80 - Western Institute of Technology v. Salas

Western Institute of Technology, Inc. v.
Salas (113032, August 21, 1997)
Facts:
Respondents are the controlling members of the BOT of Western Institute of Technology, Inc. (WIT).
According to the minority stockholders of WIT, who are private petitioners on this case, on June 1986, a
Special Board Meeting was held wherein the BOT passed a resolution granting monthly compensation to
corporate officers retroactive June 1985, and the ten per centum of the net profits shall be distributed
equally among the ten members of the BOT.
Later, private petitioners filed criminal complaints against respondents with two separate criminal
informations – one is for falsification of a public document and the other is for estafa. The charge for
falsification of public document was anchored on respondents’ submission of WIT's income statement for
the fiscal year 1985-1986 with the SEC reflecting the disbursement of corporate funds for their
compensation based on the resolution, making it appear that the same was passed by the board on March
1986, when in truth, the same was actually passed on June 1986, a date not covered by the corporation's
fiscal year ending April 1986. After a full-blown hearing, respondents were acquitted on both counts
without being imposed any civil liability.
Private petitioners filed the petition for review on certiorari on the issue of the civil liability of
respondents. They base their claim on the alleged illegal issuance by respondents of the resolution
ordering the disbursement of corporate funds representing retroactive compensation as of June 1985 in
favor of the board members of WIT, and for the subsequent collective salaries of respondents until the
filing of the criminal complaints against them. It is maintained that this grant is proscribed under Section
30 of the Corporation Code. Thus, respondents must return these amounts to the corporation.
Issue (Topic: Compensation of Directors):
Whether or not herein respondents are proscribed from claiming the compensation given them
Held:
No. Following Section 30 of the Corporation Code, directors or trustees are not entitled to any
compensation when they perform merely the ordinary duties of their office. It is presumed that they
render service gratuitously, and that the return upon their shares adequately furnishes the motives for
service. There are only two ways by which members can be granted compensation apart from reasonable
per diems: (1) when there is a provision in the by-laws fixing it; and (2) when the stockholders representing
a majority of the outstanding capital stock at a meeting agree to give it to them.
However, the phrase “as such directors” under Section 30 delimits the scope of the prohibition to
compensation given to them for services performed purely in their capacity as directors or trustees. Thus,
members of the board may receive compensation, when they render services to the corporation in a
capacity other than as directors or trustees. Here, the resolution granted monthly compensation to
respondents not as members of the board, but rather as officers of the corporation, more particularly as
Chairman, Vice-Chairman, Treasurer and Secretary of WIT. Therefore, the prohibition with respect to
granting compensation to corporate directors or trustees is not violated.
Issue (Topic: Derivative Suit):

Whether or not the instant case is a derivative suit brought by petitioners as minority shareholders of WIT
for and on behalf of the corporation to annul the resolution
Held:
No. A derivative suit is an action brought by minority shareholders in the name of the corporation to
redress wrongs committed against it, for which the directors refuse to sue. Among the basic requirements
for a derivative suit to prosper is that the minority shareholder must allege in his complaint before the
proper forum that he is suing on a derivative cause of action on behalf of the corporation and all other
shareholders similarly situated who wish to join. This is jurisidictional upon the tribunal in line with the
rule that it is the allegations in the complaint that vests jurisdiction upon the court or quasi-judicial body
concerned over the subject matter and nature of the action.
This was not complied with by private petitioners either in their complaint before the court a quo nor in
the instant petition which, in part, merely states that this is a petition for review on certiorari on pure
questions of law to set aside a portion of the RTC decision since its judgment failed to impose any civil
liability against respondents. By no amount of equity considerations can a mere appeal on the civil aspect
of a criminal case be treated as a derivative suit.

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Western Institute of Technology, Inc. v.

Salas (113032, August 21, 1997)

Issue (Topic: Compensation of Directors):

Issue (Topic: Derivative Suit):

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