Case Summary (G.R. No. L-15092)
Conditional “Most-Favored-Nation” Provision
Paragraph 9 of the August 20, 1936 Resolution provided that if any sugar central in Negros Occidental (with annual output > 1/3 of the province total) granted planters more favorable terms than those in the Amended Contract, Bacolod-Murcia would automatically extend those superior terms to its planters.
Incorporation of the Resolution into the Contract
Although the planters signed the printed Amended Contract on September 10, 1936, the Board Resolution (resolution text) had been adopted 21 days earlier. It was formally attached to the printed contract on April 17, 1937, with a notation declaring its amendments part of the contract.
Emergence of the Dispute
By the 1951-52 crop year, other centrals (La Carlota, Binalbagan-Isabela, San Carlos, Hawaiian Philippines) granted planters an average 62.333% share. In 1953 the planters demanded Bacolod-Murcia to match that rate under Paragraph 9.
Trial Court Decision
The Court of First Instance of Occidental Negros dismissed the planters’ complaint. It held that the Board Resolution constituted an unsupported gratuitous concession—an ultra vires donation by the directors—and thus was void.
Supreme Court’s Analysis on Consideration and Contract Integration
The Supreme Court held that the August 20, 1936 Resolution was adopted before contract signature and formed an integral part of the Amended Contract. The extension of the contract term and other obligations constituted adequate consideration (“causa”) supporting the conditional concession. Consequently, the resolution was not a separate, unsupported donation, nor a void novation.
Authority of Corporate Directors and Ultra Vires Doctrine
Under prevailing corporate-law principles, the board acted within its charter powers in amending the proposed contract to secure the planters’ consent. The resolution was in direct furtherance of corporate ends, adopted in good faith, and therefore not reviewable by the courts on policy or business-management grounds.
Obligation to Grant Differential Participation
Since other majorcentrals had granted higher shares beginning the 1951-52 crop year, Bacolod-Murcia was duty-bound under Paragraph 9 to grant identical increases. The Court specified the exact additional percentages for each appellant and each crop year from 1951-52 through 1955-56, with legal interest on withheld amounts and reservation of rights for subsequent years.
Final Judgment and Relief
The Supreme Court reversed the lower court’s dismissal and ordered Bacolod-Murcia to pay:
• 0.333% differential
Case Syllabus (G.R. No. L-15092)
Parties and Contracts
- Plaintiffs-Appellants: Alfredo Montelibano, Alejandro Montelibano, and the limited copartnership Gonzaga and Company, all sugar planters.
- Defendant-Appellee: Bacolod-Murcia Milling Co., Inc., a sugar central mill in Occidental Negros.
- Original Milling Contracts (1919): 30‐year term starting 1920‐21, with a 55% share of manufactured sugar and molasses to planters and 45% to the mill.
- Proposed Amended Milling Contract (1936): Increase planters’ share to 60%, extension of term to 45 years, plus other concessions.
Factual Background
- August 20, 1936: Board of Directors of Bacolod‐Murcia Milling Co., Inc. adopts Acta No. 11, Acuerdo No. 1, granting further concessions including paragraph 9:
- If during the amended contract’s term any Negros Occidental sugar central producing over one‐third of the province’s total grants better terms to its planters, those improved terms shall automatically apply to planters bound by this amended contract.
- September 10, 1936: Appellants sign the printed Amended Milling Contract.
- April 17, 1937: A copy of the August 20 resolution is attached to the printed contract with a notation making the amendments integral to the contract.
Procedural Posture
- 1953: Appellants sue in CFI Occidental Negros (Civil Case No. 2603) to compel Bacolod‐Murcia to increase their sugar share from 60% to 62.33% starting 1951‐52 crop year.
- Trial Court: Dismisses complaint, ruling the disputed resolution was a gratuitous, ultra vires donation unsupported by consideration.
- Appeal: Advanced to the Supreme Court on points of law.
Contested Contractual Provision
- Paragraph 9 of the August 20, 1936 resolution:
- Tied appellants’ share to any better conditions granted by other major sugar centrals (over one‐third production), making such conditions automatically applicable.
Arguments of the Parties
- Appellants:
- The resolution was an integral amendment to their milling contract, supported by the same consideration (extension of term and other obligations).
- Other centrals granted planters 62.5% share; under paragraph 9, Bacolod‐Murcia must match that rate.
- Appellee:
- The resolution is a null, ul