CORPORATION LAW CASE MATRIX 5
TITLE FACTS
Section 32
Mead v. - Mead, McCullough and three others
McCullough organized the Philippine Engineering
and Construction Company. The 5 of
them were the only stockholders and
also the directors of the company,
with general ordinary powers.
- Mead was elected as the general
manager of the company. Under him,
the company failed in their
undertaking to raise sunken Spanish
fleet. It became a losing concern and
a financial failure.
- After 9 mos. as general manager,
Mead resigned to accept the position
of engineer of the Canton and
Shanghai Railway Company and thus
left for China.
- Thereafter, realizing that continuing
the operations of the company would
mean more losses, the remaining
directors unanimously assigned all the
rights and interests of the company to
McCullough for value, who also
assigned the same for value to other
people who with McCullough
subsequently formed the Manila
Salvage Association.
- Mead is now alleging that he is
entitled to receive his salary as
general manager, profits made before
the assignment and the value of his
personal property which he have left
and sold by the defendants. (main
issue but impertinent to the lesson).
Prime White - Prime White (thru its President & BOD
Cement v. IAC Chair) and Te (also a director of Prime
White) entered into a dealership
agreement wherein the former will
ISSUE/S HELD
- Whether or not the - Yes. It has to be remembered that the
remaining directors 5 directors herein are also the only
have the power to stockholders. When the four
sell or transfer to remaining directors met to resolve for
one of its members the assignment, there was a quorum
the assets of the not only of the directors but also of
corporation. the stockholders.
- McCullough, while he was the
president of the corporation, did not
sit in the said meeting as a
representative of the corporation. The
corporation was represented by the 3
directors who by themselves already
constituted a quorum.
- Hence, McCullough’s vote was not
necessary in this case, nor was his
presence needed to have a quorum.
- The contact was also fair and
reasonable as the company was
already in bad shape.
- WON the dealership - NO. While it is true that the Board may
agreement was a delegate its powers to the President or
valid and any of its officers and that contracts
enforceable contract entered into by such officers are
DOCTRINE
- A majority of the
stockholders or directors
have the power to sell or
transfer to one of its
members the corporate
property, where the
stockholders or directors
have general ordinary
powers, and where there is
nothing in the articles of
incorporation which
prohibit such a sale.
- Whether a private
corporation remains
solvent or is insolvent,
there is no reason why a
director or officer, by
authority of the majority of
its stockholders or board of
managers, may not deal
with the corporation, loan it
money, or buy property
from it in like manner as a
stranger. But in all cases,
such officer or director
must act in good faith and
pay an adequate
consideration.
- A contract of a director
with his corporation, if fair
and reasonable, may be
ratified by the stockholders
1
 supply Te with 20,000 bags of cement binding upon the corporation, SC held provided a full disclosure of
per month at Php 9.70 per bag. that such general rules apply when his adverse interest is
- Te would open an irrevocable letter of the corporation deals with a third made.
credit in a bank each time he received person. - See Section 32 also
a delivery. - In this case, Te was also a director of
- Te then started to advertise that he Prime White. He holds a position of
was the exclusive dealer of the white trust and as such, he owes a duty of
cement, and entered into several loyalty to his corporation.
written agreements to supply the said - SC held that the contract was neither
cement with third parties. fair nor reasonable. The very low price
- Te was later on informed by the of the cement was meant to benefit
corporate secretary of Prime White Te. He was a businessman and knew
that the BOD decided to impose the ff. of the real market prices of cement.
conditions: (at that time, the price was at least
 delivery shall start at the end Nov. Php 14.50 and became Php 37.50 in
1970 1975)
 only 8000 bags would be delivered
for a period of 3 months
 price will be Php 13.30 per bag
 price may be unilaterally adjusted
by Prime White
 delivery place is Austutias (sic)
 letter of credit to be opened with
the Makati branch of Prudential
Bank
- Despite demands to enforce the
dealership agreement, Prime White
refused, forcing Te to cancel the
agreements with third parties.
- RTC adjudged Prime White liable for
damages. CA affirmed

Section 36
TITLE FACTS ISSUE/S HELD DOCTRINE
Montelibano v. - The Montelibanos and some others - Whether or not the - The SC held in the affirmative. - The test to be applied is
Bacolod – are sugar planters with identical requested increase - The resolution is supported by a valid whether the act in question
Murcia Milling milling contracts with Bacolod milling. in the annual consideration and is therefore not a is in immediate furtherance
Co. - The Montelibanos were originally production should donation ultra vires. of the corporation’s
granted a share in the resulting be granted the - It is to be noted that the contract is business, fairly incident to
product at a ratio of 45%-55%. (the farmers. signed only after the resolution. Thus, the express powers and
55% pertaining to the farmers.) the such resolution shall be deemed as a reasonably necessary to
contract has a 30-year period. modification to the proposed their exercise.
2
 - Sometime in 1936, the farmers and
the Milling Company entered into a
modified Milling Contract which
increased the former’s share to 60%
but also with the condition that the
period of their contract will be
extended for an additional 15 years.,
- In the same year a resolution was
passed by the Board of the milling
company granting the farmers further
concessions over and above the
provisions of the Proposed Amended
Milling Contract.
- It was only days after the passing of
the said resolution that the proposed
milling contract was signed by both
parties.
- Sometime in 1950, 3 of the major
sugar centrals granted an increase in
the share of their workers to the
product yield.
- Montelibanos et.al wanted to avail of
similar increase based on the
provision of the 1936 resolution.
- The Milling company denied such
liability by contending that the
resolution was granted without
consideration and is therefore a
donation ultra vires.
- The resolution being ultra vires, it is
contended to be void ab initio.
Section 37
TITLE FACTS
Alhambra - The term of existence of Alhambra
Cigar v. SEC Cigar & Cigarette Manufacturing Co.,
(Alhambra) Inc. for fifty (50) years
from incorporation had expired on
January 15, 1962.
- Following the expiration of its term as
Amended Contract. Therefore, that - The acts must have a
resolution is considered integrated logical relation to the
with the contract, without which, the corporate purpose
farmers would not have assented to expressed in the charter.
the said Amended Contract. As such,
the consideration for the main
contract is deemed to be the
consideration for the grant of further
concessions in the resolution (e.g. the
extended period of the contract.)
- The directors’ lack of power to amend
would be relevant if the resolution was
passed after the farmers had already
bound themselves to the terms of the
printed milling contract. In this case,
the resolution was adopted 21 days
before the farmers’ assented to the
contract or while the latter were not
yet bound.
- It could not also be seen as a
novation, since the resolution
modified only a proposal, not yet
binding between the parties.
- In this light, it cannot be gainsaid that
the board has the power to modify the
terms of the proposal. The standard
for such validity is whether the act is
in immediate furtherance of the
corporation’s business, fairly incident
to the express powers and reasonably
necessary to their exercise.
Regardless if it will cause losses.
- This standard is met in the adoption of
the resolution.
ISSUE/S HELD DOCTRINE
- Whether or not - NO. When Alhambra made its attempt - Sec. 37, Corporation Code –
Alhambra could to extend its corporate existence, its A private corporation may
extend the term of original term of fifty hyears had extend or shorten its term
its corporate already expired; it was in the midst of as stated in the articles of
existence pursuant the three-year grace period for incorporation when
to RA 3531. liquidation. approved by a majority
3
 provided in its articles of
incorporation, the company
commenced its liquidation and a new
corporation, Alhambra Industries, Inc.,
was formed to carry on the business
of Alhambra.
- On June 20, 1963, within Alhambra’s
three-year statutory period for
liquidation, Republic Act 3531 was
enacted into law, amending Section
18 of the Corporation Law to the
effect that domestic private
corporations were empowered to
extend their corporate life beyond the
period fixed by the articles of
incorporation for a term not to exceed
fifty (50) years in any one instance.
- Thereafter, Alhambra’s board of
directors amended their articles of
incorporation to extend its corporate
life for an additional fifty years.
- Alhambra’s stockholders, representing
more than two-thirds of the
company’s outstanding capital stock,
voted to approve the resolution.
- The amended articles of incorporation
were file with the Securities and
Exchange Commission (SEC) which
rejected the same as it averred that
Alhambra could not avail of RA 3531
as its term of existence had already
expired when the law took effect; in
short, said law had no retroactive
effect.
- As provided in Section 77 of the
Corporation Law, continuance of a
“dissolved” corporation as a body
corporate for three years has for its
purpose the final closure of its affairs,
and no other; the corporation is
specifically enjoined from “continuing
the business for which it was
established.”
- Liquidation of the corporation’s affairs
had become necessary precisely
because its life had ended, hence, the
corporate existence and juridical
personality of that corporation to do
business may no longer be extended.
- The moment a corporation’s right to
exist as an “artificial person” ceases,
its corporate powers are terminated
“just as the powers of a natural
person to take part in mundane affairs
cease to exist upon his death”; there
is nothing left but to conduct, as it
were, the settlement of the estate of a
deceased juridical person.
- Under Section 77, no corporation in a
state of liquidation can act in any way,
much less amend its articles, “for the
purpose of continuing the business for
which it was established.”
- Nowhere in RA 3531 could be found
the word “renew” in reference to the
authority given to corporations to
protract their lives; the law limits itself
to extension of corporate existence;
as such extension may be made only
before the term provided in the
corporate charter expires.
- Allowing Alhambra to extend its
corporate existence in view of he
circumstances would open the gates
for all defunct corporations – whose
charters have expired even long
before RA 3531 came into being – to
vote of the board of
directors or trustees and
ratified at a meeting by the
stockholders representing
at least two-thirds (2/3) of
the outstanding capital
stock or by at least two-
thirds (2/3) of the members
in case of non-stock
corporations.
- As provided in Section 77
of the Corporation Law,
continuance of a
“dissolved” corporation as
a body corporate for three
years has for its purpose
the final closure of its
affairs, and no other; the
corporation is specifically
enjoined from “continuing
the business for which it
was established.”
- To renew a charter is to
revive a charter which has
expired, or, in other words,
‘to give a new existence to
one which has been
forfeited, or which has lost
its vitality by lapse of time’.
- To extend a charter is ‘to
increase the time for the
existence of one which
would otherwise reach its
limit at an earlier period.
4
 resuscitate their corporate existence.
- At the time of the passage of RA 3531,
Alhambra’s corporate life had already
expired. It had overstepped the limits
of its limited existence; no life there is
to prolong.
- With the creation of Alhambra
Industries, Inc., the word Alhambra,
the name that counts (it has goodwill),
remains.

Section 38
TITLE FACTS
Phil. Trust v. - Cooperativa Naval Filipina was duly
Rivera incorporated under the laws of the
Philippine Islands, with a capital of
P100,000, divided into one thousand
shares of a par value of P100 each.
Among the incorporators of this
company was Mariano Rivera, who
subscribed for 450 shares
representing a value of P45,000, the
remainder of the stock being taken by
other persons.
- The articles of incorporation were duly
registered in the Bureau of Commerce
and Industry on October 30 of the
same year.
- In the course of time the company
became insolvent and went into the
hands of the Philippine Trust
Company, as assignee in bankruptcy;
and by it this action was instituted to
recover one-half of the stock
subscription of Rivera , which
admittedly has never been paid.
- The reason given for the failure of the
Rivera to pay the entire subscription
is, that not long after the Cooperativa
Naval Filipina had been incorporated,
a meeting of its stockholders
occurred, at which a resolution was
adopted to the effect that the capital
ISSUE/S HELD
- Whether or not the - YES. The resolution releasing the
resolution was ineffectual shareholders from their obligation to
pay 50 per centum of their respective
subscriptions was an attempted
withdrawal of so much capital from
the fund upon which the company's
creditors were entitled ultimately to
rely and, having been effected without
compliance with the statutory
requirements, was wholly ineffectual.
DOCTRINE
- It is established doctrine
that subscription to the
capital of a corporation
constitute a find to which
creditors have a right to
look for satisfaction of their
claims and that the
assignee in insolvency can
maintain an action upon
any unpaid stock
subscription in order to
realize assets for the
payment of its debts.
- A corporation has no power
to release an original
subscriber to its capital
stock from the obligation of
paying for his shares,
without a valuable
consideration for such
release; and as against
creditors a reduction of the
capital stock can take place
only in the manner an
under the conditions
prescribed by the statute
or the charter or the
articles of incorporation.
Moreover, strict compliance
with the statutory
5
 should be reduced by 50 per centum regulations is necessary.
and the subscribers released from the
obligation to pay any unpaid balance
of their subscription in excess of 50
per centum of the same. As a result of
this resolution it seems to have been
supposed that the subscription of the
various shareholders had been
cancelled to the extent stated; and
fully paid certificate were issued to
each shareholders for one-half of his
subscription.
- It does not appear that the formalities
prescribed in section 17 of the
Corporation Law, as amended, relative
to the reduction of capital stock in
corporations were observed, and in
particular it does not appear that any
certificate was at any time filed in the
Bureau of Commerce and Industry,
showing such reduction.
Madrigal & Co. - Petitioner was engaged in the mgmt. of Rizal - WON the NLRC was - No. As a general rule, findings of administrative - Section 38 of the corporation code
v. Zamora Cement Co., Inc. In fact, the 2 are sister incorrect with its agencies are accorded not only respect but even talks about the power of the
companies because both are owned by the same findings. finality. In no way can the questioned decisions corporation to increase or decrease
or practically the same stockholders. be seen as arbitrary. The decisions themselves capital stock or create or increase
- Respondent Zamora of the Madrigal Central show why. bonded indebtedness. For such to
Office Employees Union sought for the renewal - There was no substantial compliance with the happen, it needs the vote of the
of its CBA with petitioner; but the latter clearance requirement to terminate. The letter majority of the Board, approved
requested for a deferment in the negotiations. was unverified, not even a single document by 2/3 of outstanding stock or
- Then, petitioner on 2 several occasions had its submitted in support thereof, the same failed to members and approved by the
capitalization reduced from 765,000 to 267,366 specify the individual employees to be affected SEC.
to 110,085 shares by effecting distribution of by the intended retrenchment. It was not clear. - In the case at bar, petitioner,
marketable securities owned by petitioner to its - That’s why it was correctly concluded that the wanting to evade the pains of
stockholders in exchange for their shares in an letter was insufficient in form and substance to dealing with union’s asking for
equivalent amount in the corporation. constitute a valid compliance with the clearance wage and benefits increase,
- After the failure of the petitioner to sit down requirement. decided to reduce its capital stock
with respondent union, the latter commenced - What clearly emerges from the recorded facts is to make it appear that they were
with the NLRC a complaint for ULP, but that the petitioner, awash with profits its operating at a loss though in
petitioner filed its position paper alleging business operations but confronted with the reality they weren’t.
operational losses; the Rizal had ceased demand of the union for wage increases,
operating temporarily; that because of the desire decided to evade its responsibility towards the
of stockholders to phase out the operations of employees by a devised capital reduction.
Madrigal it has effected reduction in - While the reduction in capital stock created an

6
 capitalization, and had turned to retrenching
employees for reorganization. They then asked
that they may be allowed to effect
reorganization gradually.
- The letter however was not verified neither was
it accompanied by the proper supporting
documents thus DOLE took no action.
- Labor Arbiter then rendered a decision granting
a general wage increase plus a monthly living
allowance in favor of the employees.
- Petitioner then applied for clearance to
terminate a number of employees but this was
denied. Also, the other case was affirmed by the
NLRC.
- Hence this appeal
Section 39
TITLE FACTS
Benito v. SEC - Jamiatul Philippine Al Islamia Inc. had
an authorized capital stock of
P200,000.00 divided into 20,000
shares at par value of P10.00. 8,058
shares were fully paid for. Benito
subscribed to 460 shares.
- In 1975, the corporation filed a
certificate of increase of its capital
stock from P200,000.00 to
P1,000,000.00. It was shown in the
certificate that P191,560.00 worth of
shares were represented.
- Thus, P110,980.00 worth of shares
were subsequently issued by the
corporation from the unissued portion
of the authorized capital stock of
P200,000.00. Of the increased capital
stock of P1,000,000.00, P160,000.00
worth of shares were subscribed by
Ramos, Lucman and Alonto.
- Benito filed a petition with the SEC
praying that the additional issue of
shares of previously authorized capital
stock as well as the shares issued
from the increase of capital stock be
apparent need for retrenchment, it was, by all
indications just a mask for the purge of union
members, who, by then, had agitated for wage
increases.
- Therefore the petitions are dismissed. Findings
of LA affirmed.
ISSUE/S HELD DOCTRINE
- Whether or not a - NO. The power to issue shares of -
stockholders’ stocks in the corporation is lodged in
meeting is the BOD and no stockholders’ meeting
necessary for the is necessary to consider it because
issuance of the additional issuance of shares of stock
unsubscribed does not need the approval of the
portion of the stockholders.
capital stock - The by-laws of the corporation itself
states that “the Board of Trustees
shall, in accordance with law, provide
for the issue and transfer of shares of
stock of the Institute and shall
- Whether or not a prescribe the form of the certificate of
stockholder enjoys stock of the Institute”.
pre-emptive right to - NO. The general rule is that the pre-
buy unissued shares emptive right is recognized only with
of originally respect to new issue of shares, and
authorized capital not with respect to additional issues of
stock. originally authorized shares.
- This is on the theory that 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. An original
subscriber is deemed to have taken
7
 cancelled on the following grounds:
- the stockholders were not
notified of the meeting wherein
the proposed increase was in the
agenda
- the additional issue of previously
subscribed shares was made in
violation of his pre-emptive right
to said additional issue
Section 40
TITLE FACTS
Islamic - The Islamic Directorate of the Philippines (IDP)
Directorate v. is composed of all major tribal groups in the
CA Phils.
- When martial law was declared, most of the
members of the Board of Trustees went into
hiding to escape political persecution.
- Thereafter, 2 Muslim groups sprung – the
Carpizo group and the Tamano group. Both
claim to be the legitimate IDP.
- In a suit between them, however, the SEC
declared that neither of them are IDP board
members and further ordered the election of a
new board members.
- Without having been elected as Board
Members, the Carpizo group sold a parcel of
land owned by the IDP to the Iglesia ni Cristo
(INC).
- The IDP now seeks to have the contract of sale
declared null and void because the Carpizo
group is bereft of any authority to bind IDP in
any kind of transaction.
