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Montelibano vs Bacolod-Murcia Milling (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.
The appellee Bacolod-Murcia Milling Co., inc., resisted the claim, and
defended by urging that the stipulations contained in the resolution were
made without consideration; that the resolution in question 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.
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.

Philippine Realty and Holding Corp. vs. Ley Const. and Dev. Corp./Ley
Cons. and Dev. Corp. vs. Philippine Realty and Holding Corp., G.R.
No. 165548/G.R. No. 167879. June 13, 2011
Agency; doctrine of apparent authority. (J. Abad)
The Court finds that the signature of Abcede is sufficient to bind PRHC. As its
construction manager, his very act of signing a letter embodying the P 36
million escalation agreement produced legal effect, even if there was a blank
space for a higher officer of PHRC to indicate approval thereof. At the very
least, he indicated authority to make such representation on behalf of PRHC.
On direct examination, Abcede admitted that, as the construction manager,
he represented PRHC in running its affairs with regard to the execution of the
aforesaid projects. Abcede had signed, on behalf of PRHC, other documents
that were almost identical to the questioned letter-agreement. PRHC does not
question the validity of these agreements; it thereby effectively admits that
this individual had actual authority to sign on its behalf with respect to these
construction projects.

Atrium Management vs Ca
Corporation Law Ultra Vires Act Liability of Corporate Officers
In 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and
Antonio De Las Alas (its Chairman, now deceased) issued four postdated
checks to E.T. Henry and Co. The checks amount to P2 million. The checks are
crossed checks and are only made payable to E.T. Henrys account. However,
E.T. Henry still indorsed the checks to Atrium Management Corporation
(AMC). AMC then made sure that the checks were validly issued by
requesting E.T. Henry to get some confirmation from Atrium. Interestingly, De
Leon confirmed the checks and advised that the checks are okay to be
rediscounted by AMC notwithstanding the fact that the checks are crossed
checks payable to no other accounts but that of E.T. Henry. So when AMC

presented the check, it was dishonored because Hi-Cement stopped


payment. Eventually, AMC sued Hi-Cement, E.T. Henry, and De Leon. The trial
court ruled in favor of AMC and made all the respondents liable.
On appeal, Hi-Cement averred that De Leons act in signing the check was
ultra vires hence De Leon should be personally liable for the check. De Leon,
on the other hand, insisted that the checks were authorized by the
corporation.
ISSUE: Whether or not De Leons act of signing the check constitutes an ultra
vires act hence making her personally liable.
HELD: No, the act is not ultra vires but De Leon is still personally liable. The
act is not ultra vires because the act of issuing the checks was well within the
ambit of a valid corporate act. De Leon as treasurer is authorized to sign
checks. When the checks were issued, Hi-Cement has sufficient funds to
cover the P2 million.
As a rule, there are four instances that will make a corporate director, trustee
or officer along (although not necessarily) with the corporation personally
liable to certain obligations. They are:
He assents (a) to a patently unlawful act of the corporation, or (b) for bad
faith or gross negligence in directing its affairs, or (c) for conflict of interest,
resulting in damages to the corporation, its stockholders or other persons;
He consents to the issuance of watered down stocks or who, having
knowledge thereof, does not forthwith file with the corporate secretary his
written objection thereto;
He agrees to hold himself personally and solidarily liable with the corporation;
or
He is made, by a specific provision of law, to personally answer for his
corporate action.
In the case at bar, De Leon is negligent. She was aware that the checks were
only payable to E.T. Henrys account yet she sent a confirmation to Atrium to
the effect that the checks can be negotiated to them (Atrium) by E.T. Henry.
Therefore, she may be held personally liable along with E.T. Henry (but not
with Hi-Cement where she is an officer).

Rural Bank of Milaor vs. Francisca Ocfemia et. al G.R. No 137686,


February 8, 2000
FACTS: Several parcels of land were mortgaged by the respondents during
the lifetime of the respondents grandparents to the Rural bank of Milaor as
shown by the Deed of Real Estate Mortgage and the Promissory Note.
Spouses Felicisimo Ocfemia and Juanita Ocfemia, one of the respondents,
were not able to redeem the mortgaged properties consisting of seven
parcels of land and so the mortgage was foreclosed and thereafter ownership
was transferred to the petitioner bank. Out of the seven parcels of land that
were foreclosed, five of them are in the possession of the respondents
because these five parcels of land were sold by the petitioner bank to the
respondents as evidenced by a Deed of Sale. However, the five parcels of
land cannot be transferred in the name of the parents of Merife Nino, one of
the respondents, because there is a need to have the document of sale
registered. The Register of deeds, however, said that the document of sale
cannot be registered without the board resolution of the petitioner bank
confirming both the Deed of sale and the authority of the bank manager, Fe
S. Tena, to enter such transaction.
The petitioner bank refused her request for a board resolution and made
many alibis. Respondents initiated the present proceedings so that they could
transfer to their names the subject five parcel of land and subsequently
mortgage said lots and to use the loan proceeds for the medical expenses of
their ailing mother.

ISSUE: May the Board of Directors of a rural banking corporation be


compelled to confirm a deed of absolute sale of real property owned by the
corporation which deed of sale was executed by the bank manager without
prior authority of the board of directors of the rural banking corporation?

HELD: YES. The bank acknowledges, by its own acts or failure to act, the
authority of Fe S. Tena to enter into binding contracts. After the execution of
the Deed of Sale, respondents occupied the properties in dispute and paid
the real estate taxes. If the bank management believed that it had title to the
property, it should have taken measured to prevent the infringement and

invasion of title thereto and possession thereof. Likewise, Tena had previously
transacted business on behalf of the bank, and the latter had acknowledged
her authority. A bank is liable to innocent third persons where representation
is made in the course of its normal business by an agent like Manager Tena
even though such agent is abusing her authority. Clearly, persons dealing
with her could not be blamed for believing that she was authorized to
transact business for and on behalf of the bank.
The bank is estopped from questioning the authority of the bank to enter into
contract of sale. If a corporation knowingly permits one of its officers or any
other agent to act within the scope of an apparent authority, it holds the
agent out to the public as possessing the power to do those acts; thus, the
corporation will, as against anyone who has in good faith dealt with it through
such agent, be estopped from denying the agents authority.

Zuellig vs nlrc (change of corpo name)

PRIVATE respondent Ronaldo V. San Miguel was employed as a


checker/customs representative of Zeta Brokerage Corp. (Zeta) since Dec. 15,
1985.
In January 1994, he and other employees of Zeta were informed that Zeta
would cease operations and that all affected employees, including him, would
be separated from the service effective March 31, 1994. He reluctantly
accepted separation pay subject to the outstanding offer to be hired for his
former position by the petitioner.
Petitioner Zuellig Freight and Cargo Systems contended that San Miguels
termination from Zeta had been for a cause authorized by the Labor Code.
Zeta, its predecessor-in-interest, had complied with the requirements for
termination due to the cessation of business operations. Did this contention
find merit?
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The Supreme Court ruling: No.

The unanimous conclusions of the Court of Appeals (CA), the National Labor
Relations Commission (NLRC) and the Labor Arbiter, being in accord with law,
were not tainted with any abuse of discretion, least of all grave, on the part of
the NLRC.
The amendments of the articles of incorporation of Zeta to change the
corporate name to Zuellig Freight and Cargo Systems, Inc. did not produce
the dissolution of the former as a corporation. For sure, the Corporation Code
defined and delineated the different modes of dissolving a corporation, and
amendment of the articles of incorporation was not one of such modes.
The effect of the change of name was not a change of the corporate being,
for, as well stated in Philippine First Insurance Co., Inc. v. Hartigan, No. L86370, July 31, 1970, 34 SCRA 252, 266, citing Pacific Bank v. De Ro, 37 Cal.
538: The changing of the name of a corporation is no more the creation of a
corporation than the changing of the name of a natural person is begetting of
a natural person. The act, in both cases, would seem to be what the language
which we use to designate it imports a change of name, and not a change
of being.
xxx
In short, Zeta and petitioner remained one and the same corporation. The
change of name did not give petitioner the license to terminate employees of
Zeta like San Miguel without just or authorized cause.
The situation was not similar to that of an enterprise buying the business of
another company where the purchasing company had no obligation to rehire
terminated employees of the latter.
Petitioner, despite its new name, was the mere continuation of Zetas
corporate being, and still held the obligation to honor all of Zetas obligations,
one of which was to respect San Miguels security of tenure. The dismissal of
San Miguel from employment on the pretext that petitioner, being a different
corporation, had no obligation to accept him as its employee, was illegal and
ineffectual (Zuellig Freight and Cargo Systems vs. National Labor Relations
Commission and Ronaldo V. San Miguel, G.R. No. 157900, July 22, 2013).

Fleischer v. Botica Nolasco Co. (1925)


G.R. No. L-23241

March 14, 1925

Lessons Applicable: Right of First Refusal (Corporate Law)


FACTS:
March 13, 1923: Manuel Gonzales made a written statement to the Botica
Nolasco, Inc., requesting that 5 shares of stock sold by him to Henry Fleischer
be noted transferred to Fleischer's name
He also acknowledged in said written statement the preferential right of the
corporation to buy said five shares
June 14, 1923: he withdraw and cancelled his written statement of March 13,
1923
Nolasco replied that his letter of June 14th was of no effect, and that the
shares in question had been registered in the name of the Botica Nolasco,
Inc.,
November 15, 1923: Fleischer
filed an amended complaint against the Botica Nolasco, Inc., alleging that he
became the owner of 5 shares of fully paid stock of Botica Nolasco Co
(Nolasco) by purchase from their original owner, Manuel Gonzalez
Despite repeated demands, Nolasco refused to register said shares in his
name in the books of the corporation
caused him damages amounting to P500
Nolasco's defense:
article 12 of its by-laws: it had preferential right to buy the shares at the par
value of P100/share, plus P90 as dividends corresponding to the year 1922
offer was refused by Fleischer
Trial Court: favored Fleischer and ordered the shared be registered
ISSUE: W/N article 12 of Nolasco's by-laws is in conflict with Act No. 1459
(Corporation Law), especially with section 35 (Now Sec. 63)
HELD: Affirmed. mandamus will lie to compel the officers of the corporation to
transfer said stock upon the books of the corporation

Section 13, paragraph 7, above-quoted, empowers a corporation to make bylaws, not inconsistent with any existing law, for the transferring of its stock.
section 35 of Act No. 1459 (now Sec. 63)
contemplates no restriction as to whom they may be transferred or sold
It does not suggest that any discrimination may be created by the
corporation in favor or against a certain purchaser.
The holder of shares, as owner of personal property, is at liberty, under said
section, to dispose of them in favor of whomsoever he pleases, without any
other limitation in this respect, than the general provisions of law
GR: the by-laws of a corporation are valid if they are reasonable and
calculated to carry into effect the objects of the corporation, and are not
contradictory to the general policy of the laws of the land
A by-law cannot take away or abridge the substantial rights of stockholder.
Under a statute authorizing by- laws for the transfer of stock, a corporation
can do no more than prescribe a general mode of transfer on the corporate
books and cannot justify an unreasonable restriction upon the right of sale.
by-law cannot operate to defeat his rights as a purchaser who obtained them
in good faith and for a valuable consideration.

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