REPUBLIC VS ACOJE MINING

Held: The claim that the resolution adopted by the board of directors of appellant company is an ultra
vires act cannot also be entertained it appearing that the same covers a subject which concerns the
benefit, convenience and welfare of its employees and their families. While as a rule an ultra vires act is
one committed outside the object for which a corporation is created as defined by the law of its
organization and therefore beyond the powers conferred upon it by law (19 C.J.S., Section 965, p. 419),
there are however certain corporate acts that may be performed outside of the scope of the powers
expressly conferred if they are necessary to promote the interest or welfare of the corporation. Thus, it has
been held that "although not expressly authorized to do so a corporation may become a surety where the
particular transaction is reasonably necessary or proper to the conduct of its business," 1 and here it is
undisputed that the establishment of the local post office is a reasonable and proper adjunct to the
conduct of the business of appellant company. Indeed, such post office is a vital improvement in the living
condition of its employees and laborers who came to settle in its mining camp which is far removed from
the postal facilities or means of communication accorded to people living in a city or municipality..
Even assuming arguendo that the resolution in question constitutes an ultra vires act, the same
however is not void for it was approved not in contravention of law, customs, public order or public policy.
The term ultra vires should be distinguished from an illegal act for the former is merely voidable which
may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be
validated.2 It being merely voidable, an ultra vires act can be enforced or validated if there are equitable
grounds for taking such action. Here it is fair that the resolution be upheld at least on the ground of
estoppel. On this point, the authorities are overwhelming:
The weight of authority in the state courts is to the effect that a transaction which is merely ultra
vires and notmalum in se or malum prohibitum, is, if performed by one party, not void as between
the parties to all intents and purposes, and that an action may be brought directly on the
transaction and relief had according to its terms. (19 C.J.S., Section 976, p. 432, citing Nettles v.
Rhett, C.C.A.S.C., 94 F. 2d, reversing, D.C., 20 F. Supp. 48)
This rule is based on the consideration that as between private corporations, one party cannot
receive the benefits which are embraced in total performance of a contract made with it by another
party and then set up the invalidity of the transaction as a defense." (London & Lancashire
Indemnity Co. of America v. Fairbanks Steam Shovel Co., 147 N.E. 329, 332, 112 Ohio St. 136.)
The defense of ultra vires rests on violation of trust or duty toward stockholders, and should not be
entertained where its allowance will do greater wrong to innocent parties dealing with corporation..
The acceptance of benefits arising from the performance by the other party may give rise to an
estoppel precluding repudiation of the transaction. (19 C.J.S., Section 976, p. 433.)
The current of modern authorities favors the rule that where the ultra vires transaction has been
executed by the other party and the corporation has received the benefit of it, the law interposes
an estoppel, and will not permit the validity of the transaction or contract to be questioned, and this
is especially true where there is nothing in the circumstances to put the other party to the
transaction on notice that the corporation has exceeded its powers in entering into it and has in so
doing overstepped the line of corporate privileges. (19 C.J.S., Section 977, pp. 435437, citing Williams v. Peoples Building & Loan Ass'n, 97 S.W. 2d 930, 193 Ark. 118; Hays v. Galion
Gas Light Co., 29 Ohio St. 330)
Neither can we entertain the claim of appellant that its liability is only that of a guarantor. On this
point, we agree with the following comment of the court a quo: "A mere reading of the resolution of the
Board of Directors dated August 31, 1949, upon which the plaintiff based its claim would show that the
responsibility of the defendant company is not just that of a guarantor. Notice that the phraseology and the

terms employed are so clear and sweeping and that the defendant assumed 'full responsibility for all cash
received by the Postmaster.' Here the responsibility of the defendant is not just that of a guarantor. It is
clearly that of a principal."

WESTMONT BANK VS INLAND CONSTRUCTION

Held: The general rule remains that, in the absence of authority from the board of directors, no person,
not even its officers, can validly bind a corporation. [21] If a corporation, however, consciously lets one of its
officers, or any other agent, to act within the scope of an apparent authority, it will be estopped from
denying such officers authority
The records show that Calo was the one assigned to transact on petitioners behalf respecting the
loan transactions and arrangements of Inland as well as those of Hanil-Gonzales and Abrantes. Since it
conducted business through Calo, who is an Account Officer, it is presumed that he had authority to sign
for the bank in the Deed of Assignment.
Petitioner cannot feign ignorance of the May 26, 1978 Deed of Assignment, the pertinent portion of which
was quoted above. Notably, assignee Abrantes notified petitioner about his assumption of Inlands
obligation.
Thus, the assertion that the petitioner cannot be faulted for its delay in repudiating the apparent
authority of Calo is similarly flawed, there being no evidence on record that it had actually repudiated such
apparent authority. It should be noted that it was the bank which pleaded that defense in the first
place. What is extant in the records is a reasonable certainty that the bank had ratified the Deed of
Assignment.

BPI FAMIL Y SAVINGS BANK V. FIRST METRO INVESTMENT CORP

Held: We have held that if a corporation knowingly permits its officer, or any other agent, to perform acts
within the scope of an apparent authority, holding him out to the public as possessing power to do those
acts, the corporation will, as against any person who has dealt in good faith with the corporation through
such agent, be estopped from denying such authority. 5 We reiterated this doctrine in Prudential Bank vs.
Court of Appeals,6 thus:
"A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by
the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor
will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to
the bank therefrom. Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of
his authority even though the agent is secretly abusing his authority and attempting to perpetrate a
fraud upon his principal or some other person for his own ultimate benefit."
Thus, we uphold the finding of both lower courts that petitioner failed to exercise that degree of
diligence required by the nature of its obligations to its depositors. A bank is under obligation to treat the
accounts of its depositors with meticulous care, whether such account consists only of a few hundred
pesos or of millions of pesos.10 Here, petitioner cannot claim it exercised such a degree of care required of
it and must, therefore, bear the consequence.

PMI COLLEGES V. NLRC

Held: At any rate, the vouchers prepared by petitioner's own accounting department and the letterrequest of its Acting Director asking for payment of private respondent's services suffice to support a
reasonable conclusion that private respondent was employed with petitioner. How else could one explain
the fact that private respondent was supposed to be paid the amounts mentioned in those documents if he
were not employed? Petitioner's evidence is wanting in this respect while private respondent affirmatively
stated that the same arose out of his employment with petitioner. As between the two, the latter is
weightier inasmuch as we accord affirmative testimony greater value than a negative one. For the
foregoing reasons, we find it difficult to agree with petitioner's assertion that the absence of a copy of the
alleged contract should nullify private respondent's claims.
Neither can we concede that such contract would be invalid just because the signatory thereon was not
the Chairman of the Board which allegedly violated petitioner's by-laws. Since by-laws operate merely as
internal rules among the stockholders, they cannot affect or prejudice third persons who deal with the
corporation, unless they have knowledge of the same." 11 No proof appears on record that private
respondent ever knew anything about the provisions of said by-laws. In fact, petitioner itself merely asserts
the same without even bothering to attach a copy or excerpt thereof to show that there is such a provision.
How can it now expect the Labor Arbiter and the NLRC to believe it? That this allegation has never been
denied by private respondent does not necessarily signify admission of its existence because technicalities
of law and procedure and the rules obtaining in the courts of law do not strictly apply to proceedings of this
nature.

LEE V. CA
Held: What is the nature of the voting trust agreement executed between two parties in this case? Who
owns the stocks of the corporation under the terms of the voting trust agreement? How long can a voting
trust agreement remain valid and effective? Did a director of the corporation cease to be such upon the
creation of the voting trust agreement?
A voting trust is defined in Ballentine's Law Dictionary as follows:
(a) trust created by an agreement between a group of the stockholders of a corporation and
the trustee or by a group of identical agreements between individual stockholders and a
common trustee, whereby it is provided that for a term of years, or for a period contingent
upon a certain event, or until the agreement is terminated, control over the stock owned by
such stockholders, either for certain purposes or for all purposes, is to be lodged in the
trustee, either with or without a reservation to the owners, or persons designated by them,
of the power to direct how such control shall be used. (98 ALR 2d. 379 sec. 1 [d]; 19 Am J 2d
Corp. sec. 685).
Under Section 59 of the new Corporation Code which expressly recognizes voting trust agreements, a more
definitive meaning may be gathered. The said provision partly reads:
Sec. 59. Voting Trusts One or more stockholders of a stock corporation may create a
voting trust for the purpose of conferring upon a trustee or trustees the right to vote and
other rights pertaining to the share for a period rights pertaining to the shares for a period
not exceeding five (5) years at any one time: Provided, that in the case of a voting trust
specifically required as a condition in a loan agreement, said voting trust may be for a period
exceeding (5) years but shall automatically expire upon full payment of the loan. A voting
trust agreement must be in writing and notarized, and shall specify the terms and conditions

thereof. A certified copy of such agreement shall be filed with the corporation and with the
Securities and Exchange Commission; otherwise, said agreement is ineffective and
unenforceable. The certificate or certificates of stock covered by the voting trust agreement
shall be cancelled and new ones shall be issued in the name of the trustee or trustees
stating that they are issued pursuant to said agreement. In the books of the corporation, it
shall be noted that the transfer in the name of the trustee or trustees is made pursuant to
said voting trust agreement.
By its very nature, a voting trust agreement results in the separation of the voting rights of a stockholder
from his other rights such as the right to receive dividends, the right to inspect the books of the
corporation, the right to sell certain interests in the assets of the corporation and other rights to which a
stockholder may be entitled until the liquidation of the corporation. However, in order to distinguish a
voting trust agreement from proxies and other voting pools and agreements, it must pass three criteria or
tests, namely: (1) that the voting rights of the stock are separated from the other attributes of ownership;
(2) that the voting rights granted are intended to be irrevocable for a definite period of time; and (3) that
the principal purpose of the grant of voting rights is to acquire voting control of the corporation. (5
Fletcher, Cyclopedia of the Law on Private Corporations, section 2075 [1976] p. 331 citingTankersly v.
Albright, 374 F. Supp. 538)
Under section 59 of the Corporation Code, supra, a voting trust agreement may confer upon a trustee not
only the stockholder's voting rights but also other rights pertaining to his shares as long as the voting trust
agreement is not entered "for the purpose of circumventing the law against monopolies and illegal
combinations in restraint of trade or used for purposes of fraud." (section 59, 5th paragraph of the
Corporation Code) Thus, the traditional concept of a voting trust agreement primarily intended to single
out a stockholder's right to vote from his other rights as such and made irrevocable for a limited duration
may in practice become a legal device whereby a transfer of the stockholder's shares is effected subject to
the specific provision of the voting trust agreement.
The execution of a voting trust agreement, therefore, may create a dichotomy between the equitable or
beneficial ownership of the corporate shares of a stockholders, on the one hand, and the legal title thereto
on the other hand.
The law simply provides that a voting trust agreement is an agreement in writing whereby one or more
stockholders of a corporation consent to transfer his or their shares to a trustee in order to vest in the
latter voting or other rights pertaining to said shares for a period not exceeding five years upon the
fulfillment of statutory conditions and such other terms and conditions specified in the agreement. The five
year-period may be extended in cases where the voting trust is executed pursuant to a loan agreement
whereby the period is made contingent upon full payment of the loan.
Had the five-year period of the voting trust agreement expired in 1986, the DBP would not have
transferred all its rights, titles and interests in ALFA "effective June 30, 1986" to the national government
through the Asset Privatization Trust (APT) as attested to in a Certification dated January 24, 1989 of the
Vice President of the DBP's Special Accounts Department II. In the same certification, it is stated that the
DBP, from 1987 until 1989, had handled APT's account which included ALFA's assets pursuant to a
management agreement by and between the DBP and APT (CA Rollo, p. 142) Hence, there is evidence on
record that at the time of the service of summons on ALFA through the petitioners on August 21, 1987, the
voting trust agreement in question was not yet terminated so that the legal title to the stocks of ALFA,
then, still belonged to the DBP.