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    Case Digest

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    Jessa Belle Eubion
    This case involves a dispute between BF Corporation and Shangri-La Properties over an unpaid construction project. BF Corporation sued Shangri-La Properties for payment as well as two former directors, Gerardo Lanuza Jr. and Antonio Olbes. The directors argued they should not be parties to arbitration as required by the contract since they had resigned. However, the court determined that when allegations of bad faith are made against corporate directors, the directors may be treated as a single entity with the corporation and subject to the arbitration clause.

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    Case Digest

    Uploaded by

    Jessa Belle Eubion
    39 views2 pages
    This case involves a dispute between BF Corporation and Shangri-La Properties over an unpaid construction project. BF Corporation sued Shangri-La Properties for payment as well as two former directors, Gerardo Lanuza Jr. and Antonio Olbes. The directors argued they should not be parties to arbitration as required by the contract since they had resigned. However, the court determined that when allegations of bad faith are made against corporate directors, the directors may be treated as a single entity with the corporation and subject to the arbitration clause.

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    This case involves a dispute between BF Corporation and Shangri-La Properties over an unpaid construction project. BF Corporation sued Shangri-La Properties for payment as well as two former directors, Gerardo Lanuza Jr. and Antonio Olbes. The directors argued they should not be parties to arbitration as required by the contract since they had resigned. However, the court determined that when allegations of bad faith are made against corporate directors, the directors may be treated as a single entity with the corporation and subject to the arbitration clause.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    39 views2 pages

    Case Digest

    Uploaded by

    Jessa Belle Eubion
    This case involves a dispute between BF Corporation and Shangri-La Properties over an unpaid construction project. BF Corporation sued Shangri-La Properties for payment as well as two former directors, Gerardo Lanuza Jr. and Antonio Olbes. The directors argued they should not be parties to arbitration as required by the contract since they had resigned. However, the court determined that when allegations of bad faith are made against corporate directors, the directors may be treated as a single entity with the corporation and subject to the arbitration clause.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    GERARDO LANUZA, JR. AND ANTONIO O. OLBES vs.

    BF CORPORATION, SHANGRI-LA PROPERTIES, INC.


    G.R. No. 174938, October 01, 2014

    Case Digest
    Facts
    Gerardo Lanuza, Jr and Antonio Olbes are members of the Board of Directors of
    Shangri-La.
    BF Corporation claimed that it entered into agreements with Shangri-La under
    which it agreed to build a mall and a multilevel parking structure along EDSA for
    Shangri-La. Shangri-La had been paying BF Corp on time and in accordance with
    its progress billing statements. However, Shangri-La began to fall behind on
    payments. Shangri-La and its board of directors were sued by BF Corp. Shangri-
    La, according to BF Corp, misrepresented that it had funds to pay and that it was
    simply a matter of delayed processing of BF's progress billing statements.
    Construction was eventually completed, but despite repeated demands, Shangri-La
    refused to pay the remaining balance. In addition, BF claimed that Shangri-
    directors La's acted in bad faith and should be held jointly and severally liable with
    Shangri-La. Shangri-La and respondent board members moved to halt the
    proceedings because BF failed to submit its dispute to arbitration. The RTC denied
    the motion, but the petitioners responded by stating that they have been resigned
    members of the board since July 15, 1991. Shangri-La and the respondents then
    petitioned the CA, which granted their petition and ordered arbitration.

    Issue

    Whether petitioners be made parties to the arbitration proceedings, pursuant to the


    arbitration clause provided in the contract between BF Corporation and Shangri-
    La.

    Conclusions

    Yes. Petitioners argue that their personalities as Shangri-La directors are separate
    and distinct from Shangri-La. Because a corporation's existence is merely a legal
    fiction, it can only exercise its rights and powers through its directors, officers, or
    agents, all of whom are natural persons. Without them, a corporation cannot sue or
    enter into contracts. As a result of a corporation's separate personality, consent
    given by the corporation through its representatives is not consent given by the
    representative personally. Its obligations are those incurred through official acts of
    its representatives. A contract is not entered into by a stockholder, director, or
    representative. However, courts or tribunals are required to decide whether
    corporate directors or representatives should be treated as a single entity when
    there are allegations of bad faith or malice against them.

    Section 31 of the Corporation Code specifies the circumstances under which


    directors, trustees, or officers may be held jointly and severally liable for corporate
    acts:

    a) The director or trustee knowingly and willfully voted for or consented to a


    patently illegal corporate act;
    b) The director or trustee was negligent or acted in bad faith in directing
    corporate affairs; and
    c) When courts disregard the corporation's distinct and separate personality
    from its directors or officers, they do not say that the corporation is the same
    as its directors, stockholders, officers, and agents in all instances and for all
    purposes. It does not result in a complete conflation of the personalities of
    the corporation and the people who compose or represent it.

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