9.

) COLLATERAL TRANSFERS
Uson vs. Diosomito
G.R. No. L-42135; June 17, 1935
FACTS:
Toribia Uson filed a civil action for debt against Vicente Diosomito. Upon
institution of said action, an attachment was duly issued and respondents property was
levied upon, including 75 shares of the North Electric Co., which stood in his name on
the books of the company when the attachment was levied. The sheriff sold said shares
at a public auction with Uson being the highest bidder. Jollye claims to be the owner of
said certificate of stock issued to him by the North Electric Co.
There is no dispute that Diosomito was the original owner of said shares, which
he sold to Barcelon. However, Barcelon did not present these certificates to the
corporation for registration until 19 months after the delivery thereof by Barcelon, and 9
months after the attachment and levy on said shares. The transfer to Jollye was made 5
months after the issuance of a certificate of stock in Barcelon's name.
ISSUE:

Is a bona fide transfer of the shares of corp., not registered or noted on the books
of the corp., valid as against a subsequent lawful attachment of said shares, regardless
of whether the attaching creditor had actual notice of said transfer or not?
HELD:
NO, it is not valid. The transfer of the 75 shares in the North Electric Co., Inc
made by the defendant Diosomito as to the defendant Barcelon was not valid as to the
plaintiff. Toribia Uson, on 18 Jan. 1932, the date on which she obtained her attachment
lien on said shares of stock will still stood in the name of Diosomito on the books of the
corp. Sec. 35 provides that No transfer, however, is valid, except as between the
parties, until the transfer is entered and noted upon the books of the corporation so as
to show the names of the parties to the transaction, the date of the transfer, the
number of the certificate, and the number of shares transferred.
All transfers of shares not so entered are invalid as to attaching or execution
creditors of the assignors, as well as to the corporation and to subsequent purchasers in
good faith, and indeed, as to all persons interested, except the parties to such transfers.
Chua Guan vs. Samahang Magsasaka
G.R. No. L-42091; November 2, 1935
FACTS:
A certain Co Toco was the owner of 5,894 shares of Samahang Magsasaka, Inc.
which he mortgaged to Chua Chiu to guarantee the payment of debt. The
corresponding certificates were delivered to Chua Chiu and were duly registered in the
office of the register of deeds of Manila and in the office of the said corporation. About
five months after, Chua Chui assigned all his rights and interest in said mortgage to the
plaintiff, Chua Gan which was also duly recorded. Co Toco defaulted. The plaintiff
foreclosed on the mortgage. In the public auction he won as the highest bidder.
However, upon presenting the certificates to the corporation for registration, the officers
refused because they and the plaintiff could not agree on the noting of nine other
attachments that had been issued, served and noted on the books of the corporation
against the shares of Co Toco.

ISSUE:
WON the said mortgage takes priority over the already noted writs of
attachment.
HELD:
The Supreme Court ruled that the attaching creditors are entitled to priority over
the defectively registered mortgage of the appellant. The court argues that the
registration in the register of deeds must be done both at the place where the owner is
domiciled and at the place where the principal office of the corporation is located. The
purpose of this is to give sufficient constructive of any claim or encumbrance over the
recorded shares to third persons. Furthermore, any share still standing in the name of
the debtor on the books of the corporation will be liable to seizure by attachment or levy
on execution at the instance of other creditors. Thus, the game here is to have the
highest or most preferred priority over any pledged or mortgaged shares.
NOTE: The provision of the Chattel Mortgage Law (Act No. 1508) providing for delivery
of mortgaged property to the mortgagee as a mode of constituting a chattel mortgage
is no longer valid in view of the Civil Code provision defining such as a pledge.
Chemphil Export & Import vs. CA
G.R. Nos. 112438-39; December 12, 1995
FACTS:
This case involved a consortium of banks which obtained a writ of preliminary
attachment in a civil case ("consortium case") over shares of stock belonging to Mr.
Antonio Garcia in the Chemical Industries of the Philippines ("Chemphil"). The
attachment, which was served on the secretary to the President of Chemphil, was not
registered in the stock and transfer book of Chemphil. A few years thereafter, Mr. Garcia
sold the same shares of stock to the Ferro Chemicals, Inc. ("FCI"). FCI subsequently
assigned the shares to the Chemphil Export and Import Corporation ("CEIC"). The shares
were registered and recorded in the corporate books of Chemphil in CEICs name and
the corresponding stock certificates were issued to it.
The consortium case was appealed to the CA. While the appeal was pending, Mr.
Garcia and the bank consortium amicably settled the case. The CA rendered a judgment
by compromise. Unfortunately, Mr. Garcia failed to comply with the compromise
agreement. The consortium of banks caused to be sold on execution the shares of stock
(earlier attached by them), which were the same shares subsequently sold by Mr. Garcia
to CEIC. A certificate of sale covering the shares was issued in the name of the bank
consortium.
ISSUE:

Who has priority to the shares of stock an attaching creditor or the subsequent

buyer?
HELD:

The Supreme Court ruled that the attachment lien acquired by the bank
consortium is valid and effective even as against the buyer (FCI) and its assignee
(CEIC), notwithstanding the fact that said attachment lien was not registered in the
corporate books of Chemphil. "Both the Revised Rules of Court and the Corporation
Code", according to the Court, "do not require annotation in the corporations stock and

transfer book for the attachment of shares of stock to be valid and binding on the
corporation and third party."
Consequently, when FCI purchased the shares of stock from Mr. Garcia, it
purchased them subject to the attachment lien of the bank consortium. In this regard,
the High Court explained that a preliminary attachment is a security for the satisfaction
of whatever judgment may be obtained by the attaching creditor in a court action,
which continues until the judgment debt is fully satisfied.

Strategic Alliance vs. Star Infrastructure (GR 187872; 11/17/2010)

Real v. SanguPhils.(G.R. 168757; 1/19/ 2011)
Medical Plaza v. Cullen
(G.R. 181416; 11/11/ 2013)
Republic of the Philippines vs. Acoje Mining Co.
G.R. No. L-18062; February 28, 1963

FACTS:
Acoje Mining requested to the Director of Posts for opening of a post, telegraph
and money order offices at its mining camp. The latter signify its willingness but
requested that a board resolution be passed upon regarding assumption of direct
responsibility in case of pecuniary loss. The board resolution was approved and
thereafter a post office branch was opened.
A postmaster was hired to conduct the operations of post office. The postmaster
that was hired went on a leave but never returned. The company immediately informed
the officials of the Manila Post Office and the provincial auditor of Zambales of
postmasters disappearance with the result that the accounts of the postmaster were
checked and a shortage was found. Several demands were made upon the company for
the payment of the shortage, having failed; the petitioner commenced the present
action. The company in its answer denied liability contending that the resolution of the
board of directors wherein it assumed responsibility for the act of the postmaster is ultra
vires, and in any event its liability under said resolution is only that of a guarantor who
answers only after the exhaustion of the properties of the principal, aside from the fact
that the loss claimed by the plaintiff is not supported by the office record.
ISSUE:

Is the board resolution for the approval of post office branch ultra vires?

HELD:
Resolution adopted by the company to open a post office branch at the mining
camp and to assume sole and direct responsibility for any dishonest, careless or
negligent act of its appointed postmaster is NOT ULTRA VIRES because the act covers a
subject which concerns the benefit, convenience, and welfare of the companys
employees and their families.
While as a rule an ultra vires act is one committed outside the object for which a
corporation is created as defined by the law of its organization and therefore beyond the
powers conferred upon it by law, 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.
National Power Corp. vs. Vera
G.R. No. 83558; February 27, 1989
FACTS:

Sea Lion International Port Services, private respondent, filed a complaint for
prohibition and mandamus against petitioner NPC alleging that it had acted in bad faith
in not renewing its contract for stevedoring services for its plant and in taking over its
stevedoring services. Respondent judge issued a restraining order against NPC enjoining
the latter from undertaking stevedoring services at its pier. Consequently, NPC filed an
"Urgent Motion" to dissolve the restraining order, asserting that respondent judge had
no jurisdiction to issue the order and private respondent, whose contract with NPC had
expired prior to the commencement of the suit, failed to establish a cause of action for a
writ of preliminary injunction. The respondent judge denied the NPCs motion and issued
a TRO after finding that NPC was not empowered by its Charter to engage in
stevedoring and arrastre services.
ISSUE:

WON the undertaking of stevedoring services is empowered by the NPCs charter

powers.
HELD:

YES. To carry out the national policy of total electrification of the country, the NPC
was created and empowered not only to construct, operate and maintain power plants,
reservoirs, transmission lines, and other works, but also to exercise such powers and do
such things as may be reasonably necessary to carry out the business and purposes for
which it was organized, or which, from time to time, may be declared by the Board to be
necessary, useful, incidental or auxiliary to accomplish said purpose.
In determining whether or not an NPC act falls within the purview of the above
provision, the Court must decide whether or not a logical and necessary relation exists
between the act questioned and the corporate purpose expressed in the NPC charter.
For if that act is one which is lawful in itself and not otherwise prohibited, and is done
for the purpose of serving corporate ends, and reasonably contributes to the promotion
of those ends in a substantial and not in a remote and fanciful sense, it may be fairly
considered within the corporation's charter powers.
Government of Phil. Islands vs. El Hogar Filipino (supra)
G.R. No. L-26649; July 13, 1927
NOTE: This case is an example of how the implied powers concept may be used to
justify certain acts of a corporation.
A quo warranto proceeding instituted by the Government against El Hogar, a
building and loan association, to deprive it of its corporate franchise.
1. El Hogar held title to real property for a period in excess of 5 years in good faith;
hence this cause will not prosper.
2. El Hogar owned a lot and bldg. at a business district in Manila allegedly in excess
of its reasonable requirements, held valid because, it was found to be necessary
and legally acquired and developed.
3. El Hogar leased some office space in its bldg.; it administered and managed
properties belonging to delinquent stockholders; and managed properties of its
stockholders even if such were not mortgaged to them.
Held: first two valid, but the third is ultra vires because the administration
of property in that manner is more befitting of the business of a real estate agent
or trust company and not of a building and loan association.

4. Compensation to the promoter and organizer allegedly excessive and

unconscionable.
Held: Court cannot dwell on the issue since the promoter is not a party in
the proceeding and it is the corp. or its stockholders who may bring a complaint
on such.
5. Issuance of special shares did not affect El Hogar's character as a building and
loan association nor make its loans usurious.
6. Corporate policy of using a depreciation rate of 10 % per annum is not excessive,
because according to the SC, the by-laws expressly authorizes the BOD to
determine each year the amount to be written down upon the expenses of
installation and the property of the corp.
7. The Corp. Law does not expressly grant the power of maintaining reserve funds
but such power is implied. All business enterprises encounter periods of gains
and losses, and its officers would usually provide for the creation of a reserve to
act as a buffer for such circumstances.
8. That loans issued to member borrowers are being used for purposes other than
the bldg. of homes not invalid because there is no statute which expressly
declares that loans may be made by these associations solely for the purpose of
bldg. homes.
9. Sec. 173 of the Corp. Law provides that "any person" may become a stockholder
on a bldg. and loan association. The word "person" is used on a broad sense
including not only natural persons but also artificial persons.
Pirovano, et. al. vs. De la Rama
G.R. No. L-5377; December 29, 1954
FACTS:
Enrico Pirovano, president of the defendant company, managed the company
until it became a multi-million corporation by the time Pirovano was executed by the
Japanese during the occupation.
BOD Resolution: Out of the proceeds, the sum of P400,000 be set aside for equal
division among the 4 minor children, convertible into shares of stock of the De la Rama
Steamship Company, at par and, for that purpose, that the present registered
stockholders of the corporation be requested to waive their pre-emptive right to 4,000
shares of the unissued stock of the company in order to enable each of the 4 minor
heirs to obtain 1,000 shares at par.
Plaintiffs herein are the minor children of the late Enrico Pirovano represented by
their mother and judicial guardian Estefania Pirovano. They seek to enforce certain
resolutions adopted by the Board of Directors and stockholders of the defendant
company giving to said minor children of the proceeds of the insurance policies taken on
the life of their deceased father Enrico Pirovano with the company as beneficiary.
Defendant's main defense is: that said resolutions and the contract executed pursuant
thereto are ultra vires, and, if valid, the obligation to pay the amount given is not yet
due and demandable.
RTC ruled that contract or donation is not ultra vires.
ISSUE:

WON corporation donation of the proceeds of the insurance policies is an ultra

vires act.
HELD:

NO. The AOI of the corporation provided two relevant items: (1) to invest and
deal with moneys of the company not immediately required, in such manner as from
time to time may be determined; and (2) to aid in any other manner any person,
association or corporation of which any obligation or in which any interest is held by this
corporation or in the affairs of prosperity of which this corporation has a lawful interest.
From this, it is obvious that the corporation properly exercised within its
chartered powers the act of availing of insurance proceeds to the heirs of the insured
and deceased officer.
NOTE: Ultra vires act vs. Illegal Acts
A distinction should be made between corporate acts or contracts which are
illegal and those which are merely ultra vires. The former contemplates the doing of an
act which is contrary to law, morals, or public policy or public duty, and are, like similar
transactions between the individuals void. They cannot serve as basis of a court action,
nor require validity ultra vires acts on the other hand, or those which are not illegal and
void ab initio, but are merely within are not illegal and void ab initio, but are not merely
within the scope of the articles of incorporation, are merely voidable and may become
binding and enforceable when ratified by the stockholders.
Harden, et. al. vs. Benguet
G.R. No. L-37331; March 18, 1933
FACTS:
A contract between Benguet Consolidated Mining and Balatoc Mining Co.
provided that Benguet will bring in capital, equipment. and technical expertise in
exchange for capital shares in Balatoc. Harden was a stockholder of Balatoc and he
contends that this contract violated the Corporation Law which restricts the acquisition
of interest by a mining corporation in another mining corporation.
ISSUE:

WON the plaintiff can maintain an action based upon the violation of the law
supposedly committed by respondent company.
HELD:

NO. The provision was adopted by the lawmakers with a sole view to the public
policy that should control in the granting of mining rights. Furthermore, the penalties
imposed in what is now section 190 (A) of the Corporation Law for the violation of the
prohibition in question are of such nature that they can be enforced only by a criminal
prosecution or by an action of quo warranto. but these proceedings can be maintained
only by the Attorney-General in representation of the Government.
Bissell vs. Michigan Southern
22 NY 258; 1860
FACTS:
Two railroad corporations contend that they transcended their own powers and
violated their own organic laws. Hence, they should not be held liable for the injury of
the plaintiff who was a passenger in one of their trains.
ISSUE:

WON the contract made between the two railroad corporations is valid and as
such can be use a defense to evade the liability against the passenger.
HELD:
NO. The contract between the two corporations was an ultra vires act. However,
it is not one tainted with illegality, therefore, the accompanying rights and obligations
based on the contract of carriage between them and the plaintiff cannot be avoided by
raising such a defense.

