the same general principles of law which govern the relation of
BA Savings Bank vs. Sia Case Digest
BA Savings Bank vs. Sia
[GR 131214, 27 July 2000]
Facts: On 6 August 1997, the Court of Appeals issued a Resolution
denying due course to a Petition for Certiorari filed by BA Savings
Bank, on the ground that "the Certification on anti-forum shopping
incorporated in the petition was signed not by the duly authorized
representative of the petitioner, as required under Supreme Court
Circular No. 28-91, but by its counsel, in contravention of said
circular." A Motion for Reconsideration was subsequently filed by BA
Savings Bank, attached to which was a BA Savings Bank Corporate
Secretary's Certificate, dated 14 August 1997. The Certificate that
BA Savings Bank's Board of Directors approved a Resolution on 21
May 1996, authorizing the bank's lawyers to represent it in any action
or proceeding before any court, tribunal or agency; and to sign,
execute and deliver the Certificate of Non-forum Shopping, among
others.
On 24 October 1997, the Motion for Reconsideration was denied by
the Court of Appeals on the ground that Supreme Court Revised
Circular 28-91 "requires that it is the petitioner, not the counsel, who
must certify under oath to all of the facts and undertakings required
therein." The bank appealed.
Issue: Whether the certificate of non-forum shopping can be signed
by the corporate counsel, not necessarily by the corporate officers
alone.
Held: A corporation has no powers except those expressly conferred
on it by the Corporation Code and those that are implied by or are
incidental to its existence. In turn, a corporation exercises said
powers through its board of directors and/or its duly authorized
officers and agents. Physical acts, 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 of directors. "All
acts within the powers of a corporation may be performed by agents
of its selection; and, except so far as limitations or restrictions which
may be imposed by special charter, by-law, or statutory provisions,
agency for a natural person govern the officer or agent of a
corporation, of whatever status or rank, in respect to his power to act
for the corporation; and agents once appointed, or members acting in
their stead, are subject to the same rules, liabilities and incapacities
as are agents of individuals and private persons." Herein, the
corporation's board of directors issued a Resolution specifically
authorizing its lawyers "to act as their agents in any action or
proceeding before the Supreme Court, the Court of Appeals, or any
other tribunal or agency[;] and to sign, execute and deliver in
connection therewith the necessary pleadings, motions, verification,
affidavit of merit, certificate of non-forum shopping and other
instruments necessary for such action and proceeding." The
Resolution was sufficient to vest such persons with the authority to
bind the corporation and was specific enough as to the acts they
were empowered to do. In the case of natural persons, Circular 28-
91 requires the parties themselves to sign the certificate of non-
forum shopping. However, such requirement cannot be imposed on
artificial persons, like corporations, for the simple reason that they
cannot personally do the task themselves. As already stated,
corporations act only through their officers and duly authorized
agents. In fact, physical actions, like the signing and the delivery of
documents, may be performed, on behalf of the corporate entity, only
by specifically authorized individuals. It is noteworthy that the
Circular does not require corporate officers to sign the certificate.
More important, there is no prohibition on against authorizing agents
to do so. In fact, not only was BA Savings Bank authorized to name
an agent to sign the certificate; it also exercised its appointing
authority reasonably well. For who else knows of the circumstances
required in the Certificate but its own retained counsel. Its regular
officers, like its board chairman and president, may not even know
the details required therein. Circular 28-91 was prescribed by the
Supreme Court to prohibit and penalize the evils of forum shopping.
We see no circumvention of this rationale if the certificate was signed
by the corporation's specifically authorized counsel, who had
personal knowledge of the matters required in the Circular.
 MADRIGAL & CO VS ZAMORA
Madrigal & Company, Inc. (MCI) manages the business of another
corporation, Rizal Cement Co., Inc. (RCC). In 1973, a labor union in
MCI sought the renewal of the collective bargaining agreement
(CBA). The union proposes a P200.00 monthly wage increase and
an additional P100 monthly allowance. MCI refused to negotiate.
Later, MCI reduced its authorized capital stocks. It then wrote a letter
to the Department of Labor averring that it is incurring losses and so
it will enforce a retrenchment program. The letter is however
unsupported by documents and so the Department of Labor ignored
it. However, MCI went on to dismiss several employees which led the
labor union to sue MCI for unfair labor practices and illegal dismissal.
The labor arbiter ruled in favor of the labor union. The issue reached
the Office of the President. The then Presidential Assistant For Legal
Affairs, Ronaldo Zamora, denied MCI’s appeal.
On appeal, MCI insists that it is incurring losses; that as such, it has
to reduce its capitalization; that the profits it is earning are cash
dividends from RCC; that under the law, dividends are the absolute
property of a stockholder like MCI and cannot be compelled to share
it with creditors (like the employees).
ISSUE: Whether or not the dividends in this case, as understood by
MCI, cannot be made available to meet its employees economic
demands.
HELD: No. As found by the labor arbiter, MCI is in fact making
significant profits. MCI’s reduction of its capitalization is simply a
scheme to avoid negotiations with the labor union. It is therefore
correct for the arbiter to order MCI to comply with the union’s
demands.
It is true that cash dividends are the absolute property of the
stockholders and cannot be made available for disposition to a
corporation’s creditors. However, this should be viewed in context.
This is only true in the case of corporation distributing dividends to
its stockholders. If this is the case (if the dividends are still with the
corporation, in this case RCC), then creditors cannot touch such
dividends. But if the stockholder already receives the dividends, then
it becomes a profit on the part of the stockholder hence its creditors
(like the employees) can make some demands out of it. In this case,
MCI is a stockholder of RCC. While RCC still has not distributed the
dividends, creditors cannot demand it because such dividends are
owned by stockholders like MCI. But when MCI already receives the
dividends, then MCI’s creditors can already demand share from the
dividends because such dividends are already the profits of the
stockholder/MCI. So in this case, the employees can demand their
share from said profits (not strictly viewed as dividends now) by way
of salary increase.
Peña v. CA
PAMPANGA BUS CO., INC. (PAMBUSCO) is the owner of the three
lots in dispute. PAMBUSCO mortgaged the lots to the Development
Bank of the Philippines (DBP), which were later on foreclosed.
Rosita Peña was awarded the lots in a foreclosure sale for being the
highest bidder. The certificate of sale was later issued to her and
registered in her name.
Subsequently, the Board of Directors of PAMBUSCO, through three
out of its five directors, issued a resolution to assign its right of
redemption over the lots in favor of any interested party. The right of
redemption was later on assigned to Marcelino Enriquez, who
redeemed the property.
Enriquez then sold the lots to spouses Rising T. Yap and Catalina
Lugue-Yap.
Meanwhile, a case involving the validity of the sale to the spouses
Yap was pending, and despite the protestations of Peña as to validity
of the PAMBUSCO's assignment of the right of redemption, the lots
were somehow registered in the name of spouses Yap. Despite the
registration of the lots to spouses Yap, Peña retained possession of
the property.
Main Case:
Spouses Yap sought to recover the possession of the lots from
Peña. The latter countered that she is now the legitimate owner of
the subject lands for having purchased the same in a foreclosure
proceeding instituted by the DBP against PAMBUSCO and no valid
redemption having been effected within the period provided by law.
The defense was that since the deed of assignment executed by
PAMBUSCO in favor of Enriquez was void ab initio for being an ultra
vires act of its board of directors and for being without any valuable
consideration, it could not have had any legal effect.
(It should be noted that the by-laws of PAMBUSCO provide that four
out of five directors must be present in a special meeting of the board
to constitute a quorum, and that the corporation has already ceased
to operate.)
CFI ruled in favor of Petitioner Peña, but the same was overturned
by the CA.
Issue: W/N there Peña is entitled to the lots.
Ruling: Yes.
The by-laws of a corporation are its own private laws which
substantially have the same effect as the laws of the corporation.
They are in effect, written, into the charter. In this sense they become
part of the fundamental law of the corporation with which the
corporation and its directors and officers must comply.
Apparently, only three (3) out of five (5) members of the board of
directors of respondent PAMBUSCO convened by virtue of a prior
notice of a special meeting. There was no quorum to validly transact
business since it is required under its by-laws that at least four (4)
members must be present to constitute a quorum in a special
meeting of the board of directors.
Under Section 25 of the Corporation Code of the Philippines, the
articles of incorporation or by-laws of the corporation may fix a
greater number than the majority of the number of board members to
constitute the quorum necessary for the valid transaction of
business. Any number less than the number provided in the articles
or by-laws therein cannot constitute a quorum and any act therein
would not bind the corporation; all that the attending directors could
do is to adjourn.
Moreover, the records show that respondent PAMBUSCO ceased to
operate for about 25 years prior to the board meeting. Being a
dormant corporation for several years, it was highly irregular, for a
group of three (3) individuals representing themselves to be the
directors of respondent PAMBUSCO to pass a resolution disposing
of the only remaining asset of the corporation in favor of a former
corporate officer.
As a matter of fact, the three (3) alleged directors who attended the
special meeting on November 19, 1974 were not listed as directors
of respondent PAMBUSCO in the latest general information sheet.
Similarly, the latest list of stockholders of respondent PAMBUSCO
on file with the SEC does not show that the said alleged directors
were among the stockholders of respondent PAMBUSCO, in
contravention of the rule requiring a director to own one (1) share in
their to qualify as director of a corporation.
Further, under the Corporation Law, the sale or disposition of any
and/or substantially all properties of the corporation requires, in
addition to a proper board resolution, the affirmative votes of the
stockholders holding at least two-thirds (2/3) of the voting power in
the corporation in a meeting duly called for that purpose. This was
not complied with in the case at bar.
At the time of the passage of the questioned resolution, respondent
PAMBUSCO was insolvent and its only remaining asset was its right
of redemption over the subject properties. Since the disposition of
said redemption right of respondent PAMBUSCO by virtue of the
questioned resolution was not approved by the required number of
stockholders, the said resolution, as well as the subsequent
assignment and sale, were null and void.
Lastly, for lack of consideration, the assignment should be construed
as a donation. Under Article 725 of the Civil Code, in order to be
valid, such a donation must be made in a public document and the
acceptance must be made in the same or in a separate instrument.
In the latter case, the donor shall be notified of the acceptance in an
authentic form and such step must be noted in both instruments.
Since assignment to Enriquez shows that there was no acceptance
of the donation in the same and in a separate document, the said
deed of assignment is thus void ab initio.
ISLAMIC DIRECORATE VS CA
1971, the ISLAMIC DIRECTORATE OF THE PHILIPPINES ("IDP")
was incorporated with the primary purpose of establishing a
mosque, school, and other religious infrastructures in Quezon City.
IDP purchased a 49,652-square meter lot in Tandang Sora, QC,
which was covered by TCT Nos. RT-26520 (176616) and RT-26521
(170567).
When President Marcos declared martial law in 1972, most of the
members of the 1971 Board of Trustees ("Tamano Group")flew to the
Middle East to escape political persecution.
Thereafter, two contending groups claiming to be the IDP Board of
Trustees sprung: the Carpizo group and Abbas group.
In a suit between the two groups, SEC rendered a decision in 1986
declaring both groups to be null and void. SEC recommeded that the
a new by-laws be approved and a new election be conducted upon
the approval of the by-laws. However, the SEC recommendation was
not heeded.
In 1989, the Carpizo group passed a Board Resolution authorizing
the sale of the land to Iglesia Ni Cristo ("INC"), and a Deed of Sale
was eventually executed.
In 1991, the Tamano Group filed a petition before the SEC
questioning the sale.
Meanwhile, INC filed a suit for specific performance before RTC
Branch 81 against the Carpizo group. INC also moved to compel a
certain Leticia Ligon (who is apparently the mortgagee of the lot) to
surrender the title.
The Tamano group sought to intervene, but the intervention was
denied despite being informed of the pending SEC case. In 1992, the
Court subsequently ruled that the INC as the rightful owner of the
land, and ordered Ligon to surrender the titles for annotation. Ligon
appealed to CA and SC, but her appeals were denied.
In 1993, the SEC ruled that the sale was null and void . On appeal
CA reversed the SEC ruling.
MAIN ISSUE: W/N the sale between the Carpizo group and INC
is null and void.
RULING: YES.
Since the SEC has declared the Carpizo group as a void Board of
Trustees, the sale it entered into with INC is likewise void. Without a
valid consent of a contracting party, there can be no valid contract.
In this case, the IDP, never gave its consent, through a legitimate
Board of Trustees, to the disputed Deed of Absolute Sale executed
in favor of INC. Therefore, this is 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.
Further, the Carpizo group failed to comply with Section 40 of the
Corporation Code, which provides that: " ... a corporation may, by a
majority vote of its board of directors or trustees, sell, lease,
exchange, mortgage, pledge or otherwise dispose of all or
substantially all of its property and assets... when authorized by the
vote of the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock; or in case of non-stock corporation, by the
vote of at least two-thirds (2/3) of the members, in a stockholders' or
members' meeting duly called for the purpose...."
The subject lot constitutes the only property of IDP. Hence, its sale to
a third-party is a sale or disposition of all the corporate property and
assets of IDP. For the sale to be valid, the majority vote of the
legitimate Board of Trustees, concurred in by the vote of at least 2/3
of the bona fide members of the corporation should have been
obtained. These twin requirements were not met in the case at bar.
DATU VS SEC
FACTS:
 February 6, 1959: Articles of Incorporation (AIC)
of Jamiatul Philippine-Al Islamia, Inc.
(Jamiatul) (originally Kamilol Islam Institute, Inc.) were
filed with the SEC
 December 14, 1962: approved AIC
 The corporation had an authorized capital stock of P200K
divided into 20K shares at a par value of P10 each. Of the
authorized capital stock, 8,058 shares worth P80,580.00
were subscribed and fully paid for
 Datu Tagoranao Benito subscribed to 460 shares worth
P4,600
 October 28, 1975: filed a certificate of increase of its
capital stock from P200K to P1M
 November 25, 1975: stockholders meeting was held
were P191,560.00 worth of shares were represented
 P110,980 worth of shares were subsequently issued by the
corporation from the unissued portion of the authorized
capital stock of P200,000
 Of the increased capital stock of P1M0, P160K worth of shares
were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A.
Lucman and Mrs. Moki-in Alonto.
 November 18, 1976: Datu Tagoranao filed with SEC a
petition alleging that the additional issue (worth P110,980)
was made in violation of his pre-emptive right to said
additional issue and that the increase in the authorized
capital stock was illegal considering that the stockholders
of record were not notified of the meeting wherein the
proposed increase was in the agenda
 SEC:
 issuance by the corporation of its unissued shares was
validly made and was not subject to the pre-emptive rights
of stockholders
 directed Jamiatul 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
ISSUES:
1. W/N the issuance of the P110,980 of authorized capital stock
of P200,000 is in violation of pre-emptive right - NO
2. W/N the issuance of the increase in the authorized capital
stock is in violation of pre-emptive right
HELD: Dismissed for lack of merit
1. NO
 GR: pre-emptive right is recognized only with respect to
new issue of shares, and not with respect to additional
issues of originally authorized shares
 Theory: 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
 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
 stockholders' meeting was held which included the increase
of its capital stock from P200,000.00 to P1,000,000.00
 he was not notified of said meeting and that he never
attended the same as he was out of the country at the time
 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
 MONTELIBANO ET AL vs.BACOLOD-
MURCIA MILLING CO., INC.
 G.R. No. L-15092
 May 18, 1962
 FACTS: Montelibano et al. are sugar planters
adhered to the Bacolod-Murcia Milling Co., Inc’s
sugar central mill under identical milling
contracts originally executed in 1919. In 1936, it
was proposed to execute amended milling
contracts, increasing the planters’ share of the
manufactured sugar, besides other concessions.
To this effect, a printed Amended Milling
Contract form was drawn up.
 The Board of Directors of Bacolod-Murcia
Milling Co., Inc. adopted a resolution granting
further concessions to the planters over and above
those contained in the printed Amended Milling
Contract on August 10, 1936.
 The printed Amended Milling Contract was
signed by the Appellants on September 10, 1936,
but a copy of the resolution was not attached to
the printed contract until April 17, 1937.
 In 1953, the appellants initiated an action,
contending that 3 Negros sugar centrals had
already granted increased participation to their
planters, and that under paragraph 9 of
the resolution of August 20, 1936, the appellee
had become obligated to grant similar
concessions to the appellants herein.
 The Bacolod-Murcia Milling Co., inc., resisted
the claim, urging that the resolution in question
was null and void ab initio, being in effect a
donation that was ultra vires and beyond the
powers of the corporate directors to adopt.
 ISSUE: Was the act of the BOD ultra vires?
