G.R. No. 100152 March 31, 2000 Iligan City.
Iligan City. The report further advised that no new permit shall be granted to petitioner for the year 1989
ACEBEDO OPTICAL COMPANY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, Hon. MAMINDIARA MANGOTARA, in his capacity
as Presiding Judge of the RTC, 12th Judicial Region, Br. 1, Iligan City; SAMAHANG
OPTOMETRIST Sa PILIPINAS Iligan City Chapter, LEO T. CAHANAP, City Legal Officer,
and Hon. CAMILO P. CABILI, City Mayor of Iligan, respondents.
PURISIMA, J.:
At bar is a petition for review under Rule 45 of the Rules of Court seeking to nullify the dismissal by the
Court of Appeals of the original petition for certiorari, prohibition and mandamus filed by the herein
petitioner against the City Mayor and City Legal Officer of Iligan and the Samahang Optometrist sa
Pilipinas Iligan Chapter (SOPI, for brevity).
The antecedent facts leading to the filing of the instant petition are as follows:
Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After consideration of
petitioner's application and the opposition interposed thereto by local optometrists, respondent City Mayor
issued Business Permit No. 5342 subject to the following conditions:
1. Since it is a corporation, Acebedo cannot put up an optical clinic but only a commercial
store;
2. Acebedo cannot examine and/or prescribe reading and similar optical glasses for patients,
because these are functions of optical clinics;
3. Acebedo cannot sell reading and similar eyeglasses without a prescription having first been
made by an independent optometrist (not its employee) or independent optical clinic. Acebedo
can only sell directly to the public, without need of a prescription, Ray-Ban and similar
eyeglasses;
4. Acebedo cannot advertise optical lenses and eyeglasses, but can advertise Ray-Ban and
similar glasses and frames;
5. Acebedo is allowed to grind lenses but only upon the prescription of an independent
optometrist. 1
On December 5, 1988, private respondent Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter,
through its Acting President, Dr. Frances B. Apostol, lodged a complaint against the petitioner before the
Office of the City Mayor, alleging that Acebedo had violated the conditions set forth in its business permit
and requesting the cancellation and/or revocation of such permit.
Acting on such complaint, then City Mayor Camilo P. Cabili designated City Legal Officer Leo T.
Cahanap to conduct an investigation on the matter. On July 12, 1989, respondent City Legal Officer
submitted a report to the City Mayor finding the herein petitioner guilty of violating all the conditions of
its business permit and recommending the disqualification of petitioner from operating its business in
and should only be given time to wind up its affairs.
On July 19, 1989, the City Mayor sent petitioner a Notice of Resolution and Cancellation of Business
Permit effective as of said date and giving petitioner three (3) months to wind up its affairs.
On October 17, 1989, petitioner brought a petition for certiorari, prohibition and mandamus with prayer
for restraining order/preliminary injunction against the respondents, City Mayor, City Legal Officer and
Samahan ng Optometrists sa Pilipinas-Iligan City Chapter (SOPI), docketed as Civil Case No. 1497 before
the Regional Trial Court of Iligan City, Branch I. Petitioner alleged that (1) it was denied due process
because it was not given an opportunity to present its evidence during the investigation conducted by the
City Legal Officer; (2) it was denied equal protection of the laws as the limitations imposed on its
business permit were not imposed on similar businesses in Iligan City; (3) the City Mayor had no
authority to impose the special conditions on its business permit; and (4) the City Legal Officer had no
authority to conduct the investigation as the matter falls within the exclusive jurisdiction of the
Professional Regulation Commission and the Board of Optometry.
Respondent SOPI interposed a Motion to Dismiss the Petition on the ground of non-exhaustion of
administrative remedies but on November 24, 1989, Presiding Judge Mamindiara P. Mangotara deferred
resolution of such Motion to Dismiss until after trial of the case on the merits. However, the prayer for a
writ of preliminary injunction was granted. Thereafter, respondent SOPI filed its answer.1wphi1.nt
On May 30, 1990, the trial court dismissed the petition for failure to exhaust administrative remedies, and
dissolved the writ of preliminary injunction it earlier issued. Petitioner's motion for reconsideration met
the same fate. It was denied by an Order dated June 28, 1990.
On October 3, 1990, instead of taking an appeal, petitioner filed a petition for certiorari, prohibition and
mandamus with the Court of Appeals seeking to set aside the questioned Order of Dismissal, branding the
same as tainted with grave abuse of discretion on the part of the trial court.
On January 24, 1991, the Ninth Division 2 of the Court of Appeals dismissed the petition for lack of merit.
Petitioner's motion reconsideration was also denied in the Resolution dated May 15, 1991.
Undaunted, petitioner has come before this court via the present petition, theorizing that:
A.
THE RESPONDENT COURT, WHILE CORRECTLY HOLDING THAT THE
RESPONDENT CITY MAYOR ACTED BEYOND HIS AUTHORITY IN IMPOSING THE
SPECIAL CONDITIONS IN THE PERMIT AS THEY HAD NO BASIS IN ANY LAW OR
ORDINANCE, ERRED IN HOLDING THAT THE SAID SPECIAL CONDITIONS
NEVERTHELESS BECAME BINDING ON PETITIONER UPON ITS ACCEPTANCE
THEREOF AS A PRIVATE AGREEMENT OR CONTRACT.
B.
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE
CONTRACT BETWEEN PETITIONER AND THE CITY OF ILIGAN WAS ENTERED
INTO BY THE LATTER IN THE PERFORMANCE OF ITS PROPRIETARY FUNCTIONS.
The petition is impressed with merit. Succinct and in point is the ruling of this Court, that:

Although petitioner agrees with the finding of the Court of Appeals that respondent City Mayor acted . . . While a business may be regulated, such regulation must, however, be within the bounds of
beyond the scope of his authority in imposing the assailed conditions in subject business permit, it has reason, i.e., the regulatory ordinance must be reasonable, and its provision cannot be
excepted to the ruling of the Court of Appeals that the said conditions nonetheless became binding on oppressive amounting to an arbitrary interference with the business or calling subject of
petitioner, once accepted, as a private agreement or contract. Petitioner maintains that the said special regulation. A lawful business or calling may not, under the guise of regulation, be unreasonably
conditions are null and void for being ultra vires and cannot be given effect; and therefore, the principle of interfered with even by the exercise of police power. . . .
estoppel cannot apply against it.
xxx xxx xxx
On the other hand, the public respondents, City Mayor and City Legal Officer, private respondent SOPI
and the Office of the Solicitor General contend that as a valid exercise of police power, respondent City
. . . The exercise of police power by the local government is valid unless it contravenes the
Mayor has the authority to impose, as he did, special conditions in the grant of business permits.
fundamental law of the land or an act of the legislature, or unless it is against public policy or
is unreasonable, oppressive, partial, discriminating or in derogation of a common right. 6
Police power as an inherent attribute of sovereignty is the power to prescribe regulations to promote the
health, morals, peace, education, good order or safety and general welfare of the people. 9 The State,
In the case under consideration, the business permit granted by respondent City Mayor to petitioner was
through the legislature, has delegated the exercise of police power to local government units, as agencies
burdened with several conditions. Petitioner agrees with the holding by the Court of Appeals that
of the State, in order to effectively accomplish and carry out the declared objects of their creation. 4 This
respondent City Mayor acted beyond his authority in imposing such special conditions in its permit as the
delegation of police power is embodied in the general welfare clause of the Local Government Code
same have no basis in the law or ordinance. Public respondents and private respondent SOPI, on the other
which provides:
hand, are one in saying that the imposition of said special conditions on petitioner's business permit is well
within the authority of the City Mayor as a valid exercise of police power.
Sec. 6. General Welfare. Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or
As aptly discussed by the Solicitor General in his Comment, the power to issue licenses and permits
incidental for its efficient and effective governance, and those which are essential to the
necessarily includes the corollary power to revoke, withdraw or cancel the same. And the power to revoke
promotion of the general welfare. Within their respective territorial jurisdictions, local
or cancel, likewise includes the power to restrict through the imposition of certain conditions. In the case
government units shall ensure and support, among other things, the preservation and
of Austin-Hardware, Inc. vs. Court of Appeals, 7 it was held that the power to license carries with it the
enrichment of culture, promote health and safety, enhance the right of the people to a balanced
authority to provide reasonable terms and conditions under which the licensed business shall be
ecology, encourage and support the development of appropriate and self-reliant scientific and
conducted. As the Solicitor General puts it:
technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants. If the City Mayor is empowered to grant or refuse to grant a license, which is a broader power,
it stands to reason that he can also exercise a lesser power that is reasonably incidental to his
express power, i.e. to restrict a license through the imposition of certain conditions, especially
The scope of police power has been held to be so comprehensive as to encompass almost all matters
so that there is no positive prohibition to the exercise of such prerogative by the City Mayor,
affecting the health, safety, peace, order, morals, comfort and convenience of the community. Police power
nor is there any particular official or body vested with such authority. 8
is essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for
a regulatory and not revenue-raising purpose, is within the ambit of this power. 5
However, the present inquiry does not stop there, as the Solicitor General believes. The power or authority
of the City Mayor to impose conditions or restrictions in the business permit is indisputable. What
The authority of city mayors to issue or grant licenses and business permits is beyond cavil. It is provided
petitioner assails are the conditions imposed in its particular case which, it complains, amount to a
for by law. Section 171, paragraph 2 (n) of Batas Pambansa Bilang 337 otherwise known as the Local
confiscation of the business in which petitioner is engaged.
Government Code of 1983, reads:

Distinction must be made between the grant of a license or permit to do business and the issuance of a
Sec. 171. The City Mayor shall:
license to engage in the practice of a particular profession. The first is usually granted by the local
authorities and the second is issued by the Board or Commission tasked to regulate the particular
xxx xxx xxx profession. A business permit authorizes the person, natural or otherwise, to engage in business or some
form of commercial activity. A professional license, on the other hand, is the grant of authority to a natural
person to engage in the practice or exercise of his or her profession.
n) Grant or refuse to grant, pursuant to law, city licenses or permits, and revoke the same for
violation of law or ordinance or the conditions upon which they are granted.
In the case at bar, what is sought by petitioner from respondent City Mayor is a permit to engage in the
business of running an optical shop. It does not purport to seek a license to engage in the practice of
However, the power to grant or issue licenses or business permits must always be exercised in accordance
optometry as a corporate body or entity, although it does have in its employ, persons who are duly licensed
with law, with utmost observance of the rights of all concerned to due process and equal protection of the
to practice optometry by the Board of Examiners in Optometry.
law.
The case of Samahan ng Optometrists sa Pilipinas vs. Acebedo International Corporation, G.R. No.
117097, 9 promulgated by this Court on March 21, 1997, is in point. The factual antecedents of that case
are similar to those of the case under consideration and the issue ultimately resolved therein is exactly the
same issue posed for resolution by this Court en banc.
In the said case, the Acebedo International Corporation filed with the Office of the Municipal Mayor an
application for a business permit for the operation of a branch of Acebedo Optical in Candon, Ilocos Sur.
The application was opposed by the Samahan ng Optometrists sa Pilipinas-Ilocos Sur Chapter, theorizing
that Acebedo is a juridical entity not qualified to practice optometry. A committee was created by the
Office of the Mayor to study private respondent's application. Upon recommendation of the said
committee, Acebedo's application for a business permit was denied. Acebedo filed a petition with the
Regional Trial Court but the same was dismissed. On appeal, however, the Court of Appeals reversed the
trial court's disposition, prompting the Samahan ng Optometrists to elevate the matter to this Court.
The First Division of this Court, then composed of Honorable Justice Teodoro Padilla, Josue Bellosillo,
Jose Vitug and Santiago Kapunan, with Honorable Justice Regino Hermosisima, Jr. as ponente, denied the
petition and ruled in favor of respondent Acebedo International Corporation, holding that "the fact that
private respondent hires optometrists who practice their profession in the course of their employment in
private respondent's optical shops, does not translate into a practice of optometry by private respondent
itself," 10 The Court further elucidated that in both the old and new Optometry Law, R.A. No. 1998,
superseded by R.A. No. 8050, it is significant to note that there is no prohibition against the hiring by
corporations of optometrists. The Court concluded thus:
All told, there is no law that prohibits the hiring by corporations of optometrists or considers
the hiring by corporations of optometrists as a practice by the corporation itself of the
profession of optometry.
In the present case, the objective of the imposition of subject conditions on petitioner's business permit
could be attained by requiring the optometrists in petitioner's employ to produce a valid certificate of
registration as optometrist, from the Board of Examiners in Optometry. A business permit is issued
primarily to regulate the conduct of business and the City Mayor cannot, through the issuance of such
permit, regulate the practice of a profession, like that of optometry. Such a function is within the exclusive
domain of the administrative agency specifically empowered by law to supervise the profession, in this
case the Professional Regulations Commission and the Board of Examiners in Optometry.
It is significant to note that during the deliberations of the bicameral conference committee of the Senate
and the House of Representatives on R.A. 8050 (Senate Bill No. 1998 and House Bill No. 14100), the
committee failed to reach a consensus as to the prohibition on indirect practice of optometry by
corporations. The proponent of the bill, former Senator Freddie Webb, admitted thus:
Senator Webb: xxx xxx xxx
The focus of contention remains to be the proposal of prohibiting the indirect practice of
optometry by corporations.1wphi1 We took a second look and even a third look at the issue in
the bicameral conference, but a compromise remained elusive. 11
Former Senator Leticia Ramos-Shahani likewise voted her reservation in casting her vote:
Senator Shahani: Mr. President.
The optometry bills have evoked controversial views from the members of the panel. While we
realize the need to uplift the standards of optometry as a profession, the consesnsus of both
Houses was to avoid touching sensitive issues which properly belong to judicial determination.
Thus, the bicameral conference committee decided to leave the issue of indirect practice of
optometry and the use of trade names open to the wisdom of the Courts which are vested with
the prerogative of interpreting the laws. 12
From the foregoing, it is thus evident that Congress has not adopted a unanimous position on the matter of
prohibition of indirect practice of optometry by corporations, specifically on the hiring and employment of
licensed optometrists by optical corporations. It is clear that Congress left the resolution of such issue for
judicial determination, and it is therefore proper for this Court to resolve the issue.
Even in the United States, jurisprudence varies and there is a conflict of opinions among the federal courts
as to the right of a corporation or individual not himself licensed, to hire and employ licensed
optometrists. 13
Courts have distinguished between optometry as a learned profession in the category of law and medicine,
and optometry as a mechanical art. And, insofar as the courts regard optometry as merely a mechanical art,
they have tended to find nothing objectionable in the making and selling of eyeglasses, spectacles and
lenses by corporations so long as the patient is actually examined and prescribed for by a qualified
practitioner. 14
The primary purpose of the statute regulating the practice of optometry is to insure that optometrical
services are to be rendered by competent and licensed persons in order to protect the health and physical
welfare of the people from the dangers engendered by unlicensed practice. Such purpose may be fully
accomplished although the person rendering the service is employed by a corporation. 15
Furthermore, it was ruled that the employment of a qualified optometrist by a corporation is not against
public policy. 16 Unless prohibited by statutes, a corporation has all the contractual rights that an individual
has 17 and it does not become the practice of medicine or optometry because of the presence of a physician
or optometrist. 18 The manufacturing, selling, trading and bartering of eyeglasses and spectacles as articles
of merchandise do not constitute the practice of optometry. 19
In the case of Dvorine vs. Castelberg Jewelry Corporation, 20 defendant corporation conducted as part of
its business, a department for the sale of eyeglasses and the furnishing of optometrical services to its
clients. It employed a registered optometrist who was compensated at a regular salary and commission and
who was furnished instruments and appliances needed for the work, as well as an office. In holding that
corporation was not engaged in the practice of optometry, the court ruled that there is no public policy
forbidding the commercialization of optometry, as in law and medicine, and recognized the general
practice of making it a commercial business by advertising and selling eyeglasses.
