June 1970 - Philippine Supreme Court Decisions/Resolutions
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G.R. No. L-27972 June 30, 1970 - CENTRAL COOPERATIVE EXCHANGE, INC. v. CONCORDIO TIBE, SR., ET AL.:
EN BANC
[G.R. No. L-27972. June 30, 1970.]
CENTRAL COOPERATIVE EXCHANGE, INC., Petitioner, v. CONCORDIO TIBE, SR. and THE HONORABLE COURT OF APPEALS, Respondents.
Faustino, Peralta & Estacio for Petitioner.
Generoso Casimpan for Respondents.
SYLLABUS
1. CORPORATION LAW; BOARD OF DIRECTORS; COMPENSATION; DIRECTORS NOT ENTITLED TO COMPENSATION IN THE ABSENCE OF AGREEMENT IN RELATION THERETO. — The law is well-settled that directors of corporations presumptively serve without compensation and in the absence of an express agreement or a resolution in relation thereto, no claim can be asserted therefor.
2. ID.; ID.; ID.; ID.; CASE AT BAR. — Where the by-laws of the corporation explicitly reserved unto the stockholders the power to determine the compensation of members of the board of directors and the stockholders did restrict such compensation to "actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting," it is not within the power of the board of directors to enact a resolution providing for themselves compensation for additional duties.
3. ID.; ID.; ID.; ID.; POWER OF THE BOARD OF DIRECTORS TO CONTROL CORPORATION’S PROPERTY AND BUSINESS DOES NOT EMPOWER IT TO PROVIDE THE DIRECTORS WITH COMPENSATION WHERE THIS RIGHT IS SPECIFICALLY RESERVED TO THE STOCKHOLDERS. — Section 28 of the Corporation Law giving the exercise of corporate powers and the control of the corporation’s business and property to the board of directors, or a provision of the by-laws empowering the board with "general supervision and control of the affairs and property of the (corporation)" is no justification for the adoption by the board of a resolution providing themselves with increased compensation. These provisions of the law and the by-laws pertain to the general powers of the board merely and do not extend to giving the members of the board such compensation for themselves where the matter of providing for the compensation is specifically withheld from the board of directors and reserved to the stockholders.
4. ID.; ID.; SUIT AGAINST DIRECTORS; LACHES; LACHES BEGIN TO ATTACH AGAINST CORPORATION ONLY WHEN ITS DIRECTORS CEASE TO HAVE CONTROL OF THE AFFAIRS OF THE CORPORATION. — Where the corporation is virtually immobilized from commencing suit against its directors, as when the board of directors, under the by-laws of the corporation had the control of the affairs of the corporation, laches does not begin to attach against the corporation until the directors cease to be such.
5. ID.; ID.; ID., ID.; DEFENSE OF LACHES DEEMED WAIVED BY ADMISSION OF LIABILITY. — Where the respondent member of the board of directors admitted liability to the corporation for cash advances, he waived all defenses thereto, including laches, so that there is nothing left for the court to do but to order payment. This admission dispenses with the need of disbursement receipts covering the cash advances to prove the debt.
6. ID.; ID.; ID.; ID.; A DELAY OF SIX MONTHS IN THE FILING OF THE ACTION DOES NOT AMOUNT TO LACHES. — The lapse of the period of six months from the time respondent ceased to be a director of petitioner company to the date when the action was filed for refund of certain amounts received by the former from the latter by way of compensation as director of said company, is too short a time for the claim to be considered stale.
2. ID.; ID.; ID.; ID.; CASE AT BAR. — Where the by-laws of the corporation explicitly reserved unto the stockholders the power to determine the compensation of members of the board of directors and the stockholders did restrict such compensation to "actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting," it is not within the power of the board of directors to enact a resolution providing for themselves compensation for additional duties.
3. ID.; ID.; ID.; ID.; POWER OF THE BOARD OF DIRECTORS TO CONTROL CORPORATION’S PROPERTY AND BUSINESS DOES NOT EMPOWER IT TO PROVIDE THE DIRECTORS WITH COMPENSATION WHERE THIS RIGHT IS SPECIFICALLY RESERVED TO THE STOCKHOLDERS. — Section 28 of the Corporation Law giving the exercise of corporate powers and the control of the corporation’s business and property to the board of directors, or a provision of the by-laws empowering the board with "general supervision and control of the affairs and property of the (corporation)" is no justification for the adoption by the board of a resolution providing themselves with increased compensation. These provisions of the law and the by-laws pertain to the general powers of the board merely and do not extend to giving the members of the board such compensation for themselves where the matter of providing for the compensation is specifically withheld from the board of directors and reserved to the stockholders.
4. ID.; ID.; SUIT AGAINST DIRECTORS; LACHES; LACHES BEGIN TO ATTACH AGAINST CORPORATION ONLY WHEN ITS DIRECTORS CEASE TO HAVE CONTROL OF THE AFFAIRS OF THE CORPORATION. — Where the corporation is virtually immobilized from commencing suit against its directors, as when the board of directors, under the by-laws of the corporation had the control of the affairs of the corporation, laches does not begin to attach against the corporation until the directors cease to be such.
5. ID.; ID.; ID., ID.; DEFENSE OF LACHES DEEMED WAIVED BY ADMISSION OF LIABILITY. — Where the respondent member of the board of directors admitted liability to the corporation for cash advances, he waived all defenses thereto, including laches, so that there is nothing left for the court to do but to order payment. This admission dispenses with the need of disbursement receipts covering the cash advances to prove the debt.
6. ID.; ID.; ID.; ID.; A DELAY OF SIX MONTHS IN THE FILING OF THE ACTION DOES NOT AMOUNT TO LACHES. — The lapse of the period of six months from the time respondent ceased to be a director of petitioner company to the date when the action was filed for refund of certain amounts received by the former from the latter by way of compensation as director of said company, is too short a time for the claim to be considered stale.
D E C I S I O N
REYES, J.B.L., J.:
Review, on certiorari, of a decision of the Court of Appeals (in its Case No. 36202-R), affirming the decision of the Court of First Instance of Manila (in its civil Case No. 44536) dismissing after trial a complaint filed by herein petitioner, Central Cooperative Exchange, Inc. (CCE for short), against herein respondent, Concordio Tibe, Sr., for the refund of certain amounts received by the latter from the corporation, while he served as a member of the board of directors of the Exchange.
The petitioner is a national federation of farmers’ cooperative marketing associations, or FACOMAS, scattered throughout the country; its single majority stockholder is the former Agricultural Credit and Cooperative Financing Administration (ACCFA), now Agricultural Credit Administration (ACA). As a member of the petitioner’s board of directors from 23 May 1958 to 26 May 1960, representing FACOMAS in Eastern Visayas, respondent Concordio Tibe, Sr. drew and collected from petitioner CCE cash advances amounting to P5,668.00; of this sum, respondent had, admittedly, already liquidated P3,317.25, leaving the sum of P2,350.75 still to be accounted for. By admission of the petitioner the sum of P2,350.75 has been further reduced to P2,133.45 as of 31 January 1963 on account of partial payments made after suit was filed (Petitioner’s Brief, page 17). Respondent Tibe had also drawn several sums, amounting to P14,436.95, representing commutable per diems for attending meetings of the Board of Directors in Manila, per diems and transportation expenses for FACOMA visitations, representation expenses and commutable discretionary funds. All these sums were disbursed with the approval of general manager, treasurer and auditor of CCE.
The main issue is whether or not the board of directors of the CCE had the power and authority to adopt various resolutions which appropriated the funds of the corporation for the above-enumerated expenses for the members of the said board.
Section 8 of the By-Laws of petitioner federation provides:jgc:chanrobles.com.ph
"The compensation, if any, and the per diems for attendance at meetings of the members of the Board of Directors shall be determined by the members at any annual meeting in special meeting of the Exchange called for the purpose."cralaw virtua1aw library
In the annual meeting of the stockholders, held in Manila on 31 January 1956, it was resolved that:jgc:chanrobles.com.ph
"The members of the Board of Directors attending the CCE board meetings be entitled to actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting."cralaw virtua1aw library
The resolutions of the Board of Directors under which respondent Tibe drew and collected the sums of money sought to be recovered, and which petitioner claims are invalid resolutions, are the following:chanrob1es virtual 1aw library
(a) Res. No. 55, May 5, 1957, authorizing:chanrob1es virtual 1aw library
1. Visitation of FACOMAS, in order to be official, must be with prior sanction or authority of the board, except when it is urgent, in which case Board confirmation is needed;
2. Per diem of P10.00 is authorized for visitations outside the place of residence of the director concerned;
3. Actual transportation expenses allowed for all visitations sanctioned or authorized by the board.
(b) Res. No. 52, July 8, 1958, appropriating P10,000.00 as discretionary fund of the board of directors, disbursement from which will be made upon authorization of the board chairman and for which no supporting receipts need be presented.
(c) Res. No. 49, July 10, 1958, granting monthly commutable allowance of P200.00 to each director starting from July 1, 1958, in lieu of the regular waiting time per diems and transportation expenses while in the City of Manila attending Board and committee meetings.
(d) Res. No. 57, July 24, 1958, amending Res. No. 49 by adding P20.00 to the P200.00 as commutable transportation allowances while attending meetings in Manila.
(e) Res. No. 35, June 11, 1959, increasing the monthly commutable allowance for each director from P300.00 to P500.00 per month effective June 1, 1959.
(f) Res No. 87, October 9, 1959, appropriating P10,000.00 as commutable discretionary fund of the board of directors.
We agree with the petitioner that the questioned resolutions are contrary to the By-Laws of the federation and, therefore, are not within the power of the board of directors to enact. The By-Laws, in the aforequoted Section 8, explicitly reserved unto the stockholders the power to determine the compensation of members of the board of directors, and the stockholders did restrict such compensation to "actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting." Even without the express reservation of said power, the directors are not entitled to compensation, for —
". . . The law is well-settled that directors of corporations presumptively serve without compensation and in the absence of an express agreement or a resolution in relation thereto, no claim can be asserted therefor (Sec. 2110, 5 Fletcher 375-376). Thus it has been held that there can be no recovery of compensation, unless expressly provided for, when a director serves as president or vice president, as secretary, as treasurer or cashier, as a member of an executive committee, as chairman of a building committee, or similar offices (Sec. 2112, 5 Fletcher 381-382)." (Alvendia, The Law of Private Corporations in the Philippines, pages 275-276)
Thus, the directors, in assigning themselves additional duties, such as the visitation of FACOMAS, acted within their power, but, by voting for themselves compensation for such additional duties, they acted in excess of their authority, as expressed in the By-Laws.
Nor may the directors rely on Section 28 of the Corporation Law, giving the exercise of corporate powers and the control of the corporation’s business and property to the board of directors, or on Section 1 of Article VI of the By-Laws, empowering the board with "general supervision and control of the affairs and property of the Exchange," as justifications for the adoption of the questioned resolutions, because these provisions of the law and the By-Laws pertain to the board’s general powers merely and do not extend to giving the members of the said board the compensations stated in the resolution, as the matter of providing for their compensations are specifically withheld from the board of directors, and reserved to the stockholders.
It is vain for the respondent to rely on the good intentions of the board, that the board, for reasons of "expediency and economy", cancelled the per diems and actual transportation and waiting expenses provided by the stockholders and substituted these by monthly commutable allowances of P200.00 (per Resolution No. 49) because the court is not concerned with the propriety or wisdom of the measure of compensation already fixed by stockholders, but which the directors wanted to correct by increase thereof (Government of P.I. v. El Hogar Filipino, 50 Phil. 399).
As stated earlier, respondent Tibe was a director of the corporation from May, 1958 to May, 1960. During his term, he collected the sums of money appropriated in and pursuant to the board resolutions. Suit was filed against respondent on 22 October 1960. One of the grounds of the appealed decision in finding for the respondent is that the petitioner’s claim is barred by laches. We do not agree. The board of directors, under the By-Laws of the corporation, had the control of the affairs of the corporation and it is not to be expected that the board would sue its members to recover the sums of money voted by and for themselves. We think that, under the circumstances, where the corporation was virtually immobilized from commencing suit against its directors, laches does not begin to attach against the corporation until the directors cease to be such (Cf. Bates Street Shirt Co. v. Waite, 166 Atl. 293, 297, and cases cited therein). From May, 1960, when respondent ceased to be a director, to October, 1960, when action was filed, is too short a time for the claim to be considered stale.
The Court of Appeals plainly erred in not granting petitioner’s claim on the cash advances. In the course of the trial, respondent admitted liability therefor (T.s.n., March 1965, pages 7-8). Having admitted liability for the cash advances, respondent waived all defenses thereto, including laches, and there was nothing left for the court to have done but to order payment. The appellate court argued that it would not be easy for the respondent to produce the disbursement receipts covering the cash advances. This is certainly no reason for disapproving petitioner’s claim; those receipts are no longer necessary, for the liability was admitted.
FOR THE FOREGOING REASONS, the decision under review is hereby reversed, and another one entered ordering the respondent to pay unto the petitioner the sums of P1,730.35 and P14,436.95, with legal interests on both sums from 22 October 1960 until fully paid. Costs against the Respondent.
Concepcion, C.J., Dizon, Makalintal, Zaldivar Castro and Barredo, JJ., concur.
Fernando and Teehankee, JJ., concur in the result.
Villamor, J., took no part.
The petitioner is a national federation of farmers’ cooperative marketing associations, or FACOMAS, scattered throughout the country; its single majority stockholder is the former Agricultural Credit and Cooperative Financing Administration (ACCFA), now Agricultural Credit Administration (ACA). As a member of the petitioner’s board of directors from 23 May 1958 to 26 May 1960, representing FACOMAS in Eastern Visayas, respondent Concordio Tibe, Sr. drew and collected from petitioner CCE cash advances amounting to P5,668.00; of this sum, respondent had, admittedly, already liquidated P3,317.25, leaving the sum of P2,350.75 still to be accounted for. By admission of the petitioner the sum of P2,350.75 has been further reduced to P2,133.45 as of 31 January 1963 on account of partial payments made after suit was filed (Petitioner’s Brief, page 17). Respondent Tibe had also drawn several sums, amounting to P14,436.95, representing commutable per diems for attending meetings of the Board of Directors in Manila, per diems and transportation expenses for FACOMA visitations, representation expenses and commutable discretionary funds. All these sums were disbursed with the approval of general manager, treasurer and auditor of CCE.
The main issue is whether or not the board of directors of the CCE had the power and authority to adopt various resolutions which appropriated the funds of the corporation for the above-enumerated expenses for the members of the said board.
Section 8 of the By-Laws of petitioner federation provides:jgc:chanrobles.com.ph
"The compensation, if any, and the per diems for attendance at meetings of the members of the Board of Directors shall be determined by the members at any annual meeting in special meeting of the Exchange called for the purpose."cralaw virtua1aw library
In the annual meeting of the stockholders, held in Manila on 31 January 1956, it was resolved that:jgc:chanrobles.com.ph
"The members of the Board of Directors attending the CCE board meetings be entitled to actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting."cralaw virtua1aw library
The resolutions of the Board of Directors under which respondent Tibe drew and collected the sums of money sought to be recovered, and which petitioner claims are invalid resolutions, are the following:chanrob1es virtual 1aw library
(a) Res. No. 55, May 5, 1957, authorizing:chanrob1es virtual 1aw library
1. Visitation of FACOMAS, in order to be official, must be with prior sanction or authority of the board, except when it is urgent, in which case Board confirmation is needed;
2. Per diem of P10.00 is authorized for visitations outside the place of residence of the director concerned;
3. Actual transportation expenses allowed for all visitations sanctioned or authorized by the board.
(b) Res. No. 52, July 8, 1958, appropriating P10,000.00 as discretionary fund of the board of directors, disbursement from which will be made upon authorization of the board chairman and for which no supporting receipts need be presented.
(c) Res. No. 49, July 10, 1958, granting monthly commutable allowance of P200.00 to each director starting from July 1, 1958, in lieu of the regular waiting time per diems and transportation expenses while in the City of Manila attending Board and committee meetings.
(d) Res. No. 57, July 24, 1958, amending Res. No. 49 by adding P20.00 to the P200.00 as commutable transportation allowances while attending meetings in Manila.
