CORPORATE NAME

41. Republic Planters Bank v. Court of AppealsGR 93073, December 21, 1992Campos, Jr., J.:

Facts:Canlas and Yamaguchi were officers of Worldwide Garment Manufacturing. By virtue of a Board Resolution the two were authorized to apply for credit facilities with Planters Bank. Nine PNs were issued in the name of Worldwide. On December 220, 1982, Worldwide changed its corporate name to Pinch.The notes were not paid upon maturity, this prompted the bank to file an action for recovery which was originally brought against Worldwide but was after amended to Pinch.The CA ruled that change of corporate name extinguished the corporate personality of the original corporation.Issue:Whether or not a change in corporate name extinguishes the personality of the original corporationHeld:NO. a change in corporate name does not make it a new corporation and does not affect its properties, rights and liabilities.

42. Industrial Refractories Corporation v. Court of AppealsGR 122174, October 3, 2002Austria- Martinex, J.:

Facts: Refractories Corporation of the Philippines (RCP) was organized on October 1976. On June 1977, it registered its corporate and business name with the Bureau of Domestic Trade.Industrial Refractories Corp. of the Philippines (IRCP) on the other hand, was incorporated on August 1979 originally under the name "Synclaire Manufacturing Corporation". It amended its Articles of Incorporation on August 1985 to change its corporate name to "Industrial Refractories Corp. of the Philippines".Both RCP and IRCP were the only local supplier of monolithic gunning mix.RCP filed with the SEC a petition to compel IRCP to change its corporate name.

The SEC decided in favor of RCP.SEC En Banc modified the appealed decision, IRCP was ordered to delete or drop from its corporate name only the word "Refractories". IRCP elevated the decision to the Court of Appeals which then rendered the decision, denying to give due course the petition filed by IRCP, it ruled that the corporate names of IRCP and RCP are confusingly or deceptively similar, and that RCP has established its prior right to use the word "Refractories" as its corporate name.Issue: Whether the corporate names of IRCP and RCP are confusingly similar.Held:YES. Refractories Corporation of the Philippines (RCP) is confusingly similar with Industrial Refractories Corporation of the Philippines (IRCP). Being the prior registrant, the RCP has acquired the right to use the word “Refractories” as part of its corporate name.

43. PC Javier &Sons Inc. v. Court of AppealsG.R. No. 129552. June 29, 2005Chico- Nazario, J.:

Facts:PC Javier & Sons applied with First Summa Bank for a loan accommodation under the Industrial Guarantee Loan Fund (IGLF). The corporation through Pablo Javier was advised that its loan application was approved and that the same shall be forwarded to the Central Bank for processing.The CB released the loan.To secure the loan, Javier executed CM over some machinery in favor of the bank. In the meantime, the bank changed its name to PAIC Savings and Mortgage Bank Inc. Thereafter, the corporation failed to pay; this prompted the Bank to move for the extrajudicial foreclosure of the mortgages.PC Javier filed an action to restrain the extrajudicial foreclosure on the ground that it First Summa and PAIC Bank are separate entities.Issue:Whether the debtor should be formally notified of the corporate creditor’s change of nameHeld:NO. There is no such requirement under the law or any regulation ordering a bank that changes its corporate name to formally notify all its debtors.

This being the case, the court cannot impose on the bank that changes its corporate name to notify its debtors of such change absent any law, circular or regulation requiring it. Formal notification is therefore discretionary on the bank.

RESIDENCE AND NATIONALITY OF A CORPORATION

44. Hyatt Elevators and Escalator Corp. v. Goldstar ElevatorsGR NO. 161026 October 24, 2005Panganiban, J.:

Facts:HYATT is a domestic corporation with address at the 6th Floor, Dao I Condominium, Salcedo St., Legaspi Village, Makati, as stated in its Articles of Incorporation.HYATT filed a Complaint for unfair trade practices and damages against LG Industrial Systems Co. Ltd. (LGISC) and LG International Corporation (LGIC) in RTC Mandaluyong, alleging among others, that LGISC and LGIC, in the middle of negotiations, terminated the proposal to the prejudice of HYATT.In the course of the proceedings, HYATT filed a motion for leave of court to substitute LGISC to LG OTIS, it alleged that subsequent to the filing of the complaint, it learned that LGISC transferred all its organization, assets and goodwill, as a consequence of a joint venture agreement with Otis Elevator Company of the USA, to LG Otis Elevator Company (LG OTIS, for brevity). It was further alleged that GOLDSTAR was being utilized by LG OTIS and LGIC in perpetrating their unlawful and unjustified acts against HYATT, because GOLDSTAR is being managed and operated by the same Korean officers of defendants LG-OTIS Elevator Company and LG International Corporation.’ GOLDSTAR filed for a MTD on the ground that the venue was improperly laid. Issue:Whether the venue was improper

Held:YES. The residence of a corporation is the place where its principal office is located, as stated in its Articles of Incorporation even though the corporation has closed its office therein and relocated to another place.

45. Unchuan v. LozadaGR NO 172671 April 16, 2009

Quisumbing, J.:

Facts:Sisters Anita and Peregrina who were based in the US sold to their nephew Antonio several parcel of lots which were located in the Philippines. Dr. Lozada, their brother who was an American citizen agreed to advance the purchase price for Antonio. Antonio and Dr. Lozada agreed that said subject properties would be the capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively.The Deed of Sale was later notarized and authenticated and was sent to Antonio in the Philippines. Upon receipt of said documents, Antonio recorded the sale with the RD. Pending registration of the deed, Unchuan caused the annotation of adverse claim on the lots. Marissa claimed that Anita donated an undivided share in the lots to her; she likewise raised the issue that it was Dr. Lozada an American citizen who paid for said lots and that Antonio was merely a dummy of the former.The court declare Antonio to be the absolute owner of the subject properties. On Motion for Reconsideration, the court reversed and cancelled the titles in Antonio’s name. Issue:Whether the sale violated the public policy prohibiting aliens from owning landsHeld:NO. the sale to a foreigner of parcels of lands does not violate the public policy prohibiting aliens from owning lands in the Philippines when the foreigner advanced the money for the payment thereof but at no point were the lots registered in his name nor was it contemplated that the lots be under his control for they are actually to be included as capital of a private corporation to be formed with a Filipino individual who will own 60% of the corporation with the foreigner holding 40% thereof. Under RA 7042, a corporation organized under the laws of the Philippines of which at least 60% of the outstanding capital stock and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine national. As such, the corporation ,ay acquire disposable lands in the Philippines.

CORPORATION BY ESTOPPEL

46. Pioneer Surety & Insurance Corporation v. Court of AppealsGR NO 84197 July 28, 1989Gutierrez, Jr. J.:

Facts:Japan Domestic Airlines (JDA) and Jacob Lim entered into a contract of sale of 2 aircraft DC-3A for US$ 109,000.Petitioner executed a surety bond in favor of JDA on behalf of Lim as principal in the name of Southern Airlines.Border Machinery & Heavy Equipments Corp, Francisco and Modesto Cervantes, Costancio Maglana contributed funds to the endeavor and guaranteed the obligationIssue:Whether or not a partnership is formed when funds were invested in a corporation that was not created.Held:NO. Where someone convinced other parties to contribute funds for the formation of a corporation which was never formed, there is no partnership among them, and the latter cannot be held liable to share in the losses of the proposed corporation.