 HELD: NO (The Bacolod-Murcia Milling Co.,
Inc. is ordered to pay appellants the increase of
participation in the milled sugar in accordance
with paragraph 9 of the Resolution of August 20,
1936.)
 As the resolution in question was passed in good
faith by the board of directors, it is valid and
binding, and whether or not it will cause losses or
decrease the profits of the central, the court has
no authority to review them.
 Xx It is a well-known rule of law that questions
of policy or of management are left solely to the
honest decision of officers and directors of a
corporation, and the court is without authority to
substitute its judgment of the board of directors;
the board is the business manager of the
corporation, and so long as it acts in good faith its
orders are not reviewable by the courts.
 __
 It must be remembered that the controverted
resolution was adopted by appellee corporation as
a supplement to, or further amendment of, the
proposed milling contract, and that it was
approved on August 20, 1936, twenty-one days
 prior to the signing by appellants on September
10, of the Amended Milling Contract itself; so
that when the Milling Contract was executed, the
concessions granted by the disputed resolution
had been already incorporated into its terms.
Pirovano vs Dela Rama
FACTS:
 Enrico Pirovano, president of the defendant company, managed the
company until it became a multi-million corporation by the time
Pirovano was executed by the Japanese during the occupation.
 BOD Resolution: Out of the proceeds, the sum of P400,000 be set
aside for equal division among the 4 minor children, convertible
into shares of stock of the De la Rama Steamship Company, at par
and, for that purpose, that the present registered stockholders of the
corporation be requested to waive their preemptive right to 4,000
shares of the unissued stock of the company in order to enable each
of the 4 minor heirs to obtain 1,000 shares at par
 if the Pirovano children would given shares of stock, the voting
strength of the 5 daughters of Don Esteban would be adversely
affected - Mrs. Pirovano would have a voting power twice that of
her sisters
 Lourdes de la Rama wrote secretary of the corporation, Atty.
Marcial Lichauco, asking him to cancel the waiver she supposedly
gave of her pre-emptive rights.
 The company ammended the resolution turning it into a loan with
5% interest payable when the obligation can be met
 The company revoked its donation of the life premium proceeds
since it is not in compliance with the SEC
 Minor children of the late Enrico represented by their mother and
judicial guardian demanded the payment of the credit due them as
of December 31, 1951, amounting to P564,980.89
 RTC: contract or donation is not ultra vires
ISSUE: W/N corporation donation of the proceeds of insurance policies
is an ultra vires act
HELD: NO. valid and binding
 remunerative donation
 That which is made to a person in consideration of his merits or for
services rendered to the donor, provided they do not constitute
recoverable debts, or that in which a burden less than the value of
the thing given is imposed upon the donee, is also a donation." (Art.
619, old Civil Code)
 In donations made to a person for services rendered to the donor,
the donor's will is moved by acts which directly benefit him. The
motivating cause is gratitude, acknowledgment of a favor, a desire
to compensate. (Sinco and Capistrano, The Civil Code, Vol. 1, p.
676; Manresa, 5th ed., pp. 72-73.)
 donation has reached the stage of perfection which is valid and
binding upon the corporation and as such cannot be rescinded
unless there is exists legal grounds for doing so.
 donation was embodied in a resolution duly approved by the Board
of Directors on January 6, 1947
 July 25, 1949: BOD approved the proposal of Mrs. Pirovano to buy
the house at New Rochelle, New York, owned by a subsidiary of
the corporation at the costs of S75,000
 2 reasons given for the rescission of donation in the resolution of
the corporation adopted on March 8, 1951 - valid and legal as to
justify the rescission
 corporation failed to comply with the conditions to which the above
donation was made subject
 in the opinion of the Securities and Exchange Commission said
donation is ultra vires
 articles of incorporation contain:
 To invest and deal with the moneys of the company and
immediately required, in such manner as from time to time may be
determined.
 To aid in any other manner any person, association, or corporation
of which any obligation or in which any interest is held by this
corporation or in the affairs or prosperity of which this corporation
has a lawful interest.
 By ratification the infirmity of the corporate act has been obliterated
thereby making it perfectly valid and enforceable. This is specially
so if the donation is not merely executory but executed and
consummated and no creditors are prejudice, or if there are creditors
affected, the latter has expressly given their confirmity