Professional Documents
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953 [1929]
MONTELIBANO VS BACOLOD-MURCIA MILING Case Digest
Held: No. There can be no doubt that the directors of the appellee company had ISSUE:
authority to modify the proposed terms of the Amended Milling Contract for the
purpose of making its terms more acceptable to the other contracting parties. As the Whether or not the defendant-officers of the corporation acted in grossly
resolution in question was passed in good faith by the board of directors, it is valid and negligent, hence, liable.
binding, and whether or not it will cause losses or decrease the profits of the central,
the court has no authority to review them. Whether the business of a corporation HELD:
should be operated at a loss during depression, or close down at a smaller loss, is a
purely business and economic problem to be determined by the directors of the The officers acted negligently and are liable. The court cited the following:
corporation and not by the court. The appellee Bacolod-Murcia Milling Company is,
under the terms of its Resolution of August 20, 1936, duty bound to grant similar “Upon each of those points, the rule is well stated in Ruling Case Law, vol. 7,
increases to plaintiffs-appellants herein. p. 473, section 454 where it is said:
Alberto Barretto, Jose Barretto, and Jose de Amusategui were directors of La ISSUE
Previsora Filipina, from its incorporation up until March 1929. They filed a case
against the corporation with the CFI to recover a sum of money. WON amended by-laws and the obligation which arose from it are valid? NO.
Note: They were previously directors, but starting March 1929 they were no
longer directors HELD
Although the corporation law allows mutual building and loan associations,
such as defendant corporation, to create by-laws, the same expressly limits
such authority to the adoption of by-laws which are consistent with the
provisions of the law.
Note: Court cited Fleischer vs. Botica Nolasco, where an article in the by-laws
was considered invalid. Again, the pension-like stipulation is illegal.
Building and loan associations are founded upon principles of strict mutuality
and equality (A.K.A. Trust Companies). There is an implied contract with its
members that it shall not divert its funds or powers for purposes other than
those for which it was created.
Note: This amendment in the by-laws and the pension betrays this principle
It is clear that the amendment was an attempt to give in the future to certain
directors compensation for past services gratuitously rendered by them to the
corporation. Such a provision is without consideration, and imposes no
obligation on the corporation which can be enforced by action at law.
Note: The whole thing was a scheme so that directors can continue to get
compensation even after they’re no longer directors of the corporation.
PETITION DENIED