Benito v. SEC 123 SCRA 732 (1993)

XIII. CONTROL AND MANAGEMENT
1.) BOARD OF DIRECTORS/TRUSTEES
Ramirez vs. Orientalist Co.
G.R. No. 11897; September 24, 1918
FACTS:
Orientalist Co. engaged in the theatre business, desired to be the exclusive agent
of Ramirez, who is based in Paris, for two film outfitsclair Films and Milano films.
Through the active involvement and negotiations of Ramon El Presidente Fernandez, a
director of Orientalist and also its treasurer, Orientalist was able to secure an offer, the
terms of which were acceptable to the Board as well as to the stockholders. It appears
that this acceptance of the terms of the offer was decided during an informal meeting of
the board, and conveyed to Ramirez in two letters signed only by Fernandez, both in his
individual and his capacity as treasurer of Orientalist. It turns out that the company was
not financially capable to comply with the obligations set forth in the agency contract,
and about this time films had already been delivered to the company. Two stockholders
meetings were organized, the first adopted a resolution approving the action of the
board on the offer, the second raising the contingency of the lack of funds and the
proviso that the four officers involved, including Fernandez would continue importing
the films using their own funds. Ramirez sues Orientalist and Fernandez for what is due
on the contract. RTC ruled Oriental as the principal debtor while Fernandez is
subsidiarily liable.
ISSUE:

(1) WON the treasurer has an independent authority to bind the respondent
company by signing its name to the letters in questioned.
(2) Can stockholders ratify the abovementioned contract?
HELD:
(1) NO. It is declared in section 28 of the Corporation Law that corporate power
shall be exercised, and all corporate business conducted by the board of directors; and
this principle is recognized in the by-laws of the corporation in question which contain a
provision declaring that the power to make contracts shall be vested in the board of
directors. It is true that it is also declared in the same by-laws that the president shall
have the power, and it shall be his duty, to sign contract; but this has reference rather
to the formality of reducing to proper form the contract which are authorized by the
board and is not intended to confer an independent power to make contract binding on
the corporation.

(2) NO. The subsequent action by the stockholders in not ratifying the contract
must be ignored. The functions of the stockholders are limited of nature. The theory of a
corporation is that the stockholders may have all the profits but shall return 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 a third
person must be made by directors and not stockholders. 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.

Expert Travel & Tours vs. CA

G.R. No. 152392; May 26, 2005
FACTS:
Korean Airlines (KAL) is a corporation established and registered in the Republic
of South Korea and licensed to do business in the Philippines. Its general manager in the
Philippines is Suk Kyoo Kim, while its appointed counsel was Atty. Mario Aguinaldo and
his law firm.
KAL, through appointed counsel, filed a complaint against Expert Travel with the
RTC for the collection of sum of money. The verification and certification against forum
shopping was signed by the same appointed counsel, who indicated therein that he was
the resident agent and legal counsel of KAL and had caused the preparation of the
complaint. Expert Travel filed a motion to dismiss the complaint on the ground that the
appointed counsel was not authorized to execute the verification and certificate of nonforum shopping as required by the Rules of Court. KAL opposed the motion, contending
that he is a resident agent and was registered as such with the SEC as required by the
Corporation Code. He also claimed that he had been authorized to file the complaint
through a resolution of the KAL Board of Directors approved during a special meeting,
wherein the board of directors conducted a special teleconference which he attended. It
was also averred that in the same teleconference, the board of directors approved a
resolution authorizing him to execute the certificate of non-forum shopping and to file
the complaint. Suk Kyoo Kim alleged, however, that the corporation had no written copy
of the aforesaid resolution. TC denied motion to dismiss. CA affirms.
ISSUE:

Can a special teleconference be recognized as legitimate means to approved a

board resolution and authorize an agent to execute an act in favor of the corporation?
HELD:

YES. In this age of modern technology, the courts may take judicial notice that
business transactions may be made by individuals through teleconferencing.
teleconferencing and videoconferencing of members of board of directors of private
corporations is a reality, in light of Republic Act No. 8792. The Securities and Exchange
Commission issued SEC Memorandum Circular No. 15, on November 30, 2001, providing
the guidelines to be complied with related to such conferences.

HOWEVER, in the case at bar, even given the possibility that Atty. Aguinaldo and
Suk Kyoo Kim participated in a teleconference along with the respondents Board of
Directors, the Court is not convinced that one was conducted; even if there had been
one, the Court is not inclined to believe that a board resolution was duly passed
specifically authorizing Atty. Aguinaldo to file the complaint and execute the required
certification against forum shopping. Facts and circumstances show that there was
gross failure on the part of company to prove that there was indeed a special
teleconference such as failure to produce a written copy of the board resolution via
teleconference.
NOTE: Read SEC Memo Circular No. 15-2001, the guidelines for the conduct of
teleconferencing and videoconferencing.
Citibank, N.A. vs. Chua
G.R. No. 102300; March 17, 1993
FACTS:
Petitioner is a foreign commercial banking corporation duly licensed to do
business in the Philippines. Private respondents, spouses Cresencio and Zenaida Velez,
were good clients of petitioner bank's branch in Cebu until when they filed a complaint
for specific performance and damages against the former for violation of BP 22 and
several count of estafa cases in RTC of Cebu.
On the date of pre-trial conference, counsel for petitioner bank appeared,
presenting a special power of attorney executed by Citibank officer in favor of petitioner
bank's counsel, the J.P. Garcia & Associates, to represent and bind petitioner bank at the
pre-trial conference of the case at bar. Inspite of this special power of attorney, counsel
for private respondents orally moved to declare petitioner bank as in default on the
ground that the special power of attorney was not executed by the Board of Directors of
Citibank. Respondent judge denied private respondents' oral motion to declare
petitioner bank as in default and set the continuation of the pre-trial conference. The
private respondents filed for reconsideration, and this time the respondent holds the
petitioner bank in default for failure to have a proper representation. CA affirms.
ISSUE:

WON a resolution of the board of directors of a corporation is always necessary

for granting authority to an agent to represent the corporation in court cases.
HELD:

In the corporate hierarchy, there are three levels of control: (1) the board of
directors, which is responsible for corporate policies and the general management of
the business affairs of the corporation; (2) the officers, who in theory execute the
policies laid down by the board, but in practice often have wide latitude in determining
the course of business operations; and (3) the stockholders who have the residual
power over fundamental corporate changes, like amendments of the articles of
incorporation. However, just as a natural person may authorize another to do certain
acts in his behalf, so may the board of directors of a corporation validly delegate some
of its functions to individual officers or agents appointed by it.
Although as a general rule, all corporate powers are to be exercised by the board
of directors, exceptions are made where the Code provides otherwise under Sec. 25 and
47. It is clear that corporate powers may be directly conferred upon corporate officers or
agents by statute, the articles of incorporation, by-laws or by resolution or other act of

the board of directors. In addition, an officer who is not a director may also appoint
other agents when so authorized by the by-laws or by the board of directors. Such are
referred to as express powers. There are also powers incidental to express powers
conferred. It is a fundamental principle in the law of agency that every delegation of
authority, whether general or special, carries with it, unless the contrary be expressed,
implied authority to do all of those acts, naturally and ordinarily done in such cases,
which are reasonably necessary and proper to be done in order to carry into effect the
main authority conferred.
Since the by-laws are a source of authority for corporate officers and agents of
the corporation, a resolution of the Board of Directors of Citibank appointing an attorney
in fact to represent and bind it during the pre-trial conference of the case at bar is not
necessary because its by-laws allow its officers, the Executing Officer and the Secretary
Pro-Tem, to execute a power of attorney to a designated bank officer, clothing him with
authority to direct and manage corporate affairs.
Boyer-Roxas vs. CA
G.R. No. 100866; July 14, 1992
FACTS:
The corporation, Heirs of Eugenia Roxas Inc, was established to engage in
agriculture to develop the properties inherited from Eugenia Roxas and Eufroncio Roxas,
which includes the land upon which the Hidden Valley Springs Resort was put up,
including various improvements thereon, using corporate funds. The AOI of Heirs Inc.
was amended for this purpose. Heirs Inc. claims that Boyer-Roxas and Guillermo Roxas
had been in possession of the various properties and improvements in the resort and
only upon the tolerance of the corporation. It was alleged that they committed acts that
impeded the corporations expansion and normal operation of the resort. They also did
not comply with court and regulatory orders, and thus the corporation adopted a
resolution authorizing the ejectment of the defendants. TC grants. CA affirms. Boyer and
Roxas contend that, being stockholders, their possession of the properties of the
corporation must be respected in view of their ownership of an aliquot portion of all
properties of the corporation.
ISSUE:

WON the possession of the properties in question must be respected in view of

being a stockholder.
HELD:

NO. Regarding properties owned by the corporation, under the doctrine of

corporate entity properties registered in the name of the corporation are owned by it
as an entity separate and distinct from its members. While shares of stock constitute
personal property, they do not represent property of the corporation. A share of stock
only typifies an aliquot part of the corporations property, or the right to share in its
proceeds to that extent when distributed according to law and equity, but its holder is
not the owner of any part of the capital of the corporation, nor is he entitled to the
possession of any definite portion of its property or assets. The stockholder is not a coowner or tenant in common of the corporate property.
The corporation has a personality distinct and separate from its members and
transacts business only through its officers or agents. Whatever authority these officers
or agents may have is derived from the board or other governing body, unless conferred
by the charter of the corporation itself. An officer's power as an agent of the corporation

