McArthur (TP) v. TIMES PRINTING CO. (C)1) (Nimocks) was engaged as Promoter in procuring the organization of

the defendant TIMES PRINTING CO. (a newspaper publisher). 2) 12 Sept- Promoter (Nimocks) made a contract w/ TP-plaintiff

(McArthur) for his services as “advertising solicitor” in behalf of the contemplated newspaper publishing company for a period of 1 year starting Oct 1.

3) Oct 16- date C was organized.

4) April following year- TP was discharged

5) TP sues C for damages for breach of contract.

HELD: C LB! The acts and acquiescence of the C officers, after the organization, justifies finding that the contract adopted as its own.

1) All of the stockholders, directors, and officers of the C knew of this contract at the time of C’s organization, or were informed of it soon afterwards.and

2) None of them objected or repudiated it, but, on the contrary retained TP in the employment of the C w/o any other or new contract as to his services.

3) EVEN THOUGH C Board of Directors never took any formal action vav the contract made in its behalf by Promoter.

RATIO: Of course the agreement must one w/c the C itself could make and one w/c the usual agents of the C have express or implied authority to make.

BUILDERS DUNTILE CO. (C) v. DUNN MFG. CO. (TP)1) P (Samuels) received some ads from DUNN MFG. CO. (TP) showing that its ‘duntiles’ were fireproof and cheaper.

2) After some correspondence, DUNN MFG. CO. (TP) sent its agent to Paducah to talk to (Samuels).

3) (Samuels) told the agent that he was organizing a C to manufacture these ‘duntiles’.

4) Samuels and agent went to see 1 or 2 of the other promoters.

5) Samuels preferred to organize the C and then make the contract for the machinery.

6) Agent wished that Samuel to order the machinery then go ahead w/ the C afterwards.

7) 23 April- After talking w/ the other Ps in the city P (Samuels) signed the contract ordering “machinery for making a hollow building tile” from Dunn Mfg. Co. (TP).

8) The contract contained a provision: “Dunn Mfg. Co. (TP) agreed to furnish, free of charge, an experienced service man for a period of 5 days to insure proper installation and instruct your force.”

9) 6 June- machinery reached Paducah

June 16- Dunn Mfg. Co. (TP) sends person 1 to set up the machinery

10) June 20- AOI were filed by P and associates

11) Capital stock fixed at $10,000.

12) P (Samuels) has paid out or assumed to pay $5,100 for the machinery and other expenses.

13) C stocks for this amount was ordered issued by P (Samuels).

14) Machinery was making value-less tiles.

15) Dunn Mfg. Co. (TP) sends P2 to fix it. P1 actually set-up machinery wrongly and gave wrong formula.

16) C (Builders Duntile Co.) sues TP (Dunn Mfg. Co.) to recover on written contract signed by P (Samuels). HELD: C can sue on the contract. Though there was no formal assignment of the contract to it, C acts were an adoption of the contract no less than a formal resolution to this effect.

It was the only person having any real interest in the due performance of the contract, and is the proper party to recover for its breach.

To hold otherwise would be to leave a wrong w/o a remedy.

1) It was clearly understood between P (Samuels) and the other promoters and agent of the TP (Dunn Mfg. Co. ) that the Contract was made on behalf of the C w/c they proposed to perform.

2) The Incorporators at once took charge of the plant w/c had been bought for it and gave Samuels stock to the amount of his expenditures.

3) P was one of the promoters and had no intention the machinery for himself.

QUAKER HILL, INC. (TP) v. Parr (P) Summary: QUAKER HILL, INC. ( a NY C acting thru a local agent) made a sale to a corp. to be formed, and later accepted still another corp. after the formation of the latter.

1) May 58- QUAKER HILL, INC. (TP) (through its salesman Barker) sold a large quantity of “nursery stock” to DENVER MEMORIAL NURSERY, INC.

2) QUAKER HILL, INC. (TP) salesman Barker insisted to Parr that the deal be consummated at once because the growing season was rapidly passing.

3) 14 May 58- an order was signed by Parr, on behalf of DENVER MEMORIAL NURSERY, INC., w/c to the knowledge of QUAKER HILL, INC. (TP) was not yet formed, that fact being noted in the contract.

