G.R. No. L-32473; G.R. No. L-32483 – 52 SCRA 210 – Mercantile Law – Corporation Law – Delegation of Corporate Powers – Compromise Agreement
In 1967, HI Cement Corporation was granted authority to operate mining facilities in Bulacan. However, the areas allowed for it to explore cover areas which were also being explored by Ignacio Vicente, Juan Bernabe, and Moises Angeles. And so a dispute arose between the three and HI Cement as neither side wanted to give up their mining claims over the disputed areas. Eventually, HI Cement filed a civil case against the three. During pre-trial, the possibility of an amicable settlement was explored where HI Cement offered to purchase the areas of claims of Vicente et al at the rate of P0.90 per square meter. Vicente et al however wanted P10.00 per square meter.
In 1969, the lawyers of HI Cement agreed to enter into a compromise agreement with the three whereby commissioners shall be assigned by the court for the purpose of assessing the value of the disputed areas of claim. An assessment was subsequently made pursuant to the compromise agreement and the commissioners recommended a price rate of P15.00 per square meter.
One of the lawyers of HI Cement, Atty. Francisco Ventura, then notified the Board of Directors of HI Cement for the approval of the compromise agreement. But the Board disapproved the compromise agreement hence Atty. Ventura filed a motion with the court to disregard the compromise agreement. Vicente et al naturally assailed the motion. Vicente et al insisted that the compromise agreement is binding because prior to entering into the compromise agreement, the three lawyers of HI Cement declared in open court that they are authorized to enter into a compromise agreement for HI Cement; that one of the lawyers of HI Cement, Atty. Florentino Cardenas, is an executive official of HI Cement; that Cardenas even nominated one of the commissioners; that such act ratified the compromise agreement even if it was not approved by the Board. HI Cement, in its defense, averred that the lawyers were not authorized and that in fact there was no special power of attorney executed in their favor for the purpose of entering into a compromise agreement. Judge Ambrosio Geraldez ruled in favor of HI Cement.
ISSUE: Whether or not a compromise agreement entered into by a lawyer purportedly in behalf of the corporation is valid without a written authority.
HELD: No. Corporations may compromise only in the form and with the requisites which may be necessary to alienate their property. Under the corporation law the power to compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the Board of Directors but such power may be delegated. The delegation must be clearly shown for as a general rule an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him either expressly or by reasonable implication from the circumstances. In the case at bar, there was no special power of attorney authorizing the three lawyers to enter into a compromise agreement. This is even if the lawyers declared in open court that they are authorized to do so by the corporation (in this case, the transcript of stenographic notes does not show that the lawyers indeed declare such in open court).
The fact that Cardenas, an officer of HI Cement, acted in effecting the compromise agreement, i.e. nominating a commissioner, does not ratify the compromise agreement. There is no showing that Cardenas’ act binds HI Cement; no proof that he is authorized by the Board; no proof that there is a provision in the articles of incorporation of HI Cement that he can bind the corporation.
