Central Cooperative Exchange, Inc. v. Tibe
REITERATIONFacts
The Antecedents: Petitioner Central Cooperative Exchange, Inc. (CCE) is a national federation of farmers' cooperative marketing associations, with the former ACCFA as its majority stockholder. Respondent Concordio Tibe, Sr. served as a member of CCE's board of directors from May 23, 1958, to May 26, 1960. During his term, Tibe drew cash advances totaling P5,668.00, of which P3,317.25 was liquidated, leaving P2,350.75 unaccounted for (later reduced to P2,133.45 due to partial payments). Tibe also collected P14,436.95 for commutable per diems, FACOMA visitations, representation expenses, and discretionary funds, all disbursed with the approval of CCE's general manager, treasurer, and auditor. Procedural History: CCE filed a complaint against Tibe for the refund of these amounts. The Court of First Instance of Manila dismissed the complaint. The Court of Appeals affirmed the dismissal, ruling that CCE's claim was barred by laches. The Petition: CCE filed a petition for review on certiorari, arguing that the resolutions under which Tibe collected the funds were invalid as they exceeded the board's authority and contravened the By-Laws.
Issue(s)
Issue 1: Whether the board of directors of CCE had the power and authority to adopt various resolutions which appropriated corporate funds for per diems, commutable allowances, and discretionary funds for its members. Issue 2: Whether the petitioner's claim for the refund of said sums is barred by laches. Issue 3: Whether respondent Tibe is liable for the unliquidated cash advances.
Ruling
The decision of the Court of Appeals is reversed. Respondent Concordio Tibe, Sr. is ordered to pay petitioner Central Cooperative Exchange, Inc. the sums of P1,730.35 and P14,436.95, with legal interests from October 22, 1960, until fully paid.
Ratio Decidendi
On Issue 1: The Supreme Court held that the questioned resolutions are contrary to the By-Laws of the federation and therefore outside the power of the board of directors to enact. Section 8 of the By-Laws explicitly reserved the power to determine the compensation of board members to the stockholders, who had restricted it to "actual transportation expenses plus the per diems of P30.00 and actual expenses while waiting." The Court reiterated the well-settled principle that directors of corporations presumptively serve without compensation, and claims for such compensation can only be asserted if there is an express agreement or a resolution in relation thereto. While the board could assign additional duties like FACOMA visitations, they could not vote themselves compensation for such duties, as this power was specifically withheld from the board and reserved to the stockholders. The general powers granted to the board by Section 28 of the Corporation Law and Section 1 of Article VI of the By-Laws do not extend to fixing their own compensation. On Issue 2: The Supreme Court disagreed with the lower court's finding that the petitioner's claim was barred by laches. The Court explained that the board of directors had control of the corporation's affairs, and it could not be expected that the board would sue its own members for sums they themselves had approved. Therefore, under circumstances where the corporation was effectively immobilized from initiating suit against its directors, laches does not begin to attach against the corporation until the directors cease to be such. Given that the respondent ceased to be a director in May 1960 and the action was filed in October 1960, the period was too short for the claim to be considered stale. On Issue 3: The Supreme Court found that the Court of Appeals plainly erred in not granting the petitioner's claim on the cash advances. The respondent had admitted liability for these cash advances during the trial (T.s.n., 4 March 1965, pages 7-8). By admitting liability, the respondent effectively waived all defenses, including laches, regarding these specific sums. The appellate court's reasoning that it would be difficult for the respondent to produce disbursement receipts was deemed irrelevant, as the admission of liability rendered such receipts unnecessary for proving the claim.
Main Doctrine
Resolutions of a corporation's board of directors appropriating corporate funds for their own compensation are invalid if they contravene the corporation's By-Laws, which reserve the power to determine such compensation to the stockholders. Directors are not entitled to compensation unless expressly agreed upon or provided for by resolution, and they cannot vote themselves compensation for additional duties when such power is specifically withheld from them.