Republic of the PhilippinesSUPREME COURTManilaSECOND
DIVISIONG.R. No. 108905 October 23, 1997GRACE CHRISTIAN HIGH
SCHOOL,petitioner,vs.THE COURT OF APPEALS, GRACE VILLAGE
ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L.
GO,respondents.MENDOZA,J.:The question for decision in this case is
the right of petitioner's representative to sit in the board of
directors of respondent Grace Village Association, Inc. as a
permanent member thereof. For fifteen years from 1975 until 1989
petitioner's representative had been recognized as a "permanent
director" of the association. But on February 13, 1990, petitioner
received notice from the association's committee on election that
the latter was "reexamining" (actually, reconsidering) the right of
petitioner's representative to continue as an unelected member of
the board. As the board denied petitioner's request to be allowed
representation without election, petitioner brought an action
formandamusin the Home Insurance and Guaranty Corporation. Its
action was dismissed by the hearing officer whose decision was
subsequently affirmed by the appeals board. Petitioner appealed to
the Court of Appeals, which in turn upheld the decision of the
HIGC's appeals board. Hence this petition for review based on the
following contentions:1. The Petitioner herein has already acquired
a vested right to a permanent seat in the Board of Directors of
Grace Village Association;2. The amended By-laws of the Association
drafted and promulgated by a Committee on December 20, 1975 is
valid and binding; and3. The Practice of tolerating the automatic
inclusion of petitioner as a permanent member of the Board of
Directors of the Association without the benefit of election is
allowed under the law.1Briefly stated, the facts are as
follows:Petitioner Grace Christian High School is an educational
institution offering preparatory, kindergarten and secondary
courses at the Grace Village in Quezon City. Private respondent
Grace Village Association, Inc., on the other hand, is an
organization of lot and/or building owners, lessees and residents
at Grace Village, while private respondents Alejandro G. Beltran
and Ernesto L. Go were its president and chairman of the committee
on election, respectively, in 1990, when this suit was brought.As
adopted in 1968, the by-laws of the association provided in Article
IV, as follows:The annual meeting of the members of the Association
shall be held on the first Sunday of January in each calendar year
at the principal office of the Association at 2:00 P.M. where they
shall elect by plurality vote and by secret balloting, the Board of
Directors, composed of eleven (11) members to serve for one (1)
year until their successors are duly elected and have qualified.2It
appears, that on December 20, 1975, a committee of the board of
directors prepared a draft of an amendment to the by-laws, reading
as follows:3VI. ANNUAL MEETINGThe Annual Meeting of the members of
the Association shall be held on thesecond Thursdayof January of
each year. EachCharter or AssociateMember of the Association is
entitled to vote. He shall be entitled to as many votes as he has
acquired thru his monthly membershipfees onlycomputed on a ratio
ofTEN (P10.00) PESOSfor one vote.TheCharter and Associate
Membersshall elect the Directors of the Association. The candidates
receiving thefirst fourteen (14)highest number of votes shall be
declared and proclaimed elected until their successors are elected
and qualified.GRACE CHRISTIAN HIGH SCHOOL representative is a
permanent Director of the ASSOCIATION.This draft was never
presented to the general membership for approval. Nevertheless,
from 1975, after it was presumably submitted to the board, up to
1990, petitioner was given a permanent seat in the board of
directors of the association. On February 13, 1990, the
association's committee on election in a letter informed James Tan,
principal of the school, that "it was the sentiment that all
directors should be elected by members of the association" because
"to make a person or entity a permanent Director would deprive the
right of voters to vote for fifteen (15) members of the Board," and
"it is undemocratic for a person or entity to hold office in
perpetuity."4For this reason, Tan was told that "the proposal to
make the Grace Christian High School representative as a permanent
director of the association, although previously tolerated in the
past elections should be reexamined." Following this advice,
notices were sent to the members of the association that the
provision on election of directors of the 1968 by-laws of the
association would be observed.Petitioner requested the chairman of
the election committee to change the notice of election by
following the procedure in previous elections, claiming that the
notice issued for the 1990 elections ran "counter to the practice
in previous years" and was "in violation of the by-laws (of 1975)"
and "unlawfully deprive[d] Grace Christian High School of its
vested right [to] a permanent seat in the board."5As the
association denied its request, the school brought suit
formandamusin the Home Insurance and Guaranty Corporation to compel
the board of directors of the association to recognize its right to
a permanent seat in the board. Petitioner based its claim on the
following portion of the proposed amendment which, it contended,
had become part of the by-laws of the association as Article VI,
paragraph 2, thereof:TheCharter and Associate Membersshall elect
the Directors of the Association. The candidates receiving thefirst
fourteen (14)highest number of votes shall be declared and
proclaimed elected until their successors are elected and
qualified.GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION.It appears that the opinion of the
Securities and Exchange Commission on the validity of this
provision was sought by the association and that in reply to the
query, the SEC rendered an opinion to the effect that the practice
of allowing unelected members in the board was contrary to the
existing by-laws of the association and to 92 of the Corporation
Code (B.P. Blg. 68).Private respondent association cited the SEC
opinion in its answer. Additionally, the association contended that
the basis of the petition formandamuswas merely "a proposed by-laws
which has not yet been approved by competent authority nor
registered with the SEC or HIGC." It argued that "the by-laws which
was registered with the SEC on January 16, 1969 should be the
prevailing by-laws of the association and not the proposed amended
by-laws."6In reply, petitioner maintained that the "amended by-laws
is valid and binding" and that the association was estopped from
questioning the by-laws.7A preliminary conference was held on March
29, 1990 but nothing substantial was agreed upon. The parties
merely agreed that the board of directors of the association should
meet on April 17, 1990 and April 24, 1990 for the purpose of
discussing the amendment of the by-laws and a possible amicable
settlement of the case. A meeting was held on April 17, 1990, but
the parties failed to reach an agreement. Instead, the board
adopted a resolution declaring the 1975 provision null and void for
lack of approval by members of the association and the 1968 by-laws
to be effective.On June 20, 1990, the hearing officer of the HIGC
rendered a decision dismissing petitioner's action. The hearing
officer held that the amended by-laws, upon which petitioner based
its claim, "[was] merely a proposed by-laws which, although
implemented in the past, had not yet been ratified by the members
of the association nor approved by competent authority"; that, on
the contrary, in the meeting held on April 17, 1990, the directors
of the association declared "the proposed by-law dated December 20,
1975 prepared by the committee on by-laws . . . null and void" and
the by-laws of December 17, 1968 as the "prevailing by-laws under
which the association is to operate until such time that the
proposed amendments to the by-laws are approved and ratified by a
majority of the members of the association and duly filed and
approved by the pertinent government agency." The hearing officer
rejected petitioner's contention that it had acquired a vested
right to a permanent seat in the board of directors. He held that
past practice in election of directors could not give rise to a
vested right and that departure from such practice was justified
because it deprived members of association of their right to elect
or to be voted in office, not to say that "allowing the automatic
inclusion of a member representative of petitioner as permanent
director [was] contrary to law and the registered by-laws of
respondent association."8The appeals board of the HIGC affirmed the
decision of the hearing officer in its resolution dated September
13, 1990. It cited the opinion of the SEC based on 92 of the
Corporation Code which reads:92. Election and term of trustees.
Unless otherwise provided in the articles of incorporation or the
by-laws, the board of trustees of non-stock corporations, which may
be more than fifteen (15) in number as may be fixed in their
articles of incorporation or by-laws, shall, as soon as organized,
so classify themselves that the term of office of one-third (1/3)
of the number shall expire every year; and subsequent elections of
trustees comprising one-third (1/3) of the board of trustees shall
be held annually and trustees so elected shall have a term of three
(3) years. Trustees thereafter elected to fill vacancies occurring
before the expiration of a particular term shall hold office only
for the unexpired period.The HIGC appeals board denied claims that
the school "[was] being deprived of its right to be a member of the
Board of Directors of respondent association," because the fact was
that "it may nominate as many representatives to the Association's
Board as it may deem appropriate." It said that "what is merely
being upheld is the act of the incumbent directors of the Board of
correcting a long standing practice which is not anchored upon any
legal basis."9Petitioner appealed to the Court of Appeals but
petitioner again lost as the appellate court on February 9, 1993,
affirmed the decision of the HIGC. The Court of Appeals held that
there was no valid amendment of the association's by-laws because
of failure to comply with the requirement of its existing by-laws,
prescribing the affirmative vote of the majority of the members of
the association at a regular or special meeting called for the
adoption of amendment to the by-laws. Article XIX of the by-laws
provides:10The members of the Association by an affirmative vote of
the majority at any regular or special meeting called for the
purpose, may alter, amend, change or adopt any new by-laws.This
provision of the by-laws actually implements 22 of the Corporation
Law (Act No. 1459) which provides:22. The owners of a majority of
the subscribed capital stock, or a majority of the members if there
be no capital stock, may, at a regular or special meeting duly
called for the purpose, amend or repeal any by-law or adopt new
by-laws. The owners of two-thirds of the subscribed capital stock,
or two-thirds of the members if there be no capital stock, may
delegate to the board of directors the power to amend or repeal any
by-law or to adopt new by-laws:Provided, however, That any power
delegated to the board of directors to amend or repeal any by-law
or adopt new by-laws shall be considered as revoked whenever a
majority of the stockholders or of the members of the corporation
shall so vote at a regular or special meeting.And provided,
further, That the Director of the Bureau of Commerce and Industry
shall not hereafter file an amendment to the by-laws of any bank,
banking institution or building and loan association, unless
accompanied by certificate of the Bank Commissioner to the effect
that such amendments are in accordance with law.The proposed
amendment to the by-laws was never approved by the majority of the
members of the association as required by these provisions of the
law and by-laws. But petitioner contends that the members of the
committee which prepared the proposed amendment were duly
authorized to do so and that because the members of the association
thereafter implemented the provision for fifteen years, the
proposed amendment for all intents and purposes should be
considered to have been ratified by them. Petitioner
contends:11Considering, therefore, that the "agents" or committee
were duly authorized to draft the amended by-laws and the acts done
by the "agents" were in accordance with such authority, the acts of
the "agents" from the very beginning were lawful and binding on the
homeowners (the principals)per sewithout need of any ratification
or adoption. The more has the amended by-laws become binding on the
homeowners when the homeowners followed and implemented the
provisions of the amended by-laws. This is not merely tantamount to
tacit ratification of the acts done by duly authorized "agents" but
express approval and confirmation of what the "agents" did pursuant
to the authority granted to them.Corollarily, petitioner claims
that it has acquired a vested right to a permanent seat in the
board. Says petitioner:The right of the petitioner to an automatic
membership in the board of the Association was granted by the
members of the Association themselves and this grant has been
implemented by members of the board themselves all through the
years. Outside the present membership of the board, not a single
member of the Association has registered any desire to remove the
right of herein petitioner to an automatic membership in the board.
If there is anybody who has the right to take away such right of
the petitioner, it would be the individual members of the
Association through a referendum and not the present board some of
the members of which are motivated by personal interest.Petitioner
disputes the ruling that the provision in question, giving
petitioner's representative a permanent seat in the board of the
association, is contrary to law. Petitioner claims that that is not
so because there is really no provision of law prohibiting
unelected members of boards of directors of corporations. Referring
to 92 of the present Corporation Code, petitioner says:It is clear
that the above provision of the Corporation Code only provides for
the manner of election of the members of the board of trustees of
non-stock corporations which may be more than fifteen in number and
which manner of election is even subject to what is provided in the
articles of incorporation or by-laws of the association thus
showing that the above provisions [are] not even mandatory.Even a
careful perusal of the above provision of the Corporation Code
would not show that it prohibits a non-stock corporation or
association from granting one of its members a permanent seat in
its board of directors or trustees. If there is no such legal
prohibition then it is allowable provided it is so provided in the
Articles of Incorporation or in the by-laws as in the instant
case.xxx xxx xxxIf fact, the truth is that this is allowed and is
being practiced by some corporations duly organized and existing
under the laws of the Philippines.One example is the Plus XII
Catholic Center, Inc. Under the by-laws of this corporation, that
whoever is the Archbishop of Manila is considered a member of the
board of trustees without benefit of election. And not only that.
He also automatically sits as the Chairman of the Board of
Trustees, again without need of any election.Another concrete
example is the Cardinal Santos Memorial Hospital, Inc. It is also
provided in the by-laws of this corporation that whoever is the
Archbishop of Manila is considered a member of the board of
trustees year after year without benefit of any election and he
also sits automatically as the Chairman of the Board of Trustees.It
is actually 28 and 29 of the Corporation Law not 92 of the present
law or 29 of the former one which require members of the boards of
directors of corporations to be elected. These provisions read:28.
Unless otherwise provided in this Act, the corporate powers of all
corporations formed under this Act shall be exercised, all business
conducted and all property of such corporations controlled and held
by a board of not less than five nor more than eleven directors to
be elected from among the holders of stock or, where there is no
stock, from the members of the corporation:Provided, however, That
in corporations, other than banks, in which the United States has
or may have a vested interest, pursuant to the powers granted or
delegated by the Trading with the Enemy Act, as amended, and
similar Acts of Congress of the United States relating to the same
subject, or by Executive Order No. 9095 of the President of the
United States, as heretofore or hereafter amended, or both, the
directors need not be elected from among the holders of the stock,
or, where there is no stock from the members of the corporation.
(emphasis added)29. At the meeting for the adoption of the original
by-laws, or at such subsequent meeting as may be then determined,
directors shall be elected to hold their offices for one year and
until their successors are elected and qualified. Thereafter
thedirectors of the corporation shall be elected annually by the
stockholders if it be a stock corporation or by the members if it
be a nonstock corporation, and if no provision is made in the
by-laws for the time of election the same shall be held on the
first Tuesday after the first Monday in January. Unless otherwise
provided in the by-laws, two weeks' notice of the election of
directors must be given by publication in some newspaper of general
circulation devoted to the publication of general news at the place
where the principal office of the corporation is established or
located, and by written notice deposited in the post-office,
postage pre-paid, addressed to each stockholder, or, if there be no
stockholders, then to each member, at his last known place of
residence. If there be no newspaper published at the place where
the principal office of the corporation is established or located,
a notice of the election of directors shall be posted for a period
of three weeks immediately preceding the election in at least three
public places, in the place where the principal office of the
corporation is established or located. (Emphasis added)The present
Corporation Code (B.P. Blg. 68), which took effect on May 1,
1980,12similarly provides:23. The Board of Directors or Trustees.
Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled
and held by the board of directors or trusteesto be electedfrom
among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified.
(Emphasis added)These provisions of the former and present
corporation law leave no room for doubt as to their meaning: the
board of directors of corporations must be elected from among the
stockholders or members. There may be corporations in which there
are unelected members in the board but it is clear that in the
examples cited by petitioner the unelected members sit asex
officiomembers,i.e., by virtue of and for as long as they hold a
particular office. But in the case of petitioner, there is no
reason at all for its representative to be given a seat in the
board. Nor does petitioner claim a right to such seat by virtue of
an office held. In fact it was not given such seat in the
beginning. It was only in 1975 that a proposed amendment to the
by-laws sought to give it one.Since the provision in question is
contrary to law, the fact that for fifteen years it has not been
questioned or challenged but, on the contrary, appears to have been
implemented by the members of the association cannot forestall a
later challenge to its validity. Neither can it attain validity
through acquiescence because, if it is contrary to law, it is
beyond the power of the members of the association to waive its
invalidity. For that matter the members of the association may have
formally adopted the provision in question, but their action would
be of no avail because no provision of the by-laws can be adopted
if it is contrary to law.13It is probable that, in allowing
petitioner's representative to sit on the board, the members of the
association were not aware that this was contrary to law. It should
be noted that they did not actually implement the provision in
question except perhaps insofar as it increased the number of
directors from 11 to 15, but certainly not the allowance of
petitioner's representative as an unelected member of the board of
directors. It is more accurate to say that the members merely
tolerated petitioner's representative and tolerance cannot be
considered ratification.Nor can petitioner claim a vested right to
sit in the board on the basis of "practice." Practice, no matter
how long continued, cannot give rise to any vested right if it is
contrary to law. Even less tenable is petitioner's claim that its
right is "coterminus with the existence of the
association."14Finally, petitioner questions the authority of the
SEC to render an opinion on the validity of the provision in
question. It contends that jurisdiction over this case is
exclusively vested in the HIGC.But this case was not decided by the
SEC but by the HIGC. The HIGC merely cited as authority for its
ruling the opinion of the SEC chairman. The HIGC could have cited
any other authority for the view that under the law members of the
board of directors of a corporation must be elected and it would be
none the worse for doing so.WHEREFORE, the decision of the Court of
Appeals is AFFIRMED.SO ORDERED.
Digest
GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs.THE COURT OF APPEALS,
GRACE VILLAGE ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO
L. GO, respondents.
G.R. No. 108905 October 23, 1997
MENDOZA, J.:
Petitioner Grace Christian High School is an educational
institution located at the Grace Village in Quezon City, while
Private respondent Grace Village Association, Inc. ["Association']
is an organization of lot and/or building owners, lessees and
residents at Grace Village.
The original 1968 by-laws provide that the Board of Directors,
composed of eleven (11) members, shall serve for one (1) year until
their successors are duly elected and have qualified.
On 20 December 1975, a committee of the board of directors
prepared a draft of an amendment to theby-laws which provides that
"GRACE CHRISTIAN HIGH SCHOOL representative is a permanentDirector
of the ASSOCIATION."
However, this draft was never presented to the general
membership for approval. Nevertheless, from 1975 to 1990,
petitioner was given a permanent seat in the board of directors of
the association.
On 13 February 1990, the association's committee on election
sought to change the by-laws and informed the Petitioner's school
principal "the proposal to make the Grace Christian High School
representative as a permanent director of the association, although
previously tolerated in the past elections should be
reexamined."
Following this advice, notices were sent to the members of the
association that the provision on election of directors of the 1968
by-laws of the association would be observed. Petitioner requested
the chairman of the election committee to change the notice to
honor the 1975 by-laws provision, but was denied.
The school then brought suit for mandamus in the Home Insurance
and Guaranty Corporation (HIGC) to compel the board of directors to
recognize its right to a permanent seat in the board.
Meanwhile, the opinion of the SEC was sought by the association,
and SEC rendered an opinion to the effect that the practice of
allowing unelected members in the board was contrary to the
existing by-laws of the association and to 92 of the Corporation
Code (B.P. Blg. 68). This was adopted by the association in its
Answer in the mandamus filed with the HIGC.
The HIGC hearing officer ruled in favor of the association,
which decision was affirmed by the HIGC Appeals Board and the Court
of Appeals.
Issue:W/N the 1975 provision giving the petitioner a permanent
board seat was valid.
Ruling:No.
Section 23 of the Corporation Code (and its predecessor Section
28 and 29 of the Corporation Law) leaves no room for doubt that the
Board of Directors of a Corporation must be elected from among the
stockholders or members.
There may be corporations in which there are unelected members
in the board but it is clear that in these instances, the unelected
members sit as ex officio members, i.e., by virtue of and for as
long as they hold a particular office (e.g. whoever is the
Archbishop of Manila is considered a member of the board of
Cardinal Santos Memorial Hospital, Inc.)
But in the case of petitioner, there is no reason at all for its
representative to be given a seat in the board. Nor does petitioner
claim a right to such seat by virtue of an office held. In fact it
was not given such seat in the beginning. It was only in 1975 that
a proposed amendment to the by-laws sought to give it one.
Since the provision in question is contrary to law, the fact
that it has gone unchallenged for fifteen years cannot forestall a
later challenge to its validity. Neither can it attain validity
through acquiescence because, if it is contrary to law, it is
beyond the power of the members of the association to waive its
invalidity.
It is more accurate to say that the members merely tolerated
petitioner's representative and tolerance cannot be considered
ratification.
Nor can petitioner claim a vested right to sit in the board on
the basis of "practice." Practice, no matter how long continued,
cannot give rise to any vested right if it is contrary to law.
THIRD DIVISION[G.R. No. 121791.December 23, 1998]ENRIQUE
SALAFRANCA,petitioner, vs.PHILAMLIFE (PAMPLONA) VILLAGE, HOMEOWNERS
ASSOCIATION, INC., BONIFACIO DAZO and THE SECOND DIVISION, NATIONAL
LABOR RELATIONS COMMISSION (NLRC),respondents.D E C I S I O
NROMERO,J.:Petitioner Enrique Salafranca started working with the
private respondent Philamlife Village Homeowners Association on May
1, 1981 as administrative officer for a period of six months.From
this date until December 31, 1983, petitioner was reappointed to
his position three more times.[1]As administrative officer,
petitioner was generally responsible for the management of the
villages day to day activities.[2]After petitioners term of
employment expired on December 31, 1983, he still continued to work
in the same capacity, albeit, without the benefit of a renewed
contract.Sometime in 1987, private respondent decided to amend its
by-laws.Included therein was a provision regarding officers,
specifically, the position of administrative officer under which
said officer shall holdoffice at the pleasure of the Board of
Directors.In view of this development, private respondent, on July
3, 1987, informed the petitioner that his term of office shall be
coterminus with the Board of Directors which appointed him to his
position.Furthermore, until he submits a medical certificate
showing his state of health, his employment shall be on a
month-to-month basis.[3]Oddly, notwithstanding the failure of
herein petitioner to submit his medical certificate, he continued
working until his termination in December 1992.[4]Claiming that his
services had been unlawfully and unceremoniously dispensed with,
petitioner filed a complaint for illegal dismissal with money
claims and for damages.[5]After the submission by the parties of
their respective position papers and other pleadings, the Labor
Arbiter rendered a decision[6]ordering private respondent to pay
the petitioner the amount ofP257,833.33 representing his backwages,
separation pay and 13th month pay.In justifying the award, the
Labor Arbiter elucidated:Respondents contention that complainants
term of employment was co-terminus with the term of Office of the
Board of Directors, is wanting in merit.Records show that
complainant had been hired in 1981 while the Amendment of the
respondents By-Laws making the position of an Administrative
Officer co-terminus with the term of the Board of Directors was
made in 1987.Evidently, the said Amendment would not be applicable
to the case of complainant who had become a regular employee long
time before the Amendment took place.Moreover, the Amendment should
be applied prospectively and not retroactively.On appeal by the
private respondent, the NLRC reversed the decision of the
LaborArbiter and rendered a new one[7]reducing petitioners monetary
award to only one-half (1/2) month pay for every year of service
representing his retirement pay.In other words, the NLRC viewed the
dismissal of the petitioner as a valid act by the private
respondent.The fact that he continued to perform the function of
the office of administrative officer without extension or
re-appointment thereafter, to our mind, did not in any way make his
employment permanent as in fact, he was even reminded of the nature
of his position by then president of the association Jaime Y. Ladao
in a letter of 3 July 1987.His reply to the aforesaid letter,
claiming his employment regular, and viz a viz, referring to submit
his medical certificate, notwithstanding, to our mind, merely
underscored the need to define his position as, in fact, the
Associations Rules and Regulations were amendedif but to put to
rest the tenural (sic) limit of the office of the Administrative
Officer in accordance with its earlier intention, that it is
co-terminus with that of the members of the Board of
Directors.WHEREFORE, the decision appealed from is hereby set
aside.Respondents are hereby ordered to pay herein appellee one
half (1/2) month pay for every year of service representing his
retirement pay.In view of the sudden turn of events, petitioner has
elevated the case to this Court assigning the following
errors:[8]1.The NLRC gravely abused its discretion when it ruled
that the employment of the Petitioner is not purely based on
considerations of Employer-Employee relationship.2.Petitioner was
illegally dismissed by private respondents.As to the first assigned
error by the petitioner, we need not dwell on this at length.We
agree with the Solicitor Generals observation that an
employer-employee relationship exists between the petitioner and
the private respondent.[9]x x xx x xx x xThe first element is
present in this case.Petitioner was hired as Administrative Officer
by respondents.In fact, he was extended successive appointments by
respondents.The second element is also present since it is not
denied that respondent PVHA paid petitioner a fixed salary for his
services.As to the third element, it can be seen from the Records
that respondents had the power of dismissal over petitioner.In
their letter dated December 7, 1992, respondents informed
petitioner that they had decided to discontinue his services.In
their Position Paper submitted to the Labor Arbiter, respondents
stated that petitioner was dismissed for cause. (p. 17,
Record).With respect to the fourth and most important element,
respondents controlled the work of petitioner not only with respect
to the ends to be achieved but also the means used in reaching such
ends.Relative to the second assigned error of the petitioner, both
the Solicitor General and the private respondent take the stance
that petitioner was not illegally dismissed.[10]On this aspect, we
disagree with their contentions.On the outset, there is no dispute
that petitioner had already attained the status of a regular
employee, as evidenced by his eleven years of service with the
private respondent.Accordingly, petitioner enjoys the right to
security of tenure[11]and his services may be terminated only for
causes provided by law.[12]Viewed in this light, while private
respondent has the right to terminate the services ofpetitioner,
this is subject to both substantive and procedural grounds.[13]The
substantive causes for dismissal are those provided in Articles 282
and 283 of the Labor Code,[14]while the procedural grounds refer to
the observance of the requirement of due process.[15]In all these
instances, it is the private respondent, being the employer, who
must prove the validity of the dismissal.[16]Having reviewed the
records of this case carefully, we conclude that private respondent
utterly failed to substantiate petitioners dismissal, rendering the
latters termination illegal.At the risk of being redundant, it must
be stressed that these requirements are mandatory and
non-compliance therewith renders any judgment reached by the
management void and inexistent.[17]While private respondent imputes
gross negligence, and serious misconduct as the causes of
petitioners dismissal,[18]not a shred of evidence was offered in
support thereof, other than bare and uncorroborated allegations.The
facts and circumstances regarding such alleged infractionswere
never explained.While it is true that private respondent, through
its president BonifacioDazo, executed an affidavit narrating the
alleged violations of the petitioner,[19]these were never
corroborated by concrete or competent evidence.It is settled that
no undue importance should be given to a sworn statement or
affidavit as a piece of evidence because, being takenex-parte, an
affidavit is almost always incomplete and
inaccurate.[20]Furthermore, it must be noted that when petitioner
was terminated in 1992, these alleged infractions were never raised
nor communicated to him.In fact, these were only revealed after the
complaint was filed by the petitioner in 1993.Why there was a delay
was never adequately explained byprivate respondent.Likewise, we
note that Dazo himself was not presented as a witness to give the
petitioner an opportunity to cross-examine him and propound
clarificatory questions regarding matters averred in his
affidavit.All told, the foregoing lapses and the belated submission
of the affidavit, cast doubt as to the credibility of the
allegations.In sum, the dismissal of the petitioner had no factual
basis whatsoever.The rule is that unsubstantiated accusations
withoutmore, are not tantamount to guilt.[21]As regards the issue
of procedural due process, private respondent justifies its
non-compliance therewithin this wise:The Association Officers,
being his peers and friends had a problem however in terminating
his services.He had been found to have committed infractions as
previously enumerated.PVHA could have proceeded with a full-blown
investigation to hear these charges, but the ordeal might break the
old mans heart as this will surely affect his standing in the
community.So they decided to make their move as discreetly (but
legally) as possible to save the petitioners reputation.Terminating
him in accordance with the provision of the by-laws of the
Association without pointing out his numerous faults and
malfeasance in office and with one-half month pay for every year of
service in accordance with the Retirement Law was the best and only
alternative.We are not impressed.The reasoning advanced by the
private respondent is as puerile as it ispreposterous.The essence
of due process is to afford the party an opportunity to be heard
and defend himself,to cleanse his name and reputation from any
taint.It includes the twin requirements of notice and
hearing.[22]This concept evolved from the basic tenet that ones
employment or profession is a property right protected by the
constitutional guaranty of due process of law.[23]Hence, an
individuals separation from work must be founded on
clearly-established facts, not on mere conjectures and
suspicions.[24]In light of the foregoing, private respondents
arguments areclearly baseless and without merit.In truth, instead
of protecting petitioners reputation, private respondent succeeded
in doing exactly the opposite - it condemned the petitioner without
even hearing his side.It is stating the obvious that dismissal,
being the ultimate penalty that can be meted out to an employee,
should be based on a clear or convincing ground.[25]As such, a
decision to terminate an employee without fully apprising him of
the facts, on the pretext that the twin requirements of notice and
hearing are unnecessary or useless, is an invalid and obnoxious
exercise of management prerogative.Furthermore, private respondent,
in an effort to validate the dismissal of the petitioner, posits
the theory that the latters position is coterminus with that of the
Villages Board of Directors, as provided for in its amended
by-laws.[26]Admittedly, the right to amend the by-laws lies solely
in the discretion of the employer, this being in the exercise of
management prerogative or business judgment.However this right,
extensive as it may be, cannot impair the obligation of existing
contracts or rights.Prescinding from these premises, private
respondents insistence that it can legally dismiss petitioner on
the ground that his tenure has expired is untenable.To reiterate,
petitioner, being a regular employee, is entitled to security of
tenure; hence, his services may only be terminatedfor causes
provided by law.[27]A contrary interpretation would not find
justification inthe laws or the Constitution.If we were to rule
otherwise, it would enable an employer to remove any employee from
his employment by the simple expediency of amending its by-laws and
providing that his/her position shall cease to exist upon the
occurrence of a specified event.If private respondent wanted to
make the petitioners position co-terminus with that of the Board of
Directors, then the amendment must be effective after petitioners
stay with the private respondent, not during his term.Obviously,
the measure taken by the private respondent in amending its by-laws
is nothing but a devious, but crude, attempt to circumvent
petitioners right to security of tenure as a regular employee
guaranteed under the Labor Code.[28]Interestingly, the Solicitor
General is of the view that what actually transpired was that
petitioner was retired from his employment, considering the fact
that in 1992 he was already 70 years old and not
terminated.[29]While there seems to be a semblance of plausibility
in this contention for the matter of extension of service of such
employee or official is addressed to the sound discretion of the
employer, still we have no doubt that this was just a mere
after-thought - a dismissal disguised as retirement.In the
proceedings before the Labor Arbiter, it is noteworthy that private
respondent never raised the issue of compulsory retirement,[30]as a
cause for terminating petitioners service.In its appeal before the
NLRC, this ground was never discussed.In fact, private respondent,
in justifying the termination of the petitioner, still anchored its
claim on the applicability of the amended by-laws.This omission is
fatal to private respondents cause, for the rule is well-settled
that matters, theories or arguments not brought out inthe
proceedings below will ordinarilynot be considered by a reviewing
court, as they cannot be raised for the first time on
appeal.[31]Undaunted, private respondent now asserts that the
instant petition was filed out of time,[32]considering that the
assailed NLRC decision was received on June 28, 1995 while this
petition was filed on September 20, 1995.At this juncture, we take
this opportunity to state that under the 1997 Rules of Civil
Procedure, a petition forcertiorarimust now be instituted within
sixty days of receipt of the assailed judgment, order or
resolution.[33]However, since this case arose in 1995 and the
aforementioned rule only took effect on July 1, 1997 thenthe old
rule is applicable.Since prior to the effectivity of the new rule,
a special civil action ofcertiorarishould be instituted within a
period of three months,[34]the instant petition which was filed on
September 20, 1995 ortwo months and twenty-two days thereafter, was
still withinthe reglementary period.With respect to the issue of
themonetary award to be given to the petitioner, private respondent
argues that he deserves only retirement pay and nothing more.This
position would have been tenable had petitioner not been illegally
dismissed.However, since we have already ruled petitioners
dismissal as without just cause and lacking due process, the award
of backwages and reinstatement is proper.[35]In this particular
case, reinstatement is no longer feasible since petitioner was
already 70 years old at the time he was removed from his
employment.As a substitute thereof, separation pay is generally
awarded,[36]the amount of which must be equivalent to one-month
salary for every year of service.[37]With respect to the amount of
backwages which, incidentally is differentfrom separation
pay,[38]it is now settled that an illegally dismissed employee
isentitled to its full payment as long as the cause of action
accrued afterMarch 21, 1989.[39]Considering that petitioner was
terminated from the service on December 9, 1992, which is after
March 21, 1989, he is entitled to full backwages from the time of
the illegal dismissal without any qualification or deduction.[40]As
regards the issue of retirement pay, private respondent asserts
that the correct amount should be one-half (1/2) month salary for
every year of service.This time we agree with private respondents
contention.The pertinent law is Article 287 of the Labor Code, as
amended by Republic Act No. 7641, which reads:Art. 287.Retirement.
-Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other
applicable employment contract.In case of retirement, the employee
shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining
agreement and other agreements:Provided, however, That an employees
retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein.In the
absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon
reaching the age of sixty (60) years or more, but not beyond
sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year
of service, a fraction of at least six (6) months being considered
as one whole year.x x xx x xx x x.With respect to the issue that
petitioner, being a managerial employee, is not entitled to
thirteenth month pay,Memorandum Order No. 28, as implemented by the
Revised Guidelines on the Implementation of the 13th Month Pay Law
dated November 16, 1987, provides:Section 1 of Presidential Decree
No. 851 is hereby modified to the extent that all employers are
hereby required to pay all theirrank and file employeesa 13th month
pay not later than December 24 of every year.Clearly, therefore,
the foregoing exempts managerial employees from this benefit.Of
course, this does not preclude an employer from granting other
bonuses, in lieu of the 13th month pay, to managerial employees in
its discretion.Finally, we cannot simply ignore private respondents
malicious scheme to remove petitioner from his position which is
contrary to good customs and effectedin an oppressive manner, thus
warranting an award of moral and exemplary damages to the
petitioner.[41]Moreover, since petitioner was forced to litigate
and incur expenses to protect his right and interests, he is
entitled to attorneys fees.[42]WHEREFORE, in view of the foregoing,
the instant petition is GRANTED. The NLRC decision dated June 15,
1995 is herebyREVERSED andSET
ASIDE.PrivaterespondentPhilamlifeVillageHomeowners Association is
ORDERED: (1) to pay petitioner Enrique Salafranca separation pay
equivalent to one month salary for every year of service; (2) to
pay his full backwages in accordance with our ruling inBustamantev.
NLRC;[43](3) to pay his retirement pay in accordance with Article
287 of the Labor Code, as amended by Republic Act No. 7641, (4)to
pay moral and exemplary damages in the amount of twenty thousand
(P20,000.00) pesos and ten thousand (P10,000.00) pesos,
respectively;[44]and(5) to pay ten (10%) percent of the total
amount due to petitioner, as attorneys fees.Consequently, the
respondent NLRC isORDEREDtoCOMPUTEthe total monetary benefits
awarded in accordance with this decision and to submit its
compliance thereon within thirty (30) days from notice of this
decision.SO ORDERED.
digestIn 1981, Enrique Salafranca was hired as an administrative
officer by the Philamlife Village Homeowners Associaiton, Inc.
(PVHAI). Salafranca was tasked to manage the villages day to day
activities. His employment was originally for 6 months only but his
contract was renewed multiple times until 1983. But even after
1983, he was still allowed to continue work even without a renewed
contract. In 1987, PVHAI amended its by-laws. Among the amendment
was a provision that the administrative officer (Salafranca) shall
have a tenure which is co-terminus with the Board of Directors
which appointed him. In 1992, the tenure of said Board of Directors
expired and so Salafranca was terminated.ISSUE:Whether or not
Salafranca was illegally dismissed.HELD:Yes. At that time,
Salafranca already enjoys security of tenure because he is already
a regular employee. It is true that PVHAI has the right to amend
its by-laws but such amendment must not impair existing contracts
or rights. In this case, the provision that Salafrancas position
shall be co-terminus with the appointing Board impairs his right to
security of tenure which has already vested even prior to the
amendment of the by-laws in 1987.
PMI Colleges
In 1991, PMI Colleges hired the services of Alejandro Galvan for
the latter to teach in said institution. However, for unknown
reasons, PMI defaulted from paying the remunerations due to Galvan.
Galvan made demands but were ignored by PMI. Eventually, Galvan
filed a labor case against PMI. Galvan got a favorable judgment
from the Labor Arbiter; this was affirmed by the National Labor
Relations Commission. On appeal, PMI reiterated, among others, that
the employment of Galvan is void because it did not comply with its
by-laws. Apparently, the by-laws require that an employment
contract must be signed by the Chairman of the Board of PMI. PMI
asserts that Galvans employment contract was not signed by the
Chairman of the Board.ISSUE:Whether or not Galvans employment
contract is void.HELD:No. PMI Colleges never even presented a copy
of the by-laws to prove the existence of such provision. But even
if it did, the employment contract cannot be rendered invalid just
because it does not bear the signature of the Chairman of the Board
of PMI. By-Laws operate merely as internal rules among the
stockholders,they cannot affect or prejudice third personswho deal
with the corporation, unless they have knowledge of the same. In
this case, PMI was not able to prove that Galvan knew of said
provision in the by-laws when he was employed by PMI.
Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. Nos.
89679-81 September 28, 1990LAND BANK OF THE
PHILIPPINES,petitioner,vsCOMMISSION ON AUDIT,respondent.Menandro A.
Alvarez and Norberto L. Martinez for
petitioner.MELENCIO-HERRERA,J.:This Petition raises the issue of
whether it is within the corporate powers of the Land Bank of the
Philippines (LBP) to waive the penalty charges of P9,636.36 on the
loan of the Home Savings Bank and Trust Company (HSBTC). The LBP
asserts that, as a banking institution, its Charter authorizes it
to condone claims or liabilities. The Commission on Audit, on the
other hand, maintains that such power is exclusively vested in the
Commission pursuant to Section 36 of Pres. Decree No. 1445, or the
Government Auditing Code.The records indicate that on 22 July 1980,
the Board of Directors of the LBP issued Resolution No. 80-222
(Rollo, pp. 4-5, pp. 91-93) fixing the new rates for penalty
charges on past due loans/amortization and other credit
accommodations. The Resolution also provided that "in cases of
defaults in loan payment and other credit accommodations due to
unforeseen, highly justifiable reasons/circumstances beyond the
control of the borrower such as damages due to natural calamities,
sickness, adverse government rulings or court judgments, duly
processed and verified by the lending units,penalty charges may be
condoned/reduced by the Loan Executive Committee upon
recommendation of theappropriate lending units" (Emphasis
supplied)Pursuant to this Resolution, LBP, through its Loan
Executive Committee, waived the penalty charges in the amount of
Nine Thousand Six Hundred Thirty Six Pesos and Thirty Six Centavos
(P9,636.36) on the loan of HSBTC, a thrift banking institution
organized under Philippine laws (Rollo, p. 4).On 23 September 1986,
LBP requested its Corporate Auditor to pass in audit its waiver of
the penalty charges. Said official questioned the waiver and opined
that the power to condone interests or penalties is vested
exclusively in the COA but, in the absence of a categorical ruling
on the matter applicable to a government banking institution,
referred the LBP request to the COA in a letter dated 20 January
1987.In COA Decision No. 551, dated 29 June 1988 (Annex "C",
Petition,Rollo, p. 29), the COA held that the waiver is
unauthorized and should outrightly be disallowed in audit, pursuant
to Pres. Decree No. 1445, Section 36,infra. Reconsiderations
successively sought by LBP met with denial in COA Decision No. 701,
dated 13 December 1988 (Annex "F", Petition,Rollo, p. 38), and in
COA Decision No. 977, dated 6 June 1989 (Annex "A", ibid., p. 25),
both of which Decisions emphasized COA's exclusive prerogative to
settle and/or compromise claims.Thus, this Petition and Amended
Petition erroneously brought under Rules 44 and 43 of the Rules of
Court, respectively, the proper remedy being that ofcertiorariunder
Rule 65 (Article IX (A) Sec. 7, 1987 Constitution).The issue for
resolution is whether or not LBP is authorized to compromise or
release claims or liabilities in whole or in part.COA maintains
that it has the sole prerogative to compromise liabilities to the
Government pursuant to Section 36 of Pres. Decree No. 1445, the
Government Auditing Code, which provides, inter alia, that:Sec. 36.
Power to compromise claims. (1) When the interest of the government
so requires, the Commission may compromise or release in whole or
in part, any claim or settled liability to any government agency
not exceeding ten thousand pesos and with the written approval of
the Prime Minister, it may likewise compromise or release any
similar claim or liability not exceeding one hundred thousand
pesos, the application for relief therefrom shall be submitted,
through the Commission and the Prime Minister, with their
recommendations, to the National Assembly.xxx xxx xxxOn the other
hand, LBP claims that it, too, has the power to condone penalties
being a commercial bank clothed with authority to exercise all the
general powers mentioned in the Corporation Law and the General
Banking Act, as provided in Section 75[12] of its Charter, Rep.
Act. No. 3844, as amended by Pres. Decree No. 251, among which is
the power to write off loans and advances (General Banking Act,
Sec. 84,infra), which necessarily includes the lesser power to
charge off interests and penalties. LBP also submits that its
Charter (Rep. Act No. 3844, as amended), being a special law,
should prevail over the general grant of authority to COA by Pres.
Decree No. 1445 to compromise claims.We agree with LBP.LBP was
created as a body corporate and government instrumentality to
provide timely and adequate financial support in all phases
involved in the execution of needed agrarian reform (Rep. Act No.
3844, as amended, Sec. 74). Section 75 of its Charter vests in LBP
specific powers normally exercised by banking institutions, such as
the authority to grant short, medium and long-term loans and
advances against security of real estate and/or other acceptable
assets; to guarantee acceptance(s), credits, loans, transactions or
obligations; and to borrow from, or rediscount notes, bills of
exchange and other commercial papers with the Central Bank. In
addition to the enumeration of specific powers granted to LBP,
Section 75 of its Charter also authorizes it:12. To exercise the
general powers mentioned in the Corporation Law and the General
Banking Act, as amended, insofar as they are not inconsistent or
incompatible with this Decree.One of the general powers mentioned
in the General Banking Act is that provided for in Section 84
thereof, reading:xxx xxx xxxWriting-off loans and advances with an
outstanding amount of one hundred thousand pesos or more shall
require the prior approval of the Monetary Board (As amended by PD
71).It will thus be seen that LBP is a unique and specialized
banking institution, not an ordinary "government agency" within the
scope of Section 36 of Pres. Decree No. 1445. As a bank, it is
specifically placed under the supervision and regulation of the
Central Bank of the Philippines pursuant to its Charter (Sec. 97,
Rep. Act No. 3844, as amended by Pres. Decree No. 251). In so far
as loans and advances are concerned, therefore, it should be deemed
primarily governed by Central Bank Circular No. 958, Series of
1983, which vests the determination of the frequency of writing-off
loans in the Board of Directors of a bank provided that the loans
written-off do not exceed a certain aggregate amount. The pertinent
portion of that Circular reads:b. Frequency/ceiling of write-off.
The frequency for writing-off loans and advances shall be left to
the discretion of the Board of Directors of the bank concerned.
