Rule 43 of the
Respondents, therefore, prayed that respondent Joseph be declared Rules of Court.
the owner of the 200 shares of stock in petitioner Anthony's name.
Respondents also prayed that petitioners be ordered to: CA – affirmed the decision of the RTC (pet); MR – granted (res)
(1) deposit the corporate books and records of Winchester, Inc. with the
Branch Clerk of Court of the RTC for respondents' inspection;
(2) render an accounting of all the funds of Winchester, Inc. which
petitioners misappropriated; ISSUE
(3) reimburse the personal and family expenses which petitioners
charged to Winchester, Inc., as well as the properties of the corporation
which petitioners withheld without payment; and
(4) pay respondents' attorney's fees and litigation expenses.

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 5


RULING AF REALTY & DEVELOPMENT, INC. & ZENAIDA R. RANULLO
vs DIESELMAN FREIGHT SERVICES, CO., MANUEL C. CRUZ, JR.
The Court finds the instant Petition meritorious. & MIDAS DEVELOPMENT CORPORATION
G.R. No. 111448. January 16, 2002
To recapitulate, the case at bar was initiated before the RTC by
respondents as a derivative suit, on their own behalf and on behalf FACTS
of Winchester, Inc., primarily in order to compel petitioners to
account for and reimburse to the said corporation the corporate Dieselman Freight Services Co. is the registered owner of a commercial
assets and funds which the latter allegedly misappropriated for lot and Manuel C. Cruz, Jr. is a member of its board of directors.
their personal benefit. During the pendency of the proceedings Although Cruz has no written authority from Dieselman to sell the lot,
before the court a quo, the parties were able to reach an amicable he issued a letter ("Authority to Sell Real Estate") authorizing Cristeta
settlement wherein they agreed to divide the assets of Winchester, Politan to look for a buyer at P3,000.00 per square meter or
Inc. among themselves. This amicable settlement was already P6,282,000.00. Politan, in turn, authorized Felicisima Noble to sell the
partially implemented by the parties, when respondents repudiated same lot.
the same, for which reason the RTC proceeded with the case on
its merits. On 10 November 2004, the RTC promulgated its Noble then offered the lot to AF Realty & Development, Inc. at
Decision dismissing respondents' Complaint for failure to comply P2,500.00 per square meter. Zenaida Ranullo, a board member and
with essential pre-requisites before they could avail themselves of vice-president of AF Realty, accepted the offer and issued a check in
the remedies under the Interim Rules of Procedure Governing the amount of P330,000.00 payable to Dieselman. Cruz, as president
Intra-Corporate Controversies; and for inadequate substantiation of Dieselman, acknowledged receipt of the check only as earnest
of respondents' allegations in said Complaint after consideration of money and required AF Realty to finalize the sale at P4,000.00 per
the pleadings and evidence on record. square meter.

(FURTHER EXPLANATION OF THE RULING OF SC PP. 12-19) Later on, Cruz terminated the offer and demanded the return of the title
of the lot earlier delivered. AF Realty, claiming that the contract was
already perfected, filed a complaint for specific performance against
Dieselman and Cruz.

Meanwhile, Dieselman and Midas Development Corporation executed


a deed of absolute sale of the same property at an agreed price of
P2,800.00 per square meter and thereafter filed a motion for leave to
intervene in the case.

After trial, the lower court held that the acts of Cruz bound Dieselman
in the sale of the lot to AF Realty. Consequently, the perfected contract
of sale between Dieselman and AF Realty barred Midas's intervention.
Dissatisfied, all parties appealed to the Court of Appeals.

The Court of Appeals reversed the decision of the trial court. It held
that since Cruz was not authorized in writing to sell the subject property
to AF Realty, the sale was not perfected. It also held that the Deed of
Absolute Sale between Dieselman and Midas is valid. Hence, petitioner
filed the instant petition.

ISSUES

1. Who between petitioner AF Realty and respondent Midas has a right


over the subject lot.
2. Whether the sale of land by an unauthorized agent may be ratified
where there is acceptance of benefits involved.

RULING

Midas Devt Corp

The decision of the Court of Appeals was affirmed by the Supreme


Court. According to the Court, considering that respondent Cruz,
Polintan and Noble were not authorized by respondent Dieselman to
sell its lot, the supposed contract is void. Being a void contract, it is
not susceptible of ratification by clear mandate of the Civil Code. On
the other hand, the validity of the sale of the subject lot to respondent
Midas was unquestionable. The sale was authorized by the board
resolution of respondent Dieselman.

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 6


from the main amended milling contract, specially taking into account
ALFREDO MONTELIBANO, ET AL (appellants) vs MURCIA that appellant Alfredo Montelibano was, at the time, the President of the
MILLING CO., INC (appellee) Planters Association (Exhibit 4, p. 11) that had agitated for the
G.R. No. L-15092. May 18, 1962 concessions embodied in the resolution of August 20, 1936.

FACTS That the resolution formed an integral part of the amended milling
contract, signed on September 10, and not a separate bargain, is
Alfredo Montelibano, et al had been and are sugar planters adhered to further shown by the fact that a copy of the resolution was simply
the defendant-appellee's sugar central mill under identical attached to the printed contract without special negotiations or
milling contracts. Originally executed in 1919, said contracts were agreement between the parties.
stipulated to be in force for 30 years starting with the 1920-21 crop, and
provided that the resulting product should be divided in the ratio of 45% It follows from the foregoing that the terms embodied in the resolution
for the mill and 55% for the planters. (45-55; 30) of August 20, 1936 were supported by the same causa or consideration
underlying the main amended milling contract; i.e., the promises and
Sometime in 1936, it was proposed to execute amended milling obligations undertaken thereunder by the planters, and, particularly, the
contracts, increasing the planters' share to 60% of the manufactured extension of its operative period for an additional 15 years over and
sugar and resulting molasses, besides other concessions, but beyond the 30 years stipulated in the original contract. Hence, the
extending the operation of the milling contract from the original 30 years conclusion of the court below that the resolution constituted gratuitous
to 45 years. To this effect, a printed Amended Milling Contract form was concessions not supported by any consideration is legally untenable.
drawn up. (40-60;45)
All disquisition concerning donations and the lack of power of the
On August 20, 1936, the Board of Directors of the appellee Bacolod directors of the respondent sugar milling company to make a gift to the
Murcia Milling Co., Inc., adopted a resolution (Acta No. 11, Acuerdo No. planters would be relevant if the resolution in question had embodied a
1) granting further concessions to the planters over and above those separate agreement after the appellants had already bound themselves
contained in the printed Amended Milling Contract. to the terms of the printed milling contract. But this was not the case.

In 1953, the appellants initiated the present action, contending that When the resolution was adopted and the additional concessions were
three Negros Sugar centrals (La Carlota, Binalbagan-Isabela and San made by the company, the appellants were not yet obligated by the
Carlos), with a total annual production exceeding one-third of the terms of the printed contract, since they admittedly did not sign it until
production of all the sugar central mills in the province, had already twenty-one days later, on September 10, 1936. Before that date, the
granted increased participation (of 62.5%) to their planters, and that printed form was no more than a proposal that either party could modify
under paragraph 9 of the resolution of August 20, 1936, heretofore at its pleasure, and the appellee actually modified it by adopting the
quoted, the appellee had become obligated to grant similar concessions resolution in question. So that by September 10, 1936, defendant
to the plaintiffs (appellants herein). corporation already understood that the printed terms were not
controlling, save as modified by its resolution of August 20, 1936; and
The appellee Bacolod Murcia Milling Co., Inc., resisted the claim, and we are satisfied that such was also the understanding of appellants
defended by urging that the stipulations contained in the resolution were herein, and that the minds of the parties met upon that basis. Otherwise
made without consideration; that the resolution in question was, there would have been no consent or " meeting of the minds", and no
therefore, null and void ab initio, being in effect a donation that was ultra binding contract at all. But the conduct of the parties indicates that they
vires and beyond the powers of the corporate directors to adopt. assumed, and they do not now deny, that the signing of the contract on
September 10, 1962 did give rise to a binding agreement. That
RTC - uphold the stand of the defendant milling company, and agreement had to exist on the basis of the printed terms as modified by
dismissed the complaint. the resolution of August 20, 1936, or not at all. Since there is no rational
explanation for the Company's assenting to the further concessions
Thereupon, plaintiffs duly appealed to this Court. asked by the planters before the contracts were signed, except as
further inducement for the planters to agree to the extension of the
contract period, to allow the company now to retract such concessions
ISSUE would be to sanction a fraud upon the planters who relied on such
additional stipulations.
Whether the act in question is in direct and immediate furtherance of
the corporation's business, fairly incident to the express powers and There can be no doubt that the directors of the appellee company had
reasonably necessary to their exercise. authority to modify the proposed terms of the Amended Milling Contract
for the purpose of making its terms more acceptable to the other
contracting parties.
RULING
The rule is that —
YES. "It is a question, therefore, in each case, of the logical relation of
the act to the corporate purpose expressed in the charter. If that
The Court agrees with appellants that the appealed decisions cannot act is one which is lawful in itself, and not otherwise prohibited,
stand. It must be remembered that the controverted resolution was is done for the purpose of serving corporate ends, and is
adopted by appellee corporation as a supplement to, or further reasonably tributary to the promotion of those ends, in a
amendment of, the proposed milling contract, and that it was approved substantial, and not in a remote and fanciful, sense, it may fairly
on August 20, 1936, twenty-one days prior to the signing by appellants be considered within charter powers. The test to be applied is
on September 10, of the Amended Milling Contract itself; so that when whether the act in question is in direct and immediate
the amended milling contract was executed, the concessions granted furtherance of the corporation's business, fairly incident to the
by the disputed resolution had been already incorporated into its terms. express powers and reasonably necessary to their exercise. If
so, the corporation has the power to do it; otherwise, not."
No reason appears of record why, in the face of such concessions, the
appellants should reject them or consider them as separate and apart

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 7


As the resolution in question was passed in good faith by the board of CENTRAL TEXTILE MILLS, INC. vs NATIONAL WAGES AND
directors, it is valid and binding, and whether or not it will cause losses PRODUCTIVITY COMMISSION
or decrease the profits of the central, the court has no authority to review G.R. No. 104102. August 7, 1996
them.
FACTS
"They hold such office charged with the duty to act for the
corporation according to their best judgment, and in so doing On December 20, 1990, RTWPB-NCR issued a wage order mandating
they cannot be controlled in the reasonable exercise and a P12.00 increase in the minimum daily wage of all employees and
performance of such duty. Whether the business of a workers in the private sector in the NCR, but exempted from its
corporation should be operated at a loss during depression, or application distressed employers whose capital has been impaired by
close down at a smaller loss, is a purely business and at least twenty-five percent (25%) in the preceding year.
economic problem to be determined by the directors of the
corporation and not by the court. It is a well-known rule of law The Guidelines on Exemption provides a definition of “capital” as the
that questions of policy or of management are left solely to the "paid-up capital at the end of the last full accounting period (in case of
honest decision of officers and directors of a corporation, and corporations)." Under said guidelines, "an applicant firm may be granted
the court is without authority to substitute its judgment of the exemption from payment of the prescribed increase in wage/cost-of-
board of directors; the board is the business manager of the living allowance for a period not to exceed one (1) year from effectivity
corporation, and so long as it acts in good faith its orders are of the Order when accumulated losses at the end of the period under
not reviewable by the courts." review have impaired by at least 25% the paid-up capital at the end of
the last full accounting period preceding the application.”
And it appearing undisputed in this appeal that sugar centrals of La
Carlota, Hawaiian Philippines, San Carlos and Binalbagan (which By virtue of these provisions, petitioner filed its application for exemption
produce over one-third of the entire annual sugar production in from compliance with WO No. NCR-02 due to financial losses.
Occidental Negros) have granted progressively increasing
participations to their adhered planters, at an average rate of The Board's Vice-Chairman, Ernesto Gorospe, disapproved petitioner's
application for exemption after concluding from the documents
62.333% for the 1951-52 crop year; submitted that petitioner sustained an impairment of only 22.41%.
64.2% for the 1952-53; - MR DISMISSED for lack of merit
64.3% for the 1953-54;
64.5% for the 1954-55; and The Board, except for Vice-Chairman Gorospe who took no part in
63.5% for the 1955-1956, resolving the said motion for reconsideration, opined that according to
the audited financial statements submitted by petitioner to them, to the
the appellee Bacolod-Murcia Milling Company is, under the terms of its Securities and Exchange financial statements submitted by petitioner to
Resolution of August 20, 1936, duty bound to grant similar increases to them, to the Securities and Exchange Commission and to the Bureau
plaintiffs-appellants herein. of Internal Revenue, petitioner had a total paid-up capital of
P305,767,900.00 as of December 31, 1990, which amount should be
Thus, the decision under appeal is reversed and set aside; and the basis for determining the capital impairment of petitioner, instead of
judgment is decreed sentencing defendant-appellee to pay plaintiffs- the authorized capital stock of P128,000,000.00 which it insists should
appellants the differential or increase of participation in the milled sugar be the basis of computation. It also noted that petitioner did not file with
in accordance with paragraph 9 of the appellee's Resolution of August the SEC the August 15, 1990 resolution of its Board of Directors,
20, 1936, over and in addition to the 60% expressed in the printed concurred in by its stockholders representing at least two thirds of its
Amended Milling Contract, or the value thereof when due with interest outstanding capital stock, approving an increase in petitioner's
at the legal rate on the value of such differential during the time they authorized capital stock from P128,000,000.00 to P640,000,000.00.
were withheld; and the right is reserved to plaintiffs-appellants to sue Neither did it file any petition to amend its Articles of Incorporation
for such additional increases as they may be entitled to for the crop brought about by such increase in its capitalization.
years subsequent to those herein adjudged.
Petitioner maintains in the instant action that its authorized capital stock,
Costs against appellee, Bacolod-Murcia Milling Co. not its unauthorized paid-up capital, should be used in arriving at its
capital impairment for 1990. Citing two SEC Opinions dated August 10,
1971, and July 28, 1978, interpreting Section 38 of the Corporation
Code, it claims that "the capital stock of a corporation stand(s) increased
or decreased only from and after approval and the issuance of the
certificate of filing of increase of capital stock."

ISSUE

RULING

The Court agrees with the petitioner.

The guidelines on exemption specifically refer to paid-up capital, not


authorized capital stock, as the basis of capital impairment for
exemption from WO. No. NCR-02. The records reveal, however, that
petitioner included in its total paid-up capital payments on advance
subscriptions, although the proposed increased in its capitalization had
not yet been approved by, let alone presented for the approval of, the

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 8


SEC. As observed by the Board in its order of February 4, 1992, "the LOPEZ REALTY, INC. & ASUNCION LOPEZ GONZALES
aforementioned resolution (of August 15, 1990) has not been filed by vs. FLORENTINA FONTECHA, ET AL
the corporation with the SEC, nor was a petition to amend its Articles of G.R. No. 76801. August 11, 1995
Incorporation by reason of the increase in its capitalization filed by the
same." FACTS

It is undisputed that petitioner incurred a net loss of P68,844,222.49 in Lopez Realty, Inc., is a corporation engaged in real estate business,
1990, and its authorized capital stock as of that time stood at while petitioner Asuncion Lopez Gonzales is one of its majority
P128,000,000.00. On August 15, 1990, a Board resolution increasing shareholders. Her interest in the company vis-a-vis the other
the capital stock of the corporation was affirmed by shareholders is as follows:
the requisite number of stockholders. Although no petition to that effect 1. Asuncion Lopez Gonzales - 7,831 shares
was ever submitted to the SEC for its approval, petitioner already 2. Teresita Lopez Marquez - 7,830 shares
started receiving subscriptions and payments on the proposed 3. Arturo F. Lopez - 7,830 shares
increase, which it allegedly held conditionally, that is, pending approval 4. Rosendo de Leon - 4 shares
of the same by the SEC. In its Memorandum, however, petitioner 5. Benjamin Bernardino - 1 share
admitted, without giving any reason therefor, that it indeed "received 6. Leo Rivera - 1 share
'subscriptions' and 'payments' to the said proposed increase in capital Except for Arturo F. Lopez, the rest of the shareholders also sit as
stock, even in the absence of SEC approval of the increase as required members of the Board of Directors.
by the Corporation Code." Thus, by the end of 1990, the corporation
had a subscribed capital stock of P482,748,900.00 and, after deducting Sometime in 1978, Arturo Lopez submitted a proposal relative to the
P176,981,000.00 in subscriptions receivables, a total paid-up capital of distribution of certain assets of petitioner corporation among its three
P305,767,900.00. 3 P177,767,900.00 of this sum constituted the main shareholders. The proposal had three aspects, viz:
unauthorized increase in its subscribed capital stock, which are actually (1) the sale of assets of the company to pay for its obligations;
payments on future issues of shares. (2) the transfer of certain assets of the company to its three (3)
main shareholders, while some other assets shall remain with the
These payments cannot as yet be deemed part of petitioner's paid-up company;
capital, technically speaking, because its capital stock has not yet been (3) the reduction of employees with provision for their gratuity
legally increased. Thus, its authorized capital stock in the year when pay. The proposal was deliberated upon and approved in a
exemption from WO No. NCR-02 was sought stood at special meeting of the board of directors
P128,000,000.00, which was impaired by losses of nearly 50%. Such
payments constitute deposits on future subscriptions, money which the It appears that petitioner corporation approved two (2) resolutions
corporation will hold in trust for the subscribers until it files a petition to providing for the gratuity pay of its employees:
increase its capitalization and a certificate of filing of increase of capital 1.) to set aside, twice a year, a certain sum of money for the gratuity
stock is approved and issued by the SEC. As a trust fund, this money pay of its retiring employees and to create a Gratuity Fund for the said
is still withdrawable by any of the subscribers at any time before the contingency;
issuance of the corresponding shares of stock, unless there is a 2.) setting aside the amount of P157,750.00 as Gratuity Fund covering
presubscription agreement to the contrary, which apparently is not the period from 1950 up to 1980
present in the instant case. Consequently, if a certificate of increase has
not yet been issued by the SEC, the subscribers to the unauthorized Due to various circumstances, three members of the board convened a
issuance are not to be deemed as stockholders possessed of such legal special meeting and passed a resolution which reads:
rights as the rights to vote and dividends. (a) Those who will be laid off be given the full amount of gratuity;
(b) Those who will be retained will receive 25% of their gratuity (pay)
The Court observes that the subject wage order exempts from its due on September 1, 1981, and another 25% on January 1, 1982, and
coverage employers whose capital has been impaired by at least 25% 50% to be retained by the office in the meantime.
because if impairment is less than this percentage, the employer can
still absorb the wage increase. In the case Private respondents were the retained employees of petitioner
at hand, petitioner's capital held answerable for the additional wages corporation. In a letter, dated August 31, 1981, private respondents
would include funds it only holds in trust, which to reiterate may not be requested for the full payment of their gratuity pay. Their request was
deemed par of its paid-up capital, the losses of which shall be the basis granted in a special meeting.
of the 25% referred to above. To include such funds in the paid-up
capital would be prejudicial to the corporation as an employer At that time, however, petitioner Asuncion Lopez Gonzales was still
considering that the records clearly show that it is entitled to exemption, abroad. Allegedly, while she was still out of the country, she sent a
even as the anomaly was brought about by an auditing error. cablegram to the corporation, objecting to certain matters taken up by
the board in her absence, such as the sale of some of the assets of the
In order to avoid any similar controversy, petitioner is reminded to corporation. Upon her return, she filed a derivative suit with the
adopt a more systematic and precise accounting procedure keeping in Securities and Exchange Commission (SEC) against majority
mind the various principles and nuances surrounding corporate shareholder Arturo F. Lopez.
practice.
Notwithstanding the "corporate squabble" between petitioner Asuncion
Thus, the petition is hereby GRANTED. The assailed orders of the Lopez Gonzales and Arturo Lopez, the first two (2) installments of the
Regional Tripartite Wages and Productivity Board — National Capital gratuity pay of private respondents Florentina Fontecha, Mila Refuerzo,
Region, dated October 22, 1991 and February 4, 1992, are ANNULLED Marcial Mamaril and Perfecto Bautista were paid by petitioner
and SET ASIDE. Said Board is also hereby mandated to issue another corporation.
order granting the application of petitioner Central Textile Mills, Inc. for
exemption from Wage Order No. NCR-02 for the year ending December Also, petitioner corporation had prepared the cash vouchers and checks
31, 1990. for the third installments of gratuity pay of said private respondents
(Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto
Bautista). For some reason, said vouchers were cancelled by petitioner
Asuncion Lopez Gonzales. Likewise, the first, second and third

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 9


installments of gratuity pay of the rest of private respondents, September 1, 1981, it is erroneous to state that the resolutions passed
particularly, Edward Mamaril, Marissa Pascual and Allan Pimentel, by the board during the said meetings were ultra vires.
were prepared but cancelled by petitioner Asuncion Lopez Gonzales.
Despite private respondents' repeated demands for their gratuity pay, In legal parlance, "ultra vires" act refers to one which is not within the
petitioner corporation refused to pay the same. corporate powers conferred by the Corporation Code or articles of
incorporation or not necessary or incidental in the exercise of the
LA – in favor of private respondents powers so conferred.
NLRC – dismissed the appeal for lack of merit (favor of res)
- MR – DENIED The assailed resolutions before us cover a subject which concerns the
benefit and welfare of the company's employees. To stress, providing
ISSUE gratuity pay for its employees is one of the express powers of the
corporation under the Corporation Code, hence, petitioners cannot
Whether or not public respondent acted with grave abuse of discretion invoke the doctrine of ultra vires to avoid any liability arising from the
in holding that private respondents are entitled to receive their gratuity issuance the subject resolutions.
pay under the assailed board resolutions dated August 17, 1981 and
September 1, 1981. We reject petitioners' allegation that private respondents who resigned
from petitioner corporation after the filing of the case, are precluded
RULING from receiving their gratuity pay. Pursuant to board resolutions
petitioner corporation obliged itself to give the gratuity pay of its retained
The resolutions passed by the board of employees in four (4) installments. Hence, at the time the aforenamed
directors during the special meetings on were private respondents tendered their resignation, the aforementioned
ultra vires for lack of notice – NO! private respondents were already entitled to receive their gratuity pay.

The general rule is that a corporation, through its board of directors, SEC. 40 OF CORPO CODE – inapplicable
should act in the manner and within the formalities, if any, prescribed by
its charter or by the general law. Thus, directors must act as a body in The cited provision is not applicable to the case at bench as it refers to
a meeting called pursuant to the law or the corporation's by-laws, the sale, lease, exchange or disposition of all or substantially all of the
otherwise, any action taken therein may be questioned by any objecting corporation's assets, including its goodwill. In such a case, the action
director or shareholder. Be that as it may, jurisprudence tells us that an taken by the board of directors requires the authorization of the
action of the board of directors during a meeting, which was illegal for stockholders on record.
lack of notice, may be ratified either expressly, by the action of the
directors in subsequent legal meeting, or impliedly, by the corporation's It will be observed that, except for Arturo Lopez, the stockholders of
subsequent course of conduct. petitioner corporation also sit as members of the board of directors.
Under the circumstances in field, it will be illogical and superfluous to
Ratification by directors may be by an express resolution or vote to that require the stockholders' approval of the subject resolutions. Thus, even
effect, or it may be implied from adoption of the act, acceptance or without the stockholders' approval of the subject resolutions, petitioners
acquiescence. Ratification may be effected by a resolution or vote of are still liable to pay private respondents' gratuity pay.
the board of directors expressly ratifying previous acts either of
corporate officers or agents; but it is not necessary, ordinarily, to show Thus, the instant petition is DISMISSED for lack of merit. Accordingly,
a meeting and formal action by the board of directors in order to the assailed resolution of NLRC is hereby AFFIRMED.
establish a ratification.
NIELSON & COMPANY, INC vs.
Moreover, the unauthorized acts of an officer of a corporation may be LEPANTO CONSOLIDATED MINING COMPANY
ratified by the corporation by conduct implying approval and adoption of G.R. No. L-21601. December 28, 1968
the act in question. Such ratification may be express or may be inferred
from silence and inaction.

In the case at bar, it was established that petitioner corporation did not
issue any resolution revoking nor nullifying the board resolutions PRIME WHITE CEMENT CORPORATION vs. HONORABLE
granting gratuity pay to private respondents. Instead, they paid the INTERMEDIATE APPELLATE COURT & ALEJANDRO TE
gratuity pay, particularly, the first two (2) installments thereof, of private G.R. No. L-4935. May 28, 1954
respondents Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and
Perfecto Bautista.

Despite the alleged lack of notice to petitioner Asuncion Lopez


Gonzales at that time the assailed resolutions were passed, we can
glean from the records that she was aware of the corporation's
obligation under the said resolutions. More importantly, she acquiesced J.M. TUASON & CO., INC., represented by its Managing
thereto. As pointed out by private respondents, petitioner Asuncion PARTNER, GREGORIO ARANETA, INC vs. QUIRINO BOLAÑOS
Lopez Gonzales affixed her signature on Cash Voucher evidencing the G.R. No. L-4935. May 28, 1954
2nd installment of the gratuity pay of private respondents Mila Refuerzo
and Florentina Fontecha.

We hold, therefore, that the conduct of petitioners after the passage of


resolutions had estopped them from assailing the validity of said board
resolutions.

Assuming, arguendo, that there was no notice given to Asuncion Lopez


Gonzales during the special meetings held on August 17, 1981 and

CORPORATION LAW |GULLAS LAW SCHOOL| OSABEL, KM 10