Lopez Realty Inc. v.

Fontecha
Facts: 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 corporations 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.
In the case at bench, it was established that petitioner corporation did not issue any
resolution revoking nor nullifying the board resolutions granting gratuity pay to private
respondents. Instead, they paid the gratuity pay, particularly, the first two (2)
installments thereof, of private respondents Florentina Fontecha, Mila Refuerzo, Marcial
Mamaril and Perfecto Bautista.
Despite the alleged lack of notice to petitioner Asuncion Lopez Gonzales at that time the
assailed resolutions were passed, we can glean from the records that she was aware of
the corporation's obligation under the said resolutions. More importantly, she
acquiesced thereto. As pointed out by private respondents, petitioner Asuncion Lopez
Gonzales affixed her signature on Cash Voucher Nos. 81-10-510 and 81-10-506, both
dated October 15, 1981, evidencing the 2nd installment of the gratuity pay of private
respondents Mila Refuerzo and Florentina Fontecha.

18

We hold, therefore, that the conduct of petitioners after the passage of resolutions dated
August, 17, 1951 and September 1, 1981, had estopped them from assailing the validity
of said board resolutions.

G.R. No. 99032 March 26, 1997

RICARDO A. LLAMADO, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

The facts of the case, as found by the Court of Appeals, are as follows:

Accused-appellant, Ricardo Llamado, together with Jacinto

Pascual, was charged with violation of Batas Pambansa Blg. 22
and pleaded "not guilty" of the crime charged.

Accused Jacinto Pascual remained at large. Thus trial on the merits

was conducted against accused-appellant, Ricardo Llamado, only.

Accused Ricardo Llamado and his co-accused Jacinto Pascual

were the Treasurer and President, respectively, of the Pan Asia
Finance Corporation.

As found by the trial court, private complainant, Leon Gaw,

delivered to accused the amount of P180,000.00, with the
assurance of Aida Tan, the secretary of the accused in the
corporation, that it will be repaid on 4 November 1983, plus
interests thereon at 12% plus a share in the profits of the
corporation, if any.

Upon delivery of the money, accused Ricardo Llamado took it and

placed it inside a deposit box. Accused Jacinto Pascual and
Ricardo Llamado signed Philippine Trust Company Check No.
047809, postdated 4 November 1983, in the amount of
P186,500.00 in the presence of private complainant.

The aforesaid check was issued in payment of the cash money

delivered to the accused by private complainant, plus interests
thereon for sixty (60) days in the amount of P6,500.00.

On 4 November 1983, private complainant deposited the check in

his current account with the Equitable Banking Corporation which
later informed the complainant that said check was dishonored by

the drawee bank because payment was stopped, and that the
check was drawn against insufficient funds. Private complainant
was also notified by the Equitable Banking Corporation that his
current account was debited for the amount of P186,500.00
because of the dishonor of the said check.

Private complainant returned to Aida Tan to inform her of the

dishonor of the check. Aida Tan received the check from private
complainant with the assurance that she will have said check
changed with cash. However, upon his return to Aida Tan, the latter
informed him that she had nothing to do with the check.

Thereupon, private complainant went to accused Ricardo Llamado

on 11 November 1983 to inform him of the dishonor of the check.
Accused offered in writing to pay private complainant a portion of
the amount equivalent to 10% thereof on 14 or 15 November 1983,
and the balance to be rolled over for a period of ninety (90) days.
This offer was accepted by private complainant.

Accused, however, failed to remit to private complainant the

aforesaid 10% on or before 15 November 1983 and to roll over the
balance of the money.

Private complainant then demanded from the accused the payment

of P186,500.00 but accused failed to pay and instead, accused
offered to return to private complainant only 30% of his money
which was refused by the latter. Thus, the filing of the complaint for
violation of Batas Pambansa No. 22 against the accused.

After trial on the merits, the trial court rendered judgment convicting
the accused of violation of Batas Pambansa No. 22,

On appeal, the Court of Appeals affirmed the trial court's decision

ISSUE: Is the petitioner personally liable for the amount of the check in question,
although it was a check of the Pan Asia Finance Corporation and he signed the
same in his capacity as Treasurer of the corporation?

RULING: YES. Petitioner's argument that he should not be held personally liable
for the amount of the check because it was a check of the Pan Asia Finance
Corporation and he signed the same in his capacity as Treasurer of the
corporation, is also untenable. The third paragraph of Section 1 of BP Blg. 22
states: Where the check is drawn by a corporation, company or entity, the person
or persons who actually signed the check in behalf of such drawer shall be liable
under this Act.

G.R. No. L-52129 April 21, 1980

JOHN GOKONGWEI, JR., petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION, SAN MIGUEL CORPORATION,
ANDRES M. SORIANO, JOSE M. SORIANO, ENRIQUE ZOBEL, ANTONIO
ROXAS, EMETERIO BUNAO, WALTHRODE B. CONDE, MIGUEL ORTIGAS,
EMIGDIO TANJUATCO and EDUARDO VISAYA, respondents.

In this petition for review, petitioner seeks to nullify and set aside the resolution en
banc dated May 7, 1979 of respondent Securities and Exchange Commission in
SEC Case No. 1375, sustaining the findings of the San Miguel Corporation's Board
of Directors that petitioner is engaged in a business competitive with or antagonistic
to that of the San Miguel Corporation and, therefore, ineligible for election as
director, pursuant to Section 3, Article III of the amended by-laws. Petitioner alleges

that the matter of petitioner's disqualification should not have been heard in view of
the pendency of petitioner's motion for reconsideration with this Court; that when
respondent Commission sustained the disqualification of petitioner, it failed to
consider that private respondents are precluded from disqualifying petitioner
because of the rule of pari delicto; and that the resolution of disqualification of the
respondent Board of Directors was an "over exertion of corporate power" because
by this act the afore-mentioned Board of Directors intended to perpetuate
themselves in power. Considering the afore-mentioned allegations and the
comments thereto, We find no merit in the petition.
Aside from the presumptive validity of the amended by-laws at the time the
questioned resolution was rendered by respondent Securities and Exchange
Commission, the Chief Justice and six (6) Justices of this Court had already
promulgated their opinions that the validity of the amended by-laws insofar and only
insofar as the parties herein are concerned, can no longer be relitigated on the basis
of the "law of the. case" doctrine and, therefore, the enforcement of the amended bylaws could not have been ipso factor stayed by the motion for reconsideration.
Petitioner's allegation that respondent Commission (Securities and Exchange
Commission) could not have validly sustained the resolution of the San Miguel
Corporation Board because some members of the Board were also disqualified as
they were situated like petitioner appears inapposite. The alleged disqualification of
some members of the Board was never in issue during the hearing of the
disqualification case, and petitioner has not submitted any evidence in support of his
contention. Petitioner's assertion that the order of respondent Commission
disqualifying him is based on evidence which are "at the most, contingent and
flimsy" appears unsupported by the records. The order of respondent Commission
was based principally on the affidavits of Nazario Avendao, Ruperto Sarandi, Jr.,
Fernando Constantino, Jose Picornell and Mabini Antonio and documentary
evidence showing that petitioner is engaged in agricultural and poultry business
competitive with that of San Miguel Corporation. Petitioner did not adduce any
evidence to rebut the evidence of his disqualification. It is well-settled that findings of

fact of administrative bodies will not be interferred with by the courts in the absence
of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence (Central Bank V.
Cloribel, 44 SCRA 307 [1972]).
WHEREFORE, in view of the foregoing, the Court resolves to DISMISS the petition
for lack of merit.
#22 Strategeic Alliance Development Corporation v. Radstock Securities Limited
(607 SCRA 413; GR No. 178158; December 4, 2009)
Facts:
The Construction Development Corporation of the Philippines (CDCP), which was
eventually changed in 1983 into Philippine National Construction Corporation (PNCC), was
incorporated in 1966 for a term of fifty (50) years and was a 30-year franchise to construct,
operate, and maintain toll facilities in the North and South Luzon Tollways.
Between the year 1978 and 1981, the affiliate of CDCP (Basay Mining) obtained loans
from Marubeni Corporation of Japan in the amount 5,460,000.00 Japanese Yen and US$
5,000,000.00. Basay Mining changed its name into CDCP Mining. But the loans were still
unpaid.
But in October 20, 2000 the PNCC Board of Directors passed two Board Resolutions
which recognized their loans to Marubeni (Php 10,743,103,388.00) and the Government of the
Republic of the Philippines (Php 36,023,784,751.00).
The PNCC first admitted liability for the Marubeni loans and the latter assigned its credit
to Radstock for US$ 2,000,000.00 or less than Php 100,000,000.00 which means Radstock paid
10% of the loan of PNCC and immediately sent a demand letter to PNCC.
The Radstock filed a case for collection of sum of money against PNCC.
During the trial, there was a compromise agreement between Radstock and PNCC
which decreased the loan of Php 10,743,103,388.00 to Php 6,196,000,000.00 and
Issue:

Did the Board of Directors perform their duties in good faith?

Ruling:
The Board of Directors did not perform their duties in good faith. The Court ruled that
members of the Board of Directors have a three-fold duty: duty of obedience, diligence and
loyalty. The members of the Board of Directors: (1) shall direct the affairs of the corporation only
in accordance with purposes for which it was organized; (2) shall not willfully vote or assent to
patently unlawful acts of the Corporation or act in bad faith or with gross negligence in directing
the affairs in the corporation and (3) shall not acquire any personal or pecuniary interest in
conflict with their duty as such directors or trustees.
In the present case, the PNCC Board of Directors violated its duty of diligence and failed
to act in good faith in directing the affairs of the Corporation. The loan was obtained between
1978 and 1981 so after ten years from the time it obtained the loan, the obligation should have
been extinguished but the PNCC Board of Directors passed a resolution which admitted liability
to the loans acquired from Marubeni and the PNCC Board of Directors had a compromise
agreement, which is contrary to law on the ground that the PNCC Board of Directors had no
power to compromise.
The Court ruled that the authority to compromise a settled claim exceeding Php
100,000.00 involving a government agency (PNCC) is vested with the Congress not in COA
(Commission on Audit) so without the approval of Congress to compromise the amount then the
Compromise Agreement between PNCC and Radstock is void.
Facts
Construction Development Corporation of the Philippines (CDCP) was incorporated in 1966. It was
granted a franchise to construct, operate and maintain toll facilities in the North and South Luzon
Tollways

and

Metro

Manila

Expressway.

CDCP Mining Corporation (CDCP Mining), an affiliate of CDCP, obtained loans from Marubeni Corporation
of Japan (Marubeni). A CDCP official issued letters of guarantee for the loans although there was no
CDCP Board Resolution authorizing the issuance of such letters of guarantee. CDCP Mining secured the
Marubeni loans when

CDCP and

CDCP Mining were

still

privately owned and

managed.

In 1983, CDCPs name was changed to Philippine National Construction Corporation (PNCC) in order to

reflect that the Government already owned 90.3% of PNCC and only 9.70% is under private ownership.
Meanwhile,

the

Marubeni

loans

to

CDCP

Mining

remained

unpaid.

On 20 October 2000 and 22 November 2000, the PNCC Board of Directors (PNCC Board) passed Board
Resolutions admitting PNCCs liability to Marubeni. Previously, for two decades the PNCC Board
consistently

refused

to

admit

any

liability

for

the

Marubeni

loans.

In January 2001, Marubeni assigned its entire credit to Radstock Securities Limited (Radstock), a
foreign

corporation.

Radstock

immediately

sent

notice

and

demand

letter

to

PNCC.

PNCC and Radstock entered into a Compromise Agreement. Under this agreement, PNCC shall pay
Radstock the reduced amount of P6,185,000,000.00 in full settlement of PNCCs guarantee of CDCP
Minings debt allegedly totaling P17,040,843,968.00 (judgment debt as of 31 July 2006). To satisfy its
reduced obligation, PNCC undertakes to (1) "assign to a third party assignee to be designated by
Radstock all its rights and interests" to the listed real properties of PNCC; (2) issue to Radstock or its
assignee common shares of the capital stock of PNCC issued at par value which shall comprise 20% of
the outstanding capital stock of PNCC; and (3) assign to Radstock or its assignee 50% of PNCCs 6%
share, for the next 27 years, in the gross toll revenues of the Manila North Tollways Corporation.
Strategic Alliance Development Corporation (STRADEC) moved for reconsideration. STRADEC alleged
that it has a claim against PNCC as a bidder of the National Governments shares, receivables,
securities and interests in PNCC.