(e) Res. No. 35, June 11, 1959, increasing the monthly commutable allowance for each director from P300.00 to P500.00 per month effective June 1, 1959.
(f) Res No. 87, October 9, 1959, appropriating P10,000.00 as commutable discretionary fund of the board of directors.
We agree with the petitioner that the questioned resolutions are contrary to the By-Laws of the federation and, therefore, are not within the power of the board of directors to enact. The By-Laws, in the aforequoted Section 8, explicitly reserved unto the stockholders the power to determine the compensation of members of the board of directors, and the stockholders did restrict such compensation to "actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting." Even without the express reservation of said power, the directors are not entitled to compensation, for —
". . . The law is well-settled that directors of corporations presumptively serve without compensation and in the absence of an express agreement or a resolution in relation thereto, no claim can be asserted therefor (Sec. 2110, 5 Fletcher 375-376). Thus it has been held that there can be no recovery of compensation, unless expressly provided for, when a director serves as president or vice president, as secretary, as treasurer or cashier, as a member of an executive committee, as chairman of a building committee, or similar offices (Sec. 2112, 5 Fletcher 381-382)." (Alvendia, The Law of Private Corporations in the Philippines, pages 275-276)
Thus, the directors, in assigning themselves additional duties, such as the visitation of FACOMAS, acted within their power, but, by voting for themselves compensation for such additional duties, they acted in excess of their authority, as expressed in the By-Laws.
Nor may the directors rely on Section 28 of the Corporation Law, giving the exercise of corporate powers and the control of the corporation’s business and property to the board of directors, or on Section 1 of Article VI of the By-Laws, empowering the board with "general supervision and control of the affairs and property of the Exchange," as justifications for the adoption of the questioned resolutions, because these provisions of the law and the By-Laws pertain to the board’s general powers merely and do not extend to giving the members of the said board the compensations stated in the resolution, as the matter of providing for their compensations are specifically withheld from the board of directors, and reserved to the stockholders.
It is vain for the respondent to rely on the good intentions of the board, that the board, for reasons of "expediency and economy", cancelled the per diems and actual transportation and waiting expenses provided by the stockholders and substituted these by monthly commutable allowances of P200.00 (per Resolution No. 49) because the court is not concerned with the propriety or wisdom of the measure of compensation already fixed by stockholders, but which the directors wanted to correct by increase thereof (Government of P.I. v. El Hogar Filipino, 50 Phil. 399).
As stated earlier, respondent Tibe was a director of the corporation from May, 1958 to May, 1960. During his term, he collected the sums of money appropriated in and pursuant to the board resolutions. Suit was filed against respondent on 22 October 1960. One of the grounds of the appealed decision in finding for the respondent is that the petitioner’s claim is barred by laches. We do not agree. The board of directors, under the By-Laws of the corporation, had the control of the affairs of the corporation and it is not to be expected that the board would sue its members to recover the sums of money voted by and for themselves. We think that, under the circumstances, where the corporation was virtually immobilized from commencing suit against its directors, laches does not begin to attach against the corporation until the directors cease to be such (Cf. Bates Street Shirt Co. v. Waite, 166 Atl. 293, 297, and cases cited therein). From May, 1960, when respondent ceased to be a director, to October, 1960, when action was filed, is too short a time for the claim to be considered stale.
The Court of Appeals plainly erred in not granting petitioner’s claim on the cash advances. In the course of the trial, respondent admitted liability therefor (T.s.n., March 1965, pages 7-8). Having admitted liability for the cash advances, respondent waived all defenses thereto, including laches, and there was nothing left for the court to have done but to order payment. The appellate court argued that it would not be easy for the respondent to produce the disbursement receipts covering the cash advances. This is certainly no reason for disapproving petitioner’s claim; those receipts are no longer necessary, for the liability was admitted.
FOR THE FOREGOING REASONS, the decision under review is hereby reversed, and another one entered ordering the respondent to pay unto the petitioner the sums of P1,730.35 and P14,436.95, with legal interests on both sums from 22 October 1960 until fully paid. Costs against the Respondent.
Concepcion, C.J., Dizon, Makalintal, Zaldivar Castro and Barredo, JJ., concur.
Fernando and Teehankee, JJ., concur in the result.
Villamor, J., took no part.
