G. R. No.L-6915 - Intestate estate of the deceased Teodoro Alcaraz, Paciencia Magsumbol, administratrix-appellant, vs. Pagbilao Lumber Company, Inc., et al.

The decedent, Teodoro Alcaraz, had been the Treasurer of Pagbilao Lumber Co., Inc. during his lifetime.
Upon his death, his estate became involved in proceedings to settle debts and distribute his liquid assets among various creditors.
Among the creditors was the Pagbilao Lumber Co., Inc., which had originally claimed P7,700.00, later reduced to a prorated share of P1,909.15 in accordance with an agreement reached during the distribution of the insufficient estate assets.

The court, on September 17, 1953, ordered the Administratrix, Paciencia Magsumbol, to withdraw the amount of P1,909.15 from the Philippine National Bank.
Further, the court directed that the withdrawn amount be delivered to Pedro C. Martinez, Treasurer of the Pagbilao Lumber Co., and subsequently deposited in the Philippine National Bank, Lucena Branch, in the name of the Corporation.
The court also ordered the deduction of P350.00 from the proceeds to satisfy the professional fee for Atty. Mariano P. Duldulao, representing the creditor Pagbilao Lumber Co.

The Administratrix contended that payment should not be made to the officers of the Pagbilao Lumber Co. on the basis that they lacked authority to represent the corporation.
She argued specifically that the empowering resolutions passed by the majority of the board of directors on June 15, 1953, were invalid.

The contention was based on the allegation that four of the five directors who voted for these resolutions (Saturnino Glorioso, Pedro C. Martinez, Marceliano Goyma, and Arsenio Lu Kang) had ceased to be directors even during the lifetime of Teodoro Alcaraz.

As evidence, the Administratrix submitted a document signed by the disputed directors, which referenced the return of shares to stockholders by the late Treasurer.

The phrasing of the document ("isinauli na sa amin ng aming naguing Tesorero") was ambiguous, lending itself to two possible interpretations regarding stock or personal account transactions.

The Administratrix further alleged that since 1945 no valid election of directors had been held for Pagbilao Lumber Co., a situation she claimed further undermined the legitimacy of the board resolutions.
To address these corporate governance issues, she prayed that the court sustain the payment order in abeyance and instead call a stockholders’ meeting pursuant to Section 26 of the Corporation Law to elect new directors.
The court of first instance, however, overruled these contentions and maintained its previous order regarding the payment and the professional fee allowance.

The appeal raised by the Administratrix challenged the validity of board resolutions which authorized:

The professional fee for Atty. Mariano P. Duldulao.
The appointment of Pedro C. Martinez as Treasurer-Elect, thereby entitling him to receive the prorated share for the Pagbilao Lumber Co.

The appellant assigned as error the approval of said resolutions and the denial of her motion for reconsideration in the subsequent order dated December 21, 1953.
She argued that because of the alleged invalidity of the board resolutions, the orders for payment and the allotment of professional funds ought to have been reversed or declared void.

Whether the board resolutions passed on June 15, 1953, were valid given that several directors had purportedly ceased to be directors during the lifetime of the decedent.
Whether these resolutions conferred proper authority to the individuals, particularly Pedro C. Martinez and Mariano P. Duldulao, to act on behalf of Pagbilao Lumber Co.

Whether issues pertaining to corporate governance—such as the election of directors and the management of company affairs—should be adjudicated within an intestate estate proceeding.
Whether the disputed status of the directors and the alleged inoperative powers of the corporation affect the settlement of the decedent’s estate.

Whether Atty. Mariano P. Duldulao’s professional fee of P350.00 was rightly allowed based on the quantum meruit principle for the legal services rendered on behalf of the Pagbilao Lumber Co.
Whether the alleged procedural irregularities in the authorization of such fees undermine the court’s order.