H. POWERS OF A CORPORATION Realty.

Also, Lopez Realty had prepared the cash vouchers and checks for the
1.) LOPEZ REALTY v FONTECHA et al third installments of gratuity pay of Fontecha et al. For some reason, said
vouchers were cancelled by Asuncion. Likewise, the first, second and third
FACTS:
installments of gratuity pay of the rest of private respondents were prepared but
Asuncion Lopez Gonzales is a majority shareholder of Lopez Realty and
cancelled by Asuncion. Despite private respondents' repeated demands for their
a member of its BOD, along with the rest of Lopez’s shareholders with the
gratuity pay, corporation refused to pay the same. In 1984, the LA rendered
exception of Arturo Lopez.
judgment in favor of private respondents. Lopez Realty appealed to the NLRC but
In 1978, Arturo submitted a proposal for the distribution of certain
the same was denied.
assets of Lopez Realty among its 3 main shareholders. The proposal had 3
In their motion for reconsideration, petitioners assailed the validity of
aspects: (1) the sale of assets of the company to pay for its obligations; (2) the
the board resolutions and claimed, for the first time, that petitioner Asuncion
transfer of certain assets of the company to its 3 main shareholders, while some
Lopez Gonzales was not notified of the special board meetings held on said dates.
other assets shall remain with the company; and (3) the reduction of employees
The MR was denied. The SC issued a TRO enjoining the NLRC from enforcing or
with provision for their gratuity pay. The proposal was deliberated upon and
executing its Resolution.
approved in a special meeting of the board of directors.
Lopez Realty approved 2 resolutions providing for the gratuity pay of
ISSUE: WON the NLRC acted with grave abuse of discretion in holding that
its employees, viz: (a) Resolution No. 6, Series of 1980, passed by the stockholders
Fontecha et al are entitled to receive their gratuity pay under the assailed board
in a special meeting, resolving to set aside, twice a year, a certain sum of money
resolutions.
for the gratuity pay of its retiring employees and to create a Gratuity Fund for the
said contingency; and (b) Resolution No. 10,Series of 1980, setting aside the
HELD: YES.
amount of P157,750.00 as Gratuity Fund covering the period from 1950 up to
Petitioners contend that the board resolutions passed on August 17,
1980.
1981 and September 1, 1981, granting gratuity pay to their retained employees,
In 1981, except for Asuncion who was then abroad, the remaining
are ultra vires on the ground that petitioner Asuncion Lopez Gonzales was not
members of the BOD convened a special meeting and passed a resolution which
duly notified of the said special meetings. They aver, further, that said board
reads:
resolutions were not ratified by the stockholders of the corporation pursuant to
Resolved, as it is hereby resolved that the gratuity (pay) of the
Section 28 1/2 of the Corporation Law (Section 40 of the Corporation Code).
employees be given as follows:
They also insist that the gratuity pay must be given only to the retiring
(a) Those who will be laid off be given the full amount of
employees, to the exclusion of the retained employees or those who voluntarily
gratuity;
resigned from their posts.
(b) Those who will be retained will receive 25% of their
At the outset, we note that petitioners allegation on lack of notice to
gratuity (pay) due on September 1, 1981, and another 25% on
petitioner Asuncion Lopez Gonzales was raised for the first time in the in their
January 1, 1982, and 50% to be retained by the office in the
motion for reconsideration filed before public respondent National Labor
meantime.
Relations Commission, or after said public respondent had affirmed the decision
Fontecha et al were the retained employees of Lopez Realty. They
of the labor arbiter. To stress, in their appeal before the NLRC, petitioners never
requested for the full payment of their gratuity pay. Said request was granted in
raised the issue of lack of notice to Asuncion Lopez Gonzales. The appeal dealt
a special meeting held in September 1981. It was decided that, all those
with (a) the failure of the stockholders to ratify the assailed resolutions and (b)
remaining employees will receive another 25% (of their gratuity) on or before
the alleged "mistake" committed by petitioner corporation in giving the gratuity
October 15, 1981 and another 25% on or before the end of November, 1981 of
pay to some of its employees who are yet to retire from employment.
their respective gratuity.
In their comment, private respondents maintain that the new ground
At that, time, however, Asuncion was still abroad. Allegedly, while she
of lack of notice was not raised before the labor arbiter, hence, petitioners are
was still out of the country, she sent a cablegram to the corporation, objecting to
barred from raising the same on appeal. Private respondents claim, further, that
certain matters taken up by the board in her absence, such as the sale of some of
such failure on the part of petitioners, had deprived them the opportunity to
the assets of the corporation. Upon her return, she filed a derivative suit with the
present evidence that, in a subsequent special board meeting held on September
SEC against majority shareholder Arturo Lopez. Nevertheless, the first two
29, 1981, the subject resolution dated September 1, 1981, was unanimously
installments of the gratuity pay of Florentina Fontecha et al were paid by Lopez
approved by the board of directors of petitioner corporation, including
petitioner Asuncion Lopez Gonzales.
Indeed, it would be offensive to the basic rules of fair play and justice
to allow petitioners to raise questions which have not been passed upon by the
labor arbiter and the public respondent NLRC. It is well settled that questions not
raised in the lower courts cannot, be raised for the first time on appeal. 13 Hence,
petitioners may not invoke any other ground, other than those it specified at the
labor arbiter level, to impugn the validity of the subject resolutions.
We now come to petitioners' argument that the resolutions passed by
the board of directors during the special meetings on August 1, 1981, and
September 1, 1981, were ultra vires for lack of notice.
The general rule is that a corporation, through its board of directors,
should act in the manner and within the formalities, if any, 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 the corporation's by-laws, otherwise, any action
taken therein may be questioned by any objecting director or shareholder.
Be that as it may, jurisprudence tells us that 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 corporation's subsequent course of conduct.
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.
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.
Assuming, arguendo, that there was no notice given to Asuncion Lopez
Gonzalez during the special meetings held on August 17, 1981 and September 1,
1981, it is erroneous to state that the resolutions passed by the board during the
said meetings were ultra vires. In legal parlance, "ultra vires" act refers to one
which is not within the corporate powers conferred by the Corporation Code or
articles of incorporation or not necessary or incidental in the exercise of the
powers so conferred.
The assailed resolutions before us cover a subject which concerns the
benefit and welfare of the company's employees. To stress, providing gratuity
pay for its employees is one of the express powers of the corporation under the
Corporation Code, hence, petitioners cannot invoke the doctrine of ultra vires to
avoid any liability arising from the issuance the subject resolutions.
We reject petitioners' allegation that private respondents, namely, Mila
Refuerzo, Marissa Pascual and Edward Mamaril who resigned from petitioner
corporation after the filing of the case, are precluded from receiving their
gratuity pay. Pursuant to board resolutions dated August 17, 1981 and
September 1, 1981, respectively, petitioner corporation obliged itself to give the
gratuity pay of its retained employees in four (4) installments: on September 1,
1981; October 15, 1981; November, 1981; and January 1, 1982. Hence, at the
time the aforenamed private respondents tendered their resignation, the
aforementioned private respondents were already entitled to receive their
gratuity pay.
Petitioners try to convince us that the subject resolutions had no force
and effect in view of the non-approval thereof during the Annual Stockholders'
Meeting held on March 1, 1982. To strengthen their position, petitioners cite
section 28 1/2 of the Corporation Law (Section 40 of the Corporation Code). We
are not persuaded.
The cited provision is not applicable to the case at bench as it refers to
the sale, lease, exchange or disposition of all or substantially all of the
corporation's assets, including its goodwill. In such a case, the action taken by the
board of directors requires the authorization of the stockholders on record.
It will be observed that, except far Arturo Lopez, the stockholders of
petitioner corporation also sit as members of the board of directors. Under the
circumstances in field, it will be illogical and superfluous to require the
stockholders' approval of the subject resolutions. Thus, even without the
stockholders' approval of the subject resolutions, petitioners are still liable to
pay private respondents' gratuity pay. Petition DISMISSED, NLRC resolution
AFFIRMED.

