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Prime White Cement Corporation vs. Intermediate Appellate Court GR 68555, 19 March 1993 Facts

The Supreme Court ruled that the dealership agreement between Prime White Cement Corporation and Alejandro Te was not valid and enforceable. [1] As a member of the Board of Directors and Auditor of PWCC, Te was considered a "self-dealing" director. [2] Under corporation law, all corporate powers are exercised by the Board of Directors unless otherwise provided. [3] There was no evidence that the Board expressly delegated powers to the President to enter into the dealership agreement or that the Board ratified the agreement.

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201 views1 page

Prime White Cement Corporation vs. Intermediate Appellate Court GR 68555, 19 March 1993 Facts

The Supreme Court ruled that the dealership agreement between Prime White Cement Corporation and Alejandro Te was not valid and enforceable. [1] As a member of the Board of Directors and Auditor of PWCC, Te was considered a "self-dealing" director. [2] Under corporation law, all corporate powers are exercised by the Board of Directors unless otherwise provided. [3] There was no evidence that the Board expressly delegated powers to the President to enter into the dealership agreement or that the Board ratified the agreement.

Uploaded by

carlo_tabangcura
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Prime White Cement Corporation

vs.
Intermediate Appellate Court
GR 68555, 19 March 1993

FACTS:

On or about 16 July 1969, Alejandro Te and Prime White Cement Corporation (PWCC) thru its President,
Mr. Zosimo Falcon and Justo C. Trazo, as Chairman of the Board, entered into a dealership agreement whereby Te
was obligated to act as the exclusive dealer and/or distributor of PWCC of its cement products in the entire Mindanao
area for a term of 5 years.
Right after Te entered into the dealership agreement, he placed an advertisement in a national, circulating
newspaper the fact of his being the exclusive dealer of PWWC's white cement products in Mindanao area, more
particularly, in the Manila Chronicle dated 16 August 1969 and was even congratulated by his business associates, so
much so, he was asked by some of his businessmen friends and close associates if they can be his sub-dealer in the
Mindanao area.

ISSUE:

Whether the "dealership agreement" referred by the President and Chairman of the Board of PWCC is a valid
and enforceable contract.

RULING:

NO.

The “dealership agreement” is not valid and unenforceable. Under the Corporation Law, which was then in
force at the time the case arose, as well as under the present Corporation Code, all corporate powers shall be exercised
by the Board of Directors, except as otherwise provided by law. Although it cannot completely abdicate its power and
responsibility to act for the juridical entity, the Board may expressly delegate specific powers to its President or any
of its officers.
In the absence of such express delegation, a contract entered into by its President, on behalf of the
corporation, may still bind the corporation if the board should ratify the same expressly or impliedly. Implied
ratification may take various forms — like silence or acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing therefrom. Furthermore, even in the absence of express
or implied authority by ratification, the President as such may, as a general rule, bind the corporation by a contract in
the ordinary course of business, provided the same is reasonable under the circumstances. These rules are basic, but
are all general and thus quite flexible. They apply where the President or other officer, purportedly acting for the
corporations, is dealing with a third person, i.e., a person outside the corporation. The situation is quite different
where a director or officer is dealing with his own corporation. Herein, Te was not an ordinary stockholder; he was a
member of the Board of Directors and Auditor of the corporation as well. He was what is often referred to as a "self-
dealing" director.

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