Edward Nell v. - Nell Company sued Insular Farms for
Pacific Farms the unpaid balance of the purchase
price of the pump that it sold to the
latter. After the writ of execution was
returned unsatisfied because the
Insular Farms has no leviable property,
Nell Company sued against Pacific
Farms to claim the amount upon the
theory that the latter company is an
alter ego of Insular Farms.
his shares knowing that they form a
definite proportionate part of the
whole number of authorized shares.
- When the shares left unsubscribed are
later reoffered, he cannot therefore
claim a dilution of interest.
ISSUE/S HELD DOCTRINE
- W/N the contract of sale - NO.
entered into between the - The Corporation Code provides that for the sale
Carpizo group and INC is to be valid, the majority vote of the legitimate
valid Board of Members/Trustees must be obtained
and concurred in by the vote of at least 2/3 of
the bona fide members of the corporation.
- Since the SC had earlier ruled that the election
of the Carpizo group as board members is null
and void, the latter is bereft of any authority to
bind the IDP in any kind of transaction.
- Whether or not - SC held that it is not liable because: - Generally where a
Pacific Farms is - The sale was not entered into to corporation sells or
liable to Nell defraud Nell because the sale otherwise transfers all of
Company. happened 1 month before the filing of its assets to another
the case. corporation, the latter is
- Pacific purchased the shares as the not liable for the debts and
highest bidder at an auction sale held liabilities of the transferor,
at the instance of bank to which the except:
shares were pledged. 1. Where the purchaser
- Pacific paid for the shares separately expressly or impliedly
8
 - Pacific Farms bought 1,000 shares of
Insular and then sold them to a group
of individuals who reorganized the
corporation, then the BOD sold the
reorganized company and all of its
assets to Nell for 10,000.
Section 41
TITLE FACTS
Steinberg v. - Steinberg is the receiver of the
Velasco Sibuguey Trading Company.
- It is alleged that the defendants
(president, vice president, secretary-
treasurer and director), at a meeting,
approved and authorized various
unlawful purchases already made of a
large portion of the capital stock of
Sibuguey from its various
stockholders, thereby diverting its
funds to the injury, damage, and in
fraud of the creditors of the
corporation. (Sec. 41 applicable)
- That when the capital stock
amounting to Php 3,300 was
purchased, Sibuguey had accounts
payable to about Php 14K.
- As another cause of action, it is also
alleged that the officers and directors
of the corporation approved a
resolution for the payment of Php 3K
dividends to its stockholders when
during that time Sibuguey had
accounts payable of about Php 9K.
(Sec. 43 applicable)
- Steinberg prayed that the defendants
from the subsequent sale of assets.
- No consolidation or merger because
the allegations of being an alter ego
clearly negates such.
- The inadequacy of the P10,000 is
untenable because the sale was
approved by the SEC, hence, price
was fair and reasonable.
ISSUE/S HELD
- Whether Sibuguey - NO. In this issue, the SC held that the
could legally directors did not act in good faith or
purchase its own that they were grossly ignorant of
stock. (Sec. 41) their duties.
- It appeared that the action of the
board in purchasing the stock and in
declaring dividends was all done at
the same meeting of the board of
directors. At that time, Ganzon and
Mendaros were formally directors and
resigned before the board approved
the purchase and declared dividends.
- In other words, they were permitted to
resign so that they could sell their
- Whether the Board stock to the corporation.
of Directors of - NO. It seemed that the board of
Sibuguey could directors acted on the assumption
legally declare a that, because it appeared from the
dividend. (Sec. 43) books that it had accounts receivable,
therefore it had a surplus over and
above its debts and liabilities.
- However, the SC noted that there was
no stipulation as to the actual cash
value of those accounts. Thus, that in
the purchase of its own stock and in
declaring dividends, the real assets of
agrees to assume such
debts,
2. Where the transaction
amounts to a
consolidation or merger
of the corporation,
3. Where the purchasing
corporation is merely a
continuation of the
selling corporation,
4. Where the transaction is
entered into fraudulently
in order to escape
liability for such debts.
DOCTRINE
- See Section 41
- The creditors of a
corporation have the right
to assume that so long as
there are debts and
liabilities, the board of
directors of the corporation
will not use its assets to
purchase its own stock or
to declare dividends to its
stockholders when the
corporation is insolvent.
- If the directors of a
corporation do acts clearly
beyond their power, by
reason of which a loss
ensued, or dispose of its
property without authority,
they will be required to
make good the loss out of
their private estate.
9
 be liable for the amount of the capital
stock purchased and the amount of
the dividends paid.
- The lower court dismissed the
complained and rendered judgment in
favor of the defendants.
Section 42
TITLE FACTS
De la Rama v. - This case was filed by four minority
Ma-ao Sugar stockholders against the Ma-ao Sugar
Central Co., Central and four of its directors.
Inc. - It is alleged that Ma-ao Sugar Central,
through its President (Araneta),
subscribed for Php 300K worth of
capital stock of the Philippine Fiber
Processing Co.
- At that at the time the first two
payments were made, there was no
board resolution authorizing such
investment. It was only a few months
after that Araneta was authorized by
the Board of Directors.
- It was also alleged that 355,000
shares of stock of Philippine Fiber,
owned by Luzon Industrial, were
transferred to Ma-ao without prior
board resolution. Such transfer
however was subsequently approved.
- The lower court held that the
investment of corporate funds was not
a violation of the Corporation Law. It
considered the defendants correct in
contending that since the company
was engaged in the manufacture of
sugar bags it was legitimate for Ma-ao
to either manufacture sugar bags or
invest in another corporation engaged
the corporation were diminished by
Php 6,300.
- In other words, the corporation did not
have then an actual bona fide surplus
from which dividends could be paid,
and that eh payment of them in full at
that time would “affect the financial
condition of the corporation.”
- The SC reversed the decision of the
lower court and held the defendants
liable.
ISSUE/S HELD
- Whether the - NO. The SC agreed with the finding of
investment of the the lower court that the investment in
corporate funds by question does not fall under the
Ma-ao in Philippine purview of the Section 17 ½ of the
Fiber constitutes a Corporation Law.
violation of the - The SC quoted Prof. Guevara in
Corporation Law. explaining the said provision. “Such
an act, if done in pursuance of the
corporate purpose, does not need the
approval of the stockholders. But
when the purchase of shares of
another corporation is done solely for
investment and not to accomplish the
purpose of its incorporation, the vote
of approval of the stockholders is
necessary.”