4) 15 May 58- 2nd order

5) 19 May 58- A sales contract, together w/ a PN was executed w/ DENVER MEMORIAL NURSERY, INC. named as the contracting party in the sales contract and as the maker in the PN.

The contract is signed as:E.D. Parr, Pres.

The PN is signed as:“Denver Memorial Nursery, Inc.E.D. Par, Pres.James P. Presba Sc’y.-Treas.”

6) DENVER MEMORIAL NURSERY, INC. was never formed.

7) 27 May 58- articles of MOUNTAIN VIEW NURSERIES, INC. were executed

8) Neither DENVER MEMORIAL NURSERY, INC. nor MOUNTAIN VIEW NURSERIES, INC ever functioned as going concerns.

9) QUAKER HILL, INC. (TP) sues Parr contending that:a) Parr is personally LB in view of the defunct financial condition of the C, based upon the fact that the C was not formed at the time the contract was made and on the further ground that the Ds as promoters were LB.

ISSUE: WON personal LB can be imposed on the P?

HELD: NO, LB on C! The Plaintiff, acting thru its agent, was well aware of the fact that the C was not formed and nevertheless urged that the contract be made in the name of the proposed C. “There is but little evidence indicating intent on the part of the Plaintiff to look to the Defendants for performance or payment.” The single fact supporting the Plaintiff’s theory is the obtaining of an individual balance sheet. On the contrary, the entire transaction contemplated the C as the contracting party. Personal LB does not arise under such circumstances.

CHAPTER VI- CORPORATE POWERS

RP (TP) v. ACOJE MINING (C) (1963)1) ACOJE MINING wrote the Director of Posts requesting of a (post, telegraph and money order) office in its mining camp at Sta. Cruz, Zambales to service its employees and their families that were living in said camp.

2) 11 April 49- Director of Post again wrote a letter to the company stating among other things that:

"In cases where a post office will be opened under circumstances similar to the present, it is policy of this office to have the company assume direct responsibility for whatever pecuniary loss may be suffered by the Bureau of Post 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 letter suggests that a resolution be adopted by the board of directors of the company expressing conformity to the above condition relative to the responsibility to be assumed by it in the event a post office branch is opened as requested.

4) 2 Sept. 49- C informed the Director of Posts of:

a) passage by its BOD of a resolution of the following tenor.

"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."

b) C feels that that resolution fulfills the last condition imposed by the Director of Posts and that, therefore, it would request that an inspector be sent to the camp for the purpose of acquainting the postmaster with the details of the operation of the branch office.

5) 13 Oct 49- post office branch was opened at the camp w/ an employee of the C as Postmaster (Hilario M. Sanchez)

6) 11 May 54- Postmaster went on a 3-day leave but never returned.

7) C immediately informed the officials of the Manila post office and the provincial auditor of Zambales of Sanchez' disappearance.

8) The accounts of the Postmaster were checked and a shortage of P13,867 was found.

9) RP made several demands made upon the C for the payment of the shortage in line with the LB it has assumed.

10) 10 Sept 54- Having failed, the government commenced the present action before CFI Manila seeking to recover the amount of P13,867.24.

11) C DEFENSE:

a) BOD Resolution wherein it assumed responsibility for the act of the postmaster is ultra vires

b) its liability under said resolution is only that of a guarantor who answers only after the exhaustion of the properties of the principal

c) the loss claimed by the plaintiff is not supported by the office record.

HELD: C LB!The BOD’s Resolution covers a subject which concerns the benefit,

convenience and welfare of its employees and their families.

Indeed, such post office is a vital improvement in the living condition of its employees and laborers who came to settle in its mining camp which is far removed from the postal facilities or means of communication accorded to people living in a city or municipality.

RATIO: While as a rule an ultra vires act is one committed outside the object for which a C is created as defined by the law of its organization and therefore beyond the powers conferred upon it by law (19 C.J.S., Section 965, p. 419), there are however 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.

NPC (C) v. Vera (and TP) (1989)1) NPC had a Contract for Stevedoring Services w/ SEA LION INTL. PORT TERMINAL SERVICES, INC. for Coal-Handling Operations at NPC’s pier located at Calaca, Batangas.

2) It is an undisputed fact that the NPC owned pier at Calaca, Batangas receives the various shipments of coal used exclusively to fuel the NPC Batangas Coal-Fired Thermal Power Plant for the generation of electric power.

3) NPC did not renew its Contract for Stevedoring Services for Coal-Handling Operations at NPC's plant, and took over its own stevedoring services.

4) SEA LION filed a “Complaint for Prohibition and Mandamus with Damages” v. NPC and PPA contending that:

NPC had acted in bad faith and with grave abuse of discretion in not renewing its Contract for Stevedoring Services for Coal-Handling Operations at NPC's plant, and in taking over its stevedoring services.

ISSUE: WON a logical and necessary relation exists between the act questioned and the corporate purpose expressed in the NPC charter?

HELD 1: YES! NPC is empowered under its Charter to undertake such services, it being reasonably necessary to the operation and maintenance of the power plant.

It is an undisputed fact that the pier located at Calaca, Batangas, which is owned by NPC, receives the various shipments of coal which is used exclusively to fuel the Batangas Coal-Fired Thermal Power Plant of the NPC for the generation of electric power.

The stevedoring services which involve the unloading of the coal shipments into the NPC pier for its eventual conveyance to the power plant are incidental and indispensable to the operation of the plant.

HELD 2: Respondent judge's directive ordering NPC to enter into a contract for stevedoring and arrastre services or to conduct a public bidding therefor amounted to a writ of mandamus.

Whether NPC will enter into a contract for stevedoring and arrastre services to handle its coal shipments to its pier, or undertake the services itself, is entirely and exclusively within its corporate discretion. It does not involve a duty the performance of which is enjoined by law. Thus, the courts cannot, direct the NPC in the exercise of this prerogative.

RATIO:1) It is a settled rule that mandamus will lie only to compel the performance of a ministerial duty; it does not lie to require anyone to fulfill contractual obligations or compel a course of conduct, nor to control or review the exercise of discretion.

2) The Court laid the fundamental principle governing the issuance of a writ of mandamus that the duties to be enforced thereby must be such as are clearly and peremptorily enjoined by law or by reason of official station.

MADRIGAL & CO. (C) v. Zamora (and Madrigal Central Office Employees Union)1) MADRIGAL & CO. was engaged (among several other corporate objectives) in the management of Rizal Cement Co., Inc.

2) MADRIGAL & CO. and Rizal Cement Go., Inc. are sister companies. Both are owned by the same or practically the same stockholders.

3) 28 Dec 73- Madrigal Central Office Employees Union, sought for the renewal of its CBA (expire on 28 Feb 74) w/ MADRIGAL & CO. It specifically proposed:

a) a wage increase of P200/monthb) an allowance of P100/month c) other economic benefits.

4) MADRIGAL & CO. requested for a deferment in the negotiations.

5) 28 Feb 74- CBA expired

6) 29 July 74- (by an alleged resolution of its stockholders) MADRIGAL & CO. reduced its capital stock from 765,000 shares to 267,366 shares.

(This was effected thru the distribution of the marketable securities owned by MADRIGAL & CO. to its stockholders in exchange for their shares in an equivalent amount in the C.)

10) 28 Aug 74- Madrigal Central Office Employees Union filed a complaint for ULP w/ NLRC for MADRIGAL & CO.’s failure to sit down with the respondent union.

11) In due time- MADRIGAL & CO. filed its position paper, alleging operational losses.

10) 22 Aug 75- (by yet another alleged resolution of its stockholders) MADRIGAL & CO. reduced its authorized capitalization from 267,366 shares to 110,085 shares thru the same scheme.

11)Pending the resolution of the ULP case- MADRIGAL & CO. in a letter (dated 17 Nov 75) informed the SOLE that:

a) Rizal Cement Co., Inc., "from which it derives income" as the General Manager or Agent" had "ceased operating temporarily."

b) (In addition) “because of the desire of the stockholders to phase out the operations of MADRIGAL & CO. due to lack of business incentives and prospects, and in order to prevent further losses, " it had to reduce its capital stock on two occasions "

c) As the situation, therefore, now stands, the Madrigal & Co., Inc. is w/o substantial income to speak of, necessitating a reorganization, by way of retrenchment, of its employees and operations."

d) MADRIGAL & CO. then requested that it "be allowed to effect said reorganization gradually considering all the circumstances, by phasing out in at least three (3) stages, or in a manner the Company deems just, equitable and convenient to all concerned, about which your good office will be apprised accordingly."

12) DOLE: took no action on request bec MADRIGAL & CO. letter was not verified nor accompanied by the proper supporting papers.

13) (19 Jan 76) LA: since the petitioner "had been making substantial profits in its operation" since through 1975, he granted

a) general wage increase of P200/month beginning 1 March 74 b) monthly living allowance of P100/month in favor of the petitioner's

employees.

14)NLRC: affirmed LA

15)SOLE: dismissed the appeal.

______________________16)29 Jan 76- , MADRIGAL & CO. applied for clearance to terminate the

services of a number of employees pursuant supposedly to its retrenchment program.

17)3 Feb 76- MADRIGAL & CO. applied for clearance to terminate 18 employees more.

18)On the same date- respondent union went to DOLE Regional Office IV to complain of illegal lockout against the petitioner.

19)SOLE: dismissals "contrary to law" and ordered the petitioner to reinstate some 40 employees, 37 of them w/ backwages.

20)The petitioner then moved for reconsideration, which the Acting SOLE denied.

21)Thereafter, the petitioner filed an appeal to the Office of the President.

22) Presidential Assistant on Legal Affairs: affirmed w/ modification the SOLE’s decision.

Pirovino, et al. v. DE LA RAMA STEAMSHIP CO. (1954) 1) DE LA RAMA STEAMSHIP CO. is a C w/ an authorized capital of P500,000, divided into 5,000 shares, with a par value of P100 each share.

2) The stockholders were: Esteban de la Rama, 1,800 shares, Leonor de la Rama, 100 shares, Estefania de la Rama, 100 shares, and Eliseo Hervas, Tomas Concepcion, Antonio G. Juanco, and Gaudencio Volasote with 5 shares each. Leonor and Estefania are daughters of Don Esteban, while the rest his employees.

3) Estefania de la Rama was married to the late Enrico Pirovano and to them four children were born who are the plaintiffs in this case.

4)

CHAPTER VII- CONTROL/MANAGEMENT

Ramirez v. ORIENTALIST CO. and Fernandez (1918)1) ORIENTALIST CO. engaged in the business of maintaining and conducting a theater in the city of Manila for the exhibition of cinematographic films. Under the articles of incorporation the company is authorized to manufacture, buy, or otherwise obtain all accessories necessary for conducting such a business.

2) Plaintiff J. F. Ramirez was, at the same time, a resident of the city of Paris, France, and was engaged in the business of marketing films for a manufacturer or manufacturers, there engaged in the production or distribution of cinematographic material. In this enterprise the plaintiff was represented in the city of Manila by his son, Jose Ramirez.

3) July 1913- certain of the directors of the ORIENTALIST CO. in Manila, became apprised of the fact that the plaintiff in Paris had control of the agencies for 2 different marks of films, namely, the "Eclair Films" and the "Milano Films;"

4) Negotiations were begun with said officials of the ORIENTALIST CO. by Ramirez’s son, as agent of the plaintiff, for the purpose of placing the exclusive agency of these films in the hands of the ORIENTALIST CO.

5) The defendant Ramon J. Fernandez, one of the directors of the Orientalist Company and also its treasurer, was chiefly active in this matter, being moved by the suggestions and representations of the manager of the Oriental Theater, to the effect that the securing of the exclusive agency of said films was necessary to the success of the C.

6) Near the end of July of the year aforesaid, Jose Ramirez, as representative of his father, placed in the hands of 'Ramon J. Fernandez an offer, dated July 4, 1913, stating in detail the terms upon which the plaintiff would undertake to supply from Paris the. aforesaid films. This offer was declared to be good until the end of July; and as only about two days of this period remained, it appeared important for the Orientalist Company to act upon the matter speedily, if it desired to take advantage of said offer.

4) 30 July- Fernandez had an informal conference with all the members of the C’s BOD except one, and with the approval of those with whom he had communicated, addressed a letter to Jose Ramirez, in Manila, accepting the offer contained in the memorandum of July 4th for the exclusive agency of the Eclair films.

5) 5 Aug- Fernandez addressed another letter couched in the same terms, likewise accepting the offer of the exclusive agency for the Milano film

6) What the SC considers to be the most material portion of the two letters of acceptance written by R. J. Fernandez to Jose Ramirez is in the following terms:

"We willingly accepted the offer under the terms communicated by your father in his letter dated at Paris on July 4th of the present year."

These communications were signed in the following form, in which it will be noted the separate signature of R. J. Fernandez, as an individual, is placed somewhat below and to the left of the signature of the Orientalist Company as signed by R. J. Fernandez, in the capacity of treasurer:"THE ORIENTALIST COMPANY,"By R. J. FERNANDEZ,Treasurer. "R. J. FERNANDEZ."

Ramirez files a suit v. Orientalist Company and Fernandez.

TC: Orientalist Company- principal debtor and Ramon J. Fernandez- liable subsidiarily as guarantor.

From this judgment both of the parties defendant appealed.

HELD: It thus appears that the board, of directors, before the financial inability of the corporation to proceed with the project was revealed, had already recognized the contracts as being in existence and had proceeded to take the steps necessary to utilize the films. Particularly suggestive is the direction given at this meeting for the publication of announcements in the newspapers to the effect that the company was engaged in importing films.

'In the light of all the circumstances of the case, we are of the opinion that the contracts in question were thus inferentially approved by the company's board of directors and that the company is bound unless the subsequent failure of the stockholders to approve said contracts had the effect of abrogating the liability thus created.

RATIO: Both upon principle and authority it is clear that the action of the stockholders, whatever its character, must be ignored. The functions of the stockholders of a corporation are, it must be remembered, of a limited nature. The theory of a corporation is that the stockholders may have all the profits but shall turn over the complete management of the enterprise to their representatives and agents, called directors. Accordingly there is little for the stockholders to do beyond electing directors, making by-laws, and exercising certain other special powers defined by law. In conformity with this idea it is settled that contracts between a corporation and third persons must be made by the directors and not by the stockholders. The corporation, in such matters, is

represented by the former and not by the latter. (Cook on Corporations, sixth ed., sees. 708, 709.) This conclusion is entirely accordant with the provisions of section 28 of our Corporation Law already referred to. It results that where a meeting of the stockholders is called for the purpose of passing on the propriety of making a corporate contract, its resolutions are at most advisory and not in any wise binding on the board.

ISSUE 2: It being determined that the corporation is bound by the contracts in question, it remains to consider the character of the liability assumed by Ramon J. Fernandez, in affixing his personal signature to said contracts. The question here is whether Fernandez is liable jointly with the Orientalist Company as a principal obligor, or whether his liability is that of a guarantor merely.

HELD: As appears upon the face of the contracts, the signature of Fernandez, in his individual capacity, is not in line with the signature of the Orientalist Company, but is set off to the left of the company's signature and somewhat below. Observation teaches that it is customary for persons who sign contracts in some capacity other than that of principal obligor to place their signatures to one side; but we hardly think that this circumstance alone would justify a court in holding that Fernandez here took upon himself the responsibility of a guarantor rather than that of a principal obligor. We do, however, think that the form in which the contract is signed raises a doubt as to what the real intention was; and we feel justified, in looking to the evidence to discover that intention. In this connection it is entirely clear, from the testimony of both Ramirez and Ramon J. Fernandez, that the responsibility of the latter was intended to be that of a guarantor. There is, to be sure, a certain difference between these witnesses as to the nature of this guaranty, inasmuch as Fernandez would have us believe that his name was signed as a guaranty that the contract would be approved by the corporation, while Ramirez says that the name was put on the contract for the purpose of guaranteeing, not the approval of the contract, but its performance. We are convinced that the latter was the real intention of the contracting parties.

Lopez v. Ericta1)

ISSUE: WON respondent Dr. Consuelo S. Blanco was duly elected Dean of the College of Education, University of the Philippines, in the meeting of the BOR on July 9, 1970, at which her ad interim appointment by University President Salvador P. Lopez, one of the petitioners here, was submitted for consideration?

HELD: