1. Cumulative voting gives the stockholder entitled to vote the right to give a candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal or he may distribute them among the candidates as he may see fit.
2. This is granted by law to each stockholder with voting rights. However, in non-stock corporations, cumulative voting is generally not allowed, UNLESS allowed by the AOI or by-laws.
3. Under this method, if there are 10 directors to be elected, a holder of 1,000 shares will have 10,000 votes which he may cast in favor of one candidate or may apportion to any number of candidate he may wish;
4. PURPOSE: to allow the minority to have a rightful representation in the board of directors.
Sec. 25. Corporate officers, quorum. - Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.
NOTE:
1. Except in a close corporation where the corporate officers may be elected directly by the stockholders, the Code requires the BOD to elect the said officers;
2. The officers that may be elected are the:
a. President – who must be a director;
b. Treasurer – who may or may not be a director;
c. Secretary – who should be a resident and citizen of the Philippines;
d. Such other officers as may be provided for in the by-laws.
3. Any two or more positions may be held concurrently by the same person, except:
a. The president and the secretary;
b. The president and the treasurer.
B. VALIDITY AND BINDING EFFECT OF ACTIONS OF CORPORATE OFFICERS
Sec. 25. Corporate officers, quorum
The directors or trustees and officers to be elected shall perform the duties xxx enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board.
QUORUM: requirement for a valid board meeting is the majority of the number of the board fixed in the AOI, and a decision of at least a majority of the directors/trustees present in a meeting at which there is a quorum shall be a valid corporate act, except:
1. Election of officers, which shall require the majority of all the members of the board; and
2. Unless the AOI or the by-laws provide for a greater quorum/voting requirement.
Every action of the board without a meeting and without the required voting and quorum requirement will not bind the corporation unless subsequently ratified, expressly or impliedlly.
Individual directors, however, can rightfully be considered as agents of the corporation. And although they cannot bind the corporation by their individual acts, this is subject to certain EXCEPTIONS: (1) by delegation of authority; (2) when expressly conferred; or (3) where the officer or agent is clothed with actual or apparent authority.
YAO KA SIN TRADING VS. CA (209 SCRA 763; June 15, 1992) – Constacio B. Malagna, President and Chairman of the Board of private respondent Prime White Cement Corporation (PWCC), sent a letter-offer (Exhibit A) to Mr. Yao for the delivery of cement, which was accepted by the latter by delivering a check for P243,000.
ISSUE: WON the letter-offer sent by Malagna binds the corporation?
HELD: No. A corporation can act only through its officers and agents, all acts within the powers of said corporation may be performed by agents of his selection and except in so far as limitations or restrictions may be imposed by special charter, by-law or statutory provisions, the same general provision of law which govern the relation of agency for natural person govern the officer or agent of a corporation, of whatever status or rank, in respect to his power to act for the corporation; and the agents once appointed, or members acting in their stead, are subject to the same rules, liabilities and incapacities as are agents of individuals and private persons.
Moreover, a corporate officer or agent may represent and bind the corporation in transactiosn with third person to the extent that authority has been conferred upon him, and this includes powers which have been (1) intentionally conferred, and (2) also such powers as, in the usual course of business, are incidental thereto, or may be implied therefrom, (3) powers added by custom and usage, as usually pertaining to the particular officer or agent, and (4) such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred.
While Mr. Maglana was an officer, the by-laws do not in any way confer upon the president the authority to enter into contracts for the corporation independently of the BOD. That power is expressly lodged in the latter.
Nevertheless, to expedite or facilitate the execution of the contract, only the President shall sign the contact for the corporation. No greater power can be implied from such express, but limited delegated authority. Neither can it be logically claimed that any power greater than that expressly conferred is inherent in Mr. Maglana’s position as president and chairman of the corporation.
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Cesar Nickolai F. Soriano Jr.Arellano University School of Law 2011-0303
THE CORPORATION CODE OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based on the book of Atty Ruben C. Ladia Although there is authority "that if the president is given general control and
supervision over the affairs of the corporation, it will be presumed that he has authority to make contract and do acts within the course of its ordinary business," We find such inapplicable in this case. We note that the private corporation has a general manager who, under its By-Laws has, inter alia, the following powers: "(a) to have the active and direct management of the business and operation of the corporation, conducting the same accordingly to the order, directives or resolutions of the Board of Directors or of the president." It goes without saying then that Mr. Maglana did not have a direct and active and in the management of the business and operations of the corporation.
Petitioner's last refuge then is his alternative proposition, namely, that private respondent had clothed Mr. Maglana with the apparent power to act for it and had caused persons dealing with it to believe that he was conferred with such power. The rule is of course settled that "[a]lthough an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time."
Also, "if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority in real, as to innocent third persons dealing in good faith with such officers or agents." This "apparent authority may result from (1) the general manner, by which the corporation holds out an officer or agent as having power to act or, in other words, the apparent authority with which it clothes him to act in general or (2) acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or without the scope of his ordinary powers.
It was incumbent upon the petitioner to prove that indeed the private respondent had clothed Mr. Maglana with the apparent power to execute Exhibit "A" or any similar contract. This could have been easily done by evidence of similar acts executed either in its favor or in favor of other parties. Petitioner miserably failed to do that. Upon the other hand, private respondent's evidence overwhelmingly shows that no contract can be signed by the president without first being approved by the Board of Directors; such approval may only be given after the contract passes through, at least, the comptroller, who is the NIDC representative, and the legal counsel.
LOPEZ REALTY, INC. VS. FOTENCHA (147 SCRA 183; Aug. 11, 1995) – Petitioner corporation approved two resolutions providing for the gratuity pay of its employees. Except for Asuncion Lopez-Gonzales, who was then abroad, the remaining member of the board convened a special meeting and passed a resolution adopting the above-mentioned resolutions. Private respondents requested for the full payment of the gratuity pay which was granted.
At that time, however, petitioner Asuncion was still abroad, and allegedly sent a cablegram objecting to certain matters taken up by the board in her absence.
Notwithstanding a corporate squabble between Asuncion and Arturo Lopez, the first two installments of the gratuity pay of private respondents were paid. Also, petitioner corporation had prepared the cash vouchers and checks for the thir installment. For some reason, said voucher was cancelled by petitioner Asuncion.
A complaint was filed before the labor arbiter who decided in favor of private respondents.
ISSUE: WON the gratuity pay should be paid?
HELD: Yes. The general rules is that a corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law. Thus, the
directors must act as a body in a meeting called pursuant to the law or the corporation’s by-laws, otherwise, any action taken therein may be questioned by any objecting director or shareholder.
Be that as it may, jurisprudence tells us that an action of the board of directors during a meeting, which was illegal for lack of notice, may be ratified either (1) expressly, by the action of the directors in subsequent legal meeting, or (2) impliedly, by the corporations‘
subsequent conduct.
Ratification by directors may be by an express resolution or vote to that effect, or it may be implied from adoption of the act, acceptance or acquiescence. Moreover, the unauthorized acts of an officer of a corporation may be ratified by the corporation by conduct implying approval and adoption of the act in question. Such ratification may be expressed or may be inferred from silence and inaction.
In the case at bench, it was established that petitioner corporation did not issue any resolution revoking nor nullifying the board resolution granting gratuity pay to private respondents. Instead, they paid the gratuity pay, particularly, the first two installments thereof.
Despite lack of notice to Asuncion, we can glean from the records that she was aware of the corporation’s obligations under the said resolution. More importantly she acquiesced thereto by affixing her signature on two cash vouchers. The conduct of petitioners had estopped them from assailing the validity of the said board resolutions.
PUA CASIM & CO. VS. NEUMARK AND CO. (46 Phil. 242; Oct. 2, 1924) – W. Neumark, president of defendant corporation borrowed P15000 from plaintiff which was delivered by means of a check in favor of defendant and deposited in BPI and the amount of it credited to the corporation’s current account.
ISSUE: WON the corporation is responsible for the money borrowed by its president?
HELD: Yes. W. Neumark is the principal stockholder, president and general business manager of the defendant corporation. On behalf of the corporation, he solicited a loan and was given a check, which was endorsed by him in his capacity as president and deposited to the corporation’s account. It may be true that a large part of the amount so deposited was diverted by Neumark to his own use, but that does not alter that the money was borrowed for the corporation and was placed in its possession.
It is conceded that Neumark was not expressly authorized by the board of directors to borrow the money in question and the general rule is that a business manager or other officer of a corporation, has no implied power to borrow money on its behalf. But much depends upon the circumstances of each particular case and the rule state is subject to important exceptions.
Thus, where a general business manager of a corporation is clothed with apparent authority to borrow money and the amount borrowed does not exceed the ordinary requirements of the business, it has often been held that the authority is implied and that the corporation is bound.
YU CHUCK VS. KONG LI PO (46 Phil. 608; Dec. 3, 1924) – CC Chen or TC Chen, General Manager of defendant corporation Kong Li Po, entered into an agreement with the plaintiffs by which the latter bound themselves to do the necessary printing for the newspaper. Later on, the new general manager, Tan Tian Hong, discharged plaintiffs with no special reasons. Aggrieved, plaintiffs sought to recover full payment of the remaining term of the contract, which was originally for 3 years, as stated therein.
ISSUE: WON Chen had the power to bind the corporation under a contract of that character?
HELD: No. The general rule is that the power to bind a corporation by contract lies with its board of directors or trustees, but this power may either be expressly or impliedly be delegated to other officers or agents of the corporation, and it is well settled that except where the authority of employing servants and agents is expressly vested in the BOD/T, an
34
Cesar Nickolai F. Soriano Jr.Arellano University School of Law 2011-0303
THE CORPORATION CODE OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based on the book of Atty Ruben C. Ladia officer or agent who has general control and management of the
corporation‘s business, or a specific part thereof, may bind the corporation as are usual and necessary in th conduct of such business. But the contracts of employment must be reasonable.
Chen, as general manager of Kong Li Po, had implied authority to bind the defendant corporation by a reasonable and usual contract of employment with the plaintiffs, but we do not think that contract here in question can be so considered. Not only is the term of employment usually long, but the conditions are otherwise so onerous to the defendant that the possibility of the corporation being thrown into insolvency thereby is expressly contemplated in the same contract. This fact, in itself was, in our opinion, sufficient to put the plaintiffs upon inquiry as to the extent of the business manager’s authority; they had not the right to presume that he or any other single officer or employee of that corporation had implied authority to enter into a contract of employment which might bring about its ruin.
TRINIDAD J. FRANCISCO VS. GSIS (7 SCRA 557; March 30, 1963) – Trinidad Francisco, in consideration of loan extended by GSIS, mortgaged her property in QC. For being in arrears in her installments, GSIS extrajudicially foreclosed the mortgage.
Plaintiff’s father, Atty. Vicente Francisco sent a letter to Rodolfo Andal, general manager of GSIS, offering to redeem the property which was replied to by Andal through a telegram saying ―GSIS BOARD APPROVED YOUR REQUEST RE REDEMTPION OF FORECLOSED PROPERTY OF YOUR DAUGHTER‖
Later, inasmuch as, according to the defendant GSIS, the remittances made by Atty. Francisco were allegedly not sufficient to pay off her daughter’s arrears, the one year redemption period has expired, said defendant consolidated title to the property in its name.
ISSUE: WON the telegram sent by the Andal binds the corporation?
HELD: Yes. The terms of the offer were clear and over the signature of Andnal, plaintiff was informed that the proposal has been accepted. There was nothing in the telegram that hinted at any anomaly, or gave grounds to suspect its veracity, and the plaintiff, therefore, cannot be blamed for relying upon it. There is no denying that the telegram was within Andal’s apparent authority, but eh defense is that he did not sign it, but that it was sent by the board secretary in his name and without his knowledge. Assuming this to be true, how was appellee to know it? Corporate transactions would speedily come to a standstill were every person dealing with a corporation were held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face.
Indeed, it is well-settled that If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents.
Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by the telegram.
The error in the wording cannot be taken seriously. All the while GSIS pocketed the various remittances, and kept silent as to the true facts as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff constitutes in itself a binding ratification of the original agreement.
THE BOARD OF LIQUIDATORS VS. KALAW (20 SCRA 987; Aug. 10, 1965) – National Coconut Corporation (NACOCO) embarked on copra trading activities led by its General Manager Maximo Kalaw and the other defendants as members of the board. Due to natural calamities, the business of copra became unprofitable. Kalaw made a full disclosure of the situation and apprised the baord of the impending losses on the contracts already entered into, but no action was taken. But later on, the contracts were unanimously approved by the Board.
The buyers threated damage suits, but some were settled. Louis Dreyfus &
Co. Ltd. Actually sued but was also culminated in an out-of-court settlement.
NACOCO now seeks to recover the sum paid to Louis from general manager and board chairman Kalaw and the other members who approved the contracts. It charges Kalaw with negligence and bad faith and/or breach of trust for having approved the contracts, which was dismissed by the trial court.
ISSUE: WON the contracts executed by Kalaw binds the corporation?
ISSUE: WON the contracts executed by Kalaw binds the corporation?