Case List no.

5
Case No. 1
Gala v. Ellice
GR. No. 156819, December 11, 2003
Justice Ynares-Santiago
Facts: The spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul Gala, and
Rita Benson, and their encargados Virgilio Galeon and Julian Jader formed and organized the Ellice
Agro-Industrial Corporation. The total subscribed capital stock of the corporation was apportioned as
follows:
Name
Number of Shares
Amount
Manuel R. Gala
11, 700
1,170,000.00
Alicia E. Gala 23,200
2,320,000.00
Guia G. Domingo
16
1,600.00
Ofelia E. Gala
40
4,000.00
Raul E. Gala
40
4,000.00
Rita G. Benson
2
200.00
Virgilio Galeon
1
100.00
Julian Jader
1
100.00
TOTAL
35,000
P3,500,000.00
As payment for their subscriptions, the Gala spouses transferred several parcels of land
located in the provinces of Quezon and Laguna to Ellice.
In 1982, Manuel Gala, Alicia Gala and Ofelia Gala subscribed to an additional 3,299 shares,
10,652.5 shares and 286.5 shares, respectively.
On June 28, 1982, Manuel Gala and Alicia Gala acquired an additional 550 shares and 281
shares, respectively.
Subsequently, on September 16, 1982, Guia Domingo, Ofelia Gala, Raul Gala, Virgilio Galeon
and Julian Jader incorporated the Margo Management and Development Corporation (Margo). The
total subscribed capital stock of Margo was apportioned as follows:
Name
Number of Shares
Amount
Raul E. Gala
6,640
66,400.00
Ofelia E. Gala
6,640
66,400.00
Guia G. Domingo
6,640
66,400.00
Virgilio Galeon
40
40.00
Julian Jader
40
40.00
TOTAL
20,000
P200,000.00
On November 10, 1982, Manuel Gala sold 13,314 of his shares in Ellice to Margo.
Alicia Gala transferred 1,000 of her shares in Ellice to a certain Victor de Villa on March 2,
1983. That same day, de Villa transferred said shares to Margo. A few months later, Alicia Gala
transferred 854.3 of her shares to Ofelia Gala, 500 to Guia Domingo and 500 to Raul Gala.
Years later, Manuel Gala transferred all of his remaining holdings in Ellice, amounting to 2,164
shares, to Raul Gala.
On July 20, 1988, Alicia Gala transferred 10,000 of her shares to Margo.
Thus, as of the date on which this case was commenced, the stockholdings in Ellice were allocated as
follows:
Name
Number of Shares
Amount
Margo
24,312.5
2,431,250.00
Alicia Gala
21,480.2
2,148,020.00
Raul Gala
2,704.5
270,450.00
Ofelia Gala
980.8
98,080.00
Gina Domingo
516
51,600.00

Rita Benson
Virgilio Galeon
Julian Jader
Adnan Alonto
Elias Cresencio
TOTAL

2
1
1
1
1
50,000

200.00
100.00
100.00
100.00
100.00
P5,000,000.00

On June 23, 1990, a special stockholders meeting of Margo was held, where a new board of
directors was elected. That same day, the newly-elected board elected a new set of officers. Raul Gala
was elected as chairman, president and general manager. During the meeting, the board approved
several actions, including the commencement of proceedings to annul certain dispositions of Margos
property made by Alicia Gala. The board also resolved to change the name of the corporation to MRG
Management and Development Corporation.
Similarly, a special stockholders meeting of Ellice was held on August 24, 1990 to elect a new
board of directors. In the ensuing organizational meeting later that day, a new set of corporate officers
was elected. Likewise, Raul Gala was elected as chairman, president and general manager.
Ellice filed against Gala with the Securities and Exchange Commission (SEC) a petition for the
appointment of a management committee or receiver, accounting and restitution by the directors and
officers, and the dissolution of Ellice Agro-Industrial Corporation for alleged mismanagement, diversion
of funds, financial losses and the dissipation of assets. The petition was amended to delete the prayer
for the appointment of a management committee or receiver and for the dissolution of Ellice.
Additionally, respondents prayed that they be allowed to inspect the corporate books and documents
of Ellice.
In turn, Gala initiated a complaint against Ellice praying for, among others, the nullification of the
elections of directors and officers of both Margo Management and Development Corporation and
Ellice Industrial Corporation; the nullification of all board resolutions issued by Margo from June 23,
1990 up to the present and all board resolutions issued byEllice from August 24, 1990 up to the
present; and the return of all titles to real property in the name of Margo and Ellice, as well as all
corporate papers and records of both Margo and Ellicewhich are in the possession and control of the
respondents.
The two cases were consolidated.
Meanwhile, during the pendency of the SEC cases, the shares of stock of Alicia and Ofelia Gala in
Ellice were levied and sold at public auction to satisfy a judgment rendered against them by he
Regional Trial Court of Makati.
SEC rendered a Joint Decision in SEC Cases dismissing the petition of Ellice and ruling in favor
of Gala.
Respondents appealed to the SEC En Banc, which reversed and set aside the decision of SEC
Issue: WON the lower court erre in ruling that the organization of Ellice and Margo was not illegeal for
depriving Rita G. Benson, one of the petitioners, her legitime.
Held: In an attempt to bolster their theory that the organization of the respondent corporations was
illegal, the petitioners aver that the legitime pertaining to petitioners Rita G. Benson and Guia G.
Domingo from the estate of their father had been subject to unwarranted reductions as a result
thereof. In sum, they claim that stockholdings in Ellice which the late Manuel Gala had assigned to
them were insufficient to cover theirlegitimes, since Benson was only given two shares while Domingo

received only sixteen shares out of a total number of 35,000 issued shares.
The reliefs sought by petitioners should have been raised in a proceeding for settlement of estate,
rather than in the present intra-corporate controversy. If they are genuinely interested in securing that
part of their late fathers property which has been reserved for them in their capacity as compulsory
heirs, then they should simply exercise their actio ad supplendam legitimam, or their right of
completion of legitime. Such relief must be sought during the distribution and partition stage of a case
for the settlement of the estate of Manuel Gala, filed before a court which has taken jurisdiction over
the settlement of said estate