ULTRA VIRES DOCTRINE (SEC.

45); TYPES; BASIS; BUSINESS

JUDGEMENT RULE; DOCTRINE OF APPARENT AUTHORITY

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
aresolution 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 onSeptember
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 theresolution 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.

Lopez Realty vs Florentina Fontecha et. al. Facts: Fontecha et al. were the retained employees, filed a complaint
against employer Lopez Realty Incorporated (petitioner) and its majority stockholder, Asuncion Lopez Gonzales, for
alleged non-payment of their gratuity pay and other benefits. As found by the Labor arbiter Arturo Lopez submitted a
proposal relative to the distribution of certain assets of petitioner corporation among its three (3) main shareholders.
The proposal had three (3) aspects, viz: (1) the sale of assets of the company to pay for its obligations; (2) the
transfer of certain assets of the company to its three (3) main shareholders, while some other assets shall remain
with the company; and (3) the reduction of employees with provision for their gratuity pay. Corporation approved two
(2) resolutions providing for the gratuity pay of its employees, viz: (a) Resolution No. 6, Series of 1980, passed by the
stockholders in a special meeting held on September 8, 1980, resolving to set aside, twice a year, a certain sum of
money for the gratuity pay of its retiring employees and to create a Gratuity Fund for the said contingency; and (b)
Resolution No. 10, Series of 1980, setting aside the amount of P157,750.00 as Gratuity Fund covering the period
from 1950 up to 1980. The gratuity (pay) of the employees be given as follows: (a) Those who will be laid off be given
the full amount of gratuity; (b) Those who will be retained will receive 25% of their gratuity (pay) due on September 1,
1981, and another 25% on January 1, 1982, and 50% to be retained by the office in the meantime. Asuncion Lopez
Gonzales while still abroad sent a cablegram to the corporation, objecting to certain matters taken up by the board in
her absence, such as the sale of some of the assets of the corporation. corporation had prepared the cash vouchers
and checks for the third installments of gratuity pay of said private respondents, however it was cancelled for no
reason LA ruled in favor of employees. Corporation appealed to NLRC - ground - Mistake - that said gratuity pay
should be given only upon the employees' retirement. NLRC dismissed the appeal Issue: whether or not public
respondent acted with grave abuse of discretion in holding that private respondents are entitled to receive their
gratuity pay under the assailed board resolutions dated August 17, 1951 and September 1, 1981. Held: No. The
general rule is that a corporation, through its board of directors, should act in the manner and within the formalities, if
any, prescribed by its charter or by the general law. Thus, directors must act as a body in a meeting called pursuant
to the law or the corporation's by-laws, otherwise, any action taken therein may be questioned by any objecting
director or shareholder. Be that as it may, jurisprudence tells us that an action of the board of directors during a
meeting, which was illegal for lack of notice, may be ratified either expressly, by the action of the directors in
subsequent legal meeting, or impliedly, by the corporation's subsequent course of conduct. Petitioner corporation did
not issue any resolution revoking nor nullifying the board resolutions granting gratuity pay to private respondents.
Instead, they paid the gratuity pay, particularly, the first two (2) installments Also, as to the issue of lack of notice,
based on the record Asuncion was aware of said obligation because she has affixed her signature in the said
vouchers. As to the issue of ultra vires, providing gratuity pay for its employees is one of the express powers of the
corporation under the Corporation Code, hence, petitioners cannot invoke the doctrine of ultra vires to avoid any
liability arising from the issuance the subject resolutions
Lessons Applicable: Ratification of Ultra Vires Acts (Corporate law)

FACTS:

 Enrico Pirovano, president of the defendant company, managed the companyuntil 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
071 Republic of the Phils. V Acoje Mining Co. AUTHOR: (Keith Meridores)
February 23, 1963, GR No. L-18062 - No notes. A simple case.
TOPIC: Corporate Powers; Ultra Vires Doctrine
PONTENTE: BAUTISTA ANGELO, J.
FACTS
1. On May 17, 1948, the Acoje Mining Company, Inc. wrote the 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.
2. The Director of Posts acted on their request, and required that 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.
3. The Board of Directors of Acoje passed a resolution stating that: “"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."
4. The post office branch was opened on Oct. 13, 1949.
5. On May 11, 1954, the postmaster, an employee of Acoje, went on a 3 day leave and never returned
6. Acoje informed the Manila Post Office and upon auditing, it was found that P13,867.24 was missing.
7. The post office demanded payment and filed a suit with the CFI of Manila for the amount but Acoje denied liability
alleging that the Board of Directors’ act in assigning a postmaster was ultra vires; also, the company alleged that their
liability was merely that of a guarantor.
8. CFI of Manila ruled in favor of the Post Office but only to the amount of P9,515.25 (since they could only present
evidence for such amount)
9. Acoje appealed to the SC.

