Monday, October 19, 2015

New Durawood Company v. Court of Appeals


NEW DURAWOOD COMPANY INC. vs. COURT OF APPEALS
G.R. No. 111732

FACTS OF THE CASE
On February 14, 1990, a “Petition for Judicial Reconstitution of the Lost Owner’s Duplicate Certificates of TCT Nos. 140486; 156454 and 140485” was filed in the Regional Trial Court, Branch LXXI, Antipolo, Rizal by petitioner-corporation, “represented by its Branch Manager, Wilson M. Gaw x x x.” Attached to said petition was an “Affidavit of Loss” dated December 31, 1990 of respondent Orlando S. Bongat, one of the stockholders of petitioner-corporation.

Finding the petition “to be sufficient in form and in substance,” respondent Judge set the case for hearing on March 18, 1991. On April 16, 1991, respondent Judge issued the questioned order.

Sometime in May, 1991, petitioner discovered that the original TCT Nos. N-140485, N-140486 and 156454 on file with the Register of Deeds of Rizal had been cancelled and, in lieu thereof, TCT Nos. 200100, 200101 and 200102 had been issued in the name of respondent Durawood Construction and Lumber Supply, Inc. Surprised by this cancellation, petitioner - after investigation - found out about the reconstitution proceeding in the respondent trial court.

 So, on July 17, 1991, petitioner filed suit in the Court of Appeals docketed as CA-G.R.25434 praying for the annulment of the assailed order in LRC Case No. 91-924 penned by respondent Judge. It also prayed for the cancellation of the new certificates (TCT Nos. 200100, 200101 and 200102). On May 31, 1993, the respondent Court of Appeals rendered the assailed Decision and on August 30, 1993, the Resolution denying the motion for reconsideration. Hence, the present recourse to the Supreme Court.

ISSUE
Whether a board resolution issued in the absence of a quorum during the board meeting is valid.

RULING
No. The appellate court explained that while there may not have been a quorum during the board meeting of petitioner-corporation on May 10, 1984 when a resolution authorizing Gaw to sue on its behalf was allegedly passed, this did “not mean however, that New Durawood Co., Inc. cannot be bound by Gaw’s action” because “no howl of protest, complaint or denial came from (said corporation),” and that said corporation in fact had taken advantage of the benefits therefrom. Hence, petitioner is estopped from questioning Gaw’s acts. The appellate Court was of the belief that petitioner-corporation ratified Gaw’ s “authority” by acquiescence to his acts. The respondent Court thus concluded that petitioner-corporation’s “claim of being a victim of extrinsic fraud is baseless.”

We are appalled by this rather novel interpretation of corporate law. It is clear that, there having been no quorum present during the meeting in question, the board of directors could not have validly given Gaw any express authority to file the petition. Upon the other hand, the doctrine of “apparent authority” cannot apply as to Gaw because, being a mere branch manager, he could not be looked upon as acorporate officer clothed with the implied or “apparent” power to file suit for and in behalf of a corporation. Neither will estoppel prevent the corporation from questioning Gaw’s acts. Precisely, these acts were hidden from the company and its top officers. How then can estoppel attach?

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