McArthur (TP) v. TIMES PRINTING CO.

(C)
1) (Nimocks) was engaged as Promoter in procuring the organization of
the defendant TIMES PRINTING CO. (a newspaper publisher).

2) 12 Sept- Promoter (Nimocks) made a contract w/ TP-plaintiff

(McArthur) for his services as “advertising solicitor” in behalf of the
contemplated newspaper publishing company for a period of 1 year
starting Oct 1.

3) Oct 16- date C was organized.

4) April following year- TP was discharged

5) TP sues C for damages for breach of contract.

HELD: C LB! The acts and acquiescence of the C officers, after the
organization, justifies finding that the contract adopted as its own.

1) All of the stockholders, directors, and officers of the C knew of this

contract at the time of C’s organization, or were informed of it soon afterwards.
and

2) None of them objected or repudiated it, but, on the contrary retained TP in

the employment of the C w/o any other or new contract as to his services.

3) EVEN THOUGH C Board of Directors never took any formal action vav the
contract made in its behalf by Promoter.

RATIO: Of course the agreement must one w/c the C itself could make and
one w/c the usual agents of the C have express or implied authority to make.

BUILDERS DUNTILE CO. (C) v. DUNN MFG. CO. (TP)

1) P (Samuels) received some ads from DUNN MFG. CO. (TP) showing that
its ‘duntiles’ were fireproof and cheaper.

2) After some correspondence, DUNN MFG. CO. (TP) sent its agent to
Paducah to talk to (Samuels).

3) (Samuels) told the agent that he was organizing a C to manufacture these

‘duntiles’.

4) Samuels and agent went to see 1 or 2 of the other promoters.

5) Samuels preferred to organize the C and then make the contract for the
machinery.

6) Agent wished that Samuel to order the machinery then go ahead w/ the C
afterwards.

7) 23 April- After talking w/ the other Ps in the city P (Samuels) signed the
contract ordering “machinery for making a hollow building tile” from Dunn Mfg.
Co. (TP).

8) The contract contained a provision: “Dunn Mfg. Co. (TP) agreed to

furnish, free of charge, an experienced service man for a period of 5 days to
insure proper installation and instruct your force.”

9) 6 June- machinery reached Paducah

June 16- Dunn Mfg. Co. (TP) sends person 1 to set up the machinery

10) June 20- AOI were filed by P and associates

11) Capital stock fixed at $10,000.

12) P (Samuels) has paid out or assumed to pay $5,100 for the machinery
and other expenses.

13) C stocks for this amount was ordered issued by P (Samuels).

14) Machinery was making value-less tiles.

15) Dunn Mfg. Co. (TP) sends P2 to fix it. P1 actually set-up machinery
wrongly and gave wrong formula.

16) C (Builders Duntile Co.) sues TP (Dunn Mfg. Co.) to recover on

written contract signed by P (Samuels).

HELD: C can sue on the contract. Though there was no formal assignment
of the contract to it, C acts were an adoption of the contract no less than a formal
resolution to this effect.

It was the only person having any real interest in the due performance of
the contract, and is the proper party to recover for its breach.

To hold otherwise would be to leave a wrong w/o a remedy.

1) It was clearly understood between P (Samuels) and the other promoters
and agent of the TP (Dunn Mfg. Co. ) that the Contract was made on behalf
of the C w/c they proposed to perform.

2) The Incorporators at once took charge of the plant w/c had been bought
for it and gave Samuels stock to the amount of his expenditures.

3) P was one of the promoters and had no intention the machinery for
himself.

QUAKER HILL, INC. (TP) v. Parr (P)

Summary: QUAKER HILL, INC. ( a NY C acting thru a local agent) made a
sale to a corp. to be formed, and later accepted still another corp. after the
formation of the latter.

1) May 58- QUAKER HILL, INC. (TP) (through its salesman Barker)
sold a large quantity of “nursery stock” to DENVER MEMORIAL
NURSERY, INC.

2) QUAKER HILL, INC. (TP) salesman Barker insisted to Parr that the deal
be consummated at once because the growing season was rapidly
passing.

3) 14 May 58- an order was signed by Parr, on behalf of DENVER

MEMORIAL NURSERY, INC., w/c to the knowledge of QUAKER HILL,
INC. (TP) was not yet formed, that fact being noted in the contract.

4) 15 May 58- 2nd order

5) 19 May 58- A sales contract, together w/ a PN was executed w/

DENVER MEMORIAL NURSERY, INC. named as the contracting party in
the sales contract and as the maker in the PN.

The contract is signed as:

E.D. Parr, Pres.

The PN is signed as:

“Denver Memorial Nursery, Inc.
E.D. Par, Pres.
James P. Presba Sc’y.-Treas.”

6) DENVER MEMORIAL NURSERY, INC. was never formed.

7) 27 May 58- articles of MOUNTAIN VIEW NURSERIES, INC. were

executed
8) Neither DENVER MEMORIAL NURSERY, INC. nor MOUNTAIN VIEW
NURSERIES, INC ever functioned as going concerns.

9) QUAKER HILL, INC. (TP) sues Parr contending that:

a) Parr is personally LB in view of the defunct financial condition
of the C, based upon the fact that the C was not formed at the time
the contract was made and on the further ground that the Ds as
promoters were LB.

ISSUE: WON personal LB can be imposed on the P?

HELD: NO, LB on C! The Plaintiff, acting thru its agent, was well
aware of the fact that the C was not formed and nevertheless urged that the
contract be made in the name of the proposed C. “There is but little evidence
indicating intent on the part of the Plaintiff to look to the Defendants for
performance or payment.” The single fact supporting the Plaintiff’s theory is the
obtaining of an individual balance sheet. On the contrary, the entire transaction
contemplated the C as the contracting party. Personal LB does not arise under
such circumstances.
CHAPTER VI- CORPORATE POWERS

RP (TP) v. ACOJE MINING (C) (1963)

1) ACOJE MINING wrote the Director of Posts requesting of a (post,
telegraph and money order) office in its mining camp at Sta. Cruz, Zambales to
service its employees and their families that were living in said camp.

2) 11 April 49- Director of Post again wrote a letter to the company stating
among other things that:

"In cases where a post office will be opened under circumstances similar to the
present, it is policy of this office to have the company assume direct responsibility
for whatever pecuniary loss may be suffered by the Bureau of Post by reason of
any act of dishonesty, carelessness or negligence on the part of the employee of
the company who is assigned to take charge of the post office,"

3) The letter suggests that a resolution be adopted by the board of directors

of the company expressing conformity to the above condition relative to the
responsibility to be assumed by it in the event a post office branch is opened as
requested.

4) 2 Sept. 49- C informed the Director of Posts of:

a) passage by its BOD of a resolution of the following tenor.

"That the requirement of the Bureau of Posts that the Company should accept full
responsibility for all cash received by the Postmaster be complied with, and that
a copy of this resolution be forwarded to the Bureau of Posts."

b) C feels that that resolution fulfills the last condition imposed by the
Director of Posts and that, therefore, it would request that an inspector be sent to
the camp for the purpose of acquainting the postmaster with the details of the
operation of the branch office.

5) 13 Oct 49- post office branch was opened at the camp w/ an employee of
the C as Postmaster (Hilario M. Sanchez)

6) 11 May 54- Postmaster went on a 3-day leave but never returned.

7) C immediately informed the officials of the Manila post office and the
provincial auditor of Zambales of Sanchez' disappearance.

8) The accounts of the Postmaster were checked and a shortage of P13,867

was found.
9) RP made several demands made upon the C for the payment of the
shortage in line with the LB it has assumed.

10) 10 Sept 54- Having failed, the government commenced the present action
before CFI Manila seeking to recover the amount of P13,867.24.

11) C DEFENSE:

a) BOD Resolution wherein it assumed responsibility for the act of the

postmaster is ultra vires
b) its liability under said resolution is only that of a guarantor who
answers only after the exhaustion of the properties of the principal
c) the loss claimed by the plaintiff is not supported by the office record.

HELD: C LB!
The BOD’s Resolution covers a subject which concerns the benefit,
convenience and welfare of its employees and their families.

Indeed, such post office is a vital improvement in the living condition

of its employees and laborers who came to settle in its mining camp which
is far removed from the postal facilities or means of communication
accorded to people living in a city or municipality.

RATIO: While as a rule an ultra vires act is one committed outside the
object for which a C is created as defined by the law of its organization and
therefore beyond the powers conferred upon it by law (19 C.J.S., Section 965, p.
419), there are however certain corporate acts that may be performed
outside of the scope of the powers expressly conferred if they are
necessary to promote the interest or welfare of the corporation.
NPC (C) v. Vera (and TP) (1989)
1) NPC had a Contract for Stevedoring Services w/ SEA LION INTL. PORT
TERMINAL SERVICES, INC. for Coal-Handling Operations at NPC’s pier
located at Calaca, Batangas.

2) It is an undisputed fact that the NPC owned pier at Calaca, Batangas

receives the various shipments of coal used exclusively to fuel the NPC
Batangas Coal-Fired Thermal Power Plant for the generation of electric power.

3) NPC did not renew its Contract for Stevedoring Services for Coal-Handling
Operations at NPC's plant, and took over its own stevedoring services.

4) SEA LION filed a “Complaint for Prohibition and Mandamus with

Damages” v. NPC and PPA contending that:

NPC had acted in bad faith and with grave abuse of discretion in not
renewing its Contract for Stevedoring Services for Coal-Handling Operations at
NPC's plant, and in taking over its stevedoring services.

ISSUE: WON a logical and necessary relation exists between the act
questioned and the corporate purpose expressed in the NPC charter?

HELD 1: YES! NPC is empowered under its Charter to undertake such

services, it being reasonably necessary to the operation and maintenance of the
power plant.

It is an undisputed fact that the pier located at Calaca, Batangas, which is

owned by NPC, receives the various shipments of coal which is used exclusively
to fuel the Batangas Coal-Fired Thermal Power Plant of the NPC for the
generation of electric power.

The stevedoring services which involve the unloading of the coal

shipments into the NPC pier for its eventual conveyance to the power plant are
incidental and indispensable to the operation of the plant.

HELD 2: Respondent judge's directive ordering NPC to enter into a contract

for stevedoring and arrastre services or to conduct a public bidding therefor
amounted to a writ of mandamus.

Whether NPC will enter into a contract for stevedoring and arrastre
services to handle its coal shipments to its pier, or undertake the services itself, is
entirely and exclusively within its corporate discretion. It does not involve a duty
the performance of which is enjoined by law. Thus, the courts cannot, direct the
NPC in the exercise of this prerogative.
RATIO:
1) It is a settled rule that mandamus will lie only to compel the performance
of a ministerial duty; it does not lie to require anyone to fulfill contractual
obligations or compel a course of conduct, nor to control or review the exercise of
discretion.

2) The Court laid the fundamental principle governing the issuance of a writ
of mandamus that the duties to be enforced thereby must be such as are clearly
and peremptorily enjoined by law or by reason of official station.
MADRIGAL & CO. (C) v. Zamora (and Madrigal Central Office Employees
Union)
1) MADRIGAL & CO. was engaged (among several other corporate
objectives) in the management of Rizal Cement Co., Inc.

2) MADRIGAL & CO. and Rizal Cement Go., Inc. are sister companies. Both
are owned by the same or practically the same stockholders.

3) 28 Dec 73- Madrigal Central Office Employees Union, sought for the
renewal of its CBA (expire on 28 Feb 74) w/ MADRIGAL & CO. It specifically
proposed:
a) a wage increase of P200/month
b) an allowance of P100/month
c) other economic benefits.

4) MADRIGAL & CO. requested for a deferment in the negotiations.

5) 28 Feb 74- CBA expired

6) 29 July 74- (by an alleged resolution of its stockholders) MADRIGAL &

CO. reduced its capital stock from 765,000 shares to 267,366 shares.

(This was effected thru the distribution of the marketable securities

owned by MADRIGAL & CO. to its stockholders in exchange for their
shares in an equivalent amount in the C.)

10) 28 Aug 74- Madrigal Central Office Employees Union filed a complaint for
ULP w/ NLRC for MADRIGAL & CO.’s failure to sit down with the
respondent union.

11) In due time- MADRIGAL & CO. filed its position paper, alleging
operational losses.

10) 22 Aug 75- (by yet another alleged resolution of its stockholders)
MADRIGAL & CO. reduced its authorized capitalization from 267,366 shares
to 110,085 shares thru the same scheme.