Provided, that the aggregate amount of loans and advances which may
be written-off during the year, shall in no case exceed 3% of total
loans and investments; Provided, further, that charge-offs are made
against allowance for possible losses, earnings during the year
and/or retained earnings.The authority to write-off loans and
advances should be construed to include within its scope the waiver
of penalty charges on past due loans, which are of a lesser
category.Concededly, the power to write-off is not expressly
granted in the LBP Charter. It can be logically implied however,
from LBP's authority to exercise the general powers vested in
banking institutions as provided in the General Banking Act. The
clear intendment of its Charter is for LBP to be clothed not only
with the express powers granted to it, but also with those implied,
incidental and necessary for the exercise of those express powers.
"The test to be applied is whether the act of the corporation is in
direct and immediate furtherance of its business, fairly incident
to the express powers and reasonably necessary to their exercise.
If so, the corporation has the power to do it; otherwise, not"
(Montelibano v. Bacolod-Murcia Milling Co. Inc., L-15092, 18 May
1962, 5 SCRA 36).It bears emphasizing that LBP was created to
provide adequate financial support to the agrarian reform program
as well as to grant loans to farmers' cooperatives/associations,
and to finance and/or guarantee the acquisition of farm lots
transferred to tenant-farmers. Its clientele consists primarily of
agrarian reform beneficiaries, landowners affected by agrarian
reform and Land Bank bond-holders. It should, therefore, be given
some measure of flexibility in its operations in order not to
hamper it unduly in the fulfillment of its objectives. Moreover, it
is only the penalty charges on a past due loan of the HSBTC that
are being condoned and not the loan itself. The criteria for waiver
are likewise specifically spelled out in LBP Resolution No. 80-222,
namely, for "unforeseen, highly justifiable reasons/circumstances
beyond the control of the borrower such as damages due to natural
calamities, sickness, adverse government rulings or court
judgments, duly processed and verified by the appropriate lending
units."But while we rule that LBP is empowered by its corporate
charter to waive penalty charges, thereby overruling COA's avowed
exclusive prerogative to settle and compromise liabilities to the
Government, nevertheless, pursuant to Pres. Decree No. 1445, LBP is
still subject to COA's general audit jurisdiction to see to it that
the fiscal responsibility that rests directly with the head of the
government agency has been properly and effectively discharged
(Section 25[1]), and as provided for in its Section 26,
reading:Sec. 26.General jurisdiction. The authority and powers of
the Commission shall extend to and comprehend all matters relating
to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers
pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relating to those
accounts, and the audit and settlement of the accounts of all
persons respecting funds or property received or held by them in an
accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to
the Government or any of its subdivisions, agencies and
instrumentalities. The said jurisdiction extends to all
government-owned or controlled corporations . . .This is but in
keeping with the wide sphere of state audit set forth in the
fundamental law of the land.SEC. 2 (1) The Commission on Audit
shall have the power, authority, and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust
by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and
controlled corporations with original charters, . . . (Article IX
[D], Sec. 2[l], 1987 Constitution).Having arrived at the foregoing
conclusions, we find no need to pass upon the other arguments
raised.WHEREFORE, the Decisions of the Commission on Audit sought
to be reviewed are hereby SET ASIDE in so far as they hold that the
Commission on Audit,vis-a-visthe Land Bank, has the exclusive
prerogative to settle and compromise liabilities to the Government.
No costs.SO ORDERED.
Ignacio
In 1967, HI Cement Corporation was granted authority to operate
mining facilities in Bulacan. However, theareasallowed for it to
explore coverareaswhich were also being explored by Ignacio
Vicente,JuanBernabe, and Moises Angeles. And so a dispute arose
between the three and HI Cement as neither side wanted to give up
their mining claims over the disputedareas. Eventually, HI Cement
filed a civil case against the three. During pre-trial, the
possibility of an amicable settlement was explored where HI Cement
offered to purchase theareasof claims of Vicente et al at the rate
of P0.90 per square meter. Vicente et al however wanted P10.00 per
square meter.In 1969, the lawyers of HI Cement agreed to enter into
a compromise agreement with the three whereby commissioners shall
be assigned by the court for the purpose of assessing the value of
the disputedareasof claim. An assessment was subsequently made
pursuant to the compromise agreement and the commissioners
recommended a price rate of P15.00 per square meter.One of the
lawyers of HI Cement, Atty. Francisco Ventura, then notified the
Board of Directors of HI Cement for the approval of the compromise
agreement. But the Board disapproved the compromise agreement hence
Atty. Ventura filed a motion with the court to disregard the
compromise agreement. Vicente et al naturally assailed the motion.
Vicente et al insisted that the compromise agreement is binding
because prior toenteringinto the compromise agreement, the three
lawyers of HI Cement declared in open court that they are
authorized to enter into a compromise agreement for HI Cement; that
one of the lawyers of HI Cement, Atty. Florentino Cardenas, is an
executive official of HI Cement; that Cardenas even nominated one
of the commissioners; that such act ratified the compromise
agreement even if it was not approved by the Board. HI Cement, in
its defense, averred that the lawyers were not authorized and that
in fact there was no special power of attorney executed in their
favor for the purpose ofenteringinto a compromise agreement. Judge
Ambrosio Geraldez ruled in favor of HI Cement.ISSUE:Whether or not
a compromise agreement entered into by a lawyer purportedly in
behalf of the corporation is valid without a written
authority.HELD:No. Corporations may compromise only in the form and
with the requisites which may be necessary to alienate their
property. Under the corporation law the power to compromise or
settle claims in favor of or against the corporation is ordinarily
and primarily committed to the Board of Directors but such power
may be delegated. The delegation must be clearly shown for as a
general rule an officer or agent of the corporation has no power to
compromise or settle a claim by or against the corporation, except
to the extent that such power is given to him either expressly or
by reasonable implication from the circumstances. In the case at
bar, there was no special power of attorney authorizing the three
lawyers to enter into a compromise agreement. This is even if the
lawyers declared in open court that they are authorized to do so by
the corporation (in this case, the transcript of stenographic notes
does not show that the lawyers indeed declare such in open
court).The fact that Cardenas, an officer of HI Cement, acted in
effecting the compromise agreement, i.e. nominating a commissioner,
does not ratify the compromise agreement. There is no showing that
Cardenas act binds HI Cement; no proof that he is authorized by the
Board; no proof that there is a provision in the articles of
incorporation of HI Cement that he can bind the corporation.