- Also, “when the investment is
necessary to accomplish its purpose
or purposes as stated in the articles of
- Whether Ma-ao may incorporation, the approval of
make investments in stockholders is not necessary.
any other company - YES. The SC reversed the order of the
whose purpose is lower court refraining Ma-ao from
not connected with making investments in other company
the sugar central whose purpose not connected with
business. the sugar central business.
- It reasoned that the Corporation Law
allows a corporation to invest its funds
in any other corporation or business,
DOCTRINE
- An investment of corporate
funds in another
corporation, if done in
pursuance of the corporate
purpose, does not need the
approval of the
stockholders.
- But when the purchase of
shares of another
corporation is done solely
for investment and not to
accomplish the purpose of
its incorporation, the vote
of approval of the
stockholders is necessary.
- Further, when the purpose
is as stated in its articles of
incorporation, the approval
of the stockholders is not
necessary.
- The Corporation Law allows
a corporation to invest its
funds in any other
corporation or business, or
for any purpose other than
the main purpose for which
it was organized, provided
that its board of directors
has been so authorized by
10
 in said manufacture.
- However, the lower court ordered Ma-
ao to refrain from making investments
in any other companied whose
purpose is not connected with sugar
central business.
Gokongwei v. - Gokongwei Jr. is a stockholder of San
SEC Miguel Corporation (SMC). He seeks to
have the court nullify the amended
by-laws which disqualifies any person
for nomination or election to the
Board of Directors (BOD) if he is
engaged in any business whose
interests are adverse to the SMC.
- It was enacted by the majority of the
BOD.
- Gokongwei is also owner/stockholder
of Universal Robina Corp. and CFC.
Both businesses are engaged in
agriculture, ice cream, coffee which
are also businesses engaged in by
SMC.
- As one of his causes of action,
Gokongwei, questions the investment
of SMC corporate funds without prior
authority of the stockholders.
- The transaction that he questions is
the purchase of beer manufacturing
facilities.
- This purchase was later ratified by the
stockholders.
Gokongwei v. - Petitioner seeks to nullify the en banc
SEC (MR) decision of the SEC upholding the
findings of the San Miguel Corporation
(SMC) BOD that Gokongwei is
engaged in a business competitive to
that of SMC.
- Thus, he is ineligible to run for
election as director, pursuant to the
by-laws.
- Petitioner contends that the matter of
or for any purpose other than the
main purpose for which it was
organized, provided that its board of
directors has been so authorized by
the affirmative vote of stockholders
holding shares entitling them to
exercise at lease 2/3 of the voting
power.
- WON the transaction - NO. The law allows a corporation to
was invalid invest its funds in any other
corporation or business or for any
other purpose other than the main
purpose for which it was organized.
- The purchase of the beer
manufacturing facilities was in
furtherance of the corporate purpose
- WON the purchase and as such, no prior approval of the
was ultra vires stockholders was necessary.
- NO. The mere fact that SMC submitted
the investment for ratification at the
annual meeting cannot be construed
as an admission that SMC committed
an ultra vires act.
- WON the petition for - NO.
review should be - SC already ruled on the validity of the
granted by-laws and such cannot be re-
litigated being the law of the case.
- The alleged disqualification of some of
the board members was not an issue
during the hearing; nor has petitioner
submitted evidence to prove this
contention.
- The basis of the SEC’s order was
the affirmative vote of
stockholders holding
shares entitling them to
exercise at lease 2/3 of the
voting power.
- If the investment is made
in the pursuance of the
corporate purpose, it does
not need the approval of
the stockholders.
- But when the purchase of
shares is done solely for
investment and not to
accomplish the purpose of
its incorporation, the vote
of approval of the
stockholders is needed. At
least 2/3 of the outstanding
stock is needed.
-
11
 his disqualification has not yet been
heard since an MR is pending before
the SC.
- According to the petitioner, SEC failed
to consider that SMC cannot disqualify
Gokongwei because they were in pari
delicto since some of the board
members were also disqualified being
similarly situated like the petitioner.
- Also, petitioner claims that the BOD of
SMC over exerted its corporate power
for them to remain in position.
Section 43
TITLE FACTS
Nielson & Co. - Nielson & Company entered into a
v. Lepanto management contract with Lepanto,
Consolidated where Nielson was given the right for
five years (renewable for the same
period) to develop and operate the
mining claims of Lepanto.
- Said contract was modified and one of
the contested provisions of which is
that which grants Nielson as
compensation for its services “10% of
any dividends declared and paid.”
- The SC ruled before that the import of
this provision is that Nielson will be
given 10% of what is actually going
to be declared and distributed as
dividends by Lepanto.
- Thus, since Lepanto declared a total of
P3M of dividends during the period of
extension of the contract, the SC
ordered Lepanto to grant P300,000
worth of its stocks to Nielson.
- Lepanto contests this judgment
primarily because such provision, as
alleged, is contrary to the Corporation
Code.
based on several testimonial evidence
as well as documentary evidence
submitted showing that petitioner is
engaged in agricultural and poultry
business competitive with that of
SMC. No evidence was offered by the
petitioner to rebut such evidence.
ISSUE/S HELD
- Whether or not - The SC overruled its earlier decision,
Nielson should be - It is recognized that stocks can be
entitled to P300,000 issued in exchange of cash, property
worth of stocks as or as undistributed profits.
compensation for its - The Supreme Court then distinguished
services. the legal implications of issuing stocks
as dividends and issuing of stocks in
exchange for cash or property.
- On the one hand, issuing stocks in
payment of services is considered as
to be one in exchange of property
since services are deemed as
property.
- And the Court enunciated that
issuance of stocks in exchange of cash
or property is culled from the original
capitalization of the company or from
the increased capitalization. They are
done in order to generate capital.
Thus, they can be issued to persons
not yet stockholders of the company.
- This is not however the case with
stock dividends. A dividend is defined
as the portion of the profits of the
enterprise which the corporation sets
apart for ratable division among the
holders of the capital stock.
- From this definition, it can be easily
DOCTRINE
- “No corporation shall issue
stocks or bond except in
exchange for actual cash
paid to the corporation
or for property actually
received by it…or for
profits earned by it but
not distributed among its
stockholders or members.”
- Stocks issued in exchange
for cash or property are
issued for capital
generation and can be
issued to a non-
stockholder.