11) Pending the resolution of the ULP case- MADRIGAL & CO. in a letter (dated
17 Nov 75) informed the SOLE that:
 a) Rizal Cement Co., Inc., "from which it derives income" as the
General Manager or Agent" had "ceased operating temporarily."

b) (In addition) “because of the desire of the stockholders to phase out

the operations of MADRIGAL & CO. due to lack of business
incentives and prospects, and in order to prevent further losses, "
it had to reduce its capital stock on two occasions "

c) As the situation, therefore, now stands, the Madrigal & Co., Inc. is
w/o substantial income to speak of, necessitating a reorganization,
by way of retrenchment, of its employees and operations."

d) MADRIGAL & CO. then requested that it "be allowed to effect said
reorganization gradually considering all the circumstances, by phasing
out in at least three (3) stages, or in a manner the Company deems
just, equitable and convenient to all concerned, about which your good
office will be apprised accordingly."

12) DOLE: took no action on request bec MADRIGAL & CO. letter was not
verified nor accompanied by the proper supporting papers.

13) (19 Jan 76) LA: since the petitioner "had been making substantial profits in
its operation" since through 1975, he granted

a) general wage increase of P200/month beginning 1 March 74

b) monthly living allowance of P100/month in favor of the petitioner's
employees.

14) NLRC: affirmed LA

15) SOLE: dismissed the appeal.

______________________
16) 29 Jan 76- , MADRIGAL & CO. applied for clearance to terminate the
services of a number of employees pursuant supposedly to its retrenchment
program.

17) 3 Feb 76- MADRIGAL & CO. applied for clearance to terminate 18
employees more.

18) On the same date- respondent union went to DOLE Regional Office IV to
complain of illegal lockout against the petitioner.

19) SOLE: dismissals "contrary to law" and ordered the petitioner to reinstate
some 40 employees, 37 of them w/ backwages.
20) The petitioner then moved for reconsideration, which the Acting SOLE
denied.

21)Thereafter, the petitioner filed an appeal to the Office of the President.

22) Presidential Assistant on Legal Affairs: affirmed w/ modification the SOLE’s

decision.

Pirovino, et al. v. DE LA RAMA STEAMSHIP CO. (1954)

1) DE LA RAMA STEAMSHIP CO. is a C w/ an authorized capital of
P500,000, divided into 5,000 shares, with a par value of P100 each share.

2) The stockholders were: Esteban de la Rama, 1,800 shares, Leonor de la

Rama, 100 shares, Estefania de la Rama, 100 shares, and Eliseo Hervas, Tomas
Concepcion, Antonio G. Juanco, and Gaudencio Volasote with 5 shares each.
Leonor and Estefania are daughters of Don Esteban, while the rest his
employees.

3) Estefania de la Rama was married to the late Enrico Pirovano and to them
four children were born who are the plaintiffs in this case.

4)
CHAPTER VII- CONTROL/MANAGEMENT

Ramirez v. ORIENTALIST CO. and Fernandez (1918)

1) ORIENTALIST CO. engaged in the business of maintaining and
conducting a theater in the city of Manila for the exhibition of cinematographic
films. Under the articles of incorporation the company is authorized to
manufacture, buy, or otherwise obtain all accessories necessary for conducting
such a business.

2) Plaintiff J. F. Ramirez was, at the same time, a resident of the city of Paris,
France, and was engaged in the business of marketing films for a manufacturer
or manufacturers, there engaged in the production or distribution of
cinematographic material. In this enterprise the plaintiff was represented in the
city of Manila by his son, Jose Ramirez.

3) July 1913- certain of the directors of the ORIENTALIST CO. in Manila,

became apprised of the fact that the plaintiff in Paris had control of the agencies
for 2 different marks of films, namely, the "Eclair Films" and the "Milano Films;"

4) Negotiations were begun with said officials of the ORIENTALIST CO. by

Ramirez’s son, as agent of the plaintiff, for the purpose of placing the exclusive
agency of these films in the hands of the ORIENTALIST CO.

5) The defendant Ramon J. Fernandez, one of the directors of the Orientalist

Company and also its treasurer, was chiefly active in this matter, being moved by
the suggestions and representations of the manager of the Oriental Theater, to
the effect that the securing of the exclusive agency of said films was necessary
to the success of the C.

6) Near the end of July of the year aforesaid, Jose Ramirez, as

representative of his father, placed in the hands of 'Ramon J. Fernandez an offer,
dated July 4, 1913, stating in detail the terms upon which the plaintiff would
undertake to supply from Paris the. aforesaid films. This offer was declared to be
good until the end of July; and as only about two days of this period remained, it
appeared important for the Orientalist Company to act upon the matter speedily,
if it desired to take advantage of said offer.

