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G. R. No. L-15092. May 18, 1962 (Case Brief - Digest)

The Supreme Court case Alfredo Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc. addressed the validity of a 1936 resolution that aimed to increase planter shares in a milling contract. The Court ruled that the resolution was an integral part of the contract, supported by valid consideration, and binding on Bacolod-Murcia to match better terms offered by other sugar mills. This decision reinforced the enforceability of board resolutions in contractual agreements and highlighted the importance of corporate governance.

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13 views2 pages

G. R. No. L-15092. May 18, 1962 (Case Brief - Digest)

The Supreme Court case Alfredo Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc. addressed the validity of a 1936 resolution that aimed to increase planter shares in a milling contract. The Court ruled that the resolution was an integral part of the contract, supported by valid consideration, and binding on Bacolod-Murcia to match better terms offered by other sugar mills. This decision reinforced the enforceability of board resolutions in contractual agreements and highlighted the importance of corporate governance.

Uploaded by

Rubilyn Salvador
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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G. R. No. L-15092.

May 18, 1962 (Case Brief / Digest)

# Title:
Alfredo Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc.

# Facts:
Alfredo Montelibano, Alejandro Montelibano, and Gonzaga and Company partnered with
Bacolod-Murcia Milling Co., Inc. under a milling contract executed in 1919. This contract,
initially effective for 30 years starting in 1920-1921, stipulated that sugar production would
be divided such that 45% went to the mill and 55% to the planters.
In 1936, new milling contracts proposed an increased share of 60% for the planters and an
extension of the contract by an additional 15 years (totaling 45 years). Alongside these
contracts, Bacolod-Murcia’s Board of Directors adopted a resolution on August 20, 1936,
including a provision that if other sugar mills in Negros Occidental offered better terms,
those terms would apply to Bacolod-Murcia’s planters as well.

The plaintiffs signed the amended contract on September 10, 1936. By 1953, plaintiffs
claimed other sugar centrals (La Carlota, Binalbagan-Isabela, and San Carlos) had increased
planter shares to 62.5% and demanded similar increases from Bacolod-Murcia based on the
1936 resolution. The defendant countered that the resolution was void, lacking
consideration, and thus not binding.

The Court of First Instance of Occidental Negros dismissed the plaintiffs’ claims, finding the
resolution null and void. Plaintiffs appealed to the Supreme Court.

# Issues:
1. Whether the August 20, 1936 resolution formed part of the milling contract.
2. Whether the resolution was supported by valid consideration.
3. Whether the resolution’s terms, concerning increased planter shares, were binding on the
appellee.

# Court’s Decision:
Issue 1:
The Supreme Court held that the resolution of August 20, 1936, was indeed an integral part
of the printed amended milling contract. The plaintiffs signed the amended milling contract
with the understanding that it included the resolution’s additional terms.

Issue 2:
The court determined that the resolution was supported by sufficient legal consideration
arising out of the promises and obligations of the main amended milling contract, notably

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G. R. No. L-15092. May 18, 1962 (Case Brief / Digest)

the extension of the operative period of the contract. Thus, it was not a separate gratuitous
contract.

Issue 3:
Concluding that the board’s resolution constituted a binding supplement to the contract, the
Court held that Bacolod-Murcia Milling Co., Inc., was obligated to match the better terms
offered by other centrals, as per paragraph 9 of the resolution.

# Doctrine:
The doctrine reiterated by the Supreme Court is that resolution passed by a corporation’s
board of directors, adopted in good faith and aimed at amending the terms to benefit both
parties, is valid and binding. Additionally, contractual modifications agreed upon before the
execution of the contract’s final form are inherently part of the contract.

# Class Notes:
1. Contract Law:
– Formation and Integration: Contract modifications proposed and agreed upon prior to
execution form part of the final contract.
2. Consideration:
– Adequacy of Consideration: Legal consideration can be tied to the benefits, obligations,
and extensions of contract terms.
3. Binding Resolutions:
– Corporate Authority: Directors’ resolutions made in good faith and in furtherance of
corporate purposes are binding.
4. Subsequent Terms:
– Ratification of Terms: Ratified terms post-signature can be binding if understood and
incorporated by both parties.

# Historical Background:
The case unfolded within the Philippine sugar industry context, amid efforts by planters to
negotiate better terms in milling contracts, reflecting broader economic and contractual
practices of the time. The implications of the decision extended to reinforce the legality and
enforceability of board resolutions integrated into contractual agreements, emphasizing
corporate governance and fairness in contractual dealings.

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