must be sought from the statute, charter, the by-laws or in a delegation of authority to
such officer, from the acts of the board of directors, formally expressed or implied from
a habit or custom of doing business.
In this case the elder Roxas who then controlled the management of the
corporation, being the majority stockholder, consented to the petitioners use and stay
within the properties. The Board did not object and were allowed to stay until it adopted
a resolution to the effect of authorizing to eject them. Since their stay was merely by
tolerance, in deference to the wishes of the majority stockholder who controlled the
corporation, when Roxas died his actions cannot bind the company forever. There is no
provision in the by-laws or any other resolution authorizing their continued stay.
Valle Verde Country Club vs. Africa
G.R. No. 151969; September 4, 2009
FACTS:
Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan), Eduardo Makalintal
(Makalintal), Francisco Ortigas III, Victor Salta, Amado M. Santiago, Jr., Fortunato Dee,
Augusto Sunico, and Ray Gamboa were elected as BOD during the Annual Stockholders
Meeting of petitioner Valle Verde Country Club, Inc. (VVCC). Requisite quorum could not
be obtained so they continued in a hold-over capacity.
First resignation: Dinglasan, BOD still constituting a quorum elected Eric Roxas
(Roxas). Second resignation: Makalintal, Jose Ramirez (Ramirez) was elected by the
remaining BOD.
Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas
and Ramirez as members of the petitioners Board with the SEC and the RTC as contrary
to Sec. 23 and 29 of the Corporation Code. He claimed that a year after Makalintals
election as member of the petitioners Board in 1996, his term as well as those of the
other members should be considered to have already expired. Thus, according to him,
the resulting vacancy should have been filled by the stockholders in a regular or special
meeting called for that purpose, and not by the remaining members of the petitioners
Board. RTC favored respondent. SEC ruled on the same ground as RTC. Petitioner
appealed in SC for certiorari being partially contrary to law and jurisprudence.
ISSUE:

Can the members of a corporations board of directors elect another director to

fill in a vacancy caused by the resignation of a hold-over director?
HELD:

NO. The holdover period is not part of the term of office of a member of the board
of directors. When Section 23 of the Corporation Code declares that the board of
directorsshall hold office for one (1) year until their successors are elected and
qualified, we construe the provision to mean that the term of the members of the
board of directors shall be only for one year; their term expires one year after
election to the office. The holdover period that time from the lapse of one year from a
members election to the Board and until his successors election and qualification is
not part of the directors original term of office, nor is it a new term; the holdover
period, however, constitutes part of his tenure. Corollary, when an incumbent member
of the board of directors continues to serve in a holdover capacity, it implies that the
office has a fixed term, which has expired, and the incumbent is holding the
succeeding term.

The powers of the corporations board of directors emanate from its stockholders.
This theory of delegated power of the board of directors similarly explains why, under
Section 29 of the Corporation Code, in cases where the vacancy in the corporations
board of directors is caused not by the expiration of a members term, the successor so
elected to fill in a vacancy shall be elected only for the unexpired term of the his
predecessor in office. The law has authorized the remaining members of the board to
fill in a vacancy only in specified instances, so as not to retard or impair the
corporations operations; yet, in recognition of the stockholders right to elect the
members of the board, it limited the period during which the successor shall serve only
to the unexpired term of his predecessor in office.
It also bears noting that the vacancy referred to in Section 29 contemplates a
vacancy occurring within the directors term of office. When a vacancy is created
by the expiration of a term, logically, there is no more unexpired term to speak of.
Hence, Section 29 declares that it shall be the corporations stockholders who shall
possess the authority to fill in a vacancy caused by the expiration of a members term.
NOTE: The court distinguished term and tenure.
Term is the time during which the officer may claim to hold the office as of right,
and fixes the interval after which the several incumbents shall succeed one another. The
term of office is not affected by the holdover. The term is fixed by statute and it does
not change simply because the office may have become vacant, nor because the
incumbent holds over in office beyond the end of the term due to the fact that a
successor has not been elected and has failed to qualify.
Tenure represents the term during which the incumbent actually holds office.
The tenure may be shorter (or, in case of holdover, longer) than the term for reasons
within or beyond the power of the incumbent.
2.) OFFICERS
Yu Chuck vs. Kong Li Po
G.R. No. L-22450; December 3, 1924
FACTS:
Kong Li Po is a corporation engaged in the publication of a Chinese newspaper. Its
AOI provide for a president who shall sign all contracts and other instruments of writing,
but does not provide for a business or general manager. CC Chen or TC Chen was
appointed general business manager of the paper. He then entered into an agreement
with Yu Chuck for the printing of the newspaper for P580 per month. Yu Chuck worked
for a year until they were discharged by the new manager Tan Tian Hong because CC
Chen had left for China. Yu Chuck sues the paper, claiming the contract was for a period
of 3 years, and that discharge without just cause before the expiration of this term
entitles them to receive full pay for the remainder of the term. Kong Li Po counters that
CC Chen was not authorized to enter into the contract with Yu Chuck. TC ruled in favor
of Yu Chuck, concluding that the contract had been impliedly ratified by Kong Li Po and
that although he had no express authority to enter into the contract; since he was
general business manager in charge of the printing of the paper he had implied
authority to employ the petitioners.
ISSUE:
WON CC Chen had the power to bind the corporation through the contract
mentioned.