2.) Laureano Investment & Development Corporation v. CA
Facts:
Spouses Reynaldo Laureano and Florence Laureano, majority stockholders of
Laureano Investment and Development Corporation, entered into a series of loan
and credit transactions with the Philippine National Cooperative Bank (PNCB).
They executed Deeds of Real Estate Mortgage to secure the payment of the loans.
PNCB foreclosed these mortgages for the spouses failed to pay the indebtedness.
The titles were consolidated in PNCB’s name and assigned the obligations and
liabilities over the subject lots to Bormaheco. After securing titles over the said
properties, the later filed a petition for the Issuance of Writ of Possession over
the lots. Laureano Investment & Development Corporation filed a motion for
intervention and to admit attached complaint in intervention in said case. In the
complaint in intervention, the company used the name LIDECO Corporation. The
trial court granted the motion. Bormaheco filed a motion to strike out the
complaint in intervention stating therein that LIDECO is a shorter term for the
Corporation’s name. This was granted by the court reasoning that LIDECO
Corporation and LAUREANO INVESTMENT AND DEVELOPMENT
CORPORATION are two separate and distinct entities. Inasmuch as the
documents in support of its complaint in intervention – tax declarations – are in
the names of Laureano Investment and Development Corporation, and it
appearing that LIDECO Corporation is not a corporation or partnership duly
organized and registered with the SEC, there is no way that LIDECO
Corporation’s interest will be adversely affected by the outcome of the case.
Laureano Investment and Development Corporation filed an urgent motion to
substitute party intervenor but the same was denied by the court. The Court of
Appeals affirmed the denial.
Issue:
Is Bormaheco estopped from denying its knowledge that Lideco Corporation and
Laureano Investment and Development Corporation as one and the same entity
since it has previously used LIDECO as an acronym for the latter corporation?
Ruling:
No. Examining the records of the case, we observe that the motion adverted to
indeed made use of LIDECO as an acronym for Laureano Investment and
Development Corporation. But said motion distinctly specified that LIDECO was
the shorter term for Laureano Investment and Development Corporation. It is
obvious that no false representation or concealment can be attributed to private
respondent. Neither can it be charged with conveying the impression that the
facts are other than, or inconsistent with, those which it now asserts since
LIDECO, as an acronym, is clearly different from Lideco Corporation which
represented itself as a corporation duly registered and organized in accordance
with law. Nor can it be logically inferred that petitioner relied or acted upon such
representation of private respondent in thereafter referring to itself as Lideco
Corporation; for petitioner is presumed to know by which name it is registered,
and the legal provisions on the use of its corporate name.
Section 1, Rule 3 of the Rules of Court provides that only natural or juridical
persons or entities authorized by law may be parties to a civil action. Under the
Civil Code, a corporation has a legal personality of its own (Article 44), and may
sue or be sued in its name, in conformity with the laws and regulations of its
organization (Article 46). Additionally, Article 36 of the Corporation Code
similarly provides:
Article 36. Corporate powers and capacity. -- Every corporation
incorporated under this Code has the power and capacity:
1. To sue and be sued in its corporate name;
x x x (underscoring supplied)
As the trial and appellate courts have held, Lideco Corporation had no
personality to intervene since it had not been duly registered as a corporation. If
petitioner legally and truly wanted to intervene, it should have used its corporate
name as the law requires and not another name which it had not registered.
Indeed, as the Respondent Court found, nowhere in the motion for intervention
and complaint in intervention does it appear that Lideco Corporation stands for
Laureano Investment and Development Corporation. Bormaheco, Inc., thus, was
not estopped from questioning the juridical personality of Lideco Corporation,
even after the trial court had allowed it to intervene in the case.
Granting arguendo that the name Lideco Corporation could be used by petitioner
corporation in its motion, there is an even more cogent reason for denying the
petition. The trial court concluded, and we have no reason to disagree, that the
intervention of Lideco or petitioner corporation was not proper because neither
had any legal interest in the subject of litigation. The evidence (tax declarations)
attached to the petition for intervention and the complaint for intervention
pertained to properties not being litigated in the instant case. Lideco and
petitioner corporation both claimed to have an interest in two houses
constructed in Lot 3, Block 4 in Bel Air Village, Makati. The subject matter of the
instant petition, on the other hand, are Lots 4 and 5, Block 4, of Bel Air Village.
This factual finding was affirmed by the Court of Appeals.

3.) ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA and
SECURITIES & EXCHANGE COMMISSION vs. COURT OF APPEALS and
IGLESIA NI CRISTO
G.R. No. 117897 May 14, 1997 FIRST DIVISION
(HERMOSISIMA, JR., J.)
Facts:
IDP-Tamano Group alleges that sometime in 1971, Islamic leaders of all
Muslim major tribal groups in the Philippines headed by Dean Cesar Adib Majul
organized and incorporated the ISLAMIC DIRECTORATE OF THE PHILIPPINES
(IDP), the primary purpose of which is to establish an Islamic Center in Quezon
City for the construction of a "Mosque (prayer place), Madrasah (Arabic School),
and other religious infrastructures" so as to facilitate the effective practice of
Islamic faith in the area.
Towards this end, the Libyan government donated money to the IDP to
purchase land at Culiat, Tandang Sora, Quezon City, to be used as a Center for the
Islamic populace. The land was covered by two titles both registered in the name
of IDP.
In 1972, after the purchase of the land by the Libyan government in the
name of IDP, Martial Law was declared by the late President Marcos. Most of the
members of the 1971 Board of Trustees like Senators Mamintal Tamano,
Salipada Pendatun, Ahmad Alonto, and Congressman Al-Rashid Lucman flew to
the Middle East to escape political persecution.
Thereafter, two Muslim groups sprung, the Carpizo Group, headed by
Engineer Farouk Carpizo, and the Abbas Group, led by Mrs. Zorayda Tamano
and Atty. Firdaussi Abbas. Both groups claimed to be the legitimate IDP. In 1986,
the SEC, in a suit between these two contending groups, came out with a Decision
declaring the election of both the Carpizo Group and the Abbas Group as IDP
board members to be null and void for being violative of the Articles of
Incorporation of petitioner corporation. With the nullification of the election of
the respondents, the approved by-laws which they certified to this Commission
as members of the Board of Trustees must necessarily be likewise declared null
and void. However, before any election of the members of the Board of Trustees
could be conducted, there must be an approved by-laws to govern the internal
government of the association including the conduct of election. A vacuum is
created as to who should adopt the by-laws and certify its adoption. To remedy
this, the members of the petitioning corporation were authorized to prepare and
adopt their by-laws for submission to the Commission.
Neither group, however, took the necessary steps prescribed by the
SEC and, thus, no valid election of the members of the Board of Trustees of IDP
was ever called. Although the Carpizo Group attempted to submit a set of by-
laws, the SEC found that, aside from Engineer Farouk Carpizo and Atty. Musib
Buat, those who prepared and adopted the by-laws were not bona fide members
of the IDP, thus rendering the adoption of the by-laws likewise null and void.
In 1989, without having been properly elected as new members of the
Board of Trustee of IDP, the Carpizo Group caused to be signed an alleged Board
Resolution of the IDP, authorizing the sale of the subject two parcels of land to
the private respondent INC for a consideration of P22,343,400.00, which sale
was evidenced by a Deed of Absolute Sale.
In 1991, the petitioner 1971 IDP Board of Trustees headed by former
Senator Mamintal Tamano, or the Tamano Group, filed a petition before the SEC
seeking to declare null and void the Deed of Absolute Sale signed by the Carpizo
Group and the INC since the group was not the legitimate Board of Trustees of
the IDP.
Meanwhile, INC, pursuant to the Deed of Absolute Sale executed in its
favor, filed an action for Specific Performance with Damages against the vendor,
Carpizo Group to compel said group to clear the property of squatters and deliver
complete and full physical possession thereof to INC. Likewise, INC filed a motion
in the same case to compel one Mrs. Leticia P. Ligon (mortgagee of the two parcels
of land executed in her favor by certain Abdulrahman R.T. Linzag and Rowaida
Busran-Sampaco claimed to be in behalf of the Carpizo Group) to produce and
surrender to the Register of Deeds of Quezon City the owner's duplicate copy of the
2 TCTs covering the subject parcels of land.
The IDP-Tamano Group sought to intervene in the specific performance
case. INC opposed the motion arguing, inter alia, that the issue sought to be
litigated by way of intervention is an intra-corporate dispute which falls under
the jurisdiction of the SEC. RTC denied petitioner's motion to intervene on the
ground of lack of juridical personality of the IDP-Tamano Group and that the
issues being raised by way of intervention are intra-corporate in nature,
jurisdiction thereto properly pertaining to the SEC. It also ordered the IDP-
Carpizo Group to comply with its obligation under the Deed of Sale of clearing
the subject lots of squatters and of delivering the actual possession thereof to
INC. It treated INC as the rightful owner. In 1992, the above Order was amended
directing Ligon "to deliver the owner's duplicate copies of TCT to the Register of
Deeds of Quezon City . Mortgagee Ligon went to the Court of Appeals, thru a
petition for certiorari. The appellate court dismissed her petition. Undaunted,
Ligon filed a petition for review before the Supreme Court.
In the meantime, the SEC, finally came out with a Decision in SEC Case
seeking to declare null and void the Deed of Absolute Sale. It declared the by-
laws submitted by the respondents as unauthorized, and hence, null and void. It
the sale of the 2 parcels of land in QC null and void. It also declared the election
of the Board of Directors, of the corporation from 1986 to 1991 as null and void
and the acceptance of the respondents, except Farouk Carpizo and Musnib Buat,
as members of the IDP null and void.
 INC elevated SEC Case to the CA by way of a special civil action for The Tandang Sora property, it appears from the records, constitutes the
certiorari, CA granted. Thus, the IDP-Tamano Group brought the instant petition only property of the IDP. Hence, its sale to a third-party is a sale or disposition of
for review. all the corporate property and assets of IDP falling squarely within the
While the above petition was pending, however, the SC rendered contemplation of the foregoing section. For the sale to be valid, the majority vote
judgment on the petition filed by Mrs. Leticia P. Ligon. The Decision denied the of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of
Ligon petition and affirmed the decision of the CA which sustained the Order of the bona fide members of the corporation should have been obtained. These twin
RTC compelling mortgagee Ligon to surrender the owner's duplicate copies of requirements were not met as the Carpizo Group which voted to sell the Tandang
the 2 TCTs to the Register of Deeds of Quezon City so that the Deed of Absolute Sora property was a fake Board of Trustees, and those whose names and
Sale in INC's favor may be properly registered. signatures were affixed by the Carpizo Group together with the sham Board
Resolution authorizing the negotiation for the sale were, from all indications,
Issue: Did the Court of Appeals commit reversible error in setting aside that not bona fide members of the IDP as they were made to appear to be. Apparently,
portion of the SEC's Decision which declared the sale of 2 parcels of land in there are only fifteen (15) official members of the petitioner corporation
Quezon City between the IDP-Carpizo Group and private respondent INC null and including the eight (8) members of the Board of Trustees.
All told, the disputed Deed of Absolute Sale executed by the fake
void?
Carpizo Board and private respondent INC was intrinsically void ab initio.
The resolution of the question as to whether or not the SEC had
Held: Yes, CA erred. jurisdiction to declare the subject sale null and void is rendered moot and
There can be no question as to the authority of the SEC to pass upon the academic by the inherent nullity of the highly dubious sale due to lack of consent
issue as to who among the different contending groups is the legitimate Board of of the IDP, owner of the subject property.
Trustees of the IDP since this is a matter properly falling within the original and
exclusive jurisdiction of the SEC by virtue of Sections 3 and 5(c) of Presidential
Decree No. 902-A. If the SEC can declare who is the legitimate IDP Board, then by
parity of reasoning, it can also declare who is not the legitimate IDP Board. This
is precisely what the SEC did when it adjudged the election of the Carpizo Group
to the IDP Board of Trustees to be null and void. By this ruling, the SEC in effect
made the unequivocal finding that the IDP-Carpizo Group is a bogus Board of
Trustees. Consequently, the Carpizo Group is bereft of any authority whatsoever
to bind IDP in any kind of transaction including the sale or disposition of ID
property. Premises considered, all acts carried out by the Carpizo Board,
particularly the sale of the Tandang Sora property, allegedly in the name of the
IDP, have to be struck down for having been done without the consent of the IDP
thru a legitimate Board of Trustees.
The IDP, owner of the subject parcels of land, never gave its consent,
thru a legitimate Board of Trustees, to the disputed Deed of Absolute Sale
executed in favor of INC. This is, therefore, a case not only of vitiated consent, but
one where consent on the part of one of the supposed contracting parties is
totally wanting. Ineluctably, the subject sale is void and produces no effect
whatsoever.
The Carpizo Group-INC sale is further deemed null and void ab
