Magallanes Watercraft Association vs Auguis & Basnig Neither MWAI's Articles of Incorporation nor its By-
G.R. No. 211485, May 30, 2016 Laws contained any provision that expressly and/or
impliedly vested power or authority upon its Board to
Characters recommend the imposition of disciplinary sanctions on
Petitioner - Magallanes Watercraft Association, Inc. its delinquent officers and/or members.
(MWAI) - a local association of motorized banca
owners and operators ferrying cargoes and passengers Issue: Did the BOT of MWAI commit an ultra vires act?
from Magallanes, Agusan del Norte, to Butuan City and
back. Ruling: NO
Respondents - Margarito C. Auguis (Auguis) and
Dioscoro C. Basnig (Basnig), members and officers of Corporate powers include implied and incidental
MWAI - vice-president and secretary, respectively powers
Facts: Section 45 of the Corporation Code provides for the
December 5, 2003 - Board of Trustees (Board) of MWAI powers possessed by a corporation, to wit:
passed a resolution and issued a memorandum Sec. 45. Ultra vires acts of corporations. - No
suspending the rights and privileges (30 days) of Auguis corporation under this Code shall possess or exercise
and basing as members of the association for their any corporate powers except those conferred by this
refusal to pay Code or by its articles of incorporation and except such
a. Membership dues and as are necessary or incidental to the exercise of the
b. Berthing fees powers so conferred.
Reason – they have a pending oral complaint and From a reading of the said provision, it is clear that a
demand for financial audit of the association funds. corporation has:
(1) express powers, which are bestowed upon by law or
Accumulated unpaid obli: its articles of incorporation; and
Auguis - P4,059.00 (2) necessary or incidental powers to the exercise of
Basnig - P7,552.00.4 those expressly conferred.
Despite of the suspension of their privileges as An act which cannot fall under a corporation's express
members, Auguis and Basnig still failed to settle their or necessary or incidental powers is an ultra vires act.
obligations with MWAI.
In this case, not ultra vires
Thus, MWAI issued another memorandum suspending Under Section 3(a) and Section 3(c) Article V of MWAI's
their rights and privileges for another thirty (30) days. By-Laws, its members are bound
"[t]o obey and comply with the by-laws, rules and
Due to this, Auguis and Basnig filed an action for regulations that may be promulgated by the association
damages with a prayer for the issuance of a writ of from time to time" and "[t]o pay membership dues and
preliminary injunction before the RTC. other assessments of the association."
RTC Thus, the respondent members were obligated to pay
held that MWAI committed an ultra vires act for the membership dues of which they were delinquent.
imposing sanctions on its delinquent members. MWAI could not be faulted in suspending the rights
and privileges of its delinquent members.
CA
Affirmed RTC decision that MWAI was guilty of an ultra The fact alone that neither the articles of incorporation
vires act. nor the bylaws of MWAI granted its Board the
authority to discipline members does not make the
suspension of the rights and privileges of the Also, the imposition of the temporary ban on the use
respondents ultra vires of MWAI's berthing facilities until Auguis and Basnig
have paid their outstanding obligations was a
In National Power Corporation v. Vera, the Court reasonable measure that the former could undertake
stressed that an act might be considered within to ensure the prompt payment of its membership
corporate powers, even if it was not among the dues.
express powers, if the same served the corporate ends.
Otherwise, MWAI will be unable to continue with its
RULE: a corporation is not restricted to the exercise of operations if the members continue to be delinquent in
powers expressly conferred upon it by its charter, but the payment of their obligations, without fear of
has the power to do what is reasonably necessary or possible sanctions.
proper to promote the interest or welfare of the
corporation.
Montelibano, et al. v. Bacolod-Murcia Milling Co., Inc.
stated the test to determine if a corporate act is in
accordance with its purposes:
What is the logical relation of the act to the corporate
purpose?
If that act is
1. one which is lawful in itself, and
2. not otherwise prohibited,
3. is done for the purpose of serving corporate
ends, and
4. is reasonably tributary to the promotion of
those ends, in a substantial, and not in a remote
and fanciful, sense, it may fairly be considered
within charter powers.
The test to be applied is whether the act in question is
in direct and immediate furtherance of the
corporation's business, fairly incident to the express
powers and reasonably necessary to their exercise. If
so, the corporation has the power to do it; otherwise,
not.
IN THIS CASE, MWAI can properly impose sanctions on
Auguis and Basnig for being delinquent members
considering that the payment of membership dues
enables MWAI to discharge its duties and functions
enumerated under its charter.
Moreover, respondents were obligated by the by-laws
of the association to pay said dues.
The suspension of their rights and privileges is not an
ultra vires act as it is reasonably necessary or proper in
order to further the interest and welfare of MWAI.
