BERNAS v CINCO

DOCTRINE: Only the President and Board of Directors are authorized by the by-
laws to call a special meeting. In cases where the person authorized to call a
meeting refuses, fails or neglects to call a meeting, then the stockholders
representing at least 100 shares, upon written request, may file a petition to call a
special stockholder’s meeting.

FACTS
1. Makati Sports Club (MSC) is a domestic corporation under Philippine laws.
2. Bernas, Cheng, Africa and others (Bernas Group) were among the Members of
the Board of Directors and Officers of the corporation whose terms were to
expire either on 1990 or 1999.
3. Alarmed with the rumored anomalies in handling the corporate funds, the
MSC Oversight Committee (MSCOC), composed of the past presidents of the
club, demanded from the Bernas Group (incumbent members of the
corporation) to resign from their respective positions to pave the way
for the election of new set of officers.
4. On December 1997, a Special Stockholders Meeting called upon by MSCOC
was held wherein Bernas Group was ousted from their positions and the
Cinco Group (Jovencio Cinco, Librea, Pardo) were declared the newly elected
Members of the Board of Directors and Officers of the Corporation.
5. Citing Section 28 of CC, Bernas Group argued that MSCOC, a mere
oversight body has no power to call corporate meetings, hence the
December 1997 meeting and their removal as members of BOD shall be
null and void.
6. Both the Securities Investigation and Clearing Department (SICD) and CA
agreed with Bernas Group.

ISSUE
Whether the Stockholder’s Meeting which was called upon by the MSCOC is valid.

RULING
No. It is not valid. Only the President and Board of Directors are authorized by the
by-laws to call a special meeting. In cases where the person authorized to call a
meeting refuses, fails or neglects to call a meeting, then the stockholders
representing at least 100 shares, upon written request, may file a petition to call a
special stockholder’s meeting.
In the instant case, there is no dispute that the Meeting was called neither by the
President nor by the Board of Directors but by the MSCOC. Nowhere in the by-
laws does it state that MSCOC is authorized to exercise corporate powers,
such as the power a special meeting.
A corporation’s board of directors is understood to be that body which 1) exercises
all powers provided for under CC; 2) conducts all business of the
corporation; 3) controls and holds all the property of the corporation. Its
members have been characterized as trustees or directors clothed with
fiduciary character.

FEDERATED LPG DEALERS v DEL ROSARIO

FACTS
- Petitioner sought assistance from the CIDG-AFCCD of the PNP in the
surveillance, investigation and apprehension of certain persons and
establishments within Metro Manila reportedly committing acts violative of BP
33 as amended by PD 1865 which involves refilling of LPG cylinders
(branded as Shellane, Petron Gasul, Caltex, Totalgaz, etc) without any written
authorization from the companies which own the said brands; underfilling
LPG products or possession of underfilled LPG cylinders for the purpose of
sale, distribution, transportation; and refilling LPG cylinders without giving
any receipt therefor.
- Having reasonable grounds to believe that ACCS Ideal Gas Corporation was in
violation of BP 33, applications for a search warrant were filed against the
officers of ACCS: Antonio Del Rosario and respondents. A search and
seizure operation was conducted. Afterwards, Complaints-Affidavits against
Anonio and respondents were filed with the DOJ.
- In his Counter-Affidavit, Antonio admitted that he was the General
Manager of ACCS but denied that the company was engaged in illegal
trading and underfilling. He claimed that was merely a dealer of LPG products
and that the refilling plant was only being used by ACCS as storage of LPG
intended for distribution.
- Respondents corroborated that they were merely
incorporators/stockholders of ACCS who have no active participation
in the operation, management and control of the business;
- P/Supt. Esguerra stressed that pursuant to Section 4 of BP 33, the President,
General Manager, Managing Partner, or Such other officer in charged with
the management of the business affairs of the corporation, or the employee
reasonable for the violation shall be criminally liable. Thus, Antonio being
the General Manager, is criminally liable.
- Antonio and respondents stressed that they cannot be held liable under BP 33
since the AOI of CCS did not state that they were the President,
General Manager, Managing Partner, or such other officer charged
with the management of business affairs. What the Aoi plainly indicated
was that they were the incorporating stockholders of the corporation and
nothing more.
-

ISSUE:
Whether respondents, as members of the Board of Directors of ACCS, can be
criminally prosecuted for the latter’s alleged violation of BP 33.

RULING
- NO. Respondents were not officers charged with the management of
business affairs who could be held liable pursuant to Section 4, of BP 33: A
member of the Board of Directors of a corporation, cannot, by mere
reason of such membership, be held liable for the corporation’s
probable violation of BP 33.
- If one is not the President, General Manager, or Managing Partner, it is
imperative that it first be shown that he/she falls under the catch-all “such
other officers charged with the management of business affairs” before
he/she can be prosecuted.
 -Here, there is no dispute that neither of the respondents was the
President, General Manager or Managing Partner of ACCS. There is no
allegation that they were in-charge of the management of the
corporation’s affairs (the Board only concerns itself in the business affairs
by setting administrative operational policies).
- Therefore, it is only Antonio, who was the General Manager – the daily
business operations of the corporation were vested in his hands and
had ceased to be the responsibility of respondents as members of
Board of Directors – can be prosecuted for ACCS’ perceived violations of
the said law.
WESLEYAN UNIVERSITY OF PH v MAGLAYA

CALUBAD v RICARCEN DEVELOPMENT CORP

DOCTRINE: When a corporation intentionally or negligently clothes its agent with

apparent authority to act in its behalf, it is estopped from denying it’s agent’s
apparent authority as to innocent third parties who dealt with this in good faith.

FACTS
- Ricarcen Development Corp was the registered owner of a parcel of land
which was subdivided into two lots. Marilyn, the President of Ricarcen, acting
on the latter’s behalf, took out a 4-million-peso loan from Calubad. This loan
was secured by a real estate mortgage over Ricarcen’s QC property.
- The terms of the loan provided that Ricarcen would pay the 4 million loan
within a period of 6 months with an interest at the rate of 5% for the first
month and 3% for the succeeding months.
- Ricarcen, through Marilyn, and Calubad amended and increased the loan to 5
million in the Amendment of Deed of Mortgage (additional loan of 1 million)
with the same property and under the same terms and conditions as those of
the original Deed of Real Estate Mortgage.
- Ricarcen, again acting through Marilyn, took out an additional loan of 2
million from Calubad, as evidenced by the Second Amendment of Deed of
Mortgage.
- To prove her authority to execute the three mortgage contracts in Ricarcen’s
behalf, Marilyn presented Calubad with a Board Resolution. This Resolution
empowered here to borrow money and use the QC property as collateral for
the loans.
- After Ricarcen failed to pay its loan, Calubad initiated extrajudicial
foreclosure proceedings on the real estate mortgage. Calubad was the
highest bidder during the auction sale.
- Ricarcen claimed that it only learned of Marilyn’s transactions with Calubad.
Ricarcen claimed that it never authorized Marilyn to obtain loans from
Calubad.
- Calubad argued that even if Ricarcen did not authorize Marilyn, it was already
estopped from denying her authority since the loan proceeds had been
released and Ricarcen had benefited from them.

ISSUE
Whether Ricarcen is estopped from denying Marilyn’s authority to contract loans
and mortgages with Calubad under the doctrine of apparent authority.
RULING
YES. As a corporation, Ricarcen exercises its powers and conducts its business
through its board of directors, as provided for by Section 23 of the CC. However, the
board of directors may validly delegate its functions and powers to its officers and
agents.
Law and jurisprudence recognize actual authority and apparent authority as
the two types of authorities conferred upon a corporate officer or agent in dealing
with third persons.
 Actual authority can either be express or implied.
o Express actual authority refers to the power delegated to the agent by
the corporation
o Implied authority can be measure by his or her prior acts which have
been ratified by the corporation or whose benefits have been accepted
by the corporation
 APPARENT AUTHORITY is based on the principle of estoppel.
o It is determined by the acts of the principal and not by the acts of the
agent.
o The doctrine of apparent authority provides that even if no actual
authority has been conferred on an agent, his or her acts, as
long as they are within his or her apparent scope of authority,
bind the principal. However, the principal’s liability is limited
to third persons who are reasonably led to believe that the
agent was authorized to act for the principal due to principal’s
conduct.
- As the former president of Ricarcen, it was within Marilyn’s scope of authority
to act for and enter into contracts in Ricarcen’s behalf. She also had
possession of the owner’s duplicate copy of the land title covering the
property mortgaged to Calubad, further proving her authority from Ricarcen.

DR. LORECHE AMIT V CAGAYAN DE ORO MEDICAL CENTER

FACTS
- Dr. Amit was an Associate Pathologist in CDMC before she was officially
appointed as Chief Pathologist. However, her appointment was recalled after
a dispute between her and another doctor in the hospital went out of hand.
She filed a complaint for illegal dismissal, contending that she was dismissed
by CDMC without just cause. CDMC, averred that Dr. Amit was not hired by
the hospital as he merely assisted the then Chief Pathologist and that she
worked at the same time as pathologist in two other hospitals as she was not
prohibited to do so.
- Labor Arbiter dismissed the complaint for lack of jurisdiction. It found that
petitioner is a corporate officer of the hospital because of her appointment by
the Board of Directors thru a resolution.

ISSUE
Whether Dr. Amit was an employee of CDMC.

RULING
 - No, as the relationship does not pass the four-fold test and the
economic reality test.
- Dr. Amit is not a corporate officer as her position as Pathologist is not among
those included in the by-laws of CDMC nor in the CC. To be considered a
corporate officer, the designation must be either provided by the
Corporation Code or the by-laws of the corporation.
- However, this is not an automatic declaration that petitioner is an employee
of CDMC. The FOUR-FOLD TEST to with: 1) the selection and
engagement of the employees; 2) payment of wages; 3) the power of
dismissal; and 4) the power to control the employee’s conduct, must
be applied to determine the existence of an employer-employee relationship.
- It is apparent that CDMC, through the Board of Directors, exercised the power
to select and supervise petitioner as the Pathologist. It must be emphasized
that petitioner was appointed as Pathologist with a term of five years. She
was likewise paid compensation which is at 4% of the gross receipts of the
Clinical Section of the laboratory. However, CDMC does not exercise the
power of control over petitioner. The control test is premised on whether
the person for whom the services are performed reserves the right to control
both the end achieved and the manner and means used to achieve that end.
The fact that Dr. Amit also works at two other hospitals evinces that
petitioner controls her working hours.
- The Court has also adopted the economic reality test in determining the
existence of employer-employee relationship. The benchmark of
economic reality in analyzing possible employment relationships is the
economic dependence of the worker on his employer. The fact that
petitioner continued to work for other hospitals strengthens the proposition
that petitioner was not wholly dependent on CDMC.
- The rule is that where a person who works for another performs his
job more or less than his pleasure, not subject to definite hours or
conditions of work, and is compensated according to the result of his
efforts and not the amount thereof, no employer-employee
relationship exists.

ENGINEERING GEOSCIENCE v PHIL SAVINGS BANK

GEORG ET AL v HOLY TRINITY COLLEGE

FACTS
- The Holy Trinity College Chorale and Dance Company (the Group) was
organized by Sister Medalle, the President of respondent Holy Trinity College.
The Group were two separate groups but for the purpose of performing
locally or abroad, they were usually introduced as one entity.
- The Group was slated to perform abroad. Enriquez, who allegedly represented
Sr. Medalle, contacted petitioner Georg to seek assistance for payment of the
Group’s international airplane tickets.
- In 2001, petitioner (assignee), the Group (assignor), and S.C Roque
Foundation (grantor) executed a Memorandum of Agreement with Deed of
Assignment. Under the Agreement, petitioner, thru her travel agency, will
advance the payment of international airplane tickets amounting to 4
 million in favor of the group on the assurance of a matching allocation
from the Foundation.
- Petitioner claimed that the Group and S.C. Roque Foundation have not paid
and refused to pay their obligation. Petitioner prayed that they be
ordered to solidarily pay the sum of money.
- Respondent countered that the MOA does not state that respondent is a
party. Neither was respondent obligated to pay the sum of money nor did it
consent to complying with the terms of the MOA.

ISSUE
Whether respondent is liable under the MOA

RULING
YES. Sister Medalle, as President of Holy Trinity, is clothed with sufficient authority
to enter into a loan agreement.
- The doctrine of apparent authority provides that a corporation will be
estopped from denying the agent’s authority if it knowingly permits one of its
officers or any other agent within the scope of an apparent authority, and it
holds him out to the public as possessing the power to do acts.
- In this case, Sr. Medalle formed and organized the Group. She had been
giving financial support to the Group, in her capacity as President of Holy
Trinity College. The Board of Trustees never questioned the existence and
activities of the Group. Thus, any agreement or contract entered into by
Sr. Medalle as President of Holy Trinity College relating to the Group
bears the consent and approval of respondent.
- The Court found that Sr. Medalle possessed full mental faculty in affixing her
thumbmark in the MOA and that respondent is hereby bound by her actions.

TERP CONSTRUCTION CORPORATION v BANCO FILIPINO SAVINGS

MCDC v ERABCO

FACTS
MCDC is a domestic corporation engaged in developing and selling residential
subdivisions, most of which consist of low-cost housing projects. Olivares is MCDC’s
President. MCDC entered into a Marketing Agreement with ERABCO, a cooperative
engaged in the realty business as a broker. ERABCO undertook to promote and sell
the farmer’s properties in Mahogany Villas in Laguna. In turn, MCDC agreed to pay
ERABCO a sales commissions of 9% for the latter’s first 50 million sales within
a period of 2-5 months. However, MCDC suddenly refused to pay ERABCO’s
commissions. The ERABCO sent demand letters to MCDC, which were unfortunately
unheeded. This prompted ERABCO to file a complaint for sum of money with
damages. ERABCO impleaded Olivares as a party defendant.

ISSUE
Whether Olivares is personally liable for MCDC’s obligation.

RULING
NO. Olivares is not personally liable for MCDC’s obligation.
 - A corporation is invested by law with a personality separate and distinct from
that of the persons comprising it. The corporation’s obligations are its sole
liabilities. The corporate directors, officers or employees are not personally
liable for the corporation’s obligations.
- Section 30 of the Corporation Code enumerates instances that render
corporate officers solidarily liable with the corporation: 1) the complainant
must allege in the complaint that the director or officer assented to patently
unlawful acts of the corporation or that the officer was guilty of gross
negligence or bad faith; and 2) the complainant must clearly and
convincingly prove such unlawful acts, negligence or bad faith.
- Olivares; bad faith and intentional wrongdoing were not proven. No proof
was adduced to establish such accusations. Hence, absent clear proof of bad
faith, Olivares may not be held personally liable for MCDC’s liability.

ATIENZA v GOLDEN RAM SUPPLIES

FACTS
- Atienza was engaged in the business of operating MV Ace I, a passenger
vessel. Golden Ram is a dealer and distributor of engines and heave
equipment. Its president is Torres. Torres offered 2 vessel engines for sale to
be installed in MV Ace I. Atienza bought it and he was issued an invoice as
proof of his purchase. The invoice had a warranty of 12 months. After one
month, one of the engines malfunctioned. Atienza immediately reported it to
Golden Ram. Engineer Torres confirmed that the damage was due to a factory
defect and he reported it to their foreign supplier. He also promised Atienza to
replace the engine based on the warranty.
- The defective engine was not replaced and Atienza suffered losses because
the vessel was unable to operate. Atienza wrote a demand letter to Golden
Ram offering 2 alternatives – either the engine is replaced and he is
reimbursed for his losses or refund the cost of 2 engines with interest plus
payment of losses. Golden Ram did not respond. Atienza then filed a
complaint for damages against Golden Ram.
- Golden Ram answered that the damage was not due to a factory defect by
was because of Atienza’s improper maintenance. It also argued that the
foreign supplier was liable only for the replacement of defective parts and
that the defect was not covered by the warranty claim

ISSUE
Whether Torres is personally and solidarily liable with Golden Ram for all damages.

RULING
YES. Both Goden Ram and Bartolome were in bad faith.
- Bad faith does not simply connote a bad judgment or negligence. It
imports a breach of a known duty though some motive or interest or
ill will that partakes the nature of fraud.
- Both Golden Ram and Bartolome were in bad faith because of the following:
o The starboard engine broke down in 6 months from the time it was
commissioned
o The starboard engine performed poorly and continuously emitted black
smoke
 o Despite being brand new, various parts of engines had to be replaced.
o During sale negotiations, Golden Ram and Torres repeatedly told
Atienza that they were responsible for the engines. Atienza was not
made aware of the foreign supplier requirement to file a written claim
to avail the warranty.
- There is solidary liability when the obligation expressly so state,
when the law provides or when the nature of the obligation so
requires.
- Section 30 of the Corporation Code enumerates instances that render
corporate officers solidarily liable with the corporation: 1) the complainant
must allege in the complaint that the director or officer assented to patently
unlawful acts of the corporation or that the officer was guilty of gross
negligence or bad faith; and 2) the complainant must clearly and
convincingly prove such unlawful acts, negligence or bad faith.
- Personal liability of a corporate director, trustee or officer along with the
corporation may so validly attach only when:
o He assents to a patently unlawful act of the corporation, or b) for bad
faith or gross negligence in directing its affairs, or c) for conflict of
interest, resulting in damages to the corporation, its stockholders or
other persons;
o He consents to the issuance of watered stocks or who, having
knowledge thereof, does not file with the corporate secretary his
objection thereto;
o He agrees to hold himself personally and solidarily liable with the
corporation
o He is made, by a specific provision of law, to personally answer for his
corporate action.
- GRESEC AND TORREST ARE DECLARED SOLIDARILY LIABLE.

AGRO FOOD PROCESSING v VITARICH CORPORATION

FACTS
- Agro and Vitarich executed 2 agreements: 1) a Memorandum of Agreement
under which Vitarich offered to buy Agro’s chicken dressing plant and 2) a Toll
Agreement under which Agro agreed to dress the chickens supplied by
Vitarich for a toll fee.
- Pursuant to the MOA, Vitarich paid 20 million as deposidt to Agro and was
given a period of 45 days within which to evaluate the dressing plant
facilities. At the end of the period, Vitarich formally made its offer to
purchase, but Agro did not accept the offer. Thus, Agro needed to return the
20 million deposit.
- More than 2 years later, Vitarich filed a complaint for sum of money with
damages against Agro. Agro argued that the amount was inaccurate as it
was based on the alleged verbal amendments to the toll fees, which
were not binding on Agro as they were entered into by Vitarich and Agro’s
Financial Manager which had no authority to amend the original Toll
Agreement.
- The trial court held that the amendments did not bind Agro considering the
lack of any signature to the documentary evidence presented by Vitarich. CA
 held that the verbal amendments to the toll fees were valid and obligatory on
Agro. CA applied the doctrine of apparent authority in arriving at the
conclusion that del Castillo was clothed with authority by Agro’s board of
directors in concurring and implementing the amendments.

ISSUE
Whether CA erred when it applied the doctrine of apparent authority

RULING
NO. Del Castillo had apparent authority to implement the verbal amendments to
the parties’ agreement. It is evident that:
o In over a span of 2 years, with the billings and instances of amendments,
Agro never contested the amended toll fees;
o Even after several demand letters from Vitarich, Agro never made an issue of
the amended toll fees
o Agro accepted the benefits arising from the amendments through the
extension of the period for its payment of the 20 million deposit.
Here, it is evident that Agro, having knowledge of the amendments, acquiesced to
the same. Agro never contested no protested the amendments; it even
accepted the benefits arising therefrom.
 The doctrine of apparent authority is determined by the acts of the principal
and not by the acts of the agent. As applied to corporations, it provides that
"a corporation is estopped from denying the officer's authority if it knowingly
permits such officer to act within the scope of an apparent authority, and it
holds him out to the public as possessing the power to do those acts."
 It bears stressing that the existence of apparent authority may be
ascertained not only through the "general manner in which the corporation
holds out an officer or agent as having the apparent authority to act in
general", but also through the corporation's
"acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, whether within or beyond the scope of his ordinary
powers".
 "When a corporation intentionally or negligently clothes its officer with
apparent authority to act in its behalf, it is estopped from denying its officer's
apparent authority as to innocent third parties who dealt with this officer in
good faith."