Coleman vs. Hotel de France Company

A hotel corporation's contract employing a professional performer to entertain its guests is valid, being within the professional-actors exception to contract-labor exclusion and within the corporation's incidental powers, and its unjustified cancellation entitles the performer to the full contract compensation less earnings actually obtained or obtainable in other employment.

Geraldine Coleman was a professional acrobat, artistic gymnast and trapeze artist of ten years' standing. The Hotel de France Company was engaged in the operation of hotels and week-end resorts in the city of Manila and its environs. At the time, section 2 of the United States Immigration Act of February 20, 1907, in force in the Philippine Islands, governed contract labor but expressly excepted professional actors, artists, lecturers, singers and other specified classes.

On September 13, 1912, at Sydney, Australia, Geraldine Coleman, a professional gymnast, entered into a written contract with the Hotel de France Company through its manager, Ignacio Arnalot. The company hired her to entertain the patrons of its hotel at Manila for three months at a salary of £12 per month, besides agreeing to furnish her board, lodging and laundry expenses and to pay her passage from Australia to Manila and return.

Thereafter Coleman held herself able and ready to fulfill her part of the agreement, while the company cancelled the contract. Her ability and readiness to perform and the cancellation by the defendant were not controverted on appeal. According to the evidence, she had pursued the profession of artistic gymnast and trapeze artist for ten years, and the contract was for her services as a professional acrobat in exhibitions to be given under the auspices and control of the defendant. Even the principal witness for the defense described her as all right for the work she was engaged to do.

Because of the cancellation, Coleman sought recovery of damages for breach of the employment contract. The record sustained that she was a professional acrobat engaged for exhibitions under defendant's control, that she was qualified for the stipulated work, and that the company discharged her in flagrant violation of its employment contract without just cause or excuse.

• Immigration Laws: Respondent argued that the contract was void under the immigration laws in force in the Islands as prohibited contract labor.
• Ultra Vires: Respondent maintained that the contract exceeded its corporate capacity under its articles of incorporation and was therefore void as ultra vires.
• Justified Cancellation: Respondent argued that, even if valid, cancellation was justified by reason of plaintiff's violation of the contract's terms through alleged misconduct.
• Measure of Damages: Respondent argued that the trial court erred in awarding the full stipulated salary and expenses, plaintiff being at most entitled to the value of services actually rendered before breach.

• Contract Labor: Whether the employment contract for a professional gymnast was void under the immigration laws in force in the Islands as prohibited contract labor.
• Corporate Capacity: Whether the hotel corporation's contract hiring a vaudeville performer was void as beyond its express or implied powers under its articles of incorporation.
• Justification for Discharge: Whether the defendant was justified in cancelling the contract by reason of plaintiff's alleged violation of its terms and misconduct.
• Damages: Whether plaintiff was entitled only to compensation for services actually rendered or to the full amount earnable under the contract less mitigation.

• Contract Labor: No. The contract was not barred, plaintiff being a professional acrobat clearly included within the statutory exception in favor of professional actors.
• Corporate Capacity: No. The contract was not ultra vires, employment of vaudeville artists for hotel guests being fairly included within powers incidental to operating hotels.
• Justification for Discharge: No. The discharge was without just cause or excuse, the alleged misconduct contentions having been satisfactorily disposed of below.
• Damages: The latter. Wrongful discharge entitled plaintiff to the full contract amount less compensation actually obtained or obtainable in other employment, with the burden of reduction on defendant.

• Contract Labor: Section 2 of the United States Immigration Act of February 20, 1907 expressly provides that contract-labor provisions shall not exclude professional actors, artists, lecturers, singers and other enumerated classes. The evidence sustained that plaintiff was a professional acrobat engaged for exhibitions under defendant's auspices and control, with ten years' practice, and found by defense testimony to be all right for the work. Her right to enter the Islands under contract for professional services was therefore clearly within the exception for professional actors.
• Corporate Capacity: A contract not on its face necessarily beyond corporate power is presumed valid, corporations being presumed to contract within their powers, and ultra vires should not prevail where it would defeat justice or work legal wrong. The evidence fell far short of showing that a corporation operating hotels and week-end resorts in Manila and its environs lacked implied power to contract for vaudeville entertainments, including acrobatic exhibitions, to entertain guests and attract patronage. Execution of contracts for vaudeville artists, bands and orchestras was instead fairly included within powers incidental to hotel operation.
• Justification for Discharge: The defendant's misconduct-based justification was sufficiently and satisfactorily disposed of in the trial judge's opinion. Holding the discharge to be without just cause or excuse, in flagrant violation of the employment contract, left no ground to excuse nonperformance.
• Damages: Following Aldaz vs. Gay, wrongful discharge allows recovery not merely of compensation for services rendered before breach but of the full amount earnable under the contract less compensation actually obtained or obtainable in other employment during the unexpired term. The burden of proving the amount by which prima facie damages may thus be reduced rests upon the defendant. No prejudicial error in the P585.42 award was found.

• Contract-labor exception for professional performers — Statutory prohibitions on contract labor do not exclude professional actors, artists, lecturers, singers, ministers, professors, members of recognized learned professions, or strictly personal or domestic servants. Applied to sustain entry and employment under contract of a professional acrobat engaged for hotel exhibitions.
• Presumption of corporate capacity; limited use of ultra vires — When a contract is not on its face necessarily beyond corporate power, validity is presumed, corporations being presumed to contract within their powers. The doctrine of ultra vires, whether invoked for or against a corporation, should not prevail where it would defeat the ends of justice or work a legal wrong. Applied to reject the hotel company's disavowal of its entertainment contract after enjoying its benefits.
• Incidental powers of a hotel corporation — Powers incidental to express corporate purposes include acts fairly necessary or useful to those purposes. Applied to hold that employing vaudeville artists, bands, orchestras and acrobats to entertain guests and attract patronage is incidental to operating hotels and week-end resorts.
• Damages for wrongful discharge from employment — A wrongfully discharged employee recovers not merely services rendered before breach but the full amount earnable under the contract, less compensation actually obtained or that might have been obtained in other employment during the unexpired term, the burden of proving mitigation resting on the employer. Applied pursuant to Aldaz vs. Gay to affirm the full award.

• "The provisions of this law applicable to contract labor shall not be held to exclude professional actors, artists, lecturers, singers, ministers of any religious denomination, professors for colleges or seminaries, persons belonging to any recognized learned profession, or persons employed strictly as personal or domestic servants." — States the statutory exception that removed plaintiff's professional engagement from contract-labor prohibition.
• "When a contract is not on its face necessarily beyond the scope of the power of the corporation by which it was made, it will, in the absence of proof to the contrary, be presumed to be valid. Corporations are presumed to contract within their powers. The doctrine of ultra vires, when invoked for or against a corporation, should not be allowed to previal where it would defeat the ends of justice or work a legal wrong." — Gives the canonical formulation for presuming corporate capacity and limiting ultra vires.
• "As you have called it a contract, we will do the same. As you have enjoyed the benefits when it was beneficial, you must bear the burden when it becomes onerous, unless it clearly appears that that which you have assumed to do is beyond your powers." — Explains why a corporation that contracted as within its powers cannot repudiate the agreement merely because performance became onerous.

• Chicago, Rock Island and Pacific R.R. Co. vs. Union Pacific Ry. Co., 47 Fed. Rep., 15, 22 — Quoted for the principle that a corporation that has treated its undertaking as a contract and enjoyed its benefits must bear its burdens unless clearly beyond its powers.
• Railway Co. vs. McCarthy, 96 U.S., 267 — Quoted for the rule presuming corporate contracts valid when not facially beyond power and restricting ultra vires where it would defeat justice or cause legal wrong.
• Aldaz vs. Gay, 7 Phil. Rep., 268 — Followed as authority for the measure of damages on wrongful discharge: full contract compensation less mitigation, with burden of proving reduction on the defendant.

• Section 2, United States Immigration Act of February 20, 1907 — Provides that contract-labor provisions shall not exclude professional actors and other enumerated classes; applied to hold that plaintiff's contract as a professional acrobat for hotel exhibitions was not void under immigration laws.

Arellano, C.J., Torres, Moreland, Trent and Araullo, JJ., concur.