47. People v. GarciaGR NO. 117010 April 18, 1997Puno, J.:

Facts:Complainants in this case applied to a recruitment corporation named Ricorn Philippine International Shipping Lines, Inc. Garcia and Botero represented themselves as president and vice-president of the corporation.After the complainants sent the required documents for their respective job applications, they returned to the purported main office of the corporation but they discovered that Ricorn abandoned its office. After further investigation, they found out that Ricorn was not registered in SEC and was not also licensed in DOLE.During trial, accused Garcia testified that he knew that the group representing Ricorn was not registered ion SEC and DOLE.

Issue:Whether or not a person representing himself as a corporation can be liable as a general partner.

Held:YES. The persons who illegally recruited workers for overseas employment by representing themselves to be officer of a corporation which they knew had not been incorporated are liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof.

48. Lozano v. Delos SantosGR NO. 125221 June 19, 1997Puno, J.:

Facts:Lozano alleged that he was the president of the Kapatirang Mabalacat-Angeles Jeepney Drivers' Association, Inc. (KAMAJDA) while respondent Anda was the president of the Samahang Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc. (SAMAJODA).Upon the request of the Sangguniang Bayan of Mabalacat, Pampanga, Lozano and Anda agreed to consolidate their respective associations and form the Unified Mabalacat-Angeles Jeepney Operators' and Drivers' Association, Inc. (UMAJODA); they also agreed to elect one set of officers who shall be given the sole authority to collect the daily dues from the members of the consolidated association.Elections were held on October 29, 1995 and both petitioner and private respondent ran for presidency.Petitioner won; private respondent protested and, alleging fraud, refused to recognize the results of the election; private respondent also refused to abide by their agreement and continued collecting the dues from the members of his association despite several demands to desist. Petitioner was thus constrained to file the complaint to restrain private respondent from collecting the dues.Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming that jurisdiction was lodged with the Securities and Exchange Commission (SEC).Issue: Whether or not the case is classified as an intra-corporate controversy thus falling within the jurisdiction of the SEC?Whether or not the proposed consolidated corporation may be considered a corporation by estoppel

Held:

THE SEC HAS NO JURISDICTION OVER THE COMPLAINT. There is no intracorporate nor partnership relation between petitioner and private respondent. The controversy between them arose out of their plan to consolidate their respective jeepney drivers' and operators' associations into a single common association. This unified association was, however, still a proposal. The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are duly registered with the SEC, but these associations are two separate entities. It is between members of separate and distinct associations. Petitioner and private respondent have no intracorporate relation much less do they have an intracorporate dispute. The SEC therefore has no jurisdiction over the complaint.NO. The doctrine of corporation by estoppel advanced by private respondent cannot override jurisdictional requirements. Jurisdiction is fixed by law and is not subject to the agreement of the parties. It cannot be acquired through or waived, enlarged or diminished by, any act or omission of the parties; neither can it be conferred by the acquiescence of the court. Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. It applies when persons assume to form a corporation and exercise corporate functions and enter into business relations with third persons. Where there is no third person involved and the conflict arises only among those assuming the form of a corporation, who therefore know that it has not been registered, there is no corporation by estoppel.49. Lim Tong Lim v. Philippine Fishing Gear IndustriesGR NO. 136448 November 3, 1999Panganiban, J.:

Facts:On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract, for the purchase of fishing nets from the Philippine Fishing Gear Industries, Inc. (PFGI). They claimed that they were engaged in a business venture with Lim Tong Lim, who however was not a signatory to the agreement. The buyers, however, failed to pay for the fishing nets and the floats; hence, PFGI filed a collection suit against Chua, Yao and Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the SEC.

The lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment.Lim argues, among others, that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him.

Issue: Whether Lim should be held jointly liable with Chua and Yao.

Held: In the first instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits. On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred from denying its corporate existence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took advantage of. There is no dispute that PFGI is entitled to be paid for the nets it sold. The only question here is whether Lim should be held jointly liable with Chua and Yao. Lim contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable. Although technically it is true that Lim did not directly act on behalf of the corporation; however, having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel.DE FACTO CORPORATION50. Sawadjaan v. Court of AppealsGR NO. 141735 June 8, 2005Chico- Nazario, J.:

Facts:

Sappari K. Sawadjaan was among the first employees of the Philippine Amanah Bank (PAB) when it was created. He rose through the ranks, working his way up from his initial designation as security guard.In February 1988, while still designated as appraiser/investigator, Sawadjaan was assigned to inspect the properties offered as collaterals by Compressed Air Machineries and Equipment Corporation (CAMEC) for a credit line of Five Million Pesos secure by REM over the latter’s poperties. On the basis of his Inspection and Appraisal Report, the PAB granted the loan application. In the meantime, Sawadjaan was promoted to Loans Analyst I.In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing P.D. No. 264 (which created the PAB). By virtue of which all assets, liabilities and capital accounts of the PAB were transferred to the AIIBP, and the existing personnel of the PAB were to continue to discharge their functions unless discharged. In the ensuing reorganization, Sawadjaan was among the personnel retained by the AIIBP. When CAMEC failed to pay despite the given extension, the bank, now referred to as the AIIBP, discovered that TCT No. N-130671 was spurious, the property described therein non-existent, and that the property covered by TCT No. C-52576 had a prior existing mortgage in favor of one Divina Pablico. The Board of Directors of the AIIBP created an Investigating Committee to look into the CAMEC transaction. They found petitioner guilty of conduct prejudicial to the best interest of the service. The board suspended the petitioner, prompting the latter to appeal the decision citing AIIBP’s lack of legal standing to sue since it was not able to file its by-laws within the prescribed period.

Issue:Whether a corporation which failed to file its by-laws within the prescribed period ipso facto lose its power as suchHeld:NO. At the very least, by its failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose right to exercise corporate powers may not be inquired into collaterally in any private suit to which such corporations may be a party. Moreover, a corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the Certificate of Registration of Corporations, details the procedures and remedies that

may be availed of before an order of revocation can be issued. There is no showing that such a procedure has been initiated in this case.

