G.R. No. L-15092; May 18, 1962
ALFREDO MONTELIBANO, ET AL., plaintiffs-appellants, vs. BACOLOD-MURCIA MILLING CO., INC., defendant-appellee.

FACTS

Plaintiffs-appellants are sugar planters adhered to defendant-appellee’s sugar central under milling contracts. The original 1919 contracts provided for a 55-45% sharing ratio in favor of the planters for 30 years. In 1936, the parties moved to execute amended contracts, increasing the planters’ share to 60% but extending the contract term to 45 years. Prior to the signing of the printed Amended Milling Contract form, the defendant’s Board of Directors adopted a resolution on August 20, 1936, granting further concessions. Paragraph 9 of this resolution stipulated that if sugar centrals in Negros Occidental, whose annual production exceeded one-third of the province’s total, granted better conditions to their planters, those same better conditions would be extended to the plaintiffs. The plaintiffs signed the printed Amended Milling Contract on September 10, 1936, and a copy of the August 20 resolution was attached to it in April 1937.
In 1953, the plaintiffs initiated this action, contending that other specified centrals, whose combined production exceeded the one-third threshold, had granted their planters a 62.5% share. They argued that under paragraph 9 of the 1936 resolution, the defendant was obligated to grant them a similar increased participation starting from the 1951-1952 crop year. The defendant resisted, arguing the resolution’s stipulations were unsupported by consideration, constituting an ultra vires and void donation by the corporate directors. The trial court dismissed the complaint, prompting this appeal.

ISSUE

Whether the concessions in the Board Resolution of August 20, 1936, particularly paragraph 9, formed a valid and binding part of the amended milling contract, obligating the defendant to grant increased shares to the plaintiffs.

RULING

Yes. The Supreme Court reversed the trial court’s decision. The legal logic centers on the integration and timing of the agreement. The disputed resolution was adopted on August 20, 1936, twenty-one days before the plaintiffs signed the printed Amended Milling Contract on September 10, 1936. Therefore, when the plaintiffs executed the main contract, the concessions in the resolution had already been incorporated into its terms. The resolution was a supplement or further amendment to the proposed contract, not a separate, subsequent agreement.
Consequently, the terms in the resolution were supported by the same consideration underlying the main amended contract—namely, the mutual promises of the parties, including the critical concession by the planters to extend the milling contract’s duration by an additional 15 years. The claim that the resolution was a gratuitous donation failed because the plaintiffs were not yet bound by any contract when the resolution was passed; the printed form was merely a proposal. The resolution validly modified that proposal before its acceptance. The Court also upheld the business judgment of the defendant’s board in adopting the resolution. Since it was undisputed that other centrals meeting the production threshold had granted increased shares, the defendant was duty-bound under paragraph 9 to grant the plaintiffs similar increases for the specified crop years.