Yu Chuck v. Kong Li Po G.R. No. L-22450 Dec. 3, 1924. Plaintiff filed an action for specific performance with damages. Plaintiff claimed that in its contract with the corporation is for three (3) years. The lower court ruled in favor of the plaintiff ruling that Chen had the authority to enter into the contract with plaintiff.
Yu Chuck v. Kong Li Po G.R. No. L-22450 Dec. 3, 1924. Plaintiff filed an action for specific performance with damages. Plaintiff claimed that in its contract with the corporation is for three (3) years. The lower court ruled in favor of the plaintiff ruling that Chen had the authority to enter into the contract with plaintiff.
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Yu Chuck v. Kong Li Po G.R. No. L-22450 Dec. 3, 1924. Plaintiff filed an action for specific performance with damages. Plaintiff claimed that in its contract with the corporation is for three (3) years. The lower court ruled in favor of the plaintiff ruling that Chen had the authority to enter into the contract with plaintiff.
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Attribution Non-Commercial (BY-NC)
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Baixe no formato DOC, PDF, TXT ou leia online no Scribd
FACTS: Kong Li Po is a domestic corporation engaged in the
publication of a Chinese newspaper. It had a president but had no business manager. T.C. Chen was thereafter appointed as manager of the corporation. Chen agreed to enter into a contract with plaintiff Yu Chuck for the printing of their materials. Chen was later replaced by Tan Tia Heng who dismissed plaintiff without explanation. As a result, plaintiff filed an action for specific performance with damages, claiming that in its contract with the corporation is for three (3) years and it was stated that in the event the contract with them is terminated before its expiration, they would be obliged to pay the unexpired portion of the contract even in the event of insolvency. Tan Tia Heng, on the other hand, claims that Chen had no authority top enter into that contract with plaintiff. The lower court ruled in favor of the plaintiff ruling that Chen had the authority to enter into the contract, taking into consideration a notice made by the president that it shall not recognize any receipt, letter or document if it is not signed by T.C. Chen.
ISSUE: Whether or not Chen had the authority to bind the corporation in the contract it entered into with plaintiff
HELD: No. The judgment is REVERSED.
It was settled by the Court that as a rule, officers of the corporation have an implied authority to enter into contracts if such power is not expressly vested in a certain director or officer. However, the contract must be usual and reasonable. In the present case, the contract entered into cannot be considered reasonable and usual because its duration of three (3) years was unusual and unreasonable because it was so onerous for the corporation and even stated that the corporation is liable for the unexpired portion of the contract despite insolvency. Plaintiff had no right to presume that any employee of the corporation had an implied authority to enter into a contract of employment which would bring about its ruin. Moreover, the president of the corporation had no knowledge of the existence of the contract although he admittedly saw some printers working in the office. Lastly, such contract was not ratified by the board of directors. The defendant corporation is absolved from liability. Valle Verde vs. Africa In the present case, the term of Makalintal has long expired before he resigned from his office, which means that the vacancy must be filled through election by the stockholders in a meeting called FACTS: Valle Verde Country Club (VVCC) elected members of its for that purpose. Once the term of office expires and the officer board of directors at its annual stockholders’ meeting in 1996. Among continues to serve his duties, there is no more unexpired portion to the members elected to the board were Makalintal, Dinglasan and speak of. other nine (9) members. The members failed to reach a quorum in the succeeding 2. VVCC’s claim that the board of directors have the power to fill years, so the directors elected in 1996 continued to serve as directors. in vacancies citing the El Hogar case, weakens the stockholders’ Dinglasan resigned in 1998 and the 9-member board filled in the power to participate in corporate governance by electing their vacancy electing Roxas as one of the members of the board. A month representatives to the board of directors. later, Makalintal also resigned and was replaced by Makalintal The board of directors is the controlling body of the through election by the remaining board of directors. corporation. Its creation and power is derived from the stockholders. Africa, a member of the VVCC, questioned the validity of Therefore, the board should exercise not only care and diligence but Ramirez and Roxas’ appointment with the SEC and with the RTC utmost good faith in the management of the corporate affairs. through a nullification complaint alleging that it is in violation of Sec. 3. It is the underlying policy of the corporation code that the business 29 of the Corpo. Code in relation to Sec. 23. and affairs of the corporation must be governed by a board of The RTC and the SEC ruled that the appointment is null and directors which are: void. VVCC did not appeal. a) actually elected b) by stockholders ISSUE: Whether or not the remaining directors of the VVCC board, c) on an annual basis still constituting a quorum, can elect another director to fill in the That way, the accountability of directors to shareholders and vacancy caused by resignation of a hold-over director legitimacy of their decisions binding stockholders can be assured. The shareholder vote is critical to the theory that legitimizes HELD: NO. Petition is DENIED. the exercise of powers of directors or officers over properties not The hold-over period is the lapse of time between the owned by them. expiration of the term of office and the election of a new director. Term is defined as the time during which an officer may claim to hold the office as of right. It is fixed by statute. Tenure is defined as the term during which an incumbent actually holds office and may be shorter or longer than the term of office, as the case may be.
