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Steinberg v. Velasco, 52 Phil. 953 (1929) Case

The plaintiffs were sugar planters who had milling contracts with the defendant sugar central mill since 1919. In 1936, amended contracts were proposed that increased the planters' share of the sugar but extended the contract length. The mill's board adopted a resolution granting further concessions. The plaintiffs sued, arguing other mills had granted higher shares. The mill argued the resolution was invalid as an ultra vires donation. The court held the resolution was valid, as directors have authority to modify contracts to make them more acceptable, and the court will not review business decisions causing potential losses. The mill was bound to grant the plaintiffs the increases under the resolution terms.

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71 views1 page

Steinberg v. Velasco, 52 Phil. 953 (1929) Case

The plaintiffs were sugar planters who had milling contracts with the defendant sugar central mill since 1919. In 1936, amended contracts were proposed that increased the planters' share of the sugar but extended the contract length. The mill's board adopted a resolution granting further concessions. The plaintiffs sued, arguing other mills had granted higher shares. The mill argued the resolution was invalid as an ultra vires donation. The court held the resolution was valid, as directors have authority to modify contracts to make them more acceptable, and the court will not review business decisions causing potential losses. The mill was bound to grant the plaintiffs the increases under the resolution terms.

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Benjie Sales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Steinberg v. Velasco, 52 Phil.

953 [1929] Case Digest

MONTELIBANO VS BACOLOD-MURCIA MILING Facts: Plaintiffs-appellants, Alfredo


Montelibano, Alejandro Montelibano, and the Limited co-partnership Gonzaga and Company,
had been and are sugar planters adhered to the defendant-appellee’s sugar central mill under
identical milling contracts. Originally executed in 1919, said contracts were stipulated to be in
force for 30 years starting with the 1920-21 crop, and provided that the resulting product should
be divided in the ratio of 45% for the mill and 55% for the planters.Sometime in 1936, it was
proposed to execute amended milling contracts, increasing the planters’ share to 60% of the
manufactured sugar and resulting molasses, besides other concessions, but extending the
operation of the milling contract from the original 30 years to 45 years. The Board of Directors of
the appellee Bacolod-Murcia Milling Co., Inc., adopted a resolution granting further concessions
to the planters over and above those contained in the printed Amended Milling Contract. The
appellants initiated the present action, contending that three Negros sugar centrals with a total
annual production exceeding one-third of the production of all the sugar central mills in the
province, had already granted increased participation (of 62.5%) to their planters, and that
under the resolution the appellee had become obligated to grant similar concessions to the
plaintiffs. The appellee Bacolod-Murcia Milling Co., inc., resisted the claim, and defended by
urging that the stipulations contained in the resolution were made without consideration; that the
resolution in question was, therefore, null and void ab initio, being in effect a donation that was
ultra vires and beyond the powers of the corporate directors to adopt.

Issue: WON the board resolution is an ultra vires act and in effect a donation from the board of
directors?

Held: No. There can be no doubt that the directors of the appellee company had authority to
modify the proposed terms of the Amended Milling Contract for the purpose of making its terms
more acceptable to the other contracting parties. As the resolution in question was passed in
good faith by the board of directors, it is valid and binding, and whether or not it will cause
losses or decrease the profits of the central, the court has no authority to review them. Whether
the business of a corporation should be operated at a loss during depression, or close down at
a smaller loss, is a purely business and economic problem to be determined by the directors of
the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under
the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-
appellants herein.

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