CORPORATE NAME Incorporation on August 1985 to change its corporate name to

"Industrial Refractories Corp. of the Philippines".

41. Republic Planters Bank v. Court of Appeals Both RCP and IRCP were the only local supplier of monolithic gunning
GR 93073, December 21, 1992 mix.
Campos, Jr., J.: RCP filed with the SEC a petition to compel IRCP to change its
corporate name.
Facts: The SEC decided in favor of RCP.
Canlas and Yamaguchi were officers of Worldwide Garment SEC En Banc modified the appealed decision, IRCP was ordered to
Manufacturing. By virtue of a Board Resolution the two were delete or drop from its corporate name only the word "Refractories".
authorized to apply for credit facilities with Planters Bank. Nine PNs IRCP elevated the decision to the Court of Appeals which then
were issued in the name of Worldwide. rendered the decision, denying to give due course the petition filed
On December 220, 1982, Worldwide changed its corporate name to by IRCP, it ruled that the corporate names of IRCP and RCP are
Pinch. confusingly or deceptively similar, and that RCP has established its
The notes were not paid upon maturity, this prompted the bank to prior right to use the word "Refractories" as its corporate name.
file an action for recovery which was originally brought against Issue:
Worldwide but was after amended to Pinch.  Whether the corporate names of IRCP and RCP are confusingly
The CA ruled that change of corporate name extinguished the similar.
corporate personality of the original corporation. Held:
Issue: YES. Refractories Corporation of the Philippines (RCP) is confusingly
Whether or not a change in corporate name extinguishes the similar with Industrial Refractories Corporation of the Philippines
personality of the original corporation (IRCP). Being the prior registrant, the RCP has acquired the right to
Held: use the word “Refractories” as part of its corporate name.
NO. a change in corporate name does not make it a new corporation
and does not affect its properties, rights and liabilities. 43. PC Javier &Sons Inc. v. Court of Appeals
G.R. No. 129552.  June 29, 2005
42. Industrial Refractories Corporation v. Court of Appeals Chico- Nazario, J.:
GR 122174, October 3, 2002
Austria- Martinex, J.: Facts:
PC Javier & Sons applied with First Summa Bank for a loan
Facts: accommodation under the Industrial Guarantee Loan Fund (IGLF).
Refractories Corporation of the Philippines (RCP) was organized on The corporation through Pablo Javier was advised that its loan
October 1976. On June 1977, it registered its corporate and business application was approved and that the same shall be forwarded to
name with the Bureau of Domestic Trade. the Central Bank for processing.
Industrial Refractories Corp. of the Philippines (IRCP) on the other The CB released the loan.
hand, was incorporated on August 1979 originally under the name To secure the loan, Javier executed CM over some machinery in favor
"Synclaire Manufacturing Corporation". It amended its Articles of of the bank. In the meantime, the bank changed its name to PAIC
Savings and Mortgage Bank Inc. Elevator Company (LG OTIS, for brevity). It was further alleged that
Thereafter, the corporation failed to pay; this prompted the Bank to GOLDSTAR was being utilized by LG OTIS and LGIC in perpetrating
move for the extrajudicial foreclosure of the mortgages. their unlawful and unjustified acts against HYATT, because GOLDSTAR
PC Javier filed an action to restrain the extrajudicial foreclosure on is being managed and operated by the same Korean officers of
the ground that it First Summa and PAIC Bank are separate entities. defendants LG-OTIS Elevator Company and LG International
Issue: Corporation.’ GOLDSTAR filed for a MTD on the ground that the
Whether the debtor should be formally notified of the corporate venue was improperly laid.
creditor’s change of name Issue:
Held: Whether the venue was improper
NO. There is no such requirement under the law or any regulation
ordering a bank that changes its corporate name to formally notify all Held:
its debtors. This being the case, the court cannot impose on the bank YES. The residence of a corporation is the place where its principal
that changes its corporate name to notify its debtors of such change office is located, as stated in its Articles of Incorporation even though
absent any law, circular or regulation requiring it. Formal notification the corporation has closed its office therein and relocated to another
is therefore discretionary on the bank. place.

RESIDENCE AND NATIONALITY OF A CORPORATION 45. Unchuan v. Lozada

GR NO 172671 April 16, 2009
44. Hyatt Elevators and Escalator Corp. v. Goldstar Elevators Quisumbing, J.:
GR NO. 161026 October 24, 2005
Panganiban, J.: Facts:
Sisters Anita and Peregrina who were based in the US sold to their
Facts: nephew Antonio several parcel of lots which were located in the
HYATT is a domestic corporation with address at the 6 th Floor, Dao I Philippines. Dr. Lozada, their brother who was an American citizen
Condominium, Salcedo St., Legaspi Village, Makati, as stated in its agreed to advance the purchase price for Antonio.
Articles of Incorporation. Antonio and Dr. Lozada agreed that said subject properties would be
HYATT filed a Complaint for unfair trade practices and damages the capital of Damasa Corporation.  According to their agreement,
against LG Industrial Systems Co. Ltd. (LGISC) and LG International Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said
Corporation (LGIC) in RTC Mandaluyong, alleging among others, that corporation, respectively.
LGISC and LGIC, in the middle of negotiations, terminated the The Deed of Sale was later notarized and authenticated and was sent
proposal to the prejudice of HYATT. to Antonio in the Philippines. Upon receipt of said documents,
In the course of the proceedings, HYATT filed a motion for leave of Antonio recorded the sale with the RD.
court to substitute LGISC to LG OTIS, it alleged that subsequent to the Pending registration of the deed, Unchuan caused the annotation of
filing of the complaint, it learned that LGISC transferred all its adverse claim on the lots. Marissa claimed that Anita donated an
organization, assets and goodwill, as a consequence of a joint venture undivided share in the lots to her; she likewise raised the issue that it
agreement with Otis Elevator Company of the USA, to LG Otis
was Dr. Lozada an American citizen who paid for said lots and that Issue:
Antonio was merely a dummy of the former. Whether or not a partnership is formed when funds were invested in
The court declare Antonio to be the absolute owner of the subject a corporation that was not created.
properties. Held:
On Motion for Reconsideration, the court reversed and cancelled the NO. Where someone convinced other parties to contribute funds for
titles in Antonio’s name. the formation of a corporation which was never formed, there is no
Issue: partnership among them, and the latter cannot be held liable to share
Whether the sale violated the public policy prohibiting aliens from in the losses of the proposed corporation.
owning lands
Held: 47. People v. Garcia
NO. the sale to a foreigner of parcels of lands does not violate the GR NO. 117010 April 18, 1997
public policy prohibiting aliens from owning lands in the Philippines Puno, J.:
when the foreigner advanced the money for the payment thereof but
at no point were the lots registered in his name nor was it Facts:
contemplated that the lots be under his control for they are actually Complainants in this case applied to a recruitment corporation named
to be included as capital of a private corporation to be formed with a Ricorn Philippine International Shipping Lines, Inc. Garcia and Botero
Filipino individual who will own 60% of the corporation with the represented themselves as president and vice-president of the
foreigner holding 40% thereof. Under RA 7042, a corporation corporation.
organized under the laws of the Philippines of which at least 60% of After the complainants sent the required documents for their
the outstanding capital stock and entitled to vote is owned and held respective job applications, they returned to the purported main
by citizens of the Philippines, is considered a Philippine national. As office of the corporation but they discovered that Ricorn abandoned
such, the corporation ,ay acquire disposable lands in the Philippines. its office.
After further investigation, they found out that Ricorn was not
CORPORATION BY ESTOPPEL registered in SEC and was not also licensed in DOLE.
46. Pioneer Surety & Insurance Corporation v. Court of Appeals During trial, accused Garcia testified that he knew that the group
GR NO 84197 July 28, 1989 representing Ricorn was not registered ion SEC and DOLE.
Gutierrez, Jr. J.:
Issue:
Facts: Whether or not a person representing himself as a corporation can be
Japan Domestic Airlines (JDA) and Jacob Lim entered into a contract liable as a general partner.
of sale of 2 aircraft DC-3A for US$ 109,000. Held:
Petitioner executed a surety bond in favor of JDA on behalf of Lim as YES. The persons who illegally recruited workers for overseas
principal in the name of Southern Airlines. employment by representing themselves to be officer of a
Border Machinery & Heavy Equipments Corp, Francisco and Modesto corporation which they knew had not been incorporated are liable as
Cervantes, Costancio Maglana contributed funds to the endeavor and general partners for all debts, liabilities and damages incurred or
guaranteed the obligation arising as a result thereof.
 THE SEC HAS NO JURISDICTION OVER THE COMPLAINT. There is no
48. Lozano v. Delos Santos intracorporate nor partnership relation between petitioner and
GR NO. 125221 June 19, 1997 private respondent. The controversy between them arose out of
Puno, J.: their plan to consolidate their respective jeepney drivers' and
operators' associations into a single common association. This unified
Facts: association was, however, still a proposal. The KAMAJDA and
Lozano alleged that he was the president of the Kapatirang SAMAJODA to which petitioner and private respondent belong are
Mabalacat-Angeles Jeepney Drivers' Association, Inc. (KAMAJDA) duly registered with the SEC, but these associations are two separate
while respondent Anda was the president of the Samahang Angeles- entities. It is between members of separate and distinct associations.
Mabalacat Jeepney Operators' and Drivers' Association, Inc. Petitioner and private respondent have no intracorporate relation
(SAMAJODA). much less do they have an intracorporate dispute. The SEC therefore
Upon the request of the Sangguniang Bayan of Mabalacat, Pampanga, has no jurisdiction over the complaint.
Lozano and Anda agreed to consolidate their respective associations NO. The doctrine of corporation by estoppel advanced by private
and form the Unified Mabalacat-Angeles Jeepney Operators' and respondent cannot override jurisdictional requirements. Jurisdiction
Drivers' Association, Inc. (UMAJODA); they also agreed to elect one is fixed by law and is not subject to the agreement of the parties. It
set of officers who shall be given the sole authority to collect the daily cannot be acquired through or waived, enlarged or diminished by,
dues from the members of the consolidated association. any act or omission of the parties; neither can it be conferred by the
Elections were held on October 29, 1995 and both petitioner and acquiescence of the court. Corporation by estoppel is founded on
private respondent ran for presidency. principles of equity and is designed to prevent injustice and
Petitioner won; private respondent protested and, alleging fraud, unfairness. It applies when persons assume to form a corporation and
refused to recognize the results of the election; private respondent exercise corporate functions and enter into business relations with
also refused to abide by their agreement and continued collecting the third persons. Where there is no third person involved and the
dues from the members of his association despite several demands to conflict arises only among those assuming the form of a corporation,
desist. Petitioner was thus constrained to file the complaint to who therefore know that it has not been registered, there is no
restrain private respondent from collecting the dues. corporation by estoppel.
Private respondent moved to dismiss the complaint for lack of 49. Lim Tong Lim v. Philippine Fishing Gear Industries
jurisdiction, claiming that jurisdiction was lodged with the Securities GR NO. 136448 November 3, 1999
and Exchange Commission (SEC). Panganiban, J.:
Issue:
Whether or not the case is classified as an intra-corporate Facts:
controversy thus falling within the jurisdiction of the SEC? On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and
Whether or not the proposed consolidated corporation may be Peter Yao entered into a Contract, for the purchase of fishing nets
considered a corporation by estoppel from the Philippine Fishing Gear Industries, Inc. (PFGI). They claimed
that they were engaged in a business venture with Lim Tong Lim, who
Held: however was not a signatory to the agreement.
The buyers, however, failed to pay for the fishing nets and the floats; of the ostensible corporation should be held liable. Although
hence, PFGI filed a collection suit against Chua, Yao and Lim Tong Lim technically it is true that Lim did not directly act on behalf of the
with a prayer for a writ of preliminary attachment. The suit was corporation; however, having reaped the benefits of the contract
brought against the three in their capacities as general partners, on entered into by persons with whom he previously had an existing
the allegation that "Ocean Quest Fishing Corporation" was a relationship, he is deemed to be part of said association and is
nonexistent corporation as shown by a Certification from the SEC. covered by the scope of the doctrine of corporation by estoppel.
The lower court issued a Writ of Preliminary Attachment, which the DE FACTO CORPORATION
sheriff enforced by attaching the fishing nets on board F/B Lourdes 50. Sawadjaan v. Court of Appeals
which was then docked at the Fisheries Port, Navotas, Metro Manila. GR NO. 141735 June 8, 2005
Lim Tong Lim, on the other hand, filed an Answer with Counterclaim Chico- Nazario, J.:
and Crossclaim and moved for the lifting of the Writ of Attachment.
Lim argues, among others, that under the doctrine of corporation by Facts:
estoppel, liability can be imputed only to Chua and Yao, and not to Sappari K. Sawadjaan was among the first employees of the Philippine
him. Amanah Bank (PAB) when it was created. He rose through the ranks,
working his way up from his initial designation as security guard.
Issue: In February 1988, while still designated as appraiser/investigator,
Whether Lim should be held jointly liable with Chua and Yao. Sawadjaan was assigned to inspect the properties offered as
collaterals by Compressed Air Machineries and Equipment
Held: Corporation (CAMEC) for a credit line of Five Million Pesos secure by
In the first instance, an unincorporated association, which REM over the latter’s poperties. On the basis of his Inspection and
represented itself to be a corporation, will be estopped from denying Appraisal Report, the PAB granted the loan application.
its corporate capacity in a suit against it by a third person who relied In the meantime, Sawadjaan was promoted to Loans Analyst I.
in good faith on such representation. It cannot allege lack of In January 1990, Congress passed Republic Act 6848 creating the
personality to be sued to evade its responsibility for a contract it AIIBP and repealing P.D. No. 264 (which created the PAB). By virtue of
entered into and by virtue of which it received advantages and which all assets, liabilities and capital accounts of the PAB were
benefits. On the other hand, a third party who, knowing an transferred to the AIIBP, and the existing personnel of the PAB were
association to be unincorporated, nonetheless treated it as a to continue to discharge their functions unless discharged. In the
corporation and received benefits from it, may be barred from ensuing reorganization, Sawadjaan was among the personnel
denying its corporate existence in a suit brought against the alleged retained by the AIIBP.
corporation. In such case, all those who benefited from the When CAMEC failed to pay despite the given extension, the bank,
transaction made by the ostensible corporation, despite knowledge of now referred to as the AIIBP, discovered that TCT No. N-130671 was
its legal defects, may be held liable for contracts they impliedly spurious, the property described therein non-existent, and that the
assented to or took advantage of. There is no dispute that PFGI is property covered by TCT No. C-52576 had a prior existing mortgage in
entitled to be paid for the nets it sold. The only question here is favor of one Divina Pablico.
whether Lim should be held jointly liable with Chua and Yao. Lim The Board of Directors of the AIIBP created an Investigating
contests such liability, insisting that only those who dealt in the name Committee to look into the CAMEC transaction. They found petitioner
guilty of conduct prejudicial to the best interest of the service. The engaged in any business which competes with that of the
board suspended the petitioner, prompting the latter to appeal the Corporation.”
decision citing AIIBP’s lack of legal standing to sue since it was not The board based their authority to do so on a resolution of the
able to file its by-laws within the prescribed period. stockholders. It was contended that according to section 22 of the
Corporation Law and Article VIII of the by-laws of the corporation, the
Issue: power to amend, modify, repeal or adopt new by-laws may be
Whether a corporation which failed to file its by-laws within the delegated to the Board of Directors only by the affirmative vote of
prescribed period ipso facto lose its power as such stockholders representing not less than 2/3 of the subscribed and
Held: paid up capital stock of the corporation, which 2/3 should have been
NO. At the very least, by its failure to submit its by-laws on time, the computed on the basis of the capitalization at the time of the
AIIBP may be considered a de facto corporation whose right to amendment. Since the amendment was based on the 1961
exercise corporate powers may not be inquired into collaterally in any authorization, Gokongwei contended that the Board acted without
private suit to which such corporations may be a party. Moreover, a authority and in usurpation of the power of the stockholders.
corporation which has failed to file its by-laws within the prescribed Gokongwei claimed that prior to the questioned amendment, he had
period does not ipso facto lose its powers as such. The SEC Rules on all the qualifications to be a director of the corporation, being a
Suspension/Revocation of the Certificate of Registration of substantial stockholder thereof; that as a stockholder, Gokongwei
Corporations, details the procedures and remedies that may be had acquired rights inherent in stock ownership, such as the rights to
availed of before an order of revocation can be issued. There is no vote and to be voted upon in the election of directors; and that in
showing that such a procedure has been initiated in this case. amending the by-laws, Soriano, et. al. purposely provided for
Gokongwei's disqualification and deprived him of his vested right as
BOARD OF DIRECTORS afore-mentioned, hence the amended by-laws are null and void.
51. Gokongwie v. SEC As additional causes of action, it was alleged that corporations have
GR NO. L- 45911 April 11, 1979 no inherent power to disqualify a stockholder from being elected as a
Antonio, J.: director and, therefore, the questioned act is ultra vires and void.
Issue:
Facts: Whether the corporation has the power to provide for the
John Gokongwei Jr., as stockholder of San Miguel Corporation, filed (additional) qualifications of its directors
with the SEC a petition for "declaration of nullity of amended by-laws, Held:
cancellation of certificate of filing of amended by-laws, injunction and YES. It is recognized by all authorities that "every corporation has the
damages with prayer for a preliminary injunction" against the inherent power to adopt by-laws 'for its internal government, and to
majority of the members of the Board of Directors and San Miguel regulate the conduct and prescribe the rights and duties of its
Corporation as an unwilling petitioner. members towards itself and among themselves in reference to the
Gokongwei alleged that the Board amended the bylaws of the management of its affairs.'" In this jurisdiction under section 21 of the
corporation, prescribing additional qualifications for its directors, Corporation Law, a corporation may prescribe in its by-laws "the
“that no person shall qualify or be eligible for nomination if he is qualifications, duties and compensation of directors, officers and
employees." This must necessarily refer to a qualification in addition
to that specified by section 30 of the Corporation Law, which provides corporate management counsel against sharing sensitive information
that "every director must own in his right at least one share of the with a director whose fiduciary duty to loyalty may require that he
capital stock of the stock corporation of which he is a director." Any discloses this information to a competitive rival.
person "who buys stock in a corporation does so with the knowledge
that its affairs are dominated by a majority of the stockholders and 52. Sales v. SEC
that he impliedly contracts that the will of the majority shall govern in GR NO L-54330 January 13, 1989
all matters within the limits of the act of incorporation and lawfully Cortes, J.:
enacted by-laws and not forbidden by law." To this extent, therefore,
the stockholder may be considered to have "parted with his personal Facts:
right or privilege to regulate the disposition of his property which he State Investment House, Inc. (formerly State Financing Center, Inc.)
has invested in the capital stock of the corporation, and surrendered entered into a sales agreement with Sipalay Mining whereby the
it to the will of the majority of his fellow incorporators. It cannot latter sold to the former 200,000,000 common shares of its capital
therefore be justly said that the contract, express or implied, between stock in the amount of P2,600,000.00. The sales agreement between
the corporation and the stockholders is infringed by any act of the Sipalay Mining and State Investment contained the following terms
former which is authorized by a majority." Pursuant to section 18 of and conditions:
the Corporation Law, any corporation may amend its articles of 2. That the stockbroker shall not sell more than 1,000,000 shares per
incorporation by a vote or written assent of the stockholders buyer, to the extent practicable;
representing at least two-thirds of the subscribed capital stock of the 3. In the event you decide to make a public offering [of] additional
corporation. If the amendment changes, diminishes or restricts the shares in the future, whether with Sipalay Mining and Exploration
rights of the existing shareholders, then the dissenting minority has Corporation or any other corporation organized by Sipalay Mining
only one right, viz.: "to object thereto in writing and demand Exploration Corporation, you hereby grant us a right of first refusal to
payment for his share." Under section 22 of the same law, the owners undertake the same;
of the majority of the subscribed capital stock may amend or repeal 4. The Corporation shall as soon as practicable after the offering
any by-law or adopt new by-laws. It cannot be said, therefore, that period of our shares, apply for listing in the Stock Exchange in
Gokongwei has a vested right to be elected director, in the face of the accordance with the rules and regulations of the Securities and
fact that the law at the time such right as stockholder was acquired Exchange Commission. The timing of the date of listing shall be
contained the prescription that the corporate charter and the by-law mutually decided by us.
shall be subject to amendment, alteration and modification. 5. That State Financing Center, Inc. shall issue a voting trust in favor of
Note: the Board of Directors of Sipalay Mining Exploration Corporation
A corporation is authorized to prescribe qualifications of its directors; which shall only be good up to the time the sale to the public of said
such is not invalid, provided, however that before such nominee is shares has been effected.
disqualified, he should be given due process to show that he is not The 200,000,000 shares of stock of Sipalay Mining, covered by ten
covered by such disqualification. A director stands in fiduciary relation certificates of stock, were delivered to State Investment.
to the corporation and its stockholders. The disqualification of a Subsequently, the restriction on the sale of the shares was modified
competition from being elected to the board of directors is a by allowing sale in blocks of 5,000,000 shares per buyer.
reasonable exercise of corporate authority. Sound principles of
On December 1975, State Investment requested Sipalay Mining to
transfer the 200,000,000 shares to Anselmo Trinidad & Co., Inc. 53. Pena v. Court of Appeals
(hereinafter referred to as ATCO), to which it had sold the shares. GR NO 91478 February 7, 1991
Sipalay Mining complied with this request. During the time that ATCO Gancayco, J.:
held the shares, it voted them in the stockholders' meetings of Sipalay
Mining. Facts:
Some two and a half years later, ATCO in turn sold 198,500,000 of the PAMBUSCO mortgaged the subject properties to the DBP. For failure
shares to respondent VULCAN. Sipalay Mining was requested by to pay its obligation, the mortgage was foreclosed and was sold to
ATCO to transfer the 198,500,000 shares to the name of VULCAN. Pena.
Eight days prior to the scheduled annual stockholders' meeting of The Board of Directors of PAMBUSCO, through three out of its five
Sipalay Mining, petitioners filed before the SEC a petition to nullify directors, resolved to assign its right of redemption over the said
the sale of the shares to VULCAN, with a prayer for the issuance of a properties and authorized one of its members, Atty. Briones to
writ of preliminary injunction to enjoin VULCAN from voting the execute and sign a Deed of Assignment for and in behalf of
shares. PAMBUSCO. The remaining asset of the corporation was the right to
Issue: redeem the foreclosed parcels of land.
Whether the transferee of the shares can be deprived of his right to Under the by laws of PAMBUSCO, to constitute a quorum in a special
vote due to the fact that the transferor has violated a condition in the meeting of the Board, at least four members must be present.
sales agreement it entered when it acquired the subject shares? Consequently, Briones executed executed a Deed of Assignment in
favor of Enriquez. The latter redeemed the properties and sold the
Held: same in favor of Spouses Yap.
NO, THE BUYER’S RIGHT TO VOTE THE SHARE IS A RIGHT INHERENT The Yaps wrote Pena asking for the payment of the back rentals.
TO OWNERSHIP. Where the corporation sold its share to an Despite the foregoing, Pena remained in possession of the lots
investment house on the condition that the same shall be sold to the prompting the Yaps to file an action in court.
public through stockbrokers in block of 1 million shares per buyer and
the condition was not fulfilled, the sale is nevertheless valid unless set Issue:
aside by a competent court. Thus, the buyer, as a stockholder, cannot Whether or not the board resolution authorizing the assignment of
be deprived of his right to vote his shares as it is a right inherent to the right to redeem the properties is valid
ownership. The stockholder may be deprived of the right to vote only
upon clear showing of its lawful denial under the articles of
incorporation or by- laws of the corporation.
Further issues relating to the directive of the board of directors of the Held:
issuing corporation to issue a stock certificate in favor of the buyer NO. three out of five directors of the board of directors present in a
are questions of policy or management and are left solely to the special meeting do not constitute a quorum to validly transact
honest decision of officers and directors of a corporation, and so long business when its by- kaws require at least four members to
as they act in good faith, their orders are not reviewable by the constitute a quorum. Under Section 25 of the Corporation Code, the
courts. articles of incorporation or by-laws may fix a greater number than the
majority of the number of directors to constitute a quorum. Any assailing the ground for the issuance of the writ of preliminary
number less than the number provided in the articles or by- laws mandatory injunction by the lower court.
cannot constitute a quorum; any act therein would not bind the The SC issued a writ of preliminary injunction to enjoin enforcement
corporation; all the attending directors could do is to adjourn. of the writ of preliminary mandatory injunction issued by the lower
Further, where the remaining asset of a corporation was its right to court. Pursuant to the above-quoted resolution, Rivera and Akasako
redeem the parcels of land that were foreclosed, the assignment of regained control and management of Fujiyama Hotel & Restaurant,
the right to redeem requires in addition to a proper board resolution, Inc. Immediately upon assumption of the management of the
the affirmative votes of the stockholders representing at least 2/3 of corporation, Rivera et al., refused to recognize as employees of the
the outstanding capital stock. There having been no stockholders’ corporation all persons that were hired by Jureidini and Tsuchiya
approval the redemption madde by the assignee is invalid. during the one-year period that the latter had operated the company
and reinstated the employees previously hired by them. This gave rise
54. Visayan v. NLRC to the filing of the present case by the dismissed employees hired by
GR NO 69999 April 30, 1991 Jureidini and Tsuchiya (some of whom had allegedly been hired by
Paras, J.: Rivera and Akasako even before Jureidini and Tsuchiya assumed
management of the corporation) against Fujiyama Hotel &
Facts: Restaurant, Inc. for illegal dismissal.
Upon organization of private respondent Fujiyama Hotel &
Restaurant, Inc., in which Rivera holds majority interest; it Issue:
immediately opened a Japanese establishment, known as Fujiyama whether or not there is privity of contract between petitioners and
Hotel & Restaurant. In order to fully offer an authentic Japanese private respondent as to establish an employer-employee
cuisine and traditional Japanese style of service, private respondent relationship between the parties.
hired the services of Isamu Akasako as its chef and restaurant Held:
supervisor. NO PRIVITY OF CONTRACT, THE HIRING OF EMPLOYEES BY THOSE
In June, 1980, Lourdes Jureidini and Milagros Tsuchiya, allegedly WHO TOOK OVER THE COMPANY DOES NOT BIND THE LATTER.
pretending to be stockholders of the corporation, filed a case against Where two parties forcibly took over the management of the
Rivera and Akasako to wrest control over the establishment. corporation by virtue of a writ of preliminary injunction issued on the
The court issued a writ of preliminary mandatory injunction basis of their claim that they were stockholders, their hiring of new
transferring possession of all the assets of the company and the employees to replace the original employees cannot bint the
management thereof to Jureidini and Tsuchiya. corporation, as the act was done without authority from the board.
Upon assuming management, Jureidini and Tsuchiya replaced almost The claim of illegal dismissal by the new employees is without merit
all of the existing employees with new ones, majority of whom are as they were not hired by the corporation or its duly authorized
the present petitioners in the instant case. officers of agents.