1. It was settled by the court that Sec. 23 of the Corporation
Code provides that the term of the members of the board of directors shall only be for ONE (1) YEAR and after the expiration of their term, the vacancy must be filled by the stockholders in a regular or special meeting called for that purpose. The members of the board of directors only have the right to fill in the vacancy be election of another director if the vacancy took place before the expiration of his term and such new member shall only hold office for the unexpired portion of his predecessor’s term. Woodchild Holdings vs. Court of Appeals and RECCI corporation is not the property of its stockholders. Corporate property may not be sold by its stockholders or members without express authorization from the board of directors. The FACTS: In 1991, the Board of Directors of RECCI through a corporation may only act through its board of directors or its resolution, authorized its president, Roberto Roxas, to sell a parcel of by-laws or through board resolution. land owned by the corporation, set the selling price deemed advantageous to the corporation, deliver the property and 3. Acts done by officers beyond their scope of authority cannot corresponding documents to the buyer and receive the proceeds of bind the corporation UNLESS the corporation ratified such the sale. acts expressly or tacitly or is estopped from denying them. Woodchild Holdings, an interested buyer, agreed to purchase the land on the condition that it would be granted a right of way or 4. It has been settled in the case of BA Finance Corp vs. CA that: beneficial use of another parcel of land owned by the corporation, that Persons dealing with an assumed agency are bound at it would be granted an option to purchase the same, and if there are their peril if they would hold principal liable to ascertain tenants in the property and are not evicted after three months from the the fact of agency and the nature and extent of sale, they will be reimbursed of the amount they gave as payment. authority. If either is controverted, the burden of proof Roxas agreed and the sale took place. is on them to establish it. While WHI was constructing a warehouse on the lot purchased In the present case, the corporation denied authorizing Roxas by them, it advised Roxas that it needed a right of way since the to sell a portion of the other lot owned by RECCI. WHI was burdened vehicles used by RECCI were occupying the land that WHI wanted to to prove that RECCI authorized Roxas to sell and create a lien over have beneficial use of and that it be granted its option to purchase the the same. other land owned by the corporation. Roxas said he will look into it, but he died shortly thereafter. 5. Contracts which have for their object, the creation of real rights WHI filed an action for specific performance against RECCI over immovable property (such as grant of right of way) must enforcing the contract. The lower court ruled in favor of WHI but this appear in a public document. decision was reversed by the Court of Appeals which dismissed the complaint. 6. Powers of attorney are construed strictly. The Courts will not infer or presume broad powers from deeds which do not ISSUE: Whether or not the corporation is bound by the deed of sale sufficiently include property under which the agent is to deal/ provision granting beneficial use and option to purchase the property owned by the corporation
HELD: No. The decision of the Court of Appeals is AFFIRMED with
MODIFICATION.
1. In the 1991 board resolution of RECCI, Roxas was only
authorized to SELL the land, DELIVER the property and the documents, and RECEIVE the proceeds of the sale. The board never authorized him to grant beneficial use of any portion of Lot No. 491-A-3-B-1 or to sell any portion thereof.
2. The deed of sale is likewise ULTRA VIRES. It was ruled in the
San Juan Structural vs. CA case that the property of the