Montelibano vs. Bacolod-Murcia Milling G.R. No.

L-15092

May 18, 1962

Facts: Plaintiffs-appellants, Alfredo Montelibano, Alejandro Montelibano, and the Limited co-partnership Gonzaga and Company, had been and are sugar planters adhered to the defendant-appellees sugar central mill under identical milling contracts. Originally executed in 1919, said contracts were stipulated to be in force for 30 years starting with the 1920-21 crop, and provided that the resulting product should be divided in the ratio of 45% for the mill and 55% for the planters. Sometime in 1936, it was proposed to execute amended milling contracts, increasing the planters share to 60% of the manufactured sugar and resulting molasses, besides other concessions, but extending the operation of the milling contract from the original 30 years to 45 years. The Board of Directors of the appellee Bacolod-Murcia Milling Co., Inc., adopted a resolution granting further concessions to the planters over and above those contained in the printed Amended Milling Contract. The appellants initiated the present action, contending that three Negros sugar centrals with a total annual production exceeding one-third of the production of all the sugar central mills in the province, had already granted increased participation (of 62.5%) to their planters, and that under the resolution the appellee had become obligated to grant similar concessions to the plaintiffs. Issue: WON the board resolution is an ultra vires act and in effect a donation from the board of directors? Held: No. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As 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. Whether the business of a corporation should be operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein. Gokongwei vs. SEC G.R. No. L-45911 April 11, 1979 Facts: Petitioner, stockholder of San Miguel Corp. filed a petition with the SEC for the declaration of nullity of the by-laws etc. against the majority members of the BOD and San Miguel. It is stated in the by-laws that the amendment or modification of the by-laws may only be delegated to the BODs upon an affirmative vote of stockholders representing not less than 2/3 of the subscribed and paid uo capital stock of the corporation, which 2/3 could have been computed on the basis of the capitalization at the time of the amendment. Petitioner contends that the amendment was based on the 1961 authorization, the Board acted without authority and in usurpation of the power of the stockholders n amending the by-laws in 1976. He also contends that the 1961 authorization was already used in 1962 and 1963. While this was pending, the corporation called for a stockholders meeting for the ratification of the amendment to the by-laws. This prompted petitioner to seek for summary judgment. This was denied by the SEC. In another case filed by petitioner, he alleged that the corporation had been using corporate funds in other corps and businesses outside the primary purpose clause of the corporation in violation of the Corporation Code. Issue: Are amendments valid? Held: The Court held that a corporation has authority prescribed by law to prescribe the qualifications of directors. It 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 An amendment to the corporate by-laws which renders a stockholder ineligible to be director, if he be also director in a corporation whose business is in competition with that of the other corporation, has been sustained as valid. This is based upon the principle that where the director is employed in the service of a rival company, he cannot serve both, but must betray one or the other. The amendment in this case serves to advance the benefit of the corporation and is good. Corporate officers are also not permitted to use their position of trust and confidence to further their private needs, and the act done in furtherance of private needs is deemed to be for the benefit of the corporation. This is called the doctrine of corporate opportunity.

MEL VELARDE vs. LOPEZ, INCG.R. No. 153886 January 14, 2004 FACTS: Lopez Inc., granted a loan to Mel V. Velarde (Mel), the General Manager of Sky Vision which is a subsidiary company owned by Lopez Inc. However, Mel was not able to pay the loan and Lopez Inc. proposed that he may use his retirement benefits to partially settle his loan, but because of disagreement on the amount of his retirement benefits, Mel refused the proposal which led Lopez Inc. to file a complaint for the claim of the payment with interest. Lopez Inc., petitioned to dismiss the case for lack of jurisdiction which drew MEL to assert that the veil of corporate fiction must be pierced to hold Lopez Inc., liable for his counterclaims. The Regional Trial Court denied the motion to dismiss and the motion for reconsideration. Lopez Inc., then filed a petition for certiorari to the Court of Appeals which held that Lopez Inc., is not a real party-in-interest on the counterclaim and that there was a failure to show the presence of any of the circumstances to justify the application of the principle of piercing the veil of corporate fiction. ISSUE: Whether or not Mel Velarde, on a complaint for collection of sum of money can raise a counterclaim for retirement benefits, unpaid salaries and incentives arising from services rendered by him in a subsidiary company of Lopez Inc. HELD: In determining which has jurisdiction over a case, the averments of the complaintcounterclaim taken as a whole are considered. With regards to Mel Velardes claim for unpaid salaries, unpaid share in net income, reasonable return on the stock ownership plan and other benefits for services rendered to Sky Vision, jurisdiction thereon pertains to the Securities and Exchange Commission even if the complaint by a corporate officer includes money claims since such claims are actually part of the prerequisite of his position and, therefore interlinked with his relations with the corporation. The question of remunerations involving a person who is not a mere employee but a stockholder and officer of the

corporation is not a simple labor problem but a matter that comes within the area of corporate affairs and management as is in fact a corporate controversy in contemplation of the Corporation Code. Mel Velarde argues nevertheless that jurisdiction over the subsidiary is justified bypiercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one. Ponce vs Encarnacion G.R. No. L-5883 November 28, 1953