BOARD OF DIRECTORS51. Gokongwie v. SECGR NO. L- 45911 April 11, 1979Antonio, J.:

Facts:John Gokongwei Jr., as stockholder of San Miguel Corporation, filed with the SEC a petition for "declaration of nullity of amended by-laws, cancellation of certificate of filing of amended by-laws, injunction and damages with prayer for a preliminary injunction" against the majority of the members of the Board of Directors and San Miguel Corporation as an unwilling petitioner. Gokongwei alleged that the Board amended the bylaws of the corporation, prescribing additional qualifications for its directors, “that no person shall qualify or be eligible for nomination if he is engaged in any business which competes with that of the Corporation.”The board based their authority to do so on a resolution of the stockholders. It was contended that according to section 22 of the Corporation Law and Article VIII of the by-laws of the corporation, the power to amend, modify, repeal or adopt new by-laws may be delegated to the Board of Directors only by the affirmative vote of stockholders representing not less than 2/3 of the subscribed and paid up capital stock of the corporation, which 2/3 should have been computed on the basis of the capitalization at the time of the amendment. Since the amendment was based on the 1961 authorization, Gokongwei contended that the Board acted without authority and in usurpation of the power of the stockholders. Gokongwei claimed that prior to the questioned amendment, he had all the qualifications to be a director of the corporation, being a substantial stockholder thereof; that as a stockholder, Gokongwei had acquired rights inherent in stock ownership, such as the rights to vote and to be voted upon in the election of directors; and that in amending the by-laws, Soriano, et. al. purposely provided for Gokongwei's disqualification and deprived him of his vested right as afore-mentioned, hence the amended by-laws are null and void. As additional causes of action, it was alleged that corporations have no inherent power to disqualify a stockholder from being elected as a director and, therefore, the questioned act is ultra vires and void.Issue:

Whether the corporation has the power to provide for the (additional) qualifications of its directorsHeld:YES. It is recognized by all authorities that "every corporation has the inherent power to adopt by-laws 'for its internal government, and to regulate the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its affairs.'" In this jurisdiction under section 21 of the Corporation Law, a corporation may prescribe in its by-laws "the 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 that "every director must own in his right at least one share of the capital stock of the stock corporation of which he is a director." Any person "who buys stock in a corporation does so with the knowledge that its affairs are dominated by a majority of the stockholders and that he impliedly contracts that the will of the majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted by-laws and not forbidden by law." To this extent, therefore, the stockholder may be considered to have "parted with his personal right or privilege to regulate the disposition of his property which he has invested in the capital stock of the corporation, and surrendered it to the will of the majority of his fellow incorporators. It cannot therefore be justly said that the contract, express or implied, between the corporation and the stockholders is infringed by any act of the former which is authorized by a majority." Pursuant to section 18 of the Corporation Law, any corporation may amend its articles of incorporation by a vote or written assent of the stockholders representing at least two-thirds of the subscribed capital stock of the corporation. If the amendment changes, diminishes or restricts the rights of the existing shareholders, then the dissenting minority has only one right, viz.: "to object thereto in writing and demand payment for his share." Under section 22 of the same law, the owners of the majority of the subscribed capital stock may amend or repeal any by-law or adopt new by-laws. It cannot be said, therefore, that Gokongwei has a vested right to be elected director, in the face of the fact that the law at the time such right as stockholder was acquired contained the prescription that the corporate charter and the by-law shall be subject to amendment, alteration and modification.Note:A corporation is authorized to prescribe qualifications of its directors; such is not invalid, provided, however that before such nominee is disqualified,

he should be given due process to show that he is not covered by such disqualification. A director stands in fiduciary relation to the corporation and its stockholders. The disqualification of a competition from being elected to the board of directors is a reasonable exercise of corporate authority. Sound principles of corporate management counsel against sharing sensitive information with a director whose fiduciary duty to loyalty may require that he discloses this information to a competitive rival.

52. Sales v. SECGR NO L-54330 January 13, 1989Cortes, J.:

Facts:State Investment House, Inc. (formerly State Financing Center, Inc.) entered into a sales agreement with Sipalay Mining whereby the latter sold to the former 200,000,000 common shares of its capital stock in the amount of P2,600,000.00. The sales agreement between Sipalay Mining and State Investment contained the following terms and conditions:2. That the stockbroker shall not sell more than 1,000,000 shares per buyer, to the extent practicable; 3. In the event you decide to make a public offering [of] additional shares in the future, whether with Sipalay Mining and Exploration Corporation or any other corporation organized by Sipalay Mining Exploration Corporation, you hereby grant us a right of first refusal to undertake the same; 4. The Corporation shall as soon as practicable after the offering period of our shares, apply for listing in the Stock Exchange in accordance with the rules and regulations of the Securities and Exchange Commission. The timing of the date of listing shall be mutually decided by us. 5. That State Financing Center, Inc. shall issue a voting trust in favor of the Board of Directors of Sipalay Mining Exploration Corporation which shall only be good up to the time the sale to the public of said shares has been effected.The 200,000,000 shares of stock of Sipalay Mining, covered by ten certificates of stock, were delivered to State Investment. Subsequently, the restriction on the sale of the shares was modified by allowing sale in blocks of 5,000,000 shares per buyer. On December 1975, State Investment requested Sipalay Mining to transfer the 200,000,000 shares to Anselmo Trinidad & Co., Inc. (hereinafter referred to as ATCO), to which it had sold the shares. Sipalay Mining complied with

this request. During the time that ATCO held the shares, it voted them in the stockholders' meetings of Sipalay Mining. Some two and a half years later, ATCO in turn sold 198,500,000 of the shares to respondent VULCAN. Sipalay Mining was requested by ATCO to transfer the 198,500,000 shares to the name of VULCAN. Eight days prior to the scheduled annual stockholders' meeting of Sipalay Mining, petitioners filed before the SEC a petition to nullify the sale of the shares to VULCAN, with a prayer for the issuance of a writ of preliminary injunction to enjoin VULCAN from voting the shares. Issue:Whether the transferee of the shares can be deprived of his right to vote due to the fact that the transferor has violated a condition in the sales agreement it entered when it acquired the subject shares?

Held:NO, THE BUYER’S RIGHT TO VOTE THE SHARE IS A RIGHT INHERENT TO OWNERSHIP. Where the corporation sold its share to an investment house on the condition that the same shall be sold to the public through stockbrokers in block of 1 million shares per buyer and the condition was not fulfilled, the sale is nevertheless valid unless set aside by a competent court. Thus, the buyer, as a stockholder, cannot be deprived of his right to vote his shares as it is a right inherent to 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 issuing corporation to issue a stock certificate in favor of the buyer are questions of policy or management and are left solely to the honest decision of officers and directors of a corporation, and so long as they act in good faith, their orders are not reviewable by the courts.

53. Pena v. Court of AppealsGR NO 91478 February 7, 1991Gancayco, J.:

Facts:PAMBUSCO mortgaged the subject properties to the DBP. For failure to pay its obligation, the mortgage was foreclosed and was sold to Pena.The Board of Directors of PAMBUSCO, through three out of its five directors, resolved to assign its right of redemption over the said properties and authorized one of its members, Atty. Briones to execute and sign a Deed of

Assignment for and in behalf of PAMBUSCO. The remaining asset of the corporation was the right to redeem the foreclosed parcels of land.Under the by laws of PAMBUSCO, to constitute a quorum in a special meeting of the Board, at least four members must be present.Consequently, Briones executed executed a Deed of Assignment in favor of Enriquez. The latter redeemed the properties and sold the same in favor of Spouses Yap. The Yaps wrote Pena asking for the payment of the back rentals.Despite the foregoing, Pena remained in possession of the lots prompting the Yaps to file an action in court.

Issue:Whether or not the board resolution authorizing the assignment of the right to redeem the properties is valid

Held:NO. three out of five directors of the board of directors present in a special meeting do not constitute a quorum to validly transact business when its by- kaws require at least four members to constitute a quorum. Under Section 25 of the Corporation Code, the articles of incorporation or by-laws may fix a greater number than the majority of the number of directors to constitute a quorum. Any number less than the number provided in the articles or by- laws cannot constitute a quorum; any act therein would not bind the corporation; all the attending directors could do is to adjourn.Further, where the remaining asset of a corporation was its right to redeem the parcels of land that were foreclosed, the assignment of the right to redeem requires in addition to a proper board resolution, the affirmative votes of the stockholders representing at least 2/3 of the outstanding capital stock. There having been no stockholders’ approval the redemption madde by the assignee is invalid.

54. Visayan v. NLRCGR NO 69999 April 30, 1991Paras, J.:

Facts:Upon organization of private respondent Fujiyama Hotel & Restaurant, Inc., in which Rivera holds majority interest; it immediately opened a Japanese

establishment, known as Fujiyama Hotel & Restaurant. In order to fully offer an authentic Japanese cuisine and traditional Japanese style of service, private respondent hired the services of Isamu Akasako as its chef and restaurant supervisor. In June, 1980, Lourdes Jureidini and Milagros Tsuchiya, allegedly pretending to be stockholders of the corporation, filed a case against Rivera and Akasako to wrest control over the establishment.The court issued a writ of preliminary mandatory injunction transferring possession of all the assets of the company and the management thereof to Jureidini and Tsuchiya. Upon assuming management, Jureidini and Tsuchiya replaced almost all of the existing employees with new ones, majority of whom are the present petitioners in the instant case.

In the meantime, Rivera and the rest of the stockholders elevated the civil case to the Supreme Court through a petition for certiorari assailing the ground for the issuance of the writ of preliminary mandatory injunction by the lower court. The SC issued a writ of preliminary injunction to enjoin enforcement of the writ of preliminary mandatory injunction issued by the lower court. Pursuant to the above-quoted resolution, Rivera and Akasako regained control and management of Fujiyama Hotel & Restaurant, Inc. Immediately upon assumption of the management of the corporation, Rivera et al., refused to recognize as employees of the corporation all persons that were hired by Jureidini and Tsuchiya during the one-year period that the latter had operated the company and reinstated the employees previously hired by them. This gave rise to the filing of the present case by the dismissed employees hired by Jureidini and Tsuchiya (some of whom had allegedly been hired by Rivera and Akasako even before Jureidini and Tsuchiya assumed management of the corporation) against Fujiyama Hotel & Restaurant, Inc. for illegal dismissal.

Issue:whether or not there is privity of contract between petitioners and private respondent as to establish an employer-employee relationship between the parties.Held:NO PRIVITY OF CONTRACT, THE HIRING OF EMPLOYEES BY THOSE WHO TOOK OVER THE COMPANY DOES NOT BIND THE LATTER.

Where two parties forcibly took over the management of the corporation by virtue of a writ of preliminary injunction issued on the basis of their claim that they were stockholders, their hiring of new employees to replace the original employees cannot bint the corporation, as the act was done without authority from the board. The claim of illegal dismissal by the new employees is without merit as they were not hired by the corporation or its duly authorized officers of agents.

55. Lee v. Court of AppealsGR NO 93695 February 4, 1992Gutierrez, Jr. J.:

Facts

On November 1985, filed a complaint for a sum of money against Sacoba Manufacturing Corp who, in turn, filed a third party complaint against ALFA and the petitioners. IN the course of the proceedings, Lee and Lacdao informed the court that by virtue of the voting trust agreement they ceased to be officers and directors of ALFA, hence, they could no longer receive summons or any court processes for or on behalf of ALFA.; that management of ALFA had been transferred to DBP.The DBP, on the other hand, claimed that it was not authorized to receive summons on behalf of ALFA since the DBP had not taken over the company which has a separate and distinct corporate personality and existence. The trial court issued an order advising Sacoba Manufacturing, et. al. to take the appropriate steps to serve the summons to ALFA. Sacoba Manufacturing, et. al. filed a Manifestation and Motion for the Declaration of Proper Service of Summons which the trial court granted.

Issue:whether or not there was proper service of summons ALFA through the petitioners as president and vice-president, allegedly, of the subject corporation after the execution of a voting trust agreement between ALFA and DBP.

Held:NO. Any director who ceases to be the owner of at least 1 share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Since a director who executes a VTA over all his shares

ceases to be a stockholder of record in the books of the corporation and cease to be a director, he cannot be served with summons intended for the corporation.

56. Citibank N.A. v. ChuaGR NO 102300 March 17, 1993

Facts:Citibank is a foreign commercial banking corporation duly licensed to do business in the Philippines. Spouses Cresencio and Zenaida Velez, were good clients of the bank.They filed a complaint for specific performance and damages against the bank.On the date of the pre-trial conference, counsel for petitioner bank appeared, presented a special power of attorney executed by Citibank officer Florencia Tarriela in favor of petitioner bank's counsel, the J.P. Garcia & Associates, authorizing it to represent and bind petitioner bank at the pre-trial conference of the case.The by-laws of the bank grant to its Executing Officer and Secretary Pro-Tem the power to delegate to a Citibank officer, in this case Ferguson, the authority to represent and defend the bank and its interests.In spite of this SPA, counsel for private respondents orally moved to declare petitioner bank in default on the ground that the SPA was not executed by the Board of Directors of Citibank. Petitioner bank was then required to file a written opposition to this oral motion to declare it in default. In said opposition petitioner bank attached another SPA made by William W. Ferguson, Vice President and highest ranking officer of Citibank, Philippines, constituting and appointing the J.P. Garcia & Associates to represent and bind the BANK at the pre-trial conference and/or trial of the case.

Issue:Whether a board resolution is necessary for its legal counsel or Citibank employees to act as its attorney-in-fact in the case because petitioner bank's by-laws grant to its Executing Officer and Secretary Pro-Tem the power to delegate to a Citibank officer, in this case William W. Ferguson, the authority to represent and defend the bank and its interests.

Held:NO. 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. It is clear that corporate powers may be directly conferred upon corporate officers or agents by statute, the articles of incorporation, the by-laws or by resolution or 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 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, William W. Ferguson in this case, clothing him with authority to direct and manage corporate affairs.

57. Grace Christian Highschool v. Court of AppealsGR NO. 108905 October 23, 1997Mendoza, J.:

Facts:Grace Christian High School is an educational. Grace Village Association, Inc., on the other hand, is an organization of lot and/or building owners, lessees and residents at Grace Village. On December 1975, a committee of the board of directors prepared a draft of an amendment to the by-laws, providing that GRACE CHRISTIAN HIGH SCHOOL representative is a permanent Director of the ASSOCIATION." This draft was never presented to the general membership for approval. For 15 years, Grace Christian High School was given a permanent seat in the board of directors of the association.After some time, the association's committee on election informed James Tan, principal of the school, that "it was the sentiment that all directors should be elected by members of the association." For this reason, Tan was told that "the proposal to make the Grace Christian High School

representative as a permanent director of the association, although previously tolerated in the past elections should be re-examined."

