Professional Documents
Culture Documents
Issue:
Whether or not the creation of an executive committee and other offices in the corporation
with corresponding remunerations are within the corporate powers of the Board of Director.
Held:
The governing body of a corporation is its board of directors. Section 23 of the Corporation
Code explicitly provides that unless otherwise provided therein, the corporate powers of all
corporations formed under the Code shall be exercised, all business conducted and all
property of the corporation shall be controlled and held by a board of directors. Thus, with
the exception only of some powers expressly granted by law to stockholders (or members, in
case of non-stock corporations), the board of directors (or trustees, in case of non-stock
corporations) has the sole authority to determine policies, enter into contracts, and conduct
the ordinary business of the corporation within the scope of its charter, i.e., its articles of
incorporation, by-laws and relevant provisions of law. Verily, the authority of the board of
directors is restricted to the management of the regular business affairs of the corporation,
unless more extensive power is expressly conferred.
The concentration in the board of the powers of control of corporate business and of
appointment of corporate officers and managers is necessary for efficiency in any large
organization. Stockholders are too numerous, scattered and unfamiliar with the business of a
corporation to conduct its business directly. And so the plan of corporate organization is for
the stockholders to choose the directors who shall control and supervise the conduct of
corporate business.
In the present case, the boards creation of the positions was in accordance with the regular
business operations of Filport as it is authorized to do so by the corporations by-laws,
pursuant to the Corporation Code. Likewise, the fixing of the corresponding remuneration for
the positions in question is provided for in the same by-laws of the corporation.
The Court cannot rule that the creation of the executive committee by the board of directors
is illegal or unlawful. One reason is the absence of a showing as to the true nature and
functions of said executive committee considering that the "executive committee," referred
to in Section 35 of the Corporation Code which is as powerful as the board of directors and in
effect acting for the board itself, are within the competency of the board to create at any
time and whose actions require ratification and confirmation by the board. Another reason is
that, the Board of Directors has the power to create positions not provided for in Filports
bylaws since the board is the corporations governing body, clearly upholding the power of
its board to exercise its prerogatives in managing the business affairs of the corporation.
With regard to the increased emoluments, the increases in the salaries are indeed
reasonable enough to be able to effectively discharge their respective functions and duties.
To the mind of the Court, Cruz testimony on the matter of mismanagement is bereft of any
foundation. Respondents may not be held liable in the absence of a showing of bad faith in
doing the acts complained of. If the cause of the losses is merely error in business judgment,
not amounting to bad faith or negligence, directors and/or officers are not liable. For them to
be held accountable the mismanagement and the resulting losses on account thereof are
not the only matters to be proven; it is likewise necessary to show that the directors and/or
officers acted.
NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC.,
AND MCARTHUR MINING, INC., Petitioners, v. REDMONT CONSOLIDATED MINES CORP.,Respondent.
Facts:
June 2, 2014
With Yujuico at the helm, STRADEC appointed petitioner Bonifacio C. Sumbilla (Sumbilla)
as treasurer and one Joselito John G. Blando (Blando) as corporate secretary. Blando
replaced respondent Eric C. Pilapil (Pilapil), the previous corporate secretary of
STRADEC.
Petitioners filed a criminal complaint against respondents and one Giovanni T. Casanova
(Casanova). He alleges that demanded Quiambao for the turnover of the corporate
records of the company, particularly the accounting files, ledgers, journals and other
records of the corporation's business. Quiambao refused. Casanova was keeping
custody of the said records on behalf of Quiambao, who allegedly needed the same as
part of his defense in a pending case in court. Blando likewise demanded Pilapil for the
turnover of the stock and transfer book of STRADEC. Pilapil refused. Since Quiambao
and Pilapil still refused to turnover the stock and transfer book, Blando again acceded to
have the book deposited in a safety deposit box, this time, with the Export and Industry
Bank in San Miguel A venue, Pasig City.
7
Petitioners theorize the refusal by the respondents and Casanova to turnover STRADEC's
corporate records and stock and transfer book violates their right, as stockholders,
directors and officers of the corporation, to inspect such records and book under Section
7 4 of the Corporation Code. For such violation, petitioners conclude, respondents may
be held criminally liable pursuant to Section 144 of the Corporation Code.
Issue:
1. Whether the refusal of inspection of book of corporation constitute a criminal offense.
2. Whether respondent can be held liable.
Held:
1. The act of ref using to allow inspection of the stock and transfer book of a
corporation, when done in violation of Section 74(4) of the Corporation Code, is
punishable as an offense under Section 144 of the same code.
The records of all business transactions of the corporation and the minutes of any
meetings shall be open to inspection by any director, trustee, stockholder or member of
the corporation at reasonable hours on business days and he may demand, in writing,
for a copy of excerpts from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any director, trustees,
stockholder or member of the corporation to examine and copy excerpts from its
records or minutes, in accordance with the provisions of this Code, shall be liable to
such director, trustee, stockholder or member for damages, and in addition, shall be
guilty of an offense which shall be punishable under Section 144 of this Code: Provided,
That if such refusal is made pursuant to a resolution or order of the board of directors or
trustees, the liability under this section for such action shall be imposed upon the
directors or trustees who voted for such refusal: and Provided, further, That it shall be a
defense to any action under this section that the person demanding to examine and
copy excerpts from the corporation's records and minutes has improperly used any
information secured through any prior examination of the records or minutes of such
corporation or of any other corporation, or was not acting in good faith or for a
legitimate purpose in making his demand.
The problem with the petitioners complaint and the evidence that they
submitted during preliminary investigation is that they do not establish
that respondents were acting on behalf of STRADEC. Quite the
contrary, the scenario painted by the complaint is that the respondents
are merely outgoing officers of STRADEC who, for some reason,
withheld and refused to tum-over the company records of STRADEC;
that it is the petitioners who are actually acting on behalf of STRADEC;