Heirs of Antonio Pael vs. Court of Appeals (Corporation Law)

CORPORATION LAW

Heirs of Antonio Pael vs. Court of Appeals

371 SCRA 587 (G.R. No. 133574)

December 7, 2001

Petitioner: Heirs of Antonio Pael and Andrea Alcantara and Crisanto Pael

Respondent: Court of Appeals

J. Ynares-Santiago

FACTS:

PFINA Properties, Inc. acquired by virtue of a deed of assignments dated January 25, 1983, certain parcels of land from the heirs of Antonio Pael. It appears that at the time PFINA acquired the land, it was known to be a a mining company. The transfer was also replete with badges of fraud and irregularities. Furthermore, the heirs of Pael had earlier disposed of their rights over the subject property long before the transfer to PFINA was made.

ISSUE:

Whether or not the acquisition of PFINA of the disputed properties was within its power and hence a valid corporate act.

HELD:

No.

At the time of PFINA acquired the disputed properties in 1983, its corporate name was PFINA Mining and Exploration, Inc., a mining company which had no valid grounds to engage in the highly speculative business of urban real estate development.

Republic vs. Acoje Mining Co., Inc. 7 SCRA 361 (Corporation Law)

CORPORATION LAW

Republic vs. Acoje Mining Co., Inc.

7 SCRA 361 (G.R. No. L-18062)

February 28, 1963

Petitioner/Appellant: Acoje Mining Company, Inc.

Respondent/Appellee: Republic of the Philippines

J. Bautista - Angelo

FACTS:

Acoje Mining wrote the Director of Posts requesting the opening of a post, telegraph and money order offices and its mining camp at Sta. Cruz, Zambales to serve its employees and their families that were said living in the camp. Acting on the request, Director of Posts replied that if aside from free quarters, the company would provide for all the essential equipment and assign responsible employee to perform a postmasters duties. It is also indicated that the company shall assure direct responsibility for whatever pecuniary loss the Bureau of Post may suffer. The post office branch was opened at the camp with one Hilario Sandrez as postmaster. The postmasters went on a 3 day leave but never returned. The company immediately informed the Manila Post Office of Sanchez's disappearance when the accounts were checked a shortage was found. Several demands made upon the company for the payment of shortage in line with the liability it has assumed having failed, the government brought the present action.

ISSUE:

Whether or not an act outside the scope of powers expressly conferred may be performed.

HELD:

Yes.

While as a rule an ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the powers conferred upon it by law, there are however certain corporate acts that may be performed outside the scope of the powers expressly conferred if they are necessary to promote the interest and welfare of the corporation, such as the establishment, in the case at bar, of a local post office in a mining camp which is far removed from the postal facilities or means of communication accorded to people living in a city or municipality.

An illegal act is void and cannot be validated, while an ultra vires act is merely voidable and can be enforced by performance, ratification or estoppel, or on equitable grounds. In the present case the validity of the resolution of Board of Directors of the corporation accepting full responsibility in connection with funds to be received by its postmaster, should be upheld on the ground of estoppel.

AF Realty & Development, Inc. vs. Dieselman Freight Services, Co. 373 SCRA 385 (Corporation Law)

CORPORATION LAW

AF Realty & Development, Inc. vs. Dieselman Freight Services, Co.

373 SCRA 385 (G.R. No. 1114448)

January 16, 2002

Petitioner: AF Realty & Development, Inc.

Respondents: Dieselman Freight Services, Co., Manuel C. Cruz, Jr. and Midas Development Corporation

J. Sandoval Gutierrez

FACTS:

Dieselman Freight Service Co. is an owner of commercial lot consisting of 2,094 sqm., located at Pasig City. On May 10, 1988, Manuel C. Cruz, Jr. a member of the board of directors of Dieselman, issued a letter authorizing Cristeta N. Polintan "to look for a buyer and negotiate the sale" of the lot at ₱3,000.00 per sqm.. Cruz Jr. has no written authority from Dieselman to sell the lot. In turn Polintan authorized Felicisima Noble to sell the same lot. Noble offered the property to AF Realty & Development, Inc. at ₱2,500.00 per sqm. Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer and issued a check in the amount of ₱300,000.00. Ranullo asked Polintan for the board resolution of Dieselman  authorizing the sale. However, Polintan could only give Ranullo the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a photocopy of the Articles of Incorporation of Dieselman. Cruz, Sr. president of Dieselman, acknowledged receipt of the said ₱300,000.00 as "earnest money" but required AF Realty to finalize the sale at ₱4,000.00 per sqm. AF Realty replied that it is willing to pay the balance. However, Cruz, Sr. terminated the offer and demanded from AF Realty the return of the title of the lot claiming that there was a perfected contract of sale, AF Realty filed a complaint for specific performance against Dieselman and Cruz, Jr.. The complain prays that Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty. In its answer Dieselman alleged that it did not authorize any person to enter into such transaction on its behalf. Meanwhile, on July 30, 1988, Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale of the same property.

The CA held that Cruz, Jr. was not authorized in writing by Dieselman to sell the property to AF Realty, the sale was not perfected, and that the Deed of Absolute Sale between Dieselman and Midas is valid, there being no bad faith on the part of the latter.

ISSUE:

Whether or not there was a valid delegation of power.

HELD:

Yes.

Sec. 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors just as natural person may authorize another to do certain acts in his behalf, so may board of directors of a corporation may delegate some of its functions to individual officers or agents appointed by it. Thus contracts or acts of a corporation must be made either by the Board of Directors 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 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, are held not binding on the corporation.

Inter-Asia Investment Industries, Inc. vs. Court of Appeals 403 SCRA 452 (Corporation Law)

CORPORATION LAW

Inter-Asia Investment Industries, Inc. vs. Court of Appeals

403 SCRA 452 (G.R. No. 125778)

June 10, 2003

Petitioner: Inter-Asia Investments Industries, Inc.

Respondents: Court of Appeals and Asia Industries, Inc.

J. Carpio-Morales

FACTS:

Petitioner, by a Stock Purchase Agreement, sold to private respondent Asia Industries all its rights, title and interest in, and to all outstanding shares of stocks of FARMACOR, Inc.. Such was signed by Leonidas P. Gonzales and Jesus J. Vergara, presidents of respective corporations. It was provided that respondent may retain ₱7,500,000.00 out of the stipulated price of ₱19,500,000.00 from which may be deducted any shortfall on the Minimum Guaranteed Net Worth of ₱12,000,000.00. It turned out that the guaranteed net worth shortfall amounted to ₱13,244,225.00. Private respondent having already paid petitioner ₱12,000,000.00 was entitled to ₱5,744,225.00 refund since it was also stated that if the amount retained is not sufficient to make up for the deficiency in the Minimum Guaranteed Net Worth, petitioner shall pay the difference within 5 days from date of receipt of the audited financial statements. Petitioner thereafter proposed by letter signed by its president, that private respondent's claim for refund be reduced to ₱4,093,993.00, it promise to pay the cost of the Northern Cotabato Industries, Inc. superstructures in the amount of ₱759,570.00 to which respondent agreed. Petitioner, however, wielded on its promise. Private respondent filed a case against petitioner with RTC Makati. The trial court ruled in favor of respondent. Such was upheld by the Court of Appeals.

ISSUE:

Whether or not an officer of a corporation who is authorized purchased stock of another corporation has the implied power to perform all other obligations arising therefrom.

HELD:

Yes.

As correctly argued by private respondent, an officer of a corporation who is authorized to purchase the stock of another corporation has the implied power to perform all other obligations arising therefrom, such as payment of the shares of stock. By allowing, its president to sign the agreement on its behalf, petitioner clothed him with apparent capacity to perform all acts which are expressly, impliedly and inherently stated therein.

Atrium Management Corporation vs. Court of Appeals 353 SCRA 23 (Corporation Law)

CORPORATION LAW

Atrium Management Corporation vs. Court of Appeals

353 SCRA 23 (G.R. No. 109491)

February 28, 2001

Petitioner: Atrium Management Corporation

Respondent: Court of Appeals, E. T. Henry and Co., Lourdes Victoria M. De Leon, Rafael De Leon, Jr., and Hi-Cement Corporation.

J. Pardo:

FACTS:

Hi-Cement Corporation through its corporate signatories, Lourdes M. De Leon, treasurer and the late Antonio de Las Alas, Chairman, issued checks in favor of E.T. Henry and Co. Inc., as payee E. T. Henry and Co. Inc., in turn, endorsed the four checks to Atrium for valuable consideration. Upon presentment for payment the drawee bank dishonored all four checks for the common reason "payment stopped". On 3 January 1983 Atrium filed with the RTC, Manila an action for collection of the proceeds of four postdated checks in the total amount of ₱2 million, after its demand for payment of the value of the checks was denied. After due proceedings, on July 20, 1989, the trial court rendered a decision ordering Lourdes De Leon, her husband Rafael De Leon, E. T. Henry and Co., Inc. and Hi-Cement Corporation to pay Atrium jointly and severally, the amount of ₱2 million corresponding to the value of the 4 (postdated) checks, plus interest and attorney's fees. On appeal to the CA, on 17 March 1993, the CA promulgated its decision modifying the decision of the trial court, absolving Hi-Cement Corporation from liability and dismissing the complaint as against it. The appellate court ruled that (1) Lourdes De Leon was not authorized to issue the subject checks in favor of E. T. Henry, Inc., (2) the issuance of the subject checks by Lourdes M. De Leon and the late Antonio Alas constituted ultra vires acts; and (3) the subject checks were not issued for valuable consideration. Hence, Atrium filed the petition.

ISSUE:

Whether the issuance of the checks was an ultra vires act.

HELD:

No.

Hi-Cement, however, maintains that the checks were not issued for consideration and that Lourdes and E.T. Henry engaged in a "kiting operation" to raise funds for E. T. Henry, who admittedly was in need of financial assistance. The Court finds that there was no sufficient evidence to show that such is the case. Lourdes M. De Leon is the treasurer of the corporation and is authorized to sign checks for the corporation. At the time of the issuance of the checks, there was sufficient funds in the bank to cover payment of the amount of ₱2 million pesos. It is, however, our view that there is basis to rule that the act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra vires act.

"An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law." The term "ultra vires" is distinguished from an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is avoid and cannot be validated.

In the case at bar, Lourdes M. De Leon and Antonio de las Alas as treasurer and Chairman of Hi-Cement were authorized to issue the checks. However, Ms. De Leon was negligent when she signed the confirmation letter requested by Mr. Yap of Atrium and Mr. Henry of E. T. Henry for the rediscounting of the crossed checks issued in favor of E.T. Henry. She was aware that the checks were strictly endorsed for deposit only to the payee's account and not to be further negotiated. What is more, the confirmation letter contained a clause that was no true, that is, "that the check issued to E. T. Henry were in payment of Hydro Oil bought by Hi-Cement from E.T. Henry." Her negligence resulted in damage to the corporation. Hence, Ms. De Leon may be held personally liable therefor.