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    178 - The Board of Liquidators V - Heirs of Kalaw

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    1) The National Coconut Corporation (NACOCO) was established as a non-profit organization to protect and develop the coconut industry. Its general manager, Maximo Kalaw, entered into copra trading contracts without prior board approval. 2) Four typhoons devastated the Philippines and prevented NACOCO from fulfilling the contracts. One buyer sued NACOCO, which then sought to recover losses from Kalaw and board members. 3) The Supreme Court ruled that Kalaw did not act in bad faith because the board had acquiesced to the general practice of allowing him to execute contracts without approval. Questions of management policy are left to the honest decision of corporate officers.

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    178 - The Board of Liquidators V - Heirs of Kalaw

    Uploaded by

    mimiyuki_
    384 views1 page
    1) The National Coconut Corporation (NACOCO) was established as a non-profit organization to protect and develop the coconut industry. Its general manager, Maximo Kalaw, entered into copra trading contracts without prior board approval. 2) Four typhoons devastated the Philippines and prevented NACOCO from fulfilling the contracts. One buyer sued NACOCO, which then sought to recover losses from Kalaw and board members. 3) The Supreme Court ruled that Kalaw did not act in bad faith because the board had acquiesced to the general practice of allowing him to execute contracts without approval. Questions of management policy are left to the honest decision of corporate officers.

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    178_. the Board of Liquidators v . Heirs of Kalaw

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    1) The National Coconut Corporation (NACOCO) was established as a non-profit organization to protect and develop the coconut industry. Its general manager, Maximo Kalaw, entered into copra trading contracts without prior board approval. 2) Four typhoons devastated the Philippines and prevented NACOCO from fulfilling the contracts. One buyer sued NACOCO, which then sought to recover losses from Kalaw and board members. 3) The Supreme Court ruled that Kalaw did not act in bad faith because the board had acquiesced to the general practice of allowing him to execute contracts without approval. Questions of management policy are left to the honest decision of corporate officers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    384 views1 page

    178 - The Board of Liquidators V - Heirs of Kalaw

    Uploaded by

    mimiyuki_
    1) The National Coconut Corporation (NACOCO) was established as a non-profit organization to protect and develop the coconut industry. Its general manager, Maximo Kalaw, entered into copra trading contracts without prior board approval. 2) Four typhoons devastated the Philippines and prevented NACOCO from fulfilling the contracts. One buyer sued NACOCO, which then sought to recover losses from Kalaw and board members. 3) The Supreme Court ruled that Kalaw did not act in bad faith because the board had acquiesced to the general practice of allowing him to execute contracts without approval. Questions of management policy are left to the honest decision of corporate officers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    178. THE BOARD OF LIQUIDATORSv . HEIRS OF MAXIMO M.

    KALAW
    G.R. No. L-18805, August 14, 1967

    FACTS: The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit
    governmental organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection,
    preservation and development of the coconut industry in the Philippines. NACOCO, after the passage of
    Republic Act 5, embarked on copra trading activities. Amongst the scores of contracts executed by
    general manager Kalaw are the disputed contracts, for the delivery of copra. An unhappy chain of events
    conspired to deter NACOCO from fulfilling these contracts. Nature supervened. Four devastating
    typhoons visited the Philippines. One buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before
    the Court of First Instance of Manila, upon claims. NACOCO settled for P1,343,274.52, which it
    subsequently sought to recover from general manager and board chairman Maximo M. Kalaw, and
    directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with negligence under Article
    1902 of the old Civil Code (now Article 2176, new Civil Code); and defendant board members, including
    Kalaw, with bad faith and/or breach of trust for having approved the contracts. The lower court
    dismissed the complaint. Plaintiff appealed direct to the Supreme Court.

    ISSUE: W/N Maximo Kalaw, the general manager, acted with bad faith and/or breach of trust for
    entering contracts without prior board approval

    RULING: No. In the case at bar, the practice of the corporation has been to allow its general manager to
    negotiate and execute contracts in its copra trading activities for and in NACOCO's behalf without prior
    board approval. If the by-laws were to be literally followed, the board should give its stamp of prior
    approval on all corporate contracts. But that board itself, by its acts and through acquiescence,
    practically laid aside the by-law requirement of prior approval. By corporate confirmation, the contracts
    executed by Kalaw are valid corporate acts and are thus purged of whatever vice or defect they may
    have.

    Even in the face of an express by-law requirement of prior approval, the law on corporations is not to be
    held so rigid and inflexible as to fail to recognize equitable considerations. And, the conclusion inevitably
    is that the embattled contracts remain valid. It is a well known rule of law that questions of policy of
    management are left solely to the honest decision of officers and directors of a corporation, and the
    court is without authority to substitute its judgment for the judgment of the board of directors; the
    board is the business manager of the corporation, and so long as it acts in good faith its orders are not
    reviewable by the courts."The decision of the lower court is affirmed.

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