Juasing Hardware vs Mendoza
to bring suit in court. The law merely recognizes the existence of a
G.R. No. L-55687 July 30, 1982
Juasing Hardware, alleging to be a single proprietorship duly
organized and existing under and by virtue of the laws of the
Philippines and represented by its manager Ong Bon Yong, filed a
complaint for the collection of a sum of money against Pilar Dolla.
In her Answer, Dolla stated that she has no knowledge about Juasing
Hardware's legal personality and capacity to sue as alleged in the
complaint.
After Juasing Hardware had completed the presentation of its
evidence and rested its case, Dolla filed a Motion for Dismissal of
Action for Juasing Hardware’s lack of legal capacity to sue. Dolla
contended that Juasing Hardware is a single proprietorship, not a
corporation or a partnership duly registered in accordance with law,
and therefore is not a juridical person with legal capacity to bring an
action in court. Juasing Hardware filed an opposition and moved for
the admission of an Amended Complaint to change the name.
Respondent Judge issued an Order dismissing the case and denying
admission of the Amended Complaint.
ISSUE: W/N the Court properly dismissed the case filed by Juasing
Hardware.
RULING: No.
Juasing Hardware is definitely not a natural person; nor is it a juridical
person as defined in the New Civil Code of the Philippines thus:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or
purpose, created by law; their personality begins as soon as they
have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or
purpose to which the law grants a juridical personality, separate and
distinct from that of each shareholder, partner or member.
There is no law authorizing sole proprietorships like Juasing Hardware
sole proprietorship as a form of business organization conducted for
profit by a single individual, and requires the proprietor or owner
thereof to secure licenses and permits, register the business name,
and pay taxes to the national government. It does not vest juridical or
legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.
Thus, the complaint in the court should have been filed in the name of
the owner of Juasing Hardware. The allegations in the body of the
complaint would show that the suit is brought by such person as
proprietor or owner of the business conducted under the name and
style “Juasing Hardware.” The descriptive words "doing business as
Juasing Hardware' " may be added in the title of the case, as is
customarily done.
Be that as it may, Juasing Hardware's contention that respondent
judge erred in not allowing the amendment of the complaint to correct
the designation of the party plaintiff in the lower court, is impressed
with merit. The defect of the complaint in the instant case is merely
formal, not substantial. Substitution of Juasing Hardware would not
constitute a change in the Identity of the parties. No unfairness or
surprise to Dolla would result by allowing the amendment, the
purpose of which is merely to conform to procedural rules or to correct
a technical error.
Commisioner of Customs vs KMK Gani However, a foreign corporation not engaged in the in business in the
Philippines may not be denied the right to file an action in the
FACTS: Philippine courts for an isolated transaction.
1. Two containers loaded with 103 cartons of merchandise covered by
eleven airway bills of several supposedly Singapore based
consignees arrived at the Manila International Airport. The fact that a foreign corporation is not doing business in the
2. The cargoes were consigned to different entities, among others, Philippines must be disclosed if it desires to sue in the Philippine
KMK Gani and Indrapal and Company, private respondents. courts under the “isolated transaction rule.” Without this disclosure,
3. While the cargoes were at the MIA, a “reliable source” tipped the the court may choose to deny it the right to sue.
Bureau of Customs that the said cargoes were going to be unloaded
to Manila.
In the case at bar, the private respondents KMK Gani and Indrapal
4. The Suspected Cargo and Anti-Narcotics (SCAN) dispatched an
aver that they are “suing upon a singular and isolated transaction.”
agent to verify the information. But they failed to prove their legal existence or juridical personality as
5. The cargoes were seized and thereafter subject to Seizure and foreign corporations.
Forfeiture proceedings for “technical smuggling.”
6. Atty. Armando Padilla entered his appearance for the consignees
KMK and Indrapal. *** The “isolated transaction rule” refers only to foreign corporations.
7. Records of the case do not show any appearance of the Here the petitioners are not foreign corporations. They do not even
consignees in person. pretend to be so. The first paragraph of their petition, containing the
8. The Collector of Customs rules for the forfeiture of all the cargoes. allegation of their identities, does not even aver their corporate
9. Appeal was made to the Commissioner of Customs. character. On the contrary, KMK alleges that it is a “single
10. The Commissioner of Customs affirmed the finding of the proprietorship” while Indrapal hides under the vague identification as a
Collector of Customs of the presence of the intention to import the “firm”, although both describe themselves. With the phrase “Doing
said goods in violation of the dangerous drugs Act and a Central Bank business in accordance with the laws of Singapore.”
Circular in relation to the Tariff and Customs Code.
11. Appeal was then made to the Court of Tax Appeals, which
reversed the decision of the Commissioner of Customs.
12. Hence this petition to review.
ISSUE:
Did private respondents fail to establish their personality to sue?
Can private respondents sue within Philippine jurisdiction under the
“isolated transaction rule”?

HELD:
No foreign corporation transacting in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be
sued or proceeded against before Philippine courts or administrative
tribunals on any valid cause of action recognized under Philippine
laws. (Section 133, Corporation Code of the Philippines)
Ralla vs Ralla
Facts: Rosendo Ralla had two sons, Pablo and Pedro. The father
apparently loved the former but not the latter,Pablo and his family
lived with Rosendo, while Pedro lived with his mother, Paz Escarella,
in another town. Hewas not on good terms with his father.Paz
Escarella died in 1 !" and the two brothers partitioned #$
parcels of land she left as her paraphernaliaproperty. The
partition was sustained by the court. &eanwhile, Rosendo e'ecuted a
will disinheriting Pedro andleaving everything he owned to Pablo, to
whom he said he had earlier sold a part of his property for
P1(,(((.((.Rosendo himself filed for the probate of the will
but pendente lite died on )ctober 1, 1 #(. The probate
*udgeconverted +P !# into an intestate proceeding. -
creditor of the deceased filed a petition for the probate
of Rosendo s will in +P 11(#, which was heard *ointly with +P
!# . The order was set aside.T h e l a s t w i l l a n d t e s t a m e n t o f
Rosendo Ralla was allowed on June ", 1 0 but on(,
1 0 , t h e disinheritance of Pedro was disapproved. This order
was elevated to the %ourt of -ppeals. The %ourt of -ppealsreversed
the trial court and reinstated the disinheritance clause after
finding that the re2uisites of a validdisinheritance had been
complied with in the will. The appellate court noted that Pedro had
threatened to 3ill hisfather, who was afraid of him and had earlier
sued him for slander and grave oral defamation. The decision was
assailed before the +%, which was dismissed in a resolution. The
motion for reconsiderationwas denied with finality in a resolution.4hat
is involved in the present petition is the correctness of the decision of
the respondent court annulling thedeed of sale e'ecuted by Rosendo
Ralla in favor of Pablo over 1 parcels of land. Pedro had filed on
&ay 1 ,1 " , a complaint to annul the transaction on the ground that
it was simulated. The original decision of the trialcourt declared the
sale null and void. 5n the resolution of the motion for reconsideration,
however, judge /ose 6.&adara completely reversed himself and held
the deed of sale to be valid. This order was in turn set aside by
therespondent court, which reinstated the original decision invalidating
the deed of sale.but the court found that, regardless of the curious
resolutions, the petition must nevertheless be sustained albeitnot on
the ground that the deed of sale was indeed valid. The court
is inclined to support the findings of therespondent court.
However, the court do not and cannot ma3e any decision on
this matter because of oneinsuperable obstacle. That obstacle is
the proper party personality of Pedro Ralla to 2uestion the transaction
Issue:
4hether or not Pedro Ralla has the proper personality to 2uestion the
validity of the deed of sale.
Held:
The decision of the CA approved the disinheritance of Pedro Ralla.
That decision was appealed to SC but the petition for review was
dismissed. The decision has long since become final. since then,
Pedro Rallano longer had the legal standing to 2uestion the validity of
the sale executed by Rosendo in favor of his other sonPablo.The real
party8in8interest is the party who stands to be benefited or injured by
the judgment or the party entitled tothe avails of the suit. 95nterest9
within the meaning of the rule means material interest, an interest in
issue and tobe affected by the decree, as distinguished from
mere interest in the 2uestion involved, or a mere
incidentalinterest. -s a general rule, one having no right or interest to
protect cannot invo3e the jurisdiction of the court asa party8plaintiff in
an action. -s the sole heir, Pablo Ralla had the right to inherit the
totality of his father s estate after payment of all its debts.Even if it be
assumed that the deed of sale was indeed invalid, the sub*ect8matter
thereof nevertheless devolvedupon Pablo as the universal successor
of his father Rosendo. 5n his wig, Rosendo claimed the 1 parcels
as9part of my property :: as distinguished from the conjugal
estate :: which he had earlier sold to Pablo. significantly, Pedro
did not deny this description of the property in his comment to the
present petition, confininghimself to assailing the validity of the
sale.The %ourt;s decision is that as a validly disinherited heir, and not
claiming to be a creditor of his deceased father,Pedro Ralla had no
legal personality to 2uestion the deed of sale between
Rosendo Ralla and his son Pablo.legally speaking, Pedro Ralla
was a stranger to the transaction as he did not stand to benefit from
its annulment.His disinheritance had rendered him hors de combat.
Set aside

Merill lynch vs CA
Facts: On 23 November 1987, Merrill Lynch futures, Inc. (ML
FUTURES) filed a complaint with the Regional Trial Court at Quezon
City against the Spouses Pedro M. Lara and Elisa G. Lara for the
recovery of a debt and interest thereon, damages, and attorney's fees.
In its complaint ML FUTURES described itself as (a) "a non-resident
foreign corporation, not doing business in the Philippines, duly
organized and existing under and by virtue of the laws of the state of
Delaware, U.S.A.;" as well as (b) a 'futures commission merchant'
duly licensed to act as such in the futures markets and exchanges in
the United States, . . . essentially functioning as a broker (executing)
orders to buy and sell futures contracts received from its customers
on U.S. futures exchanges." In its complaint ML FUTURES alleged (1)
that on 28 September 1983 it entered into a Futures Customer
Agreement with the spouses (Account 138-12161), in virtue of which it
agreed to act as the latter's broker for the purchase and sale of
futures contracts in the U.S.; (2) that pursuant to the contract, orders
to buy and sell futures contracts were transmitted to ML FUTURES by
the Lara Spouses "through the facilities of Merrill Lynch Philippines,
Inc., a Philippine corporation and a company servicing ML Futures'
customers;" (3) that from the outset, the Lara Spouses "knew and
were duly advised that Merrill Lynch Philippines, Inc. was not a broker
in futures contracts," and that it "did not have a license from the
Securities and Exchange Commission to operate as a commodity
trading advisor (i.e., "and entity which, not being a broker, furnishes
advice on commodity futures to persons who trade in futures
contracts"); (4) that in line with the above mentioned agreement and
through said Merill Lynch Philippines, Inc., the Lara Spouses actively
traded in futures contracts, including "stock index futures" for four
years or so, i.e., from 1983 to October, 1987, there being more or less
regular accounting and corresponding remittances of money (or
crediting or debiting) made between the spouses and ML FUTURES;
(5) that because of a loss amounting to US $160,749.69 incurred in
respect of 3 transactions involving "index futures," and after setting
this off against an amount of US $75,913.42 then owing by ML
FUTURES to the Lara Spouses, said spouses became indebted to ML
FUTURES for the ensuing balance of US $84,836.27, which the latter
asked them to pay; (6) that the Lara Spouses however refused to pay
this balance, "alleging that the transactions were null and void
because Merrill Lynch Philippines, Inc., the Philippine company
servicing accounts of ML Futures, had no license to operate as a
"commodity and/or financial futures broker."
On the foregoing essential facts, ML FUTURES prayed (1) for a
preliminary attachment against the spouses' properties "up to the
value of at least P2,267,139.50," and (2) for judgment, after trial,
sentencing the spouses to pay ML FUTURES: (a) the Philippine peso
equivalent of $84,836.27 at the applicable exchange rate on date of
payment, with legal interest from the date of demand until full
payment; (b) exemplary damages in the sum of at least P500,000,00;
and (c) attorney's fees and expenses of litigation as may be proven at
the trial. Preliminary attachment issued ex parte on 2 December 1987,
and the spouses were duly served with summons. The spouses filed a
motion to dismiss dated 18 December 1987 on the grounds that (1)
ML FUTURES had "no legal capacity to sue" and (2) its "complaint
states no cause of action since it is not the real party in interest." On
12 January 1988, the Trial Court promulgated an Order sustaining the
motion to dismiss, directing the dismissal of the case and discharging
the writ of preliminary attachment. It later denied ML FUTURES's
motion for reconsideration, by Order dated 29 February 1988. ML
FUTURES appealed to the Court of Appeals. In its own decision
promulgated on 27 November 1990, the Court of Appeals affirmed the
Trial Court's judgment. Its motion for reconsideration having been
denied, ML FUTURES appealed to the Supreme Court on certiorari.
Issue:
1. Whether ML FUTURES was doing business in the
Philippines without license.
2. Whether – in light of the fact that the Laras were fully
aware of its lack of license to do business in the Philippines,
and in relation to those transactions had made payments to,
and received money from it for several years –the Lara
Spouses are estopped to impugn ML FUTURES capacity to
sue them in the courts of the forum.
Held:
 monetary advantage, for ML FUTURES credited them with the
1. The facts on record adequately establish that ML FUTURES, amount of US $75,913.42 then due to them, thus reducing their debt
operating in the United States, had indeed done business with the to US $84,836.27. Given these facts, and assuming that the Lara
Lara Spouses in the Philippines over several years, had done so at all Spouses were aware from the outset that ML FUTURES had no
times through Merrill Lynch Philippines, Inc. (MLPI), a corporation license to do business in this country and MLPI, no authority to act as
organized in this country, and had executed all these transactions broker for it, it would appear quite inequitable for the Laras to evade
without ML FUTURES being licensed to so transact business here, payment of an otherwise legitimate indebtedness due and owing to
and without MLPI being authorized to operate as a commodity futures ML FUTURES upon the plea that it should not have done business in
trading advisor. These are the factual findings to both the Trial Court this country in the first place, or that its agent in this country, MLPI,
and the Court of Appeals. These, too, are the conclusions of the had no license either to operate as a "commodity and/or financial
Securities & Exchange Commission which denied MLPI's application futures broker." Considerations of equity dictate that, at the very least,
to operate as a commodity futures trading advisor, a denial the issue of whether the Laras are in truth liable to ML FUTURES and
subsequently affirmed by the Court of Appeals. Prescinding from the if so in what amount, and whether they were so far aware of the
proposition that factual findings of the Court of Appeals are generally absence of the requisite licenses on the part of ML FUTURES and its
conclusive, the Supreme Court has been cited to no circumstance of Philippine correspondent, MLPI, as to be estopped from alleging that
substance to warrant reversal of said Appellate Court's findings or fact as a defense to such liability, should be ventilated and
conclusions in this case. Further, the Laras did transact business with adjudicated on the merits by the proper trial court.
ML FUTURES through its agent corporation organized in the
Philippines, it being unnecessary to determine whether this domestic
firm was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce
Fenner & Smith (MLPI's alleged predecessor). The fact is that ML
FUTURES did deal with futures contracts in exchanges in the United
States in behalf and for the account of the Lara Spouses, and that on
several occasions the latter received account documents and money
in connection with those transactions. Given these facts, if indeed the
last transaction executed by ML FUTURES in the Laras's behalf had
resulted in a loss amounting to US $160,749.69; that in relation to this
loss, ML FUTURES had credited the Laras with the amount of US $
75,913.42 — which it (ML FUTURES) then admittedly owed the
spouses — and thereafter sought to collect the balance, US
$84,836.27, but the Laras had refused to pay (for the reasons already
above stated).

2. The Laras received benefits generated by their business relations

with ML FUTURES. Those business relations, according to the Laras
themselves, spanned a period of 7 years; and they evidently found
those relations to be of such profitability as warranted their
maintaining them for that not insignificant period of time; otherwise, it
is reasonably certain that they would have terminated their dealings
with ML FUTURES much, much earlier. In fact, even as regards their
last transaction, in which the Laras allegedly suffered a loss in the
sum of US$160,749.69, the Laras nonetheless still received some

Mina vs Pacson
FACTS:
-Plaintiffs, all surnamed Mina, are alleged to be the illegitimate
children of the deceased Joaquin Mina with plaintiff Pilar Lazo from
1933-1958, while married to Antonia Pacson.
-Joaquin Mina died in August, 1958, leaving no descendants nor
ascendants except his widow, the defendant herein Antonia Pacson.
-On April 9, 1958, Joaquin Mina, then still living, executed a deed of
absolute sale of three parcels of land situated in the municipality of
Muñoz, Nueva Ecija, in favor of the defendants Crispino Medina and
Cresencia Mina for the sum of P12,000.
case would be dismissed, and it was because of plaintiffs' refusal to
comply with this express mandate that the dismissal was ordered. The
dismissal was, therefore, justified under Rule 30, Section 3 of the
Rules of Court
RES JUDICATA; COMPLETE IDENTITY NECESSARY; PARTIES
NOT INCLUDED AND MATTERS NOT RAISED IN PREVIOUS CASE
NOT BARRED. — The previous order of dismissal bars the present
complaint only as to matters already presented in the previous care,
like the action for annulment of the deeds of sale as regards the
defendants named therein, but matters not raised and parties not
included in the previous case are not barred, like the action for the
recognition of the filiation of the plaintiffs against the defendant widow
of the deceased alleged father

-On April 15, 1958 again he executed another deed of sale of parcels
of land covered by 12 transfer certificates of title to the same spouses
Crispino Medina and Cresencia Mina. Both deeds of sale bear the
conformity of his wife Antonia Pacson
-COURT ORDER: Plaintiffs are hereby directed to amend their
complaint within fifteen (15) days from receipt hereof by including as
party defendant the surviving widow of the deceased Joaquin Mina
and other necessary parties.
-Plaintiffs failed to do so  Court dismissed
ISSUE: WON the failure to comply with the order of the court warrants
dismissal
HELD: YES
RATIO:
FAILURE TO PROSECUTE; FAILURE TO COMPLY WITH ORDER
TO IMPLEAD INDISPENSABLE PARTY. — Appellants' contention
that the dismissal of the complaint in the previous action was "at the
indirect instance of the plaintiffs through inaction or omission," is not
supported by the facts of the case, because the order of the court
dismissing the complaint in the first case contained the warning that
should the plaintiffs fail to comply with its order to implead the
surviving widow of the deceased and other necessary parties, the
Robles vs CA
Petitioners (all surnamed Robles) trace their ownership of a parcel of
land (9,985 sq m.) to Leon and Silvino, their grandfather and father,
respectively. Upon Silvino’s death in 1942, said petitioners inherited
the property and started cultivation thereof. Hilario Robles, private
respondent and half-brother of the petitioners, was entrusted with the
payment of land taxes due on the property. In 1962, Hilario caused
both the cancellation of the tax declaration covering the property and
its transfer to Ballane (his father-in-law). Ballane mortgaged the
property and, for some reason, the tax declaration thereon was
subsequently named to Hilario. The latter then mortgaged the
property to private respondent Rural Bank of Cardona. The mortgage
was foreclosed and said bank acquired by public bidding the property
which was then sold by it to the spouses Santos. Petitioners learned
of the mortgage only in 1987. Subsequently, the action was filed,
impleading also as parties-defendant the Director of Lands and the
District Land Officer sue to an issuance of a free patent in favour of
spouses Santos. Trial court ruled in favour of petitioners, declaring
null the patent, declaring the heirs of Silvino absolute owners of the
subject land. CA reversed on the ground that petitioners no longer
had title to the property.
rights of his co-heirs as co-owners of the real estate. He must have
first repudiated the ownership clearly and evidently. CA failed to
consider the irregularities in the transactions involving the property.
No instrument/deed of conveyance was presented to show any
transaction between petitioners and Ballane or even Hilario.
(2) Mortgage was only valid insofar as Hilario’s undivided interest is
concerned there being co-ownership between the heirs. Court also
delved into gross negligence which amounted to bad faith on part of
bank by not exercising due diligence in verifying the ownership of the
land considering such was unregistered.
Free patent was also not valid, the land in question having been
converted ipso jure to private land by virtue of the adverse possession
in the concept of owners since.
(3) 1916 by the petitioners. Issuance of patents covering private lands
is out of the jurisdiction of the Director of Lands or Bureau of Lands.
Hence, the sale of the property in favour of the spouses Santos WRT
the share of Hiario was valid but the patent issued was null.

ISSUES
(1) whether petitioners have the appropriate title essential to an action
for quieting of title (relevant issue) and whether title claimed by
respondents is valid
(2) whether REM between Hilario and RBC is valid
(3) whether issuance of free patent is valid

HELD
(1) Petitioners have valid title by virtue of their continued and open
occupation and possession as owners of the subject property.
In this case, the cloud on petitioners’ title emanate from the apparent
validity of the free patent issued and the tax declarations and other
evidence in favour of respondents ultimately leading to the transfer of
the property to spouses Santos. WRT title of the spouses Santos,
such is deemed invalid/inoperative insofar as it is rooted in the title
and appropriation of Hilario. Hilario could not have prejudiced the
Aguas vs Llemos
FACTS:
 Francisco Salinas and the spouses Felix Guardino and Maria
Aguas jointly filed before the CFI of Catbalogan, Samar an
action for damages against Hermogenes Llemos
 Plaintiffs averred that:
1. Llemos had served them by registered mail with a copy
of a petition for a writ of possession, with notice that the
same would be submitted to the said CFI
2. In view of the copy and notice served, plaintiffs went all
the way from Manila to Samar accompanied by their
lawyers, only to discover that no such petition had been
filed
3. Llemos maliciously failed to appear in court, rendering
plaintiff's expenses and trouble all in vain, causing
them mental anguish and undue embarrassment
 Llemos died before he could answer the complaint
 Upon leave of court, plaintiffs amended their complaint to
include Llemos' heirs
 The heirs filed a motion to dismiss, which was granted on the
following grounds:
1. The legal representative, not the heirs, should have
been made the party defendant
2. The action being for recovery of money,
testate/intestate proceedings should be initiated and
the claim filed therein
 Motion for reconsideration = denied
 Hence this appeal
ISSUE: Was the action filed by plaintiff-appellants one that is abated
by the death of the defendant?
RULING: NO.
 Plaintiffs argue that when a comparison is made between
those provisions of the Rules of Court concerning claims that
are barred if not filed in the estate settlement proceedings
(Rule 86 [then Rule 87], Sec. 5) and those defining actions
that survive and may be prosecuted against the executor or
administrator (Rule 87 [then Rule 88], Sec. 1), actions for
damages caused by tortious conduct of a defendant (as in the
case at bar) survive the death of the latter – plaintiffs are
correct
 Rule 86, Sec. 5 provides that the actions that are abated by
death are:
1. Claims for funeral expenses and those for the last
sickness of the decedent
2. Judgments for money
3. All claims for money against the decedent, arising from
contract express or implied
 ... none of which include that of the plaintiffs, for it is not
enough that the claim against the deceased party be for
money, but it must arise from "contract express or implied", i.e.
all purely personal obligations other than those which have
their source in delict or tort
 Rule 87, Sec. 1, enumerates actions that survive against a
decedent's executors or administrators:
1. Actions to recover real and personal property from the
estate
2. Actions to enforce a lien thereon
3. Actions to recover damages for an injury to person or
property
 ... the present suit being under the third kind of action
enumerated above, it having been held that "injury to property"
is not limited to injuries to specific property, but extends to
other wrongs by which personal estate is injured or diminished
 To maliciously cause a party to incur unnecessary expenses,
as charged in this case, is certainly injurious to that party's
property
 However, the parties have arrived at an amicable settlement of
their differences, and that they have agreed to dismiss the
appeal, rendering the case moot
 APPEAL DISMISSED, w/o special pronouncement as to costs
Board of Liquidators vs Kalaw
Facts: The National Coconut Corporation (NACOCO, for short) was
chartered as a non-profit governmental organization avowedly for the
protection, preservation and development of the coconut industry in
the Philippines. General manager and board chairman was Maximo
M. Kalaw; defendants Juan Bocar and Casimiro Garcia were
members of the Board; defendant Leonor Moll became director only
on December 22, 1947.
An unhappy chain of events conspired to deter NACOCO from
fulfilling some contracts entered. Nature supervened. Four
devastating typhoons visited the Philippines: the first in October, the
second and third in November, and the fourth in December, 1947.
Coconut trees throughout the country suffered extensive damage.
Copra production decreased. Prices spiralled. Warehouses were
destroyed. Cash requirements doubled. Deprivation of export facilities
increased the time necessary to accumulate shiploads of copra. Quick
turnovers became impossible, financing a problem.
The buyers threatened damage suits. All the settlements sum up to
P1,343,274.52.
NACOCO, represented by the Board of Liquidators, seeks to recover
the above sum of P1,343,274.52 from general manager and board
chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro
Garcia and Leonor Moll. It charges Kalaw with negligence under
Article 1902 of the old Civil Code (now Article 2176, new Civil Code);
and defendant board members, including Kalaw, with bad faith and/or
breach of trust for having approved the contracts without prior
approval of the Board.
The lower court came out with a judgment dismissing the complaint.
Hence, plaintiff appealed direct to this Court. Plaintiff levelled a major
attack on the lower court's holding that Kalaw justifiedly entered into
the controverted contracts without the prior approval of the
corporation's directorate. Plaintiff leans heavily on NACOCO's
corporate by-laws. Article IV (b), Chapter III thereof, recites, as
amongst the duties of the general manager, the obligation: "(b) To
perform or execute on behalf of the Corporation upon prior approval of
the Board, all contracts necessary and essential to the proper
accomplishment for which the Corporation was organized.”
ISSUE: Whether or not the acts of the respondent as General
Manager without prior approval of the Board are valid corporate acts.
HELD:
Not of de minimis importance in a proper approach to the problem at
hand, is the nature of a general manager's position in the corporate
structure. A rule that has gained acceptance through the years is that
a corporate officer "intrusted with the general management and
control of its business, has implied authority to make any contract or
do any other act which is necessary or appropriate to the conduct of
the ordinary business of the corporation. As such officer, "he may,
without any special authority from the Board of Directors perform all
acts of an ordinary nature, which by usage or necessity are incident to
his office, and may bind the corporation by contracts in matters arising
in the usual course of business.
Settled jurisprudence has it that where similar acts have been
approved by the directors as a matter of general practice, custom, and
policy, the general manager may bind the company without formal
authorization of the board of directors. In varying language, existence
of such authority is established, by proof of the course of business,
the usage and practices of the company and by the knowledge which
the board of directors has, or must be presumed to have, of acts and
doings of its subordinates in and about the affairs of the corporation.
In the case at bar, the practice of the corporation has been to allow its
general manager to negotiate and execute contracts in its copra
trading activities for and in NACOCO's behalf without prior board
approval. If the by-laws were to be literally followed, the board should
give its stamp of prior approval on all corporate contracts. But that
board itself, by its acts and through acquiescence, practically laid
aside the by-law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid
corporate acts.
Viewed in the light of the entire record, the judgment under review
must be, as it is hereby, affirmed.