Manuel R. Dulay Ent. vs. CA (225 SCRA 678 [1993]) CorpLaw Case Digest

 Manuel R. Dulay Ent. vs. CA (225 SCRA 678 [1993])

FACTS:

Manuel R.Dulay Enterprises, Inc., a domestic corporation owned a property known as Dulay Apartment consisting of 16 apartment units in Pasay City. 

Members:

Manuel R. Dulay (BOD) with 19,960 shares and designated as president, treasurer and general manager; Atty. Virgilio E. Dulay (VP) with 10 shares; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary.

Manuel Dulay by virtue of Board Resolution sold the subject property to spouses Maria Theresa and Castrense Veloso. 

Manuel Dulay and the spouses Veloso executed a Memorandum to the Deed of Absolute Sale giving Manuel Dulay within 2 years to repurchase the subject property which was, however, not annotated. 

Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to Manuel A. Torres which was duly annotated. Upon the failure of Maria Veloso to pay Torres, the subject property was sold to Torres as the highest bidder in an extrajudicial foreclosure sale. 

Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel Dulay assigning her right to repurchase the subject property from Torres. Neither Veloso nor her assignee Dulay was able to redeem the subject property within the one year statutory period for redemption. 

Torres then filed a petition for the issuance of a writ of possession against spouses Veloso and Manuel Dulay. 

However, when Virgilio Dulay appeared in court to intervene in said case alleging that Manuel Dulay was never authorized by the corporation to sell or mortgage the subject property, the trial court ordered Torres to implead the corporation as an indispensable party. 

Torres and Edgardo Pabalan, real estate administrator of Torres, filed an action against the corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay Apartment for the recovery of possession, sum of money and damages with preliminary injunction.

ISSUE:

Whether the sale of the subject property between spouses Veloso and Manuel Dulay has no binding effect on the corporation as Board Resolution 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary.

HELD:

NO. 

The corporation's claim that the sale of the subject property by its president, Manuel Dulay, to spouses Veloso is null and void as the alleged Board Resolution 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained.

 

Section 101 of the Corporation Code of the Philippines provides that "When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: 

1. Before or after such action is taken, written consent thereto is signed by all the directors; or 

2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or 

3. The directors are accustomed to take informal action with the express or implied acquiesce of all the stockholders; or 

4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. If a directors' meeting is held without proper call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof."

Herein, the corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. 

At any rate, a corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in this case, Virgilio Dulay failed to do. 

In ordinary parlance, the said entity is loosely referred to as a "family corporation."

The nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives namely, 3 children and their father whose name identifies their corporation. 

Besides, the fact that Virgilio Dulay executed an affidavit that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of Torres indicates that he was aware of the transaction executed between his father and Torres and had, therefore, adequate knowledge about the sale of the subject property to Torres. 

Consequently, the corporation is liable for the act of Manuel Dulay and the sale of the subject property to Torres by Manuel Dulay is valid and binding.