CORPORATION LAW – CASE RULINGS (Week 4)
Among
Jann Claudine M. Amago 3 – A
1. Grace Christian Highschool vs. CA
Issue: Whether or not the petitioner has a vested right to sit as a
permanent director of the institution
Ruling: NO.
 Legal basis: Section 23, Corporation Code
Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held
by the board of directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year
until their successors are elected and qualified.
 In this case, the provision in the by-laws relied upon by
the petitioner was not approved nor ratified by the
board.
 Moreover, since the provision is contrary to law, the fact
that for fifteen years it has not been questioned or
challenged but, on the contrary, appears to have been
implemented by the members of the association cannot
forestall a later challenge to its validity. Neither can it attain
validity through acquiescence because, if it is contrary to
law, it is beyond the power of the members of the
association to waive its invalidity.
2. Gokongwei vs. SEC
Issue:
3. Western Institute of Technology vs. Salas
Issues: Whether or not the PRs are entitled to compensation;
Whether or not it is a derivative suit
Ruling:
a. YES, THEY ARE ENTITLED.
 Legal Basis: Section 30, Corporation Code
In the absence of any provision in the by-laws fixing their
compensation, the directors shall not receive any
compensation, as such directors, except for reasonable per
diems: Provided, however, That any such compensation other
than per diems may be granted to directors by the vote of the
stockholders representing at least a majority of the
outstanding capital stock at a regular or special stockholders’
meeting. In no case shall the total yearly compensation of
directors, as such directors, exceed ten (10%) percent of the net
income before income tax of the corporation during the
preceding year.
 In this case, the private respondents were given a
right to receive compensation not as members of
the corporation but as officers of WIT under the by-
laws of the institution.
b. NO, IT IS NOT A DERIVATIVE SUIT.
 A derivative suit is an action brought by minority
shareholders in the name of the corporation to redress
wrongs committed against it, for which the directors
refuse to sue. Here, however, the case is not a
derivative suit but is merely an appeal on the civil
aspect of Criminal Cases filed against the PRs.
the basic requirements for a derivative suit to prosper
is that the minority shareholder who is suing for and
on behalf of the corporation must allege his complaint
before the proper forum that he is suing on a
derivative cause of action on behalf of the corporation
and all other shareholders similarly situated who wish
to join. This is necessary to vest jurisdiction upon the
tribunal in line with the rule that it is the allegations in
the complaint that vests jurisdiction upon the court or
quasi-judicial body concerned over the subject matter
and nature of the action. By no amount of equity
considerations, can a mere appeal on the civil aspect of
a criminal case be treated as a derivative suit.
4. Nacpil vs. Intercontinental Broadcasting Corporation
Issue: Whether the Labor Arbiter had jurisdiction over the case for
illegal dismissal and non-payment of benefits filed by petitioner.
Ruling: THE LABOR ARBITER HAS NO JURISDICTION. PETITION
DENIED.
 The officers of the corporation shall consist of a
President, a Vice-President, a Secretary-Treasurer, a
General Manager, and such other officers as the Board of
Directors may from time to time does fit to provide for.
Said officers shall be elected by majority vote of the
Board of Directors and shall have such powers and duties
as shall hereinafter provide.
 There are 2 factors to determine whether SEC has
jurisdiction over a case – 1. The relationship of the
parties; 2. The natures of the question before the court.
 In this case, Since complainants appointment was approved
unanimously by the Board of Directors of the corporation,
he is therefore considered a corporate officer and his claim
of illegal dismissal is a controversy that falls under the
jurisdiction of the SEC . The rule is that dismissal or non-
appointment of a corporate officer is clearly an intra-
corporate matter and jurisdiction over the case properly
belongs to the SEC, not to the NLRC
5. People’s Aircargo vs. CA
Issue: Whether or not the contract is binding upon the corporation;
Whether or not the contract was simulated
Ruling: THE CONTRACT IS BINDING. PETITION DENIED.
 A corporate officer or agent may represent and bind the
corporation in transactions with third persons to the
extent that [the] authority to do so has been conferred
upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the
usual course of the particular business, are incidental to,
or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent, and
such apparent powers as the corporation has caused
persons dealing with the officer or agent to believe that
it has conferred. (Doctrine of Apparent Authority)
 In the case at bar, petitioner, through its president
Antonio Punsalan Jr., entered into the First Contract
1
 without first securing board approval. Despite such lack
of board approval, petitioner did not object to or
repudiate said contract, thus clothing its president with
the power to bind the corporation. The grant of
apparent authority to Punsalan is evident in the
testimony of the other corporate officers.
 The Court agrees with the appellate court that the
alleged badges of fraud mentioned earlier have not
affected in any manner the perfection of the Second
Contract or proved the alleged simulation thereof.

6. Prime White Cement vs. IAC

Issue: Whether or not the contract is binding

Ruling: NO. DECISION OF IAC SET ASIDE.

 Legal basis: Section 32, Corporation Code
 Under the Corporation Law, all corporate powers shall
be exercised by the Board of Directors, except as
otherwise provided by law. Although, the Board may
expressly delegate specific powers to its President or any
of its officers. In the absence of such express delegation,
a contract entered into by its President, on behalf of the
corporation, may still bind the corporation if the board
should ratify the same expressly or impliedly.
 The situation is quite different where a director or officer
is dealing with his own corporation. In the instant case
respondent Te was not an ordinary stockholder; he was a
member of the Board of Directors and Auditor of the
corporation as well. He was what is often referred to as a
"self-dealing" director.
 The PR is guilty of disloyalty to the corporation; he was
attempting in effect, to enrich himself at the expense of
the corporation. There is no showing that the
stockholders ratified the "dealership agreement" or that
they were fully aware of its provisions. The contract was
therefore not valid and this Court cannot allow him to
reap the fruits of his disloyalty.

7. Santos vs. NLRC

Issue: