Premium Marble Resources, Inc. v. Court of Appeals
G.R. No. 96551 (November 4, 1996)
Facts:
On July 18, 1986, Premium Marble Resources, Inc. (Premium) filed a complaint for damages against International Corporate Bank (ICB), alleging that ICB wrongfully accepted and processed checks issued to Premium by Ayala Investment and Development Corporation. The checks, totaling P31,663.88, were deposited by former officers of Premium, led by Saturnino G. Belen, Jr., into an account of Intervest Merchant Finance (Intervest) at ICB, despite being clearly marked for "payee's account only." Premium claimed that this act was unauthorized and resulted in financial harm.
In response, ICB filed an answer asserting that Premium lacked the capacity to sue, as the complaint was not authorized by its duly constituted Board of Directors. Shortly after, Printline Corporation, a sister company of Premium, filed a similar action against ICB, leading to the consolidation of both cases.
During the proceedings, Premium's representation changed, and a motion to dismiss was filed by Siguion Reyna, Montecillio and Ongsiako Law Office, claiming that the filing of the case was without proper authority from the Board of Directors. Premium's original counsel, Atty. Arnulfo Dumadag, countered that the individuals who signed the board resolution were not legitimate directors and had been dismissed for misconduct.
The trial court ultimately ruled that neither set of officers had the legal capacity to sue on behalf of Premium, as the authority to act for the corporation was still under dispute in a pending case before the Securities and Exchange Commission (SEC). The court dismissed the cases, leading to an appeal by Premium.
Legal Issues:
- Whether the filing of the complaint for damages against ICB was authorized by a duly constituted Board of Directors of Premium.
- The implications of the pending SEC case on the authority of the officers to represent the corporation in court.
Arguments:
Petitioner (Premium):
- Argued that the filing of the case was authorized by the Board of Directors as evidenced by the minutes of a meeting held on April 1, 1982.
- Contended that the opposing counsel's motion to dismiss was filed on behalf of individuals who were not legitimate officers of the corporation.
- Asserted that the Articles of Incorporation should be the primary evidence of the current officers, not the general information sheet.
Respondent (ICB):
- Maintained that Premium lacked the authority to sue, as the board resolution presented by the opposing counsel indicated that the filing was unauthorized.
- Joined the motion to dismiss, emphasizing that the authority to act on behalf of the corporation was still unresolved in the SEC case.
Court's Decision and Legal Reasoning:
The Court of Appeals affirmed the trial court's dismissal of the cases, concluding that the authority to file the complaint was not established. The court noted that the evidence presented by Premium did not sufficiently prove that the officers who authorized the filing were recognized by the SEC as the legitimate board of directors. The court emphasized that the power to sue and be sued is vested in the board of directors, and without a valid resolution from the board, the action could not proceed.
The court also highlighted the importance of compliance with the Corporation Code, specifically Section 26, which mandates that corporations report the election of their directors and officers to the SEC. The failure to do so rendered the claims of the petitioners regarding their authority to act on behalf of the corporation unsubstantiated.
Significant Legal Principles Established:
- The authority to represent a corporation in legal proceedings is vested in its Board of Directors, and any action taken without proper authorization is invalid.
- Compliance with the Corporation Code, particularly the requirement to report the election of officers to the SEC, is crucial for establishing the legitimacy of corporate actions.
- The resolution of intra-corporate disputes, such as the legitimacy of officers, must be settled before a corporation can pursue legal action.