MARIA CLARA PIROVANO ET AL.

vs.
THE DE LA RAMA STEAMSHIP CO.
G.R. No. L-5377. December 29, 1954

FACTS:

Plaintiffs herein are the minor children of the late Enrico Pirovano represented by their
mother and judicial guardian Estefania R. Pirovano. They seek to enforce certain resolutions
adopted by the Board of Directors and stockholders of the defendant company giving to said minor
children of the proceeds of the insurance policies taken on the life of their deceased father Enrico
Pirovano with the company as beneficiary. Defendant's main defense is: that said resolutions and
the contract executed pursuant thereto are ultra vires, and, if valid, the obligation to pay the
amount given is not yet due and demandable.
Plaintiff-appellant Pirovano is the owner of 3424 shares of stocks in defendant-appellee
Corporation which declared a dividend of P100 per share. Appellant wants to recover from appellee
the sum of P221, 975 after deducting the sum of P120, 424 which she had withdrawn or received
from appellee for advances she received after the death of her father, the late Esteban de la Rama.
Appellant’s theory is that the cash advances to her for her personal use and that of her
children were assumed by Esteban de la Rama. She claims that the advances made to her by
appellees were debited from the account of Hijos de I. de la Rama, another corporation practically
owned by Esteban de la Rama. She further claims that the appellee can only deduct from the
amount of dividend she is entitled to, the amount of cash advances which was not assumed by her
father. The withdrawals by the appellant were made during the period 1940 to 1949 during which
the appellee made a deed of trust with Hijos. The deed of trust was made to circumvent the
prohibition of declaring dividends during the period.

ISSUE:

Whether or not the donation made by the corporation of the proceeds of the insurance is a
valid act.

RULING:

YES.

The Articles of Incorporation of Dela Rama Steamship provided that under (g) the company
may invest and deal with moneys of the company not immediately required, in such a manner as
from time to time may be determined, and under (i)… to lend money or to aid in any other manner
any person association, or corporation of which any obligation or in which any interest is held by
the corporation or in the affairs of prosperity of which the corporation has a lawful interest.
The corporation was thus given broad and almost unlimited powers to carry out the purposes
for which it was organized. The word “deal” is broad enough to include any manner of disposition,
and thus the donation comes within the scope of this broad power. The company was in fact very
much solvent as it was able to declare and issue dividends to its stockholders, and shows that the
excess funds which were not needed by the company which was donated to the children was
justified under the AOI. Under the second broad power, the corporation knew well its scope such
that none lifted a finger to dispute its validity. The company gave the donation not only because it
was indebted to him but also because it was fit and proper to make provisions for the children and
out of a sense of gratitude.