Codal and Case Assignments for 27 September 2016

For all cases, legal doctrines only will be asked during class. But read the cases to have a better understanding
of the doctrine.
Sections 23 -30, 31 & 34 (Special Mention) and 35 of the Corporation Code
Understand and Memorize Elements of Sections 32 and 33

Centralized Management/Apparent Authority

Philippine Airlines v FASAP 479 SCRA 605

Acts of corporate officers within the scope of their authority are binding on the corporation. But
when these officers exceed their authority, their actions cannot bind the corporation unless it
has ratified such acts or estopped from disclaiming them.

Only individuals vested with authority by a valid board resolution may sign the certificate of
non-forum shopping on behalf of a corporation. We also required proof of such authority to be
presented. The petition is subject to dismissal if a certification was submitted unaccompanied
by proof of the signatorys authority.
Peoples Air Cargo v CA 297 SCRA 170

San Juan Structural v CA 296 SCRA 631

A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members
and may not be sold by the stockholders or members without express authorization from the
corporation's Board of Directors.

In this case, the sale of a piece of land belonging to Motorich Corporation by the corporation
treasurer (Gruenberg) was held to be invalid in the absence of evidence that said corporate
treasurer was authorized to enter into the contract of sale, or that the said contract was
ratified by Motorich. Even though Gruenberg and her husband owned 99.866% of Motorich,
her act could not bind the corporation since she was not the sole controlling stockholder.

Woodchild Holdings v Roxas Electric 436 SCRA 235

Yao Ka Sin Trading v CA 209 SCRA 763

By-Laws do not in any way confer upon the President the authority to enter into contracts for
the corporation independently, of the Board of Directors. The power is exclusively lodged in
the latter.

Since a corporation can act only through its officers and agents, all acts within the powers of
the corporation may be performed by agents of its selection and, except so far as limitations
may be imposed by special charter, by-law or statutory provision, the principles of agency
govern the officer and the corporation.

Business Judgment /Directors&Officers Liability

Montelibano v Bacolod-Murcia 5 SCRA 36

Directors of the company had authority to modify the proposed terms of the Amended Milling
Contract.

Test is whether the act in question is in direct and immediate furtherance of the corporation's
business, fairly incident to the express powers and reasonably necessary to their exercise.

Tramat v CA 238 SCRA 14

Ong is not liable. He acted as an officer of TRAMAT, and not in his personal capacity.

Personal liability: (1) assents, unlawful, BF, gross negligence, conflict of interest, damages; (2)
consents to issuance of watered stocks; (3) agrees to personal and solidary liability; (4) made
by law to personally answer for corporate action

Sanchez v Republic 603 SCRA 229

Premium Marble v CA 264 SCRA 11

The info sheet filed with the SEC showed that Belen, Nograles, Reyes were members of the
board. Same list as the 1981 set of board members. There was no proof that the 1982
election was reported to the SEC. [Required to submit within the period of 30 days to SEC,
according to Sec. 26]

In the absence of an authority from the board of directors, no person, not even the officers of
the corporation, can validly bind the corporation.

Prime White Cement v IAC 220 SCRA 605

Te was guilty of disloyalty to the corporation. He was attempting to enrich himself at the
expense of the corporation. The contract was not valid.

A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to
his corporation.

A director's contract with his corporation is not in all instances void or voidable. If the contract
is fair and reasonable, it may be ratified by the stockholders provided a full disclosure of his
adverse interest is made.

Rights of Stockholders and Members

Re-Read Sections 6, 7, 8, 50, 52, 55, 56, 58, 59, 64, 71, 74, 75, 81 - 86
Mobilia Products v Umezawa 452 SCRA 736

Lee v Court of Appeals 205 SCRA 752

It is clear that in order to be eligible as a director, what is material is the legal title to, not the
beneficial ownership of, the stock as appearing on the books of the corporation.

Ponce v Encarnacion 94 Phil 81

Upon good cause, such as a Chairman of the Board failing to call a meeting, either by his
absence or neglect, the Court may grant a stockholder the authority to call such a meeting.
Lanuza v CA 454 SCRA 54

The stock and transfer of PMMSI cannot be used as the sole basis for determining the
quorum as it does not reflect the totality of shares which have been subscribed, more so
when the articles of incorporation show a significantly larger amount of shares issued and
outstanding as compared to that listed in the stock and transfer book.

Section 74
Pardo v Hercules Lumber 47 Phil 964

A by-law unduly restricting the right of inspection is undoubtedly invalid.

Right of inspection can be exercised at reasonable hours --> Right of inspection may be
exercised at reasonable hours on business days throughout the year, and not merely during
an arbitrary period of a few days chosen by the directors.

WG Philpotts v Phil Manufacturing Co. 40 Phil 471

The right of inspection given to a stockholder can be exercised by himself or by any proper
representative or attorney in fact, and either with or without the attendance of the stockholder.

Ang-Abaya v Ang 573 SCRA 129

Appraisal Rights
Section 81 Corporation Code
Turner v Lorenzo Shipping GR No. 157479 24 Nov 2010

A stockholder who dissents from certain corporate actions such as amendment of the articles
of incorporation which prejudice his interest has the right to demand payment of the fair value

of his shares. This right is known as the appraisal right.

The petitioners may exercise their appraisal right since there was a fundamental change in
the charter or articles of incorporation substantially prejudicing the rights of the stockholders. It
serves the purpose of enabling the dissenting stockholder to have his interest purchased and
to retire from the corporation.

Quiz Questions:
1. Under Section 32 of the Corporation Code, what are the conditions that need to be present in order that
contracts entered into by a corporation with its directors or officers, will not be voidable?

2. What is the liability of a self-dealing director or officer?

3. Enumerate the basic rights of stockholders. (Refer to Syllabus)
4. Differentiate Proxies from Voting Trusts.