In the meantime, Rivera and the rest of the stockholders elevated the 55. Lee v. Court of Appeals
civil case to the Supreme Court through a petition for certiorari GR NO 93695 February 4, 1992
Gutierrez, Jr. J.:
 56. Citibank N.A. v. Chua
Facts GR NO 102300March 17, 1993

On November 1985, filed a complaint for a sum of money against Facts:

Sacoba Manufacturing Corp who, in turn, filed a third party complaint Citibank is a foreign commercial banking corporation duly licensed to
against ALFA and the petitioners. do business in the Philippines. Spouses Cresencio and Zenaida Velez,
IN the course of the proceedings, Lee and Lacdao informed the court were good clients of the bank.
that by virtue of the voting trust agreement they ceased to be officers They filed a complaint for specific performance and damages against
and directors of ALFA, hence, they could no longer receive summons the bank.
or any court processes for or on behalf of ALFA.; that management of On the date of the pre-trial conference, counsel for petitioner bank
ALFA had been transferred to DBP. appeared, presented a special power of attorney executed by Citibank
The DBP, on the other hand, claimed that it was not authorized to officer Florencia Tarriela in favor of petitioner bank's counsel, the J.P.
receive summons on behalf of ALFA since the DBP had not taken over Garcia & Associates, authorizing it to represent and bind petitioner
the company which has a separate and distinct corporate personality bank at the pre-trial conference of the case.
and existence. The by-laws of the bank grant to its Executing Officer and Secretary
The trial court issued an order advising Sacoba Manufacturing, et. al. Pro-Tem the power to delegate to a Citibank officer, in this case
to take the appropriate steps to serve the summons to ALFA. Sacoba Ferguson, the authority to represent and defend the bank and its
Manufacturing, et. al. filed a Manifestation and Motion for the interests.
Declaration of Proper Service of Summons which the trial court In spite of this SPA, counsel for private respondents orally moved to
granted. declare petitioner bank in default on the ground that the SPA was not
executed by the Board of Directors of Citibank. Petitioner bank was
Issue: then required to file a written opposition to this oral motion to
whether or not there was proper service of summons ALFA through declare it in default. In said opposition petitioner bank attached
the petitioners as president and vice-president, allegedly, of the another SPA made by William W. Ferguson, Vice President and
subject corporation after the execution of a voting trust agreement highest ranking officer of Citibank, Philippines, constituting and
between ALFA and DBP. appointing the J.P. Garcia & Associates to represent and bind the
BANK at the pre-trial conference and/or trial of the case.
Held:
NO. Any director who ceases to be the owner of at least 1 share of Issue:
the capital stock of the corporation of which he is a director shall Whether a board resolution is necessary for its legal counsel or
thereby cease to be a director. Since a director who executes a VTA Citibank employees to act as its attorney-in-fact in the case because
over all his shares ceases to be a stockholder of record in the books of petitioner bank's by-laws grant to its Executing Officer and Secretary
the corporation and cease to be a director, he cannot be served with Pro-Tem the power to delegate to a Citibank officer, in this case
summons intended for the corporation. William W. Ferguson, the authority to represent and defend the bank
and its interests.
Held: CHRISTIAN HIGH SCHOOL representative is a permanent Director of
NO. In the corporate hierarchy, there are three levels of control: the ASSOCIATION." This draft was never presented to the general
1 the board of directors, which is responsible for corporate policies membership for approval. For 15 years, Grace Christian High School
and the general management of the business affairs of the was given a permanent seat in the board of directors of the
corporation; association.
2 the officers, who in theory execute the policies laid down by the After some time, the association's committee on election informed
board, but in practice often have wide latitude in determining the James Tan, principal of the school, that "it was the sentiment that all
course of business operations; and directors should be elected by members of the association." For this
3 the stockholders who have the residual power over fundamental reason, Tan was told that "the proposal to make the Grace Christian
corporate changes, like amendments of the articles of incorporation. High School representative as a permanent director of the
However, just as a natural person may authorize another to do association, although previously tolerated in the past elections should
certain acts in his behalf, so may the board of directors of a be re-examined."
corporation validly delegate some of its functions to individual
officers or agents appointed by it. It is clear that corporate powers Issue:
may be directly conferred upon corporate officers or agents by Whether or not provision in the by- laws allowing a director to hold
statute, the articles of incorporation, the by-laws or by resolution or the position perpetually is valid.
other act of the board of directors. Since the by-laws are a source of
authority for corporate officers and agents of the corporation, a Held:
resolution of the Board of Directors of Citibank appointing an NO. The BOD of Corporations must be elected from among the
attorney in fact to represent and bind it during the pre-trial stockholders or members. Since the provision is contrary to law, the
conference of the case at bar is not necessary because its by-laws fact that for 15 years it has not been questioned cannot forestall a
allow its officers, the Executing Officer and the Secretary Pro-Tem, to later challenge to its validity.
execute a power of attorney to a designated bank officer, William W. 58. Naguiat v. NLRC
Ferguson in this case, clothing him with authority to direct and G.R. No. 116123. March 13, 1997
manage corporate affairs. Panganiban, J.:

57. Grace Christian Highschool v. Court of Appeals Facts:

GR NO. 108905 October 23, 1997 CFTI held a concessionaire’s contract with the Army Air Force
Mendoza, J.: Exchange Services (AAFES) for the operation of taxi services within
Clark Air Base. Sergio Naguiat was CFTI’s president while Antolin
Facts: Naguiat was its VP. The Naguiats were actively engaged in the
Grace Christian High School is an educational. Grace Village management of CFTI.
Association, Inc., on the other hand, is an organization of lot and/or Clark Air Base was not spared from the phase out of the US Military
building owners, lessees and residents at Grace Village. bases in the country, as a result, the AAFES was dissolved and
On December 1975, a committee of the board of directors prepared a employees were terminated.
draft of an amendment to the by-laws, providing that GRACE
The AAFES Taxi Drivers Association (UNION for brevity) and CFTI Heving been made aware of the serious financial condition of
negotiated as regards separation benefits for the displaced BENECO, Casalan implemented remedial measures.
employees. An agreement was reached, however some of the The members of the Board reacted by adopting a series of
employees refused to accept the same, they disaffiliated from the resolutions. The resolutions adopted abolished the housing allowance
Union and joined the National Organization of Workingmen (NOWM). of Casalan and reduced his salary, among others.
NOWM filed a complaint against AAFES, Sergio, Antolin and Sergio F. Another resolution was adopted, removing Casalan as General
Naguiat Enterprises. Manager. Despite such, he continued to work as a GM in the belief
The enterprise was impleaded on the ground that both CFTI and that he could be suspended or removed only by duly authorized
Naguiat Enterprises were "close family corporations" owned by the officials of NEA.
Naguiat family Casalan requested BENECO to release his salary, the latter denied the
request. This prompted Casalan to challenge the validity of the board
Issue: resolutions with the NLlRC.
Whether the corporate officers of CFTI can be held solidarily liable for LA held both BENECO and its board members to be jointly and
corporate debts severally liable.

Held: Issue:
YES. Stockholders who are actively engaged in the management or Whether the members of BOD are liable
operation of the business and affairs of a close corporation shall be
personally liable for the corporate torts unless the corporation has Held:
obtained reasonably adequate liability insurance coverage. YES.
GR: the board members of the corporation who in good faith purport
59. Yao Ka Sin Trading v. Court of Appeals to act for and in behalf of the corporation within the lawful scope of
GR NO their authority do not become liable for the consequences of their
acts.
Facts: EXP: when the directors abolished the benefits and eventually
dismissed in bad faith and without procedural due process the GM
60. Benguet Electric Cooperative, Inc. v. NLRC who tried to implement remedial measures to solve the serious
GR NO financial condition of the corporation.

Facts: 61. Metropolitan bank and Trust Company v. Quilts & All Inc.
Cosalan was the General manager of Benguet Electric Cooperative, GR NO.
Inc. (BENECO).
BENECO, through Casalan received COA Audit Report stating the Facts:
financial status and irregularities in the utilization of funds released de los Santos the then Corporate Secretary of Quilts issued a
by the National Electrification Administration (NEA) to BENECO. Secretary's Certificate which certified that in a special meeting of the
Board of Directors its President, Dizon was authorized and
empowered to mortgage in favor of Metrobank, a property belonging approved two (2) resolutions providing for the gratuity pay of its
to Quilts. On the basis of the Secretary's Certificate, Metrobank employees.
restructured Dizon's existing personal loan, which was secured by a Private respondents were the retained employees of the Corporation.
mortgaged over the personal property of Dizon and of the In a letter, the private respondents requested for the full payment of
corporation. their gratuity pay. Their request was granted in a special meeting
More than a year later, Metrobank received a letter from Atty. held. At that, time, however, Gonzales was still abroad. Allegedly,
Villanueva, Quilt's counsel offering an amount for the cancellation of while she was still out of the country, she sent a cablegram to the
the mortgage on the property owned by Quilts because, allegedly, corporation, objecting to certain matters taken up by the board in her
"Mr. & Mrs. Senen Dizon had left the Philippines, leaving several absence, such as the sale of some of the assets of the corporation.
creditors." Metrobank refused the offer since the amount offered did Upon her return, she filed a derivative suit with the SEC against
not approximate the appraised value of the mortgaged property. majority shareholder Lopez.
Atty. Trinidad, Quilt's new counsel wrote Metrobank reiterating the Notwithstanding the "corporate squabble" between Gonzales and
mortgage cancellation. In addition, counsel claimed that the alleged Lopez, the first two (2) installments of the gratuity pay of the private
April 7, 1987 special meeting could not have taken place for lack of respondents were paid by the corporation. Also, the corporation had
the requisite number of directors present to constitute a quorum prepared the cash vouchers and checks for the third installments of
since the Chairman and 2 other members of the Board of Directors gratuity pay of said private respondents.
were aboard on that date. For some reason, said vouchers were cancelled by Gonzales. Likewise,
the first, second and third installments of gratuity pay of the rest of
Issue: private respondents were prepared but cancelled by Gonzales.
Whether or not the loan may be annulled Despite private respondents' repeated demands for their gratuity
pay, corporation refused to pay the same.
Held:
NO. A mortgage on corporate property accepted by a bank as basis Issue:
for restructuring a personal loan cannot be annulled even though it Whether the corporation is bound to grant its employees gratuity pay
could not have been authorized by the board of directors for lack of despite the lack of notice to a board director during the meeting
quorum where the bank relied on the secretary’s certificate attesting wherein the said resolution was passed
to the existence of a board resolution approving the mortgage.
62. Lopez Realty Inc. v. Fontecha Held:
GR NO YES. As a general rule, a corporation through its board of directors
Facts: should act in the manner and within the formalities prescribed by its
Lopez Realty, Inc., is a corporation engaged in real estate business, charter or by the general law. Thus, directors must act as a body in a
petitioner Gonzales is one of its majority shareholders. meeting called pursuant to the law or corporations by- laws,
Sometime in 1978, Lopez submitted a proposal relative to the the otherwise any action may be questioned by any objecting
reduction of employees with provision for their gratuity pay. The stockholder. However, an action of the board of directors during a
proposal was deliberated upon and approved in a special meeting of meeting, which was illegal for lack of notice may be ratified either
the board of directors. It appears that petitioner corporation expressly, by the action of the directors in subsequent legal meeting
or impliedly by the corporation’s subsequent course of conduct. Thus, names, nationalities and residence of the directors and officers
a director who was not notified of a board meeting is precluded from elected. In determining whether the filing of an action was authorized
questioning the validity of the resolution granting gratuity pay to by the board, it is the list of directors in the latest general information
employee approved at that meeting if she later on acquiesced to it by sheet as siled with the SEC which is controlling.
signing the vouchers for the payment of the gratuity pay.
64. Esguerra v. Court of Appeals
63. Premium Marble Resources Inc. v. Court of Appeals GR NO
GR NO
Facts;
Facts: Julieta Esguerra filed a complaint for administration of conjugal
Premium Marble Resources, Inc. (PREMIUM for brevity), assisted by partnership or separation of property against her husband Vicente
Atty. Dumadag as counsel, filed an action for damages against Esguerra, Jr. The said complaint was later amended impleading V.
International Corporate Bank (ICB). Esguerra Construction Co., Inc. (VECCI for brevity) and other family
Meantime, the same corporation, i.e., PREMIUM, but this time corporations as defendants.
represented by Siguion Reyna, Montecillio and Ongsiako Law Office as The parties entered into a compromise agreement which was
counsel, filed a motion to dismiss (MTD) on the ground that the filing submitted to the court. On the basis of the said agreement, the court
of the case was without authority from its duly constituted board of rendered two partial judgments: one between Vicente and Esguerra;
directors as shown by the excerpt of the minutes of PREMIUM’s and the other as between the latter and VECCI. By virtue of said
board of directors’ meeting. In its opposition to the MTD, PREMIUM agreement, Esguerra Bldg. I was sold and the net proceeds distributed
thru Atty. Dumadag contended that the persons who signed the according to the agreement.
board resolution are not directors of the corporation and were The controversy arose with respect to Esguerra Building II. Esguerra
allegedly former officers and stockholders of PREMIUM who were started claiming one-half of the rentals of the said building which
dismissed for various irregularities and fraudulent acts; VECCI refused. Esguerra filed a motion with respondent court praying
On the other hand, Siguion Reyna Law firm as counsel of PREMIUM in that VECCI be ordered to remit one-half of the rentals to her until the
a rejoinder, asserted that it is the general information sheet filed with same be sold.
the SEC, among others, that is the best evidence that would show VECCI opposed said motion. Meanwhile, Esguerra Bldg. II was sold to
who are the stockholders of a corporation and not the AOI since the Sureste Properties, Inc. Sureste relied on the certification given by the
latter does not keep track of the many changes that take place after corporate secretary that such sale was authorized by resolution of the
new stockholders subscribe to corporate shares of stocks. biard
Esguerra sought to nullify the sale on the ground that VECCI is not the
Issue: lawful and absolute owner thereof and that she has not been notified
Whether the filing of the action was with authorization from the BOD nor consulted as to the terms and conditions of the sale.

Held: Issue:
NO. By express mandate of the Corporation Code, all corporations Whether or not the sale may be invalidated
duly organized pursuant thereof are required to file with SEC the Held:
NO. A stockholder cannot invalidate the sale of corporate properties NO. The assignment made without authorization of the board of
for failure to comply with Section 40 of the Corporation Code, where directors does not bind the corporation
the buyer relied on the secretary’s certificate that the sale had been
authorized by resolution of the board of directors and of the 66. Western Institute Technology, Inc. v. Salas
stockholders. Being regular on its face, a Secretary’s Certificate is GR NO 113032August 21, 1997
sufficient for a third party to rely on. It does not have to investigate
the truth of the facts contained in such certification, otherwise Facts:
business transaction of corporations would become tortuously slow The members of the Salas family are the majority and controlling
and unnecessarily hampered. members of the Board of Trustees of Western Institute of
Technology, Inc. (WIT, for short).
65. Traders Royal Bank v. Court of Appeals The minority stockholders of WIT held a Special Board meeting in the
GR NO principal office of WIT. In attendance were other members of the
Board.
Facts: Prior to the Special Board Meeting, copies of notice thereof were
Filriters Guaranty Assurance Corporation (FILRITERS) is the registered distributed to all Board Members. In said meeting, the Board of
owner of CBCI No. D891. Under a deed of assignment, FILRITERS Trustees passed Resolution No. 48, granting monthly compensation
transferred CBCI No. D891 to Philippine Underwriters Finance to the private respondents as corporate officers.
Corporation (PHILFINANCE). Subsequently, PHILFINANCE transferred A few years later, two (2) separate criminal informations were filed,
CBCI No. D891, which was still registered in the name of FILRITERS, to one for falsification of a public document and the other for estafa
Traders Royal Bank (TRB). were filed.
The transfer was made under a repurchase agreement granting The charge for falsification was anchored on the ground that
PHILFINANCE the right to repurchase the instrument on or before Resolution No. 4 was passed on a date not covered by the WIT
April 27, 1981. When PHILFINANCE failed to buy back the note on income statement passed with the SEC.
maturity date, it executed a deed of assignment, dated April 27, 1981, The private respondents were acquitted of the complaints.
conveying to TRB all its rights and title to CBCI No. D891. Petitioners however contend that private respondents should be held
Armed with the deed of assignment, TRB then sought the transfer civilly liable despite their acquittal. They base their claim on the
and registration of CBCI No. D891 in its name before the Security and alleged illegal issuance by private respondents of Resolution No. 48,
Servicing Department of the Central Bank (CB). Central Bank, ordering the disbursement of corporate funds in favor of private
however, refused to effect the transfer and registration in view of an respondents, board members of WIT. Petitioners maintain that this
adverse claim filed by FILRITERS. grant of compensation to private respondents is proscribed under
Section 30 of the Corporation Code. Thus, private respondents are
Issue: obliged to return these amounts to the corporation with interest.
Whether or not the deed of assignment is valid
Issue:
Held: Whether or not the grant of additional compensation to WIT’s Board
of Directors as corporate officers was valid
 by any board or stockholders’ resolution, contract nor any other
Held: document.
YES. In the case at bench, Resolution No. 48, s. 1986 granted monthly Bitong alleged stocks were sold and endorsed in his favour by Senator
compensation to private respondents not in their capacity as Enrile, by virtue of which he has the right to bring such action in
members of the board, but rather as officers of the corporation, more behalf of the corporation; records however showed that the subject
particularly as Chairman, Vice-Chairman, Treasurer and Secretary of stocks were issued in favour of Apostol by virtue of Declaration of
Western Institute of Technology. trust and Deed of Sale executed by JAKA.

Note: Issue:
Members of the board of directors may receive compensation, in Whether Bitong has the capacity to initiate a derivative suit in behalf
addition to reasonable per diems, in the following cases: of the corporation to assail the supposed fraudulent acts of the
When there is a provision in the by- laws fixing their compensation; private respondents
When the stockholders representing at least majority of the Whether or not Bitong is entitled to dividends declared by the
outstanding capital stock at a regular or special stockholders’ meeting corporation
agree to give it to them; and
When they render services to the corporation in any capacity other Held:
than as a director
NO. The power to sue and be sued in any court by a corporation is
67. Bitong v. Court of Appeals lodged in the board of directors that exercises its corporate powers
GR NO123553 July 13, 1998 and not in the president or any officer thereof. A derivative suit
should not prosper if it is filed by a person who is not authorized by
Facts: the corporate share for whose benefit the shares are held.
Ex Libris Publishing Co., Inc was incorporated by Senator Enrile, NO. The alleged endorsement of the Certificate of Stock in the name
Cristina Ponce Enrile through Jaka Investments Corporation (JAKA) of JAKA nor the deed of sale executed by Sen. Enrile directly in favor
and the Apostols. When Ex Libris suffered financial difficulties, JAKA of petitioner could not have legally transferred or assigned the shares
and the Apostols together with the new investors restructured Ex of stock in favor of petitioner because said Certificate of Stock in the
Libris by organizing a new corporation known as Mr. & Mrs. name of JAKA was already cancelled and a new one was issued in
Bitong as treasurer and member of the Board of Mr & Ms company favor of respondent Apostol by virtue of a Declaration of Trust and
complained of the irregularities committed by Apostol, the President Deed of Sale. Petitioner was well aware of this trust, being the person
and Chairperson of the Board. in charge of this documentation and being one of the witnesses to the
She further claimed that except for the sale of the name Philippine execution of this document. Hence, petitioner is not entitled to
Inquirer to Philippine Daily Inquirer (PDI hereafter) all other dividends.
transactions and agreements entered into by Mr. & Ms. with PDI When a dividend is declared, it belongs to the person who is the
were not supported by any bond and/or stockholders’ resolution. substantial and beneficial owner of the stock at the time regardless of
That upon instructions of Eugenia D. Apostol, Mr. & Ms. made several when the distribution profit was earned.
cash advances to PDI on various occasions which was not supported
 GR NO 126200August 16, 2001
68. Tan Wing Talk v. Makasiar Kapunan, J.:
GR NO 122452 January 29, 2001
Facts:
Facts: Marinduque Mining Corporation (MMC) purchased construction
Petitioner as director of Concord-World Properties, Inc., (CONCORD materials from Remington Industrial Sales Corporation (RISC).
for brevity), filed an action for violation of BP 22 with the City MMC failed to pay, this prompted RISC to file an action for collection
Prosecutor against Vic Ang Siong . with the court.
The complaint alleged that the check issued by Vic Ang Siong in favor In the meantime, MMC obtained various loan accommodations from
of Concord was dishonored when presented for encashment. the PNB, as a security, the former (MMC) executed REMs and CMs
Vic Ang Siong sought the dismissal of the case on two grounds: First, over its properties in favour of the bank.
that petitioner had no authority to file the case on behalf of The Mortgage Agreement was amended it was agreed that
CONCORD, the payee of the dishonored check, since the firm’s board Marinduque mortgaged in favour of PNB all other real and personal
of directors had not empowered him to act on its behalf. Second, he properties and other real rights the latter may subsequently acquire.
and CONCORD had already agreed to amicably settle the issue after For failure to settle the account, the bank extrajudicially foreclosed
he made a partial payment of on the dishonored check. the mortgaged property. PNB and DBP emerged as the highest
On March 23, 1994, the City Prosecutor dismissed the complaint on bidders.
the following grounds: (1) that petitioner lacked the requisite PNB and DBP assigned and conveyed all their rights, interests and
authority to initiate the criminal complaint for and on Concord’s participation over the foreclosed properties in favour of Nonoc
behalf; and (2) that CONCORD and Vic Ang Siong had already agreed Mining, Mariculum Mining, Island Cement and APT.
upon the payment of the latter’s balance on the dishonored check. Sometime in 1987, PNB and DBP pursuant to Resolution No. 50
assigned, transferred and conveyed to the National Government thru
Issue: the Asset Privatization Trust (APT) all its rights and interest over MMC
Whether Tam Wing Tak has the authority to sue in behalf of the which were earlier assigned to other corporations.
corporation Remington impleaded as co defendants PNB, DBP and other assignee
corporations on the ground that all of them must be treated in law as
Held: one and the same entity by disregarding the veil of corporate fiction
NO. Under Section 36 of the Corporation Code, read in relation of since all of these corporations share the same or almost the same set
Section 23, it is clear that where the corporation is an injured party, of directors.
its power to sue is lodges with its board of directors or trustees. In the
absence of proof that he was authorized or granted specific powers Issue:
by the board of directors, a minority stockholder and member of the Whether Remington, a third person may raise the issue on
BOD had no such power or authority to sue on behalf of the interlocking directors
corporation.
Held:
69. DBP v. Court of Appeals
NO. The rule pertaining to transactions between corporation with Meanwhile, Dieselman and Midas Development Corporation
interlocking directors resulting in prejudice to one of the corporation executed a Deed of Absolute Sale over the same property.
does not apply where the corporation allegedly prejudiced is a third The lower court held that the acts of Cruz bound the corporation.
party, not one of the corporations with interlocking directors. Thus, CA reversed.
when a mortgage bank foreclosed the mortgage on the real and
personal property of the debtor and thereafter assigned and the Issue:
properties to a corporation it formed to manage and thereafter Whether the alleged sale of land to A.F. Realty bound the corporation
assigned the properties to a corporation it formed to manage the
foreclosed assets, the unpaid seller of the debtor can not complain Held:
that the assignment is invalid simply because the morgagee and the NO. Contracts or acts of a corporation must be made either by the
assignee have interlocking directors. BOD or by a corporate agent duly authorized by the board. Absent
such valid delegation/ authorization, the rule is that the declaration of
70. A.F. Realty & Dev’t Inc. v. Dieselman Freight Services an individual director relating to the affairs of the corporation, but
GR NO 111448January 16, 2002 not in the course of, or connected with the performance of
Sandoval- Gutierrez, J.: authorized duties of such director, is held not binding on the
corporation.
Facts: Thus, where the director was not authorized by the board to sell
Manuel Cruz member of BOD of Dieselman Corporation authorized corporate property, its sale is not binding on the corporation. The sale
Polintan, a real estate broker of the CNP Real Estate Brokerage to cannot be ratified despite acceptance by the corporation of the
look for a buyer of a parcel of land registered under the name of the partial payment if what is involved is sale of land. Considering that the
corporation. Cruz, however had no authority from the corporation to officers who represented and acted as agents in behalf of the
sell the said property. corporation were not authorized, the contract of sale is null and void
In turn, Polintan authorized Noble to sell the same lot. under Article 1874 of the Civil Code. Being a void contract, it is not
Noble then offered the property to A.F. Realty. susceptible of ratification.
A.F. through Ranullo, a board member and the vice president
accepted the offer and issued a check payable to the order of 71. Filipinas Port Services, Inc. v. Go
Dieselman. Ranullo then asked Polintan for the board resolution of GR NO 161886March 16, 2007
Dieselman authorizing the sale of said lot, which the latter failed to Garcia, J.:
produce; what was given was the TCT, tax declaration and other
documents. Facts:
A higher price was demanded from A.F. Realty; however it reiterated Cruz, FILPORT’s president wrote a letter to the BOD questioning the
that it is willing to pay only the balance. Because of this, Cruz board’s creation of certain positions with a monthly remuneration
terminated the offer and demanded the return of the title and other and the election thereto of certain members of the board,
documents. Cruz requested the board to take necessary actions to recover from
A.F Realty then filed a complaint for specific performance against those elected the salaries they have received.
Dieselman and Cruz. However, whatever action the board took did not sit well with Cruz.
Cruz as a response filed a derivative suit with the SEC for alleged During the pendency of the case, the bank offered the property for
mismanagement of the corporation. sale, Spouses Pronstroller offered to purchase the same; the offer was
The derivative suit however hibernated with the SEC and was turned made through Atty. Saluta, the bank’s VP, Corporate Secretary, Board
over to the RTC which ruled that the creation of the questioned member and in- house counsel. The offer was accepted and
positions were unnecessary. negotiations between the parties ensued which resulted to a letter-
CA reversed. agreement between them.
The parties agreed that deposit must be made within ninety days
Issue: from the signing of the agreement.
Whether or not the creation of additional offices/ positions by the On July 1993 or prior to the expiration of the 90-day, in view of the
board may be questioned in court through the filing of a derivative pendency of the case between the spouses Vaca and the bank
suit involving the subject property,  Spouses Pronstroller requested that
the balance of the purchase price be made payable only upon service
Held: on them of a final decision or resolution of this Court affirming
NO AS LONG AS THE BOD ACTS IN GOOD FAITH AND IN THE EXERCISE petitioner's right to possess the subject property. Atty. Saluta agreed
OF HONEST JUDGMENT IN THE INTEREST OF THE CORPORATION. through another letter- agreement without any board resolution, thus
The determination of the necessity for additional offices and/ or in effect extending the 90 day period.
positions in a corporation, if authorized under the by- laws, is a After some time the bank underwent reorganization and Atty. Saluta
management prerogative which the courts will not review in the was relieved of his responsibilities, the new management reviewed
absence of any proof that such prerogative was exercised in bad faith the records of the bank and found out that Spouses Pronstroller failed
or with malice. to pay the balance. The bank through Asset Recovery and Remedial
Questions of policy or of management are left solely to the honest Management Committee (ARRMC) disapproved the request of the
decision of the board as the business manager of the corporation, and Pronstrollers. The latter submitted a proposal as to how the balance
the court is without authority to substitute its judgment for that of will be paid but the bank disapproved.
the board, and as long as it acts in good faith and in the exercise of For failure of the parties to reach an agreement, the Pronstrollers
honest judgment in the interest of the corporation, its orders are not informed the bank that they will enforce the July 1993 agreement;
reviewable by the courts. the bank countered that Atty. Saluta was not authorized to sign in
behalf of the bank.
72. Associated Bank v. Spouses Pronstroller
GR NO 148444July 14, 2008 Issue:
Nachura, J.: Whether the Letter Agreement signed by Atty. Saluta is binding on
the bank under the doctrine of apparent authority
Facts:
Spouses Vaca failed to pay their obligation with Association Bank Held:
which led to the foreclosure and sale of their property with the bank YES. The doctrine of “apparent authority” had long been recognized
as the highest bidder. The Vacas filed an action to annul the in this jurisdiction. Apparent authority is derived not merely from
foreclosure as well as the sale. practice. Its existence may be ascertained through:
the general manner in which the corporation holds out an officer or A significant amendment to CCCI’s Amended By-Laws requiring the
agent as having the power to act in general, with which it clothes him; unanimous vote of the directors present at a special or regular
or meeting was not printed on the application form respondent filled
the acquiescence in his acts of a particular nature, with actual or and submitted to CCCI; considering that such amendment was
constructive knowledge thereof, within or beyond the scope of his introduced 20 years before respondent filed his application. What
ordinary powers. was printed thereon was the original provision which was silent on
Accordingly, the authority to act for and to bind a corporation may be the required number of votes needed for admission of an applicant as
presumed from acts of recognition in other instances, wherein the a proprietary member. Thus, respondent was not informed as to why
power was exercised without any objection from its board or his application was rejected; he does not even have knowledge that
shareholders, Undoubtedly, the bank had previously allowed its in- unanimous vote of the Board members was required.
house counsel to enter into the first agreement without a board This prompted Elizagaque to file an action for damages which ruled
resolution expressly authorizing him to sell corporate property; thus it and its favor. CA affirmed.
had clothe him with apparent authority to modify the same via the
second letter- agreement. Thus, the corporation is bound by the acts Issue:
entered into by its in house counsel even though he was whether in disapproving respondent’s application for proprietary
subsequently relieved of the position. membership with CCCI, petitioners are liable to respondent for
Naturally, the third person has little or no information as to what damages, and if so, whether their liability is joint and several
occurs in corporate meetings; and he must necessarily rely upon the
external manifestations of corporate consent. The integrity of Held:
commercial transactions can only be maintained by holding the YES. In rejecting respondent’s application for proprietary
corporation strictly to the liability fixed upon it by its agents in membership, we find that petitioners violated the rules governing
accordance with law. human relations, the basic principles to be observed for the rightful
relationship between human beings and for the stability of social
73. Cebu Country Club, Inc. v. Elizagaque order. The trial court and the Court of Appeals aptly held that
GR NO 160273January 18, 2008 petitioners committed fraud and evident bad faith in disapproving
Sandoval- Gutierrez, J.: respondent’s applications.
The CCCI Board of Directors, under its Articles of Incorporation, has
Facts: the right to approve or disapprove an application for proprietary
Sometime in 1987, San Miguel Corporation, a special company membership. But such right should not be exercised arbitrarily.
proprietary member of CCCI, designated respondent Ricardo F.
Elizagaque, its Senior Vice President and Operations Manager for the 74. People v. Hermenegildo Dumlao and Emilio La’o
Visayas and Mindanao, as a special non-proprietary member. The GR NO 168918March 2, 2009
designation was thereafter approved by the CCCI’s Board of Directors. Chico- Nazario, J.:
Elizagaque filed with CCCI an application for proprietary membership.
After several inquiries as to the status of his application he was Facts:
informed that the Board rejected his application.
An information was filed before the Sandiganbayan charging Dumlao criminal liability since only three members out of seven signed the
and others with violation of the anti graft and corrupt practices act. minutes of the meeting. The non-signing by the majority of the
The information alleged that the respondent being then members of members of the Board of Trustees of the said minutes does not
the board of trustees of GSIS entered into a contract of lease necessarily mean that the supposed resolution was not approved by
purchase with La’o whereby GSIS agreed to sell to La’o a GSIS the Board. The signing of the minutes by all the members of the
property. board is not required. There is no provision in the Corporation Code
Dumlao for his defense presented the Agreement and as well as the of the Philippines that requires that the minutes of the meeting
minutes of the meeting. He argued that the allegedly approved Board should be signed by all the members of the board. The proper
Resolution was not in fact approved by the GSIS Board of Trustees, custodian of the books, minutes and official records of a corporation
contrary to the allegations in the information. Since the signatures of is usually the corporate secretary. Being the custodian of corporate
Fabian Ver, Roman Cruz, Aber Canlas and Jacobo Clave did not appear records, the corporate secretary has the duty to record and prepare
in the minutes of the meeting held on 23 April 1982, he said it was the minutes of the meeting. The Signature of the corporate secretary
safe to conclude that these people did not participate in the alleged gives the minutes of the meeting. The signature of the corporate
approval of the Lease-Purchase Agreement. This being the case, he secretary gives the minutes of the meeting probative value and
maintained that there was no quorum of the board to approve the credibility. Moreover, the entries contained in the minutes are prima
supposed resolution authorizing the sale of the GSIS property. There facie evidence of what actually took place during the meeting.
being no approval by the majority of the Board of Trustees, there can
be no resolution approving the Lease-Purchase Agreement. The
unapproved resolution, he added, proved his innocence. 75. Westmont Bank formerly Associated Citizens Bank then United
The Sandiganbayan ruled that the minutes of the meeting showed Overseas Bank, Phils. v. Inland Construction and Development Corp.
that the Board failed to approve the Lease- Purchase agreement GR NO 123650March 23, 2009
because only three out of the seven members signed the minutes; Carpio- Morales, J.:
that it is required that in order to validly pass a resolution at least a
majority of four of the Board of Trustees must sign and approve the Facts:
same. Inland obtained various loans from Associated Bank now Westmont.
REMs were executed to secure the full payment of the obligation.
Issue: Under a Deed of Assignment, Abrantes assumed the obligations of
whether or not the signatures of the majority of the GSIS board of Inland and Aranda.
trustees are necessary on the minutes of meeting to give force and The records show that Calo was the one assigned to transact on
effect to the Board Resolution pproving the proposed agreement by petitioner’s behalf respecting the loan transactions and arrangements
and among the GSIS and La’o. of Inland as well as those of Hanil-Gonzales and Abrantes.  Since it
conducted business through Calo, who is an Account Officer, it is
Held: presumed that he had authority to sign for the bank in the Deed of
NO. In a criminal case involving a lease-purchase agreement allegedly Assignment; that petitioner sent a reply-letter which indicates that it
disadvantageous to the government, the Sandiganbyan erred in had full and complete knowledge of the assumption by Abrantes of
concluding that there was no such agreement into and thus negating Inland’s obligation.  Thus, the assertion that the petitioner cannot be
faulted for its delay in repudiating the apparent authority of Calo is
similarly flawed, there being no evidence on record that it had
actually repudiated such apparent authority.  It should be noted that
it was the bank which pleaded that defense in the first place.  What is
extant in the records is a reasonable certainty that the bank had
ratified the Deed of Assignment.      

Issue:
Whether the bank ratified the questioned Deed of Assignment

Held:
The general rule remains that, in the absence of authority from the
board of directors, no person, not even its officers, can validly bind a
corporation. If a corporation, however, consciously lets one of its
officers, or any other agent, to act within the scope of an apparent
authority, it will be estopped from denying such officer’s authority.
Where the bank conducted business through its Account Officer, it is
presumed that the latter had authority to sign for the bank in the
Deed of Assignment. In this case, it is incumbent upon the bank to
show that its account officer is not authorized to transact for the
corporation.