HELD:
The general rule is that the power to bind a corporation by contract lies with its
board of directors or trustees, but this power may either expressly or impliedly be
delegated to other officers or agents of the corporation, and it is well settled that except
where the authority of employing servants and agent is expressly vested in the board of
directors or trustees, an officer or agent who has general control and management of
the corporation's business, or a specific part thereof, may bind the corporation by the
employment of such agent and employees as are usual and necessary in the conduct of
such business. But the contracts of employment must be reasonable.
In the case at bar, although the court affirmed the power to bind the corporation
may be made by an officer or agent, the contract of employment in the printing
business is not reasonable for it was too long and onerous to the business.
Woodchild Holdings vs. Roxas Electric
G.R. No. 140667; August 12, 2004
FACTS:
The respondent was the owner of two parcels of land located along the Sumulong
Highway. Petitioner wanted to buy the one parcel on which it planned to construct its
warehouse building. Roxas, as the president of respondent company, accepted the offer
through the BOD resolution issued by the latter. However, the respondent posits that
Roxas was not so authorized under the May 17, 1991 Resolution of its Board of Directors
to impose a burden or to grant a right of way in favor of the petitioner on Lot No.491-A3-B-1, much less convey a portion thereof to the petitioner. Hence, the respondent was
not bound by such provisions contained in the deed of absolute sale.
ISSUE:

WON whether the respondent is bound by the provisions in the deed of absolute
sale granting to the petitioner beneficial use and a right of way over a portion of Lot No.
491-A-3-B-1 accessing to the Sumulong Highway.
HELD:
NO. Generally, the acts of the corporate officers within the scope of their
authority are binding on the corporation. However, under Article 1910 of the New Civil
Code, acts done by such officers beyond the scope of their authority cannot bind the
corporation unless it has ratified such acts expressly or tacitly, or is estopped from
denying them. Thus, contracts entered into by corporate officers beyond the scope of
authority are unenforceable against the corporation unless ratified by the corporation.
Evidently, Roxas was not specifically authorized under the said resolution to
grant a right of way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or to
agree to sell to the petitioner a portion thereof. The authority of Roxas, under the
resolution, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the
authority to sell a portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey
real rights thereon. Neither may such authority be implied from the authority granted to
Roxas to sell Lot No. 491-A-3-B-2 to the petitioner on such terms and conditions which
he deems most reasonable and advantageous. The general rule is that the power of
attorney must be pursued within legal strictures, and the agent can neither go beyond
it; nor beside it. The act done must be legally identical with that authorized to be done.
In sum, then, the consent of the respondent to the assailed provisions in the deed of
absolute sale was not obtained; hence, the assailed provisions are not binding on it.

The doctrine of apparent authority was not applicable in this case because the
president of the company was given a specific authority by virtue of a board resolution
to sell a particular land. Any actions of the president outside such vested authority shall
not bind the corporation with third party. The apparent power of an agent is to be
determined by the acts of the principal and not by the acts of the agent.
Board of Liquidators vs. Heirs of Kalaw
G.R. No. L-18805; August 14, 1967
FACTS:
Maximo Kalaw is chairman of the board and general manager of the National
Coconut Corporation (NACOCO), a non-profit GOCC empowered by its charter to buy sell
barter export and deal in coconut, copra, and desiccated coconut. Bocar, Garcia and
Moll were directors. It entered into contracts for the trading and delivery of copra.
Nature intervened4 typhoons devastated agriculture and copra production. NACOCO
was on the verge of sustaining losses and could not be able to make good on the
contracts. Sensing this, Kalaw submitted the contracts to the board for approval and
made a full disclosure of the situation. No action was taken, and no vote was taken on
the matter. On 20 Jan 1947 the board met again with Kalaw, Bocar, Garcia, and Moll in
attendance, and approved the contracts. NACOCO however only partially performed the
contracts. One of the contracts concerns the Louis Drayfus & Co., which sued NACOCO.
NACOCO settled out-of-court and paid Drayfus P567,024.52 representing 70% of total
claims. The total settlements sum up to P1.3M. NACOCO sues Kalaw, and his directors
Bocar, Moll and Garcia to recover this sum, alleging negligence, bad faith and breach of
trust in approving the contracts, by not having them approved by the board. TC
dismisses complaint. NACOCO claims that the by-laws provide that prior board approval
is required before the GM can perform or execute in behalf of NACOCO all contracts
necessary to accomplish its purpose.
ISSUE:

WON the Kalaw contracts are valid despite its lack of prior board approval as
required by the NACOCO by-laws.
HELD:

The contracts in question are forward sales contractsa sales agreement

entered into, even though the goods are not yet in the hands of the seller. Given the
peculiar nature of copra trading, i.e. copra must be disposed of as soon as possible else
it would lose weight and would decrease its value, it necessitates a quick turnover and
execution of the contract on short notice (w/in 24 hours). It would be difficult if not
impractical to call a formal meeting of the board each time a contract is to be executed.
Kalaw was a corporate officer entrusted with general management and control of
NACOCO. He had implied authority to make any contract or do any act which is
necessary for the conduct of the business. He may, without authority from the board,
perform acts of ordinary nature for as long as these redound to the interest of the
corporation. Particularly, he contracted forward sales with business entities. Long
before some of these contracts were disputed, he contracted by himself alone, without
board approval. All of the members of the board knew about this practice and have
entrusted fully such decisions with Kalaw. He was never questioned nor reprimanded
nor prevented from this practice. In fact, the board itself, through its acts and by
acquiescence, have laid aside the by-law requirement of prior board approval. Thus, it
cannot now declare that these contracts (failures) are not binding on NACOCO.

Ratification by a corporation of an unauthorized act or contract by its officers

relates back to the time of the act or contract ratified and is equivalent to original
authority. The theory of corporate ratification is predicated upon the right of a
corporation to contract, and any ratification or adoption is equivalent to a grant of prior
authority. Ratification cleanses the contract from all its defects from the moment it was
constituted. Thus, even in the face of an express by-law requirement of prior approval,
the law on corporations is not to be held too rigid and inflexible as to fail to recognize
equitable considerations.

Zamboanga Transpo. V. Bachrach Motors 52 Phil 244

Matling Industrial vs. Coros
G.R. No. 157802; October 13, 2010
FACTS:
This case involves the dismissal of Coros who held the position of vice president
for finance and administration of the company. He was at the same time a member of
its board of directors.
Coros filed a complaint for illegal dismissal with the Labor Arbiter. The company
sought the dismissal of the case on the ground that, since he is a corporate officer and
director, his complaint is an intra-corporate dispute which, at that time, was under the
jurisdiction of the Securities and Exchange Commission (now RTC) . The Labor Arbiter,
NLRC and CA denied the companys plea and ruled that Coros is not a corporate officer
and therefore his complaint falls within the Labor Arbiters jurisdiction. The company
elevated the matter to the tribunal for final resolution.
The company argued that Coros was appointed to his position by its president
pursuant to the authority given to him by the board of directors in its by-laws. On the
basis of that grant of power, it was as if Coros was directly appointed by the board, thus
making him a corporate officer. Coros countered that inasmuch as his position does not
appear in the companys by-laws and he was not directly appointed by the board, he
should be classified as an ordinary or non-corporate officer.
ISSUES:
WON respondent is a corporate officer?
Who is a corporate officer?
HELD:

NO. Central to the issue is Section 25 of the Corporation Code, which states that
immediately after their election, the directors of a corporation must formally organize
by the election of a president, a treasurer, a secretary, and such other officers as may
be provided for in the by-laws.
The tribunal stated that for a position to be considered a corporate office, it is
essential that it is one of those expressly mentioned in the Corporation Code or in the
companys by-laws. Thus, the creation of an office pursuant to or under a by-law
enabling provision is NOT enough to make a position a corporate office.
The companys argument that its by-laws made a valid delegation of the boards
appointing power to the president was rejected by the tribunal. It pointed out that the
delegation is invalid because the law requires the board itself to elect the corporate
officers. That power is exclusively vested in the board of directors and could not be
delegated to subordinate officers or agents. Moreover, the tribunal explained, the
appointment authority granted to the president was limited to the creation of non-

corporate offices to be occupied by ordinary employees. Their appointment is incidental

to the presidents duty as executive to assist him in running the company.

Real v. SanguPhils.

(G.R. No. 168757; 1/19/ 2011)

E. B. Villarosa v. Benito (1999; 312 SCRA 65)

3.) BOARD COMMITTEES
Hayes vs. Canada Atlantic & Plant Steamship Co.
181 F. 289; 1910
FACTS:
Petitioner is one of the executive committee of respondent company. In this case,
the Executive Committee: (a) removed the Treasurer and appointed a new one; (b) fixed
the annual salary of the members of the Executive Committee; (c) amended the by-laws
by giving the President the sole authority to call a stockholder's meeting and a board of
directors meeting; and (d) amended the composition of the Executive Committee by
limiting it to just 2 persons.
ISSUE:

Were these actions valid?

HELD:
No, because the Executive Committee usurped the powers vested in the board
and the stockholders. If their actions were valid, it would put the corporation in a
situation wherein only two men, acting in their own pecuniary interests, would have
absorbed the powers of the entire corporation.
"Full powers" should be interpreted only in the ordinary conduct of business and
not total abdication of board and stockholders' powers to the Executive Committee.
"FULL POWERS" does not mean unlimited or absolute power.

Filipinas Port Services, Inc. v.Go 518 SCRA 453 (2007)

4) Stockholders
a) Sec. 23 and other provisions of the Corp. Code requiring stockholders action
b) Meetings Secs. 49, 50, 51, 52, 54, 55, 56, 57

Tan v. Sycip G.R. 153468 (Aug.17, 2006)

c) Deadlocks in close corps Sec. 104