RAMIREZ VS. ORRIENTALIST CO.

Facts
- The orientslist co., was engaged in the
business of maintaining a theatre in the city
of manila.
- Under its AOI, it is authorized to mfg, buy
or otherwise obtain all accessories
necessary for conducting such a business.
- Plaintiff amirez engaged in mar!eting
films. In this enter"rise, he was
re"resented by his son, #ose amirez
- $oard of directors of Orientalist a""rised
of the fact that "laintiff had control of the
agencies of two different mar!s of films.
%egotiations begun with said officials of
orientalist by &ose amirez, as agent of
"laintiff, for the "ur"ose of "lacing the
e'clusi(e agency of the films in the hands
of orientalist.
- amon )ernandez, one of the directors and
its treasurer was chiefly acti(e in this
matter
- )ernandez had an informal meeting with
all the members of the com"any, and with
the a""ro(al of those whom he had
communicated. ) thus sent a letter
acce"ting the e'clusi(e agency to the two
films
- These communication were signed by
)ernandez as the treasurer.
- Films begun to arri(e in the Phili""ines.
Attached thereto was a draft of cost and
incident e'"enses. It a""ears that
orientalist was without funds to meet these
obligations.
- The drafts had thus been "aid by
)ernandez with his own funds and treated
the same as his "ersonal "ro"erty. They
ne(er in fact came into actual "ossession of
the orientalist as owners
- *e(eral remittances arri(ed, all the drafts
were acce"ted by )ernandez as the
cor"oration+s "resident e'ce"t the last one
he acce"ted in his "ersonal ca"acity
- %one of the drafts acce"ted were ta!en u"
by the drawee or )ernandez when they fell
due
- Thereu"on, "laintiff instituted this action
against orientalist co, where orientalist was
declared as a "rinci"al debtor and ramon
)ernandez to be subsidiary liable
I**U,- whether or not cor"oration can be held
liable on the contracts
),./-
- In dealing with cor"orations, the "ublic at
large is bound to rely to a large e'tent u"on
outward a""earances. If a man is found to
be acting for a cor"oration, with the
e'ternal indicia of authority, any "erson not
ha(ing of want of authority, may usually
rely u"on those a""earances.
- If it be found that that the directors
"ermitted the agent to e'ercise that
authority and thereby held him out as a
"erson com"etent to bind cor"orations, the
cor"oration will be bound, notwithstanding
the actual authority may ne(er ha(e
granted.
- It is therefore reasonable in a case where an
officer of a cor"oration has made contract
in its name, that the cor"oration should be
re0uired, if it denies its authority to state it
in its answer. The defendant cor"oration
failed to alleged in its answer the want of
authority of )ernandez to bind the
com"any and deny s"ecifically the
genuineness and due e'ecution of the
contract.
- It also a""ears in the e(idence, s"ecifically
in its minutes that, u"on the dis"atch of the
letter acce"ting the offer of 1clair films, the
$O/ con(ened on a s"ecial meeting, as
re0uested by )ernandez. There were
"resent 2 $O/, its resident and treasurer,
all acce"ting and signifying their consent to
the ma!ing of the contract. )ernandez
inform them of the offer and terms and
conditions which the film nay "rocured.
- Thus it is a fair inference that the $O/ was
then cognizant that the offer had already
been acce"ted in the name of the
cor"oration
- $ut there was also the 0uestion of whether
the stoc!holders in their final resolution
re"udiate the contract which has been made
in the name of the cor"oration.
- It must be consider that the action of the
*) must be ignored. The functions of the
stoc!holder, must be remembered are of a
limited nature. The theory that *) may
ha(e all the "rofits but shall turno(er the
com"lete management of the cor"oration to
their re"resentati(es and agents, called
directors
- There is a little for the *) to do beyond
electing directors, ma!ing by laws, and
e'ercising certain "owers defined by law.
3ontracts between cor"oration and third
"ersons, must be made by directors not
stoc!holders
BARRETO VS. LA PREVISORA
FA3T*-
- An action was brought by the "etitioners
against the defendant cor"oration for the
reco(ery of 45 to each of the "laintiffs of
the "rofit of said cor"oration, under and in
accordance with the amendment of bylaws
which was made at a general meeting of
stoc!holders.