Issue:Whether or not provision in the by- laws allowing a director to hold the position perpetually is valid.

Held:NO. The BOD of Corporations must be elected from among the stockholders or members. Since the provision is contrary to law, the fact that for 15 years it has not been questioned cannot forestall a later challenge to its validity. 58. Naguiat v. NLRCG.R. No. 116123. March 13, 1997Panganiban, J.:

Facts:CFTI held a concessionaire’s contract with the Army Air Force Exchange Services (AAFES) for the operation of taxi services within Clark Air Base. Sergio Naguiat was CFTI’s president while Antolin Naguiat was its VP. The Naguiats were actively engaged in the management of CFTI.Clark Air Base was not spared from the phase out of the US Military bases in the country, as a result, the AAFES was dissolved and employees were terminated.The AAFES Taxi Drivers Association (UNION for brevity) and CFTI negotiated as regards separation benefits for the displaced employees. An agreement was reached, however some of the employees refused to accept the same, they disaffiliated from the Union and joined the National Organization of Workingmen (NOWM). NOWM filed a complaint against AAFES, Sergio, Antolin and Sergio F. Naguiat Enterprises.The enterprise was impleaded on the ground that both CFTI and Naguiat Enterprises were "close family corporations" owned by the Naguiat family

Issue:Whether the corporate officers of CFTI can be held solidarily liable for corporate debts

Held:YES. Stockholders who are actively engaged in the management or operation of the business and affairs of a close corporation shall be

personally liable for the corporate torts unless the corporation has obtained reasonably adequate liability insurance coverage.

59. Yao Ka Sin Trading v. Court of Appeals GR NO

Facts:

60. Benguet Electric Cooperative, Inc. v. NLRCGR NO

Facts:Cosalan was the General manager of Benguet Electric Cooperative, Inc. (BENECO). BENECO, through Casalan received COA Audit Report stating the financial status and irregularities in the utilization of funds released by the National Electrification Administration (NEA) to BENECO.Heving been made aware of the serious financial condition of BENECO, Casalan implemented remedial measures.The members of the Board reacted by adopting a series of resolutions. The resolutions adopted abolished the housing allowance of Casalan and reduced his salary, among others.Another resolution was adopted, removing Casalan as General Manager. Despite such, he continued to work as a GM in the belief that he could be suspended or removed only by duly authorized officials of NEA.Casalan requested BENECO to release his salary, the latter denied the request. This prompted Casalan to challenge the validity of the board resolutions with the NLlRC.LA held both BENECO and its board members to be jointly and severally liable.

Issue:Whether the members of BOD are liable

Held:YES.GR: the board members of the corporation who in good faith purport to act for and in behalf of the corporation within the lawful scope of their authority do not become liable for the consequences of their acts.

EXP: when the directors abolished the benefits and eventually dismissed in bad faith and without procedural due process the GM who tried to implement remedial measures to solve the serious financial condition of the corporation.

61. Metropolitan bank and Trust Company v. Quilts & All Inc.GR NO.

Facts:de los Santos the then Corporate Secretary of Quilts issued a 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 to Quilts. On the basis of the Secretary's Certificate, Metrobank restructured Dizon's existing personal loan, which was secured by a mortgaged over the personal property of Dizon and of the corporation.More than a year later, Metrobank received a letter from Atty. Villanueva, Quilt's counsel offering an amount for the cancellation of the mortgage on the property owned by Quilts because, allegedly, "Mr. & Mrs. Senen Dizon had left the Philippines, leaving several creditors." Metrobank refused the offer since the amount offered did not approximate the appraised value of the mortgaged property. Atty. Trinidad, Quilt's new counsel wrote Metrobank reiterating the mortgage cancellation. In addition, counsel claimed that the alleged April 7, 1987 special meeting could not have taken place for lack of the requisite number of directors present to constitute a quorum since the Chairman and 2 other members of the Board of Directors were aboard on that date.

Issue:Whether or not the loan may be annulled

Held:NO. A mortgage on corporate property accepted by a bank as basis for restructuring a personal loan cannot be annulled even though it could not have been authorized by the board of directors for lack of quorum where the bank relied on the secretary’s certificate attesting to the existence of a board resolution approving the mortgage.62. Lopez Realty Inc. v. FontechaGR NOFacts:

Lopez Realty, Inc., is a corporation engaged in real estate business, petitioner Gonzales is one of its majority shareholders. Sometime in 1978, Lopez submitted a proposal relative to the the reduction of employees with provision for their gratuity pay. The proposal was deliberated upon and approved in a special meeting of the board of directors. It appears that petitioner corporation approved two (2) resolutions providing for the gratuity pay of its employees.Private respondents were the retained employees of the Corporation. In a letter, the private respondents requested for the full payment of their gratuity pay. Their request was granted in a special meeting held. At that, time, however, Gonzales was still abroad. Allegedly, while she was still out of the country, she sent a cablegram to the corporation, objecting to certain matters taken up by the board in her absence, such as the sale of some of the assets of the corporation. Upon her return, she filed a derivative suit with the SEC against majority shareholder Lopez. Notwithstanding the "corporate squabble" between Gonzales and Lopez, the first two (2) installments of the gratuity pay of the private respondents were paid by the corporation. Also, the corporation had prepared the cash vouchers and checks for the third installments of gratuity pay of said private respondents.For some reason, said vouchers were cancelled by Gonzales. Likewise, the first, second and third installments of gratuity pay of the rest of private respondents were prepared but cancelled by Gonzales. Despite private respondents' repeated demands for their gratuity pay, corporation refused to pay the same.

Issue:Whether the corporation is bound to grant its employees gratuity pay despite the lack of notice to a board director during the meeting wherein the said resolution was passed

Held:YES. As a general rule, a corporation through its board of directors should act in the manner and within the formalities prescribed by its charter or by the general law. Thus, directors must act as a body in a meeting called pursuant to the law or corporations by- laws, otherwise any action may be questioned by any objecting stockholder. However, an action of the board of directors during a meeting, which was illegal for lack of notice may be ratified either expressly, by the action of the directors in subsequent legal meeting or impliedly by the corporation’s subsequent course of conduct.

Thus, a director who was not notified of a board meeting is precluded from questioning the validity of the resolution granting gratuity pay to employee approved at that meeting if she later on acquiesced to it by signing the vouchers for the payment of the gratuity pay.

63. Premium Marble Resources Inc. v. Court of AppealsGR NO

Facts:Premium Marble Resources, Inc. (PREMIUM for brevity), assisted by Atty. Dumadag as counsel, filed an action for damages against International Corporate Bank (ICB).Meantime, the same corporation, i.e., PREMIUM, but this time represented by Siguion Reyna, Montecillio and Ongsiako Law Office as counsel, filed a motion to dismiss (MTD) on the ground that the filing of the case was without authority from its duly constituted board of directors as shown by the excerpt of the minutes of PREMIUM’s board of directors’ meeting. In its opposition to the MTD, PREMIUM thru Atty. Dumadag contended that the persons who signed the board resolution are not directors of the corporation and were allegedly former officers and stockholders of PREMIUM who were dismissed for various irregularities and fraudulent acts; On the other hand, Siguion Reyna Law firm as counsel of PREMIUM in a rejoinder, asserted that it is the general information sheet filed with the SEC, among others, that is the best evidence that would show who are the stockholders of a corporation and not the AOI since the latter does not keep track of the many changes that take place after new stockholders subscribe to corporate shares of stocks.

Issue:Whether the filing of the action was with authorization from the BOD

Held:NO. By express mandate of the Corporation Code, all corporations duly organized pursuant thereof are required to file with SEC the names, nationalities and residence of the directors and officers elected. In determining whether the filing of an action was authorized by the board, it is the list of directors in the latest general information sheet as siled with the SEC which is controlling.

64. Esguerra v. Court of Appeals

GR NO

Facts;Julieta Esguerra filed a complaint for administration of conjugal partnership or separation of property against her husband Vicente Esguerra, Jr. The said complaint was later amended impleading V. Esguerra Construction Co., Inc. (VECCI for brevity) and other family corporations as defendants. The parties entered into a compromise agreement which was submitted to the court. On the basis of the said agreement, the court rendered two partial judgments: one between Vicente and Esguerra; and the other as between the latter and VECCI. By virtue of said agreement, Esguerra Bldg. I was sold and the net proceeds distributed according to the agreement. The controversy arose with respect to Esguerra Building II. Esguerra started claiming one-half of the rentals of the said building which VECCI refused. Esguerra filed a motion with respondent court praying that VECCI be ordered to remit one-half of the rentals to her until the same be sold. VECCI opposed said motion. Meanwhile, Esguerra Bldg. II was sold to Sureste Properties, Inc. Sureste relied on the certification given by the corporate secretary that such sale was authorized by resolution of the biardEsguerra sought to nullify the sale on the ground that VECCI is not the lawful and absolute owner thereof and that she has not been notified nor consulted as to the terms and conditions of the sale.

Issue:Whether or not the sale may be invalidated Held:NO. A stockholder cannot invalidate the sale of corporate properties for failure to comply with Section 40 of the Corporation Code, where the buyer relied on the secretary’s certificate that the sale had been authorized by resolution of the board of directors and of the stockholders. Being regular on its face, a Secretary’s Certificate is sufficient for a third party to rely on. It does not have to investigate the truth of the facts contained in such certification, otherwise business transaction of corporations would become tortuously slow and unnecessarily hampered.

65. Traders Royal Bank v. Court of AppealsGR NO

Facts:

Filriters Guaranty Assurance Corporation (FILRITERS) is the registered owner of CBCI No. D891. Under a deed of assignment, FILRITERS transferred CBCI No. D891 to Philippine Underwriters Finance Corporation (PHILFINANCE). Subsequently, PHILFINANCE transferred CBCI No. D891, which was still registered in the name of FILRITERS, to Traders Royal Bank (TRB). The transfer was made under a repurchase agreement granting PHILFINANCE the right to repurchase the instrument on or before April 27, 1981. When PHILFINANCE failed to buy back the note on maturity date, it executed a deed of assignment, dated April 27, 1981, conveying to TRB all its rights and title to CBCI No. D891.Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse claim filed by FILRITERS.

Issue:Whether or not the deed of assignment is valid

Held:NO. The assignment made without authorization of the board of directors does not bind the corporation

66. Western Institute Technology, Inc. v. SalasGR NO 113032 August 21, 1997

Facts:The members of the Salas family are the majority and controlling members of the Board of Trustees of Western Institute of Technology, Inc. (WIT, for short). The minority stockholders of WIT held a Special Board meeting in the principal office of WIT. In attendance were other members of the Board.Prior to the Special Board Meeting, copies of notice thereof were distributed to all Board Members. In said meeting, the Board of Trustees passed Resolution No. 48, granting monthly compensation to the private respondents as corporate officers. A few years later, two (2) separate criminal informations were filed, one for falsification of a public document and the other for estafa were filed.

The charge for falsification was anchored on the ground that Resolution No. 4 was passed on a date not covered by the WIT income statement passed with the SEC.The private respondents were acquitted of the complaints. Petitioners however contend that private respondents should be held civilly liable despite their acquittal. They base their claim on the alleged illegal issuance by private respondents of Resolution No. 48, ordering the disbursement of corporate funds in favor of private respondents, board members of WIT. Petitioners maintain that this grant of compensation to private respondents is proscribed under Section 30 of the Corporation Code. Thus, private respondents are obliged to return these amounts to the corporation with interest.

Issue:Whether or not the grant of additional compensation to WIT’s Board of Directors as corporate officers was valid

Held:YES. In the case at bench, Resolution No. 48, s. 1986 granted monthly compensation to private respondents not in their capacity as members of the board, but rather as officers of the corporation, more particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western Institute of Technology.

Note:Members of the board of directors may receive compensation, in addition to reasonable per diems, in the following cases: When there is a provision in the by- laws fixing their compensation;When the stockholders representing at least majority of the outstanding capital stock at a regular or special stockholders’ meeting agree to give it to them; andWhen they render services to the corporation in any capacity other than as a director

67. Bitong v. Court of AppealsGR NO123553 July 13, 1998

Facts:Ex Libris Publishing Co., Inc was incorporated by Senator Enrile, Cristina Ponce Enrile through Jaka Investments Corporation (JAKA) and the Apostols.

When Ex Libris suffered financial difficulties, JAKA and the Apostols together with the new investors restructured Ex Libris by organizing a new corporation known as Mr. & Mrs. Bitong as treasurer and member of the Board of Mr & Ms company complained of the irregularities committed by Apostol, the President and Chairperson of the Board.She further claimed that except for the sale of the name Philippine Inquirer to Philippine Daily Inquirer (PDI hereafter) all other transactions and agreements entered into by Mr. & Ms. with PDI were not supported by any bond and/or stockholders’ resolution. That upon instructions of Eugenia D. Apostol, Mr. & Ms. made several cash advances to PDI on various occasions which was not supported by any board or stockholders’ resolution, contract nor any other document. Bitong alleged stocks were sold and endorsed in his favour by Senator Enrile, by virtue of which he has the right to bring such action in behalf of the corporation; records however showed that the subject stocks were issued in favour of Apostol by virtue of Declaration of trust and Deed of Sale executed by JAKA.