To accomplish the objective of the regulation, a state may provide by statute that corporations cannot sell
eyeglasses, spectacles, and lenses unless a duly licensed physician or a duly qualified optometrist is in
charge of, and in personal attendance at the place where such articles are sold. 21 In such a case, the
patient's primary and essential safeguard lies in the optometrist's control of the "treatment" by means of
prescription and preliminary and final examination. 22
In analogy, it is noteworthy that private hospitals are maintained by corporations incorporated for the
purpose of furnishing medical and surgical treatment. In the course of providing such treatments, these
corporations employ physicians, surgeons and medical practitioners, in the same way that in the course of
manufacturing and selling eyeglasses, eye frames and optical lenses, optical shops hire licensed
optometrists to examine, prescribe and dispense ophthalmic lenses. No one has ever charged that these
corporations are engaged in the practice of medicine. There is indeed no valid basis for treating
corporations engaged in the business of running optical shops differently.
It also bears stressing, as petitioner has pointed out, that the public and private respondents did not appeal
from the ruling of the Court of Appeals. Consequently, the holding by the Court of Appeals that the act of
respondent City Mayor in imposing the questioned special conditions on petitioner's business permit is
ultra vires cannot be put into issue here by the respondents. It is well-settled that:
A party who has not appealed from the decision may not obtain any affirmative relief from the
appellate court other than what he had obtain from the lower court, if any, whose decision is
brought up on appeal. 23
The Court of Appeals erred in adjudging subject business permit as having been issued by responded City
Mayor in the performance of proprietary functions of Iligan City. As hereinabove elaborated upon, the
issuance of business licenses and permits by a municipality or city is essentially regulatory in nature. The
authority, which devolved upon local government units to issue or grant such licenses or permits, is
essentially in the exercise of the police power of the State within the contemplation of the general welfare
clause of the Local Government Code.
WHEREFORE, the petition is GRANTED; the Decision of the Court of Appeals in CA-GR SP No. 22995
REVERSED: and the respondent City Mayor is hereby ordered to reissue petitioner's business permit in
accordance with law and with this disposition. No pronouncement as to costs.
SO ORDERED.

. . . an appellee who is not an appellant may assign errors in his brief where his purpose is to G.R. No. L-17716 July 31, 1962
maintain the judgment on other grounds, but he cannot seek modification or reversal of the
judgment or affirmative relief unless he has also appealed. 24
LUNETA MOTOR COMPANY, petitioner,
vs.
Thus, respondents' submission that the imposition of subject special conditions on petitioner's business A.D. SANTOS, INC., ET AL., respondents.
permit is not ultra vires cannot prevail over the finding and ruling by the Court of Appeals from which
they (respondents) did not appeal.
Jose Agbulos for petitioner.
Graciano C. Regala and Angel A. Sison for respondents.
Anent the second assigned error, petitioner maintains that its business permit issued by the City Mayor is
not a contract entered into by Iligan City in the exercise of its proprietary functions, such that although
DIZON, J.:
petitioner agreed to such conditions, it cannot be held in estoppel since ultra vires acts cannot be given
effect.
Appeal from the decision of the Public Service Commission in case No. 123401 dismissing petitioner's
application for the approval of the sale in its favor, made by the Sheriff of the City of Manila, of the
Respondents, on the other hand, agree with the ruling of the Court of Appeals that the business permit in
certificate of public convenience granted before the war to Nicolas Concepcion (Commission Cases Nos.
question is in the nature of a contract between Iligan City and the herein petitioner, the terms and
60604 and 60605, reconstituted after the war in Commission Case No. 1470) to operate a taxicab service
conditions of which are binding upon agreement, and that petitioner is estopped from questioning the
of 27 units in the City of Manila and therefrom to any point in Luzon.
same. Moreover, in the Resolution denying petitioner's motion for reconsideration, the Court of Appeals
held that the contract between the petitioner and the City of Iligan was entered into by the latter in the
performance of its proprietary functions. It appears that on December 31, 1941, to secure payment of a loan evidenced by a promissory note
executed by Nicolas Concepcion and guaranteed by one Placido Esteban in favor of petitioner,
Concepcion executed a chattel mortgage covering the above mentioned certificate in favor of petitioner.
This Court holds otherwise. It had occasion to rule that a license or permit is not in the nature of a contract
but a special privilege.
To secure payment of a subsequent loan obtained by Concepcion from the Rehabilitation Finance
Corporation (now Development Bank of the Philippines) he constituted a second mortgage on the same
. . . a license or a permit is not a contract between the sovereignty and the licensee or permitee,
certificate. This second mortgage was approved by the respondent Commission, subject to the mortgage
and is not a property in the constitutional sense, as to which the constitutional proscription
lien in favor of petitioner.
against impairment of the obligation of contracts may extend. A license is rather in the nature
of a special privilege, of a permission or authority to do what is within its terms. It is not in any
way vested, permanent or absolute. 25 The certificate was later sold to Francisco Benitez, Jr., who resold it to Rodi Taxicab Company. Both sales
were made with assumption of the mortgage in favor of the RFC, and were also approved provisionally by
the Commission, subject to petitioner's lien.
It is therefore decisively clear that estoppel cannot apply in this case. The fact that petitioner acquiesced in
the special conditions imposed by the City Mayor in subject business permit does not preclude it from
challenging the said imposition, which is ultra vires or beyond the ambit of authority of respondent City On October 10, 1953 petitioner filed an action to foreclose the chattel mortgage executed in its favor by
Mayor. Ultra vires acts or acts which are clearly beyond the scope of one's authority are null and void and Concepcion (Civil Case No. 20853 of the Court of First Instance of Manila) in view of the failure of the
cannot be given any effect. The doctrine of estoppel cannot operate to give effect to an act which is latter and his guarantor, Placido Esteban, to pay their overdue account.
otherwise null and void or ultra vires.
While the above case was pending, the RFC also instituted foreclosure proceedings on its second chattel
mortgage, and as a result of the decision in its favor therein rendered, the certificate of public convenience
was sold at public auction in favor of Amador D. Santos for P24,010.00 on August 31, 1956. Santos
immediately applied with the Commission for the approval of the sale, and the same was approved on
January 26, 1957, subject to the mortgage lien in favor of petitioner.
On June 9, 1958 the Court of First Instance of Manila rendered judgment in Civil Case No. 20853,
amended on August 1, 1958, adjudging Concepcion indebted to petitioner in the sum of P15,197.84, with
12% interest thereon from December 2, 1941 until full payment, plus other assessments, and ordered that
the certificate of public convenience subject matter of the chattel mortgage be sold at public auction in
accordance with law. Accordingly, on March 3, 1959 said certificate was sold at public auction to
petitioner, and six days thereafter the Sheriff of the City of Manila issued in its favor the corresponding
certificate of sale. Thereupon petitioner filed the application mentioned heretofore for the approval of the
sale. In the meantime and before his death, Amador D. Santos sold and transferred (Commission Case No.
1272231) all his rights and interests in the certificate of public convenience in question in favor of the now
respondent A.D. Santos, Inc., who opposed petitioner's application.
The record discloses that in the course of the hearing on said application and after petitioner had rested its
case, the respondent A. D. Santos, Inc., with leave of court, filed a motion to dismiss based on the
following grounds:
a) under the petitioner's Articles of Incorporation, it was not authorized to engage in the taxicab
business or operate as a common carrier;
b) the decision in Civil Case No. 20853 of the Court of First Instance of Manila did not affect
the oppositor nor its predecessor Amador D. Santos inasmuch as neither of them had been
impleaded into the case;
c) that what was sold to the petitioner were only the "rights, interests and participation" of
Nicolas Concepcion in the certificate that had been granted to him which were no longer
existing at the time of the sale.
On October 18, 1960, the respondent Commission, after considering the memoranda submitted by the
parties, rendered the appealed decision sustaining the first ground relied upon in support thereof, namely,
that under petitioner's articles of incorporation it had no authority to engage in the taxicab business or
operate as a common carrier, and that, is a result, it could not acquire by purchase the certificate of public
convenience referred to above. Hence, the present appeal interposed by petitioner who claims that, in
accordance with the Corporation Law and its articles of incorporation, it can acquire by purchase the
certificate of public convenience in question, maintaining inferentially that, after acquiring said certificate,
it could make use of it by operating a taxicab business or operate is a common carrier by land.
There is no question that a certificate of public convenience granted to the public operator is liable to
execution (Raymundo vs. Luneta Motor Co., 58 Phil. 889) and may be acquired by purchase. The question
involved in the present appeal, however, is not only whether, under the Corporation Law and petitioner's
articles of incorporation, it may acquire by purchase a certificate of public convenience, such as the one in
question, but also whether, after its acquisition, petitioner may hold the certificate and thereunder operate
as a common carrier by land.
It is not denied that under Section 13 (5) of the Corporation Law, a corporation created thereunder may
purchase, hold, etc., and otherwise deal in such real and personal property is the purpose for which the
corporation was formed may permit, and the transaction of its lawful business may reasonably and
necessarily require. The issue here is precisely whether the purpose for which petitioner was organized
and the transaction of its lawful business reasonably and necessarily require the purchase and holding by it
of a certificate of public convenience like the one in question and thus give it additional authority to
operate thereunder as a common carrier by land.
Petitioner claims in this regard that its corporate purposes are to carry on a general mercantile and
commercial business, etc., and that it is authorized in its articles of incorporation to operate and otherwise
deal in and concerning automobiles and automobile accessories' business in all its multifarious
ramification (petitioner's brief p. 7) and to operate, etc., and otherwise dispose of vessels and boats, etc.,
and to own and operate steamship and sailing ships and other floating craft and deal in the same and
engage in the Philippine Islands and elsewhere in the transportation of persons, merchandise and chattels
by water; all this incidental to the transportation of automobiles (id. pp. 7-8 and Exhibit B).
We find nothing in the legal provision and the provisions of petitioner's articles of incorporation relied
upon that could justify petitioner's contention in this case. To the contrary, they are precisely the best
evidence that it has no authority at all to engage in the business of land transportation and operate a
taxicab service. That it may operate and otherwise deal in automobiles and automobile accessories; that it
may engage in the transportation of persons by water does not mean that it may engage in the business of
land transportation an entirely different line of business. If it could not thus engage in the line of
business, it follows that it may not acquire an certificate of public convenience to operate a taxicab
service, such as the one in question, because such acquisition would be without purpose and would have
no necessary connection with petitioner's legitimate business.
In view of the conclusion we have arrived at on the decisive issue involved in this appeal, we deem it
unnecessary to resolve the other incidental questions raised by petitioner.
WHEREFORE, the appealed decision is affirmed, with costs
G.R. No. L-21804 September 25, 1967
TERESA ELECTRIC AND POWER CO., INC., petitioner,
vs.
PUBLIC SERVICE COMMISSION and FILIPINAS CEMENT CORPORATION, respondents.
Lino B. Azicate & Associates for petitioner.
G. A. Borja for respondents.
DIZON, J.:
This is a petition to review and set aside the decision of the Public Service Commission dated March 15,
1963 in Case No. 62-3521 granting to the Filipinas Cement Corporation hereinafter referred to as
Filipinas a certificate of public convenience and necessity to establish, maintain and operate an electric
plant in its factory site at Teresa, Rizal, for a period of fifty years from June 26, 1958. By resolution of
September 11, 1963, We denied petitioner's petition for the issuance of a writ of preliminary mandatory
and prohibitory injunction restraining the Commission from enforcing its decision during the pendency of
the appeal.
The Teresa Electric Light and Power Co., Inc. hereinafter referred to as petitioner is a domestic
corporation operating an electric plant in Teresa, Rizal, under a subsisting certificate of public
convenience and necessity issued on June 2, 1960 (PSC Case No. 129940), while the respondent Filipinas
is likewise a domestic corporation engaged in the manufacture and sale of cement.
On May 24, 1962 Filipinas filed an application with the Public Service Commission for a certificate of
public convenience to install, maintain and operate an electric plant in sitio Kaysapon of barrio Pamanaan,
municipality of Teresa, Rizal, for the purpose of supplying electric power and light to its cement factory
and its employees living within its compound.
Petitioner filed its written opposition alleging: that it is the duly authorized operator of an electric light,
heat and power service in Teresa, Rizal; that Filipinas is not authorized by its articles of incorporation to
operate an electric plant; that the Municipal Council of Teresa had not authorized it either to operate the
proposed service; that it is willing to supply Filipinas' need for electricity; and that Filipinas' principal
business does not come within the jurisdiction of the respondent Commission.
Answering the opposition, Filipinas averred that, under paragraph 7 of its articles of incorporation, it is
authorized to operate the proposed electric plant; that there is no need for securing the approval of the
Municipal Council before operating its electric plant as this is not a necessary requisite for the issuance of
a certificate of public convenience inasmuch as it already possesses the 3 basic requirements of law
namely: Filipino citizenship, financial capacity and the need for the service in the interest and convenience
of the consuming public.
During the hearings before the Commission Filipinas presented its evidence and petitioner's counsel cross-
examined the witnesses. Upon the resumption of the hearing on December 17, 1962, petitioner's counsel
filed an urgent motion for the postponement of the presentation of its evidence that day alleging that he
was to attend a preliminary hearing at Caloocan City. As the date agreed upon by the parties was set only
after the attorneys for the parties had consulted their respective calendars, the Commission, in open court,
denied said motion and considered the application as submitted for resolution.
Upon consideration of the evidence, oral and documentary, adduced by Filipinas to the effect that the
proposed electric service will be limited to the exclusive needs of its cement factory and to give light
facilities to its employees living in the compound only, without adversely affecting the interests and
services of petitioner; that like the latter, Filipinas will not generate its own electric current but buy it from
the MERALCO; and that no municipal streets will be traversed by its electric wires and posts except small
portions of private properties, the Commission, pursuant to section 15 of Commonwealth Act 146, as
amended, issued a certificate of public convenience to it on March 15, 1963, subject to the conditions set
forth therein.1awphl.nt
Petitioner filed a motion to set aside the above decision and re-open the case but the same was denied en
banc on August 12, 1963. Hence the instant petition for review filed on September 9 of the same year.
Considering the assignment of errors made in petitioner's brief, the following are the questions to be
resolved in this appeal: firstly, whether or not Filipinas should have secured either a municipal or
legislative franchise before it could be entitled to a certificate of public convenience and necessity to
operate and maintain an electric plant; secondly, whether under its articles of incorporation Filipinas is
authorized to operate and maintain an electric plant; and lastly, whether Filipinas could be granted a
certificate of public convenience and necessity to operate and maintain an electric plant notwithstanding
the existence of an electric plant operator in the same municipality.
In relation to the first question petitioner contends that under the provisions of Act No. 667 of the
Philippine Commission, a municipal or legislative franchise is a condition precedent to the granting to
Filipinas of a certificate of public convenience and necessity to operate and maintain an electric plant.
Section 1 of the act mentioned above requires the filing of a formal application with the Council of the
municipality in which or through which the petitioner desires to construct or maintain its line, stating,
among other things, the rate per month to be charged for electric light by lamp of specified standard
candle-power, and by amount of electricity consumed where a meter is used, and the rate per centum of
the gross receipts which petitioner is willing to pay into the provincial treasury for the franchise.
Paragraphs 2 and 3, section 2 of the same act also provide that not less than one-half of one per centum of
the gross earnings shall be paid into the provincial treasury, and that the rates to be charged shall always
be subject to regulations by act of the Philippine Commission or the legislative body of the Islands.
The above requirements show that the act was intended to apply exclusively to any person or corporation
who desires a franchise to construct and maintain an electric line or power plant and line for business
purposes, that is, to render service to the general public at such rate of compensation as may be approved
and regulated by the government. Clearly, therefore, it should not be made to apply to Filipinas who
applied for a certificate of public convenience and service to operate and maintain an electric plant
exclusively for its own use in connection with the operation of its cement factory and for the use of its
employees living within the compound of the factory the latter to receive service free of charge.
It is, consequently, our view that all that Filipinas needs for the purpose above mentioned is a certificate of
public convenience and necessity such as the one granted to it by the respondent Public Service
Commission.
In relation to the second question, it appears that the Articles of Incorporation of Filipinas (paragraph 7)
provide for authority to secure from any governmental, state, municipality, or provincial, city or other
authority, and to utilize and dispose of in any lawful manner, rights, powers, privileges, franchises and
concessions obviously necessary or at least related to the operation of its cement factory. Moreover,
said Articles of Incorporation also provide that the corporation may generally perform any and all acts
connected with the business of manufacturing portland cement or arising therefrom or incidental thereto.
It can not be denied that the operation of an electric light, heat and power plant is necessarily connected
with the business of manufacturing cement. If in the modern world where we live today electricity is
virtually a necessity for our daily needs, it is more so in the case of industries like the manufacture of
cement.
Upon the last question, petitioner claims that Filipinas is not entitled to a certificate of public convenience
to maintain and operate electric service for its cement plant and its employees because petitioner is
operating an electric plant in the same municipality where Filipinas cement plant is located.
While it is true that operators of public convenience and service deserve some protection from
unnecessary or unlawful competition, yet the rule is that nobody has any exclusive right to secure a
franchise or a certificate of public convenience. Above any or all considerations, the grant of franchises
and certificates of public convenience and service should be guided by public service and interest; the
latter are the primordial considerations to be taken into account.
Moreover, it has been established in this case that petitioner was in no condition to supply the power needs
of Filipinas, because its load capacity was only 200 kilowatts while Filipinas was in need of 6,000
Kilowatts power to operate its cement factory.
IN VIEW OF THE FOREGOING, the decision appealed from is affirmed, with costs.
G.R. No. L-48064 May 9, 1988
ANTHONY POWERS, BERTEL FASSNACHT, RICHARD I GUARDIAN, JOANN KELLY,
LANDLESS, AMADO MACASAET, JAVIER MACICIORATUSHI NAKAI KAY NG, JAMES
ROBERSON, FREDERICK SEGGERMAN, ARTHUR YANG, EZRA TOEG, ISIDRO CO, In
behalf of themselves and 316 other Associate Members all other Associate Members
similarly situated, and in behalf of and for the benefit of the INTERNATIONAL SCHOOL,
INC., plaintiffs-appellants,
vs.
DONALD I. MARSHALL, CHARLES ANGEVINE, CARLOS D. ARGUELLES, BRYCE F.
BASTIAN, GABRIEL DIMACHE, JOSE FLORENTO, JAMES T. HODGE, ROSEMARY IYAS,
EUSEBIO R. LUZURIAGA, THOMAS C. NIBLOCK Board of Trustees of the International
School, Inc., and MAX SNYDER Superintendent, International School, Inc., defendants-
appellees.
Manuel and Abdona Mafincode Castro for plaintiff's appellants.
Siguion Reyna, Montecillo and Ongsiaka Law Office for defendants-appellees.
GRIO-AQUIO, J.:
On July 16, 1975, the fourteen (14) plaintiffs, all associate members of the International School,
Inc., brought an action for injunction in the Court of First Instance of Rizal, against the ten (10)
members of the Board of Trustees of the school, praying that said Trustees be enjoined from
collecting a "development fee" of P2,625.00 per child-enrollee per school year for a period of
twelve (12) years, beginning with the school year 1975-1976, as a pre-requisite for re-enrollment
in said school.
The suit was precipitated by a letter dated May 19, 1975 which Donald I. Marshall, president of
the Board of Trustees of the International School in Makati, Metro Manila, addressed to the
parents of the students, giving notice that the Board of Trustees had decided to embark on a
program to construct new buildings and remodel existing ones to accommodate the increasing
enrollment in the school, and that it was necessary for the school to raise P35,000,000.00 for
this purpose. The Board intended to raise the needed funds primarily through subscriptions to
capital notes and prepayment certificates, and any deficiency from these sources would be
covered by collecting a so-called "development fees" of P2,625 from each enrollee starting with
the school year 1975-1976 and continuing up to the school year 1986-1987.
Under date of June 11, 1975, the school superintendent, Dr. Max Snyder, acting under
instructions from the Board of Trustees, wrote a letter to the parents of returning students,
enclosing an Application for Admission which specifically advised that the payment of the
development fee was a pre-requisite for re-enrollment.
The plaintiffs, who are associate members of the International School, Inc., protested against the
imposition of the development fee of P2,625.00 per student per year for twelve (12) years. In a
petition dated June 18, 1975 they requested the Board of Trustees "to suspend the
implementation of the requirement of payment of the development fee as a pre-requisite to final
enrollment or re-enrollment for the school year 1975-1976.
Under date of July 7, 1975, Donald Marshall, signing for the Board of Trustees and as President
of the School:
1. extended the deadline for the selection of the option by whch the Development Fee is to be
paid from July 15 to July 22, 1975;
2. allowed deferred payment thereof from August 1, 1975 to October 13, 1975 (beginning of the
second quarter) and allowing quarterly payment thereof;
3. granted "assistance" on a case to case basis.
On July 16, 1975 the plaintiffs filed a complaint for injunction against the school. It was docketed
as Civil Case No. 21612 in the Court of First Instance of Rizal.
On July 17, 1975, the trial court issued an order temporarily restraining the defendants or their
authorized representatives and agents:
... from executing and/or enforcing in any manner the development program
that they had adopted for the raising of funds to put up new building and
provide for the remodelling of existing ones belonging to the International
School, Inc., or from otherwise requiring as a pre-requisite to the re-
enrollment for the school year 1975-1976 of the children of the plaintiffs and
other similarly situated the payment of the development fee or charge
imposed under the said development plan; and from requiring the payment
of the matriculation fee likewise imposed pursuant to said development as a
pre-requisite for the enrollment for the first time of the children of the
associate members of the International School, Inc.
During the hearing on July 24,1975, the trial court heard not only the plaintiffs' application for a
preliminary writ of injunction but also the defendants' motion to dismiss the complaint.
After the submission of the parties' memoranda the trial court issued an order on November 18,
1975, dismissing the complaint for lack of valid cause of action, and dissolved the restraining
order of July 17, 1975.
Their motion for reconsideration having been denied, the plaintiffs appealed to the Court of
Appeals alleging four (4) assignments of error which may be reduced to the lone legal question
of whether the Board of Trustees of the International School was authorized to adopt the
development plan for which the disputed fee was being collected from the students.
Section 2 of Article 3 of the By-Laws of the International School, Inc. provides:
Section 2. Powers and Duties. The Board of Trustees, in addition to the
powers conferred by these By-Laws, shall have the right to such powers
and do such acts as may be lawfully exercised or performed by the
corporation, subject to applicable laws and to the provisions of the articles of
incorporation and the By-Laws x x x (Article III,By-Laws.)
Section 2 (b) of P.D. No. 732 granting certain rights to the International School, Inc., expressly
authorized the Board of Trustees "upon consultation with the Secretary of Education and
Culture, ... to determine the amount of fees and assessments which may be reasonably imposed
upon its students, to maintain or conform to the school standard of education." Such consultation
had been made with the Secretary of Education and Culture who expressed his conformity with
the reasonableness of the assessment of P2,625.00 per student for the whole school year to
carry out its development program. The lower court observed that:
... the expansion of the school facilities, which is to be done by improving
old buildings and/or constructing new ones, is an ordinary business
transaction well within competence of the Board of Trustees to act upon, ...
Being directly related to the purpose of elevating and maintaining the
school's standard of instruction, which is ordained in fact by Presidential
Decree No. 732, the expansion cannot result in any radical or fundamental
change in the kind of activity being conducted by the school that might
require the consent of the members composing it.
Since the collection of the development fee had been approved by the Board of Trustees of the
International School, Inc., it was a valid exercise of corporate power by the Board, and said
assessment was binding upon all the members of the corporation. Their action to stop the
collection of said fee was correcty dismissed by the trial court for lack of a valid cause of action
against the school.
WHEREFORE, finding no error in the appealed order of the trial court, We affirm it in toto, with
costs against the appellants.
SO ORDERED.
G.R. No. 100468 May 6, 1997
LAUREANO INVESTMENT & DEVELOPMENT CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and BORMAHECO, INC., respondents.
PANGANIBAN, J.:
May a plaintiff/petitioner which purports to be a corporation validly bring suit under a name other
than that registered with the Securities and Exchange Commission?
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner seeks the
reversal of the Decision 1 of the Court of Appeals 2 in CA-G.R. SP No. 22763, promulgated on
February 28, 1991, which resolved the above question in the negative; and its Resolution 3
promulgated on June 10, 1991, denying petitioner's motion for reconsideration. The assailed
Decision upheld the following questioned orders of the Regional Trial Court of Makati, Branch
141: 4 (1) the Order dated September 8, 1989, ruling that "Lideco Corporation" (the name under
which herein petitioner represented itself before the trial court) lacked personality to intervene; 5
(2) the Order dated May 7, 1990, denying the motion of petitioner to take the place of "Lideco
Corporation" as party-intervenor and adopt the latter's complaint in intervention and other
pleadings; 6 and (3) the Order dated August 8, 1990, which denied the motion for reconsideration
of petitioner. 7
The Facts
The antecedents of this petition are summarized by the Respondent Court as follows:
The records show that spouses Reynaldo Laureano and Florence Laureano
are majority stockholders of petitioner Corporation who entered into a series
of loan and credit transactions with Philippine National Cooperative Bank
(PNCB for short). To secure payment of the loans, they executed Deeds of
Real Estate Mortgage dated December 11, 1962, January 9, 1963, July 2,
1963 and September 5, 1964, for the following amounts: P100,000.00,
P20,000.00, P70,000.00 and P13,424.04, respectively. In view of their
failure to pay their indebtedness, PNCB applied for extrajudicial foreclosure
of the real estate mortgages. The bank was the purchaser of the properties
in question in the foreclosure sale and titles thereof were consolidated in
PNCB's name on February 20, 1984. PNCB did not secure a writ of
possession nor did it file ejectment proceedings against the Laureano
spouses, because there were then pending cases, such as . . . involving the
titles of ownership of subject two lots, which are situated at Bel-Air
Subdivision[,] Makati, Metro Manila.
Private respondent Bormaheco, Inc. became the successor of the
obligations and liabilities of PNCB over subject lots by virtue of a Deed of
Sale/Assignment on September 26, 1988 wherein Bormaheco bought from
PNCB under a bulk sale 114 titled and untitled properties including the two
parcels of land in question, formerly registered in the name of the Laureano
spouses. Transfer Certificate of Title Nos. 157724 and 157725 over the lots
in question were issued on October 12, 1988 in the name of Bormaheco.
Five (5) days after securing titles over the said properties, Bormaheco filed
an "Ex-Parte Petition for the Issuance of Writ of Possession of Lots 4 and 5,
Block 4 situated at Bel-Air Village, Makati, Metro Manila and embraced in
TCT Nos. 157724 and 157725 of the Registry of Deeds of Makati, Metro
Manila," docketed as LRC Case No. M-1530 before respondent Court.
Petitioner Corporation filed on January 18, 1989 its Motion for Intervention
and to Admit Attached Complaint in Intervention in said case. After an
exchange of pleadings, respondent Court issued its order dated February 9,
1988, which reads:
There being a prima facie showing in the attached
complaint in intervention that herein intervenor LIDECO
CORPORATION has an interest which may eventually
and adversely be affected in whatever decision the
Court may render in the instant case; to enable the
parties concerned to properly ventilate and litigate all
the issues involving the subject property thereby avoid
multiplicity of suits, and in the interest of justice, the
Motion for Intervention, filed by LIDECO
CORPORATION is hereby GRANTED; and the
attached complaint in intervention ADMITTED.
On July 26, 1989, respondent Bormaheco filed its Motion to Strike out the xxx xxx xxx
Complaint in Intervention and all related pleadings filed by LIDECO
Corporation. The motion was granted in the first questioned order dated
The court has painstakingly examined the two (2) tax declarations and has
September 8, 1989, which reads:
found out that the said tax declarations refer to two houses erected on Lot
3, Block 4 and Lot 3, Block 4 of the Bel-Air Village, Makati, Metro Manila. On
xxx xxx xxx the other hand, the subject matter of the instant petition are Lot 4, Block 4
and Lot 5, Block 4 of Bel-Air Village, Makati, Metro Manila. Clearly,
therefore, the properties upon which the herein movant-corporation has
On the instant motion, the records show that LIDECO
interests refer to properties different from those subject of the instant
Corporation appeared thru counsel and filed its
petition.
complaint in intervention, representing therein that it is
a corporation duly organized and registered in
accordance with law. Not only that. As correctly pointed out by the petitioner, the afore-mentioned
tax declarations according to the records of the Makati Assessor's Office
were canceled on July 22, 1982 or five (5) years, two (2) months and four
The Corporation Code explicitly provides that the use of
(4) days before the petitioner (BORMAHECO) purchased from the
the word corporation presupposes that an entity is duly
Philippine National Cooperative Bank the two (2) lots and the improvements
registered (with the SEC) in accordance with law.
found thereon evidenced by the copies of Tax Declaration Nos. A-002-
00512 and 6103 attached as Annexes A and B respectively to the
Intervening in the instant petition, with the use of the petitioner's rejoinder dated October 26, 1989.
name LIDECO Corporation, the latter, in effect,
represents to this court that it is a corporation whose
The movant-corporation not having shown documentary evidence showing
personality is distinct and separate from its
that it has interest on the two lots subject of the complaint and the
stockholders and/or any other corporation bearing
improvements found therein, it has, therefore, no personality to file the
different names. Hence, herein intervenor LIDECO
instant motion. . . .
Corporation and LAUREANO INVESTMENT AND
DEVELOPMENT CORPORATION, to the mind of this
Court, are two (2) separate and distinct entities. There is yet another reason why the motion should not be granted. The
Inasmuch as the documents in support of its complaint movant corporation's request to be substituted as party intervenor is not one
in intervention tax declarations are in the names of the instances provided for in Sec. 20, Rule 3 of the Rules of Court.
of Laureano Investment and Development Corporation, Substitution of party litigant may be requested in the following:
and it appearing that LIDECO Corporation is not a
corporation or partnership duly organized and
(a) When a party dies and the claim is not extinguished, upon proper
registered with the SEC, there is, therefore, no way
motion, the Honorable Court may order the legal representative of the
whatsoever that LIDECO Corporation's interests will be
deceased to appear and to be substituted for the deceased within the period
adversely affected by the outcome of the instant case.
of thirty (30) days or within such time as may be granted. (Sec. 17, Rule 3,
Rules of Court)
WHEREFORE, for intervenor's lack of personality to
intervene in the instant proceedings, petitioner's motion
(b) In case of any transfer of interest, upon motion, the Honorable Court
to strike out complaint in intervention is hereby
may direct the person to whom the interest is transferred to be substituted in
GRANTED.
the action or joined with the original party. (Sec. 20, Rule 30 [should be Rule
3], supra.)
Accordingly, all pleadings filed relative thereto are
ordered expunged from the records.
which is not so in the case.

xxx xxx xxx

xxx xxx xxx

After the issuance of the above-cited order, petitioner Corporation filed on

WHEREFORE, in view of the foregoing considerations,
October 4, 1989, its Urgent Motion to Substitute Party Intervenor and to
the motions under consideration are hereby DENIED.
Adopt Complaint in Intervention and All Pleadings. An opposition thereto
was filed by BORMAHECO, after which the lower court issued its second
questioned order quoted below:
 A Motion for Reconsideration of the above-cited order was
denied by respondent Court in its third questioned order dated August 8,
1990, . . . 8
In likewise denying the petition of Laureano Investment and Development Corporation (petitioner
corporation), Respondent Court ratiocinated:
Petitioner Corporation contends that respondent Bormaheco's motion to
strike out the complaint in intervention and all related pleadings filed by
LIDECO Corporation was based on misleading and confusing assertions
that LIDECO Corporation is not a registered corporation despite its
admission and/or use of the word LIDECO as acronym for Laureano
Investment and Development Corporation. The contention is untenable.
BORMAHECO has shown that LIDECO Corporation is not organized and
existing under Philippine laws. Neither has it been registered with the
Securities and Exchange Commission. In support of said claim,
BORMAHECO presented a certification to the effect that the records of the
Commission do not show the registration of LIDECO, INC. either as a
corporation or as partnership.
Petitioner also contends that the motion . . . should have been denied
outright because it was filed in bad faith and without legal and factual basis.
On the contrary, from the very first motion and pleading filed by petitioner in
LRC No. M-1530 pending before respondent Court, it is very clear that the
intervenor therein is LIDECO Corporation. Nowhere in its complaint does it
appear that LIDECO Corporation is the brevity or acronym for Laureano
Investment and Development Corporation. The claim that Lideco
Corporation is the name of a corporation which is duly registered and
organized in accordance with law has been belied by the absence of SEC
record showing the registration of Lideco, Inc. either as corporation or as a
partnership. It was only when intervenor (petitioner herein) filed its
opposition to the motion to strike out that it clarified that Lideco Corporation
is the acronym for Laureano Investment and Development Corporation.
xxx xxx xxx
Moreover, even assuming that Lideco Corporation and Laureano Investment
and Development Corporation are one and the same, it was found by
respondent Court that the properties being claimed by petitioner are
different from those for which private respondent is seeking the issuance of
a writ of possession; hence, the complaint in intervention was correctly
dismissed. 9
In conclusion, the appellate court said:
We, therefore, fail to see the alleged grave abuse of discretion on the part of
respondent Court in issuing the questioned orders, as they were issued
after the Court had considered the arguments of the parties and the
evidence on record. Clearly, the lower court acted within its authority and
sound discretion in issuing the said orders. 10
Petitioner's motion for reconsideration of the above ruling was, as earlier stated, denied by
Respondent Court in its Resolution 11 promulgated on June 10, 1991. Hence, this petition.
Issues
Petitioner raises for resolution the following questions:
1. Whether Respondent Bormaheco, Inc. is estopped from contesting the legal personality to
sue of "Lideco Corporation";
2. Whether bad faith attended the filing of private respondent's motion to strike out the complaint
in intervention and related pleadings. 12
Petitioner contends that private respondent is estopped from, and is in bad faith for, denying its
knowledge that "Lideco Corporation" and Laureano Investment and Development Corporation
are one and the same entity since it has previously used LIDECO as an acronym for the latter
corporation.
Private respondent submitted a lengthy (sixty-page) amended comment 13 to the petition, giving
a detailed background to the instant case including various actions allegedly commenced by the
Spouses Laureano questioning the foreclosure of the subject properties. In sum, Bormaheco,
Inc. maintains that Respondent Court did not commit reversible error in disallowing "Lideco
Corporation" to intervene for the reason that said entity did not satisfy the essential requisites for
being a party to an action, to wit: (1) natural or juridical personality; (2) legal capacity to sue or
be sued, i.e., having all the qualifications and none of the disqualifications provided for by law;
and (3) real interest in the subject matter of the action. 14
Private respondent adds that petitioner corporation is merely an alter ego of the Laureano
spouses who have lost their rights over the subject properties in favor of Bormaheco's
predecessor-in-interest, the Philippine National Cooperative Bank (PNCB), by virtue of
extrajudicial foreclosures. Petitioner's motion to intervene in the case below is just another ploy
of the spouses to prevent subsequent owners from effectively exercising their rights of
ownership over the properties.
Private respondent also filed before us a motion 15 to declare petitioner as engaged in forum
shopping and to resolve the instant petition. In support of its motion, private respondent
enumerates a string of civil actions allegedly commenced by the Laureano spouses before the
trial court as well as petitions before the appellate court concerning the properties in question.
As a result, Bormaheco claims, an "issue which could have been laid to rest in 1967 is still being
litigated." Furthermore, in an omnibus motion 16 filed on February 11, 1997, private respondent
claims that it is being unduly deprived of rental income by as much as P40,000.00 a month for
each property, or a total of eight million pesos since 1988. On the other hand, it claims to have
been assessed for and to have actually paid real estate taxes and Bel-Air Village Association
dues since such date
The Court's Ruling
The petition is not meritorious.
Petitioner's Issues:
 Estoppel
Petitioner contends that it was private respondent which first made use of LIDECO as a shorter
term for Laureano Investment and Development Corporation when it filed its first motion to strike
dated January 9, 1989, 17 prior to the filing by "Lideco Corporation" of its motion for intervention
and complaint in intervention 18 on January 18, 1989. Hence, private respondent should be
considered estopped from denying that petitioner and "Lideco Corporation" are one and the
same corporation.
The equitable doctrine of estoppel was explained by this Court in Caltex (Philippines), Inc. vs.
Court of Appeals 19:
Under the doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon. A party may not go back on his own
acts and representations to the prejudice of the other party who relied upon
them. In the law of evidence, whenever a party has, by his own declaration,
act, or omission, intentionally and deliberately led another to believe a
particular thing true, to act upon such belief, he cannot, in any litigation
arising out of such declaration, act, or omission, be permitted to falsify it.
(footnotes omitted)
We elaborated in Maneclang vs. Baun 20 :
In estoppel by pais, as related to the party sought to be estopped, it is
necessary that there be a concurrence of the following requisites: (a)
conduct amounting to false representation or concealment of material facts
or at least calculated to convey the impression that the facts are otherwise
than, and inconsistent with, those which the party subsequently attempts to
assert; (b) intent, or at least expectation that this conduct shall be acted
upon, or at least influenced by the other party; and (c) knowledge, actual or
constructive of the actual facts." (citing Kalalo vs. Luz, 34 SCRA 337, 1974)
Examining the records of the case, we observe that the motion 21 adverted to indeed made use
of LIDECO as an acronym for Laureano Investment and Development Corporation. But said
motion distinctly specified that LIDECO was the shorter term for Laureano Investment and
Development Corporation. It is obvious that no false representation or concealment can be
attributed to private respondent. Neither can it be charged with conveying the impression that
the facts are other than, or inconsistent with, those which it now asserts since LIDECO, as an
acronym, is clearly different from "Lideco Corporation" which represented itself as a corporation
duly registered and organized in accordance with law. 22 Nor can it be logically inferred that
petitioner relied or acted upon such representation of private respondent in thereafter referring to
itself as "Lideco Corporation;" for petitioner is presumed to know by which name it is registered,
and the legal provisions on the use of its corporate name.
Section 1, Rule 3 of the Rules of Court provides that only natural or juridical persons or entities
authorized by law may be parties to a civil action. Under the Civil Code, a corporation has a
legal personality of its own (Article 44), and may sue or be sued in its name, in conformity with
the laws and regulations of its organization (Article 46). 23 Additionally, Article 36 of the
Corporation Code similarly provides:
Art. 36. Corporate powers and capacity. Every corporation incorporated
under this Code has the power and capacity:
1. To sue and be sued in its corporate name;
. . . (emphasis supplied)
As the trial and appellate courts have held, "Lideco Corporation" had no personality to intervene
since it had not been duly registered as a corporation. If petitioner legally and truly wanted to
intervene, it should have used its corporate name as the law requires and not another name
which it had not registered. Indeed, as the Respondent Court found, nowhere in the motion for
intervention and complaint in intervention does it appear that "Lideco Corporation" stands for
Laureano Investment and Development Corporation. Bormaheco, Inc., thus, was not estopped
from questioning the juridical personality of "Lideco Corporation," even after the trial court had
allowed it to intervene in the case.
Granting arguendo that the name "Lideco Corporation" could be used by petitioner corporation in
its motion, there is an even more cogent reason for denying the petition. The trial court
concluded, and we have no reason to disagree, that the intervention of Lideco or petitioner
corporation was not proper because neither had any legal interest in the subject of litigation. The
evidence (tax declarations) attached to the petition for intervention and the complaint for
intervention pertained to properties not being litigated in the instant case. Lideco and petitioner
corporation both claimed to have an interest in two houses constructed in Lot 3, Block 4 in Bel
Air Village, Makati. 24 The subject matter of the instant petition, on the other hand, are Lots 4 and
5, Block 4, of Bel Air Village. This factual finding was affirmed by the Court of Appeals.
Since the conclusion of the trial and appellate courts is based on facts, and since the Supreme
Court is not a trier of facts our function not being to examine and evaluate the evidence
presented to the concerned tribunal which formed the basis of its questioned decision, resolution
or order 25 it is clear that we cannot review such holding. We note further that petitioner has
failed to show that the factual findings of the trial and appellate courts were arbitrary and/or
constituted one of the exceptions allowing review by this Court. 26
Bad Faith
(B)ad faith implies a conscious and intentional design to do a wrongful act
for a dishonest purpose or moral obliquity; . . . bad faith contemplates a
state of mind affirmatively operating with furtive design or ill will. 27
Other than its bare allegations that private respondent acted in bad faith, petitioner failed to
show that the former acted consciously and deliberately to achieve a dishonest purpose or moral
obliquity, or was motivated by ill will. Rather, as discussed above, no false representation was
contrived nor concealment made by private respondent. Neither did it deliberately convey facts
other than, or inconsistent with, what it now asserts and upon which petitioner had relied or
acted upon due to the representations of private respondent. Hence, we hold that petitioner
failed to demonstrate that private respondent acted in bad faith in filing its assailed second
motion.
Private Respondent's Issue:
 Forum Shopping
Private respondent, in turn, accuses petitioner and/or its chairman of the board and majority
stockholder, Reynaldo Laureano, of forum shopping, alleging that both have improperly
instituted a string of cases through deliberate splitting of causes of action thereby trifling with the
courts and abusing their processes.
There is forum shopping whenever, as a result of an adverse opinion in one forum, a party seeks
a favorable opinion (other than appeal or certiorari) in another, 28 raising identical causes of
action, subject matter, and issues. 29 However, private respondent, other than the enumeration in
its motion 30 of the case number and titles, nature of the actions and decisions therein, failed to
substantiate its allegations. It did not show convincingly that the cases enumerated had identical
causes of action, subject matter and issues. From its bare assertions, the Court cannot
intelligently make a valid finding of whether petitioner, indeed, engaged in forum shopping. In
any event, a ruling on this issue is not necessary to the final resolution of the entire case.
On March 23, 1994, the City Prosecutor dismissed I.S. No. 93-15886 on the following grounds: (1) that
petitioner lacked the requisite authority to initiate the criminal complaint for and on Concord's behalf; and
(2) that Concord and Vic Ang Siong had already agreed upon the payment of the latter's balance on the
dishonored check.
A copy of the City Prosecutor's resolution was sent by registered mail to petitioner in the address he
indicated in his complaint-affidavit. Notwithstanding that petitioner was represented by counsel, the latter
was not furnished a copy of the resolution.
On June 27, 1994, petitioner's counsel was able to secure a copy of the resolution dismissing I.S. No. 93-
15886. Counting his 15-day appeal period from said date, petitioner moved for reconsideration on July 7,
1994.
On October 21, 1994, the City Prosecutor denied petitioner's motion for reconsideration. Petitioner's
counsel received a copy of the denial order on November 3, 1994.

WHEREFORE, premises considered, the petition is hereby DENIED for its failure to show any
On November 7, 1994, petitioner's lawyer filed a motion to extend the period to appeal by an additional 15
reversible error on the part of Respondent Court. The questioned Decision of the Court of
days counted from November 3, 1994 with the Chief State Prosecutor. He manifested that it would take
Appeals is AFFIRMED. Costs against petitioner.
time to communicate with petitioner who is a Hong Kong resident and enable the latter to verify the
appeal as procedurally required.
SO ORDERED
On November 8, 1994, petitioner appealed the dismissal of his complaint by the City Prosecutor to the
G.R. No. 122452 January 29, 2001 Chief State Prosecutor. The appeal was signed by petitioner's attorney only and was not verified by
petitioner until November 23, 1994.
TAM WING TAK, petitioner,
vs. On December 8, 1994, the Chief State Prosecutor dismissed the appeal for having been filed out of time.
HON. RAMON P. MAKASIAR (in his Capacity as Presiding Judge of the Regional Trial Court of Petitioner's lawyer received a copy of the letter-resolution dismissing the appeal on January 20, 1995.
Manila, Branch 35) and ZENON DE GUIA (in his capacity as Chief State Prosecutor), respondents.
On January 30, 1995, petitioner moved for reconsideration.
QUISUMBING, J.:
On March 9, 1995, respondent Chief State Prosecutor denied the motion for reconsideration.
This is a petition for review on certiorari of the decision of the Regional Trial Court of Manila, Branch 35,
dated September 14, 1995, which dismissed herein petitioner's special civil action for mandamus and
Petitioner then filed Civil Case No. 95-74394 for mandamus with the Regional Trial Court of Quezon City
sustained the Letter-Order of respondent Chief State Prosecutor. The latter dismissed petitioner's appeal
to compel the Chief State Prosecutor to file or cause the filing of an information charging Vic Ang Siong
from the resolution of the City Prosecutor of Quezon City, which, in turn, dismissed petitioner's complaint
with violation of B.P. Blg. 22.
against Vic Ang Siong for violation of the Bouncing Checks Law or B.P. Blg. 22.

On September 14, 1995, the trial court disposed of the action as follows:
The factual background of this case is as follows:

WHEREFORE, for utter lack of merit, the petition for mandamus of petitioner is DENIED and
On November 11, 1992, petitioner, in his capacity as director of Concord-World Properties, Inc., (Concord
DISMISSED.
for brevity), a domestic corporation, filed an affidavit-complaint with the Quezon City Prosecutor's Office,
charging Vic Ang Siong with violation of B.P. Blg. 22. Docketed by the Prosecutor as I.S. No. 93-15886,
the complaint alleged that a check for the amount of P83,550,000.00, issued by Vic Ang Siong in favor of SO ORDERED.1
Concord, was dishonored when presented for encashment.
Petitioner moved for reconsideration, but the trial court denied this motion in its order dated October 24,
Vic Ang Siong sought the dismissal of the case on two grounds: First, that petitioner had no authority to 1995.
file the case on behalf of Concord, the payee of the dishonored check, since the firm's board of directors
had not empowered him to act on its behalf. Second, he and Concord had already agreed to amicably settle Hence, the instant petition.
the issue after he made a partial payment of P19,000,000.00 on the dishonored check.1wphi1.nt
Before this Court, petitioner claims respondent judge committed grave errors of law in sustaining
respondent Chief State Prosecutor whose action flagrantly contravenes: (1) the established rule on service
of pleadings and orders upon parties represented by counsel; (b) the basic principle that except in private
crimes, any competent person may initiate a criminal case; and (3) the B.P. Blg. 22 requirement that
arrangement for full payment of a bounced check must be made by the drawer with the drawee within five
(5) banking days from notification of the check's dishonor.2
We find pertinent for our resolution the following issues:
(1) Was there valid service of the City Prosecutor's resolution upon petitioner?
(2) Will mandamus lie to compel the City Prosecutor to file the necessary information in court?
In upholding respondent Chief State Prosecutor, the court a quo held:
It is generally accepted principle in the service of orders, resolutions, processes and other
papers to serve them on the party or his counsel, either in his office, if known, or else in the
residence, also if known. As the party or his counsel is not expected to be present at all times in
his office or residence, service is allowed to be made with a person in charge of the office, or
with a person of sufficient discretion to receive the same in the residence.
In the case under consideration, it is not disputed that the controverted Resolution dismissing
the complaint of the petitioner against Vic Ang Siong was served on the former by registered
mail and was actually delivered by the postmaster on April 9, 1994 at said petitioner's given
address in the record at No. 5 Kayumanggi Street, West Triangle, Quezon City. The registered
mail was in fact received by S. Ferraro. The service then was complete and the period for filing
a motion for reconsideration or appeal began to toll from that date. It expired on April 24,
1994. Considering that his motion for reconsideration was filed only on July 7, 1994, the same
was filed beyond the prescribed period, thereby precluding further appeal to the Office of the
respondent.3
Petitioner, before us, submits that there is no such "generally accepted practice" which gives a tribunal the
option of serving pleadings, orders, resolutions, and other papers to either the opposing party himself or
his counsel. Petitioner insists that the fundamental rule in this jurisdiction is that if a party appears by
counsel, then service can only be validly made upon counsel and service upon the party himself becomes
invalid and without effect. Petitioner relies upon Rule 13, Section 2 of the Rules of Court4 and our ruling
in J.M. Javier Logging Corp. v. Mardo, 24 SCRA 776 (1968) to support his stand. In the J.M. Javier case,
we held:
[W]here a party appears by attorney, notice to the former is not a notice in law, unless service
upon the party himself is ordered by the court5
The Solicitor General, for respondents, contends that the applicable rule on service in the present case is
Section 2 of the Department of Justice (DOJ) Order No. 223,6 which allows service to be made upon either
party or his counsel. Respondents argue that while a preliminary investigation has been considered as
partaking of the nature of a judicial proceeding,7 nonetheless, it is not a court proceeding and hence, falls
outside of the ambit of the Rules of Court.
We agree with petitioner that there is no "generally accepted practice" in the service of orders, resolutions,
and processes, which allows service upon either the litigant or his lawyer. As a rule, notice or service made
upon a party who is represented by counsel is a nullity,8 However, said rule admits of exceptions, as when
the court or tribunal order service upon the party9 or when the technical defect is waived.10
To resolve the issue on validity of service, we must make a determination as to which is the applicable
rule the on service in the Rules of Court, as petitioner insists or the rule on service in DOJ Order No.
223?
The Rules of Court were promulgated by this Court pursuant to Section 13, Article VII of the 1935
Constitution11 (now Section 5 [5], Article VIII of the Constitution)12 to govern "pleadings, practice and
procedure in all courts of the Philippines." The purpose of the Rules is clear and does not need any
interpretation. The Rules were meant to govern court (stress supplied) procedures and pleadings. As
correctly pointed out by the Solicitor General, a preliminary investigation, notwithstanding its judicial
nature, is not a court proceeding. The holding of a preliminary investigation is a function of the Executive
Department and not of the Judiciary.13 Thus, the rule on service provided for in the Rules of Court cannot
be made to apply to the service of resolutions by public prosecutors, especially as the agency concerned,
in this case, the Department of Justice, has its own procedural rules governing said service.
A plain reading of Section 2 of DOJ Order No. 223 clearly shows that in preliminary investigation, service
can be made upon the party himself or through his counsel. It must be assumed that when the Justice
Department crafted the said section, it was done with knowledge of the pertinent rule in the Rules of Court
and of jurisprudence interpreting it. The DOJ could have just adopted the rule on service provided for in
the Rules of Court, but did not. Instead, it opted to word Section 2 of DOJ Order No. 223 in such a way as
to leave no doubt that in preliminary investigations, service of resolutions of public prosecutors could be
made upon either the party or his counsel.
Moreover, the Constitution provides that "Rules of procedure of special courts and quasi-judicial bodies
shall remain effective unless disapproved by the Supreme Court."14 There is naught in the records to show
that we have disapproved and nullified Section 2 of DOJ Order No. 223 and since its validity is not an
issue in the instant case, we shall refrain from ruling upon its validity.
We hold that there was valid service upon petitioner pursuant to Section 2 of DOJ Order No. 223.
On the issue of whether mandamus will lie. In general, mandamus may be resorted to only where one's
right is founded clearly in law and not when it is doubtful.15 The exception is to be found in criminal cases
where mandamus is available to compel the performance by the public prosecutor of an ostensibly
discretionary function, where by reason of grave abuse of discretion on his part, he willfully refuses to
perform a duty mandated by law.16 Thus, mandamus may issue to compel a prosecutor to file an
information when he refused to do so in spite of the prima facie evidence of guilt.17
Petitioner takes the stance that it was grave abuse for discretion on the part of respondent Chief State
Prosecutor to sustain the dismissal of I.S. No. 93-15886 on the grounds that: (1) Vic Ang Siong's
obligation which gave rise to the bounced check had already been extinguished by partial payment and
agreement to amicably settle balance, and (2) petitioner had no standing to file the criminal complaint
since he was neither the payee nor holder of the bad check. Petitioner opines that neither ground justifies
dismissal of his complaint.
Petitioner's stand is unavailing. Respondent Chief State Prosecutor in refusing to order the filing of an
information for violation of B.P. Blg. 22 against Vic Ang Siong did not act without or in excess of
jurisdiction or with grave abuse of discretion.
First, with respect to the agreement between Concord and Victor Ang Siong to amicably settle their
difference, we find this resort to an alternative dispute settlement mechanism as not contrary to law, public
policy, or public order. Efforts of parties to solve their disputes outside of the courts are looked on with
favor, in view of the clogged dockets of the judiciary.
Second, it is not disputed in the instant case that Concord, a domestic corporation, was the payee of the
bum check, not petitioner. Therefore, it is Concord, as payee of the bounced check, which is the injured
party. Since petitioner was neither a payee nor a holder of the bad check, he had neither the personality to
sue nor a cause of action against Vic Ang Siong. Under Section 36 of the Corporation Code 18, read in
relation to Section 23,19 it is clear that where a corporation is an injured party, its power to sue is lodged
with its board of directors or turstees.20 Note that petitioner failed to show any proof that he was
authorized or deputized or granted specific powers by Concord's board of director to sue Victor And Siong
for and on behalf of the firm. Clearly, petitioner as a minority stockholder and member of the board of
directors had no such power or authority to sue on Concord's behalf. Nor can we uphold his act as a
derivative suit. For a derivative suit to prosper, it is required that the minority stockholder suing for and on
behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on
behalf of the corporation and all other stockholders similarly situated who may wish to join him in the
suit.21 There is no showing that petitioner has complied with the foregoing requisites. It is obvious that
petitioner has not shown any clear legal right which would warrant the overturning of the decision of
public respondents to dismiss the complaint against Vic Ang Siong. A public prosecutor, by the nature of
his office, is under no compulsion to file a criminal information where no clear legal justification has been
shown, and no sufficient evidence of guilt nor prima facie case has been presented by the petitioner.22 No
reversible error may be attributed to the court a quo when it dismissed petitioner's special civil action for
mandamus.1wphi1.nt
WHEREFORE, the instant petition is DISMISSED for lack of merit. Costs against petitioner.
SO ORDERED.
G.R. No. 123553 July 13, 1998
(CA-G.R. No. 33291) July 13, 1998
NORA A. BITONG, petitioner,
vs.
COURT OF APPEALS (FIFTH DIVISION), EUGENIA D. APOSTOL, JOSE A. APOSTOL, MR.
& MS. PUBLISHING CO., LETTY J. MAGSANOC, AND ADORACION G. NUYDA,
respondents.
(CA-G.R. No. 33873) July 13, 1998
NORA A. BITONG, petitioner,
vs.
COURT OF APPEALS (FIFTH DIVISION) and EDGARDO B. ESPIRITU, respondents.
BELLOSILLO, J.:
These twin cases originated from a derivative suit 1 filed by petitioner Nora A. Bitong before the
Securities and Exchange Commission (SEC hereafter) allegedly for the benefit of private
respondent Mr. & Ms. Publishing Co., Inc. (Mr. & Ms. hereafter), among others, to hold
respondent spouses Eugenia D. Apostol and Jose A. Apostol 2 liable for fraud,
misrepresentation, disloyalty, evident bad faith, conflict of interest and mismanagement in
directing the affairs of Mr. & Ms. to the damage and prejudice of Mr. & Ms. and its stockholders,
including petitioner.
Alleging before the SEC that she had been the Treasurer and a Member of the Board of
Directors of Mr. & Ms. from the time it was incorporated on 29 October 1976 to 11 April 1989,
and was the registered owner of 1,000 shares of stock out of the 4,088 total outstanding shares,
petitioner complained of irregularities committed from 1983 to 1987 by Eugenia D. Apostol,
President and Chairperson of the Board of Directors. Petitioner claimed that except for the sale
of the name Philippine Inquirer to Philippine Daily Inquirer (PDI hereafter) all other transactions
and agreements entered into by Mr. & Ms. with PDI were not supported by any bond and/or
stockholders' resolution. And, upon instructions of Eugenia D. Apostol, Mr. & Ms. made several
cash advances to PDI on various occasions amounting to P3.276 million. On some of these
borrowings PDI paid no interest whatsoever. Despite the fact that the advances made by Mr. &
Ms. to PDI were booked as advances to an affiliate, there existed no board or stockholders'
resolution, contract nor any other document which could legally authorize the creation of and
support to an affiliate.
Petitioner further alleged that respondents Eugenia and Jose Apostol were stockholders,
directors and officers in both Mr. & Ms. and PDI. In fact on 2 May 1986 respondents Eugenia D.
Apostol, Leticia J. Magsanoc and Adoracion G. Nuyda subscribed to PDI shares of stock at
P50,000.00 each or a total of P150,000.00. The stock subscriptions were paid for by Mr. & Ms.
and initially treated, as receivables from officers and employees. But, no payments were ever
received from respondents, Magsanoc and Nuyda.
The petition principally sought to (a) enjoin respondents Eugenia D. Apostol and Jose A. Apostol
from further acting as president-director and director, respectively, of Mr. & Ms. and disbursing
any money or funds except for the payment of salaries and similar expenses in the ordinary
course of business, and from disposing of their Mr. & Ms. shares; (b) enjoin respondents Apostol
spouses, Magsanoc and Nuyda from disposing of the PDI shares of stock registered in their
names; (c) compel respondents Eugenia and Jose Apostol to account for and reconvey all
profits and benefits accruing to them as a result of their improper and fraudulent acts; (d) compel
respondents Magsanoc and Nuyda to account for and reconvey to Mr. & Ms. all shares of stock
paid from cash advances from it and all accessions or fruits thereof; (e) hold respondents
Eugenia and Jose Apostol liable for damages suffered by Mr. & Ms. and the other stockholders,
including petitioner, by reason of their improper and fraudulent acts; (f) appoint a management
committee for Mr. & Ms. during the pendency of the suit to prevent further dissipation and loss of
its assets and funds as well as paralyzation of business operations; and, (g) direct the
management committee for Mr. & Ms. to file the necessary action to enforce its rights against
PDI and other third parties.
Private respondents Apostol spouses, Magsanoc, Nuyda, and Mr. & Ms., on the other hand,
refuted the allegations of petitioner by starting with a narration of the beginnings of Mr. & Ms.
They recounted that on 9 March 1976 Ex Libris Publishing Co., Inc. (Ex Libris hereafter) was
incorporated for the purpose of publishing a weekly magazine. Its original principal stockholders
were spouses Senator Juan Ponce Enrile (then Minister of National Defense) and Cristina
Ponce Enrile through Jaka Investments Corporation (JAKA hereafter), and respondents Eugenia
and Jose Apostol. When Ex Libris suffered financial difficulties, JAKA and the Apostols, together
with new investors Luis Villafuerte and Ramon Siy, restructured Ex Libris by organizing a new
corporation known as Mr. & Ms.
The original stockholders of Mr. & Ms., i.e., JAKA, Luis Villafuerte, Ramon Siy, the Apostols and
Ex Libris continued to be virtually the same up to 1989. Thereafter it was agreed among them
that, they being close friends, Mr. & Ms. would be operated as a partnership or a close
corporation; respondent Eugenia D. Apostol would manage the affairs of Mr. & Ms.; and, no
shares of stock would be sold to third parties without first offering the shares to the other
stockholders so that transfers would be limited to and only among the original stockholders.
Private respondents also asserted that respondent Eugenia D. Apostol had been informing her
business partners of her actions as manager, and obtaining their advice and consent.
Consequently the other stockholders consented, either expressly or impliedly, to her
management. They offered no objections. As a result, the business prospered. Thus, as shown
in a statement prepared by the accounting firm Punongbayan and Araullo, there were increases
from 1976 to 1988 in the total assets of Mr. & Ms. from P457,569.00 to P10,143,046.00; in the
total stockholders' equity from P203,378.00 to P2,324,954.00; and, in the net sales, from
P301,489.00 to P16,325,610.00. Likewise, cash dividends were distributed and received by the
stockholders.
Private respondents further contended that petitioner, being merely a holder-in-trust of JAKA
shares, only represented and continued to represent JAKA in the board. In the beginning,
petitioner cooperated with and assisted the management until mid-1986 when relations between
her and her principals on one hand, and respondent Eugenia D. Apostol on the other, became
strained due to political differences. Hence from mid-1986 to mid-1988 petitioner refused to
speak with respondent Eugenia D. Apostol, and in 1988 the former became openly critical of the
management of the latter. Nevertheless, respondent Eugenia D. Apostol always made available
to petitioner and her representatives all the books of the corporation.
Private respondents averred that all the PDI shares owned by respondents Eugenia and Jose
Apostol were acquired through their own private funds and that the loan of P750,000.00 by PDI
from Mr. & Ms. had been fully paid with 20% interest per annum. And, it was PDI, not Mr. & Ms.,
which loaned off P250,000.00 each to respondents Magsanoc and Nuyda. Private respondents
further argued that petitioner was not the true party to this case, the real party being JAKA which
continued to be the true stockholder of Mr. & Ms.; hence, petitioner did not have the personality
to initiate and prosecute the derivative suit which, consequently, must be dismissed.
On 6 December 1990, the SEC Hearing Panel 3 issued a writ of preliminary injunction enjoining
private respondents from disbursing any money except for the payment of salaries and other
similar expenses in the regular course of business. The Hearing Panel also enjoined respondent
Apostol spouses, Nuyda and Magsanoc from disposing of their PDI shares, and further ruled
. . . respondents' contention that petitioner is not entitled to the provisional
reliefs prayed for because she is not the real party in interest . . . is bereft of
any merit. No less than respondents' Amended Answer, specifically
paragraph V, No. 8 on Affirmative Allegations/Defenses states that "The
petitioner being herself a minor stockholder and holder-in-trust of JAKA
shares represented and continues to represent JAKA in the Board." This
statement refers to petitioner sitting in the board of directors of Mr. & Ms. in
two capacities, one as a minor stockholder and the other as the holder in
trust of the shares of JAKA in Mr. & Ms. Such reference alluded to by the
respondents indicates an admission on respondents' part of the petitioner's
legal personality to file a derivative suit for the benefit of the respondent Mr.
& Ms. Publishing Co., Inc.
The Hearing Panel however denied petitioner's prayer for the constitution of a
management committee.
On 25 March 1991 private respondents filed a Motion to Amend Pleadings to Conform to
Evidence alleging that the issue of whether petitioner is the real party-in-interest had been tried
by express or implied consent of the parties through the admission of documentary exhibits
presented by private respondents proving that the real party-in-interest was JAKA, not petitioner
Bitong. As such, No. 8, par. V (Affirmative Allegations/Defenses), Answer to the Amended
Petition, was stipulated due to inadvertence and excusable mistake and should be amended. On
10 October 1991 the Hearing Panel denied the motion for amendment.
Petitioner testified at the trial that she became the registered and beneficial owner of 997 shares
of stock of Mr. & Ms. out of the 4,088 total outstanding shares after she acquired them from
JAKA through a deed of sale executed on 25 July 1983 and recorded in the Stock and Transfer
Book of Mr. & Ms. under Certificate of Shares of Stock No. 008. She pointed out that Senator
Enrile decided that JAKA should completely divest itself of its holdings in Mr. & Ms. and this
resulted in the sale to her of JAKA's interest and holdings in that publishing firm.
Private respondents refuted the statement of petitioner that she was a stockholder of Mr. & Ms.
since 25 July 1983 as respondent Eugenia D. Apostol signed Certificate of Stock No. 008 only
on 17 March 1989, and not on 25 July 1983. Respondent Eugenia D. Apostol explained that she
stopped using her long signature (Eugenia D. Apostol) in 1987 and changed it to E.D. Apostol,
the signature which appeared on the face of Certificate of Stock No. 008 bearing the date 25
July 1983. And, since the Stock and Transfer Book which petitioner presented in evidence was
not registered with the SEC, the entries therein including Certificate of Stock No. 008 were
fraudulent. Respondent Eugenia D. Apostol claimed that she had not seen the Stock and
Transfer Book at anytime until 21 March 1989 when it was delivered by petitioner herself to the
office of Mr. & Ms., and that petitioner repeatedly referred to Senator Enrile as "my principal"
during the Mr. & Ms. board meeting of 22 September 1988, seven (7) times no less.
On 3 August 1993, after trial on the merits, the SEC Hearing Panel dismissed the derivative suit
filed by petitioner and dissolved the writ of preliminary injunction barring private respondents
from disposing of their PDI shares and any of Mr. & Ms. assets. The Hearing Panel ruled that
there was no serious mismanagement of Mr. & Ms. which would warrant drastic corrective
measures. It gave credence to the assertion of respondent Eugenia D. Apostol that Mr. & Ms.
was operated like a close corporation where important matters were discussed and approved
through informal consultations at breakfast conferences. The Hearing Panel also concluded that
while the evidence presented tended to show that the real party-in-interest indeed was JAKA
and/or Senator Enrile, it viewed the real issue to be the alleged mismanagement, fraud and
conflict of interest on the part of respondent Eugenia D. Apostol, and allowed petitioner to
prosecute the derivative suit if only to resolve the real issues. Hence, for this purpose, the
Hearing Panel considered petitioner to be the real party-in-interest.
On 19 August 1993 respondent Apostol spouses sold the PDI shares registered in the name of a pleading is offered may have the right to introduce other paragraphs which tend to destroy the
their holding company, JAED Management Corporation, to Edgardo B. Espiritu. On 25 August admission in the paragraph offered by the adversary. 6
1993 petitioner Bitong appealed to the SEC En Banc.
The Amended Petition before the SEC alleges
On 24 January 1994 the SEC En Banc 4 reversed the decision of the Hearing Panel and, among
others, ordered private respondents to account for, return and deliver to Mr. & Ms. any and all
I. THE PARTIES
funds and assets that they disbursed from the coffers of the corporation including shares of
stock, profits, dividends and/or fruits that they might have received as a result of their investment
in PDI, including those arising from the P150,000.00 advanced to respondents Eugenia D. 1. Petitioner is a stockholder and director of Mr. & Ms. . . . .
Apostol, Leticia J. Magsanoc and Adoracion G. Nuyda; account for and return any profits and
fruits of all amounts irregularly or unlawfully advanced to PDI and other third persons; and, II. THE FACTS
cease and desist from managing the affairs of Mr. & Ms. for reasons of fraud, mismanagement,
disloyalty and conflict of interest.
1. Petitioner is the registered owner of 1,000 shares of stock of Mr. & Ms.
out of the latter's 4,088 total outstanding shares. Petitioner, at all times
The SEC En Banc also declared the 19 August 1993 sale of the PDI shares of JAED material to this petition, is a member of the Board of Directors of Mr. & Ms.
Management Corporation to Edgardo B. Espiritu to be tainted with fraud, hence, null and void, and from the inception of Mr. & Ms. until 11 April 1989 was its treasurer . . .
and considered Mr. & Ms. as the true and lawful owner of all the PDI shares acquired by
respondents Eugenia D. Apostol, Magsanoc and Nuyda. It also declared all subsequent
transferees of such shares as trustees for the benefit of Mr. & Ms. and ordered them to forthwith On the other hand, the Amended Answer to the Amended Petition states
deliver said shares to Mr. & Ms.
I. PARTIES
Consequently, respondent Apostol spouses, Magsanoc, Nuyda, and Mr. & Ms. filed a petition for
review before respondent Court of Appeals, docketed as CA-GR No. SP 33291, while 1. Respondents admit the allegations contained in Caption I, pars. 1 to 4 of
respondent Edgardo B. Espiritu filed a petition for certiorari and prohibition also before the Petition referring to the personality, addresses and capacity of the
respondent Court of Appeals, docketed as CA-GR No. SP 33873. On 8 December 1994 the two parties to the petition except . . . but qualify said admission insofar as they
(2) petitions were consolidated. are limited, qualified and/or expanded by allegations in the Affirmative
Allegations/Defenses . . .
On 31 August 1995 respondent appellate court rendered a decision reversing the SEC En Banc
and held that from the evidence on record petitioner was not the owner of any share of stock in II. THE FACTS
Mr. & Ms. and therefore not the real party-in-interest to prosecute the complaint she had
instituted against private respondents. Accordingly, petitioner alone and by herself as an agent
1. Respondents admit paragraph 1 of the Petition, but qualify said
could not file a derivative suit in behalf of her principal. For not being the real party-in-interest,
admission as to the beneficial ownership of the shares of stock registered in
petitioner's complaint did not state a cause of action, a defense which was never waived; hence,
the name of the petitioner, the truth being as stated in the Affirmative
her petition should have been dismissed. Respondent appellate court ruled that the assailed
Allegations/Defenses of this Answer . . .
orders of the SEC were issued in excess of jurisdiction, or want of it, and thus were null and
void. 5 On 18 January 1996, petitioner's motion for reconsideration was denied for lack of merit.
V. AFFIRMATIVE ALLEGATIONS/DEFENSES
Before this Court, petitioner submits that in paragraph 1 under the caption "I. The Parties" of her
Amended Petition before the SEC, she stated that she was a stockholder and director of Mr. & Respondents respectfully allege by way of Affirmative Allegations/Defenses,
Ms. In par. 1 under the caption "II. The Facts" she declared that she "is the registered owner of that . . . .
1,000 shares of stock of Mr. & Ms. out of the latter's 4,088 total outstanding shares" and that she
was a member of the Board of Directors of Mr. & Ms. and treasurer from its inception until 11
3. Fortunately, respondent Apostol was able to convince Mr. Luis Villafuerte
April 1989. Petitioner contends that private respondents did not deny the above allegations in
to take interest in the business and he, together with the original investors,
their answer and therefore they are conclusively bound by this judicial admission. Consequently,
restructured the Ex Libris Publishing Company by organizing a new
private respondents' admission that petitioner has 1,000 shares of stock registered in her name
corporation known as Mr. & Ms. Publishing Co., Inc. . . . Mr. Luis Villafuerte
in the books of Mr. & Ms. forecloses any question on her status and right to bring a derivative
contributed his own P100,000.00. JAKA and respondent Jose Z. Apostol,
suit on behalf of Mr. & Ms.
original investors of Ex Libris contributed P100,000.00 each; Ex Libris
Publishing Company was paid 800 shares for the name of Mr. & Ms.
Not necessarily. A party whose pleading is admitted as an admission against interest is entitled magazine and goodwill. Thus, the original stockholders of respondent Mr. &
to overcome by evidence the apparent inconsistency, and it is competent for the party against Ms. were:
whom the pleading is offered to show that the statements were inadvertently made or were
made under a mistake of fact. In addition, a party against whom a single clause or paragraph of
Cert./No./Date Name of Stockholder No. of Shares %
 001-9-15-76 JAKA Investments Corp. 1,000 21%
002-9-15-76 Luis Villafuerte 1,000 21%
003-9-15-76 Ramon L. Siy 1,000 21%
004-9-15-76 Jose Z. Apostol 1,000 21%
005-9-15-76 Ex Libris Publishing Co. 800 16%
4,800 96%
4. The above-named original stockholders of respondent Mr. & Ms. continue
to be virtually the same stockholders up to this date . . . .
8. The petitioner being herself a minor stockholder and holder-in-trust of
JAKA shares, represented and continues to represent JAKA in the
Board . . . .
21. Petitioner Nora A. Bitong is not the true party to this case, the true party
being JAKA Investments Corporation which continues to be the true
stockholder of respondent Mr. & Ms. Publishing Co., Inc., consequently, she
does not have the personality to initiate and prosecute this derivative suit,
and should therefore be dismissed . . . .
The answer of private respondents shows that there was no judicial admission that petitioner
was a stockholder of Mr. & Ms. to entitle her to file a derivative suit on behalf of the corporation.
Where the statements of the private respondents were qualified with phrases such as, "insofar
as they are limited, qualified and/or expanded by," "the truth being as stated in the Affirmative
Allegations/Defenses of this Answer" they cannot be considered definite and certain enough,
cannot be construed as judicial admissions. 7
More so, the affirmative defenses of private respondents directly refute the representation of
petitioner that she is a true and genuine stockholder of Mr. & Ms. by stating unequivocally that
petitioner is not the true party to the case but JAKA which continues to be the true stockholder of
Mr. & Ms. In fact, one of the reliefs which private respondents prayed for was the dismissal of
the petition on the ground that petitioner did not have the legal interest to initiate and prosecute
the same.
When taken in its totality, the Amended Answer to the Amended Petition, or even the Answer to
the Amended Petition alone, clearly raises an issue as to the legal personality of petitioner to file
the complaint. Every alleged admission is taken as an entirety of the fact which makes for the
one side with the qualifications which limit, modify or destroy its effect on the other side. The
reason for this is, where part of a statement of a party is used against him as an admission, the
court should weigh any other portion connected with the statement, which tends to neutralize or
explain the portion which is against interest.
In other words, while the admission is admissible in evidence, its probative value is to be
determined from the whole statement and others intimately related or connected therewith as an
integrated unit. Although acts or facts admitted do not require proof and cannot be contradicted,
however, evidence aliunde can be presented to show that the admission was made through
palpable mistake. 8 The rule is always in favor of liberality in construction of pleadings so that the
real matter in dispute may be submitted to the judgment of the court. 9
Petitioner also argues that since private respondents failed to appeal the 6 December 1990
Order and the 3 August 1993 Decision of the SEC Hearing Panel declaring that she was the real
party-in-interest and had legal personality to sue, they are now estopped from questioning her
personality.
Not quite. The 6 December 1990 Order is clearly an interlocutory order which cannot be
considered as having finally resolved on the merits the issue of legal capacity of petitioner. The
SEC Hearing Panel discussed the issue of legal capacity solely for the purpose of ruling on the
application for writ of preliminary injunction as an incident to the main issues raised in the
complaint. Being a mere interlocutory order, it is not appealable.
For, an interlocutory order refers to something between the commencement and end of the suit
which decides some point or matter but it is not the final decision of the whole controversy. 10
Thus, even though the 6 December 1990 Order was adverse to private respondents, they had
the legal right and option not to elevate the same to the SEC En Banc but rather to await the
decision which resolves all the issues raised by the parties and to appeal therefrom by assigning
all errors that might have been committed by the Hearing Panel.
On the other hand, the 3 August 1993 Decision of the Hearing Panel dismissing the derivative
suit for failure to prove the charges of mismanagement, fraud, disloyalty and conflict of interest
and dissolving the writ of preliminary injunction, was favorable to private respondents. Hence,
they were not expected to appeal therefrom.
In fact, in the 3 August 1993 Decision, the Hearing Panel categorically stated that the evidence
presented showed that the real party-in-interest was not petitioner Bitong but JAKA and/or
Senator Enrile. Petitioner was merely allowed to prosecute her complaint so as not to sidetrack
"the real issue to be resolved (which) was the allegation of mismanagement, fraud and conflict of
interest allegedly committed by respondent Eugenia D. Apostol." It was only for this reason that
petitioner was considered to be capacitated and competent to file the petition.
Accordingly, with the dismissal of the complaint of petitioner against private respondents, there
was no compelling reason for the latter to appeal to the SEC En Banc. It was in fact petitioner's
turn as the aggrieved party to exercise her right to appeal from the decision. It is worthy to note
that even during the appeal of petitioner before the SEC En Banc private respondents
maintained their vigorous objection to the appeal and reiterated petitioner's lack of legal capacity
to sue before the SEC.
Petitioner then contends that she was a holder of the proper certificates of shares of stock and
that the transfer was recorded in the Stock and Transfer Book of Mr. & Ms. She invokes Sec. 63
of The Corporation Code which provides that no transfer shall be valid except as between the
parties until the transfer is recorded in the books of the corporation, and upon its recording the
corporation is bound by it and is estopped to deny the fact of transfer of said shares. Petitioner
alleges that even in the absence of a stock certificate, a stockholder solely on the strength of the
recording in the stock and transfer book can exercise all the rights as stockholder, including the
right to file a derivative suit in the name of the corporation. And, she need not present a separate
deed of sale or transfer in her favor to prove ownership of stock.
Sec. 63 of The Corporation Code expressly provides
Sec. 63. Certificate of stock and transfer of shares. The capital stock of
stock corporations shall be divided into shares for which certificates signed
by the president or vice president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the corporation shall be
issued in accordance with the by-laws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer however shall be valid
except as between the parties until the transfer is recorded in the books of
the corporation showing the names of the parties to the transaction, the
date of the transfer, the number of the certificate or certificates and the
number of shares transferred . . . .
This provision above quoted envisions a formal certificate of stock which can be issued only
upon compliance with certain requisites. First, the certificates must be signed by the president or
vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of
the corporation. A mere typewritten statement advising a stockholder of the extent of his
ownership in a corporation without qualification and/or authentication cannot be considered as a
formal certificate of stock. 11 Second, delivery of the certificate is an essential element of its
issuance. Hence, there is no issuance of a stock certificate where it is never detached from the
stock books although blanks therein are properly filled up if the person whose name is inserted
therein has no control over the books of the company. 12 Third, the par value, as to par value
shares, or the full subscription as to no par value shares, must first be fully paid. Fourth, the
original certificate must be surrendered where the person requesting the issuance of a certificate
is a transferee from a stockholder.
The certificate of stock itself once issued is a continuing affirmation or representation that the
stock described therein is valid and genuine and is at least prima facie evidence that it was
legally issued in the absence of evidence to the contrary. However, this presumption may be
rebutted. 13 Similarly, books and records of a corporation which include even the stock and
transfer book are generally admissible in evidence in favor of or against the corporation and its
members to prove the corporate acts, its financial status and other matters including one's status
as a stockholder. They are ordinarily the best evidence of corporate acts and proceedings.
However, the books and records of a corporation are not conclusive even against the
corporation but are prima facie evidence only. Parol evidence may be admitted to supply
omissions in the records, explain ambiguities, or show what transpired where no records were
kept, or in some cases where such records were contradicted. 14 The effect of entries in the
books of the corporation which purport to be regular records of the proceedings of its board of
directors or stockholders can be destroyed by testimony of a more conclusive character than
mere suspicion that there was an irregularity in the manner in which the books were kept. 15
The foregoing considerations are founded on the basic principle that stock issued without
authority and in violation of law is void and confers no rights on the person to whom it is issued
and subjects him to no liabilities. 16 Where there is an inherent lack of power in the corporation to
issue the stock, neither the corporation nor the person to whom the stock is issued is estopped
to question its validity since an estopped cannot operate to create stock which under the law
cannot have existence. 17
As found by the Hearing Panel and affirmed by respondent Court of Appeals, there is
overwhelming evidence that despite what appears on the certificate of stock and stock and
transfer book, petitioner was not a bona fide stockholder of Mr. & Ms. before March 1989 or at
the time the complained acts were committed to qualify her to institute a stockholder's derivative
suit against private respondents. Aside from petitioner's own admissions, several corporate
documents disclose that the true party-in-interest is not petitioner but JAKA.
Thus, while petitioner asserts in her petition that Certificate of Stock No. 008 dated 25 July 1983
was issued in her name, private respondents argue that this certificate was signed by
respondent Eugenia D. Apostol as President only in 1989 and was fraudulently antedated by
petitioner who had possession of the Certificate Book and the Stock and Transfer Book. Private
respondents stress that petitioner's counsel entered into a stipulation on record before the
Hearing Panel that the certificate was indeed signed by respondent Apostol only in 1989 and not
in 1983.
In her reply, petitioner admits that while respondent Eugenia D. Apostol signed the Certificate of
Stock No. 008 in petitioner's name only in 1989, it was issued by the corporate secretary in 1983
and that the other certificates covering shares in Mr. & Ms. had not yet been signed by
respondent Eugenia D. Apostol at the time of the filing of the complaint with the SEC although
they were issued years before.
Based on the foregoing admission of petitioner, there is no truth to the statement written in
Certificate of Stock No. 008 that the same was issued and signed on 25 July 1983 by its duly
authorized officers specifically the President and Corporate Secretary because the actual date of
signing thereof was 17 March 1989. Verily, a formal certificate of stock could not be considered
issued in contemplation of law unless signed by the president or vice-president and
countersigned by the secretary or assistant secretary.
In this case, contrary to petitioner's submission, the Certificate of Stock No. 008 was only legally
issued on 17 March 1989 when it was actually signed by the President of the corporation, and
not before that date. While a certificate of stock is not necessary to make one a stockholder,
e.g., where he is an incorporator and listed as stockholder in the articles of incorporation
although no certificate of stock has yet been issued, it is supposed to serve as paper
representative of the stock itself and of the owner's interest therein. Hence, when Certificate of
Stock No. 008 was admittedly signed and issued only on 17 March 1989 and not on 25 July
1983, even as it indicates that petitioner owns 997 shares of stock of Mr. & Ms., the certificate
has no evidentiary value for the purpose of proving that petitioner was a stockholder since 1983
up to 1989.
And even the factual antecedents of the alleged ownership by petitioner in 1983 of shares of
stock of Mr. & Ms. are indistinctive if not enshrouded in inconsistencies. In her testimony before
the Hearing Panel, petitioner said that early in 1983, to relieve Mr. & Ms. from political pressure,
Senator Enrile decided to divest the family holdings in Mr. & Ms. as he was then part of the
government and Mr. & Ms. was evolving to be an opposition newspaper. The JAKA shares
numbering 1,000 covered by Certificate of Stock No. 001 were thus transferred to respondent
Eugenia D. Apostol in trust or in blank. 18
Petitioner now claims that a few days after JAKA's shares were transferred to respondent
Eugenia D. Apostol, Senator Enrile sold to petitioner 997 shares of JAKA. For this purpose, a
deed of sale was executed and antedated to 10 May 1983. 19 This submission of petitioner is
however contradicted by the records which show that a deed of sale was executed by JAKA
transferring 1,000 shares of Mr. & Ms. to respondent Apostol on 10 May 1983 and not to
petitioner. 20
Then Senator Enrile testified that in May or June 1983 he was asked at a media interview if his
family owned shares of stock in Mr. & Ms. Although he and his family were stockholders at that
time he denied it so as not to embarrass the magazine. He called up petitioner and instructed
her to work out the documentation of the transfer of shares from JAKA to respondent Apostol to
be covered by a declaration of trust. His instruction was to transfer the shares of JAKA in Mr. &
Ms. and Ex Libris to respondent Apostol as a nominal holder. He then finally decided to transfer
the shareholdings to petitioner. 21
When asked if there was any document or any written evidence of that divestment in favor of
petitioner, Senator Enrile answered that there was an endorsement of the shares of stock. He
said that there was no other document evidencing the assignment to petitioner because the
stocks were personal property that could be transferred even orally. 22 Contrary to Senator
Enrile's testimony, however, petitioner maintains that Senator Enrile executed a deed of sale in
her favor.
A careful perusal of the records shows that neither the alleged endorsement of Certificate of
Stock No. 001 in the name of JAKA nor the alleged deed of sale executed by Senator Enrile
directly in favor of petitioner could have legally transferred or assigned on 25 July 1983 the
shares of stock in favor of petitioner because as of 10 May 1983 Certificate of Stock No. 001 in
the name of JAKA was already cancelled and a new one, Certificate of Stock No. 007, issued in
favor of respondent Apostol by virtue of a Declaration of Trust and Deed of Sale. 23
It should be emphasized that on 10 May 1983 JAKA executed, a deed of sale over 1,000 Mr. &
Ms. shares in favor of respondent Eugenio D. Apostol. On the same day, respondent Apostol
signed a declaration of trust stating that she was the registered owner of 1,000 Mr. & Ms. shares
covered by Certificate of Stock No. 007.
The declaration of trust further showed that although respondent Apostol was the registered
owner, she held the shares of stock and dividends which might be paid in connection therewith
solely in trust for the benefit of JAKA, her principal. It was also stated therein that being a
trustee, respondent Apostol agreed, on written request of the principal, to assign and transfer the
shares of stock and any and all such distributions or dividends unto the principal or such other
person as the principal would nominate or appoint.
Petitioner was well aware of this trust, being the person in charge of this documentation and
being one of the witnesses to the execution of this
document. 24 Hence, the mere alleged endorsement of Certificate of Stock No. 001 by Senator
Enrile or by a duly authorized officer of JAKA to effect the transfer of shares of JAKA to petitioner
could not have been legally feasible because Certificate of Stock No. 001 was already canceled
by virtue of the deed of sale to respondent Apostol.
And, there is nothing in the records which shows that JAKA had revoked the trust it reposed on
respondent Eugenia D. Apostol. Neither was there any evidence that the principal had requested
her to assign and transfer the shares of stock to petitioner. If it was true that the shares of stock
covered by Certificate of Stock No. 007 had been transferred to petitioner, the person who could
legally endorse the certificate was private respondent Eugenia D. Apostol, she being the
registered owner and trustee of the shares of stock covered by Certificate of Stock No. 007. It is
a settled rule that the trustee should endorse the stock certificate to validate the cancellation of
her share and to have the transfer recorded in the books of the corporation. 25
In fine, the records are unclear on how petitioner allegedly acquired the shares of stock of JAKA.
Petitioner being the chief executive officer of JAKA and the sole person in charge of all business
and financial transactions and affairs of JAKA 26 was supposed to be in the best position to show
convincing evidence on the alleged transfer of shares to her, if indeed there was a transfer.
Considering that petitioner's status is being questioned and several factual circumstances have
been presented by private respondents disproving petitioner's claim, it was incumbent upon her
to submit rebuttal evidence on the manner by which she allegedly became a stockholder. Her
failure to do so taken in the light of several substantial inconsistencies in her evidence is fatal to
her case.
The rule is that the endorsement of the certificate of stock by the owner or his attorney-in-fact or
any other person legally authorized to make the transfer shall be sufficient to effect the transfer
of shares only if the same is coupled with delivery. The delivery of the stock certificate duly
endorsed by the owner is the operative act of transfer of shares from the lawful owner to the new
transferee.
Thus, for a valid transfer of stocks, the requirements are as follows: (a) There must be delivery
of the stock certificate; (b) The certificate must be endorsed by the owner or his attorney-in-fact
or other persons legally authorized to make the transfer; and, (c) to be valid against third parties,
the transfer must be recorded in the books of the corporation. 27 At most, in the instant case,
petitioner has satisfied only the third requirement. Compliance with the first two requisites has
not been clearly and sufficiently shown.
Considering that the requirements provided under Sec. 63 of The Corporation Code should be
mandatorily complied with, the rule on presumption of regularity cannot apply. The regularity and
validity of the transfer must be proved. As it is, even the credibility of the stock and transfer book
and the entries thereon relied upon by petitioner to show compliance with the third requisite to
prove that she was a stockholder since 1983 is highly doubtful.
The records show that the original stock and transfer book and the stock certificate book of Mr. &
Ms. were in the possession of petitioner before their custody was transferred to the Corporate
Secretary, Atty. Augusto San Pedro. 28 On 25 May 1988, Assistant Corporate Secretary Renato
Jose Unson wrote Mr. & Ms. about the lost stock and transfer book which was also noted by the
corporation's external auditors, Punongbayan and Araullo, in their audit. Atty. Unson even
informed respondent Eugenia D. Apostol as President of Mr. & Ms. that steps would be
undertaken to prepare and register a new Stock and Transfer Book with the SEC. Incidentally,
perhaps strangely, upon verification with the SEC, it was discovered that the general file of the
corporation with the SEC was missing. Hence, it was even possible that the original Stock and
Transfer Book might not have been registered at all.
On 20 October 1988 respondent Eugenia D. Apostol wrote Atty. Augusto San Pedro noting the
changes he had made in the Stock and Transfer Book without prior notice to the corporate
officers. 29 In the 27 October 1988 directors' meeting, respondent Eugenia D. Apostol asked
about the documentation to support the changes in the Stock and Transfer Book with regard to
the JAKA shares. Petitioner answered that Atty. San Pedro made the changes upon her
instructions conformably with established practice. 30
This simply shows that as of 1988 there still existed certain issues affecting the ownership of the
JAKA shares, thus raising doubts whether the alleged transactions recorded in the Stock and
Transfer Book were proper, regular and authorized. Then, as if to magnify and compound the
uncertainties in the ownership of the shares of stock in question, when the corporate secretary
resigned, the Stock and Transfer Book was delivered not to the corporate office where the book
should be kept but to petitioner. 31
That JAKA retained its ownership of its Mr. & Ms. shares was clearly shown by its receipt of the
dividends issued in December 1986. 32 This only means, very obviously, that Mr. & Ms. shares in
question still belonged to JAKA and not to petitioner. For, dividends are distributed to
stockholders pursuant to their right to share in corporate profits. When a dividend is declared, it
belongs to the person who is the substantial and beneficial owner of the stock at the time
regardless of when the distribution profit was earned. 33
Finally, this Court takes notice of the glaring and open admissions of petitioner made, not just
seven (7) but nine (9) times, during the 22 September 1988 meeting of the board of directors
that the Enriles were her principals or shareholders, as shown by the minutes thereof which she
duly signed 34
5. Mrs. E. Apostol explained to the Directors that through her efforts, the
asset base of the Company has improved and profits were realized. It is for
this reason that the Company has declared a 100% cash dividend in 1986.
She said that it is up for the Board to decide based on this performance
whether she should continue to act as Board Chairman or not. In this
regard, Ms. N.A. Bitong expressed her recollection of how Ex-Libris/Mr. &
Ms. were organized and her participation for and on behalf of her principals,
as follows: She recalled that her principals were invited by Mrs. E. Apostol to
invest in Ex-Libris and eventually Mr. & Ms. The relationship between her
principals and Mrs. E. Apostol made it possible for the latter to have access
to several information concerning certain political events and issues. In
many instances, her principals supplied first hand and newsworthy
information that made Mr. & Ms. a popular
paper . . . .
6. According to Ms. Bitong, her principals were instrumental in helping Mr. &
Ms. survive during those years that it was cash strapped . . . . Ms. N.A.
Bitong pointed out that the practice of using the former Minister's influence
and stature in the government is one thing which her principals themselves
are strongly against . . . .
7. . . . . At this point, Ms. N. Bitong again expressed her recollection of the
subject matter as follows: (a) Mrs. E. Apostol, she remembers, brought up
the concept of a cooperative-ran newspaper company in one of her
breakfast session with her principals sometime during the end of 1985. Her
principals when asked for an opinion, said that they recognized the concept
as something very noble and visible . . . . Then Ms. Bitong asked a very
specific question "When you conceptualized Ex-Libris and Mr. & Ms., did
you not think of my shareholders the Ponce Enriles as liabilities? How come
you associated yourself with them then and not now? What is the
difference?" Mrs. Apostol did not answer the question.
The admissions of a party against his interest inscribed upon the record books of a corporation
are competent and persuasive evidence against him. 35 These admissions render nugatory any
argument that petitioner is a bona fide stockholder of Mr. & Ms. at any time before 1988 or at the
time the acts complained of were committed. There is no doubt that petitioner was an employee
of JAKA as its managing officer, as testified to by Senator Enrile himself. 36 However, in the
absence of a special authority from the board of directors of JAKA to institute a derivative suit for
and in its behalf, petitioner is disqualified by law to sue in her own name. The power to sue and
be sued in any court by a corporation even as a stockholder is lodged in the board of directors
that exercises its corporate powers and not in the president or officer thereof. 37
It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust,
not of mere error of judgment or abuse of discretion, and intracorporate remedy is futile or
useless, a stockholder may institute a suit in behalf of himself and other stockholders and for the
benefit of the corporation, to bring about a redress of the wrong inflicted directly upon the
corporation and indirectly upon the stockholders. 38 The stockholder's right to institute a
derivative suit is not based on any express provision of The Corporation Code but is impliedly
recognized when the law makes corporate directors or officers liable for damages suffered by
the corporation and its stockholders for violation of their fiduciary duties.
Hence, a stockholder may sue for mismanagement, waste or dissipation of corporate assets
because of a special injury to him for which he is otherwise without redress. 39 In effect, the suit
is an action for specific performance of an obligation owed by the corporation to the stockholders
to assist its rights of action when the corporation has been put in default by the wrongful refusal
of the directors or management to make suitable measures for its protection. 40
The basis of a stockholder's suit is always one in equity. However, it cannot prosper without first
complying with the legal requisites for its institution. The most important of these is the bona fide
ownership by a stockholder of a stock in his own right at the time of the transaction complained
of which invests him with standing to institute a derivative action for the benefit of the
corporation. 41
WHEREFORE, the petition is DENIED. The 31 August 1995 Decision of the Court of Appeals
dismissing the complaint of petitioner Nora A. Bitong in CA-G.R. No. SP 33291, and granting the
petition for certiorari and prohibition filed by respondent Edgardo U. Espiritu as well as annulling
the 5 November 1993, 24 January 1993 and 18 February 1994 Orders of the SEC En Banc in
CA-G.R. No. SP 33873, is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-44100 April 28, 1983
SPECIAL SERVICES CORPORATION, petitioner,
vs.
CENTRO LA PAZ (SAMAHANG ESPIRITISTA SA LUNDUYANG LA PAZ), A CHAPTER OF
UNION ESPIRITISTA CRISTIANA DE FILIPINAS, INC., respondents.
MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision promulgated on May 11, 1976 by
respondent Court of Appeals 1 in CA-G.R. No. 56582-R, entitled "Centro La Paz (Samahang
Espiritista sa Lunduyang La Paz) a Chapter of Union Espiritista Cristiana de Filipinas, Inc. vs.
The Sheriff of Manila and the Special Services Corporation." The Union Espiritista Cristiana de In a judgment rendered on August 30, 1974, the Court a quo decreed in the dispositive portion:
Filipinas, Inc., is a semi-religious and charitable organization. 2
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
The antecedental facts follow: rendered in favor of the plaintiff, against the defendants, enjoining the latter
from proceeding with the public auction sale of the real property, pursuant to
the notice of sale on execution of real property, with costs against the
On October 10, 1972, judgment was rendered in favor of petitioner Special Services Corporation
defendant.
by the Court of First Instance, Branch IV, Manila, against one Alejandro Estudillo in the amount
of P94,727.52, more or less, in an action for Replevin with Sum of Money (Civil Case No.
85819). A writ of execution was thereafter issued but which has remained unsatisfied. The writ of preliminary injunction issued in connection with this case is, as it
is hereby made permanent.
By virtue of an alias writ of execution issued on December 15, 1972, the Sheriff of Manila
caused the annotation of a notice of levy on Transfer Certificate of Title No. 51837, in respect of Defendant's counterclaim is, as it is hereby ordered dismissed for lack of
the rights, interest and participation of said Alejandro Estudillo, one of the registered owners merit.
indicated in said title. That title covers two parcels of land situated in Sampaloc, Manila,
consisting of three hundred forty eight (348) square meters and registered in the names of
SO ORDERED. 8
Alejandro Estudillo, married to Primitiva Victoria; Joaquina de la Rosa, widow; Pedro Paguio,
married to Amor Jose and Maximo Victoria, married to Juliana Roberto, all Chapter members.
The lower Court held that by a preponderance of evidence CENTRO had established that it was
"really and true and lawful owner of the property in dispute, and that the persons registered
The public auction sale of Estudillo's rights and interests in said properties was scheduled on
therein as its owners are merely trustees of the plaintiff," thus:
July 23, 1973.

The evidence on hand clearly preponderates in favor of the plaintiff. The

On June 27, 1973, Alejandro Estudillo filed a "Motion to Dissolve and/or Cancel the Notice of
Levy" alleging that he and the other registered owners indicated on the title merely held in trust
the properties and improvements thereon in favor of respondent Centro La Paz (Samahang
Espiritista Sa Lunduyang La Paz) a Chapter of Union Espiritista Cristiana de Filipinas, Inc.
(hereinafter referred to as CENTRO, for brevity), as evidenced by "Acknowledgments" executed
by them on October 20, 1961 and October 2, 1971. Estudillo further alleged that CENTRO's
ownership was also evidenced by letters dated February 15, 1963, November 29, 1963 and
August 8, 1966 sent to the City Assessor by him and Crispulo Romero, President of CENTRO,
long before the filing of the replevin case on December 28, 1971 praying for the revocation of tax
assessments on said properties as the same, were used for religious purposes. 3
On July 21, 1973, CENTRO submitted a third party claim to the Sheriff of Manila likewise
averring exclusive ownership of the properties in question . 4
On July 23, 1973, "Centro La Paz (Samahang Espiritista sa Lunduyang La Paz) a Chapter of
Union Espiritista Cristiana de Filipinas, Inc.," as plaintiff, instituted Civil Case No. 91412 for
Damages and Preliminary Injunction against herein petitioner and the Sheriff of Manila with the
Court of First Instance, Branch IV, Manila, the same Court which rendered judgment in the
replevin case. CENTRO reiterated ownership of the properties in question and emphasized that
the registered owners thereof had publicly acknowledged their possession of said properties in
the concept of trustees. 5
In its "Opposition to Petition for Preliminary Injunction and Answer," petitioner averred that a
Torrens Title issued in favor of an owner is conclusive of all matters stated therein and that the
"Acknowledgments" of the registered owners not being annotated on Transfer Certificates of
Title No. 51837 could not bind anyone. 6
series of documents executed even as early as 1957, long before the issue
of whether Alejandro Estudillo really has an interest and/or participation in
the property in dispute, attest to plaintiff's ownership of the property in
question. The Deed of Donation dated March 13, 1957 (Exh. A), Deed of
Absolute Sale (Exh. E) executed by Joaquina dela Rosa in favor of
Alejandro Estudillo, Pedro Paguio and Maximo Victoria of the same property
covered by the Deed of Donation, Exhibit A; Deed of Sale (Exh. F) of two
parcels in dispute described under T.C.T. No. 51837 executed by Sta. Mesa
Realty, Inc. in favor of Alejandro Estudillo, Joaquina dela Rosa, Pedro Q.
Paguio and Maximo Victoria, Deed of Acknowledgment dated October 30,
1961 (Exh. G) also executed by the same Estudillo de la Rosa and Victoria
acknowledging that the property described under the aforementioned T.C.T.
No. 51837, together with the improvements thereon are being possessed by
them only as trustees; another Deed of Acknowledgment executed on
October 22, 1971, jointly by Amor Jose, widow of Paguio and the latter's
daughters, Sumilang Paguio and Filipina Paguio (co-registered owner of
Estudillo) likewise declaring that their possession of the said property is
merely that of trustees and not as owners; the petitions for revocation of tax
assessments Nos. 3187 and 3188 (Exhs. I and J); the petition to exempt
said parcels from taxation, being owned by a religious organization (Exh. K)
and the follow-up letters addressed to the City Assessor of Manila, dated
February 15, 1963 (Exh. L), December 29,1963 (Exh. M) and May 29, 1962
(Exh N) respectively, plus the Deed of Sale (Exh. 0) executed by Estudillo,
heirs of dela Rosa and Paguio of the two parcels in favor of Centro La Paz,
indubitably point to one and inescapable conclusion that the plaintiff is really
the true and lawful owner of the property in dispute and that persons
registered therein as its owners, are merely trustees of the plaintiff.

On August 27, 1973, a writ of preliminary injunction was issued by the lower Court enjoining the While it may be true that the declaration of Estudillo subsequent to the levy
public auction sale of Estudillo's interest in the properties in question, 7 conditioned upon upon his interest in the aforesaid property may be self-serving, which could
CENTRO's posting a bond of P30,000.00. be for the purpose of avoiding liability, his declaration and that of his co-
 owners, however, taking place years before the instant controversy, could
hardly be said to have been motivated by a similar purpose (to evade
responsibility) since at that time, none as yet exist in favor of the defendant
nor anybody elm against the Estudillo. (Record on Appeal, pp. 54-55) 9
Faced with that adverse judgment, petitioner appealed to respondent Appellate Court, which
affirmed the Court a quo's Decision on May 11, 1976, and subsequently denied reconsideration.
Petitioner then availed of the instant Petition, raising the following issues:
l) Whether or not Centro La Paz which is merely a Chapter of Union
Espiritista de Filipinas, Inc. has a juridical personality of its own in
accordance with the provisions of our laws;
2) Whether or not Centro La Paz, as claimed by it and the respondent Court
of Appeals, can validly be conferred upon ownership of Transfer Certificate
of Title No. 51837 by virtue of documents executed allegedly in its favor.
We affirm the judgment appealed from.
For one thing, the issues now raised were not directly litigated in the Court below. For another, it
is evident from the Complaint that the plaintiff was the mother organization, thus:
Centro La Paz (Samahang Espiritista sa Lunduyang La Paz), A Chapter of
Union Espiritista Cristiana de Filipinas, Inc., Plaintiff.
Paragraph 1 of the Complaint likewise reads:
1. That the plaintiff is a juridical person duly organized and existing under
and by virtue of the laws of the Republic of the Philippines, a semi-religious
and charitable organization, with a right to sue and be sued, ...
In the Offer of Evidence filed before the Trial Court, the purpose of presenting Exhibit "A", the
Deed of Donation dated March 13, 1957, was "to establish or prove the following":
(a) That the plaintiff "CENTRO LA PAZ" as a chapter of the association of
spiritista commonly known as 'UNION ESPIRITISTA CRISTIANA DE
FILIPINAS, INC., 'which is a duly registered corporation or entity with the
Office of the Securities and Exchange Commission, is a Juridical Person
with the right to sue and be sued;
xxx xxx xxx 10
In the Memorandum of CENTRO before the Trial Court, the following allegation also appears:
That the plaintiff is a Chapter of the UNION ESPIRITISTA CRISTIANA DE
FlLIPINAS, INC., a semi-religious and charitable organization duly
registered with the Securities and Exchange Commission as per Certificate
of Registration No. 15147, dated March 19, 1959, ... 11
And in the Decision of the Trial Court, it found:
The evidence for the plaintiff disclosed that it is a chapter of the Union
Espiritista Christiana de Filipinas, Inc., a semi-religious and charitable
organization duly registered with the Securities and Exchange Commission
per Certificate of Registration No. 15147 dated March 19, 1959.
xxx xxx xxx 12
Evident from all the foregoing is that although it was CENTRO that was actively prosecuting the
case, in substance, it was representing the mother organization, the Union Espiritista Cristiana
de Filipinas, Inc., which is the real party in interest and is itself named in the Complaint. It is an
organization that is duly registered with the Securities and Exchange Commission, and thus
possessed of a juridical personality to sue and be sued. 13
As found by both the Trial Court and respondent Appellate Court, the evidence sufficiently
establishes that the registered owners of the parcels of land covered by TCT 51837, all of whom
are members of CENTRO, hold the properties in trust for CENTRO by virtue of the indubitable
documents executed even before the institution of suit. In the same manner that the real
property, registered solely in the name of a husband, can be proven to be conjugal property with
his wife, the fact of registration in the name of Alejandro Estudillo and others does not bar
evidence to show that the registered owners hold the properties in trust for CENTRO. 14
Admittedly, the trust was not registered in accordance with section 65 of Act 496 (the former
Land Registration Law). The absence of said registration, however, cannot be taken against
CENTRO inasmuch as, if the public auction sale had actually been held, with petitioner as the
successful buyer, petitioner could not have been considered a purchaser for value and in good
faith at said sale since it had knowledge of CENTRO's claim, particularly when the latter had
filed a third-party-claim with the Sheriff of Manila before the scheduled auction sale, which
knowledge was equivalent to registration of the several "Acknowledgments" in the Registry of
Deeds. 15
The conclusion follows that inasmuch as Estudillo has no interest in the properties in question,
there is nothing that petitioner can levy upon. The power of a Court in the execution of its
judgment extends only over properties unquestionably belonging to the judgment debtor. 16
WHEREFORE, the judgment of respondent Court of Appeals (now Intermediate Appellate Court)
affirming that of the Trial Court, which enjoined petitioner "from proceeding with the public
auction sale of the properties in question, pursuant to the notice of sale on execution of real
property" and made the writ of preliminary injunction permanent, is hereby affirmed.
SO ORDERED.