Facts: This is a petition for a writ of certiorari to annul an order of the respondent court granting Potenciano Gapol authority, pursuant to section 26, Act No. 1459, otherwise known as the Corporation Law, to call a meeting of the stockholders of the Dagunoy Enterprises, Inc. and to preside at such meeting by giving proper notice to the stockholders, as required by law or by laws of the corporation, until after the majority of the stockholders present and qualified to vote shall have chosen one of them to act as presiding officer of the meeting; another order denying a motion of the petitioners to have the previous order set aside; and a third order denying a motion to the same effect as the one previously filed. Daguhoy Enterprises, Inc., was duly registered at a meeting duly called, the voluntary dissolution of the corporation and the appointment of Potenciano Gapol as receiver were agreed upon. The respondent Potenciano Gapol, who is the largest stockholder, charged his mind and filed a complaint to compel the petitioners to render an accounting of the funds and assets of the corporation, to reimburse it, jointly and severally because the contended that Domingo Ponce, the president of the company, used the company funds for his own benefit. The petitioner filed an action with the TC and prayed for an order directing him to a call a meeting of the stockholders of the corporation and to preside at such meeting in accordance with section 26 of the Corporation law. TC granted their petition. Issue: WON under the corporation code, the TC can validly call for a stockholders meeting? / Are the officers deprived of due process in the action of the TC? Held: Yes. On the showing of good cause therefor, the court may authorize a stockholder to call a meeting and to preside threat until the majority stockholders representing a majority strockholders representing a majority of the stock present and permitted to be voted shall have chosen one among them to preside it. And this showing of good cause therefor exists when the court is apprised of the fact that the by-laws of the corporation require the calling of a general meeting of the stockholders to elect the board of directors but call for such meeting has not been done. With persistency petitioners claim that they have been deprived of their right without due process of law. They had no right to continue as directors of the corporation unless reflected by the stockholders in a meeting called for that purpose every even year. They had no right to a holdover brought about by the failure to perform the duty incumbent upon one of them. If they felt that they were sure to be reelected, why did they fail, neglect, or refuse to call the meeting to elect the members of the board? Or, why did they not seek their reelection at the meeting called to elect the directors pursuant to the order of the respondent court. Tan vs Sycip G.R. No. 153468 August 17, 2006 FACTS: Grace Christian High School (GCHS) is a nonstock, non-profit educationalcorporation with 15 regular members, who also constitute the board of trustees. During the annual members meeting, there were only 11 living member-trustees, as 4 have already died. Out of the 11, 7 attended the meeting through their respective proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty. Antonio C.Pacis, who argued that there was no quorum. In the meeting, Petitioners Ernesto Tanchi,Edwin Ngo, Virginia Khoo, and Judith Tan were voted to replace the four deceased member-trustees. The controversy reached SEC and the petitioners maintained that the deceased member-trustees should not be counted in the computation of the quorum because, upon their death, members automatically lost all their rights (including the right to vote) and interests in the corporation. SEC declared the meeting null and void and ruled that the phrase entitled to vote under Sec 24 should be read with Sec 89 of Corpo Code. ISSUE: In a non-stock corporation, should dead members still be counted in determination of quorum for purposed of conducting the Annual Members Meeting? HELD: Having thus determined that the quorum in a members meeting is to be reckoned as the actual number of members of the corporation, the next question to resolve is what happens in the event of the death of one of them. In stock corporations, the executor or administrator duly appointed by the Court is vested with the legal title to the stock and entitled to vote it. Until a settlement and division of the estate is effected, the stocks of the decedent are held by the administrator or executor. On the other hand, membership in and all rights arisingfrom a nonstock corporation are personal and nontransferable, unless the articles of incorporation or the bylaws of the corporation provide otherwise. In other words, the determination of whether or not "dead members" are entitled to exercise their voting rights(through their executor or administrator), depends on those articles of incorporation or by laws. Under the By Laws of GCHS, membership in the corporation shall, among others, beterminated by the death of the member. Salvatierra vs. Garlitos G.R. No. L-11442 May 23, 1958

Facts: Manuela Salvatierra-owner of a parcel of land in Leyte. MS entered into a contract of lease with the Phil Fibers Producers Co allegedly a corporation duly organized and existing under the laws of the Phils and represented by Refuerzo, the President. Lease Contract of 10 years. The land would be planted to kenaf, ramie, or other crops suitable to the soil. lessor would be entitled to 30% of the net income accruing from the harvest of any crop without being responsible for the cost of production after every harvest, the lessee was bound to declare at the earliespossible time the income derived and deliver the said share to the lessor. Not complied so MS filed with CFI for accounting, rescission and damages.CFI: grantedCourt granted and ordered the release of properties belonging the him. He claims he should be exonerated because: no allegation which

would hold him liable personally, for while it was stated that he was a signatory to the lease contract, he did so in his capacity as president of the corporation. ISSUE: WON SRefuerzo can be held personally liable to MS. HELD: SRefuerzo liable. Generally, a person who has contracted or dealt with an association in such a way as to recognize its existence as a corporate body is ESTOPPED from denying the same in an action arising out of such transaction or dealing. EXCEPTION is where there is fraud in the transaction. In the present case, SR no confirmation nor denial thus, may be concluded that MS was really made to believe that it was a corporation duly organized. A stockholder or member cannot be held personally liable for any financial obligation by the corporation in excess of his unpaid subscription. BUT THIS RULE IS UNDERSTOOD TO REFER MERELY TOREGISTERED CORPORATIONS and cannot be made applicable to the liability of members of an unincorporated association.

Government of the Phil vs. El Hogar G.R. No. L-26649

July 13, 1927

Facts: The Phil govt instituted a quo warranto proceeding against EL Hogar for the purpose of depriving it of its corporate franchise, excluding it from all corporate rights and privileges and effecting a final dissolution of the corporation. The govt questioned the validity because it conflicts with the Corpo Law whichdeclares that the BOARD SHALL NOT HAVE THE POWER TO FORCE THE SURRENDER AND WITHRAWAL OF UNMATURED STOCK EXCEPT IN CASE OF LIQUIDATION OF THECORPORATION OR OF FORFEITURE OF THE STOCK FOR DELINQUENCY. The govt asserts that because of the existence of the provision in the by-law, it justifies its dissolution. There is also a provision in the by-laws that the directors shall elect from among the shareholder members to fill the vacancies that may occur in the BOD until the election at the general meeting. ISSUE: WON El Hogar may be dissolved on such grounds HELD: NO. The by-law is a mere nullity and could not be enforced if the directors attempt to do so. Unless the law or the charter of the corporation xpressly provides that an office shall become at the expiration of the term of office for which the officer was elected, the general rule is to allow the officier to hold over until his successor is duly qualified. MERE FAILURE OF ACORPO TO ELECT OFFICERS DOES NOT TERMINATE THE TERM OF EXISTING OFFICERS AND DISSOLVE THE CORPORATION. ANTONIO CARAG VS NLRC ET. AL.G.R NO. 147590, APRIL 2, 2007 FACTS: National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU), on behalf of all of MACs rank and file employees, filed a complaint against MAC for illegal dismissal brought about by its illegal closure of business. They included in their complaint Mariveles Apparel Corporation s Chairman of the Board Antonio Carag in order to be solidarily liable for the illegal dismissal and illegal closure of business. According to the Labor Union of MAC, the Corporation suddenly closed its business without following the notice as laid down in the Labor Law of the Philippines. The Labor Arbiter decided in favor of the Labor Union and held that Antonio Carag being the owner of the corporation be solidarily liable for the payment of separation pay and backwages of the rank and file employees. Antonio Carag questioned the decision of the Labor Arbiter and alleged that the Corporation and its officers have separate and distinct personality and the latter cannot be held liable solidarily incases of payment of damages. Issue: Whether or not Antonio Carag be held solidarily liable for the payment of the illegally dismissedemployees. Held: The Supreme Court held that the rule is that a director is not personally liable for the debts of the corporation, which has a separate legal personality of its own. Phone Francisco vs GSIS G.R. No. L-18287 March 30, 1963

Facts: The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly instalments. The System itself was the buyer of the property in the foreclosure sale. The plaintiffs father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the System approved the request of Francisco to redeem the land through a telegram. Defendant received the payment and it did not, however, take over the administration of the compound. The System then sent a letter to Francisco informing of his indebtedness and the 1 year period of redemption has been expired. And the System argued that the telegram sent to Francisco saying that the System has approved the request in redeeming the property is incorrect due to clerical problems. Issue: WON the System is liable for the acts of its employees regarding the telegram? Held: Yes. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andals apparent authority. Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by the telegram. Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement.