CORPORATION

 LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    

 
given   in   consideration   of   the   services   rendered   by   the   heirs’   father   or   o Acts   done   in   excess   of   corporate   officers’   scope   of  
the   corporation.   The   donation   has   already   been   perfected   such   that   the   authority   cannot   bind   the   corporation.   However,   when  
corporation   could   no   longer   rescind   it.   It   was   embodied   in   a   Board   subsequently   a   compromise   agreement   was   on   behalf  
Resolution.  Representatives  of  the  corporation  and  even  its  creditors  as   of   the   corporation   being   represented   by   its   President  
the   NDC   have   given   their   concurrence.   The   donation   was   a   corporate   acting  pursuant  to  a  Board  of  Directors’  resolution,  such  
act   carried   out   by   the   corporation   not   only   with   the   sanction   of   the   constituted   as   a   confirmatory   act   signifying   ratification  
Board  of  Directors  but  also  of  its  stockholders.  The  donation  hasreached   of   all   prior   acts   of   its   officers.   NPC   v.   Alonzo-­‐Legasto,  
a   stage   of   perfection   which   is   valid   and   binding   upon   the   corporation   443  SCRA  342  (2004).  
and  cannot  be  rescinded  unless  there  exists  legal  grounds  for  doing  so.  
 
Doctrine:  Said   donation   even   if   ultra   vires   is   not   void   and   if   voidable,   its  
infirmity   has   been   cured   by   ratification   and   subsequent   acts   of   the  
corporation.   The   corporation   is   now   estopped   or   prevented   from  
contesting  the  validity  of  the  donation.  To  allow  the  corporation  to  undo  
what  it  has  done  would  be  most  unfair  and  contravene  the  well-­‐settled  
doctrine   that   the   defense   of   ultra   vires   cannot   be   set   up   or   availed   of   in  
any  completed  transaction.  
 
• Ratification  can  be  both  express  and  implied.  
• Even   when   a   particular   corporate   act   does   not   fall   within   the  
express   or   implied   powers   of   the   corporation,   nevertheless   it  
will   not   be   set   aside   when,   not   being   malum   prohibitum,   the  
corporation,   through   its   senior   officers   or   its   Board   of   Directors,  
are  estopped  from  questioning  the  legality  of  such  act,  contract  
or   transaction.   Carlos   v.   Mindoro   Sugar   Co.,   57   Phil.   343  
(1932).1  

                                                                                                               
1
 Republic   v.   Acoje   Mining   Co.,   3   SCRA   361   (1963);   Crisologo   Jose   v.   Court   of  
Appeals,  177  SCRA  594  (1989).  
 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)  
CORPORATION  LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    
 
DIRECTORS,  TRUSTEES  AND  OFFICERS   corporation   of   which   he   is   a   director   shall   thereby   cease   to   be   a  
  director.   Trustees   of   non-­‐stock   corporations   must   be   members  
“Board  of  Directors”  is  the  body  which:     thereof.   A   majority   of   the   directors   or   trustees   of   all   corporations  
organized  under  this  Code  must  be  residents  of  the  Philippines.  
1. Exercises  all  powers  provided  for  under  the  Corporation  Code;    
2. Conducts  all  business  of  the  corporation;      
3. Controls  and  holds  all  property  of  the  corporation.     • Doctrine  of  Centralized  Management1  
Its   members   have   been   characterized   as   trustees   or   directors   clothed   o General   Rule:   The   corporation’s   consent   is   that   of   its  
with   a   fiduciary   character.   It   is   clearly   separate   and   distinct   from   the   Board  of  Directors.  
corporate  entity  itself.  Hornilla  v.  Salunat,  405  SCRA  220  (2003).   o Exception:   Specified   instances   in   the   Corporation   Code  
• Atty.  Hofileña  à  There  must  be  a  minimum  of  five  (5)  directors   where  the  particular  exercise  of  the  corporate  power  by  
and  a  maximum  of  fifteen  (15).   the   Board,   in   order   to   be   binding   and   effective,   requires  
  the   consent   or   ratification   of   the   stockholders   or  
I.   DOCTRINE   OF   CENTRALIZED   MANAGEMENT:   Powers   of   Board   of   members,  and  also  on  the  part  of  the  State.  
Directors  (Section  23)   o Right  of  Appraisal:  It  should  be  noted  that  although  for  
  efficiency   of   running   of   corporate   affairs   the   “rule   of  
majority”  has  been  adopted  in  the  case  of  stockholders  
Section  23.  The  board  of  directors  or  trustees.  
Unless   otherwise   provided   in   this   Code,   the   corporate   powers   of   all   and   members,   the   Corporation   Code   still   recognizes  
corporations   formed   under   this   Code   shall   be   exercised,   all   business   that   in   certain   instances   a   dissenting   stockholder   whose  
conducted   and   all   property   of   such   corporations   controlled   and   held   contractual   expectation   has   either   been   frustrated   or  
by   the   board   of   directors   or   trustees   to   be   elected   from   among   the   altered  by  the  decision  of  the  majority,  should  be  given  
the   right   not   have   to   stay   within   the   confines   of   the  
holders   of   stocks,   or   where   there   is   no   stock,   from   among   the  
corporate   contractual   relationship.   In   such   instances,  
members   of   the   corporation,   who   shall   hold   office   for   one   (1)   year  
the   dissenting   stockholder   is   granted   an   option   to  
until  their  successors  are  elected  and  qualified.  
  withdraw  from  such  relationship,  by  the  exercise  of  the  
Every  director  must  own  at  least  one  (1)  share  of  the  capital  stock  of   right  of  appraisal.  
the  corporation  of  which  he  is  a  director,  which  share  shall  stand  in  his   o Court’s   Attitude   Towards   the   Board’s   Exercise   of  
name  on  the  books  of  the  corporation.  Any  director  who  ceases  to  be   Power:  The   Board   of   a   corporation   has   sole   authority   to  
the   owner   of   at   least   one   (1)   share   of   the   capital   stock   of   the                                                                                                                  
1
 Villanueva,  C.  L.,  &  Villanueva-­‐Tiansay,  T.  S.  (2013).  Philippine  Corporate  Law.  
(2013  ed.).  Manila,  Philippines:  Rex  Book  Store.  
 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)  
CORPORATION  LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    
 
determine   policy   and   conduct   the   ordinary   business   of   o Thus,   contracts   or   acts   of   a   corporation   must   be   made  
the  corporation  within  the  scope  of  its  charter.  As  long   either   by   the   Board   of   Directors   or   by   a   corporate   agent  
as   the   board   acts   honestly   and   the   contract   does   not   duly  authorized  by  the  board.    
defraud   or   abuse   the   rights   of   the   minority,   the   courts   o Absent   such   valid   delegation/authorization,   the   rule   is  
will   not   interfere   in   their   judgments   and   transactions.   that  the  declarations  of  an  individual  director  relating  to  
The   minority   members   of   the   board   and   the   minority   the  affairs  of  the  corporation,  but  not  in  the  course  of,  
stockholders   cannot   come   to   court   upon   allegations   of   or  connected  with  the  performance  of  authorized  duties  
want  of  judgment  or  lack  of  efficiency  on  the  part  of  the   of   such   director,   are   held   not   binding   on   the  
majority   and   change   the   course   of   the   administration   of   corporation.    
corporate  affairs.   • Atty.  Hofileña  à  The  one  share  required  to  be  held  by  a  director  
• Section   23   expressly   provides   that   the   corporate   powers   of   all   is  a  qualifying  share  and  in  practice  is  ignorable.  
corporations   shall   be   exercised   by   the   Board   of   Directors.    
Manila  Metal  Container  Corp.  v.  PNB,  511  SCRA  444  (2006).1   A.  Rationale  for  “Centralized  Management”  Doctrine:  
o The   source   of   power   of   the   Board   of   Directors   is   • The   raison   d’etre   behind   the   conferment   of   corporate   powers  
primarily   and   directly   vested   by   law;   it   is   not   a   on  the  Board  of  Directors  is  not  lost  on  the  Court  –  indeed,  the  
delegated  power  from  the  stockholders  or  members  of   concentration   in   the   Board   of   the   powers   of   control   of  
the  corporation.2   corporate   business   and   appointment   of   corporate   officers   and  
• Just   as   a   natural   person   may   authorize   another   to   do   certain   managers   is   necessary   for   efficiency   in   any   large   organization.  
acts   in   his   behalf,   so   may  the   Board   of   Directors   validly   delegate   Stockholders   are   too   numerous,   scattered   and   unfamiliar   with  
some  of  its  functions  to  individual  officers  or  agents  appointed   the   business   of   a   corporation   to   conduct   its   business   directly.  
by  it.     And  so  the  plan  of  corporate  organization  is  for  the  stockholders  
to   choose   the   directors   who   shall   control   and   supervise   the  
conduct  of  corporate  business.  Filipinas  Port  Services  v.  Go,  518  
                                                                                                                SCRA  453  (2007).  
1
 Yu  Chuck  v.  “Kong  Li  Po,”  46  Phil.  608,  614  (1924);  Gamboa  v.  Victoriano,  90    
SCRA   40   (1979);   Reyes   v.   RCPI   Employees   Credit   Union,   Inc.,   499   SCRA   319   Filipinas  Port  Services  v.  Go  
(2006);   Yasuma   v.   Heirs   of   Cecilio   S.   De   Villa,   499   SCRA   466   (2006);   Raniel   v.  
Jochico,   517   SCRA   221   (2007);   Republic   v.   Coalbrine   International,   617   SCRA    
491  (2010).   Facts:   Filport’s   Board   of   Directors   (herein   respondents)   enacted   a  
2
 Villanueva,  C.  L.,  &  Villanueva-­‐Tiansay,  T.  S.  (2013).  Philippine  Corporate  Law.   resolution   creating   six   new   positions.   People   were   elected   into   said   6  
(2013  ed.).  Manila,  Philippines:  Rex  Book  Store.  
 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)