initio because of the Carpizo Group's failure to comply with Section 40 of the
Corporation Code pertaining to the disposition of all or substantially all assets of
the corporation:
 4. National Power Corporation versus Hon. Abraham P.
Vera and Sea Lion International Port Terminal Services, Inc. - G.R. No.
83558, February 27, 1989, J. Cortes
TOPIC: Powers of a Corporation
STATEMENT OF FACTS:
The National Power Corporation did not renew its Contract for Stevedoring
Services for CoalHandling Operations at its power plant with Sea Lion
(Respondent). It instead took over said stevedoring services. This prompted
Respondent to filed a Complaint for Prohibition and Mandamus with Damages
against NPC and the Philippine Ports Authority (PPA), alleging that the NPC
had acted in bad faith and with grave abuse of discretion.
The Respondent Judge issued a restraining order against NPC to enjoin it from
performing stevedoring services at its pier and ordered the NPC to enter into
a contract for stevedoring and arrastre services or to conduct a public bidding
therefor. The NPC filed an Urgent Motion to dissolve the restraining order on
the ground that said Judge had no jurisdiction to issue said order and that Sea
Lion had no cause of action due to the fact that its contract with NPC had
expired prior to the commencement of the suit. This motion was denied by
the respondent Judge on the ground that the NPC had no power to engage in
stevedoring services under its charter – R.A. 6395.
NPC filed a Petition for Certiorari with the Supreme Court and a Temporary
Restraining Order was issued by the Court on June 15, 1988.
STATEMENT OF THE CASE:
Sea Lion International Port Terminal Services filed a Complaint for
Prohibition and Mandamus with Damages against the National Power
Corporation. The trial court issued a restraining order against the NPC
enjoining it from performing stevedoring services in its pier. The NPC filed an
Urgen Motion to dissolve the restraining order, but said motion was denied.
The NPC filed a Petition for Certiorari with the Supreme Court.
ISSUE:
Whether or not the NPC was empowered to undertake
stevedoring services in its pier.
RULING:
Yes. Under the NPC charter – R.A. 6395 – it was created and empowered not
only to construct, operate and maintain power plants, reservoirs,
transmission lines, and other works, but also to exercise such powers and do
things as may be reasonably necessary to carry out the business and purposes
for which it was organized, or which, from time to time, may be declared by
the Board to be necessary, useful, incidental or auxiliary to accomplish its
purpose.
In this case, stevedoring services are incidental and indispensable to the
operation of the NPC’s power plant in Batangas. The NPC receives its coal
shipments at its pier in Calaca, Batangas, exclusively for the Coal-Fired
Thermal Power Plant’s fuel to generate electricity. The unloading of the coal
shipments for its transfer to the power plant through its stevedoring services
is necessary and incidental to its purpose.
DISPOSITIVE PORTION:
Wherefore, in view of the foregoing, the Court having considered the Petition,
private respondents’ Comment, and the Reply thereto, resolve to grant the
Petition. The respondent Judge’s Order dated June 8, 1988 is set aside and the
temporary restraining order issued by the Court on June 15, 1988 is made
permanent.
 5. Wolfgang Aurbach, John Griffin, David P. Whittingham
and Charles Chamsay versus Sanitary Wares Manufacturing
Corporation, Ernesto V. Lagdameo, Ernesto R. Lagdameo, Jr., Enrique
R. Lagdameo, George F. Lee, Raul A. Boncan, Baldwin Young and
Avelino V. Cruz - G.R. No. 75875, December 15, 1989, J. Gutierrez, Jr.
TOPIC: Powers of Corporation
STATEMENT OF FACTS:
In 1961, Saniwares, a domestic corporation was incorporated for the primary
purpose of manufacturing and marketing sanitary wares. One of the
incorporators, Mr. Baldwin Young (Young) went abroad to look for foreign
partners, who could help in its expansion plans.
On Aug. 15, 1962, American Standard Inc. (ASI), a foreign corporation
domiciled in Delaware, US entered into an Agreement with Saniwares and
some Filipino investors whereby ASI and the Filipino investors agreed to
participate in the ownership of an enterprise which would engage primarily
in the business of manufacturing in the Philippines and selling here and
abroad vitreous china and sanitary wares. The parties agreed that the
business operations in the Philippines shall be carried on by an incorporated
enterprise and that the name of the corporation shall initially be "Sanitary
Wares Manufacturing Corporation."
The Agreement has the following provisions relevant to the nomination and
election of the directors of the corporation:
3. Articles of Incorporation - (a) The Articles of Incorporation of the
Corporation shall be substantially in the form annexed hereto as Exhibit A
and, insofar as permitted under Philippine law, shall specifically provide for
(1) Cumulative voting for directors:
xxx xxx xxx
5. Management - (a) The management of the Corporation shall be vested in a
Board of Directors, which shall consist of 9 individuals. As long as ASI shall
own at least 30% of the outstanding stock of the Corporation, 3 of the 9
directors shall be designated by ASI, and the other 6 shall be designated by
the other stockholders of the Corporation.
At the request of ASI, the agreement contained provisions designed to protect
it as a minority group, including the grant of veto powers over a number of
corporate acts and the right to designate certain officers, such as a member of
the ExCom whose vote was required for important corporate transactions.
The 30% capital stock of ASI was increased to 40%. The corporation was also
registered with the Board of Investments for availment of incentives with the
condition that at least 60% of the capital stock of the corporation shall be
owned by Philippine nationals.
The joint enterprise entered into by the parties prospered. Unfortunately,
with the business successes, there came a deterioration of the initially
harmonious relations between the 2 groups. According to the Filipino group, a
basic disagreement was due to their desire to expand the export operations of
the company to which ASI objected as it apparently had other subsidiaries of
joint joint venture groups in the countries where Philippine exports were
contemplated.
On March 8, 1983, the annual stockholders' meeting was held. The meeting
was presided by Young. The minutes were taken by the Corporate Secretary
(CorSec), Avelino Cruz. After disposing of the preliminary items in the agenda,
the stockholders then proceeded to the election of the members of the board
of directors (BOD). The ASI group nominated 3 persons namely; Wolfgang
Aurbach, John Griffin and David P. Whittingham. The Philippine investors
nominated 6, namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R.
Lagdameo, Jr., George F. Lee, and Baldwin Young. Eduardo R. Ceniza then
nominated Luciano E. Salazar, who in turn nominated Charles Chamsay.
Young ruled the last 2 nominations out of order on the basis of section 5 (a) of
the Agreement, the consistent practice of the parties during the past annual
stockholders' meetings to nominate only 9 persons as nominees for the 9-
member BOD, and the legal advice of Saniwares' legal counsel. However, there
were protests against the action of Chairman Young and heated arguments
ensued. ASI representative appealed to the body of stockholders present that
a vote be taken on the ruling of Chairman Young, who declared the appeal out
of order and no vote on the ruling was taken. Despite ASI representative
protested, Chairman Young instructed the CorSec to cast all the votes present
and represented by proxy equally for the 6 nominees of the Philippine
Investors and the 3 nominees of ASI, effectively excluding the last 2 additional
persons above-mentioned. ASI representative moved to recess the meeting
which was duly seconded. There was also a motion to adjourn, which was
accepted by Chairman Young who announced that the motion was carried and
declared the meeting adjourned. Protests against the adjournment were
registered and having been ignored, ASI representative, stated that the
meeting was not adjourned but only recessed and that the meeting would be
reconvened in the next room. Chairman Young threatened to have the
stockholders who did not agree to his decision on the casting of votes bodily
thrown out. The ASI Group and other stockholders decided to continue the
meeting. The continued meeting was presided by Salazar, while Andres
Gatmaitan acted as Secretary. On the basis of the cumulative votes cast earlier
in the meeting, ASI Group nominated its 4 nominees; Aurbach, Griffin,
Whittingham and Chamsay. Salazar voted for himself, thus the 5 directors
were certified as elected directors by the Acting Secretary, with the
explanation that there was a tie among the other 6 nominees for the 4
remaining positions of directors and that the body decided not to break the
tie.
STATEMENT OF THE CASE:
The parties filed separate petitions with the Securities and Exchange
Commission (SEC):
1. Preliminary injunction by Saniwares, the Lagdameos, Young, Boncan
and Lee against Salazar and Chamsay.
2. Quo warranto and application for receivership by Aurbach, Griffin,
Whittingham, Salazar and Chamsay against the group of Young and Lagdameo
and CorSec Cruz.
The 2 petitions were consolidated and tried jointly by SEC hearing officer who
upheld the election of the Lagdameo Group and dismissing the quo warranto
petition of Salazar and Chamsay. The ASI Group and Salazar appealed the