I**U,- whether the amendment to the by-laws
could ha(e abiding effect.
),./-
- while the cor"oration e'"ressly authorized
by the cor"oration law to ado"t the by-laws
for their go(ernment, section 67 of the 3.
e'"ressly limits the authority to ado"t
which are not inconsistent with the law
- The a""elless contended that the article in
0uestion is merely a "ro(ision for the
com"ensation of directors which are not
inconsistent, and authorized by section 64
of 3..
- The court cannot agree. The authority
conferred by said section refers only to
"ro(iding com"ensation for the future
ser(ices of directors, officers, and
em"loyees. It cannot in any sense be held
to authorize the gi(ing, of continuous
com"ensation to "articular directors after
their em"loyment has terminated in the
"ast.
- The bylaws cannot be establish a
contractual obligation between the "arties
because essential elements of contracts are
lac!ing.
The article relied u"on by the
"etitioners is merely a by-law ado"ted
by *), without any action ha(ing been
ta!en in relation thereto by the
directors
The law is settled that contracts
between cor"oration and third "ersons
must made under the authority of its
$O/ and not by its *).
)ence the action of *)s is merely
ad(isory and not in any wise binding
on the cor"oration.
The "laintiffs herein did not gi(e their
consent but (oted against the said by-
law. There was also no consideration
for the "ro"osed consideration
LEE VS. CA
FA3T*
- A com"laint for a sum of money was filed
by the international cor"orate ban! against
the "ri(ate res"ondents who in turn, filed a
third "arty com"laint against A.FA and the
"etitioners
- 8eaniwhile, the T3 court issued an order
re0uiring the issuance of an alias summon
u"on A.FA through /$P asitw as
contented by A.FA that the summon was
erroneously ser(ed u"on them considering
that the management of AF.A had been
transferred to the /$P
- /$P claimed that it was not authorized to
recei(e summons since /$P had not ta!en
the com"any which has se"arate and
distinct cor"orate "ersonality.
- Petitioners contended that since they are no
longer officers of A.FA, the "ri(ate
res"onded should ha(e a(ailed of another
mode of ser(ice.
- Pri(ate res"ondent argued that the (oting
trust agreement did not di(est the
"etitioners of their "ositions as "resident
and e'ecuti(e 9P
I**U,- whether or not the 3A erred in holding that
there was "ro"er ser(ice of summons in A.FA
through the "etitioners
),./
- *,3TIO% :; e'"ressly recognize 9TAs
- $y its (ery nature, 9TA results in the
se"aration of the (oting rights of a *) from
his other rights such as the right to recei(e
di(idends, right to ins"ect boo!s, right to
sell certain di(idends.
- ,lements of 9TA< that the (oting rights are
se"arated from other attributes of
ownershi"< that the (oting rights tend to be
irre(ocable for a definite "eriod< "ur"ose of
granting (oting rights is to ac0uire (oting
control of the cor"oration
- The e'ecution of 9TA may create a
dichotomy between the e0uitable or
beneficial ownershi" of the cor"orate
shares on the one hand, and the legal title
thereto, on the other hand.
- Petitioners argued that because of the 9TA,
"etitioner transferred all of their shares in
A.FA through /$P. And in su""ort of
section 6=, they can no longer be
considered as directors. Under section 6=,
any director who cease s to be the owner of
at least 4 share in the 3*, shall be cease to
be a director
- Thus the court held that the "osition of
"etitioners is meritorious.
$ecause the immediate effect of 9TA
on the status of a *) who is legal title
holder of the shares, he becomes the
beneficial owner
Under section =7- the "hrase >in his
own name? means that the *) must be
the legal owner.
)ence, there is a clear indication that in
order to be eligible as a director, what
is material is the legal title thereto, not
beneficial ownershi" of the stoc!.
DETECTIVE AND PROTECTIVE BUREAU
VS. CLORIBEL
FA3T*
- The com"laint was filed by "etitioners
against herein res"ondent for accounting
with "reliminary in&unction and
recei(ershi".
- Petitioner 3or"oration argued that
defendant was the managing director of the
cor"oration. That defendant illegally
seized and too! all control of the assets as
well as boo!s, records, (ouchers and
refused to allow its members to e'amine
the same.
- The stoc!holder in a meeting, remo(ed the
defendants as a managing director and
elected #ose dela rosa in his stead.
/efendant refused to (acate the office and
still arrogated to himself the "owers of
$O/
- /efendants stated that /ela rosa could not
be elected as 8anaging director because he
did not own any stoc! in the cor"oration
I**U,- @hether &ose dela rosa could be elected as
managing director
),./-
- There is in the record no showing that dela
rosa owned a share of stoc! of the
cor"oration
- 3ertainly he could not be a director
"ursuant to the mandatory "ro(ision of
*,3TIO% =7
- If he could not be a director, he could not
also be a managing director
- If the managing director-elect was not
0ualified to become managing director,
defendant could not be com"elled to (acate
his office because the bylaws of the
cor"oration "ro(ides that >director shall
ser(e until the election and 0ualification of
their duly 0ualified successors?. That the
incumbent director shall continue to act as
such in a hold o(er ca"acity until the
election is held
YAO KA SIN TRADING VS. CA
FA3T*
- The root of the contro(ersy is the letter
offer of the "resident and chairman of the
$O/ of res"ondent "rime white cement
cor"oration to yao !a sin and is
re"resentati(e by manager 8r. Aao
- The letter is about the offer of "rime white
of their "roduct stating therein the "rice,
0uality, 0uantity deli(ery schedule etc.
I**U,- @O% the contract binds P@33
),./-
- A cor"oration such as herein res"ondent ,
can act only through its officers and agents,
> all acts within the "ower of said
cor"oration may be "erformed by agents of
its selection< agents, once a""ointed is
sub&ect to the same liabilities, and
inca"acities as are agents of indi(iduals and
"ri(ate "ersons.
- A cor"orate officer or agent may bind the
cor"oration to the e'tent of the authority
conferred u"on it, intentionally conferred in
the usual course of its business, and those
which are incidental to or im"lied from the
"owers intentionally conferred.
- In the case at bar, "ri(ate res"ondent+s by-
laws do not in any way conferred u"on the
"resident the authority to enter into
contracts for the cor"oration indecently of
its $O/
- The authority was e'"ressly lodge u"on the
board of directors. %e(ertheless, to
e'"edite the contract, only the "resident
and not all the members is re0uired to act
or shall sign it for the cor"oration
- The "ower of the chairman to e'ecute and
sign for and in behalf of the cor"oration all
contract "resu""oses a "rior act of the
cor"oration
- It was also the contention of "etitioner that
"ri(ate res"ondent had clothe 8r. 8aglana
with a""arent authority to act for it and
caused "erson dealing with it to belie(e that
he was conferred with such "ower.
If cor"oration clothe its officer or agent
with a""arent authority to "erform acts
in behalf of the cor"oration, it will be
esto""ed to deny such a""arent
authority is real, as to innocent "erson
dealing in good faith with such officers
or agent.
LOPEZ VS. FOTENCHA
FA3T*-
- A com"laint was filed by "ri(ate
res"ondents against their em"loyer
"etitioner .o"ez realty and its ma&ority
stoc! holder Bonzales, for alleged non-
"ayment of their gratuity "ay and other
benefits.
- It a""ears that "etitioner cor"oration
a""ro(ed a resolution "ro(iding for gratuity
"ay of its em"loyees , "assed by the *)s in
a s"ecial meeting
- ,'ce"t for Bonzales, who was then abroad,
the remaining board of directors con(ened
to a s"ecial meeting and "assed a resolution
a""ro(ing the "ayment of gratuity "ay.
- Pri(ate res"ondents re0uested for the full
"ayment of their gratuity "ay. Their
re0uest was granted in a s"ecisl meeting
- )owe(er, "etitioner Bonzales, sent a
cablegram to the cor"oration, ob&ecting
certain matters ta!en u" by the board in her
absence. *he then filed a suit before the
*,3 against the ma&ority shareholders
I**U,- @O% "ublic res"ondent acted with gra(e
abuse of discretion holding that "ri(ate res"ondents
are entitled to recei(e their gratuity "ay
),./-
- The general rule is that cor"oration,
through its $O/, should act in the manner
and within the formalities as "rescribed by
its charter or by-laws
- /irectors must act as a body in a meeting
called "ursuant to the law or by-laws,
otherwise, any action ta!en therein may be
0uestioned by any ob&ecting *) or
members
- ATIFI3ATIO% by directors may be by an
e'"ress resolution or (ote to that effect
e'"ressly ratifying the former "re(ious acts
either of cor"orate officers or agents, or it
may be im"lied from ado"tion of the act,
acce"tance or ac0uiescence. It is not
necessary to show a meeting and formal
action by the board of directors
- Unauthorized of an officer of a cor"oration
may be ratified by the cor"oration by
conduct im"lying a""ro(al and ado"tion of
the act in 0uestion.
- In the case at bench, it was establish that
the cor"oration did not issue any resolution
re(o!ing nor nullifying the board resolution
granting gratuity "ay. Instead they "aid the
gratuity "ay.
- /es"ite the lac! of notice to "etitioner
Asuncion, there was no 0uestion that she
was aware of the cor"oration+s obligation
as she affi'ed her signature on two cash
(ouchers e(idencing the disbursement of
the gratuity "ay. Thus she was esto""ed
from assailing the (alidity of the contract.
PUA CASIM VS. NEUMARK AND CO
FA3T*-
- This action is brought to reco(er a certain
sum of money.
- It was alleged the defendant cor"oration,
re"resented by its "resident and ma&ority
*) neuman, borrowed from the "laintiff
the sum of 4:,777 which was deli(ered to
the defendant cor"oration by means of a
chec!.
- /efendant cor"oration denied the
allegation of "laintiff to that effect that
neuman had e(er authorized by the
defendant cor"oration to borrow money
and that said defendant had ne(er recei(ed
nor made use the money alleged to ha(e
been so borrowed.
I**U,- whether the court erred in holding the
defendant res"onsible for the "ayment of money
borrowed by neuman
),./-
- The e(idence shows that neuman was te
"rinci"al *), "resident and general
business manager of defendant cor"oration.
On behalf of the cor"oration, he solicited a
loan from the "laintiff and was gi(en the
"laintiff+s chec! in fa(our of the
cor"oration. @hich chec! was endorsed by
him in his ca"acity as the "resident and
de"osited the same to cor"oration+s
account. Although ma&ority of the amount
was di(erted by neuman in his own use, but
that does not alter the facts that the money
was borrowed for the cor"oration and was
"laced In his "ossession.
- It is conceded that neuman was not
e'"ressly authorized by the board to
borrow money and the B is that a
business manager or other officer, has no
im"lied "ower to borrow money in its
behalf. $ut the rule is sub&ect to
e'ce"tions.
- Thus where the cor"oration clothed a
general manager an a""arent authority to
borrow money and the amount does not
e'ceed the ordinary re0uirement , it has
been held that the authority is necessarily
im"lied and that the cor"oration is im"lied
- In the "resent case, there are am"le
indications that the cor"oration is in need
of funds to carry on its business and it does
not a""ear that the amount borrowed was
dis"ro"ortionate to the (olume of the
business
- Thus it a""eared that neuman as "resident,
general manager and "rinci"al *), was
clothed with a""arent authority to do
e(erything necessary for the conduct of
business. In these circumstances, he must
ha(e held to ha(e been im"liedly
authorized to borrow money here in
0uestion.
YU CHUCK VS. KONG LI PO
FA3T*-
- /efendant is engaged in the "ublication of
a 3hinese news"a"er. Its AOI "ro(ide for a
$O/ and for other officers, among them a
"resident whose duty is to >sign all
contracts and other instrument of writing?
no s"ecial "ro(ision is made for a business
or general manager.
- 33 chen was a""ointed as a general
business manager of the %P. )e then
entered into an agreement with the
"laintiffs, which bound themsel(es to do
necessary "rinting for the news"a"er.
- @hen T3 chen was in china, a letter of
discharged or dismissal state no s"ecial
reasons for the discharge of the "laintiffs
- Plaintiff then filed an action against the
defendants on the ground that term of
em"loyment was for = years< and in case of
early discharge, they shall recei(e full "ay
for the remaining "ortion of the term
- )owe(er, the s"ecial defence of the
cor"oration was that 33 chen who a""ears
to signed the contract of em"loyment was
not authorized by the defendant to e'ecute
such a contract in its behalf.
I**U,- @hether chen had the "ower to bind the
cor"oration by a contract of the character indicated
),./-
- It is a well settled that where the authority
of em"loying ser(ants and agents is
e'"ressly (ested in the $O/ or trustees, an
officer or agent who has general
management and control of the
cor"oration+s business, may bind the
cor"oration by the em"loyment of such
agents and em"loyees as are usual and
necessary in the conduct of such business.
- In the absence of e'"ress limitation, a
manager has authority to hire an em"loyee
for such a "eriod as is customary and
"ro"er under circumstances such as for a
year, for the season, or for two season. $ut
unless he is either e'"ressly granted or held
out as ha(ing an authority, he cannot ma!e
a contract of em"loyment for a long "eriod,
such as three years.
- There can be no doubt that chen has
im"lied authority to bind the cor"oration by
a reasonable and usual contract
em"loyment with the "laintiff but in the
case at bar, this rule cannot be a""lied. %ot
only the term of em"loyment is unusually
long, ut the condition are otherwise onerous
that the "ossibility of being thrown into
insol(ency is e'"ressly contem"lated in the
contract.
- %either there was an im"lied ratification on
the "art of the cor"oration. Although the
"resident admitted the fact that he saw the
em"loyees wor!ing, he denied any
!nowledge of the contract. Assuming that
he !new of the contract, ratification of the
$O/ was necessary.
TRINIDAD FRANCISCO VS. GSIS
FA3T*-
- Plaintiff Trinidad Francisco, in
consideration of a loan that was released to
her , mortgaged in fa(our of the defendant
B*I* a "arcel of land, !nown as (ic-mari
com"ound
- B*I* e'tra &udicially foreclosed the
mortgaged on the ground that u" to date,
the "laintiff-mortgagor was in arrears on
her monthly instalments
- Plaintiff+s father (icente Francis sent a
letter to the general manager of B*I* to
redeem the "ro"erty. .ater on, francisoc
recei(ed a telegram a""ri(ing his re0uest of
redem"tion, signed by Andal.
- Francisco remitted to B*I*, through andal
a chec! worth =7,777. .ater, according to
the cor"oration, the amount that was
remitted by Francisco were allegedly not
sufficient to "ay off his daughter+s arrears,
the 4 year redem"tion "eriod was already
e'"ired and that title to the land was
already consolidated in its name
I**U,- @hether or not the telegram sent by the
"etitioner binds the cor"oration.
),./-
- There is no denying that the telegram was
within Andal+s a""arent authority, but the
defence is that he did not signed the
telegram , that it was sent by the board
secretary in his name and without his
!nowledge. Asuing this to be true, how
was a""elle to !nowC
- it is familiar doctrine that if a cor"oration
!nowingly "ermits one of its officers, or
any other agent, to do acts within the sco"e
of an a""arent authority, and thus holds
him out to the "ublic as "ossessing "ower
to do those acts, the cor"oration will, as
against anyone who has in good faith dealt
with the cor"oration through such agent, be
esto""ed from denying his authority.
- ,(en ifit were the secretary who sent the
telegram, the cor"oration could not e(ade
the binding effect "roduced by the telegram
- B*I* "oc!eted the amount, and !e"t secret
about the telegram not being in accordance
with the true facts. This silence, ta!en
together with the unconditional acce"tance
of three subse0uent remittances constitutes
itself a binding ratification of the original
agreement.
BOARD OF LIQUIDATOR VS. KALAW
FA3T*-
- %A3O3O was a on "rofit organization
created for the "rotection, "reser(ation, and
de(elo"ment of coconut industry in the
Phili""ines
- Dalaw, its general manager and board
chairman, embar!ed on a co"ra acti(ity for
the deli(ery of co"ra. $ut unha""y chained
of e(ents cons"ired to deter %A3O3O
from fulfilling their obligation. /ue to the
2 ty"hoons that hit the country, coconut
trees suffered damaged, co"ra "roducts
decreased and "rices s"iralled.
- @hen it became clear that the contracts
would be un"rofitable, Dalaw discloses the
situation to the $O/ and informed them of
the im"ending losses. $ut no action was
ta!en by the $O/
- The buyers then threatened to file suits for
the undeli(ered co"ra. $ut it was settled by
the "ayment of cor"oration.
- %A3O3O then see!s to reco(er the
amount it "aid to the buyers from general
managers and board chairman Dalaw and
director
I**U,- whether the contracts e'ecuted by !alaw
binds the cor"oration.
),./-
- In the coconut industry, mo(ement of
mar!et re0uires that the sales agreements
be entered into, e(en though the goods are
not yet in the hands of the seller. Dnown as
forward sales. To %acoco, forward sales
were a necessity. 3o"ra could not stay long
in its hands< it would lose weight, its (alue
would decrease
- /uring the time Dalaw contracted forward
sales of co"ra, %A3O3O rea"ed a gross
"rofit of =8. so "leased was the $O/
(oted to grant s"ecial bonus in recognition
of the achie(ement rendered by him in
"utting %A3O3O in self-sufficient basis.
- These contract, should be noted, was
entered by !alaw without the authority
from the board. *aid contracts were !nown
all along to the board members but nothing
was said by them.
- There are instances where contracts are
e'ecuted by Dalaw and submitted to the
board after their consummation, not before.
These agreements were done e(en by
Dalaws+ "redecessor.
- *ettled &uris"rudence has it that, where
similar act ha(e been a""ro(ed by directors
as a matter of general "ractice, custom, and
"olicy, the general manager may bind the
com"any without formal authorization of
the $O/
- Authority to act for and bind the
cor"oration may be "resume from acts of
recognition in other instances where the
"ower was in act e'ercised.
- In the case at bar, the "ractice of the
cor"oration has been to allow its B8 to
negotiate and e'ecute contracts in its co"ra
trading acti(ities for and in behalf of
%A3O3O+s behalf before its "rior
a""ro(al. If the by-laws were to be
followed literally, the bard should gi(e its
a""ro(al on all cor"orate contracts. $ut the
board itself, y its acts, "ractically laid aside
the by-laws re0uirement of "rior a""ro(al.
Under the gi(en circumstances, !alaw+s at
are (alid cor"orate acts
BUENASEDA VS. BOWEN & CO., INC
FA3T*
- The $O/ of the bowen cor"oration
ado"ted a resolution, a""ointing buenseda
as managing director.
- In the same resolution, buenaseda was
authorize to negotiate for and in behalf of
the cor"oration with the go(ernment for
securing of the ,3A order for "aints, with
full "owers to arrange the financing of the
order and if necessary, to mortgage the
entire assets of the cor"oration
- For the im"ortation of the materials, it is
necessary to o"en a letter of credit with the
P%$.
- As the cor"oration did not ha(e the
necessary fund to "ut " the re0uired cash
marginal de"osit, the "resident, obligated
the cor"oration and itself in its "ersonal
ca"acity to "ay buenaseda =E F of the
"rofit to be realized from the sale of the
,3A "roducts, should buenaseda be able to
"roduce the re0uired cash marginal de"osit.
- Through its business conncetion, buenaseda
was able to con(ince a certain cor"oration
to "ut u" the 38/
- @hen materials were sold and "rofits were
realized, buenaseda claimed the =E F "rofit
on the strength of the "romise of bowen the
resident. $ut the cor"oration refused to
"ay.
I**U,- whether the 3A erred in holding that the
agreement was not binding u"on the cor"oration
),./-
- It is not "retended that the $O/ had no
!nowledge of the agreement between
buenaseda and bowen to the effect that the
latter was to recei(e =E 4G6 of the "rofits to
be realized.
- At the time the agreement was made, the
$O/ consist of bowen and his family,
controlling the ma&ority of the stoc!s, and
two others.
- The board did not re"udiate the agreement
entered into by bowen and buenaseda but in
the contrary, acce"ted and too! ad(antage
of the benefits afforded by said agreement.
- *uch acts are e0ui(alent to an im"lied
ratification of the agreement of the $O/
and binds the cor"oration e(en without the
formal resolution.
- It is clear that unauthorized act, or act of a
single director, officer or agent of a
cor"oration may be ratified e'"ressly or
im"liedly. ,'"ress ratification is made
through a formal action while i"lie
ratifications can either be by 4. *ilence or
ac0uiescence 6. Acce"tance or retention of
benefits< or =. $y recognition or ado"tion.