ULTRA VIRES DOCTRINE the establishment, in the case at bar of a local post office in a mining camp

which is far removed from the postal facilities or means of communication

Sec. 45. Ultra vires acts of corporations. - No corporation under this Code shall accorded to people living in a city or municipality
possess or exercise any corporate powers An illegal act is void and cannot be validated while an ultra vires act is
Except those conferred by this Code or merely voidable and can be enforced by performance, ratification or
By its articles of incorporation and estoppel, or on equitable grounds. In the present case the validity of the
Except such as are necessary or incidental to the exercise of the powers so resolution of the Board of Directors of the corporation accepting full
conferred responsibility in connection with funds to be received by its postmaster,
should be upheld on the ground of estoppel.
An ultra vires act is one committed outside the object for which a
corporation is created FACTS:
As defined by the law of its organization and therefore beyond the power May 1948 Acoje Mining Company (Acoje) wrote the Director of Posts
conferred upon it by law requesting the opening of a post, telegraph & money order offices at
its mining camp at Sta. Cruz Zambales
Ultra vires vs. Illegal acts o To service its employees and their families that were living in said
Ultra vires is merely voidable may be enforced by performance, camp
ratification, or estoppel Director of Posts If aside from free quarters the company would provide
Illegal acts void and cannot be validated for all essential equipment and assign a responsible employee to
perform the duties of a postmaster without compensation from his
Effects of Ultra Vires Act office until such time as funds therefor may be available
Executed contract courts will not set aside or interfere with such contracts o He would agree to put up the offices requested
Executory contracts no enforcement even at the suit of either party Company signified willingness to comply with the requirements
Part executed and part executory principle against unjust enrichment shall April 1949; Director of Posts In cases where a post office will be opened
apply under circumstances similar to the present
o It is the policy of this office to have the company assume direct
responsibility for whatever pecuniary loss may be suffered by

RP v. ACOJE MINING the Bureau of Posts by reason of any act of dishonesty,

carelessness or negligence on the part of the employee of the

DOCTRINE: company Who is assigned to take charge of the post office,"

Acoje: Requirement of the Bureau of Posts be complied with
While as a rule an ultra vires act is one committed outside the object for
o Satisfies last condition imposed; requested that an inspector be
which a corporation is created as defined by law of its organization and
sent to the camp for the purpose of acquainting the postmaster
therefore beyond the powers conferred upon it by law (19 C.J.S., Section
with the details of the operation of the branch office
965, p. 419), there are however certain corporate acts that may be
October 1949 post office branch was opened
performed outside of the scope of the powers expressly conferred if they o Hilario Sanchez postmaster; employee of Acoje
are necessary to promote the interest or welfare of the corporation, such as 1954 went on a 3 day leave but never returned
 Company informed the officials of Manila post office & provincial auditor of
Zambales of the disappearance
o Accounts of the postmaster were checked
Shortage of P13, 867. 24 was found
After several demands were made, government commenced action before
Manila CFI collection of sum of money
Acoje: denied liability for send amount contending: resolution of the board
assuming responsibility for the act of the postmaster is ultra vires &
in any event its liability under said resolution is only that o a
guarantor who answers only after the exhaustion of the properties of
the principal, aside from the fact that the loss claimed by plaintiff is
not supported by the office record
Trial court: Rejected contention that resolution adopted was ultra vires &
that the obligation is merely that of a guarantor; Only the sum of 9, 515. 25
was supported by evidence
o Appeal
ISSUE: W/N the adoption of the board resolution was ultra vires.
HELD:
The contention that the resolution adopted by the company is ultra
vires in the sense that it has no authority to act on a matter which may
render the company liable as a guarantor has no factual or legal basis
Opening of a post office branch at the mining camp of the corporation was
undertaken because of a request submitted by it to promote convenience
and benefit of its employees
o Idea did not come for the government
After the company signified willingness to comply with the requirements set
forth and condition given by the Director of Posts upon agreeing to the
opening of posts
o Company cannot now be heard to complain that it is not liable
for the irregularity committed by its employee
The claim that the resolution adopted by the board of directors of appellant
company is an ultra vires act cannot also be entertained it appearing that
the same covers a subject which concerns the benefit, convenience and
welfare of its employees and their families
There are certain corporate acts that may be performed outside of the
scope of the powers expressly conferred if they are necessary to promote
the interest or welfare of the corporation
Although not expressly authorized to do so, a corporation may become a
surety where the particular transaction is reasonably necessary or proper to
the conduct of its business
o And here it is undisputed that the establishment of the local post
office is a reasonable and proper adjunct to the conduct of the
business of appellant company
o Such post office is a vital improvement in the living condition of its
employees and laborers who came to settle in its mining camp
which is far removed from the postal facilities or means of
communication accorded to people living in a city or municipality
Even assuming arguendo that the resolution in question constitutes an ultra
vires act, the same however is not void for it was approved not in
contravention of law, customs, public order or public policy
The term ultra vires should be distinguished from an illegal act for the
former is merely voidable which may be enforced by performance,
ratification, or estoppel, while the latter is void and cannot be validated
o It being merely voidable, an ultra vires act can be enforced or
validated if there are equitable grounds for taking such action
Decision appealed from is affirmed
NATIONAL POWER CORP VS. VERA
DOCTRINE:
CORPORATION LAW; NATIONAL POWER CORPORATION; EXERCISES
POWERS EXPRESSLY GRANTED TO IT BY ITS CHAPTER. The NPC
was created and empowered not only to construct, operate and maintain
power plants, reservoirs, transmission lines, and other works, but also: . .
.To exercise such powers and do such things as may be reasonably
necessary to carry out the business and purposes for which it was
 organized, or which, from time to time, may be declared by the Board to be
necessary, useful, incidental or auxiliary to accomplish said purpose, . . .
[Sec. 3 (1) of Rep. Act No. 6395, as amended.] In determining whether or
not an NPC act falls within the purview of the above provision, the Court
must decide whether or not a logical and necessary relation exists between
the act questioned and the corporate purpose expressed in the NPC
charter. For if that act is one which is lawful in itself and not otherwise
prohibited, and is done for the purpose of serving corporate ends, and
reasonably contributes to the promotion of those ends in a substantial and
not in a remote and fanciful sense, it may be fairly considered within the
corporation's charter powers. The Court holds that NPC is empowered
under its Charter to undertake such services, it being reasonably necessary
to the operation and maintenance of the power plant.
FACTS:
Instant petition arose from a complaint for prohibition and madamus filed by
Sea Lion International Port Terminal Services against NPC and Philippine
Ports Authority (PPA)
Sea Lion alleged that NPC acted in bad faith and with grave abuse of
discretion in not renewing its Contract for Stevedoring Services for
Coal-Handling Operations at NPCs plant and in taking over its
stevedoring services
Judge Vera soon after filing the complaint, issued a restraining order
against NPC enjoining it from undertaking stevedoring services at the
pier
NPC filed an "Urgent Motion" to dissolve the restraining order, asserting,
inter alia:
o That by virtue of Presidential Decree No. 1818, respondent judge
had no jurisdiction to issue the order; and
o That private respondent, whose contract with NPC had expired
prior to the commencement of the suit, failed to establish a cause
of action for a writ of preliminary injunction
Trial Court: Finds merit in the petition
o Assailed order suffers from infirmities which must be rectified by
the grant of a writ of certiorari in favor of the petitioner
Judge acted without jurisdiction when he issued the writ of preliminary
injunction against NPC
Presidential Decree No. 1818 explicitly provides.
SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining
order, preliminary injunction, or preliminary mandatory injunction in any case, dispute,
or controversy involving an infrastructure project, or a mining, fishery, forest or other
natural resource development project of the government, or any public utility operated
by the government, including among others public utilities for the transport of the
goods or commodities, stevedoring and arrastre contracts, to prohibit any person or
persons, entity or government official from proceeding with, or continuing the
execution or implementation of any such project, or the operation of such public
utility, or pursuing any lawful activity necessary for such execution, implementation or
operation.
NPC is a public utility, created under special legislation engaged in the
generation and distribution of electric power and energy. It, therefore,
enjoys the protective mantle of the above decree
Moreover, respondent judge's finding that NPC is not empowered by its
Charter to undertake stevedoring services in its pier is erroneous.
To carry out the national policy of total electrification of the country and to
meet the needs of industrial development and the needs of rural
electrification
o NPC was created and empowered not only to construct
operate and maintain power plants but also to exercise such
powers and do such things as may be reasonable necessary
to carry out the business and purposes for which it was
organizes, or which, from time to tome, may be declared by
the Board to be necessary, useful, incidental or auxiliary to
accomplish said purpose
ISSUE: In determining whether or not an NPC act falls within the purview of the
provision the court must decide W/N a logical & necessary relation exists
between the act questioned and the corporate purposes expressed in the NPC
charter.
HELD
 It is an undisputed fact that the pier located at Calaca, Batangas, which is
owned by NPC, receives the various shipments of coal which is used
exclusively to fuel the Batangas Coal-Fired Thermal Power Plant of the NPC
for the generation of electric power
The stevedoring services which involve the unloading of the coal shipments The Government of the Philippine Islands vs. El Hogar Filipino
into the NPC pier for its eventual conveyance to the power plant are
FACTS:
incidental and indispensable to the operation of the plant.
o The Court holds that NPC is empowered under its Charter to
undertake such services, it being reasonably necessary to the
operation and maintenance of the power plant.
Assailed Order was issued in grave abuse of discretion
o Private respondent had failed to establish a right to the issuance
Or a writ of preliminary injunction
o Court cannot direct the exercise of the corporate prerogative
In the instant case, it is an undisputed fact that private respondent's contract
for stevedoring services with NPC had already expired
o There is no existing contractual relationship between the parties
o Moreover, private respondent's PPA permit for cargo handling
services at the NPC Calaca pier had expired as well
o On the other hand, NPC, which was under no legal obligation to
renew the contract for stevedoring services with private
respondent, was granted authority by the PPA to provide cargo
handling services in its pier
o Consequently, there was no right of private respondent that
needed to be protected or preserved by a writ of preliminary
injunction
Furthermore, respondent judge's directive ordering NPC to enter into a
contract for stevedoring and arrastre services or to conduct a public bidding
therefor amounted to a writ of mandamus.
But it is a settled rule that mandamus will lie only to compel the
performance of a ministerial duty; it does not lie to require anyone to fulfill
contractual obligations or compel a course of conduct, nor to control or
review the exercise of discretion
Whether NPC will enter into a contract for stevedoring and arrastre
services to handle its coal shipments to its pier, or undertake the
services itself, is entirely and exclusively within its corporate
discretion. It does not involve a duty the performance of which is enjoined
by law
TRO is made permanent
The Philippine Commission enacted Act No. 1459, also known as the
Corporation Law
El Hogar Filipino was the first corporation organized under Sec. 171-190
Act No. 1459, devoted to the subject of building and loan associations,
their organization and administration
n the said law, the capital of the corporation was not permitted to exceed
P3M, but Act No. 2092 amended the statute, permitting capitalization to the
amount of ten millions.
El Hogar took advantage of the amendment and amended its AOI as a
result thereof, stating that the amount of capital must not exceed what has
been stated in Act No. 2092.
This resulted to El Hogar having 5,826 shareholders, 125,750 shares with
paid-up value of P8.7M. The corporation paid P7.16M to its withdrawing
stockholders.
The Government of the Philippine Islands filed an action against El Hogar
due to the alleged illegal holding title to real property for a period exceeding
five (5) years after the same was bought in a foreclosure sale. Sec. 13(5) of
the Corporation Law states that corporations must dispose of real estate
obtained within 5 years from receiving the title. The Philippine Government
also prays that El Hogar be excluded from all corporate rights and privileges
and effecting a final dissolution of said corporation.
o It appears from the records that El Hogar was the holder of a
recorded mortgage on the San Clemente land as security for a
P24K loan to El Hogar. However, shareholders and borrowers
defaulted in payment so El Hogar foreclosed the mortgage and
purchased the land during the auction sale. A deed of conveyance
in favor of El Hogar was executed and sent to the Register of
Deeds of Tralac with a request that the certificate of title be
 cancelled and a new one be issued in favor of El Hogar from the ISSUE: Whether the acts of respondent corporation merit its dissolution or
Register of Deeds of Tarlac. However, no reply was received. El deprivation of its corporate franchise and to exclude it from all corporate rights and
Hogar filed a complaint with the Chief of the General Land privileges
Registration Office. The certificate of title to the San Clemente land
was received by El Hogar and a board resolution authorizing
Benzon to find a buyer was issued. Alcantara, the buyer of the
HELD: SUSTAINED only as to administering of real property not owned by it and
land, was given extension of time to make payment but defaulted
when permitted by contract.
so the contract treated rescinded. Efforts were made to find
another buyer. Respondent acquired title in December 1920 until
the property was finally sold to Felipa Alberto in July 1926. The
interval exceeded 5 years but the period did not commence to run Causes of action:
until May 7, 1921 when the register of deeds delivered the new
certificate of title. It has been held that a purchaser of land 1) Alleged illegal holding of real property for a period exceeding five years from
registered under the Torrens system cannot acquire the status of receipt of title-Cause of delay is not respondents fault
an innocent purchaser for value unless the vendor is able to place
the owners duplicate in his hands showing the title to be in the
vendor. During the period before May 1921, El Hogar was not in a
position to pass an indefeasible title to any purchaser. Therefore, 2) That respondent is owning and holding a business lot with the structure

El Hogar cannot be held accountable for this delay which was not thereon in excess of its reasonable requirements and in contravention of

due to its fault. Likewise, the period from March 25, 1926 to April Sec. 13(5) of Corpo. Law- WITHOUT MERIT

20, 1926 must not be part of the five-year period because this was
the period where respondent was under the obligation to sell the
property to Alcantara prior to the contracts rescission due to
Alcantaras non-payment.
o Another circumstance causing the delay is the fact that El Hogar
purchased the property in the full amount of the loan made by the
former owner which is nearly P24K when it was subsequently
found that the property was not salable and later sold for P6K
notwithstanding El Hogars efforts to find a purchaser upon better
terms.
Every corporation has the power to purchase, hold and lease such real property as
the transaction would of the lawful business may reasonably and necessarily require.
3) That respondent is engaged in activities foreign to the purposes for which
the corporation was created and not reasonably necessary to its legitimate
ends-VALID
The administration of property, payment of real estate taxes, causing necessary
repairs, managing real properties of non-borrowing shareholders is more befitting to
the business of a real estate agent or a trust company than a building and loan
association.

4) That the by-laws of the association stating that, the board of directors by
the vote of an absolute majority of its members is empowered to cancel
shares and to return the balance to the owner by reason of their conduct or
any other motive or liquidation is in direct conflict with Sec. 187 of the
Corporation Law which provides that the board of directors shall not have
the power to force the surrender and withdrawal of unmatured stock except
in case of liquidation or forfeiture of stock for delinquency-WITHOUT MERIT
There is no provision of law making it a misdemeanor to incorporate an invalid
provision in the by-laws of a corporation; and if there were such, the hazards incident
to corporate effort would be largely increased.
5) Art. 61 of El Hogars by-laws which states that attendance in person or by
proxy by shareholders owning one-half plus one of the shareholders shall
be necessary to constitute a quorum for the election of directors is contrary
to Sec. 31 of the Corpo Law which provides that owners of the majority of
the subscribed capital stock entitled to vote must be present either in person
or by proxy at all elections of directors- WITHOUT MERIT
No fault can be imputed to the corporation on account of the failure of the
shareholders to attend the annual meetings and their non-attendance in meetings is
doubtless to be interpreted in part as expressing their satisfaction of the way in which
things have been conducted. Mere failure of a corporation to elect officers does not
terminate the terms of existing officers nor dissolve the corporation. The general rule
is to allow the officer to holdover until his successor is duly qualified.
6) That the directors of El Hogar, instead of receiving nominal pay or serving
without pay, have been receiving large compensation, varying in amount
from time to time, out of respondents profits- WITHOUT MERIT
With the growth of the corporation, the amount paid as compensation to the directors
has increased beyond what would probably be necessary is a matter that cannot be
corrected in this action. Nor can it properly be made a basis for depriving respondent
of its franchise or enjoining it from compliance with the provisions of its own by-laws.
If a mistake has been made, the remedy is to lie rather in publicity and competition.
7) That the promoter and organizer of El Hogar was Mr. Antonio Melian and
that in the early stages of the organization of the association, the board of
directors authorized the association to make a contract with him and that
the royalty given to him as founder is unconscionable, excessive and out of
proportion to the services rendered-NOT SUSTAINED
The mere fact that compensation is in excess of what may be considered appropriate
is not a proper consideration for the court to resolve. That El Hogar is in contact with
its promoter did not affect the associations legal character. The court is of the
opinion that the traditional respect for the sanctity of the contract obligation should
prevail over the radical and innovating tendencies.
8) That Art. 70 of El Hogars by-laws, requiring persons elected as board of
directors to be holders of shares of the paid up value of P5,000 which shall
be held as security, is objectionable since a poor member or wage earner
cannot serve as a director irrespective of other qualifications- NOT
SUSTAINED
Corpo. Law expressly gives the power to the corporation to provide in its by-laws for
the qualification of its directors and the requirement of security from them for the
proper discharge of the duties of their pffice in the manner prescribed in Art. 70 is
highly prudent and in conformity with good practice.
 9) That respondent abused its franchise in issuing special shares alleged to
be illegal and inconsistent with the plan and purposes of building and loan
associations- WITHOUT MERIT
The said special shares are generally known as advance payment shares which
were evidently created for the purpose of meeting the condition caused by the
prepayment of dues that is permitted. Sec. 178 of Corpo Law allows payment of dues
or interest to be paid in advance but the corporation shall not allow interest on
advance payment grater than 6% per annum nor for a period longer than one year.
The amount is satisfied by applying a portion of the shareholders participation in the
annual earnings.The mission of special shares does not involve any violation of the
principle that the shares must be sold at par.
10) That in making purchases at foreclosure sales constituting as security for
54 of the loans, El Hogar bids the full amount after deducting the withdrawal
value, alleged to be pusuing a policy of depreciating at the rate of 10
percent per annum, the value of the real properties it acquired and that this
rate is excessive-UNSUSTAINABLE
The board of directors possess discretion in this matter. There is no provision of law
prohibiting the association from writing off a reasonable amount for depreciation on
its assets for the purpose of determining its real profits. Art. 74 of its by-laws
expressly authorizes the board of directors to determine each year the amount to be
written down upon the expenses for the installation and the property of the
corporation. The court cannot control the discretion of the board of directors about an
administrative matter as to which they have no legitimate power of action.
11) That respondent maintains excessive reserve funds-UNFOUNDED
The function of this fund is to insure stockholders against losses. When the reserves
become excessive, the remedy is in the hands of the Legislature.
No prudent person would be inclined to take a policy in a
company which had so improvidently conducted its affairs that it only retained a fund
barely sufficient to pay its present liabilities and therefore was in a condition where
any change by the reduction of interest upon or depreciation in the value of securities
or increase of mortality would render it insolvent and subject to be placed in the
hands of a receiver.
12) That the board of directors has settled upon the unlawful policy of paying a
straight annual dividend of 10 percent per centum regardless of losses suffered and
profits made by the corporation, in contravention with the requirements of Sec. 188 of
the Corpo law- UNFOUNDED
As provided in the previous cause of action, the profits and losses shall be
determined by the board of directors and this means that they shall exercise the
usual discretion of good businessmen in allocating a portion of the annual profits to
purposes needful of the welfare of the association. The law contemplates distribution
of earnings and losses after legitimate obligations have been met.
13) That El Hogar has made loans to the knowledge of its officers which were
intended to be used by the borrowers for other purposes than the building of homes
and no attempt has been made to control the borrowers with respect to the use made
of the borrowed funds- UNFOUNDED
There is no statute expressly declaring that loans may be made by these
associations SOLELY for the purpose of building homes. The building of himes in
Sec. 171 of Corpo Law is only one among several ends which building and loan
associations are designed to promote and Sec. 181 authorizes the board of directors
of the association to fix the premium to be charged.
14) That the loans made by defendant for purposes other than building or acquiring
homes have been extended in extremely large amounts and to wealthy persons and
large companies- WITHOUT MERIT
The question of whether the making of large loans constitutes a misuser of the
franchise as would justify the court in depriving the association of its corporate life is
a matter confided to the discretion of the board of directors. The law states no limit as
to the size of the loans to be made by the association. Resort should be had to the
legislature because it is not a matter amenable to judicial control
15) That when the franchise expires, supposing the corporation is not reorganized,
upon final liquidation of the corporation, a reserve fund may exist which is out of all
proportion to the requirements that may fall upon it in the liquidation of the company-
NO MERIT
This matter may be left to the discretion of the board of directors or to legislative
action if it should be deemed expedient to require the gradual suppression of reserve
funds as the time for dissolution approaches. It is no matter for judicial interference
and much less could the resumption of the franchise be justified on this ground.
16) That various outstanding loans have been made by the respondent to
corporations and partnerships and such entities subscribed to respondents shares
for the sole purpose of obtaining such loans-NO MERIT
Sec. 173 of Corpo Law declares that any person may become a stockholder in
building and loan associations. The phrase ANY PERSON does not prevent a finding
that the phrase may not be taken in its proper and broad sense of either a natural or
artificial person.
17) That in disposing real estate purchased by it, some of the properties were sold
on credit and the persons and entities to which it was sold are not members nor
shareholders nor were they made members or shareholders, contrary to the
provision of Corpo Law requiring requiring loans to be stockholders only- NOT
SUSTAINED
The law does not prescribe that the property must be sold for cash or that the
purchaser shall be a shareholder in the corporation. Such sales can be made upon
the terms and conditions approved by the parties.
Respondent is enjoined in the future from administering real property not
owned by itself, except as may be permitted to it by contract when a borrowing
shareholder defaults in his obligation. In all other respects, the complaint is
DISMISSED.