Lopez Realty vs.

Fontecha (247 SCRA 183)

SECOND DIVISION
G.R. No. 76801 August 11, 1995
LOPEZ REALTY, INC., AND ASUNCION LOPEZ GONZALES, petitioners,
vs. FLORENTINA FONTECHA, ET AL., AND THE NATIONAL LABOR RELATIONS
COMMISSION, respondents.

PUNO, J.:

DOCTRINE: Ratification by directors may be by an express resolution or vote to

that effect, or it may be implied from adoption of the act, acceptance or
acquiescence. Moreover, the unauthorized acts of an officer of a corporation may
be ratified by the corporation by conduct implying approval and adoption of the
act in question. Such ratification may be expressed or may be inferred from
silence and inaction.

In the case at bench, it was established that petitioner corporation did not issue
any resolution revoking nor nullifying the board resolution granting gratuity pay
to private respondents. Instead, they paid the gratuity pay, particularly, the first
two installments thereof

FACTS: Petitioner corporation approved two resolutions providing for the gratuity pay of
its employees. Except for Asuncion Lopez-Gonzales, who was then abroad, the
remaining member of the board convened a special meeting and passed a resolution
adopting the above-mentioned resolutions. Private respondents requested for the full
payment of the gratuity pay which was granted. At that time, however, petitioner
Asuncion was still abroad, and allegedly sent a cablegram objecting to certain matters
taken up by the board in her absence.

Notwithstanding a corporate squabble between Asuncion and Arturo Lopez, the first two
installments of the gratuity pay of private respondents were paid. Also, petitioner
corporation had prepared the cash vouchers and checks for the third installment. For
some reason, said voucher was cancelled by petitioner Asuncion.

A complaint was filed before the labor arbiter who decided in favor of private
respondents.

ISSUE1: Whether the gratuity pay should be paid.

HELD: YES. The general rules are that a corporation, through its board of directors,
should act in the manner and within the formalities, if any, prescribed by its charter or by
the general law.
Thus, the directors must act as a body in a meeting called pursuant to the law or the
corporation’s by-laws, otherwise, any action taken therein may be questioned by any
objecting director or shareholder. Be that as it may, jurisprudence tells us that an action
of the board of directors during a meeting, which was illegal for lack of notice, may be
ratified either (1) expressly, by the action of the directors in subsequent legal meeting,
or (2) impliedly, by the corporations’ subsequent conduct.

Ratification by directors may be by an express resolution or vote to that effect, or it may

be implied from adoption of the act, acceptance or acquiescence. Moreover, the
unauthorized acts of an officer of a corporation may be ratified by the corporation by
conduct implying approval and adoption of the act in question. Such ratification may be
expressed or may be inferred from silence and inaction.

In the case at bench, it was established that petitioner corporation did not issue any
resolution revoking nor nullifying the board resolution granting gratuity pay to private
respondents. Instead, they paid the gratuity pay, particularly, the first two installments
thereof.

Issue2: Was it an were ultra vires for lack of notice?

Held: No. Section 17-1/2 (Sec. 40) of the Corporation Law allows a corporation to
"invest its funds in any other corporation or business or for any purpose other than the
main purpose for which it was organized" provided that its Board of Directors has been
so authorized by the affirmative vote of stockholders holding shares entitling them to
exercise at least two-thirds of the voting power.

If the investment is made in pursuance of the corporate purpose, it does not need the
approval of the stockholders. It is only when the purchase of shares is done solely for
investment and not to accomplish the purpose of its incorporation that the vote of
approval of the stockholders holding shares entitling them to exercise at least two-thirds
of the voting power is necessary.