ISSUE:

1. Whether or not the board of directors’ acts was ultra vires?

2. Whether or not its liability was that of a mere guarantor?

HELD:

1. No. The act covers a subject which concerns the benefit, convenience, and welfare of the company’s employees and
their families. There are 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.
2. No. The phraseology and the terms employed are so clear and sweeping.

RATIO:
1st Issue:
1. 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.
2. 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.
3. There are 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.
4. What is an ultra vires act? 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.
5. An ultra vires act is merely voidable. It 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.

2nd Issue:
1. "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."

RISOLOGO JOSE V. CA - Accommodation Party

177 SCRA 594
FACTS:

The president of Movers Enterprises, to accommodate its clients Spouses

Ong, issued a check in favor of petitioner Crisologo-Jose. This was in
consideration of a quitclaim by petitioner over a parcel of land, which the
GSIS agreed to sell to spouses Ong, with the understanding that upon
approval of the compromise agreement, the check will be encashed
accordingly. As the compromise agreement wasn't approved during the expected
period of time, the aforesaid check was replaced with another one
for the same value. Upon deposit though of the checks by petitioner, it was
dishonored. This prompted the petitioner to file a case against Atty.
Bernares and Santos for violation of BP22. Meanwhile, during the
preliminary investigation, Santos tried to tender a cashier’s check for the value of
the dishonored check but petitioner refused to accept such. This was consigned by
Santos with the clerk of court and he instituted charges against petitioner. The trial
court held that consignation wasn't applicable to the case at bar but was reversed by the
CA.

HELD:

Petitioner averred that it is not Santos who is the accommodation party to the
instrument but the corporation itself. But assuming arguendo that the
corporation is the accommodation party, it cannot be held liable to the
check issued in favor of petitioner. The rule on accommodation party
doesn't include or apply to corporations which are accommodation parties. This is
because the issue or indorsement of another is ultra vires. Hence, one who has taken
the instrument with knowledge of the accommodation
nature thereof cannot recover against a corporation where it is only an
accommodation party. If the form of the instrument, or the nature of the transaction, is
such as to charge the indorsee with the knowledge that the
issue or indorsement of the instrument by the corporation is for the
accommodation of another, he cannot recover against the corporation thereon.

By way of exception, an officer or agent of a corporation shall have the

power to execute or indorse a negotiable paper in the name of the
corporation for the accommodation of a third party only is specifically
authorized to do so. Corollarily, corporate officers have no power to
execute for mere accommodation a negotiable instrument of the
corporation for their individual debts and transactions arising from or in
relation to matters in which the corporation has no legitimate concern. Since su
ch accommodation paper cannot be enforced against the corporation, the
signatories thereof shall be personally liable therefore, as well as the consequences
arising from their acts in connection therewith.

In 1927, Benguet Consolidated Mining Company, registered as a sociedad anonima under

the Spanish Law, agreed to invest and build capital equipments in favor of Balatoc Mining
Company, a corporation registered under the then relatively new Corporation Law of 1925.
In exchange, Balatoc Mining agreed to give Benguet Mining 600,000 shares.
The venture proved to be profitable and Balatoc Mining earned and so did its stockholders,
and of course, Benguet Mining was earning big too because it now owns 600k shares. This
prompted, Fred Harden a stockholder of Balatoc Mining who also owns thousands of shares
to sue Benguet Mining on the ground that under the Corporation Law a corporation like
Benguet Mining which is engaged in the mining industry is prohibited from being interested
in other corporations which are also engaged in the mining industry like Balatoc Mining.
ISSUE: Whether or not Harden’s suit should prosper.
HELD: No. The Corporation Law of 1925 subjects sociedades anonimas to its provisions
“so far as such provisions may be applicable”. In 1929, the Corporation Law was amended
and the prohibition cited by Harden was so modified as merely to prohibit any such
corporation from holding more than fifteen per centum of the outstanding capital stock of
another such corporation.
Further and more importantly, the Corporation Law of 1925 provides that if the person who
allegedly violated the provisions of said law is a corporation, the proper action is a quo
warranto which should be initiated by the Attorney-General or its deputized provincial fiscal
and not a private action as the one filed by Harden.
Facts: This is an action to recover from the defendants the value of
four bonds with due and unpaid interest thereon, issued by the
Mindoro Sugar Company and placed in trust with the Philippine Trust
Company. Mindoro Sugar Company is a corporation constituted in
accordance with the laws of the country. According to its articles of
incorporation one of its principal purposes was to acquire and exercise
the franchise granted by Act No. 2720 to George H. Fairchild, to
substitute the organized corporation. Philippine Trust Company is
another domestic corporation its principal purpose, then, as its name
indicates, is to engage in the trust business. The board of directors of
the Philippine Trust Company, adopted a resolution authorizing its
president, among other things, to purchase the bonds in the Mindoro
Sugar Company that 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 Philippine National Bank the payment of
the indebtedness to said bank by the Mindoro Sugar Company.
Pursuance of this resolution, the Mindoro Sugar Company executed in
favor of the Philippine Trust Company the deed of trust transferring
all of its property to it in consideration of the bonds it had issued.
Philippine Trust Company sold thirteen bonds, to Ramon Diaz. The
Philippine Trust Company paid the appellant, upon presentation of
the coupons, the stipulated interest from the date of their maturity
then it stopped payments; and thenceforth 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.
Issue: WON PTC has the power to guarantee and does this act
constitute an ultra vires act?
Held: No. It is not 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.
Whenever a corporation has the power to take and dispose of the
securities of another corporation, of whatsoever kind, it may, for the
purpose of giving them a marketable quality, guarantee their payment,
even though the amount involved in the guaranty may subject the
corporation to liabilities in excess of the limit of indebtedness which it
is authorized to incur. 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 a debt due to it, and
which it sells or transfers in payment of its own debt, the guaranty
being given to enable it to dispose of the bond to better advantage.
And so guaranties 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.
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 to be valid.
Pnb vs ca
Rita Tapnio owes PNB an amount of P2,000.00. The amount is secured by her sugar crops
about to be harvested including her export quota allocation worth 1,000 piculs. The said
export quota was later dealt by Tapnio to a certain Jacobo Tuazon at P2.50 per picul or a
total of P2,500. Since the subject of the deal is mortgaged with PNB, the latter has to
approve it. The branch manager of PNB recommended that the price should be at P2.80
per picul which was the prevailing minimum amount allowable. Tapnio and Tuazon agreed
to the said amount. And so the bank manager recommended the agreement to the vice
president of PNB. The vice president in turn recommended it to the board of directors of
PNB.
However, the Board of Directors wanted to raise the price to P3.00 per picul. This Tuazon
does not want hence he backed out from the agreement. This resulted to Tapnio not being
able to realize profit and at the same time rendered her unable to pay her P2,000.00 crop
loan which would have been covered by her agreement with Tuazon.
Eventually, Tapnio was sued by her other creditors and Tapnio filed a third party complaint
against PNB where she alleged that her failure to pay her debts was because of PNB’s
negligence and unreasonableness.
ISSUE: Whether or not Tapnio is correct.
HELD: Yes. In this type of transaction, time is of the essence considering that Tapnio’s
sugar quota for said year needs to be utilized ASAP otherwise her allotment may be
assigned to someone else, and if she can’t use it, she won’t be able to export her crops. It is
unreasonable for PNB’s board of directors to disallow the agreement between Tapnio and
Tuazon because of the mere difference of 0.20 in the agreed price rate. What makes it
more unreasonable is the fact that the P2.80 was recommended both by the bank manager
and PNB’s VP yet it was disapproved by the board. Further, the P2.80 per picul rate is the
minimum allowable rate pursuant to prevailing market trends that time. This unreasonable
stand reflects PNB’s lack of the reasonable degree of care and vigilance in attending to the
matter. PNB is therefore negligent.
A corporation is civilly liable in the same manner as natural persons for torts, because
“generally speaking, the rules governing the liability of a principal or master for a tort
committed by an agent or servant are the same whether the principal or master be a natural
person or a corporation, and whether the servant or agent be a natural or artificial person.
All of the authorities agree that a principal or master is liable for every tort which it expressly
directs or authorizes, and this is just as true of a corporation as of a natural person, a
corporation is liable, therefore, whenever a tortious act is committed by an officer or agent
under express direction or authority from the stockholders or members acting as a body, or,
generally, from the directors as the governing body.”

Gr l-27155
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs. TAN BOON KONG, defendant-appellee., G.R. No. 32652, 1930
Mar 15

FACTS:

On and during the four quarters of the year 1924, in Municipality of Iloilo, Province
of Iloilo, the defendant, as manager of the Visayan General Supply Co., Inc., a
corporation organized under the laws of the Philippine Islands and engaged in the
purchase and sale of sugar, `bayon,’ coprax, and other native products and as such
subject to the payment of internal-revenue taxes upon its sales, declared in 1924 for
purpose of taxation only the sum of P2,352,761.94, when in truth and in fact, and the
accused knew that the total gross sales of said corporation during that year amounted
to P2,543,303.44, thereby failing to declare P190,541.50, and voluntarily not paying
the percentage taxes the sum of P2,960.12, corresponding to 1½ per cent of said
undeclared sales.
ISSUE: WON the defendant, as manager of the corporation, is criminally liable for
violation of the tax law for the benefit of said corporation.
RULING:

A corporation can act only through its officers and agents, and where the business
itself involves a violation of the law, all who participate in it are liable
In case of State vs. Burnam (71 Wash., 199), the court hold that the manager of a
dairy corporation was criminally liable for the violation of a statute by the corporation
though he was not present when the offense was committed.
In the present case the information alleges that the defendant was the manager of a
corporation which was engaged in business as a merchant, and as such manager, he
made a false return, for purposes of taxation, of the total amount of sales made by said
corporation during the year 1924. As the filing of such false return constitutes a
violation of law, the defendant, as the author of the illegal act, must necessarily
answer for its consequences, provided that the allegations are proven.
The ruling of the court below sustaining the demurrer to the complaint is therefore
reversed, and the case will be returned to said court for further proceedings not
inconsistent with our view as hereinbefore stated.

Lessons Applicable: Corporate Criminal Liability (Criminal Procedure)

FACTS:

 Sia was the President and General Manager of the Metal Manufacturing of the Philippines Inc.
(MEMAP)
 He obtained 150 M/T Cold Rolled Sheets consigned to Continental Bank and converted it into
personal used instead of selling it and turning over the proceeds
 It resulted to a damage of 46,819 php, interest of 28,736.47 php and forfeited deposit of
71,023.60 php
ISSUE: W/N Sia can be criminally charged.

HELD: NO. Acquit.

 Sia did not act for and on behalf of MEMAP
 For crimes committed by corp. officers criminally charged, existence of criminal liability for which
the petition is being prosecuted must be clear and certain, here it may not be said to be beyond
reasonable doubt
 Allegation v. evidence = strictly in harmony
 The merchandise was manufactured before sold but although the bank was aware of this, it was
not in the trust agreement

In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-
Concio, requested Viva Production, Inc. to allow ABS-CBN to air at least 14 films produced
by Viva. Pursuant to this request, a meeting was held between Viva’s representative
(Vicente Del Rosario) and ABS-CBN’s Eugenio Lopez (General Manager) and Santos-
Concio was held on April 2, 1992. During the meeting Del Rosario proposed a film package
which will allow ABS-CBN to air 104 Viva films for P60 million. Later, Santos-Concio, in a
letter to Del Rosario, proposed a counterproposal of 53 films (including the 14 films initially
requested) for P35 million. Del Rosario presented the counter offer to Viva’s Board of
Directors but the Board rejected the counter offer. Several negotiations were subsequently
made but on April 29, 1992, Viva made an agreement with Republic Broadcasting
Corporation (referred to as RBS – or GMA 7) which gave exclusive rights to RBS to air 104
Viva films including the 14 films initially requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that
there is already a perfected contract between Viva and ABS-CBN in the April 2, 1992
meeting. Lopez testified that Del Rosario agreed to the counterproposal and he (Lopez)
even put the agreement in a napkin which was signed and given to Del Rosario. ABS-CBN
also filed an injunction against RBS to enjoin the latter from airing the films. The injunction
was granted. RBS now filed a countersuit with a prayer for moral damages as it claimed that
its reputation was debased when they failed to air the shows that they promised to their
viewers. RBS relied on the ruling in People vs Manero and Mambulao Lumber vs PNB
which states that a corporation may recover moral damages if it “has a good reputation that
is debased, resulting in social humiliation”. The trial court ruled in favor of Viva and RBS.
The Court of Appeals affirmed the trial court.
ISSUE:
1. Whether or not a contract was perfected in the April 2, 1992 meeting between the
representatives of the two corporations.
2. Whether or not a corporation, like RBS, is entitled to an award of moral damages
upon grounds of debased reputation.
HELD:
1. No. There is no proof that a contract was perfected in the said meeting. Lopez’ testimony
about the contract being written in a napkin is not corroborated because the napkin was
never produced in court. Further, there is no meeting of the minds because Del Rosario’s
offer was of 104 films for P60 million was not accepted. And that the alleged counter-offer
made by Lopez on the same day was not also accepted because there’s no proof of such.
The counter offer can only be deemed to have been made days after the April 2 meeting
when Santos-Concio sent a letter to Del Rosario containing the counter-offer. Regardless,
there was no showing that Del Rosario accepted. But even if he did accept, such
acceptance will not bloom into a perfected contract because Del Rosario has no authority to
do so.
As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the
Board of Directors. But this power may be delegated to a corporate committee, a corporate
officer or corporate manager. Such a delegation must be clear and specific. In the case at
bar, there was no such delegation to Del Rosario. The fact that he has to present the
counteroffer to the Board of Directors of Viva is proof that the contract must be accepted
first by the Viva’s Board. Hence, even if Del Rosario accepted the counter-offer, it did not
result to a contract because it will not bind Viva sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal contemplation, it has no
feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and
mental anguish, which call be experienced only by one having a nervous system. No moral
damages can be awarded to a juridical person. The statement in the case of People vs
Manero and Mambulao Lumber vs PNB is a mere obiter dictum hence it is not binding as a
jurisprudence.