decision to the SEC en banc which affirmed the hearing officer's decision.
The SEC decision led to the filing of 2 separate appeals with the Intermediate
Appellate Court (IAC) by ASI Group and by Luciano E. Salazar. The petitions
were consolidated and IAC ordered the remand of the case to SEC with the
directive that a new stockholders' meeting of Saniwares be ordered convoked
as soon as possible, under the supervision of SEC.
Upon a MR filed by the Lagdameo Group CA rendered the questioned
amended decision.
ISSUES:
Three petitions were filed and the issues raised in the
petitions are interrelated, hence, they are discussed jointly.
1. Whether or not the nature of the business
established by the parties was a joint venture or a
corporation and
2. Whether or not the ASI Group may vote their
additional 10% equity during elections of Saniwares' BOD.
RULING:
1. The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation depends
upon their actual intention which is determined in accordance with the rules
governing the interpretation and construction of contracts.
The ASI Group and Salazar contend that the actual intention of the parties
should be viewed strictly on the their August 15, 1962 "Agreement" wherein
it is clearly stated that the parties' intention was to form a corporation and
not a joint venture.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in
their Reply and Answer to Counterclaim that the Agreement failed to express
the true intent of the parties.
The Court’s examination of important provisions of the Agreement as well as
the testimonial evidence presented by the Lagdameo and Young Group shows
that the parties agreed to establish a joint venture and not a corporation. The
history of the organization of Saniwares and the unusual arrangements which
govern its policy making body are all consistent with a joint venture and not
with an ordinary corporation.
As stated by the SEC:
Baldwin Young negotiated the Agreement with ASI in behalf of the Philippine
nationals. He testified that ASI agreed to accept the role of minority vis-a-vis
the Philippine National group of investors, on the condition that the
Agreement should contain provisions to protect ASI as the minority. An
examination of the Agreement shows that certain provisions were included to
protect the interests of ASI as the minority. For example, the vote of 7 out of 9
directors is required in certain enumerated corporate acts ASI is contractually
entitled to designate a member of the ExCom and the vote of this member is
required for certain transactions.
It is pertinent to note that the provisions of the Agreement requiring a 7 out
of 9 votes of the BOD for certain actions, in effect gave ASI (which designates
3 directors under the Agreement) an effective veto power. The grant to ASI of
the right to designate certain officers of the corporation; the super-majority
voting requirements for amendments of the articles and by-laws; and most
significantly to the issues of this case, the provision that ASI shall designate 3
out of the 9 directors and the other stockholders shall designate the other 6,
clearly indicate that there are two distinct groups in Saniwares, namely ASI,
which owns 40% of the capital stock and the Philippine National stockholders
who own the balance of 60%, and that ASI is given certain protections as the
minority stockholder.
Premises considered, SC believe that under the Agreement there are 2 groups of
stockholders who established a corporation with provisions for a special
contractual relationship between the parties, i.e., ASI and the other
stockholders.
Section 5 (a) of the agreement uses the word "designated" and not
"nominated" or "elected" in the selection of the 9 directors on a 6 to 3 ratio.
Each group is assured of a fixed number of directors in the board.
ASI in its communications referred to the enterprise as joint venture. Young
also testified that Section 16(c) of the Agreement that "Nothing herein
contained shall be construed to constitute any of the parties hereto partners
or joint venturers in respect of any transaction hereunder" was merely to
obviate the possibility of the enterprise being treated as partnership for tax
purposes and liabilities to third parties.
The Lagdameo Group stated: In fact, the Philippine Corporation Code itself
recognizes the right of stockholders to enter into agreements regarding the
exercise of their voting rights.
Sec. 100. Agreements by stockholders.- xxx xxx xxx 2. An agreement between
two or more stockholders, if in writing and signed by the parties thereto, may
provide that in exercising any voting rights, the shares held by them shall be
voted as therein provided, or as they may agree, or as determined in
accordance with a procedure agreed upon by them.
Appellants contend that the above provision is included in the Corporation
Code's chapter on close corporations and Saniwares cannot be a close
corporation because it has 95 stockholders.
I. Although Saniwares had 95 stockholders at the time of the disputed
stockholders meeting, these
95 stockholders are not separate from each other but are divisible into groups
representing a single Identifiable interest. If the members of one family
and/or business or interest group are considered as one which, it is
respectfully submitted, they should be for purposes of determining how
closely held Saniwares is there were as of Mar. 8, 1983, practically only 17
stockholders of Saniwares.
Even assuming that Saniwares is technically not a close corporation because it
has more than 20 stockholders, the undeniable fact is that it is a close-held
corporation. Surely, appellants cannot honestly claim that Saniwares is a public
issue or a widely held corporation.
As correctly held by the SEC Hearing Officer:
It is said that participants in a joint venture, in organizing the joint venture
deviate from the traditional pattern of corporation management. A noted
authority has pointed out that just as in close corporations, shareholders'
agreements in joint venture corporations often contain provisions which do
one or more of the following: (1) require greater than majority vote for
shareholder and director action; (2) give certain shareholders or groups of
shareholders power to select a specified number of directors; (3) give to the
shareholders control over the selection and retention of employees; and (4)
set up a procedure for the settlement of disputes by arbitration.
Sec. 100 (2) of the Corporation Code does not necessarily imply that
agreements regarding the exercise of voting rights are allowed only in close
corporations.
In short, even assuming that sec. 5(a) of the Agreement relating to the
designation or nomination of directors restricts the right of the Agreement's
signatories to vote for directors, such contractual provision, as correctly held
by the SEC, is valid and binding upon the signatories thereto, which include
appellants.
2. CA correctly stated: “As in other joint venture companies, the extent of ASI's
participation in the management of the corporation is spelled out in the
Agreement. Section 5(a) hereof says that 3 of the 9 directors shall be
designated by ASI and the remaining 6 by the other stockholders, i.e., the
Filipino stockholders. This allocation of board seats is obviously in
consonance with the minority position of ASI.”
Having entered into a well-defined contractual relationship, it is imperative
that the parties should honor and adhere to their respective rights and
obligations thereunder. Appellants seem to contend that any allocation of
board seats, even in joint venture corporations, are null and void to the extent
that such may interfere with the stockholder's rights to cumulative voting as
provided in Section 24 of the Corporation Code. This Court should not be
prepared to hold that any agreement which curtails in any way cumulative
voting should be struck down, even if such agreement has been freely entered
into by experienced businessmen and do not prejudice those who are not
parties thereto. It may well be that it would be more cogent to hold, as the SEC
has held in the decision appealed from, that cumulative voting rights may be
voluntarily waived by stockholders who enter into special relationships with
each other to pursue and implement specific purposes, as in joint venture
relationships between foreign and local stockholders, so long as such
agreements do not adversely affect third parties.
In any event, it is believed that SC are not here called upon to make a general
rule on this question. Rather, all that needs to be done is to give life and effect
to the particular contractual rights and obligations which the parties have
assumed for themselves.
On the one hand, the clearly established minority position of ASI and the
contractual allocation of board seats cannot be disregarded. On the other hand,
the rights of the stockholders to cumulative voting should also be protected.
In our decision sought to be reconsidered, we opted to uphold the second
over the first. Upon further reflection, we feel that the proper and just
solution to give due consideration to both factors suggests itself quite clearly.
This Court should recognize and uphold the division of the stockholders into 2
groups, and at the same time uphold the right of the stockholders within each
group to cumulative voting in the process of determining who the group's
nominees would be. During this voting, each Filipino stockholder can
cumulate his votes. ASI should not be allowed to interfere in the voting within
the Filipino group. Otherwise, ASI would be able to designate more than the 3
directors it is allowed to designate under the Agreement, and may even be
able to get a majority of the board seats, a result which is clearly contrary to
the contractual intent of the parties. Such a ruling will give effect to both the
allocation of the board seats and the stockholder's right to cumulative voting.
Moreover, this ruling will also give due consideration to the issue raised by
the appellees on possible violation or circumvention of the Anti-Dummy Law
and the nationalization requirements of the Constitution and the laws if ASI is
allowed to nominate more than 3 directors. The ASI Group and petitioner
Salazar, now reiterate their theory that the ASI Group has the right to vote
their additional equity pursuant to Section 24 of the Corporation Code which
gives the stockholders of a corporation the right to cumulate their votes in
electing directors.
The ASI Group's argument is correct within the context of Section 24 of the
Corporation Code. The point of query is whether or not that provision is
applicable to a joint venture with clearly defined agreements.
It would seem that under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships. The SC
has however recognized a distinction between these 2 business forms, and
has held that although a corporation cannot enter into a partnership contract,
it may however engage in a joint venture with others. Moreover, the usual
rules as regards the construction and operations of contracts generally apply
to a contract of joint venture.
CA was correct in upholding the agreement of the parties as regards the
allocation of director seats under Section 5 (a) of the "Agreement," and the
right of each group of stockholders to cumulative voting in the process of
determining who the group's nominees would be under Section 3 (a) (1) of
the "Agreement." As pointed out by SEC, Section 5 (a) of the Agreement
relates to the manner of nominating the members of the BOD while Section 3
(a) (1) relates to the manner of voting for these nominees.
This is the proper interpretation of the Agreement of the parties as regards
the election of members of the BOD.
To allow the ASI Group to vote their additional equity to help elect even a
Filipino director who would be beholden to them would obliterate their
minority status as agreed upon by the parties.
Such a ruling will give effect to both the allocation of the board seats and the
stockholder's right to cumulative voting. Moreover, this ruling will also give
due consideration to the issue raised by the appellees on possible violation or
circumvention of the Anti-Dummy Law and the nationalization requirements
of the Constitution and the laws if ASI is allowed to nominate more than 3
directors. Equally important as the consideration of the contractual intent of
the parties is the consideration as regards the possible domination by the
foreign investors of the enterprise in violation of the nationalization
requirements enshrined in the Constitution and circumvention of the Anti-
Dummy Act. In this regard, Salazar's position is that the Anti-Dummy Act
allows the ASI group to elect board directors in proportion to their share in
the capital of the entity. It is to be noted that the same law also limits the
election of aliens as members of the BOD in proportion to their allowance
participation of said entity. In the instant case, the foreign Group ASI was
limited to designate 3 directors. This is the allowable participation of the ASI
Group. Hence, in future dealings, this limitation of 6 to 3 board seats should
always be maintained as long as the joint venture agreement exists
considering that in limiting 3 board seats in the 9-man BOD there are
provisions already agreed upon and embodied in the parties' Agreement to
protect the interests arising from the minority status of the foreign investors.
With these findings, SC, the decisions of the SEC Hearing Officer and SEC
which were impliedly affirmed by CA declaring Aurbach, Griffin, Whittingham,
the Lagdameos, Young, Boncan, and Lee as the duly elected directors of
Saniwares at the March 8, 1983 annual stockholders' meeting.
On the other hand, the Lagdameo and Young Group object to a cumulative
voting during the election of the BOD of the enterprise as ruled by CA and
submits that the 6 directors allotted the Filipino stockholders should be
selected by consensus pursuant to section 5 (a) of the Agreement which uses
the word "designate" meaning "nominate, delegate or appoint."
They also stress the possibility that the ASI Group might take control of the
enterprise if the Filipino stockholders are allowed to select their nominees
separately and not as a common slot determined by the majority of their
group.
Section 5 (a) of the Agreement which uses the word designates in the
allocation of BOD should not be interpreted in isolation. This should be
construed in relation to section 3 (a) (1) of the Agreement. Section 3(a) (1)
relates to the manner of voting for these nominees which is cumulative voting
while section 5(a) relates to the manner of nominating the members of the
BOD. The petitioners in G.R. No. 75951 agreed to this procedure, hence, they
cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the enterprise
under the cumulative voting procedure cannot, however, be ignored. The
validity of the cumulative voting procedure is dependent on the directors
elected being genuine members of the Filipino group, not voters whose
interest is to increase the ASI share in the management of Saniwares. The
joint venture character of the enterprise must always be taken into account,
so long as the company exists under its original agreement. Cumulative voting
may not be used as a device to enable ASI to achieve stealthily or indirectly
what they cannot accomplish openly. There are substantial safeguards in the
Agreement which are intended to preserve the majority status of the Filipino
investors as well as to maintain the minority status of the foreign investors
group as earlier discussed. They should be maintained.
DISPOSITIVE PORTION:
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are
DISMISSED and the petition in G.R. No. 75951 is partly GRANTED. The
amended decision of the Court of Appeals is MODIFIED in that Messrs.
Wolfgang Aurbach John Griffin, David Whittingham Emesto V. Lagdameo,
Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo,
and George F. Lee are declared as the duly elected directors of Saniwares at
the March 8,1983 annual stockholders' meeting. In all other respects, the
questioned decision is AFFIRMED. Costs against the petitioners in G.R. Nos.
75975-76 and G.R. No. 75875.
 6. Ligaya Esguerra, Lowell Esguerra and Liesell Esguerra
versus Holcim Philippines, Inc. - G.R. No. 182571, September 2,
2013, J. Reyes
TOPIC: Powers of Corporation
STATEMENT OF FACTS:
Esguerra filed an action to annul the Free Patent in the name of de Guzman
alleging himself to be the owner over the disputed lot in Matiktik, Norzagaray,
Bulacan. De Guzman sold the lot to herein respondents who utilized the land
extracted limestones from it. The Court granted such action and remanded
the case to the Trial Court for execution. During the execution, Esguerra
claimed that the royalties due them amounted to ₱10.00 per metric ton. Thus,
for the 9,187,257.67 metric tons18 of limestone which HOLCIM allegedly
acquired, the petitioners should receive a total royalty of ₱91,872,576.72.
The RTC denied HOLCIM’s motion for reconsideration and motion for ocular
inspection. It held that the petitioners proved their entitlement to the
royalties totaling to ₱91,872,576.72.
STATEMENT OF THE CASE:
HOLCIM filed a Petition for Certiorari (with Urgent Applications for
Temporary Restraining Order and/or Writ of Preliminary Injunction)33 with
the CA. The latter granted the petition which prompted petitioners to filed the
case before the Supreme Court. One of the claims of the petitioner is that
HOLCIM’s petition for certiorari in the CA failed to comply with the rules on
Verification and Certification of Non-Forum Shopping because the latter did
not secure and/or attach a certified true copy of a board resolution
authorizing any of its officers to file said petition. Thus, the CA should have
dismissed outright HOLCIM’s petition before it.
RULING:
NO. The general rule is that a corporation can only exercise its powers and
transact its business through its board of directors and through its officers
and agents when authorized by a board resolution or its bylaws. The power of
a corporation to sue and be sued is exercised by the board of directors. The
physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by
corporate bylaws or by a specific act of the board. Absent the said board
resolution, a petition may not be given due course. However, this admits to
exceptions such as in the case at bar when the corporation performed acts in
substantial compliance to such requirement. While the board resolution may
not have been attached, HOLCIM complied just the same when it attached the
Secretary’s Certificate dated July 17, 2006, thus proving that O’Callaghan had
the authority from the board of directors to appoint the counsel to represent
them in Civil Case No. 725-M-89. HOLCIM compliance was in good faith since
after the petitioners pointed out the said defect, HOLCIM submitted the
Secretary’s Certificate dated July 17, 2006, confirming the earlier Secretary’s
Certificate dated June 9, 2006.
DISPOSITIVE PORTION:
WHEREFORE, the Decision dated August 31, 2007 and the Resolution dated
April 14, 2008 of the Court of Appeals in CA-G.R. SP No. 94838 are hereby
AFFIRMED.

II. ISSUE:

Whether or not the Court of Appeals gravely erred in not

dismissing Holcim’s petition for certiorari on the ground of
lack of board resolution authorizing the filing of the
petition

7. Central Textile Mills, Inc. vs NWPC
STATEMENT OF FACTS:
Mid-Pasig Land Development Corporation (MLDC), represented by its
Chairman and President, Ronaldo Salonga, and ECRM Enterprises,
represented by Mario P. Tablante, its proprietor, executed an agreement
whereby the former would lease to the latter an area, approximately one (1)
hectare of MLDC’s lands in Pasig, or a period of three (3) months, to be used
as the staging area for the Home and Garden Exhibition Fair.
On March 6, 2000, the date of the expiration of the Lease Agreement, Tablante
assigned all his rights and interests under the said agreement to respondents
Laurie M. Litam and/or Rockland Construction Company, Inc. (Rockland)
under a Deed of Assignment of the same date.
MLDC eventually learned that respondent Tablante had executed a Contract
of Lease with respondent MC Home Depot, Inc. on November 26, 1999 over
the same parcel of land. Thereafter, respondent MC Home Depot, Inc.
constructed improvements on the land and subdivided the area into fifty-nine
(59) commercial stalls, which it leased to various entities. Upon the expiration
of the lease on March 6, 2000, petitioner demanded that respondents vacate
the land. A final demand was made in a letter dated December 20, 2000.
STATEMENT OF THE CASE:
To forestall ejectment from the premises, respondent Rockland filed a case for
Specific Performance with the Regional Trial Court (RTC), Branch 266, Pasig
City, on January 11,
2001, compelling MLDC to execute a new lease contract for another three (3)
years, commencing in July 2000. This was docketed as Civil Case No. 68213.
Petitioner moved to dismiss the complaint on the ground that it was
anticipatory in nature.
On August 22, 2001, MLDC filed Civil Case No. 8788 for unlawful detainer
against herein respondents, raffled to the Municipal Trial Court (MTC), Pasig
City, Branch 70. Simultaneously, petitioner filed a supplemental motion to
dismiss Civil Case No. 68213, on the ground of litis
pendentia. MLDC’s motion to dismiss was denied. The denial was questioned
and eventually
elevated to the Supreme Court.
The trial court ruled that the issue did not involve material or physical
possession, but rather, whether or not ECRM had the right to exercise an
option to renew its lease contract. The MTC stated that, considering that this
issue was incapable of pecuniary estimation, jurisdiction over the case was
vested in the RTC. On appeal, the RTC affirmed the lower court in toto. A
petition for certiorari was consequently filed with the CA.
In the assailed resolution dated November 20, 2003, the CA resolved to
dismiss the petition on the following grounds:
1) The verification and certification against non-forum shopping was
signed by a certain Antonio A. Merelos as General Manager of the petitioner-
corporation without attaching therewith a Corporate Secretary’s certificate or
board resolution that he is authorized to sign for and on behalf of the petitioner;
and
2) Lack of pertinent and necessary documents which are material
portions of the record as required by Section 2, Rule 42 of the Rules of Civil
Procedure.
ISSUE:
Whether or not the CA committed a reversible error in
holding that the verification and certification against
forum-shopping in the petition failed to attach the Board
Resolution showing the authority of the affiant.
RULING:
Yes. The CA committed a reversible error in holding that the verification and
certification against forum-shopping in the petition failed to attach the Board
Resolution showing the authority of the affiant.
The failure to attach the Secretary’s Certificate, attesting to General Manager
Antonio Mereloss authority to sign the Verification and Certification of Non-
Forum Shopping, should not be considered fatal to the filing of the petition.
Nonetheless, the requisite board resolution was subsequently submitted to
the CA, together with the pertinent documents.

It was held in Cagayan Valley Drug Corporation v. Commissioner of Internal

Revenue (February 13, 2008, 545 SCRA 10) that Sec. 23, in relation to Sec. 25
of the Corporation Code, clearly enunciates that all corporate powers are
exercised, all business conducted, and all properties controlled by the board
of directors. A corporation has a separate and distinct personality from its
directors and officers and can only exercise its corporate powers through the
board of directors. Thus, it is clear that an individual corporate officer cannot
solely exercise any corporate power pertaining to the corporation without
authority from the board of directors. This has been our constant holding in
cases instituted by a corporation.

However, the Supreme Court have recognized the authority of some corporate
officers to sign the verification and certification against forum shopping such
as the authority of a general manager or acting general manager to sign the
verification and certificate against forum shopping.

The following officials or employees of the company can sign the verification
and certification without need of a board resolution: (1) the Chairperson of
the Board of Directors, (2) the President of a corporation, (3) the General
Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized

signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case
basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the
verification or certificate against forum shopping, being in a position to verify
the truthfulness and correctness of the allegations in the petition.

VIII. DISPOSITIVE PORTION:

WHEREFORE, the petition is GRANTED. The assailed Resolutions of the Court

of Appeals are REVERSED and SET ASIDE. However, in view of the
developments which have rendered the issue of the right of possession over
the subject property moot and academic, the main case is hereby considered
CLOSED AND TERMINATED.
8. Datu Tagoranao Benito versus Securities and Exchange
Commission and Jamiatul Philippine-Al Islamia, Inc. – G.R. No. L-56655,
July 25, 1983, J. Relova
TOPIC: Corporation Law – Board of Directors/Trustees/Officers
STATEMENT OF FACTS:
On February 6, 1959, the Articles of Incorporation of respondent Jamiatul
Philippine-Al Islamia, Inc. were filed with the SEC and were approved on
December 14, 1962. The corporation had an authorized capital stock of
P200,000.00 divided into 20,000 shares at a par value of P10.00 each. Of the
authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and
fully paid for. Herein petitioner Datu Tagoranao Benito subscribed to 460
shares worth P4,600.00. On October 28, 1975, the respondent corporation
filed a certificate of increase of its capital stock from P200,000.00 to
P1,000,000.00. It was shown in said certificate that P191,560.00 worth of
shares were represented in the stockholders' meeting held on November 25,
1975 at which time the increase was approved. Thus, P110,980.00 worth of
shares were subsequently issued by the corporation from the unissued
portion of the authorized capital stock of P200,000.00. Of the increased
capital stock of P1,000,000.00, P160,000.00 worth of shares were subscribed
by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.
STATEMENT OF THE CASE:
On November 18, 1976, petitioner Datu Tagoranao filed with respondent
Securities and Exchange Commission a petition alleging that the additional
issue (worth P110,980.00) of previously subscribed shares of the corporation
was made in violation of his pre-emptive right to said additional issue and
that the increase in the authorized capital stock of the corporation from
P200,000.00 to P1,000,000.00 was illegal considering that the stockholders of
record were not notified of the meeting wherein the proposed increase was in
the agenda. Petitioner prayed that the additional issue of shares of previously
authorized capital stock as well as the shares issued from the increase in
capital stock of respondent corporation be cancelled; that the secretary of
respondent corporation be ordered to register the 2,540 shares acquired by
him (petitioner) from Domocao Alonto and Moki-in Alonto; and that the
corporation be ordered to render an accounting of funds to the stockholders.
Respondents denied the allegations of the petitioner and, claimed that
petitioner has no cause of action and that the stock certificates covering the
shares alleged to have been sold to petitioner were only given to him as
collateral for the loan of Domocao Alonto and Moki-in Alonto.
On July 11, 1980, the Securities and Exchange Commission, after due
proceedings, rendered a decision as follows:
(a) That the issuance by the corporation of its unissued shares was
validly made and was not subject to the pre-emptive rights of
stockholders, including the petitioner, herein;
(b) That there is no sufficient legal basis to set aside the certificate issued
by this Commission authorizing the increase in capital stock of respondent
corporation from P200,000.00 to Pl,000,000.00. Considering, however,
that petitioner has not waived his pre-emptive right to subscribe to the
increased capitalization, respondent corporation is hereby directed to
allow petitioner to subscribe thereto, at par value, proportionate to his
present shareholdings, adding thereto the 2,540 shares transferred to him
by Mr. Domocao Alonto and Mrs. Moki-in Alonto. (c) To direct respondent
corporation to religiously comply with the requirement of filing annual
financial statements under pain of a more drastic action.
Hence, this petition for review by way of appeal from the aforementioned
decision of the Securities and Exchange Commission
ISSUES:
1. Whether or not the issuance of the 110, 980 shares
without the consent of the stockholders or of the Board of
Directors, and in the absence of consideration, is null and
void.
2. Whether or not the increase in the authorized
capital stock from P200,000.00 to P1,000,000.00 without
the consent or express waiver of the stockholders, is null
and void.
RULING:
1. No. The questioned issuance of the unsubscribed portion of the capital
stock worth P110,980.00 is ' not invalid even if assuming that it was made
without notice to the stockholders as claimed by petitioner. The power to issue
shares of stocks in a corporation is lodged in the board of directors and no
stockholders' meeting is necessary to consider it because additional issuance DISPOSITIVE PORTION:
of shares of stocks does not need approval of the stockholders. The by-laws of
the corporation itself states that 'the Board of Trustees shall, in accordance ACCORDINGLY, this petition is hereby dismissed for lack of merit.
with law, provide for the issue and transfer of shares of stock of the Institute
and shall prescribe the form of the certificate of stock of the Institute. The
general rule is that pre-emptive right is recognized only with respect to new
issue of shares, and not with respect to additional issues of originally
authorized shares. This is on the theory that when a corporation at its inception
offers its first shares, it is presumed to have offered all of those which it is
authorized to issue. An original subscriber is deemed to have taken his shares
knowing that they form a definite proportionate part of the whole number of
authorized shares. When the shares left unsubscribed are later re-offered, he
cannot therefore claim a dilution of interest.

