Nestor M. Sevilla vs. Mrs. Elvira Baluyut, et al.

[SEC-SICD * CASE NO. 3623. December 4, 1990.] NESTOR M. SEVILLA , petitioner , vs . MRS. ELVIRA BALUYUT, ET AL. , respondents . D E C I S I O N This is a petition for mandamus praying that an Order be issued directing the officers of Inland Resources Development Corporation (IRDC, for brevity) and the herein respondents to submit IRDC's corporate books and records for examination by the external auditor, Carlos J. Valdez & Co. with application for the issuance of a writ of preliminary injunction, seeking to enjoin the respondents from holding the scheduled special meeting of the Board of Directors of IRDC which was supposed to be held at Mario's Restaurant, Tomas Morato St., Quezon City on August 16, 1989 at 7:00 o'clock in the evening. LibLex As culled from the records, it appears that IRDC was incorporated on March 3, 1982 and is still existing in accordance with law. The petitioner and the respondents are all stockholders and directors thereof. From the first organizational election of IRDC in 1982, up to the election in 1988, petitioner was consistently elected to the concurrent position(s) of Chairman of the Board of Directors and President of IRDC. IRDC has regularly engaged the services of an external auditor who conducts annual examination and audit of its corporate books and records and whose reports were duly passed upon by the Board of Directors and approved by the petitioner in his capacity as President: Petitioner now seeks for semi-annual audit examination of IRDC which the respondents opposed, hence, this petition. Several pre-trial conferences have been conducted to settle the case amicably but the same proved futile. However, at the preliminary conference held on October 16, 1989, the parties have agreed to dispense with the hearing on the merits and submit the case for decision based on their respective memorandum considering that the only issue raised is one of law, that is, whether or not the petitioner, as President of IRDC, can motu proprio validly enter into a contract, as he had in that August 4, 1989 agreement with Carlos J. Valdez & Co. for the external audit of the corporate books and transactions of IRDC covering the period January 1 to June 30, 1990, inclusive, at the expense of IRDC. Simply stated, the legal issue posed by the parties is whether it is the corporation or the petitioner, himself, who should bear the expense of conducting the external audit subject matter of the litigation. We find merit on the posture taken by petitioner. While it has not been denied that the By-Laws gives discretion to its Board of Directors to employ auditors who shall prepare and certify the annual balance sheet of its corporate books under the discretion of the Treasurer, we cannot concede with respondents' contention that such power is vested solely in the Board. Presidents of corporations are often given general supervision and control over the business as executive head, in view of which there is now a growing doctrine that contracts or acts made or done by the President of a business corporation, in the ordinary course of its business, will at least be presumed to be within its authority, unless the contrary appears. (Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. 3, 1988 ed, p. 237, citing Ballantine 139) "Commenting on this, an authority says: 'The President and other officers, and not the board of directors, are those who are usually brought into contract with third parties in the conduct of the business of the organization; and custom and usage, and the necessities of social order, demand that these executive officers should be regarded as entitled to bind the organizations are accustomed to transact through such officers.' (2 Fletcher, 397) It is high time . . . to adopt the sensible rule in accordance with well-recognized ideas of the people at large, that a president of a corporation is the head of the corporation subject to the control of the board of directors as to matters out of the ordinary but with the power to bind the corporation in regard to contracts involved in the everyday business of the corporation . . . (Ibid, 442-443)." LLphil As already mentioned, respondents admit that petitioner had been holding concurrently the positions of Chairman of the Board of Directors and President of the Corporation from its organizational election in 1982 until 1988. More importantly, respondents even claim that the inclusive dates of the records sought to be examined fall within the period of incumbency of petitioner as corporate president. These facts, in the opinion of this Hearing Panel, did not destroy, but even showed honesty of petitioner's intention in entering into the questioned agreement with another external auditor for the examination of the company's books and records by the latter and tend to support the validity of the contested act of petitioner. WHEREFORE, premises considered, judgment is hereby rendered directing respondents to submit within fifteen (15) days from receipt of this Decision, the corporate books of accounts of the Inland Resources Development Corporation for examination by the Carlos J. Valdez & Co. as external auditor, at the expense of the said corporation and subject to the terms and conditions of the engagement contract of August 4, 1990 entered into by and between the petitioner, in his capacity as President of Inland Resources Development Corporation, and the said auditing firm. Anent the matter of injunction, the same has become moot and academic considering that the matter sought to be enjoined has already been consummated and any ruling thereon would not be of any practical or useful purpose in the premises. LLpr SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer (SGD.) DEOGENES N. AGELLON Hearing Officer