Wednesday, May 17, 2006

Corporation Law - New Cases

Hydro Resources Contractors vs National Irrigation Administration
(GR No 160251, Nov 10, 2005, Santiago)

A contract was entered into between Hydro and NIA for the project of the latter. The contract price is to be payable partly in Philippine peso and US dollars. Once the project was being executed, there was depreciation in value of Peso resulting to price differential. In order to resolve the issue, the administrator of NIA, Mr Tek, and Hydro made a joint computation of the amount corresponding to the foreign currency differential. The computation showed that NIA owed Hydro for the differential. When a demand was made by Hydro against NIA, NIA refused to pay contending that Mr Tek has no authority to participate into a joint computation of the foreign currency differential and that Mr Tek has no authority to bind NIA.

Whether or not Mr Tek has the authority to bind NIA in the joint computation of the foreign currency differential.

The SC found out that in the course of the project, Hydro has been dealing with NIA represented by Mr. Tek. And applying the doctrine of apparent authority, if a corporation knowingly permits one of its officers to act within the scope of an apparent authority, it holds him out to the public possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be stopped from denying the agent’s authority.

Woodchild Holdings Inc. vs Roxas Electric and Construction
(GR No 140667, Aug 12, 2004, Callejo)

The doctrine of apparent authority was not applicable in this case because the president of the company was given a specific authority by virtue of a board resolution to sell a particular land. Any actions of the president outside such vested authority shall not bind the corporation with third party.

Spouses David and Coordinated Group, Inc. vs
CIAC and Spouses Quiambao

(GR No 159795, July 30, 2004, Puno)

The spouses Quiambao engaged the services of the petitioner for the construction of a five-storey building. In the performance of the project, the petitioner allegedly deviated from the original plan without the approval of Spouses Quiambao. The latter therefore decided to rescind the contract and hired the services of another contractor. When a definitive finding that indeed there was deviation on the structural plan, Quiambao sued for damages impleading the officers of the construction company, among them Engr. David, who is also an officer of the Company. The officer contended that he cannot be made personally liable for what appears to be a corporate act by virtue of the doctrine of corporate entity.

Whether or not Engr. David is personally liable to the Spouses Quiambao.

The SC held that an exception to the doctrine of corporate entity is when there is bad faith in the performance of the duty of the officer. In the instant case, bad faith was proven when Engr. David categorically admitted that the company deviated from the original structural plan in order to lower the cost of construction. By his act, Engr. David violated Sec 31 of the Corporation Code which provides that directors or trustees who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. Therefore, the SC deemed that equity demand that he should be liable to Spouses Quiambao.

(GR No 147217, Oct 7, 2004, Sandoval-Gutierrez)

When you file petitions for review, the Rules of Court provides that the cert of non-forum shopping be appended to the petition. If the petitioner is a juridical person, it must act through its agent but such agent must be armed with authority to represent such corporation thru a board resolution or secretary’s certificate.
In this case, the petitioner failed to submit to the court certified true copy of board resolution authorizing its officer to represent the company in this case. The SC said that this deficiency is fatal to the case and would constitute a sufficient ground for the dismissal of the case. The SC can neither take judicial notice of board resolutions passed by corporation nor said court may take judicial notice of the officers authority to represent the corporation in the particular suit.

Monfort Hermanos Agricultural Development Corp. vs Monfort III
(GR No 152542, July 8, 2004, Santiago)

Monfort Corp represented by its president, Antonia Salvatierra filed a complaint against the respondents for the delivery of motor vehicles, tractors and fighting cocks. The respondents filed a motion to dismiss on the ground that Antonia does not have the authority to represent the corporation in this particular case. Antonia contended that they have submitted board resolutions signed by its directors. However, this board resolution is being contested because four of the directors who signed the resolution have not been duly elected by the company.

Whether or not Antonia has the authority to represent the corporation in this case.

The SC said Antonia does not have the authority to represent the corporation in this particular case. The board resolution in question was held invalid because the general information sheet of the corporation readily indicated that four out of the six signatories in the board resolution do not appear in the general information sheet. This only showed there is now a doubt whether the four directors appearing in the resolution were duly elected as directors of the corporation.

CIR vs Estate of Toda Jr
(GR No 147188, Sept 14, 2004, Davide)

Cibeles Incorporated authorized its former president, Mr. Toda Jr. to sell a building and two parcels of land which the insurance company owns for 90 M pesos. The properties were sold and income was realized.

In the meanwhile, Mr Toda sold all his shareholdings in the insurance company to a certain Mr. Choa. A deed of sale was concluded between them for Mr. Toda’s shareholdings in the insurance company. Thereafter, BIR assessed the insurance company deficiency income tax arising from the sale of the subject real properties. Three years thereafter, Mr. Toda died. The BIR then impleaded the estate of Mr. Toda as party defendant. The respondent contended that the liability is a corporate liability, therefore the estate could not be held liable following the doctrine of corporate entity.

Since the sale took place during the incumbency of Mr. Toda and he was the one authorized by the corporation to do so, would it be possible for him or his estate to be liable for the obligation?

The SC held that following the doctrine of corporate entity, officers are not supposed to be made personally liable for what appears to be corporate liabilities. However, the rule is not without exceptions. Exception to this rule is when the officer concerned has expressly agreed to be personally bound for corporate obligations. Perusal of the deed of sale would readily show that for the tax liability of the corporation arising from the sale of real properties in question, Mr. Toda agreed to be personally liable along with the corporation.

Clarion Printing House Inc vs NLRC
(GR No 148372, June 27, 2005, Carpio-Morales)

The petitioner company filed with the SEC a petition for suspension of payment as well as an appointment of a rehabilitation receiver. While the petitioner was placed under receivership, a certain Mr. Miclat, a former employee of a corporation filed a case for illegal dismissal.

Should his claim in this case be suspended?

The SC held that even labor cases are suspended. Upon the appointment of a receiver, all claims and all pending cases against the corporation are deemed suspended the purpose being in order to give the receiver sufficient time to proceed with rehabilitation work.

Tyson’s Super Concrete, Inc. vs CA
(GR No 140081, June 23, 2005, Austria-Martinez)

Romana Dela Cruz owns a parcel of land and leased it to Tyson’s. During the period of lease, Tyson filed rehabilitation and Tyson’s was placed under receivership. The SEC appointed a management committee to take charge of the rehabilitation of the corporation.

In the meanwhile, because of Tyson’s failure to pay the rent, Romana filed an ejectment suit against the corporation. The ejectment case prospered and while the case was pending appeal, Romana filed for the execution of judgment.

Should the ejectment suit be suspended because of the rehabilitation of Tyson’s?

The ejectment was sustained by the SC.

The fact that a management committee had already been created by the SEC does not divest the first level courts of their exclusive jurisdiction.

The avowed purpose of suspending all actions against distressed corporation when management committee or rehabilitation is appointed, which is to enable such management committee or rehabilitation receiver to effectively exercise its powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the distressed company, can no longer be effectively met if the proceedings have already been pending for almost ten years and have already reached the SC.

Nakpil vs IBC
(GR No 144764, Mar 21, 2002)

Mr, Nakpil has been engaged as Asst. General Manager and Comptroller of IBC. The president of the corporation was replaced by a certain Mr. Templo and upon his assumption, the petitioner was dismissed. The petitioner then filed a complaint for illegal dismissal before the labor arbiter.
Does the labor arbiter have jurisdiction over this case?
Could Mr. Nakpil be considered a corporate officer?
Do additional claims such as back wages or damages make it a labor case?

No. This case involves an issue or controversy involving a corporate officer, therefore the SEC (now RTC) has jurisdiction over the case.
Yes. Although his appointment was made by the general manager of the company, his appointment was subject to the approval of the Board of Directors.
No. These claims are not essential. Controversy remains to be an intra-corporate controversy.

Who are officers of the corporation?
Those statutory corporate officers provided in the Corporation Code such as the president, treasurer and secretary.
Those who have been named in the by-laws of the corporation.
Those who may be appointed by the Board of Directors for as long as the Board of Directors has the authority to do so in the by-laws of the corporation.

PNB vs Andrada
(Apr 17, 2002)

The mere acquisition of all or substantially all of the assets of another company would not make the buying company liable for the existing obligations of the selling company. Even in this particular case, we maintain the separate identities of the selling company and the buying company so that the selling company would remain liable for its obligations. It could not legally pass-on this liabilities to the buying corporation provided that the selling corporation acted in good faith and there is an adequate consideration for the disposition of the assets.

The court also enumerated exceptions to this rule:
When the buying company expressly or impliedly agreed to assume the debts of the selling company;
When the transaction amounted to merger or consolidation;
When the purchasing company is only a continuation of the selling company;
When the transaction is fraudulently entered into in order to escape liability for the debts of the selling company; and
When the sale is in bulk and the selling company was not able to comply with the formalities mentioned under the bulk sales law.

1 comment:

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