I. ASSOCIATED BANK (now UNITED OVERSEAS BANK [PHILS.]) vs.

SPOUSES RAFAEL and

MONALIZA PRONSTROLLER

FACTS:
 Spouses Eduardo and Ma. Pilar Vaca (spouses Vaca) executed a Real Estate Mortgage (REM) in
favor of the petitioner over their parcel of residential land and the house constructed thereon. For
failure to pay, the subject property was sold at public auction with petitioner as the highest bidder.
The spouses Vaca commenced an action for the nullification of the REM and the foreclosure sale.
Petitioner, on the other hand, filed a petition for the issuance of a writ of possession. The case was
raised up to the Supreme Court.
 During the pendency of the case, petitioner advertised the subject property for sale. Respondents
Rafael and Monaliza Pronstroller offered to purchase the property and paid petitioner 10% of the
purchase price. A Letter-Agreement set that deposit of the balance shall be made within 90 days
from date hereof. Prior to the expiration of the 90-day, respondents requested that the balance be
made payable only upon service on them of a final decision affirming petitioner’s right to possess the
subject property in Vaca case. Atty. Soluta referred respondents’ proposal to petitioner’s Asset
Recovery and Remedial Management Committee (ARRMC) but the latter deferred action. A month
after, respondents and Atty. Soluta executed another Letter-Agreement allowing the former to pay
upon receipt of a final order (in the Vaca case).
 Early 1994, petitioner reorganized its management. Atty. Braulio Dayday (Atty. Dayday) became
petitioner’s Assistant Vice-President and Head of the Documentation Section. Atty. Soluta was
relieved of his responsibilities. Atty. Dayday reviewed petitioner’s records and discovered that
respondents failed to deposit the balance of the purchase price. The matter was then resubmitted to
the ARRMC and it was disapproved. ARRMC, thus, referred to petitioner’s Legal Department for
rescission or cancellation of the contract. Respondents talked to Atty. Dayday and gave him the
Letter-Agreement of July 14, 1993 to show that they were granted an extension. Atty. Dayday
claimed that the letter was a mistake and that Atty. Soluta was not authorized to give such
extension.
 In the Vaca case, the Court upheld petitioner’s right to possess the subject property.
 For failure to reach an agreement, respondents, informed petitioner that they would be enforcing
their agreement dated July 14, 199. Respondents commenced the instant suit by filing a Complaint
for Specific Performance.

ISSUE:
 Is the petitioner bound by the July 14, 1993 Letter-Agreement signed by Atty. Soluta under the
doctrine of apparent authority?

HELD:
 Yes.
 The general rule is that, in the absence of authority from the board of directors, no person, not even
its officers, can validly bind a corporation. The power and responsibility to decide whether the
corporation should enter into a contract that will bind the corporation is lodged in the board of
directors.
 However, just as a natural person may authorize another to do certain acts for and on his behalf, the
board may validly delegate some of its functions and powers to officers, committees and agents. The
authority of such individuals to bind the corporation is generally derived from law, corporate bylaws
or authorization from the board, either expressly or impliedly, by habit, custom, or acquiescence, in
the general course of business
 The authority of a corporate officer or agent in dealing with third persons may be actual or apparent.
 The doctrine of "apparent authority," had long been recognized in this jurisdiction.
 Apparent authority is derived not merely from practice. Its existence may be ascertained through
o the general manner in which the corporation holds out an officer or agent as having the
power to act, or in other words, the apparent authority to act in general, with which it clothes
him; or
o the acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers
  Accordingly, the authority to act for and to bind a corporation may be presumed from acts of
recognition in other instances, wherein the power was exercised without any objection from its board
or shareholders.
 Undoubtedly, petitioner had previously allowed Atty. Soluta to enter into the first agreement without a
board resolution expressly authorizing him; thus, it had clothed him with apparent authority to modify
the same via the second letter-agreement. It is not the quantity of similar acts which establishes
apparent authority, but the vesting of a corporate officer with the power to bind the corporation.
 If a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of
an apparent authority, holding him out to the public as possessing power to do those acts, the
corporation will, as against any person who has dealt in good faith with the corporation through such
agent, be estopped from denying such authority.

II. DEVELOPMENT BANK OF THE PHILIPPINES, vs. SPOUSES FRANCISCO ONG and LETICIA ONG

FACTS:
 Francisco Ong with his wife Leticia Ong, addressed a written offer to petitioner to buy the subject
property on a negotiated sale basis. Respondents informed the spouses that the bank recently
received an offer from another at the same price and term, but better and more advantageous
considering that the buyer will assume the responsibility for the ejectment of present occupants.
Rspondents were given 3 days to match the said offer, failing in which the Bank "will immediately
award the said property to the other buyer", in which event respondents’ deposit of ₱14,000.00 shall
be refunded to them. Respondents matched the said offer.
 On April 7, 1989, there was a conference whereat respondents were informed why the sale could
not be awarded to them. Thereafter, respondents were notified that the property would instead be
offered for public bidding. Feeling aggrieved, respondents filed with the Regional Trial Court a
complaint for breach of contract and/or specific performance.
 In his testimony, Ong and his wife went to the bank and told the latter that they were interested to
buy 2 lots. Palasan, the bank clerk, went to the branch manager, returned to the spouses, and
informed them that the branch manager agreed to sell the property. After some computations,
respondents pegged the downpayment therefor at ₱14,000.00. They were then required by Palasan
to sign a bank form to express their firm offer to purchase the subject property. But since the form
contains the statement that the approval of higher authorities of the bank is required to close the
deal, Palasan told them that the documents were only for formality purposes, and further assured
them that the branch manager has already agreed to sell the subject property to them.

ISSUE:
 Whether or not there actually was a perfected contract of sale between petitioner and respondents

HELD:
 No, there was no perfected contract of sale.
 Judging from the findings and the testimony of respondent Francisco Ong himself, it appears clear
that the transaction between the respondents and the petitioner was limited to Palasan, one of the
clerks of petitioner. Lagrito, the branch manager, had no personal or direct communication with
respondents to express his alleged consent to the sale transaction. Thus, the undisputed evidence
showed that it was Palasan, a mere bank clerk, and not the branch manager himself who assured
respondents that theirs was a closed deal.
 ‘In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the
situation as it presents itself to the third party with whom the contract is made. Naturally he can have
little or no information as to what occurs in corporate meetings; and he must necessarily rely upon
the external manifestation of corporate consent.
 As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to
the public as possessing power to do those acts, the corporation will, as against any one who has in
good faith dealt with the corporation through such agent, be estopped from denying his authority;
and where it is said 'if the corporation permits this means the same as 'if the thing is permitted by the
directing power of the corporation.’
  True it is that the signature of branch manager Lagrito appears below the typewritten word "NOTED"
at the bottom of respondents’ offer to purchase. However, can the mere "NOTING" of such an offer
be taken to mean an approval of the supposed sale. Quite the contrary, the very circumstance that
the offer to purchase was merely "NOTED" by the branch manager and not "approved", is a clear
indication that there is no perfected contract of sale to speak of.
 The representation of Roy Palasan, a mere clerk, that the manager had already approved the sale,
even if true, cannot bind the petitioner bank to a contract of sale with respondents, it being obvious
to us that such a clerk is not among the bank officers upon whom such putative authority may be
reposed by a third party.
 There is, thus, no legal basis to bind petitioner into any valid contract of sale with the respondents,
given the absolute absence of any approval or consent by any responsible officer of petitioner bank.

III. INTER-ASIA INVESTMENTS INDUSTRIES, INC., vs. COURT OF APPEALS and ASIA INDUSTRIES,
INC.,

FACTS:
 Inter-Asia Industries sold to Asia Industries, Inc. all its right, title and interest in and to all the
outstanding shares of stock of FARMACOR, INC. The Agreement was signed by Leonides P.
Gonzales and Jesus J. Vergara, presidents of petitioner and private respondent. Under the
Agreement, petitioner as seller made warranties and representations among which were [t]he
Minimum Guaranteed Net Worth of FARMACOR as of September 30, 1978 shall be Twelve Million
Pesos (P12,000,000.00).
 The Agreement was later amended with respect to the "Closing Date," and to the mode of payment
of the purchase price. The Agreement, as amended, provided that pending submission by SGV of
FARMACOR’s audited financial statements,
o private respondent may retain the sum of P7,500,000.00 out of the stipulated purchase price
of P19,500,000.00;
o that from this retained amount of P7,500,000.00, private respondent may deduct any shortfall
on the Minimum Guaranteed Net Worth of P12,000,000.00;
o and that if the amount retained is not sufficient to make up for the deficiency in the Minimum
Guaranteed Net Worth, petitioner shall pay the difference within 5 days from date of receipt
of the audited financial statements.
Respondent paid petitioner a total amount of P 12,000,000.00.
 From the STATEMENT OF INCOME AND DEFICIT submitted by SGV, it appears that FARMACOR
had a deficit of P11,244,225.00. Since the stockholder’s equity amounted to P10,000,000.00,
FARMACOR had a net worth deficiency of P1,244,225.00. The guaranteed net worth shortfall thus
amounted to P13,244,225.00. The adjusted contract price, therefore, amounted to P6,225,775.00
which is the difference between the contract price of P19,500,000.00 and the shortfall in the
guaranteed net worth of P13,224,225.00. Private respondent having already paid petitioner was
entitled to a refund of P5,744,225.00.
 Petitioner thereafter proposed, by letter, signed by its president, that private respondent’s claim for
refund be reduced to P4,093,993.00, it promising to pay the cost of the Northern Cotabato
Industries, Inc. (NOCOSII) superstructures in the amount of P759,570.00. Respondent agreed.
Petitioner, however, weiched on its promise. Petitioner’s total liability thus stood at P4,853,503.00
 Private respondent filed a complaint against petitioner with the Regional Trial Court of Makati for the
recovery of above-said amount of P4,853,503.00 plus interest.

ISSUE:
 Whether or not the letter-proposal (for the reduction of private respondent’s claim for refund upon
petitioner’s promise to pay the cost of NOCOSII superstructures in the amount of P759,570.00)
which was signed by its president has no legal force and effect against it as it was not authorized by
its board of directors

HELD:
 Yes.
  The general rule, in the absence of authority from the board of directors, no person, not even its
officers, can validly bind a corporation. A corporation is a juridical person, separate and distinct from
its stockholders and members, "having powers, attributes and properties expressly authorized by law
or incident to its existence
 Being a juridical entity, a corporation may act through its board of directors, which exercises almost
all corporate powers, lays down all corporate business policies and is responsible for the efficiency
of management, as provided in Section 23 of the Corporation Code of the Philippines.
 Under this provision, the power and responsibility to decide whether the corporation should enter
into a contract is lodged in the board, subject to the articles of incorporation, bylaws, or relevant
provisions of law.
 However, just as a natural person may authorize another to do certain acts for and on his behalf, the
board of directors may validly delegate some of its functions and powers to officers, committees or
agents. The authority of such individuals to bind the corporation is generally derived from law,
corporate bylaws or authorization from the board, either expressly or impliedly by habit, custom or
acquiescence in the general course of business.
 A corporate officer or agent may represent and bind the corporation in transactions with third
persons to the extent that [the] authority to do so has been conferred upon him, and this includes
powers as, in the usual course of the particular business, are incidental to, or may be implied from,
the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the corporation has caused person dealing
with the officer or agent to believe that it has conferred.
 [A]pparent authority is derived not merely from practice. Its existence may be ascertained through
o the general manner in which the corporation holds out an officer or agent as having the
power to act or, in other words the apparent authority to act in general, with which it clothes
him; or
o the acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers.
 It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other
parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of
a corporate officer with power to bind the corporation.
 True, private respondent accepted as correct the financial statements submitted to it when the
Agreement was executed. But petitioner expressly warranted that the SGV Reports "fairly present
or will present the financial position of FARMACOR." By such warranty, petitioner is estopped from
claiming that the SGV Reports are self-serving and biased. 1âwphi1

IV. PRIME WHITE CEMENT CORPORATION, vs. HONORABLE INTERMEDIATE APPELLATE COURT and
ALEJANDRO TE

FACTS:
 Plaintiff and defendant corporation thru its President, Mr. Zosimo Falcon and Justo C. Trazo, as Chairman
of the Board, entered into a dealership agreement whereby said plaintiff was obligated to act as the
exclusive dealer and/or distributor of its cement products in the entire Mindanao area for a term of five (5)
years
 Relying heavily on the dealership agreement, plaintiff entered into a written agreement with several
hardware stores dealing in buying and selling white cement in the Cities of Davao and Cagayan de Oro.
 After the plaintiff was assured by his supposed buyer that his allocation of 20,000 bags of white cement
can be disposed of, he informed the defendant corporation that he is making the necessary preparation
for the opening of the requisite letter of credit to cover the price of the due initial delivery.
 In reply to the aforesaid letter of the plaintiff, the defendant corporation thru its corporate secretary,
replied that the board of directors of the said defendant decided to impose certain conditions.
 Several demands to comply with the dealership agreement were made by the plaintiff to the defendant,
however, defendant refused to comply with the same, and plaintiff by force of circumstances was
constrained to cancel his agreement for the supply of white cement with third parties.
 Notwithstanding that the dealership agreement between the plaintiff and defendant in force, the defendant
corporation, in violation of, and with evident intention not to be bound by the terms and conditions thereof,
entered into an exclusive dealership agreement with a certain Napoleon Co for the marketing of white
cement in Mindanao hence, this suit.
  After trial, the trial court adjudged the corporation liable to Alejandro Te in the amount of P3,302,400.00
as actual damages, P100,000.00 as moral damages, and P10,000.00 as and for attorney's fees and
costs. The appellate court affirmed the said decision.

ISSUE:
 Wether or not the "dealership agreement" referred by the President and Chairman of the Board of
petitioner corporation is a valid and enforceable contract.

HELD:
 NO, the dealership agreement is not a valid and enforceable contract.
 Under the old Corporation Law, all corporate powers shall be exercised by the Board of Directors, except
as otherwise provided by law. Although it cannot completely abdicate its power and responsibility to act
for the juridical entity, the Board may expressly delegate specific powers to its President or any of its
officers.
 In the absence of such express delegation, a contract entered into by its President, on behalf of the
corporation, may still bind the corporation if the board should ratify the same expressly or impliedly.
o Implied ratification may take various forms — like silence or acquiescence; by acts showing
approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.
 Furthermore, even in the absence of express or implied authority by ratification, the President as such
may, as a general rule, bind the corporation by a contract in the ordinary course of business, provided the
same is reasonable under the circumstances.
 These rules are basic, but are all general and thus quite flexible. They apply where the President or other
officer, purportedly acting for the corporation, is dealing with a third person.

 The situation is quite different where a director or officer is dealing with his own corporation. In the instant
case respondent Te was not an ordinary stockholder; he was a member of the Board of Directors and
Auditor of the corporation as well. He was what is often referred to as a "self-dealing" director.
 A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his
corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his
own advantage and benefit. As corporate managers, directors are committed to seek the maximum
amount of profits for the corporation. This trust relationship "is not a matter of statutory or technical law. It
springs from the fact that directors have the control and guidance of corporate affairs and property and
hence of the property interests of the stockholders."
 On the other hand, a director's contract with his corporation is not in all instances void or voidable. If the
contract is fair and reasonable under the circumstances, it may be ratified by the stockholders provided a
full disclosure of his adverse interest is made.
 Section 32 of the Corporation Code provides,
o Sec. 32. Dealings of directors, trustees or officers with the corporation. — A contract of the
corporation with one or more of its directors or trustees or officers is voidable, at the option of
such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the approval of the
contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer, the contract with the officer has been previously authorized
by the Board of Directors.
o Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of
a contract with a director or trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the
members in a meeting called for the purpose: Provided, That full disclosure of the adverse
interest of the directors or trustees involved is made at such meeting: Provided, however, That
the contract is fair and reasonable under the circumstances.
 At the time of the contract, petitioner corporation had not even commenced the manufacture of white
cement, the reason why delivery was not to begin until 14 months later. He must have known that within
that period of six years, there would be a considerable rise in the price of white cement. In fact,
respondent Te's own Memorandum shows that in September, 1970, the price per bag was P14.50, and
by the middle of 1975, it was already P37.50.
 This unfairness in the contract is also a basis which renders a contract entered into by the President,
without authority from the Board of Directors, void or voidable, although it may have been in the ordinary
 course of business. We believe that the fixed price of P9.70 per bag for a period of five years was not fair
and reasonable.

V. REPUBLIC OF THE PHILIPPINES, vs. ACOJE MINING COMPANY, INC.

FACTS:
 Acoje Mining Company, Inc. wrote the Director of Posts to open a post, telegraph and money order
offices at its mining camp at Sta. Cruz, Zambales. Acting on the request, the Director of Posts reply
that if the company would provide for all essential equipment and assign an employee to perform the
duties of a postmaster he would agree to put up the offices requested, and that in cases where a
post office will be opened, it is the policy of this office to have the company assume direct
responsibility for whatever pecuniary loss may be suffered by the Bureau of Posts by reason of any
act of dishonesty, carelessness or negligence on the part of the employee of the company who is
assigned to take charge of the post office. The company informed the Director of Posts of the
passage by its board of directors of a resolution agreeing to all its conditions.
 The post office branch was opened with Hilario M. Sanchez as postmaster. On May 11, 1954, the
postmaster went on a three-day leave but never returned. The company immediately informed the
officials of the Manila Post Office and the provincial auditor of Zambales of Sanchez' disappearance
with the result that the accounts of the postmaster were checked and a shortage was found in the
amount of P13,867.24.
 The several demands have been made upon the company. Having failed, the government
commenced the present action seeking to recover the amount of Pl3,867.24. The company in its
answer denied liability for said amount contending that the resolution of the board of directors
wherein it assumed responsibility for the act of the postmaster is ultra vires, and in any event its
liability under said resolution is only that of a guarantor who answers only after the exhaustion of the
properties of the principal, aside from the fact that the loss claimed by the plaintiff is not supported
by the office record.

ISSUE:
 Whether or not the resolution adopted by the company is ultra vires and that the obligation it has
assumed is merely that of a guarantor.

HELD:
 The claim that the resolution adopted by the board of directors of appellant company is an ultra
vires act cannot be entertained it appearing that the same covers a subject which concerns the
benefit, convenience and welfare of its employees and their families.
 While as a rule an ultra vires act is one committed outside the object for which a corporation is
created as defined by the law of its organization and therefore beyond the powers conferred upon it
by law, there are however certain corporate acts that may be performed outside of the scope of the
powers expressly conferred if they are necessary to promote the interest or welfare of the
corporation.
 Thus, it has been held that "although not expressly authorized to do so a corporation may become a
surety where the particular transaction is reasonably necessary or proper to the conduct of its
business,” and here it is undisputed that the establishment of the local post office is a reasonable
and proper adjunct to the conduct of the business of appellant company. Indeed, such post office is
a vital improvement in the living condition of its employees and laborers who came to settle in its
mining camp which is far removed from the postal facilities or means of communication accorded to
people living in a city or municipality..
 Even assuming arguendo that the resolution in question constitutes an ultra vires act, the same
however is not void for it was approved not in contravention of law, customs, public order or public
policy. The term ultra vires should be distinguished from an illegal act for the former is merely
voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and
cannot be validated. It being merely voidable, an ultra vires act can be enforced or validated if there
are equitable grounds for taking such action.
 Here it is fair that the resolution be upheld at least on the ground of estoppel.
VI. MARIA CLARA PIROVANA ET AL., vs. THE DE LA RAMA STEAMSHIP CO.

FACTS:
 Don Esteban de la Rama distributed his shareholding among his five daughters, and his wife. The
other stockholders were given 40 shares each, while three stockholders, one share each, because
they merely represented the National Development Company. This Company was given
representation because at the latter had an outstanding bonded indebtedness to the National
Development Company.
 Enrico Pirovano became the president of the defendant company and under his management the
company grew and progressed by the time Pirovano was executed by the Japanese during the
occupation.
 Early in 1941, the Company had insured the life of Mr. Pirovano for a million pesos. The Company
proposed therefore that out of the proceeds of these policies the sum of P400,000 be set aside for
the minor children of the deceased, said sum of money to be convertible into 4,000 shares of the
stock of the Company, or 1,000 shares for each child. The first resolution granting to the Pirovano
children the proceeds was adopted by the Board of Directors at a meeting held on July 10, 1946.
 It appears that, although Don Esteban were agreeable to giving to the Pirovano children the amount
of P400,000, they did not realize that said Amount should be paid in the form of shares of stock, they
would be giving the Pirovano children more than what they intended to give because the value then
of the shares of stock was actually 3.6 times their par value, the donation would amount to a total of
P1,440,000.
 The Board of Directors of the De la Rama company, as a consequence, adopted a resolution
changing the form of the donation to the Pirovano children into a company's "right, title, and interest
as beneficiary in and to the proceeds of the abovementioned life insurance policies", subject to the
condition that said proceeds should be retained by the company as a loan drawing interest at the
rate of 5 per cent per annum and payable after the company "shall have first settled in full the
balance of its present remaining bonded indebtedness to the National Development Company.”
 On June 24, 1947, the Board of Directors approved a resolution that instead of the interest on the
loan being payable, together with the principal, said interest may be paid "whenever the company is
in a position to met said obligation".
 On February 26, 1948, Mrs. Pirovano executed a public document in which she formally accepted
the donation. The Dela Rama company took "official notice" of this formal acceptance at a meeting
held. In connection, the proposition of Mrs. Pirovano to buy the house at New Rochelle, New York,
which would be paid from the funds held in trust belonging to her minor children, was approved in a
resolution adopted on the same date.
 On September 14, 1950, another meeting was held to discuss the propriety of the donation. At this
meeting the president expressed the view that, since the corporation was not authorized by its
charter to make the donation to the Pirovano children and the majority of the stockholders was in
favor of making provision for said children, the manner this could be done would be to declare a
cash dividend in favor of the stockholders in the exact amount of the insurance proceeds and
thereafter have the stockholders make the donation to the children in their individual capacity.
Notwithstanding this proposal of the president, the board took no action on the matter.
 On March 8, 1951, at a stockholders' meeting the majority of the stockholders' voted to revoke the
resolution approving the donation to the Pirovano children.
 In view of the resolution declaring that the corporation failed to comply with the condition set for the
effectivity of the donation and revoking the approval given to it by the corporation, and considering
that said donation had long been perfected and consummated, the minor children of the late Enrico
Pirovano, represented by their mother and guardian, Estefania R. de Pirovano, demanded the
payment of the credit due them as of December 31, 1951, amounting to P564,980.89, and this
payment having been refused, they instituted the present action in the Court of First Instance of
Rizal wherein they prayed that the be granted an alternative relief

ISSUE:
 Can defendant corporation give by way of donation the proceeds of said insurance policies to the
minor children of the late Enrico Pirovano under the law or its articles of corporation, or is that
donation an ultra vires act?

HELD:
 Yes, such donation is not void.
 It is important for us to examine the articles of incorporation of the De la Rama company to see if the
act or donation is outside of their scope.
 We find that the corporation was given broad and almost unlimited powers to carry out the purposes
for which it was organized among them,
o “To invest and deal with the moneys of the company not immediately required, in such
manner as from time to time may be determined" and,
o “ "to aid in any other manner any person, association, or corporation of which any obligation
or in which any interest is held by this corporation or in the affairs or prosperity of which this
corporation has a lawful interest."
 The word deal is broad enough to include any manner of disposition, and refers to moneys not
immediately required by the corporation, and such disposition may be made in such manner as from
time to time may be determined by the corporations.
 The donation in question undoubtedly comes within the scope of this broad power for it is a fact
appearing in the evidence that the insurance proceeds were not immediately required when they
were given away.
 And if the former had been sanctioned and had been considered valid and intra vires, we see no
plausible reasons why the latter should now be deemed ultra vires. It may perhaps be argued that
the donation given to the children of the late Enrico Pirovano is so large and disproportionate that it
can hardly be considered a pension of gratuity that can be placed on a par with the instances above
mentioned, but this argument overlooks one consideration: the gratuity here given was not merely
motivated by pure liberality or act of generosity, but by a deep sense of recognition of the valuable
services rendered by the late Enrico Pirovano which had immensely contributed to the growth of the
corporation to the extent that from its humble capitalization it blossomed into a multi-million
corporation that it is today.
 In other words of the very resolutions granting the donation or gratuity, said donation was given not
only because the company was so indebted to him that it saw fit and proper to make provisions for
his children, but it did so out of a sense of gratitude.
 In making this pronouncement, advertence should made of the nature of the ultra vires act that is in
question. A little digression needs be made on this matter to show the different legal effect that may
result consequent upon the performance of a particular ultra vires act on the part of the corporation.
Authorities may be cited interpreting or defining, extent and scope of an ultra vires act, but all of
them are uniform and unanimous that the same may be either an act performed merely outside the
scope of the powers granted to it by it articles of incorporation, or one which is contrary to law or
violative of any principle which will void any contract whether done individually or collectively.
 In other words, a distinction should be made between corporate acts or contracts which are illegal
and those which are merely ultra vires. The former contemplates the doing of an act which is
contrary to law, morals, or public policy or public duty, and are, like similar transactions between the
individuals void. They cannot serve as basis of a court action, nor require validity ultra vires acts on
the other hand, or those which are not illegal and void ab initio, but are merely within are not illegal
and void ab initio, but are not merely within the scope of the articles of incorporation, are merely
voidable and may become binding and enforceable when ratified by the stockholders.
o Strictly speaking, an ultra vires act is one outside the scope of the power conferred by the
legislature, and although the term has been used indiscriminately, it is properly
distinguishable from acts which are illegal, in excess or abuse of power, or executed in an
unauthorized manner, or acts within corporate powers but outside the authority of particular
officers or agents
 Since it is not contended that the donation under consideration is illegal, or contrary to any of the
express provision of the articles of incorporation, nor prejudicial to the creditors of the defendant
corporation, we cannot but logically conclude, on the strength of the authorities we have quoted
above, that said donation, even if ultra vires in the supposition we have adverted to, is not voiD