Issue:Whether Bitong has the capacity to initiate a derivative suit in behalf of the corporation to assail the supposed fraudulent acts of the private respondentsWhether or not Bitong is entitled to dividends declared by the corporation

Held:

NO. The power to sue and be sued in any court by a corporation is lodged in the board of directors that exercises its corporate powers 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 the corporate share for whose benefit the shares are held.NO. The alleged endorsement of the Certificate of Stock in the name of JAKA nor the deed of sale executed by Sen. Enrile directly in favor of petitioner could not have legally transferred or assigned the shares of stock in favor of petitioner because said Certificate of Stock in the name of JAKA was already cancelled and a new one was issued in favor of respondent Apostol by virtue of a Declaration of Trust and Deed of Sale. Petitioner was well aware of this trust, being the person in charge of this documentation

and being one of the witnesses to the execution of this document. Hence, petitioner is not entitled to dividends.When a dividend is declared, it belongs to the person who is the substantial and beneficial owner of the stock at the time regardless of when the distribution profit was earned.

68. Tan Wing Talk v. MakasiarGR NO 122452 January 29, 2001

Facts:Petitioner as director of Concord-World Properties, Inc., (CONCORD for brevity), filed an action for violation of BP 22 with the City Prosecutor against Vic Ang Siong .The complaint alleged that the check issued by Vic Ang Siong in favor of Concord was dishonored when presented for encashment. Vic Ang Siong sought the dismissal of the case on two grounds: First, that petitioner had no authority to file the case on behalf of CONCORD, the payee of the dishonored check, since the firm’s board of directors had not empowered him to act on its behalf. Second, he and CONCORD had already agreed to amicably settle the issue after he made a partial payment of on the dishonored check. On March 23, 1994, the City Prosecutor dismissed the complaint on the following grounds: (1) that petitioner lacked the requisite authority to initiate the criminal complaint for and on Concord’s behalf; and (2) that CONCORD and Vic Ang Siong had already agreed upon the payment of the latter’s balance on the dishonored check.

Issue:Whether Tam Wing Tak has the authority to sue in behalf of the corporation

Held:NO. Under Section 36 of the Corporation Code, read in relation of Section 23, it is clear that where the corporation is an injured party, 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 by the board of directors, a minority stockholder and member of the BOD had no such power or authority to sue on behalf of the corporation.

69. DBP v. Court of Appeals

GR NO 126200 August 16, 2001Kapunan, J.:

Facts:Marinduque Mining Corporation (MMC) purchased construction materials from Remington Industrial Sales Corporation (RISC). MMC failed to pay, this prompted RISC to file an action for collection with the court. In the meantime, MMC obtained various loan accommodations from the PNB, as a security, the former (MMC) executed REMs and CMs over its properties in favour of the bank. The Mortgage Agreement was amended it was agreed that Marinduque mortgaged in favour of PNB all other real and personal properties and other real rights the latter may subsequently acquire.For failure to settle the account, the bank extrajudicially foreclosed the mortgaged property. PNB and DBP emerged as the highest bidders.PNB and DBP assigned and conveyed all their rights, interests and participation over the foreclosed properties in favour of Nonoc Mining, Mariculum Mining, Island Cement and APT.Sometime in 1987, PNB and DBP pursuant to Resolution No. 50 assigned, transferred and conveyed to the National Government thru the Asset Privatization Trust (APT) all its rights and interest over MMC which were earlier assigned to other corporations.Remington impleaded as co defendants PNB, DBP and other assignee corporations on the ground that all of them must be treated in law as one and the same entity by disregarding the veil of corporate fiction since all of these corporations share the same or almost the same set of directors.

Issue:Whether Remington, a third person may raise the issue on interlocking directors

Held:NO. The rule pertaining to transactions between corporation with interlocking directors resulting in prejudice to one of the corporation does not apply where the corporation allegedly prejudiced is a third party, not one of the corporations with interlocking directors. Thus, when a mortgage bank foreclosed the mortgage on the real and personal property of the debtor and thereafter assigned and the properties to a corporation it formed to manage and thereafter assigned the properties to a corporation it

formed to manage the foreclosed assets, the unpaid seller of the debtor can not complain that the assignment is invalid simply because the morgagee and the assignee have interlocking directors.

70. A.F. Realty & Dev’t Inc. v. Dieselman Freight ServicesGR NO 111448 January 16, 2002Sandoval- Gutierrez, J.:

Facts:Manuel Cruz member of BOD of Dieselman Corporation authorized Polintan, a real estate broker of the CNP Real Estate Brokerage to look for a buyer of a parcel of land registered under the name of the corporation. Cruz, however had no authority from the corporation to sell the said property.In turn, Polintan authorized Noble to sell the same lot.Noble then offered the property to A.F. Realty.A.F. through Ranullo, a board member and the vice president accepted the offer and issued a check payable to the order of Dieselman. Ranullo then asked Polintan for the board resolution of Dieselman authorizing the sale of said lot, which the latter failed to produce; what was given was the TCT, tax declaration and other documents.A higher price was demanded from A.F. Realty; however it reiterated that it is willing to pay only the balance. Because of this, Cruz terminated the offer and demanded the return of the title and other documents. A.F Realty then filed a complaint for specific performance against Dieselman and Cruz.Meanwhile, Dieselman and Midas Development Corporation executed a Deed of Absolute Sale over the same property.The lower court held that the acts of Cruz bound the corporation.CA reversed.

Issue:Whether the alleged sale of land to A.F. Realty bound the corporation

Held:NO. Contracts or acts of a corporation must be made either by the BOD or by a corporate agent duly authorized by the board. Absent such valid delegation/ authorization, the rule is that the declaration of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, is held not binding on the corporation.

Thus, where the director was not authorized by the board to sell corporate property, its sale is not binding on the corporation. The sale cannot be ratified despite acceptance by the corporation of the partial payment if what is involved is sale of land. Considering that the officers who represented and acted as agents in behalf of the corporation were not authorized, the contract of sale is null and void under Article 1874 of the Civil Code. Being a void contract, it is not susceptible of ratification.

71. Filipinas Port Services, Inc. v. GoGR NO 161886 March 16, 2007Garcia, J.:

Facts:Cruz, FILPORT’s president wrote a letter to the BOD questioning the board’s creation of certain positions with a monthly remuneration and the election thereto of certain members of the board,Cruz requested the board to take necessary actions to recover from those elected the salaries they have received.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 mismanagement of the corporation.The derivative suit however hibernated with the SEC and was turned over to the RTC which ruled that the creation of the questioned positions were unnecessary.CA reversed.

Issue:Whether or not the creation of additional offices/ positions by the board may be questioned in court through the filing of a derivative suit

Held:NO AS LONG AS THE BOD ACTS IN GOOD FAITH AND IN THE EXERCISE OF HONEST JUDGMENT IN THE INTEREST OF THE CORPORATION.The determination of the necessity for additional offices and/ or positions in a corporation, if authorized under the by- laws, is a management prerogative which the courts will not review in the absence of any proof that such prerogative was exercised in bad faith or with malice. Questions of policy or of management are left solely to the honest decision of the board as the business manager of the corporation, and the court is without authority to substitute its judgment for that of the board, and as

long as it acts in good faith and in the exercise of honest judgment in the interest of the corporation, its orders are not reviewable by the courts.

72. Associated Bank v. Spouses PronstrollerGR NO 148444 July 14, 2008Nachura, J.:

Facts:Spouses Vaca failed to pay their obligation with Association Bank which led to the foreclosure and sale of their property with the bank as the highest bidder. The Vacas filed an action to annul the foreclosure as well as the sale.During the pendency of the case, the bank offered the property for sale, Spouses Pronstroller offered to purchase the same; the offer was made through Atty. Saluta, the bank’s VP, Corporate Secretary, Board member and in- house counsel. The offer was accepted and negotiations between the parties ensued which resulted to a letter- agreement between them.The parties agreed that deposit must be made within ninety days from the signing of the agreement. On July 1993 or prior to the expiration of the 90-day, in view of the pendency of the case between the spouses Vaca and the bank involving the subject property, Spouses Pronstroller requested that the balance of the purchase price be made payable only upon service on them of a final decision or resolution of this Court affirming petitioner's right to possess the subject property. Atty. Saluta agreed through another letter- agreement without any board resolution, thus in effect extending the 90 day period.After some time the bank underwent reorganization and Atty. Saluta was relieved of his responsibilities, the new management reviewed the records of the bank and found out that Spouses Pronstroller failed to pay the balance. The bank through Asset Recovery and Remedial Management Committee (ARRMC) disapproved the request of the Pronstrollers. The latter submitted a proposal as to how the balance will be paid but the bank disapproved. For failure of the parties to reach an agreement, the Pronstrollers informed the bank that they will enforce the July 1993 agreement; the bank countered that Atty. Saluta was not authorized to sign in behalf of the bank.

Issue: Whether the Letter Agreement signed by Atty. Saluta is binding on the bank under the doctrine of apparent authority

Held: YES. The doctrine of “apparent authority” had long been recognized in this jurisdiction. Apparent authority is derived not merely from practice. Its existence may be ascertained through:the general manner in which the corporation holds out an officer or agent as having the power to act in general, with which it clothes him; orthe acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers. Accordingly, the authority to act for and to bind a corporation may be presumed from acts of recognition in other instances, wherein the power was exercised without any objection from its board or shareholders, Undoubtedly, the bank had previously allowed its in- house counsel to enter into the first agreement without a board resolution expressly authorizing him to sell corporate property; thus it had clothe him with apparent authority to modify the same via the second letter- agreement. Thus, the corporation is bound by the acts entered into by its in house counsel even though he was subsequently relieved of the position.Naturally, the third person has little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestations of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law.

73. Cebu Country Club, Inc. v. ElizagaqueGR NO 160273 January 18, 2008Sandoval- Gutierrez, J.:

Facts:Sometime in 1987, San Miguel Corporation, a special company proprietary member of CCCI, designated respondent Ricardo F. Elizagaque, its Senior Vice President and Operations Manager for the Visayas and Mindanao, as a special non-proprietary member. The designation was thereafter approved by the CCCI’s Board of Directors.Elizagaque filed with CCCI an application for proprietary membership. After several inquiries as to the status of his application he was informed that the Board rejected his application. A significant amendment to CCCI’s Amended By-Laws requiring the unanimous vote of the directors present at a special or regular meeting was not printed on the application form respondent filled and submitted to

CCCI; considering that such amendment was introduced 20 years before respondent filed his application. What was printed thereon was the original provision which was silent on the required number of votes needed for admission of an applicant as a proprietary member. Thus, respondent was not informed as to why his application was rejected; he does not even have knowledge that unanimous vote of the Board members was required. This prompted Elizagaque to file an action for damages which ruled and its favor. CA affirmed.

Issue:whether in disapproving respondent’s application for proprietary membership with CCCI, petitioners are liable to respondent for damages, and if so, whether their liability is joint and several

Held:YES. In rejecting respondent’s application for proprietary membership, we find that petitioners violated the rules governing human relations, the basic principles to be observed for the rightful relationship between human beings and for the stability of social order. The trial court and the Court of Appeals aptly held that petitioners committed fraud and evident bad faith in disapproving respondent’s applications.The CCCI Board of Directors, under its Articles of Incorporation, has the right to approve or disapprove an application for proprietary membership. But such right should not be exercised arbitrarily.

74. People v. Hermenegildo Dumlao and Emilio La’oGR NO 168918 March 2, 2009Chico- Nazario, J.:

Facts:An information was filed before the Sandiganbayan charging Dumlao and others with violation of the anti graft and corrupt practices act. The information alleged that the respondent being then members of the board of trustees of GSIS entered into a contract of lease purchase with La’o whereby GSIS agreed to sell to La’o a GSIS property. Dumlao for his defense presented the Agreement and as well as the minutes of the meeting. He argued that the allegedly approved Board Resolution was not in fact approved by the GSIS Board of Trustees, contrary to the allegations in the information. Since the signatures of Fabian Ver, Roman Cruz, Aber Canlas and Jacobo Clave did not appear in the minutes of

the meeting held on 23 April 1982, he said it was safe to conclude that these people did not participate in the alleged approval of the Lease-Purchase Agreement. This being the case, he maintained that there was no quorum of the board to approve the supposed resolution authorizing the sale of the GSIS property. There 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.The Sandiganbayan ruled that the minutes of the meeting showed that the Board failed to approve the Lease- Purchase agreement because only three out of the seven members signed the minutes; 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 same.

Issue:whether or not the signatures of the majority of the GSIS board of trustees are necessary on the minutes of meeting to give force and effect to the Board Resolution pproving the proposed agreement by and among the GSIS and La’o.

Held:NO. In a criminal case involving a lease-purchase agreement allegedly disadvantageous to the government, the Sandiganbyan erred in concluding that there was no such agreement into and thus negating criminal liability since only three members out of seven signed the minutes of the meeting. The non-signing by the majority of the members of the Board of Trustees of the said minutes does not necessarily mean that the supposed resolution was not approved by the Board. The signing of the minutes by all the members of the board is not required. There is no provision in the Corporation Code of the Philippines that requires that the minutes of the meeting should be signed by all the members of the board. The proper custodian of the books, minutes and official records of a corporation is usually the corporate secretary. Being the custodian of corporate records, the corporate secretary has the duty to record and prepare the minutes of the meeting. The Signature of the corporate secretary gives the minutes of the meeting. The signature of the corporate secretary gives the minutes of the meeting probative value and credibility. Moreover, the entries contained in the minutes are prima facie evidence of what actually took place during the meeting.

75. Westmont Bank formerly Associated Citizens Bank then United Overseas Bank, Phils. v. Inland Construction and Development Corp.GR NO 123650 March 23, 2009Carpio- Morales, J.:

Facts:Inland obtained various loans from Associated Bank now Westmont. REMs were executed to secure the full payment of the obligation.Under a Deed of Assignment, Abrantes assumed the obligations of Inland and Aranda. The records show that Calo was the one assigned to transact on petitioner’s behalf respecting the loan transactions and arrangements of Inland as well as those of Hanil-Gonzales and Abrantes. Since it conducted business through Calo, who is an Account Officer, it is presumed that he had authority to sign for the bank in the Deed of Assignment; that petitioner sent a reply-letter which indicates that it had full and complete knowledge of the assumption by Abrantes of 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.