- Stock dividends should be
considered as 1.) a
dividend, and 2.) an
enforced use of the
dividend money to
purchase additional shares
at par.
- A dividend is defined as the
portion of the profits of the
enterprise which the
corporation sets apart for
ratable division among the
holders of the capital stock.
12

Steinberg v. - Steinberg is the receiver of the
Velasco Sibuguey Trading Company.
- It is alleged that the defendants
(president, vice president, secretary-
treasurer and director), at a meeting,
approved and authorized various
unlawful purchases already made of a
large portion of the capital stock of
Sibuguey from its various
stockholders, thereby diverting its
funds to the injury, damage, and in
gleaned that stocks issued as dividend - As such, stock dividends
can only be issued to existing can only be granted to
stockholders, since they are the only existing stockholders in
ones entitled to a proportional share proportion to their shares.
in that part of the surplus which is
declared as dividends.
- From this conclusion, it is not right to
give Nielson a corresponding 10% of
the stocks dividend declared since this
amounts to issuance of stocks to
someone not yet a stockholder.
- Furthermore, since dividends are
distributed ratably, issuance of stock
dividends to Lepanto in payment of
his compensation will deprive other
stockholders to their rightful share of
the profits.
- Finally, The Court also looked upon
the minutes held by both parties to
interpret the contested provision of
the contract. It was seen that the
intention was only to tie the
computation of Nielson’s
compensation with 10% of the
declared dividends, in what form they
might be. The dividend is only the
basis but not the source for such
payment.
- As such, the SC modified its ruling
entitling Nielson with P300,000 in
cash and 6% legal interest of such
amount.
- Whether Sibuguey - NO. In this issue, the SC held that the - See Section 43
could legally directors did not act in good faith or - The creditors of a
purchase its own that they were grossly ignorant of corporation have the right
stock. (Sec. 41) their duties. to assume that so long as
- It appeared that the action of the there are debts and
board in purchasing the stock and in liabilities, the board of
declaring dividends was all done at directors of the corporation
the same meeting of the board of will not use its assets to
directors. At that time, Ganzon and purchase its own stock or
Mendaros were formally directors and to declare dividends to its
resigned before the board approved stockholders when the
13
 fraud of the creditors of the
corporation. (Sec. 41 applicable)
- That when the capital stock
amounting to Php 3,300 was
purchased, Sibuguey had accounts
payable to about Php 14K.
- As another cause of action, it is also
alleged that the officers and directors
of the corporation approved a
resolution for the payment of Php 3K
dividends to its stockholders when
during that time Sibuguey had
accounts payable of about Php 9K.
(Sec. 43 applicable)
- Steinberg prayed that the defendants
be liable for the amount of the capital
stock purchased and the amount of
the dividends paid.
- The lower court dismissed the
complained and rendered judgment in
favor of the defendants.
Section 45
TITLE FACTS
Pirovano v. - Enrico Pirovano was executed by the
dela Rama Japanese.
- The Board of Directors of De la Rama
Steamship Co., composed chiefly of
members of the De la Rama family,
adopted a resolution donating the
proceeds of the life insurance policies
of said Enrico Pirovano, husband of
Estefania de la Rama, to his minor
children.
- The donation was made in recognition
of Pirovano’s contribution to the great
success of the company when he was
president and general manager
the purchase and declared dividends.
- In other words, they were permitted to
resign so that they could sell their
- Whether the Board stock to the corporation.
of Directors of - NO. It seemed that the board of
Sibuguey could directors acted on the assumption
legally declare a that, because it appeared from the
dividend. (Sec. 43) books that it had accounts receivable,
therefore it had a surplus over and
above its debts and liabilities.
- However, the SC noted that there was
no stipulation as to the actual cash
value of those accounts. Thus, that in
the purchase of its own stock and in
declaring dividends, the real assets of
the corporation were diminished by
Php 6,300.
- In other words, the corporation did not
have then an actual bona fide surplus
from which dividends could be paid,
and that eh payment of them in full at
that time would “affect the financial
condition of the corporation.”
- The SC reversed the decision of the
lower court and held the defendants
liable.
ISSUE/S HELD
- Whether or not the - NO. A review of the corporation’s
corporation’s articles of incorporation manifested
donation was ultra that the corporation had broad powers
vires and therefore to: a) deal with the moneys of the
invalid. company not immediately required, in
such manner as from time to time
may be determined; and b) to aid in
any other manner any person,
association, or corporation of which
any obligation of in which any interest
is held by this corporation or in the
affairs or prosperity of which this
corporation has a lawful interest.
- Under the first power, the word deal
corporation is insolvent.
- If the directors of a
corporation do acts clearly
beyond their power, by
reason of which a loss
ensued, or dispose of its
property without authority,
they will be required to
make good the loss out of
their private estate.
DOCTRINE
- With respect to the
meaning, extent, and
scope of an ultra vires act,
many authorities are
uniform and unanimous
that the same may be
either an act performed
merely outside the scope
of the powers granted to
corporation by its articles
of incorporation, or one
which is contrary to law or
violative of any principle
which would void any
14
 thereof.
- It was earlier resolved that P400,000
worth of shares, or 4,000 shares with
a par value of P100 per share, will be
issued in favor of Pirovano’s children
where each of the four children will
get 1,000 shares.
- However, this was later nullified upon
showing by Lourdes de la Rama, wife
of Sergio Osmeña, Jr., that the value of
the stocks then was 3.6 times their
par value, thus P1.44 million was the
amount in fact donated.
- Another resolution was adopted
whereby the company renounced its
rights to the proceeds of the life
insurance policies but were retained
as a loan drawing interest payable
after its National Development Co.
obligation shall have been settled.
- A New York property owned by
Demwood Realty, upon approval by
the Board of Directors, was purchased
by Mrs. Pirovino from the proceeds of
the insurance policies.
- The latter resolution with some
clarifying modifications, including the
purchase of the New York property,
was ratified by the stockholders
- Sergio Osmeña, Jr. as the new
President and General Manager
challenged the validity of the donation
with the SEC which decided that the
act was void as being ultra vires
because the corporation could not
dispose of its assets by gift.
- A measure was thus considered to
circumvent the prohibition by way of
declaring cash dividends and asking
the shareholders to donate the same
to the minor children but did not
materialize.
- Majority of the stockholders thereafter
is broad enough to include any
manner of disposition, and refers to
moneys not immediately required by
the corporation, and such disposition
may be made in such manner as from
time to time may be determined by
the corporation.
- The donation in question is within the
scope of said broad power for it is a
fact appearing in the evidence that
the insurance proceeds were not
immediately required when they were
given away.
- Under the second broad power, the
record of the case is replete with
instances which clearly show that the
corporation knew well its scope and
meaning as many similar donations
were made to former employees and
even non-employees by reason of
certain moral or political
considerations.
- An issue could be raised as to the size
of the donation but aside from being
similar to the past donations,
gratuities or pensions, the gratuity
here was given not merely motivated
by pure liberality but also by a deep
sense of recognition of Enrico
Pirovano’s contributions to the
corporation.
- It is also to be considered that Enrico
Pirovano is a member of the de la
Rama family, having been married to
one of the de la Rama scions.
- Also, granting innuendo that the
donation was ultra vires, the
resolution was adopted by the Board
of Directors and was later on ratified
by the stockholders, thus obliterating
any infirmity and making the act
perfectly valid and enforceable. The
corporation is thus now prevented or
contract whether done
individually or collectively.
- Illegal corporate acts
contemplate the doing of
an act contrary to law,
morals, or public order, etc.
and are void.
- Mere ultra vires acts which
are not illegal or void ab
initio but are not merely
within the scope of the
articles of incorporation,
are merely voidable and
may become binding and
enforceable when ratified
by the stockholders.
- (As deduced) ultra vires
acts are valid when they
are approved by the Board
and ratified by the
stockholders. They are not
merely executory but
executed and
consummated, and no
creditors are prejudiced, or
if there are creditors
affected, the latter have
expressly given their
conformity.
15
 revoked the donation.
- The minor children thus brought an
action demanding payment of he
credit due them.
Republic v. - Acoje Mining Company, Inc. wrote the
Acoje Mining Director of Posts requesting the
opening of a post, telegraph and
money order offices at its mining
camp at Sta. Cruz, Zambales, to
service its employees and their
families that were living in said camp.
- Acting on the request, the Director of
Posts wrote in reply stating that if
aside from free quarters the company
would provide for all essential
equipment and assign a responsible
employee to perform the duties of a
postmaster without compensation
from his office until such time as funds
therefor may be available he would
agree to put up the offices requested.
- The company in turn replied signifying
its willingness to comply with all the
requirements outlined in the letter of
the Director of Posts requesting at the
same time that it be furnished with
the necessary forms for the early
establishment of a post office branch.
- The Director of Posts again wrote a
letter to the company stating among
other things that "In cases where a
post office will be opened under
circumstances similar to the present,
it is the policy of this office to have
- It is not contended that donation was
- To allow the corporation to revoke the
- WON the resolution is - NO. The contention that the resolution
ultra vires
- Thus, after the company had signified
estopped from contesting the validity
of the donation.
illegal or contrary to any of the
express provisions of the articles of
incorporation, nor prejudicial to the
creditors of the corporation.
donation would not only be unfair but
would also contravene the well-settled
doctrine that the defense of ultra
vires cannot be set up or availed of in
completed transactions.
adopted by the board is ultra vires in
the sense that it has no authority to
act on a matter which may render the
company liable as a guarantor has no
factual or legal basis. In the first
place, it should be noted that the
opening of a post office branch at the
mining camp the corporation was
undertaken because of a request
submitted by it to promote the
convenience and benefit of its
employees. The idea did not come
from the government, and the
Director of Posts was prevailed upon
to agree to the request only after
studying the necessity for its
establishment and after imposing
upon the company certain
requirements intended to safeguard
and protect the interest of the
government.
its willingness to comply with the
requirement of the government that it
furnish free quarters and all the
essential equipment that may be
necessary for the operation of the
office including the assignment of an
employee who will perform the duties
- The weight of authority in
the state courts is to the
effect that a transaction
which is merely ultra vires
and not malum 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.
- 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."
- The defense of ultra vires
rests on violation of trust or
duty toward stockholders,
and should not be
entertained where its
16
 the company assume direct
responsibility for whatever pecuniary
loss may be suffered by the Bureau of
Posts by reason of any act of
dishonesty, carelessness or
negligence on the part of the
employee of the company who is
assigned to take charge of the post
office," thereby suggesting that a
resolution be adopted by the board of
directors of the company expressing
conformity to the above condition
relative to the responsibility to be
assumed buy it in the event a post
office branch is opened as requested.
- The company informed the Director of
Posts of the passage by its board of
directors of a resolution of the
following tenor: "That the requirement
of the Bureau of Posts that the
Company should accept full
responsibility for all cash received by
the Postmaster be complied with, and
that a copy of this resolution be
forwarded to the Bureau of Posts."
- The letter further states that the
company feels that that resolution
fulfills the last condition imposed by
the Director of Posts and that,
therefore, it would request that an
inspector be sent to the camp for the
purpose of acquainting the
postmaster with the details of the
operation of the branch office.
- The post office branch was opened at
the camp with Sanchez as postmaster.
- The postmaster went on a three-day
leave but never returned. The
company immediately informed the
officials of the Manila Post Office and
the provincial auditor of Zambales of
Sanchez' disappearance with the
result that the accounts of the
of a postmaster, the Director of Posts
agreed to the opening of the post
office stating that "In cases where a
post office will be opened under
circumstances similar to the present,
it is the policy of this office to have
the company assume direct
responsibility for whatever pecuniary
loss may be suffered by the Bureau of
Posts by reason of any act of
dishonesty, carelessness or
negligence on the part of the
employee of the company who is
assigned to take charge of the post
office," and accepting this condition,
the company, thru its board of
directors, adopted forthwith a
resolution of the following tenor: "That
the requirement of the Bureau of Posts
that the company should accept full
responsibility for all cash received by
the Postmaster, be complied with, and
that a copy of this resolution be
forwarded to the Bureau of Posts."
- 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, 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
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.
- 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.
17
 postmaster were checked and a
shortage was found in the amount of
P13,867.24.
- The several demands made upon the
company for the payment of the
shortage in line with the liability it has
assumed having failed, the
government commenced the action
seeking to recover the amount of
Pl3,867.24. The company in its answer
denied liability for said amount
contending that the resolution of the
board of directors wherein it assumed
responsibility for the act of the
postmaster is ultra vires, and in any
event its liability under said resolution
is only that of a guarantor who
answers only after the exhaustion of
the properties of the principal, aside
from the fact that the loss claimed by
the plaintiff is not supported by the
office record.
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,"
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 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.
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.
- Neither can we entertain the claim of
appellant that its liability is only that
of a guarantor. A mere reading of the
resolution of the Board of Directors
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
18

Carlos v. - This is an action to recover the value of 4 bonds
Mindoro Sugar issued by Mindanao Sugar Company and placed
in trust with the Philippine Trust Company.
- Mindanao is a corporation incorporated here in
the Phils.
- On the other hand, Phil. Trust Company is
another domestic corporation with the principal
purpose is to engage in the trust business.
- On Nov. 17, 1917, the BOD’s of Phil. Trust
adopted a resolution authorizing its president,
among others, to purchase at par and in the
name and for the use of the trust corporation all
or such part as he may deem expedient, of the
bonds in the value of P3,000,000 that Mindoro
was about to issue, and to resell them, with or
without the guarantee of said trust corporation,
at a price not less than par, and to guarantee to
the PNB the payment of the indebtedness to said
bank by Mindoro up to P2,000,000.
- Pursuant to this, Mindoro executed in favor of
Phil. Trust Co. the deed of trust, transferring all
of its property to it in consideration of the bonds
it had issued to the value of P3,000,000
- Phil. Trust sold 13 bonds to a certain Ramon
Diaz at a net profit of P100 per bond. The four
bonds in dispute are included here.
- Phil. Trust paid appellant upon presentation of
the coupons the stipulated interest until when it
stopped payments when it alleged that it did not
deem itself bound to pay such interest or to
redeem the obligation because the guarantee
given for the bonds was illegal and void.
- Hence this appeal by the appellant.
Japanese War - Abcede, President of JWNCAI , a non-
Notes v. SEC stock non profit corporation, was
issued an order to show cause why it
should not be proceeded against for:
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.
- WON, the lower court - Yes. Phil. Trust although secondarily engaged in
erred in saying that the banking, was primarily organized as a trust
Phil. Trust Co. has no corporation with full power to acquire personal
power to guarantee the property such as the bonds in question
obligation of another according to the Corporation Law.
juridical personality, for - Thus, being authorized to acquire the bonds, it
value received. was given implied power to guarantee them in
order to place them upon the market under
better, more advantageous conditions, and
thereby secure the profit derived from their sale.
- A corporation which has power by its charter to
issue its own bonds has power to guarantee the
bonds of another corporation, which has been
taken in payment of its own debt, the guaranty
being given to enable it to dispose of the bond
to better advantage,
- And so, guarantee of payment of bonds taken by
a loan and trust company in the ordinary course
of its business, made in connection with their
sale, are not ultra vires, and are binding.
- Also, although it is not clear that Mindoro
transferred the bonds to Phil. Trust,
nevertheless, the president of Phil. Trust was
expressly authorized to purchase all or some of
the bonds and to guarantee them.
- There are other considerations leading to the
same conclusion that Phil. Trust didn’t acquire
the bonds but just guaranteed them.
- In such a case, the guarantee would be valid and
Phil. Trust would be bound to pay the Carlos
their value with the accrued interest.
- Whether or nor - NO.
JWNCAI had the - Under its articles of Incorporation,
right to continue JWNCAI is a non-profit corporation.
with the Thus, it must not engage in business
- “It is not, however ultra-vires for a
corporation to enter into contracts
of guaranty or suretyship where it
does so in the legitimate
furtherance of its purposes and
business. And it is well settled that
where a corporation acquires
commercial paper or bonds in the
legitimate transaction of its
business it may sell them, and in
furtherance of such a sale it may,
in order to make them the more
readily marketable indorse or
guarantee their payment.
- “When a contract is not on its face
necessarily beyond the scope of
the power of the corporation by
which it was made, it will, in the
absence of proof to the contrary,
be presumed valid. Corporations
are presumed to contract within
their powers. The doctrine of ultra
vires, when invoked for or against
a corporation, should not be
allowed to prevail where it would
defeat the ends of justice or work
as a legal wrong.”
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 - 1) making misrepresentations to the abovementioned for profit.
public about the need for registering activities. - JWNCAI has the privilege to work for
and depositing Japanese war notes, the redemption of war notes of its
with a view to their possible members alone, but it cannot offer its
redemption; services to the public for a
- 2) receiving deposits of such notes consideration.
and charging fees therefor; - As to the third activity, SC held that it
- 3) accepting and collecting fees for has no relation to the avowed purpose
reparation claims for civilian of the corporation.
casualties and other injuries.
- -Abcede claims that these acts are not
prohibited by the Corporation Law,
and the corporation’s authority to
engage in such acts is implied from its
Articles of Incorporation.
Crisologo-Jose - This is a case for the violation of BP22. - W/N Benares and - Yes. - Ultra vires acts done by
v. CA - Atty. Benares and Ricardo Santos are Santos are - The law provides that an officer or an agents of the corporation
the signatories of the check in personally liable for agent of a corporation shall have the cannot be enforced against
question. They are the president and the check issued power to execute or indorse a the corporation even if
vice-president, respectively, of Mover under the account of negotiable paper in the name of the made in the name of the
Enterprises. The check was under the Mover Enterprises corporation for the accommodation of latter.
account of Mover Enterprises and a third person only if he is specifically
drawn against Traders Royal Bank. authorized to do so. Absent such
- Benares and Santos issued a check to authority, such act is ultra vires.
Ernestina Crisologo-Jose as Hence, it cannot be enforced against
consideration for her waiver over a the corporation but only against the
certain property w/c the GSIS agreed signatories thereof who shall be
to sell to their client, spouses Ong, w/ personally liable thereofr.
the understanding that upon approval -
of the GSIS of the compromise
agreement, the check will be
encashed accordingly. Since the
agreement was not approved within
the expected time, it was replaced.
Upon deposit, however, said check
was dishonored for insufficiency of
funds. Thus, this case for violation of
BP 22 fiels by Crisologo-Jose against
Benares and Santos.
- Benares and Santos contends that the
check was issued for accommodation
purposes by Mover Enterprises and
they merely signed it in a

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representative capacity. Hence, they
are not liable.

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