Atrium Management Corp. vs CA (GR No. 109491, 28 Feb 2001)

Atrium Management Corp. vs CA (GR No. 109491, 28 Feb 2001)

Facts:
Hi-Cement Corporation through its corporate signatories, Lourdes M. de Leon, treasurer, and Antonio de las Alas, Chairman, issued checks in favor of E.T. Henry and Co. Inc., as payee. E.T. Henry and Co., Inc. endorsed the four checks to petitioner Atrium Management Corporation for valuable consideration. Upon presentment for payment, the drawee bank dishonored all four checks for the common reason "payment stopped". Atrium instituted this action after its demand for payment of the value of the checks was denied. The trial court rendered a decision ordering Lourdes M. de Leon, her husband Rafael de Leon, E.T. Henry and Co., Inc. and Hi-Cement Corporation to pay petitioner Atrium, jointly and severally, the amount of P2 million corresponding to the value of the four checks, plus interest and attorney's fees. The Court of Appeals modified the decision of the trial court, absolving Hi-Cement Corporation from liability and dismissing the complaint as against it on the grounds that: (1) Lourdes M. de Leon was not authorized to issue the subject checks in favor of E.T. Henry, Inc.; (2) The issuance of the subject checks by Lourdes M. de Leon and the late Antonio de las Alas constituted ultra vires acts.. Hence, this petition.

Issue:
Whether or not the issuance of the questioned checks was an ultra vires act.

Held:
No. Lourdes M. de Leon is the treasurer of the corporation and is authorized to sign checks for the corporation. At the time of the issuance of the checks, there were sufficient funds in the bank to cover payment of the amount of P2 million pesos. The act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra vires act.

"An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law" The term "ultra vires" is "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."