2. No. With respect to the claim that the increase in the authorized
capital stock was without the consent, expressed or implied, of the
stockholders, it was the finding of the Securities and Exchange Commission that
a stockholders' meeting was held on November 25,1975, presided over by Mr.
Ahmad Domocao Alonto, Chairman of the Board of Trustees and, among the
many items taken up then were the change of name of the corporation from
Kamilol Islam Institute Inc. to Jamiatul Philippine-Al Islamia, Inc., the increase
of its capital stock from P200,000.00 to P1,000,000.00, and the increase of the
number of its Board of Trustees from five to nine. "Despite the insistence of
petitioner, this Commission is inclined to believe that there was a stockholders'
meeting on November 25, 1975 which approved the increase. The petitioner
had not sufficiently overcome the evidence of respondents that such meeting
was in fact held. What petitioner successfully proved, however, was the fact
that he was not notified of said meeting and that he never attended the same.
Another thing that petitioner was able to disprove was the allegation in the
certificate of increase that all stockholders who did not subscribe to the
increase of capital stock have waived their pre-emptive right to do so. As far as
the petitioner is concerned, he had not waived his pre-emptive right to
subscribe as he could not have done so for the reason that he was not present
at the meeting and had not executed a waiver, thereof. Not having waived such
right and for reasons of equity, he may still be allowed to subscribe to the
increased capital stock proportionate to his present shareholdings.

Well-settled is the rule that the findings of facts of administrative bodies will
not be interfered 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.
9. Central Textile Mills, Inc. VS. National Wages and
Productivity Commission, Regional Tripartite Wages and Productivity
Board - National Capital Region, and United CMC Textile Workers Union -
G.R. No. 104102, August 07, 1996, J. Romero
TOPIC: Corporation Law – Board of Directors/Trustees/Officers
STATEMENT OF FACTS:
On December 20, 1990, respondent Regional Tripartite Wages and
Productivity Board - National Capital Region (the Board) issued Wage Order
No. NCR-02 (WO No. NCR-02), which took effect on January 9, 1991. Said
wage order mandated a P12.00 increase in the minimum daily wage of all
employees and workers in the private sector in the NCR, but exempted from
its application distressed employers whose capital has been impaired by at
least twenty-five percent (25%) in the preceding year.
By virtue of these provisions, petitioner filed on April 11, 1991 its application
for exemption from compliance with WO No. NCR-02 due to financial losses.
In an order dated October 22, 1991, the Board’s Vice-Chairman, Ernesto
Gorospe, disapproved petitioner’s application for exemption after concluding
from the documents submitted that petitioner sustained an impairment of
only 22.41%.
The Board opined that according to the audited financial statements
submitted by petitioner to them, to the Securities and Exchange Commission
and to the Bureau of Internal Revenue, petitioner had a total paid-up capital
of P305,767,900.00 as of December 31, 1990, which amount should be the
basis for determining the capital impairment of petitioner, instead of the
authorized capital stock of P128,000,000.00 which it insists should be the
basis of computation.
The Board also noted that petitioner did not file with the SEC the August 15,
1990 resolution of its Board of Directors, concurred in by its stockholders
representing at least two-thirds of its outstanding capital stock, approving an
increase in petitioner’s authorized capital stock from P128,000,000.00 to
P640,000,000.00. Neither did it file any petition to amend its Articles of
Incorporation brought about by such increase in its capitalization.
STATEMENT OF THE CASE:
Petitioner maintains in the instant action that its authorized capital stock, not
its unauthorized paid up capital, should be used in arriving at its capital
impairment for 1990. Citing two SEC Opinions dated August 10, 1971, and
July 28, 1978, interpreting Section 38 of the Corporation Code, it claims that
"the capital stock of a corporation stand(s) increased or decreased only from
and after approval and the issuance of the certificate of filing of increase of
capital stock.
ISSUE:
Whether or not the authorized capital stock, should be
used in arriving at its capital impairment for 1990.
RULING:
Yes. The guidelines on exemption specifically refer to paid-up capital, not
authorized capital stock, as the basis of capital impairment for exemption
from WO. No. NCR-02. The records reveal, however, that petitioner included
in its total paid-up capital payments on advance subscriptions, although the
proposed increase in its capitalization had not yet been approved by, let alone
presented for the approval of, the SEC. On August 15, 1990, a Board resolution
increasing the capital stock of the corporation was affirmed by the requisite
number of stockholders. Although no petition to that effect was ever
submitted to the SEC for its approval, petitioner already started receiving
subscriptions and payments on the proposed increase, which it allegedly held
conditionally, that is, pending approval of the same by the SEC.
Thus, by the end of 1990, the corporation had a subscribed capital stock of
P482,748,900.00 and, after deducting P176,981,000.00 in subscriptions
receivables, a total paid-up capital of P305,767,900.00. P177,767,900.00 of
this sum constituted the unauthorized increase in its subscribed capital stock,
which are actually payments on future issues of shares. These payments
cannot as yet be deemed part of petitioner’s paid-up capital, technically
speaking, because its capital stock has not yet been legally increased. Thus, its
authorized capital stock in the year when exemption from WO No. NCR-02
was sought stood at P128,000,000.00, which was impaired by losses of nearly
50%. Such payments constitute deposits on future subscriptions, money
which the corporation will hold in trust for the subscribers until it files a
petition to increase its capitalization and a certificate of filing of increase of
capital stock is approved and issued by the SEC.

As a trust fund, this money is still withdrawable by any of the subscribers at

any time before the issuance of the corresponding shares of stock, unless
there is a pre-subscription agreement to the contrary, which apparently is not
present in the instant case. Consequently, if a certificate of increase has not
yet been issued by the SEC, the subscribers to the unauthorized issuance are
not to be deemed as stockholders possessed of such legal rights as the rights
to vote and dividends.

The Court observed that the subject wage order exempts from its coverage
employers whose capital has been impaired by at least 25% because if
impairment is less than this percentage, the employer can still absorb the
wage increase. In the case at hand, petitioner’s capital held answerable for the
additional wages would include funds it only holds in trust, which to reiterate
may not be deemed par of its paid-up capital, the losses of which shall be the
basis of the 25% referred to above. To include such funds in the paid-up
capital would be prejudicial to the corporation as an employer considering
that the records clearly show that it is entitled to exemption, even as the
anomaly was brought about by an auditing error.

DISPOSITIVE PORTION:
WHEREFORE, the petition is hereby GRANTED. The assailed orders of
the Regional Tripartite Wages and Productivity Board - National Capital Region,
dated October 22, 1991 and February 4, 1992, are ANNULLED and SET ASIDE.
Said Board is also hereby mandated to issue another order granting the
application of petitioner Central Textile Mills, Inc. for exemption from Wage
Order No. NCR-02 for the year ending December 31, 1990. No pronouncement as
to cost