4) 30 July- Fernandez had an informal conference with all the members of

the C’s BOD except one, and with the approval of those with whom he had
communicated, addressed a letter to Jose Ramirez, in Manila, accepting the offer
contained in the memorandum of July 4th for the exclusive agency of the Eclair
films.

5) 5 Aug- Fernandez addressed another letter couched in the same terms,

likewise accepting the offer of the exclusive agency for the Milano film
6) What the SC considers to be the most material portion of the two letters of
acceptance written by R. J. Fernandez to Jose Ramirez is in the following terms:

"We willingly accepted the offer under the terms communicated by your
father in his letter dated at Paris on July 4th of the present year."

These communications were signed in the following form, in which it will be noted
the separate signature of R. J. Fernandez, as an individual, is placed somewhat
below and to the left of the signature of the Orientalist Company as signed by R.
J. Fernandez, in the capacity of treasurer:
"THE ORIENTALIST COMPANY,
"By R. J. FERNANDEZ,
Treasurer. "R. J. FERNANDEZ."

Ramirez files a suit v. Orientalist Company and Fernandez.

TC: Orientalist Company- principal debtor and Ramon J. Fernandez- liable

subsidiarily as guarantor.

From this judgment both of the parties defendant appealed.

HELD: It thus appears that the board, of directors, before the financial
inability of the corporation to proceed with the project was revealed, had already
recognized the contracts as being in existence and had proceeded to take the
steps necessary to utilize the films. Particularly suggestive is the direction given
at this meeting for the publication of announcements in the newspapers to the
effect that the company was engaged in importing films.

'In the light of all the circumstances of the case, we are of the opinion that
the contracts in question were thus inferentially approved by the company's
board of directors and that the company is bound unless the subsequent failure
of the stockholders to approve said contracts had the effect of abrogating the
liability thus created.

RATIO: Both upon principle and authority it is clear that the action of the
stockholders, whatever its character, must be ignored. The functions of the
stockholders of a corporation are, it must be remembered, of a limited nature.
The theory of a corporation is that the stockholders may have all the profits but
shall turn over the complete management of the enterprise to their
representatives and agents, called directors. Accordingly there is little for the
stockholders to do beyond electing directors, making by-laws, and exercising
certain other special powers defined by law. In conformity with this idea it is
settled that contracts between a corporation and third persons must be made by
the directors and not by the stockholders. The corporation, in such matters, is
represented by the former and not by the latter. (Cook on Corporations, sixth ed.,
sees. 708, 709.) This conclusion is entirely accordant with the provisions of
section 28 of our Corporation Law already referred to. It results that where a
meeting of the stockholders is called for the purpose of passing on the propriety
of making a corporate contract, its resolutions are at most advisory and not in
any wise binding on the board.

ISSUE 2: It being determined that the corporation is bound by the contracts in

question, it remains to consider the character of the liability assumed by Ramon
J. Fernandez, in affixing his personal signature to said contracts. The question
here is whether Fernandez is liable jointly with the Orientalist Company as a
principal obligor, or whether his liability is that of a guarantor merely.

HELD: As appears upon the face of the contracts, the signature of

Fernandez, in his individual capacity, is not in line with the signature of the
Orientalist Company, but is set off to the left of the company's signature and
somewhat below. Observation teaches that it is customary for persons who sign
contracts in some capacity other than that of principal obligor to place their
signatures to one side; but we hardly think that this circumstance alone would
justify a court in holding that Fernandez here took upon himself the responsibility
of a guarantor rather than that of a principal obligor. We do, however, think that
the form in which the contract is signed raises a doubt as to what the real
intention was; and we feel justified, in looking to the evidence to discover that
intention. In this connection it is entirely clear, from the testimony of both Ramirez
and Ramon J. Fernandez, that the responsibility of the latter was intended to be
that of a guarantor. There is, to be sure, a certain difference between these
witnesses as to the nature of this guaranty, inasmuch as Fernandez would have
us believe that his name was signed as a guaranty that the contract would be
approved by the corporation, while Ramirez says that the name was put on the
contract for the purpose of guaranteeing, not the approval of the contract, but its
performance. We are convinced that the latter was the real intention of the
contracting parties.

Lopez v. Ericta
1)

ISSUE: WON respondent Dr. Consuelo S. Blanco was duly elected Dean of
the College of Education, University of the Philippines, in the meeting of the BOR
on July 9, 1970, at which her ad interim appointment by University President
Salvador P. Lopez, one of the petitioners here, was submitted for consideration?

HELD: