Professional Documents
Culture Documents
shares
PUNO, J.:
2
The controversy at bench arose from a complaint filed by private
respondents,1 namely, Florentina Fontecha, Mila Refuerzo, Marcial
Mamaril, Perfecto Bautista, Edward Mamaril, Marissa Pascual and Teresita Lopez Marquez
Allan Pimentel, against their employer Lopez Realty Incorporated
(petitioner) and its majority stockholder, Asuncion Lopez Gonzales,
for alleged non-payment of their gratuity pay and other benefits.2
7830
The case was docketed as NLRC-NCR Case No. 2-2176-82.
shares
Lopez Realty, Inc., is a corporation engaged in real estate business,
while petitioner Asuncion Lopez Gonzales is one of its majority
shareholders. Her interest in the company vis-a-vis the other
shareholders is as follows: 3
Arturo F. Lopez 1
7830 share
shares 6
4 Leo Rivera
Rosendo de Leon 1
4 share
shares Except for Arturo F. Lopez, the rest of the shareholders also sit as
members of the Board of Directors.
5
As found by the Labor arbiter.3 sometime in 1978, Arturo Lopez
submitted a proposal relative to the distribution of certain assets of
Benjamin Bernardino petitioner corporation among its three (3) main shareholders. The
proposal had three (3) aspects, viz: (1) the sale of assets of the
company to pay for its obligations; (2) the transfer of certain assets Resolved, as it is hereby resolved that the gratuity (pay) of the
of the company to its three (3) main shareholders, while some other employees be given as follows:
assets shall remain with the company; and (3) the reduction of
employees with provision for their gratuity pay. The proposal was
deliberated upon and approved in a special meeting of the board of (a) Those who will be laid off be given the full amount of
directors held on April 17, 1978. gratuity;
It appears that petitioner corporation approved two (2) resolutions (b) Those who will be retained will receive 25% of their gratuity
providing for the gratuity pay of its employees, viz: (a) Resolution (pay) due on September 1, 1981, and another 25% on January 1,
No. 6, Series of 1980, passed by the stockholders in a special 1982, and 50% to be retained by the office in the meantime.
meeting held on September 8, 1980, resolving to set aside, twice a (emphasis supplied)
year, a certain sum of money for the gratuity pay of its retiring
employees and to create a Gratuity Fund for the said contingency;
and (b) Resolution No. 10, Series of 1980, setting aside the amount
Private respondents were the retained employees of petitioner
of P157,750.00 as Gratuity Fund covering the period from 1950 up
corporation. In a letter, dated August 31, 1981, private respondents
to 1980.
requested for the full payment of their gratuity pay. Their request
was granted in a special meeting held on September 1, 1981. The
relevant, portion of the minutes of the said board meeting reads:
Meanwhile, on July 28, 1981, board member and majority
stockholder Teresita Lopez Marquez died.
Respondents' (petitioners') allegation that the three (3) With regard to the award of service incentive leave and others, the
complainants, Mila E. Refuerzo, Marissa S. Pascual and Edward Commission finds no cogent reason to disturb the appealed
Mamaril, who had resigned after filing the complaint on February 8, decision.
1982, were precluded to (sic) receive gratuity because the said
resolutions referred to only retiring employee could not be given
credence. A reading of Resolutions dated 17 August 1981 and 1 We affirm.
September 1981 disclosed that there were periods mentioned for
the payment of complainants' gratuities. This disproves
respondents' argument allowing gratuities upon retirement of
WHEREFORE, let the appealed decision be, as it is hereby,
employees. Additionally, the proposed distribution of assets (Exh. C-
AFFIRMED and let the instant appeal (be) dismissed for lack of
1) filed by Mr. Arturo F. Lopez also made mention of gratuity pay, " .
merit.
. . (wherein) an employee who desires to resign from the LRI will be
given the gratuity pay he or she earned." (Emphasis supplied) Let us
be reminded, too, that the complainants' resignation was not
voluntary but it was pressurized (sic) due to "power struggle" which SO ORDERED.
Petitioners reconsidered.7 In their motion for reconsideration, Lopez Gonzales was not duly notified of the said special meetings.
petitioners assailed the validity of the board resolutions passed on They aver, further, that said board resolutions were not ratified by
August 17, 1981 and September 1, 1981, respectively, and claimed, the stockholders of the corporation pursuant to Section 28 1/2 of
for the first time, that petitioner Asuncion Lopez Gonzales was not the Corporation Law (Section 40 of the Corporation Code). They also
notified of the special board meetings held on said dates. The insist that the gratuity pay must be given only to the retiring
motion for reconsideration was denied by the Second Division on employees, to the exclusion of the retained employees or those
July 24, 1986. who voluntarily resigned from their posts.
On September 4, 1986, petitioners filed another motion for At the outset, we note that petitioners allegation on lack of notice
reconsideration. Again, the motion was denied by public to petitioner Asuncion Lopez Gonzales was raised for the first time
respondent in a Minute Resolution dated November 19, 1986.8 in the in their motion for reconsideration filed before public
respondent National Labor Relations Commission, or after said
public respondent had affirmed the decision of the labor arbiter. To
Hence, the petition. As prayed for, we issued a Temporary stress, in their appeal before the NLRC, petitioners never raised the
Restraining Order,9 enjoining public respondent from enforcing or issue of lack of notice to Asuncion Lopez Gonzales. The appeal dealt
executing the Resolution, dated November 20, 1986 (sic), in NLRC- with (a) the failure of the stockholders to ratify the assailed
NCR-2-2176-82. 10 resolutions and (b) the alleged "mistake" committed by petitioner
corporation in giving the gratuity pay to some of its employees who
are yet to retire from employment.
The sole issue is whether or not public respondent acted with grave
abuse of discretion in holding that private respondents are entitled
to receive their gratuity pay under the assailed board resolutions In their comment, 11 private respondents maintain that the new
dated August 17, 1951 and September 1, 1981. ground of lack of notice was not raised before the labor arbiter,
hence, petitioners are barred from raising the same on appeal.
Private respondents claim, further, that such failure on the part of
petitioners, had deprived them the opportunity to present evidence
Petitioners contend that the board resolutions passed on August 17,
that, in a subsequent special board meeting held on September 29,
1981 and September 1, 1981, granting gratuity pay to their retained
1981, the subject resolution dated September 1, 1981, was
employees, are ultra vires on the ground that petitioner Asuncion
unanimously approved by the board of directors of petitioner directors in subsequent legal meeting, or impliedly, by the
corporation, including petitioner Asuncion Lopez Gonzales. 12 corporation's subsequent course of conduct. Thus, in one case, 17 it
was held:
The cited provision is not applicable to the case at bench as it refers REYES, J.:
to the sale, lease, exchange or disposition of all or substantially all
of the corporation's assets, including its goodwill. In such a case, the
action taken by the board of directors requires the authorization of
This is an action originally brought in the Court of First Instance of
the stockholders on record.
Rizal, Quezon City Branch, to recover possesion of registered land
situated in barrio Tatalon, Quezon City.
II. The trial court erred in admitting the third amended complaint.
Defendant, in his answer, sets up prescription and title in himself
thru "open, continuous, exclusive and public and notorious
possession (of land in dispute) under claim of ownership, adverse to
the entire world by defendant and his predecessor in interest" from III. The trial court erred in denying defendant's motion to strike.
"time in-memorial". The answer further alleges that registration of
the land in dispute was obtained by plaintiff or its predecessors in
interest thru "fraud or error and without knowledge (of) or interest IV. The trial court erred in including in its decision land not involved
either personal or thru publication to defendant and/or in the litigation.
predecessors in interest." The answer therefore prays that the
complaint be dismissed with costs and plaintiff required to reconvey
the land to defendant or pay its value.
V. The trial court erred in holding that the land in dispute is covered
by transfer certificates of Title Nos. 37686 and 37677.
After trial, the lower court rendered judgment for plaintiff, declaring
defendant to be without any right to the land in question and
Vl. The trial court erred in not finding that the defendant is the true
ordering him to restore possession thereof to plaintiff and to pay
and lawful owner of the land.
joint venture with another where the nature of that venture is in
line with the business authorized by its charter." (Wyoming-Indiana
VII. The trial court erred in finding that the defendant is liable to pay Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of
the plaintiff the amount of P132.62 monthly from January, 1940, Corp., 1082.) There is nothing in the record to indicate that the
until he vacates the premises. venture in which plaintiff is represented by Gregorio Araneta, Inc. as
"its managing partner" is not in line with the corporate business of
either of them.
VIII. The trial court erred in not ordering the plaintiff to reconvey
the land in litigation to the defendant.
Errors II, III, and IV, referring to the admission of the third amended
complaint, may be answered by mere reference to section 4 of Rule
As to the first assigned error, there is nothing to the contention that 17, Rules of Court, which sanctions such amendment. It reads:
the present action is not brought by the real party in interest, that
is, by J. M. Tuason and Co., Inc. What the Rules of Court require is
that an action be brought in the name of, but not necessarily by, the Sec. 4. Amendment to conform to evidence. — When issues not
real party in interest. (Section 2, Rule 2.) In fact the practice is for an raised by the pleadings are tried by express or implied consent of
attorney-at-law to bring the action, that is to file the complaint, in the parties, they shall be treated in all respects, as if they had been
the name of the plaintiff. That practice appears to have been
raised in the pleadings. Such amendment of the pleadings as may be
followed in this case, since the complaint is signed by the law firm of necessary to cause them to conform to the evidence and to raise
Araneta and Araneta, "counsel for plaintiff" and commences with these issues may be made upon motion of any party at my time,
the statement "comes now plaintiff, through its undersigned even of the trial of these issues. If evidence is objected to at the trial
counsel." It is true that the complaint also states that the plaintiff is on the ground that it is not within the issues made by the pleadings,
"represented herein by its Managing Partner Gregorio Araneta, the court may allow the pleadings to be amended and shall be so
Inc.", another corporation, but there is nothing against one
freely when the presentation of the merits of the action will be
corporation being represented by another person, natural or subserved thereby and the objecting party fails to satisfy the court
juridical, in a suit in court. The contention that Gregorio Araneta, that the admission of such evidence would prejudice him in
Inc. can not act as managing partner for plaintiff on the theory that
maintaining his action or defense upon the merits. The court may
it is illegal for two corporations to enter into a partnership is grant a continuance to enable the objecting party to meet such
without merit, for the true rule is that "though a corporation has no evidence.
power to enter into a partnership, it may nevertheless enter into a
that plaintiff is the registered owner of lot No. 4-B-3-C, situate in
barrio Tatalon, Quezon City, with an area of 5,297,429.3 square
Under this provision amendment is not even necessary for the meters, more or less, covered by transfer certificate of title No.
purpose of rendering judgment on issues proved though not 37686 of the land records of Rizal province, and of lot No. 4-B-4,
alleged. Thus, commenting on the provision, Chief Justice Moran situated in the same barrio, having an area of 74,789 square meters,
says in this Rules of Court: more or less, covered by transfer certificate of title No. 37677 of the
land records of the same province, both lots having been originally
registered on July 8, 1914 under original certificate of title No. 735.
Under this section, American courts have, under the New Federal The identity of the lots was established by the testimony of Antonio
Rules of Civil Procedure, ruled that where the facts shown entitled Manahan and Magno Faustino, witnesses for plaintiff, and the
plaintiff to relief other than that asked for, no amendment to the identity of the portion thereof claimed by defendant was
complaint is necessary, especially where defendant has himself established by the testimony of his own witness, Quirico Feria. The
raised the point on which recovery is based, and that the appellate combined testimony of these three witnesses clearly shows that the
court treat the pleadings as amended to conform to the evidence, portion claimed by defendant is made up of a part of lot 4-B-3-C and
although the pleadings were not actually amended. (I Moran, Rules major on portion of lot 4-B-4, and is well within the area covered by
of Court, 1952 ed., 389-390.) the two transfer certificates of title already mentioned. This fact
also appears admitted in defendant's answer to the third amended
complaint.
Our conclusion therefore is that specification of error II, III, and IV
are without merit..
As the land in dispute is covered by plaintiff's Torrens certificate of
title and was registered in 1914, the decree of registration can no
Let us now pass on the errors V and VI. Admitting, though his longer be impugned on the ground of fraud, error or lack of notice
attorney, at the early stage of the trial, that the land in dispute "is to defendant, as more than one year has already elapsed from the
that described or represented in Exhibit A and in Exhibit B enclosed issuance and entry of the decree. Neither court the decree be
in red pencil with the name Quirino Bolaños," defendant later collaterally attacked by any person claiming title to, or interest in,
changed his lawyer and also his theory and tried to prove that the the land prior to the registration proceedings. (Soroñgon vs.
land in dispute was not covered by plaintiff's certificate of title. The Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in
evidence, however, is against defendant, for it clearly establishes derogation of that of plaintiff, the registered owner, be acquired by
prescription or adverse possession. (Section 46, Act No. 496.)
Adverse, notorious and continuous possession under claim of Error No. VIII is but a consequence of the other errors alleged and
ownership for the period fixed by law is ineffective against a Torrens needs for further consideration.
title. (Valiente vs. Judge of CFI of Tarlac,2 etc., 45 Off. Gaz., Supp. 9,
p. 43.) And it is likewise settled that the right to secure possession
under a decree of registration does not prescribed. (Francisco vs. During the pendency of this case in this Court appellant, thru other
Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent decision of this Court counsel, has filed a motion to dismiss alleging that there is pending
on this point is that rendered in the case of Jose Alcantara et al., vs. before the Court of First Instance of Rizal another action between
Mariano et al., 92 Phil., 796. This disposes of the alleged errors V the same parties and for the same cause and seeking to sustain that
and VI. allegation with a copy of the complaint filed in said action. But an
examination of that complaint reveals that appellant's allegation is
not correct, for the pretended identity of parties and cause of action
As to error VII, it is claimed that `there was no evidence to sustain in the two suits does not appear. That other case is one for recovery
the finding that defendant should be sentenced to pay plaintiff of ownership, while the present one is for recovery of possession.
P132.62 monthly from January, 1940, until he vacates the premises.' And while appellant claims that he is also involved in that order
But it appears from the record that that reasonable compensation action because it is a class suit, the complaint does not show that
for the use and occupation of the premises, as stipulated at the such is really the case. On the contrary, it appears that the action
hearing was P10 a month for each hectare and that the area seeks relief for each individual plaintiff and not relief for and on
occupied by defendant was 13.2619 hectares. The total rent to be behalf of others. The motion for dismissal is clearly without merit.
paid for the area occupied should therefore be P132.62 a month. It
is appears from the testimony of J. A. Araneta and witness Emigdio G.R. No. L-15092 May 18, 1962
Tanjuatco that as early as 1939 an action of ejectment had already
been filed against defendant. And it cannot be supposed that
defendant has been paying rents, for he has been asserting all along ALFREDO MONTELIBANO, ET AL., plaintiffs-appellants,
that the premises in question 'have always been since time
vs.
immemorial in open, continuous, exclusive and public and notorious
possession and under claim of ownership adverse to the entire BACOLOD-MURCIA MILLING CO., INC., defendant-appellee.
world by defendant and his predecessors in interest.' This
assignment of error is thus clearly without merit.
Appeal on points of law from a judgment of the Court of First ACTA No. 11
Instance of Occidental Negros, in its Civil Case No. 2603, dismissing SESSION DE LA JUNTA DIRECTIVA
plaintiff's complaint that sought to compel the defendant Milling
Company to increase plaintiff's share in the sugar produced from AGOSTO 20, 1936
their cane, from 60% to 62.33%, starting from the 1951-1952 crop
year.1äwphï1.ñët
xxx xxx xxx
After trial, the court below rendered judgment upholding the stand
Appellants signed and executed the printed Amended Milling of the defendant Milling company, and dismissed the complaint.
Contract on September 10, 1936, but a copy of the resolution of Thereupon, plaintiffs duly appealed to this Court.
August 10, 1936, signed by the Central's General Manager, was not
attached to the printed contract until April 17, 1937; with the
notation — We agree with appellants that the appealed decisions can not stand.
It must be remembered that the controverted resolution was
adopted by appellee corporation as a supplement to, or further
Las enmiendas arriba transcritas forman parte del contrato de amendment of, the proposed milling contract, and that it was
molienda enmendado, otorgado por — y la Bacolod-Murcia Milling approved on August 20, 1936, twenty-one days prior to the signing
Co., Inc. by appellants on September 10, of the Amended Milling Contract
itself; so that when the Milling Contract was executed, the
concessions granted by the disputed resolution had been already
In 1953, the appellants initiated the present action, contending that incorporated into its terms. No reason appears of record why, in the
three Negros sugar centrals (La Carlota, Binalbagan-Isabela and San face of such concessions, the appellants should reject them or
Carlos), with a total annual production exceeding one-third of the consider them as separate and apart from the main amended
production of all the sugar central mills in the province, had already milling contract, specially taking into account that appellant Alfredo
granted increased participation (of 62.5%) to their planters, and Montelibano was, at the time, the President of the Planters
that under paragraph 9 of the resolution of August 20, 1936, Association (Exhibit 4, p. 11) that had agitated for the concessions
heretofore quoted, the appellee had become obligated to grant embodied in the resolution of August 20, 1936. That the resolution
similar concessions to the plaintiffs (appellants herein). The formed an integral part of the amended milling contract, signed on
appellee Bacolod-Murcia Milling Co., inc., resisted the claim, and September 10, and not a separate bargain, is further shown by the
defended by urging that the stipulations contained in the resolution fact that a copy of the resolution was simply attached to the printed
contract without special negotiations or agreement between the save as modified by its resolution of August 20, 1936; and we are
parties. satisfied that such was also the understanding of appellants herein,
and that the minds of the parties met upon that basis. Otherwise
there would have been no consent or "meeting of the minds", and
It follows from the foregoing that the terms embodied in the no binding contract at all. But the conduct of the parties indicates
resolution of August 20, 1936 were supported by the same causa or that they assumed, and they do not now deny, that the signing of
consideration underlying the main amended milling contract; i.e., the contract on September 10, 1936, did give rise to a binding
the promises and obligations undertaken thereunder by the agreement. That agreement had to exist on the basis of the printed
planters, and, particularly, the extension of its operative period for terms as modified by the resolution of August 20, 1936, or not at all.
an additional 15 years over and beyond the 30 years stipulated in Since there is no rational explanation for the company's assenting to
the original contract. Hence, the conclusion of the court below that the further concessions asked by the planters before the contracts
the resolution constituted gratuitous concessions not supported by were signed, except as further inducement for the planters to agree
any consideration is legally untenable. to the extension of the contract period, to allow the company now
to retract such concessions would be to sanction a fraud upon the
planters who relied on such additional stipulations.
They hold such office charged with the duty to act for the
corporation according to their best judgment, and in so doing they
cannot be controlled in the reasonable exercise and performance of
such duty. Whether the business of a corporation should be the appellee Bacolod-Murcia Milling Company is, under the terms of
operated at a loss during depression, or close down at a smaller its Resolution of August 20, 1936, duty bound to grant similar
loss, is a purely business and economic problem to be determined increases to plaintiffs-appellants herein.
by the directors of the corporation and not by the court. It is a well-
known rule of law that questions of policy or of management are
left solely to the honest decision of officers and directors of a WHEREFORE, the decision under appeal is reversed and set aside;
corporation, and the court is without authority to substitute its and judgment is decreed sentencing the defendant-appellee to pay
judgment of the board of directors; the board is the business plaintiffs-appellants the differential or increase of participation in
manager of the corporation, and so long as it acts in good faith its the milled sugar in accordance with paragraph 9 of the appellee
orders are not reviewable by the courts. (Fletcher on Corporations, Resolution of August 20, 1936, over and in addition to the 60%
Vol. 2, p. 390). expressed in the printed Amended Milling Contract, or the value
thereof when due, as follows:
2.333% to appellant Gonzaga & Co., for the 1951-1952 crop year;
62.333% for the 1951-52 crop year; and to all appellants thereafter —
64.2% for 1952-53; 4.2% for the 1952-1953 crop year;
64.3% for 1953-54; 4.3% for the 1953-1954 crop year;
64.5% for 1954-55; and 4.5% for the 1954-1955 crop year;
63.5% for 1955-56, 3.5% for the 1955-1956 crop year;
with interest at the legal rate on the value of such differential P583,813.59, with interest thereon at the rate of per cent from the
during the time they were withheld; and the right is reserved to date of filing of the complaint, plus an additional amount equivalent
plaintiffs-appellants to sue for such additional increases as they may to 20 per cent of said sum of P538,813.59 as damages by way of
be entitled to for the crop years subsequent to those herein attorney's fees and the costs of action.
adjudged.
First. — That the contract executed between the plaintiffs and the
defendant is a renumerative donation.
This is an appeal from a decision of the Court of First Instance of
Rizal declaring the donation made by the defendant in favor of the
minor children of the late Enrico Pirovano of the proceeds of the
insurance policies taken on his life valid and binding, and ordering Second. — That said contract or donation is not ultra vires, but an
said defendant to pay to said minor children the sum of act executed within the powers of the defendant corporation in
accordance with its articles of incorporation and by laws, sanctioned Seventh. — That due demands were made by the plaintiffs and their
and approved by its Board of Directors and stockholders; and attorneys and these demands were rejected for no justifiable or
subsequently ratified by other subsequent acts of the defendant legal grounds.
company.
The President stated that the principal purpose for which the Whereas, the late Enrico Pirovano, President and General Manager
meeting had been called was to discuss the advisability of making of the De la Rama Steamship Company, died in Manila sometime in
some form of compensation to the minor heirs of the late Enrico November, 1944:
Pirovano, former President and General Manager of the Company.
As every member of the Board knows, said the President, the late
Enrico Pirovano who was largely responsible for the very successful Whereas, the said Enrico Pirovano was largely responsible for the
development of the activities of the Company prior to war was rapid and very successful development of the activities of thus
killed by the Japanese in Manila sometime in 1944 leaving as his company;
only heirs four minor children, Maria Carla, Esteban, Enrico and
John Albert. Early in 1941, explained the President, the Company
had insured the life of Mr. Pirovano for a million pesos. Following
the occupation of the Philippines by Japanese forces the Company Whereas, early in 1941 this company insured the life of said Enrico
was unable to pay the premiums on those policies issued by Filipino Pirovano in various Philippine and American Life Insurance
companies and these policies had lapsed. But with regards to the companies for the total sum of P1,000,000;
York Office of the De la Rama Steamship Co., Inc. had kept up
deceased, to wit: Esteban, Maria Carla, Enrico and John Albert, all
surnamed Pirovano, to obtain 1,000 shares at par;
Whereas, the said Enrico Pirovano is survived by his widow,
Estefania Pirovano and four minor children, to wit: Esteban, Maria
Carla, Enrico and John Albert, all surnamed Pirovano;lawphil.net
Resolved, further, that in view of the fact that under the provisions
of the indenture with the National Development Company, it is
necessary that action herein proposed to be confirmed by the Board
Whereas, said Enrico Pirovano left practically nothing to his heirs
of Directors of that company, the Secretary is hereby instructed to
and it is but fit proper that this company which owes so much to the send a copy of this resolution to the proper officers of the National
deceased should make some provision for his children; Development Company for appropriate action. (Exhibit B)
Whereas, this company paid premium on Mr. Pirovano's life The above resolution, which was adopted on July 10, 1946, was
insurance policies for a period of only 4 years so that it will receive submitted to the stockholders of the De la Rama company at a
from the insurance companies sums of money greatly in excess of meeting properly convened, and on that same date, July 10, 1946,
the premiums paid by this company. the same was duly approved.
Be it resolved, That out of the proceeds to be collected from the life It appears that, although Don Esteban and the Members of his
insurance policies on the life of the late Enrico Pirovano, the sum of family were agreeable to giving to the Pirovano children the amount
P400,000 be set aside for equal division among the 4 minor children of P400,000 out of the proceeds of the insurance policies taken on
of the deceased, to wit: Esteban, Maria Carla, Enrico and John the life of Enrico Pirovano, they did not realize that when they
Albert, all surnamed Pirovano, which sum of money shall be provided in the above referred two resolutions that said Amount
convertible into shares of stock of the De la Rama Steamship
should be paid in the form of shares of stock, they would be actually
Company, at par and, for that purpose, that the present registered giving to the Pirovano children more than what they intended to
stockholders of the corporation be requested to waive their give. This came about when Lourdes de la Rama, wife of Sergio
preemptive right to 4,000 shares of the unissued stock of the Osmeña, Jr., showed to the latter copies of said resolutions and
company in order to enable each of the 4 minor heirs of the asked him to explain their import and meaning, and it was value
then that Osmeña explained that because the value then of the
shares of stock was actually 3.6 times their par value, the donation Esteban, adopted a resolution changing the form of the donation to
their value, the donation, although purporting to be only P400,00, the Pirovano children from a donation of 4,000 shares of stock as
would actually amount to a total of P1,440,000. He further originally planned into a renunciation in favor of the children of all
explained that if the Pirovano children would given shares of stock the company's "right, title, and interest as beneficiary in and to the
in lieu of the amount to be donated, the voting strength of the five proceeds of the abovementioned life insurance policies", subject to
daughters of Don Esteban in the company would be adversely the express condition that said proceeds should be retained by the
affected in the sense that Mrs. Pirovano would be adversely company as a loan drawing interest at the rate of 5 per cent per
affected in the sense that Mrs. Pirovano would have a voting power annum and payable to the Pirovano children after the company
twice as much as that of her sisters. This caused Lourdes de la Rama "shall have first settled in full the balance of its present remaining
to write to the secretary of the corporation, Atty. Marcial Lichauco, bonded indebtedness in the sum of approximately P5,000,000"
asking him to cancel the waiver she supposedly gave of her pre- (Exhibit C). This resolution was concurred in by the representatives
emptive rights. Osmeña elaborated on this matter at the annual of the National Development Company. The pertinent portion of the
meeting of the stockholders held on December 12, 1946 but at said resolution reads as follows:
meeting it was decided to leave the matter in abeyance pending
further action on the part of the members of the De la Rama family.
Be resolved, that out of gratitude to the late Enrico Pirovano this
Company renounce as it hereby renounces, all of his right, title, and
Osmeña, in the meantime, took up the matter with Don Esteban interest as beneficiary in and to the proceeds of the
and, as consequence, the latter, on December 30, 1946, addressed abovementioned life insurance policies in favor of Esteban, Maria
to Marcial Lichauco a letter stating, among other things, that "in Carla, Enrico and John Albert, all surnamed Pirovano, subject to the
view of the total lack of understanding by me and my daughters of terms and conditions herein after provided;
the two Resolutions abovementioned, namely, Directors' and
Stockholders' dated July 10, 1946, as finally resolved by the majority
of the Stockholders and Directors present yesterday, that you That the proceeds of said insurance policies shall be retained by the
consider the abovementioned resolutions nullified." (Exhibit CC). Company in the nature of a loan drawing interest at the rate of 5
per cent annum from the date of receipt of payment by the
Company from the various insurance companies above-mentioned
On January 6, 1947, the Board of Directors of the De la Rama until the time the time the same amounts are paid to the minor
company, as a consequence of the change of attitude of Don heirs of Enrico Pirovano previously mentioned;
have first settled in full its bonded indebtedness, said interest may
be paid to the Pirovano children "whenever the company is in a
That all amounts received from the above-mentioned policies shall position to met said obligation" (Exhibit D), and on February 26,
be divided equally among the minors heirs of said Enrico Pirovano; 1948, Mrs. Pirovano executed a public document in which she
formally accepted the donation (Exhibit H). The Dela Rama company
took "official notice" of this formal acceptance at a meeting held by
That the company shall proceed to pay the proceeds of said its Board of Directors on February 26, 1948.
insurance policies plus interests that may have accrued to each of
the heirs of the said Enrico Pirovano or their duly appointed
representatives after the Company shall have first settled in full the In connection with the above negotiations, the Board of Directors
balance of its present remaining bonded indebtedness in the sum of
took up at its meeting on July 25, 1949, the proposition of Mrs.
the approximately P5,000,000. Pirovano to buy the house at New Rochelle, New York, owned by
the Demwood Realty, a subsidiary of the De la Rama company at its
original costs of $75,000, which would be paid from the funds held
The above resolution was carried out by the company and Mrs. in trust belonging to her minor children. After a brief discussion
Estefania R. Pirovano, the latter acting as guardian of her children, relative to the matter, the proposition was approved in a resolution
by executing a Memorandum Agreement on January 10, 1947 and adopted on the same date.
June 17, 1947, respectively, stating therein that the De la Rama
Steamship Co., Inc., shall enter in its books as a loan the proceeds of
the life insurance policies taken on the life of Pirovano totalling The formal transfer was made in an agreement signed on
S321,500, which loan would earn interest at the rate of 5 per cent September 5, 1949 by Mrs. Pirovano, as guardian of her children,
per annum. Mrs. Pirovano, in executing the agreement, acted with and by the De la Rama company, represented by its new General
the express authority granted to her by the court in an order dated Manager, Sergio Osmeña, Jr. The transfer of this property was
March 26, 1947. approved by the court in its order of September 20,
1949.lawphil.net
Whereas, early in 1941 this company insured the life of said Enrico
Before we proceed further, it is convenient to state here in passing Pirovano in various Philippine and American Life Insurance
that, before the Board of Directors had approved its resolution of companies for the total sum of P1,000,000;
January 6, 1947, as later amended by another resolution adopted
on June 24, 1947, the corporation had already decided to give to
the minor children of the late Enrico Pirovano the sum of P400,000 Whereas, the said Enrico Pirovano is survived by his widow,
out of the proceeds of the insurance policies taken on his life in the Estefania Pirovano and 4 minor children, to wit: Esteban, Maria
form of shares, and that when this form was considered Carla, Enrico and John Albert, all surnamed Pirovano;
objectionable because its result and effect would be to give to said
children a much greater amount considering the value then of the
stock of the corporation, the Board of Directors decided to amend
Whereas, the said Enrico Pirovano left practically nothing to his
the donation in the form and under the terms stated in the
heirs and it is but fit and proper that this company which owes so
aforesaid resolutions. Thus, in the original resolution approved by
much to the deceased should make some provisions for his children;
the Board of Directors on July 10, 1946, wherein the reasons for
granting the donation to the minor children of the late Enrico
Pirovano were clearly, we find out the following revealing
statements: Whereas, this company paid premiums on Mr. Pirovano's life
insurance policies for a period of only 4 years so that it will receive
from the insurance companies sums of money greatly in excess of
the premiums paid by the company,
Whereas, the late Enrico Pirovano President and General Manager
of the De la Rama Steamship Company, died in Manila sometime in
November, 1944;
Again, in the resolution approved by the Board of Directors on
January 6, 1947, we also find the following expressive statements
which are but a reiteration of those already expressed in the Be it resolved, that out of gratitude to the late Enrico Pirovano this
original resolution: Company renounce as it hereby renounces, . . . .
Whereas, the late Enrico Pirovano, President and General Manager From the above it clearly appears that the corporation thought of
of the De la Rama Steamship Co., Inc., died in Manila sometime giving the donation to the children of the late Enrico Pirovano
during the latter part of the year 1944; because he "was to a large extent responsible for the rapid and very
successful development and expansion of the activities of this
company"; and also because he "left practically nothing to his heirs
Whereas, the said Enrico Pirovano was to a large extent responsible and it is but fit and proper that this company which owes so much
for the rapid and very successful development and expansion of the to the deceased should make some provision to his children", and
activities of this company; so, the donation was given "out of gratitude to the late Enrico
Pirovano." We do not need to stretch our imagination to see that a
grant or donation given under these circumstances is remunerative
in nature in contemplation of law.
Whereas, early in 1941, the life of the said Enrico Pirovano was
insured in various life companies, to wit:
4. We now come to the fourth and last question that the The trial court, in considering these conditions in the light of the
defendant corporation, by the acts it has performed subsequent to acts subsequently performed by the corporation in connection with
the granting of the donation, deliberately prevented the fulfillment the proceeds of the insurance policies, considered said conditions
of the condition precedent to the payment of said donation such null and void, or at most not written because in its pinion their non-
that it can be said it has forfeited entirely due and demandable. fulfillment was due to a deliberate desistance of the corporation
and not to lack of funds to redeem the preferred shares of the
National Development Company. The conclusions arrived at by the
It should be recalled that the original resolution of the Board of trial court on this point are as follows:
Directors adopted on July 10, 1946 which provided for the donation
of P400,000 out of the proceeds which the De la Rama company
would collect on the insurance policies taken on the life of the late Fourth. — that the condition mentioned in the donation is null and
Enrico Pirovano was, as already stated above, amended on January void because it depends on the exclusive will of the donor, in
6, 1947 to include, among the conditions therein provided, that the accordance with the provisions of Article 1115 of the Old Civil Code.
corporation shall proceed to pay said amount, as well as the interest
due thereon, after it shall have settled in full balance of its bonded
indebtedness in the sum of P5,000,000. It should be recalled that on Fifth. — That if the condition is valid, its non-fulfillment is due to the
September 13, 1949, or more than 2 years after the last desistance of the defendant company from obeying and doing the
amendment referred too above, the stockholders adopted another wishes and mandate of the majority of the stockholders.
event of liquidation or dissolution of said company but shall be non-
participating.
Sixth. — That the non-payment of the debt in favor of the National
Development Company is due to the lack of funds, nor to lack of
authority, but to the desire of the President of the corporation to
preserve and continue the Government participation in the It is plain from the text of the above resolution that the defendant
corporation had 15 years from February 18, 1949, or until 1964,
company.
within which to effect the redemption of the preferred shares
issued to the National Development Company. This condition
cannot but be binding and obligatory upon the donees, if they
To this views of the trial court, we fail to agree. There are many desire to maintain the validity of the donation, for it is not only the
factors we can consider why the failure to immediately redeem the
basis upon which the stockholders of the defendant corporation
preferred shares issued to the National Development Company as expressed their willingness to ratify the donation, but it is also by
desired by the minor children of the late Enrico Pirovano cannot or way which its creditor, the National Development Company, would
should not be attributed to a mere desire on the part of the want it to be. If the defendant corporation is given 15 years within
corporation to delay the redemption, or to prejudice the interest of
which to redeem the preferred shares, and that period would expire
the minors, but rather to protect the interest of the corporation in 1964, one cannot blame the corporation for availing itself of this
itself. One of them is the text of the very resolution approved by the period if in its opinion it would redound to its best interest. It
National Development Company on February 18, 1949 which
cannot therefore be said that the fulfillment of the condition for the
prescribed the terms and conditions under which it expressed its payment of the donation is one that wholly depends on the
conformity to the conversion of the bonded indebtedness into exclusive will of the donor, as the lower court has concluded, simply
preferred shares of stock. The text of the resolution above
because it failed to meet the redemption of said shares in her
mentioned reads: manner desired by the donees. While it may be admitted that
because of the disposition of the assets of the corporation upon the
suggestion of its general manager more than enough funds had
Resolved: That the outstanding bonded indebtedness of the Dela been raised to effect the immediate redemption of the above
Rama Steamship Co., Inc., in the approximate amount of shares, it is not correct to say that the management has completely
P3,260,855.77 be converted into non-voting preferred shares of failed in its duty to pay its obligations for, according to the evidence,
stock of said company, said shares to bear a fixed dividend of 6 a substantial portion of the indebtedness has been paid and only a
percent per annum which shall be cumulative and redeemable balance of about P1,805,169.98 was outstanding when the
within 15 years. Said shares shall be preferred as to assets in the
stockholders of the corporation decided to revoke or cancel the maintained by the corporation to preserve its cordial and smooth
donation. (Exhibit P.) relation with the government. At any rate, whether such attitude be
considered as a mere excuse to justify the delay in effecting the
redemption of the shares, or a mere desire on the part of the
But there are other good reasons why all the available funds have corporation to retain in its possession more funds available to
not been actually applied to the redemption of the preferred attend to other pressing need as demanded by the interest of the
shares, one of them being the "desire of the president of the corporation, we fail to see in such an attitude an improper motive
corporation to preserve and continue the government participation to circumvent the early realization of the desire of the minors to
in the company" which even the lower court found it to be obtain the immediate payment of the donation which was made
meritorious, which is one way by which it could continue receiving dependent upon the redemption of said shares there being no clear
the patronage and protection of the government. Another reason is evidence that may justify such design. Anyway, a great portion of
that the redemption of the shares does not depend on the will of the funds went to the stockholders themselves by way of dividends
the corporation alone but to a great extent on the will of a third to offset, so it appears, the huge advances that the corporation had
party, the National Development Company. In fact, as the evidence made to them which were entered in the books of the corporation
shows, this Company had pledged these shares to the Philippine as loans and, therefore, they were invested for their own benefit. As
National Bank and the Rehabilitation Finance Corporation as a General Manager Osmeña said, "we were first confronted with the
security to obtain certain loans to finance the purchase of certain problem of the withdrawals of the family which had to be repaid
ships to be built for the use of the company under management back to the National Development Company and one of the most
contract entered into between the corporation and the National practical solutions to that was to declare dividends and reduce the
Development Company, and this was what prevented the amounts of their withdrawals", which then totalled about
corporation from carrying out its offer to pay the sum P3,000,000.
P1,956,513.07 on April 5, 1951. Had this offer been accepted, or
favorably acted upon by the National Development Company, the
indebtedness would have been practically liquidated, leaving All things considered, we are of the opinion that the finding of the
outstanding only one certificate worth P217,390.45. Of course, the lower court that the failure of the defendant corporation to comply
corporation could have insisted in redeeming the shares if it wanted with the condition of the donation is merely due to its desistance
to even to the extent of taking a court action if necessary to force its from obeying the mandate of the majority of the stockholders and
creditor to relinquish the shares that may be necessary to not to lack of funds, or to lack of authority, has no foundation in law
accomplish the redemption, but such would be a drastic step which or in fact, and, therefore, its conclusion that because of such
would have not been advisable considering the policy right along desistance that condition should be deemed as fulfilled and the
payment of the donation due and demandable, is not justified. In
this respect, the decision of the lower court should be reversed.