G.R. No. L-5377 December 29, 1954
MARIA CLARA PIROVANA ET AL., plaintiffs-appellees, vs. THE DE LA RAMA STEAMSHIP CO., defendant-appellant.

FACTS

The plaintiffs are the minor children of the late Enrico Pirovano, represented by their mother. Enrico Pirovano was the president and general manager of the defendant corporation, De la Rama Steamship Co., under whose management the company’s assets grew substantially. The company had insured Pirovano’s life for P1,000,000. After Pirovano was executed by the Japanese in 1944, the defendant corporation, through resolutions of its Board of Directors and stockholders, agreed to donate P400,000 from the insurance proceeds to Pirovano’s four minor children. This sum was to be convertible into 4,000 shares of the company’s stock. The donation was made in recognition of Pirovano’s invaluable services to the company. A condition was attached to the donation: it was to be paid after the corporation’s bonded indebtedness to the National Development Company (NDC) was fully paid. This indebtedness was later converted into non-voting preferred shares of the corporation. The plaintiffs sought to enforce the donation, but the defendant corporation refused payment, arguing the resolutions were ultra vires and the obligation was not yet due because the condition (full payment/redemption of the NDC preferred shares) had not been fulfilled.

ISSUE

The main issues were: (1) Whether the donation made by the corporation was valid and binding, or ultra vires; and (2) Whether the obligation to pay the donation was already due and demandable, considering the attached condition.

RULING

The Supreme Court modified the decision of the lower court. It held:
1. The donation was valid and binding on the defendant corporation. It was a renumerative donation made within the corporation’s powers, sanctioned by its Board and stockholders, in recognition of the extraordinary services of the late president which greatly benefited the company. It was not ultra vires.
2. The obligation to pay the donation was not yet due and demandable. The condition for payment—the full redemption of the preferred shares issued to the National Development Company—had not been fulfilled. The Court found that the corporation’s failure to redeem the shares was not due to a mere “desistance” from obeying the majority stockholders, as the lower court held, but because the redemption required available profits, which were insufficient after providing for the 6% cumulative dividend on the preferred shares. The condition was valid and not yet fulfilled.
3. The Court ordered the defendant to pay the plaintiffs the total amount of P583,813.59 (including interest as of August 31, 1951), plus 5% interest from the filing of the complaint, but only after the defendant corporation shall have fully redeemed the NDC preferred shares as stipulated in the relevant corporate resolutions.
4. The award for attorney’s fees was reduced from 20% to 10% of the amount of P583,813.59.