123 Montelibano v Bacolod-Murcia Milling GR No. L-15092 TOPIC: Business Judgment Rule PONTENTE: Reyes, JBL, J.

AUTHOR: Keith Meridores The board of director adopted a resolution granting an increase in the share of the planters with a condition (see fact # 5). The event happened; now, the board is contending that their resolution was invalid.

FACTS 1. Alfredo and Alejandro Montelibano, and the limited co-partnership Gonzaga & Co. are sugar planter in Negros Occ. 2. They have a milling contract with respondent Bacolod-Murcia Milling. 3. For 30 years (until crop year 1920-1921) they had a contract that provided the share 45-55 (in favor of the planters) 4. In 1936, by virtue of an Amended Milling Contract it was changed to 40-60 (in favor of the planters) and extended the contract from 30, to 45 years. 5. Subsequently later that year in Aug. 1936, the board of directors of respondent company adopted a resolution (written in Spanish) which granted to its sugar planters an increase in their share in the net profits in the event that

the sugar centrals of Negros Occidental should have a total annual production exceeding one-third of the production of all sugar central mills in the province. (contained in par. 9 of the resolution) 6. Their contract was amended to include the resolution. 7. In 1953, the production of sugar of the sugar centrals (The La Carlota, The Binalbagan-Isabela, and The San Carlos) of Negros Occ. Did increase, exceeding 1/3 of the production of all sugar mills in the province.

8. Consequently, the planters demanded and contended that all the sugar central granted 62.5% to their planters (compared to their 60). Hence, the respondent is obliged to give a similar increase. 9. The board of directors refused contending that resolution were made without consideration and that such

resolution was, therefore, null and void ab initio, being in effect a donation that was ultra vires and beyond the powers of the corporate directors to adopt. 10. The planters brought suit. The court ruled in favor of the respondent and upheld their contention. 11. Hence this appeal by the planters.
ISSUE: Whether or not the respondent milling company is bound by its resolution? HELD: Yes. RATIO: 1. The contention that the resolution was without consideration cannot stand. The terms embodied in the resolution

were supported by the same cause and consideration underlying the main amended milling contract (i.e. the extension of another 15 years) 2. With regards to their decision being an ultra vires act; it also cannot stand. 3. The resolution in question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or decrease the profits of the central, the court has no authority to review them. 4. It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of a corporation. 5. The court is without authority to substitute its judgment of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts. 6. with ratios 4 and 5, I hope you get the idea where the doctrine of business judgment rule came from.