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DECISION
The petition in G.R. No. 152542, assails the October 5, 2001 Decision 1
of the Special Tenth Division of the Court of Appeals in CA-G.R. SP
No. 53652, which ruled that Ma. Antonia M. Salvatierra has no legal
capacity to represent the Corporation in the forcible entry case
docketed as Civil Case No. 534-C, before the Municipal Trial Court of
Cadiz City. On the other hand, the petition in G.R. No. 155472, seeks
to set aside the June 7, 2002 Decision2 rendered by the Special
Former Thirteenth Division of the Court of Appeals in CA-G.R. SP No.
49251, where it refused to address, on jurisdictional considerations,
the issue of Ma. Antonia M. Salvatierra's capacity to file a complaint
for replevin on behalf of the Corporation in Civil Case No. 506-C
before the Regional Trial Court of Cadiz City, Branch 60.
On May 4, 1998, the trial court denied the motion to dismiss.8 The
group of Antonio Monfort III filed a petition for certiorari with the
Court of Appeals but the same was dismissed on June 7, 2002.9 The
Special Former Thirteenth Division of the appellate court did not
resolve the validity of the March 31, 1997 Board Resolution and the
election of the officers who signed it, ratiocinating that the
determination of said question is within the competence of the trial
court.
In their answer,12 the group of Antonio Monfort III alleged that they
are possessing and controlling the Haciendas and harvesting the
produce therein on behalf of the corporation and not for
themselves. They likewise raised the affirmative defense of lack of
legal capacity of Ma. Antonia M. Salvatierra to sue on behalf of the
Corporation.
Aggrieved, the group of Antonio Monfort III filed a petition for review
with the Court of Appeals. On October 5, 2001, the Special Tenth
Division set aside the judgment of the RTC and dismissed the
complaint for forcible entry for lack of capacity of Ma. Antonia M.
Salvatierra to represent the Corporation.15 The motion for
reconsideration filed by the latter was denied by the appellate
court.16
The group of Antonio Monfort III claims that the March 31, 1997
Board Resolution authorizing Ma. Antonia M. Salvatierra and/or
Ramon H. Monfort to represent the Corporation is void because the
purported Members of the Board who passed the same were not
validly elected officers of the Corporation.
In the instant case, the six signatories to the March 31, 1997 Board
Resolution authorizing Ma. Antonia M. Salvatierra and/or Ramon H.
Monfort to represent the Corporation, were: Ma. Antonia M.
Salvatierra, President; Ramon H. Monfort, Executive Vice President;
Directors Paul M. Monfort, Yvete M. Benedicto and Jaqueline M.
Yusay; and Ester S. Monfort, Secretary.19 However, the names of the
last four (4) signatories to the said Board Resolution do not appear in
the 1996 General Information Sheet submitted by the Corporation
with the SEC. Under said General Information Sheet the composition
of the Board is as follows:
The only issue in this case is whether or not the filing of the case
for damages against private respondent was authorized by a
duly constituted Board of Directors of the petitioner
corporation.
In the case at bar, the fact that four of the six Members of the Board
listed in the 1996 General Information Sheet 23 are already dead24 at
the time the March 31, 1997 Board Resolution was issued, does not
automatically make the four signatories (i.e., Paul M. Monfort, Yvete
M. Benedicto, Jaqueline M. Yusay and Ester S. Monfort) to the said
Board Resolution (whose name do not appear in the 1996 General
Information Sheet) as among the incumbent Members of the Board.
This is because it was not established that they were duly elected to
replace the said deceased Board Members.
The Court notes that the complaint in Civil Case No. 506-C, for
replevin before the Regional Trial Court of Negros Occidental,
Branch 60, has 2 causes of action, i.e., unlawful detention of the
Corporation's motor vehicle and tractors, and the unlawful detention
of the of 387 fighting cocks of Ramon H. Monfort. Since Ramon
sought redress of the latter cause of action in his personal capacity,
the dismissal of the complaint for lack of capacity to sue on behalf
of the corporation should be limited only to the corporation's cause
of action for delivery of motor vehicle and tractors. In view, however,
of the demise of Ramon on June 25, 1999,29 substitution by his heirs is
proper.
The complaint for forcible entry docketed as Civil Case No. 822
before the Municipal Trial Court of Cadiz City is DISMISSED. In Civil
Case No. 506-C with the Regional Trial Court of Negros Occidental,
Branch 60, the action for delivery of personal property filed by
Monfort Hermanos Agricultural Development Corporation is likewise
DISMISSED. With respect to the action filed by Ramon H. Monfort for
the delivery of 387 fighting cocks, the Regional Trial Court of Negros
Occidental, Branch 60, is ordered to effect the corresponding
substitution of parties.
No costs.
SO ORDERED.
Facts:
Monfort Corp represented by its president, Antonia Salvatierra filed a
complaint against the respondents for the delivery of motor vehicles,
tractors and fighting cocks. The respondents filed a motion to dismiss
on the ground that Antonia does not have the authority to represent
the corporation in this particular case. Antonia contended that they
have submitted board resolutions signed by its directors. However,
this board resolution is being contested because four of the directors
who signed the resolution have not been duly elected by the
company.
Issue:
Whether or not Antonia has the authority to represent the
corporation in this case.
Held:
The SC said Antonia does not have the authority to represent the
corporation in this particular case. The board resolution in question
was held invalid because the general information sheet of the
PANGANIBAN, J.:
Before us is a Petition for Review assailing the April 17, 2000 Decision1
of the Court of Appeals (CA) in CA-GR CV No. 57610. The decretal
portion of the challenged Decision reads as follows:
The Facts
‘3. Costs.
‘SO ORDERED.
Affirming the trial court, the CA held that it was offensive to the basic
tenets of justice and equity for a corporation to take over and
operate the business of another corporation, while disavowing or
repudiating any responsibility, obligation or liability arising therefrom.4
Issues
"I
"II
Succinctly put, the aforesaid errors boil down to the principal issue of
whether PNB is liable for the unpaid debts of PASUMIL to respondent.
Main Issue:
Petitioners posit that they should not be held liable for the corporate
debts of PASUMIL, because their takeover of the latter’s foreclosed
assets did not make them assignees. On the other hand, respondent
asserts that petitioners and PASUMIL should be treated as one entity
and, as such, jointly and severally held liable for PASUMIL’s unpaid
obligation.1âwphi1.nêt
This Court has pierced the corporate veil to ward off a judgment
credit,22 to avoid inclusion of corporate assets as part of the estate of
Being the party that asked for the piercing of the corporate veil,
respondent had the burden of presenting clear and convincing
evidence to justify the setting aside of the separate corporate
personality rule.34 However, it utterly failed to discharge this burden;35
it failed to establish by competent evidence that petitioner’s
separate corporate veil had been used to conceal fraud, illegality or
inequity.36
In the instant case, the CA erred in affirming the trial court’s lifting of
the corporate mask.50 The CA did not point to any fact evidencing
bad faith on the part of PNB and its transferee.51 The corporate
fiction was not used to defeat public convenience, justify a wrong,
protect fraud or defend crime.52 None of the foregoing exceptions
was shown to exist in the present case.53 On the contrary, the lifting
of the corporate veil would result in manifest injustice. This we cannot
allow.
No Merger or Consolidation
The merger, however, does not become effective upon the mere
agreement of the constituent corporations.55 Since a merger or
consolidation involves fundamental changes in the corporation, as
well as in the rights of stockholders and creditors, there must be an
express provision of law authorizing them.56 For a valid merger or
consolidation, the approval by the Securities and Exchange
Commission (SEC) of the articles of merger or consolidation is
required.57 These articles must likewise be duly approved by a
majority of the respective stockholders of the constituent
corporations.58
SO ORDERED.
Issue: Whether PNB and NASUDECO may be held liable for PASUMIL’s
liability to AEEC.
FERNANDO, J.:
From such an order, an appeal was taken to this Court not by the
domiciliary administrator, the County Trust Company of New York,
but by the Philippine corporation, the Benguet Consolidated, Inc.
The appeal cannot possibly prosper. The challenged order
The facts will explain why. As set forth in the brief of appellant
Benguet Consolidated, Inc., Idonah Slade Perkins, who died on
March 27, 1960 in New York City, left among others, two stock
certificates covering 33,002 shares of appellant, the certificates
being in the possession of the County Trust Company of New York,
which as noted, is the domiciliary administrator of the estate of the
deceased.2 Then came this portion of the appellant's brief: "On
August 12, 1960, Prospero Sanidad instituted ancillary administration
proceedings in the Court of First Instance of Manila; Lazaro A.
Marquez was appointed ancillary administrator, and on January 22,
1963, he was substituted by the appellee Renato D. Tayag. A dispute
arose between the domiciary administrator in New York and the
ancillary administrator in the Philippines as to which of them was
entitled to the possession of the stock certificates in question. On
January 27, 1964, the Court of First Instance of Manila ordered the
domiciliary administrator, County Trust Company, to "produce and
deposit" them with the ancillary administrator or with the Clerk of
Court. The domiciliary administrator did not comply with the order,
and on February 11, 1964, the ancillary administrator petitioned the
court to "issue an order declaring the certificate or certificates of
stocks covering the 33,002 shares issued in the name of Idonah Slade
Perkins by Benguet Consolidated, Inc., be declared [or] considered
as lost."3
As was made clear at the outset of this opinion, the appeal lacks
merit. The challenged order constitutes an emphatic affirmation of
judicial authority sought to be emasculated by the wilful conduct of
the domiciliary administrator in refusing to accord obedience to a
court decree. How, then, can this order be stigmatized as illegal?
It can truly be said then that the result arrived at upheld and
vindicated the honor of the judiciary no less than that of the country.
Through this challenged order, there is thus dispelled the atmosphere
of contingent frustration brought about by the persistence of the
domiciliary administrator to hold on to the stock certificates after it
had, as admitted, voluntarily submitted itself to the jurisdiction of the
lower court by entering its appearance through counsel on June 27,
1963, and filing a petition for relief from a previous order of March 15,
1963.
Thus did the lower court, in the order now on appeal, impart vitality
and effectiveness to what was decreed. For without it, what it had
been decided would be set at naught and nullified. Unless such a
blatant disregard by the domiciliary administrator, with residence
abroad, of what was previously ordained by a court order could be
thus remedied, it would have entailed, insofar as this matter was
concerned, not a partial but a well-nigh complete paralysis of
judicial authority.
It would follow then that the authority of the probate court to require
that ancillary administrator's right to "the stock certificates covering
the 33,002 shares ... standing in her name in the books of [appellant]
Benguet Consolidated, Inc...." be respected is equally beyond
question. For appellant is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as
immune from lawful court orders.
To assert that it can choose which court order to follow and which to
disregard is to confer upon it not autonomy which may be
conceded but license which cannot be tolerated. It is to argue that
it may, when so minded, overrule the state, the source of its very
existence; it is to contend that what any of its governmental organs
may lawfully require could be ignored at will. So extravagant a claim
cannot possibly merit approval.
It is bad enough as the Viloria decision made patent for our judiciary
to accept as final and conclusive, determinations made by foreign
governmental agencies. It is infinitely worse if through the absence
of any coercive power by our courts over juridical persons within our
jurisdiction, the force and effectivity of their orders could be made to
depend on the whim or caprice of alien entities. It is difficult to
imagine of a situation more offensive to the dignity of the bench or
the honor of the country.
That is all then that this case presents. It is obvious why the appeal
cannot succeed. It is always easy to conjure extreme and even
oppressive possibilities. That is not decisive. It does not settle the issue.
What carries weight and conviction is the result arrived at, the just
solution obtained, grounded in the soundest of legal doctrines and
distinguished by its correspondence with what a sense of realism
requires. For through the appealed order, the imperative
requirement of justice according to law is satisfied and national
dignity and honor maintained.
FACTS:
March 27, 1960: Idonah Slade Perkins died in New York City
FACTS:
HELD:
Probate court has authority to issue the order enforcing the ancillary
administrator’s right to the stock certificates when the actual situs of
the shares of stocks is in the Philippines.
It would follow then that the authority of the probate court to require
that ancillary administrator's right to "the stock certificates covering
the 33,002 shares ... standing in her name in the books of [appellant]
Benguet Consolidated, Inc...." be respected is equally beyond
question. For appellant is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as
immune from lawful court orders.
The facts of the case are undisputed, and are hereby restated in
sum.
The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation,
had sought to offer its shares to the public in order to raise funds
allegedly to develop its properties and pay its loans with several
banking institutions. In January, 1995, PALI was issued a Permit to Sell
its shares to the public by the Securities and Exchange Commission
(SEC). To facilitate the trading of its shares among investors, PALI
sought to course the trading of its shares through the Philippine Stock
Exchange, Inc. (PSE), for which purpose it filed with the said stock
exchange an application to list its shares, with supporting documents
attached.
PALI's answer stated that the properties forming part of the Puerto
Azul Beach Hotel and Resort Complex were not claimed by PALI as
its assets. On the contrary, the resort is actually owned by Fantasia
Filipina Resort, Inc. and the Puerto Azul Country Club, entities distinct
from PALI. Furthermore, the Ternate Development Corporation owns
only 1.20% of PALI. The Marcoses responded that their claim is not
confined to the facilities forming part of the Puerto Azul Hotel and
Resort Complex, thereby implying that they are also asserting legal
and beneficial ownership of other properties titled under the name
of PALI.
On April 11, 1996, PALI wrote a letter to the SEC addressed to the
then Acting Chairman, Perfecto R. Yasay, Jr., bringing to the SEC's
attention the action taken by the PSE in the application of PALI for
the listing of its shares with the PSE, and requesting that the SEC, in
the exercise of its supervisory and regulatory powers over stock
exchanges under Section 6(j) of P.D. No. 902-A, review the PSE's
action on PALI's listing application and institute such measures as are
just and proper under the circumstances.
On the same date, or on April 11, 1996, the SEC wrote to the PSE,
attaching thereto the letter of PALI and directing the PSE to file its
comments thereto within five days from its receipt and for its
authorized representative to appear for an "inquiry" on the matter.
On April 22, 1996, the PSE submitted a letter to the SEC containing its
comments to the April 11, 1996 letter of PALI.
SO ORDERED.
PSE filed a motion for reconsideration of the said order on April 29,
1996, which was, however denied by the Commission in its May 9,
1996 Order which states:
Dissatisfied with this ruling, the PSE filed with the Court of Appeals on
May 17, 1996 a Petition for Review (with Application for Writ of
Preliminary Injunction and Temporary Restraining Order), assailing the
above mentioned orders of the SEC, submitting the following as
errors of the SEC:
On June 4, 1996, PALI filed its Comment to the Petition for Review
and subsequently, a Comment and Motion to Dismiss. On June 10,
1996, PSE fled its Reply to Comment and Opposition to Motion to
Dismiss.
The appellate court had ruled that the SEC had both jurisdiction and
authority to look into the decision of the petitioner PSE, pursuant to
Section 3 3 of the Revised Securities Act in relation to Section 6(j) and
6(m) 4 of P.D. No. 902-A, and Section 38(b) 5 of the Revised Securities
Act, and for the purpose of ensuring fair administration of the
exchange. Both as a corporation and as a stock exchange, the
petitioner is subject to public respondent's jurisdiction, regulation and
control. Accepting the argument that the public respondent has the
authority merely to supervise or regulate, would amount to serious
consequences, considering that the petitioner is a stock exchange
whose business is impressed with public interest. Abuse is not remote
if the public respondent is left without any system of control. If the
securities act vested the public respondent with jurisdiction and
control over all corporations; the power to authorize the
establishment of stock exchanges; the right to supervise and
regulate the same; and the power to alter and supplement rules of
the exchange in the listing or delisting of securities, then the law
certainly granted to the public respondent the plenary authority
over the petitioner; and the power of review necessarily comes
within its authority.
All in all, the court held that PALI complied with all the requirements
for public listing, affirming the SEC's ruling to the effect that:
On August 15, 19961 the PSE, after it was granted an extension, filed
the instant Petition for Review on Certiorari, taking exception to the
rulings of the SEC and the Court of Appeals. Respondent PALI filed its
On February 25, 1996, the PSE filed its Consolidated Reply to the
comments of respondent PALI (October 17, 1996) and the Solicitor
General (December 26, 1996). On May 16, 1997, PALI filed its
Rejoinder to the said consolidated reply of PSE.
PSE submits that the Court of Appeals erred in ruling that the SEC
had authority to order the PSE to list the shares of PALI in the stock
exchange. Under presidential decree No. 902-A, the powers of the
SEC over stock exchanges are more limited as compared to its
authority over ordinary corporations. In connection with this, the
powers of the SEC over stock exchanges under the Revised
Securities Act are specifically enumerated, and these do not include
the power to reverse the decisions of the stock exchange. Authorities
are in abundance even in the United States, from which the
country's security policies are patterned, to the effect of giving the
Securities Commission less control over stock exchanges, which in
turn are given more lee-way in making the decision whether or not
to allow corporations to offer their stock to the public through the
stock exchange. This is in accord with the "business judgment rule"
whereby the SEC and the courts are barred from intruding into
business judgments of corporations, when the same are made in
good faith. the said rule precludes the reversal of the decision of the
PSE to deny PALI's listing application, absent a showing of bad faith
on the part of the PSE. Under the listing rules of the PSE, to which PALI
had previously agreed to comply, the PSE retains the discretion to
accept or reject applications for listing. Thus, even if an issuer has
complied with the PSE listing rules and requirements, PSE retains the
discretion to accept or reject the issuer's listing application if the PSE
determines that the listing shall not serve the interests of the investing
public.
It is, likewise, intimated that the Court of Appeals' sanction that PALI's
ownership over its properties can no longer be questioned, since
certificates of title have been issued to PALI and more than one year
has since lapsed, is erroneous and ignores well settled jurisprudence
on land titles. That a certificate of title issued under the Torrens
System is a conclusive evidence of ownership is not an absolute rule
and admits certain exceptions. It is fundamental that forest lands or
military reservations are non-alienable. Thus, when a title covers a
forest reserve or a government reservation, such title is void.
PSE, likewise, assails the SEC's and the Court of Appeals reliance on
the alleged policy of "full disclosure" to uphold the listing of PALI's
shares with the PSE, in the absence of a clear mandate for the
effectivity of such policy. As it is, the case records reveal the truth
that PALI did not comply with the listing rules and disclosure
requirements. In fact, PALI's documents supporting its application
contained misrepresentations and misleading statements, and
concealed material information. The matter of sequestration of PALI's
properties and the fact that the same form part of
military/naval/forest reservations were not reflected in PALI's
application.
The SEC's power to look into the subject ruling of the PSE, therefore,
may be implied from or be considered as necessary or incidental to
the carrying out of the SEC's express power to insure fair dealing in
securities traded upon a stock exchange or to ensure the fair
administration of such exchange. 7 It is, likewise, observed that the
principal function of the SEC is the supervision and control over
corporations, partnerships and associations with the end in view that
investment in these entities may be encouraged and protected, and
their activities for the promotion of economic development. 8
Thus, it was in the alleged exercise of this authority that the SEC
reversed the decision of the PSE to deny the application for listing in
the stock exchange of the private respondent PALI. The SEC's action
was affirmed by the Court of Appeals.
We affirm that the SEC is the entity with the primary say as to whether
or not securities, including shares of stock of a corporation, may be
traded or not in the stock exchange. This is in line with the SEC's
mission to ensure proper compliance with the laws, such as the
Revised Securities Act and to regulate the sale and disposition of
securities in the country. 9 As the appellate court explains:
Thus, notwithstanding the regulatory power of the SEC over the PSE,
and the resultant authority to reverse the PSE's decision in matters of
application for listing in the market, the SEC may exercise such
power only if the PSE's judgment is attended by bad faith. In Board of
Liquidators vs. Kalaw, 13 it was held that bad faith does not simply
connote bad judgment or negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of wrong. It
means a breach of a known duty through some motive or interest of
ill will, partaking of the nature of fraud.
In reaching its decision to deny the application for listing of PALI, the
PSE considered important facts, which, in the general scheme, brings
to serious question the qualification of PALI to sell its shares to the
public through the stock exchange. During the time for receiving
objections to the application, the PSE heard from the representative
The observation that the title of PALI over its properties is absolute
and can no longer be assailed is of no moment. At this juncture,
there is the claim that the properties were owned by TDC and MSDC
and were transferred in violation of sequestration orders, to Rebecco
Panlilio and later on to PALI, besides the claim of the Marcoses that
such properties belong to the Marcos estate, and were held only in
trust by Rebecco Panlilio. It is also alleged by the petitioner that
these properties belong to naval and forest reserves, and therefore
beyond private dominion. If any of these claims is established to be
true, the certificates of title over the subject properties now held by
PALI map be disregarded, as it is an established rule that a
registration of a certificate of title does not confer ownership over
the properties described therein to the person named as owner. The
inscription in the registry, to be effective, must be made in good
faith. The defense of indefeasibility of a Torrens Title does not extend
to a transferee who takes the certificate of title with notice of a flaw.
In resume, the Court finds that the PSE has acted with justified
circumspection, discounting, therefore, any imputation of
arbitrariness and whimsical animation on its part. Its action in refusing
to allow the listing of PALI in the stock exchange is justified by the law
and by the circumstances attendant to this case.
SO ORDERED.
Footnotes
2 Section 3, Ibid.
8 Abad vs. CFI of Pangasinan, Branch VIII, et. al., G.R. Nos.
58507-08, February 26, 1992, 206 SCRA 567.
11 Bache & Co. (Phil.), Inc. vs. Hon. Judge Ruiz, et al., No.
L-32409, February 27, 1971, 37 SCRA 823.
PALI then asked the Philippine Stock Exchange (PSE) to list PALI’s
stocks/shares to facilitate exchange. The PSE Board of Governors
denied PALI’s application on the ground that there were multiple
claims on the assets of PALI. Apparently, the Marcoses, Rebecco
Panlilio (trustee of the Marcoses), and some other corporations were
claiming assets if not ownership over PALI.
HELD: Yes. The SEC has both jurisdiction and authority to look into the
decision of PSE pursuant to the Revised Securities Act and for the
purpose of ensuring fair administration of the exchange. PSE, as a
corporation itself and as a stock exchange is subject to SEC’s
jurisdiction, regulation, and control. In order to insure fair dealing of
securities and a fair administration of exchanges in the PSE, the SEC
has the authority to look into the rulings issued by the PSE. The SEC is
the entity with the primary say as to whether or not securities,
including shares of stock of a corporation, may be traded or not in
the stock exchange.
DECISION
The Case
Antecedent Facts
A Special Audit Team from COA Regional Office No. VIII audited the
accounts of LMWD. Subsequently, LMWD received a letter from COA
dated 19 July 1999 requesting payment of auditing fees. As General
Manager of LMWD, petitioner sent a reply dated 12 October 1999
informing COA’s Regional Director that the water district could not
pay the auditing fees. Petitioner cited as basis for his action Sections
6 and 20 of Presidential Decree 198 ("PD 198")2, as well as Section 18
of Republic Act No. 6758 ("RA 6758"). The Regional Director referred
petitioner’s reply to the COA Chairman on 18 October 1999.
The COA ruled that this Court has already settled COA’s audit
jurisdiction over local water districts in Davao City Water District v.
Civil Service Commission and Commission on Audit,3 as follows:
The COA also denied petitioner’s request for COA to stop charging
auditing fees as well as petitioner’s request for COA to refund all
auditing fees already paid.
The Issues
Petitioner theorizes that what PD 198 created was the Local Waters
Utilities Administration ("LWUA") and not the LWDs. Petitioner claims
that LWDs are created "pursuant to" and not created directly by PD
198. Thus, petitioner concludes that PD 198 is not an "original charter"
that would place LWDs within the audit jurisdiction of COA as
defined in Section 2(1), Article IX-D of the Constitution. Petitioner
elaborates that PD 198 does not create LWDs since it does not
expressly direct the creation of such entities, but only provides for
their formation on an optional or voluntary basis.8 Petitioner adds
that the operative act that creates an LWD is the approval of the
Sanggunian Resolution as specified in PD 198.
Sec. 16. The Congress shall not, except by general law, provide for
the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good
and subject to the test of economic viability.
Obviously, LWDs are not private corporations because they are not
created under the Corporation Code. LWDs are not registered with
the Securities and Exchange Commission. Section 14 of the
Corporation Code states that "[A]ll corporations organized under this
code shall file with the Securities and Exchange Commission articles
of incorporation x x x." LWDs have no articles of incorporation, no
incorporators and no stockholders or members. There are no
stockholders or members to elect the board directors of LWDs as in
the case of all corporations registered with the Securities and
Exchange Commission. The local mayor or the provincial governor
appoints the directors of LWDs for a fixed term of office. This Court
(a) The name of the local water district, which shall include the
name of the city, municipality, or province, or region thereof,
served by said system, followed by the words "Water District".
xxx
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
"original charters," what exactly do we mean?
xxx
x x x. (Emphasis supplied)
If LWDs are neither GOCCs with original charters nor GOCCs without
original charters, then they would fall under the term "agencies or
instrumentalities" of the government and thus still subject to COA’s
audit jurisdiction. However, the stark and undeniable fact is that the
government owns LWDs. Section 4527 of PD 198 recognizes
government ownership of LWDs when Section 45 states that the
board of directors may dissolve an LWD only on the condition that
"another public entity has acquired the assets of the district and has
assumed all obligations and liabilities attached thereto." The
implication is clear that an LWD is a public and not a private entity.
Petitioner does not allege that some entity other than the
government owns or controls LWDs. Instead, petitioner advances the
theory that the "Water District’s owner is the District itself." 28 Assuming
for the sake of argument that an LWD is "self-owned,"29 as petitioner
describes an LWD, the government in any event controls all LWDs.
First, government officials appoint all LWD directors to a fixed term of
office. Second, any per diem of LWD directors in excess of P50 is
subject to the approval of the Local Water Utilities Administration,
and directors can receive no other compensation for their services
to the LWD.30 Third, the Local Water Utilities Administration can
require LWDs to merge or consolidate their facilities or operations.31
This element of government control subjects LWDs to COA’s audit
jurisdiction.
Petitioner claims that the auditing fees COA charges LWDs for audit
services violate the prohibition in Section 18 of RA 6758,38 which
states:
xxx
COA may charge GOCCs "actual audit cost" but GOCCs must pay
the same directly to COA and not to COA auditors. Petitioner has
not alleged that COA charges LWDs auditing fees in excess of
COA’s "actual audit cost." Neither has petitioner alleged that the
auditing fees are paid by LWDs directly to individual COA auditors.
Thus, petitioner’s contention must fail.
SO ORDERED.
Footnotes
1 Under Rule 64 of the 1997 Revised Rules of Court.
2 As amended by Presidential Decrees Nos. 768 and 1479.
3 G.R. No. 95237-38, 13 September 1991, 201 SCRA 593.
4 Section 26, Government Auditing Code of the Philippines.
Republic Act. No. 6938. See also Republic Act No. 6939 or the
12
A Special Audit Team from COA Regional Office No. VIII audited the
accounts of Leyte Metropolitan Water District (LMWD). For its
auditing services, COA requested payment but was denied by
Petitioner Feliciano as General Manager of LMWD, citing PD198 and
Section 18 of RA 6758. He further requested that COA cease all audit
services, stop charging auditing fees and refund all auditing fees
previously paid by LMWD.
Issues:
1. Whether or not a local water district created under PD198, as
amended, is a government-owned or controlled corporation subject
to the audit jurisdiction of COA;
Ruling:
The Supreme Court however ruled that PD 198 cannot prevail over
the Constitution, as it provides in Section 3, Article IX-C that “no law
shall be passed exempting any entity of the government or its
subsidiary in any guise whatever, or any investment of public funds,
from the jurisdiction of the Commission on Audit. And since there is
an irreconcilable conflict between Section 20 of PD 198, prohibiting
COA auditors from auditing LWDs, and Sections 2(1) and 3, Article IX-
D of the Constitution, vesting in COA the power to audit all GOCCs,
it is ruled that the second sentence of Section 20 of PD 198 is
unconstitutional since it violates the aforementioned section of the
Constitution.
The third issue is likewise bereft of merit. COA is not prohibited from
charging GOCCs auditing fees. As opposed to petitioner’s
contention, COA may charge GOCCs actual audit cost, but the
same must be paid directly to COA and not to COA auditors. What
Section 18 of RA 6758 prohibits is the receiving of COA personnel of
any kind of compensation from any government entity except
“compensation paid directly by COA out of its appropriations and
contributions.” Petitioner has not alleged that COA charges LWDs
auditing fees in excess of COA’s actual audit cost. Neither has he
alleged that the auditing fees are paid by LWDs directly to individual
COA auditors.
Held: Petition lacks merit. The Constitution under Sec. 2(1), Article IX-
D and existing laws mandate COA to audit all government
agencies, including government-owned and controlled corporations
with original charters. An LWD is a GOCC with an original charter.
Obviously, LWD’s are not private corporations because they are not
created under the Corporation Code. LWD’s are not registered with
the Securities and Exchange Commission. Section 14 of the
Corporation Code states that “all corporations organized under this
code shall file with the SEC articles of incorporation x x x.” LWDs have
no articles of incorporation, no incorporators and no stockholders or
members. There are no stockholders or members to elect the board
directors of LWDs as in the case of all corporations registered with
the SEC. The local mayor or the provincial governor appoints the
directors of LWDs for a fixed term of office. The board directors of
LWDs are not co-owners of the LWDs. The board directors and other
personnel of LWDs are government employees subject to civil service
laws and anti-graft laws. Clearly, an LWD is a public and not a
private entity, hence, subject to COA’s audit jurisdiction.
REGALADO, J.:
The present petition for certiorari seeks the reversal of the decision of
the National Labor Relations Commission (NLRC) in, NLRC-NCR Case
No. 00-07-02500-87, dated January 16, 1986, 1 which dismissed the
appeal of the Development Bank of the Philippines (DBP) from the
decision of the labor arbiter ordering it to pay the unpaid wages,
13th month pay, incentive pay and separation pay of herein private
respondents.
When PSC failed to pay its obligation with DBP, which amounted to
P75,752,445.83 as of March 31, 1986, DBP foreclosed and acquired
the mortgaged real estate and chattels of PSC in the auction sales
held on February 25, 1987 and March 4, 1987.
On appeal by DBP, the NLRC sustained the ruling of the labor arbiter,
holding DBP liable for unpaid wages of private respondents "not as a
majority stockholder of respondent PSC, but as the foreclosing
creditor who possesses the assets of said PSC by virtue of the auction
sale it held in 1987." In addition, the NLRC held that the labor arbiter is
correct in assuming jurisdiction because "the worker's preference to
the amount secured by DBP by virtue of said foreclosure sales of PSC
properties arose out of or are connected or interwoven with the labor
dispute brought forth by appellees against PSC and DBP. 4 Hence,
the present petition by DBP.
DBP contends that the labor arbiter and the NLRC committed a grave
abuse of discretion (1) in assuming jurisdiction over DBP; (2) in
applying the provisions of Article 110 of the Labor Code, as
amended; and (3) in not enforcing and applying Section 14 of
Executive Order No. 81.
SO ORDERED.
Separate Opinions
Separate Opinions
AQUINO, C.J.:
This case is about the liability of a marketing distributor under its sales
agreements with the owner of the products. The petitioner presented
its evidence before Judges Castro Bartolome and Benipayo.
Respondents presented their evidence before Judge Tamayo who
decided the case.
Edward A. Keller & Co., Ltd. appointed COB Group Marketing, Inc.
as exclusive distributor of its household products, Brite and Nuvan in
Panay and Negros, as shown in the sales agreement dated March
On the same day, May 8, Bax and R. Oefeli of Keller signed the
conditions for the settlement of COB Group Marketing's liability,
Exhibit J, reproduced as follows:
Twelve days later, or on May 20, COB Group Marketing, through Bax
executed two second chattel mortgages over its 12 trucks (already
mortgaged to Northern Motors, Inc.) as security for its obligation to
Keller amounting to P179,185.16 as of April 30, 1971 (Exh. PP and QQ).
However, the second mortgages did not become effective because
the first mortgagee, Northern Motors, did not give its consent. But the
second mortgages served the purpose of being admissions of the
liability COB Group Marketing to Keller.
Section 22, Rule 130 of the Rules of Court provides that the act,
declaration or omission of a party as to a relevant fact may be given
in evidence against him "as admissions of a party".
After trial, the lower court (1) dismissed the complaint; (2) ordered
Keller to pay COB Group Marketing the sum of P100,596.72 with 6%
interest a year from August 1, 1971 until the amount is fully paid: (3)
ordered Keller to pay P100,000 as moral damages to be allocated
among the stockholders of COB Group Marketing in proportion to
their unpaid capital subscriptions; (4) ordered the petitioner to pay
Manahan P20,000 as moral damages; (5) ordered the petitioner to
pay P20,000 as attomey's fees to be divided among the lawyers of
all the answering defendants and to pay the costs of the suit; (6)
declared void the mortgages executed by Manahan and Lorenzo
and the cancellation of the annotation of said mortgages on the
Torrens titles thereof, and (7) dismissed Manahan's cross-claim for
lack of merit.
Bax and the other respondents quoted the six assignments of error
made by the petitioner in the Appellate Court, not the four
assignments of error in its brief herein. Manahan did not file any
appellee's brief.
The lower courts not only allowed Bax to nullify his admissions as to
the liability of COB Group Marketing but they also erroneously
rendered judgment in its favor in the amount of its supposed
overpayment in the sum of P100,596.72 (Exh. 8-A), in spite of the fact
that COB Group Marketing was declared in default and did not file
any counterclaim for the supposed overpayment.
While the evidence shows that the amount due from COB Group
Marketing is P184,509.60 as of July 31, 1971 or P186,354.70 as of
August 31, 1971 (Exh. JJ), the amount prayed for in Keller's complaint
is P182,994.60 as of July 31, 1971 (18-19 Record on Appeal). This latter
amount should be the one awarded to Keller because a judgment
entered against a party in default cannot exceed the amount
prayed for (Sec. 5, Rule 18, Rules of Court).
WHEREFORE, the decisions of the trial court and the Appellate Court
are reversed and set aside.
COB Group marketing, Inc. is ordered to pay Edward A. Keller & Co.,
Ltd. the sum of P182,994.60 with 12% interest per annum from August
1, 1971 up to the date of payment plus P20,000 as attorney's fees.
If after ninety (90) days from notice of the finality of the judgment in
this case the judgment against COB Group Marketing has not been
satisfied fully, then the mortgages executed by Manahan and
Lorenzo should be foreclosed and the proceeds of the sales applied
to the obligation of COB Group Marketing. Said mortgage
obligations should bear six percent legal interest per annum after the
expiration of the said 90-day period. Costs against the private
respondents.
SO ORDERED.
Edward Keller & Co vs COB Group Marketing Inc., (G.R. No. L-68097)
Facts:
Issue:
Ruling:
The lower courts not only allowed Bax to nullify his admissions as
to the liability of COB Group Marketing but they also
erroneously rendered judgment in its favor in the amount of its
supposed overpayment in the sum of P100, 596.72, in spite of
the fact that COB Group Marketing was declared in default
and did not file any counterclaim for the supposed
overpayment.
The decisions of the trial court and the Appellate Court are
reversed and set aside.
QUISUMBING, J.:
This petition for review on certiorari seeks to reverse and set aside the
decision1 promulgated on June 17, 1996 in CA-GR No. CV-43239 of
public respondent and its resolution2 dated November 29, 1996
denying petitioner’s motion for reconsideration.3
The facts of this case as found by the Court of Appeals and which
we find supported by the records are as follows:
xxx
xxx
On the other hand, ECO questioned its being held liable for the
amount of the loan. Upon order of the court, both parties
submitted Supplemental Motions for Reconsideration and their
respective Oppositions to each other’s Motions.
The primary issues for resolution here are (1) whether or not the
corporate veil of ECO Management Corporation should be pierced;
and (2) whether or not Emmanuel C. Oñate should be held jointly
and severally liable with ECO Management Corporation for the
loans incurred from Land Bank.
The mere fact that Oñate owned the majority of the shares of ECO is
not a ground to conclude that Oñate and ECO is one and the
same. Mere ownership by a single stockholder of all or nearly all of
the capital stock of a corporation is not by itself sufficient reason for
disregarding the fiction of separate corporate personalities.24 Neither
is the fact that the name "ECO" represents the first three letters of
Oñate’s name sufficient reason to pierce the veil. Even if it did, it
does not mean that the said corporation is merely a dummy of
Oñate. A corporation may assume any name provided it is lawful.
There is nothing illegal in a corporation acquiring the name or as in
this case, the initials of one of its shareholders.
WHEREFORE, the petition is DENIED for lack of merit. The decision and
resolution of the Court of Appeals in CA-G.R. CV No. 43239 are
AFFIRMED. Costs against petitioner.
SO ORDERED.
The trial court ruled in favor of Land Bank but Oñate was absolved
from liabilities. The Court of Appeals affirmed the decision of the trial
court.
HELD: No. Land Bank was not able to produce sufficient evidence to
prove its claim. A corporation, upon coming into existence, is
invested by law with a personality separate and distinct from those
Corporation Law/alfred0 Page 95 of 1509
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persons composing it as well as from any other legal entity to which it
may be related. The corporate fiction is only disregarded when the
fiction is used to defeat public convenience, justify wrong, protect
fraud, defend crime, confuse legitimate legal or judicial issues,
perpetrate deception or otherwise circumvent the law. This is likewise
true where the corporate entity is being used as an alter ego,
adjunct, or business conduit for the sole benefit of the stockholders
or of another corporate entity. None of the foregoing was proved by
Land Bank.
The mere fact that Oñate owned the majority of the shares of ECO is
not a ground to conclude that Oñate and ECO is one and the
same. Mere ownership by a single stockholder of all or nearly all of
the capital stock of a corporation is not by itself sufficient reason for
disregarding the fiction of separate corporate personalities.
Anent the issue of the corporate name, the fact that Oñate’s initials
coincide with the corporate name ECO is not sufficient to disregard
the corporate fiction. Even if ECO does stand for “Emmanuel C.
Oñate”, it does not mean that the said corporation is merely a
dummy of Oñate. A corporation may assume any name provided it
is lawful. There is nothing illegal in a corporation acquiring the name
or as in this case, the initials of one of its shareholders.
General Credit Corp. vs. Alsons Dev. & Investment (513 SCRA 225
[2007])
DECISION
GARCIA, J.:
The facts:
Some four years later, the Alcantara family assigned its rights and
interests over the bearer note to ALSONS which thenceforth became
the holder thereof.7 But even before the execution of the assignment
deal aforestated, letters of demand for interest payment were
already sent to EQUITY, through its President, Wilfredo Labayen, who
pleaded inability to pay the stipulated interest, EQUITY no longer
then having assets or property to settle its obligation nor being
extended financial support by GCC.
For its part, GCC called only Wilfredo Labayen to testify. It stuck to its
underlying defense of separateness and presented documentary
evidence detailing the organizational structures of both GCC and
EQUITY. And in a bid to negate the notion that it was conducting its
business illegally, GCC presented CB and SEC-issued licenses
authoring it to engage in financing and quasi-banking activities. It
also adduced evidence to prove that it was never a party to any of
the actionable documents ALSONS and its predecessors-in-interest
had in their possession and that the November 27, 1985 deed of
assignment of rights over the promissory note was unenforceable.
Eventually, the trial court, on its finding that EQUITY was but an
instrumentality or adjunct of GCC and considering the legal
consequences and implications of such relationship, came out with
its decision on November 8, 1990, rendering judgment for ALSONS, to
wit:
On April 11, 2002, the appellate court rendered the herein assailed
Decision,11 affirming that of the trial court, thus:
SO ORDERED.
4. The fact of full payment stated in the ten (10) deeds of sale
of the shares of stock is conclusive on the sellers, and by the
patrol evidence rule, the alleged fact of its non-payment
cannot be introduced in evidenced; and
The petition and the arguments and/or issues holding it together are
without merit. The desired reversal of the assailed decision and
resolution of the appellate court is accordingly DENIED.
Corporation Law/alfred0 Page 100 of 1509
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Instead of raising distinctly formulated questions of law, as is
expected of one seeking a review under Rule 45 of the Rules of
Court of a final CA judgment,13 petitioner GCC starts off by voicing
disappointment over the "perfunctory" denial by the CA of its twin
motions for reconsideration and oral argument. Petitioner, to be sure,
cannot plausibly expect a reversal action premised on the cursory
way its motions were denied, if such indeed were the case. Such
manner of denial, while perhaps far from ideal, is not even a
recognized ground for appeal by certiorari, unless a denial of due
process ensues, which is not the case here. And lest it be overlooked,
the CA prefaced its assailed denial resolution with the clause:
"[F]inding no reversible error committed to warrant the modification
and/or reversal of the April 11, 2002 Decision," suggesting that the
appellate court gave the petitioner’s motion for reconsideration the
attention it deserved. At the very least, the petitioner was duly
apprised of the reasons why reconsideration could not be favorably
considered. An extended resolution was not really necessary to
dispose of the motion for reconsideration in question.
If the petition is given due course, the Court may consider the case
submitted for decision or require the parties to submit their
memorandum or set the case for oral argument. xxx. After the oral
argument or upon submission of the memoranda … the case shall
be deemed submitted for decision.
In the case at bench, records reveal that the appellate court, in line
with the prescription of its own rules, required the parties to just
submit, as they did, their respective memoranda to properly
ventilate their separate causes. Under this scenario, the petitioner
cannot be validly heard, having been deprived of due process.
This brings us to the remaining but core issue tendered in this case
and aptly raised by the petitioner, to wit: whether there is absolutely
no basis for piercing GCC’s veil of corporate identity.
The Court agrees with the disposition of the appellate court on the
application of the piercing doctrine to the transaction subject of this
case. Per the Court’s count, the trial court enumerated no less than
20 documented circumstances and transactions, which, taken as a
package, indeed strongly supported the conclusion that respondent
EQUITY was but an adjunct, an instrumentality or business conduit of
petitioner GCC. This relation, in turn, provides a justifying ground to
pierce petitioner’s corporate existence as to ALSONS’ claim in
question. Foremost of what the trial court referred to as "certain
circumstances" are the commonality of directors, officers and
stockholders and even sharing of office between petitioner GCC
and respondent EQUITY; certain financing and management
arrangements between the two, allowing the petitioner to handle
the funds of the latter; the virtual domination if not control wielded
by the petitioner over the finances, business policies and practices of
respondent EQUITY; and the establishment of respondent EQUITY by
the petitioner to circumvent CB rules. For a perspective, the following
are some relevant excerpts from the trial court’s decision setting forth
in some detail the tipping circumstances adverted to therein:
ALSONS has likewise shown …that the bonuses of the officers and
directors of … EQUITY was based on its total financial performance
together with all its affiliates… both firms were sharing one and the
same office when both were still operational … and that the
directors and executives of … EQUITY never acted independently …
but took their orders from … GCC….
It bears to stress at this point that the facts and the inferences drawn
therefrom, upon which the two (2) courts below applied the piercing
doctrine, stand, for the most part, undisputed. Among these is, to
reiterate, the matter of EQUITY having been incorporated to serve,
as it did serve, as an instrumentality or adjunct of GCC. With the view
we take of this case, GCC did not adduce any evidence, let alone
rebut the testimonies and documents presented by ALSONS, to
establish the prevailing circumstances adverted to that provided the
justifying occasion to pierce the veil of corporate fiction between
GCC and EQUITY. We quote the trial court:
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
ADOLFO S. AZCUNA
Associate Justice
REYNATO S. PUNO
Chief Justice
Facts:
4 years later, the Alcantara family assigned its rights and interests
over the bearer note to ALSONS which became the holder thereof.
Held:
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision1
dated October 21, 1999 of the Court of Appeals in CA-G.R. CV No.
41536 which dismissed herein petitioners' appeal from the Decision2
dated February 10, 1993 of the Regional Trial Court (RTC) of Quezon
City, Branch 84, in Civil Case No. Q-89-4152. The trial court had
dismissed petitioners' complaint for annulment of real estate
mortgage and the extra-judicial foreclosure thereof. Likewise
brought for our review is the Resolution3 dated February 23, 2000 of
the Court of Appeals which denied petitioners' motion for
reconsideration.
Eventually, the loan was later restructured in the name of BEC and
subsequent loans were obtained by BEC with the corresponding
promissory notes duly executed by Teresita on behalf of the
corporation. A letter of credit was also opened by Pacific Bank in
favor of A. O. Knitting Manufacturing Co., Inc., upon the request of
BEC after BEC executed the corresponding trust receipt therefor.
Export bills were also executed in favor of Pacific Bank for additional
finances. These transactions were all secured by the real estate
mortgage over the Lipats' property.
On November 28, 1989, the spouses Lipat filed before the Quezon
City RTC a complaint for annulment of the real estate mortgage,
extrajudicial foreclosure and the certificate of sale issued over the
property against Pacific Bank and Eugenio D. Trinidad. The
complaint, which was docketed as Civil Case No. Q-89-4152,
alleged, among others, that the promissory notes, trust receipt, and
export bills were all ultra vires acts of Teresita as they were executed
without the requisite board resolution of the Board of Directors of
BEC. The Lipats also averred that assuming said acts were valid and
binding on BEC, the same were the corporation's sole obligation, it
having a personality distinct and separate from spouses Lipat. It was
likewise pointed out that Teresita's authority to secure a loan from
Pacific Bank was specifically limited to Mrs. Lipat's sole use and
benefit and that the real estate mortgage was executed to secure
the Lipats' and BET's P583,854.00 loan only.
After trial on the merits, the RTC dismissed the complaint, thus:
No costs.
IT IS SO ORDERED.7
The Lipats timely appealed the RTC decision to the Court of Appeals
in CA-G.R. CV No. 41536. Said appeal, however, was dismissed by
the appellate court for lack of merit. The Court of Appeals found
that there was ample evidence on record to support the application
of the doctrine of piercing the veil of corporate fiction. In affirming
the findings of the RTC, the appellate court noted that Mrs. Lipat had
full control over the activities of the corporation and used the same
to further her business interests.9 In fact, she had benefited from the
loans obtained by the corporation to finance her business. It also
found unnecessary a board resolution authorizing Teresita Lipat to
secure loans from Pacific Bank on behalf of BEC because the
corporation's by-laws allowed such conduct even without a board
resolution. Finally, the Court of Appeals ruled that the mortgage
property was not only liable for the original loan of P583,854.00 but
likewise for the value of the promissory notes, trust receipt, and
export bills as the mortgage contract equally applies to additional or
new loans, discounting lines, overdrafts, and credit
accommodations which petitioners subsequently obtained from
Pacific Bank.
The Lipats then moved for reconsideration, but this was denied by
the appellate court in its Resolution of February 23, 2000.10
Hence, this petition, with petitioners submitting that the court a quo
erred —
In sum, the following are the relevant issues for our resolution:
3. Whether or not petitioners are liable to pay the 15% attorney's fees
stipulated in the deed of real estate mortgage.
On the first issue, petitioners contend that both the appellate and
trial courts erred in holding them liable for the obligations incurred by
BEC through the application of the doctrine of piercing the veil of
corporate fiction absent any clear showing of fraud on their part.
Firstly, it could not have been possible for BEC to release a board
resolution since per admissions by both petitioner Estelita Lipat and
Alice Burgos, petitioners' rebuttal witness, no business or stockholder's
meetings were conducted nor were there election of officers held
since its incorporation. In fact, not a single board resolution was
passed by the corporate board29 and it was Estelita Lipat and/or
Teresita Lipat who decided business matters.30
On the third and final issue, petitioners assail the decision of the
Court of Appeals for not taking cognizance of the issue on attorney's
fees on the ground that it was raised for the first time on appeal. We
find the conclusion of the Court of Appeals to be in accord with
settled jurisprudence. Basic is the rule that matters not raised in the
complaint cannot be raised for the first time on appeal.35 A close
perusal of the complaint yields no allegations disputing the attorney's
fees imposed under the real estate mortgage and petitioners
cannot now allege that they have impliedly disputed the same
when they sought the annulment of the contract.
SO ORDERED.
Facts: The spouses Alfredo Lipat and Estelita Burgos Lipat, owned
"Bela's Export Trading" (BET), a single proprietorship with principal
office at No. 814 Aurora Boulevard, Cubao, Quezon City. BET was
engaged in the manufacture of garments for domestic and foreign
consumption. The Lipats also owned the "Mystical Fashions" in the
United States, which sells goods imported from the Philippines
through BET. Mrs. Lipat designated her daughter, Teresita B. Lipat, to
manage BET in the Philippines while she was managing "Mystical
Fashions" in the United States. In order to facilitate the convenient
operation of BET, Estelita Lipat executed on 14 December 1978, a
special power of attorney appointing Teresita Lipat as her attorney-
in-fact to obtain loans and other credit accommodations from
Pacific Banking Corporation (Pacific Bank). She likewise authorized
Teresita to execute mortgage contracts on properties owned or co-
owned by her as security for the obligations to be extended by
Pacific Bank including any extension or renewal thereof.
Issue: Whether BEC and BET are separate business entities, and thus
the Lipt spouses can isolate themselves behind the corporate
personality of BEC.
AND DEVELOPMENT
CORPORATION,
Petitioner, Present:
YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
PROVINCIAL AGRARIAN
REFORM OFFICER OF
BULACAN, MUNICIPAL
x--------------------------------------------------x
DECISION
The Facts
CA Disposition
SO ORDERED.16[16]
Issue
Our Ruling
xxxx
Third, Trinidad and her counsel failed to notify the DAR of the
prior sale to Sta. Monica during the administrative proceedings.
Worse, Trinidad feigned ignorance of the sale by filing a motion for
bill of particulars seeking specifics from De Guzman of her alleged
landholdings which are subject of his petition with the DAR.
It is the duty of Atty. Gutierrez to inform the DAR, at the very first
opportunity, of the sale to Sta. Monica. He was utterly remiss of this
duty. Instead of informing the DAR, Trinidad and her counsel
engaged in wild goose chase and stonewalling, feigning ignorance
when they ought to have informed the DAR of the sale to Sta.
Fifth, the ultimate factor that betrays Trinidad and Sta. Monica is
the continued payment of lease rentals by De Guzman. Records
show that De Guzman paid and continued to pay lease rentals to
Trinidad even after she sold the land to Sta. Monica. The
receipt33[33] dated May 30, 2002 discloses that De Guzman paid 40
cavans of palay to Clodinaldo dela Cruz, the authorized
representative of Trinidad, as lease rentals for the agricultural land.
Final Note
To Our mind, part of the problem lies with the CARP law itself. As
crafted, the law has its own loopholes. It provides for a long list of
exclusions. Some landowners used these exclusions to go around the
law. There is now a growing trend of land conversion in the
countryside suspiciously to evade coverage under the CARP law. Of
course, the solution to this problem lies with Congress. It is high time
We sounded the call for a more realistic, rational comprehensive
agrarian reform law.
Sta. Monica Industrial & Dev. Corp. vs. DAR Regional Director for
Region III (555 SCRA 97 [2008])
G.R. No. 164846, 18 June 2008, THIRD DIVISION (Reyes, R.T., J.)
Trinidad.
Trinidad is the owner of five parcels of land with a total area of 4.69
hectares in Calumpit,
land under his tillage, De Guzman filed a petition for the issuance of
patent in his name with the Office
of the Regional Director of the DAR. DAR duly sent notices to Trinidad
requiring her to comment.
A year later, petitioner Sta. Monica filed a petition for certiorari and
prohibition with the CA
assailing the order of the Regional Director. Sta. Monica claimed that
a portion of the Trinidad
landholding was sold to it. Sta. Monica asserted that there was a
denial of due process of law because it
required under P.D. No. 27, the Tenant Emancipation Decree, which
prohibits transfer of covered lands
except to tenant-beneficiaries.
the DAR”.
ISSUE:
Whether Sta. Monica was denied due process for not receiving a
notice of coverage from DAR
First, the sale to Sta. Monica is prohibited. P.D. No. 27, as amended,
forbids the transfer or
transfer in July 22, 1981. The sale to Sta. Monica in 1986 is void for
being contrary to law. Trinidad
that Trinidad, her husband and two sons own more than 98% of the
outstanding capital stock of Sta.
Monica. They are all officers of the corporation. There are only two
non-related incorporators who own
corporation.
Third, Trinidad and her counsel failed to notify the DAR of the prior
sale to Sta. Monica during
Monica. She herself signed the deed of sale as seller. She is also a
stockholder and officer of Sta.
petition with the DAR was her own landholding, which she sold to
Sta. Monica in direct violation of
Trinidad filed a motion for bill of particulars with the DAR seeking
specifics on the sale to Sta. Monica
when she herself signed for the vendor as a party to the transaction.
Fourth, it was only after an adverse decision against Trinidad that Sta.
Monica suddenly filed a
proceedings.
Fifth, the ultimate factor that betrays Trinidad and Sta. Monica is the
continued payment of lease
Trinidad even after she sold the land to Sta. Monica. The receipt
dated May 30, 2002 discloses that De
land sold to Sta. Monica. The sale to Sta. Monica is not valid because
it is prohibited under P.D. No. 27.
law.
DECISION
The bulk of the business of the CLL was the importation of molasses
from the Philippines, principally from the Mar Tierra Corporation, and
the resale thereof in the international market.5 However, Mar Tierra
Corporation also sold molasses to its customers.6 Wilfrido C. Martinez
was the president of Mar Tierra Corporation, while its executive vice-
president was Blamar Gonzales. The business operations of both the
CLL and Mar Tierra Corporation were run by Wilfrido Martinez and
Gonzales.
About 42% of the capital stock of Mar Tierra Corporation was owned
by RJL Martinez Fishing Corporation (RJL), the leading tuna fishing
outfit in the Philippines. Petitioner Ruben Martinez was the president
of RJL and a member of the board of directors thereof. The majority
stockholders of RJL were Ruben Martinez and his brothers, Jose and
Luis Martinez. Sixty-eight (68) percent of the total assets of Ruben
Martinez were in the RJL.
On May 19, 1980, the CLL, through Wilfrido Martinez, and the
respondent, through Senen L. Matoto and Michael Sung, Senior
Manager of the Money Management Division of the respondent,
executed a letter-agreement in which the existing back-to-back
credit facility granted to the CLL way back in 1979 was extended up
to July 1980, and increased to US$5,000,000. The credit facility was to
be secured as follows:
MMP – 063
12- USD306,043.4
25/9/80 28/11/80 USD 312,708.43
1/4 8
MMP –
084
CINTAS LARGAS
1 DAY 10-
15/9/80 USD 46,131.26
CALL 7/8
1 DAY 11-
25/9/80 USD500,000.00
CALL 1/4
12- USD
26/9/80 31/10/80 USD420,831.45
1/4 425,843.44
On August 16, 1982, the CLL, through its certified public accountant,
wrote the respondent requesting the latter to furnish its accountant
with a copy of the financial report prepared by its auditors.29 An
audit was, thereafter, conducted by the Jacinto, Belano, Castro &
Co., certified public accountants of the CLL and Mar Tierra
Corporation. Based on their report, the auditors found that the CLL
owed the respondent US$340,000.30
The CLL was declared in default for its failure to file an answer to the
complaint.
After trial, the RTC rendered its decision, the dispositive portion of
which reads as follows:
SO ORDERED.34
The trial court ruled that the CLL was a mere paper company with
nominee shareholders in Hongkong. It ruled that the principle of
piercing the veil of corporate entity was applicable in this case, and
held the defendants liable, jointly and severally, for the claim of the
respondent, on its finding that the defendants merely used the CLL
as their business conduit. The trial court declared that the majority
shareholder of Mar Tierra Corporation was the RJL, controlled by
petitioner Ruben Martinez and his brothers, Jose and Luis Martinez, as
majority shareholders thereof. Moreover, petitioner Ruben Martinez
was a joint account holder of MMP Nos. 063 and 084. The trial court,
likewise, found that the auditors of Mar Tierra Corporation and the
CLL confirmed that the defendants owed US$340,000. The trial court
concluded that the respondent had established its causes of action
against Wilfrido Martinez, Lacson, Gonzales, and petitioner Ruben
Martinez; hence, held all of them liable for the claim of the
respondent.
The decision was appealed to the CA. On June 27, 1997, the CA
rendered its decision, the dispositive portion of which reads:
SO ORDERED.35
The petitioner asserts that the trial and appellate courts erred when
they held him liable for the reimbursement of US$340,000 to the
respondent. He contends that he is not in actuality a stockholder of
Mar Tierra Corporation, nor a stockholder of the CLL. He was not
involved in any way in the operations of the said corporations. He
added that while he may have signed the signature cards of MMP
Nos. 063 and 084 in blank, he never had any involvement in the
management and disposition of the said accounts, nor of any
deposits in or withdrawals from either or both accounts. He was not
aware of any transactions between the respondent, Wilfrido
Martinez, and Gonzales, with reference to the remittance of the
US$340,000 to FCD SA 18402-7; nor did he oblige himself to pay the
said amount to the respondent. According to the petitioner, there is
no evidence that he had benefited from any of the following: (a)
the remittance by the respondent of the US$340,000 to Account No.
FCD SA 18402-7 owned by Mar Tierra Corporation; (b) the money
market placements in MMP Nos. 063 and 084, or, (c) from any
deposits in or withdrawals from the said account and money market
placements.
On the other hand, the appellate court found the petitioner and his
co-defendants, jointly and severally, liable to the respondent for the
payment of the US$340,000 based on the following findings of the
trial court:
On the basis of the evidence, the Court finds and so holds that
the cause of action of the plaintiff against the defendants has
been established.39
Also, the mere fact that part of the proceeds of the sale of molasses
made by Mar Tierra Corporation to the CLL may have been used by
the latter as deposits in its deposit account with the respondent or in
the money market placements in MMP Nos. 063 and 084, or that the
funds of Mar Tierra Corporation and the CLL with the respondent
were mingled, and their disposition controlled by Wilfrido Martinez,
does not constitute preponderant evidence that the petitioner,
Wilfrido Martinez and Lacson used the Mar Tierra Corporation and
the RJL to defraud the respondent. The respondent treated the CLL
and Mar Tierra Corporation as separate entities and considered
them as one and the same entity only when Wilfrido C. Martinez
and/or Blamar Gonzales failed to pay the US$340,000 remitted by
the respondent to FCD SA 18402-7. This being the case, there is no
factual and legal basis to hold the petitioner liable to the respondent
for the said amount.
Contrary to the ruling of the trial court and the appellate court, the
auditors of the CLL and the Mar Tierra Corporation, in their report, did
not find the petitioner liable for the respondent’s claim in their report.
The auditors, in fact, found the CLL alone liable for the said
amount.55 Even a cursory reading of the report will show that the
name of the petitioner was not mentioned therein.
FR: B. GONZALES
The appellate court affirmed the ruling of the trial court without
making any specific reference to the aforequoted ruling of the trial
court.60
SIGNATURE CARD
Residence Address:
________________________________________________
_________________________________________ Tel.:
___________________
Office Address:
____________________________________________________
_________________________________________ Tel.:
___________________
___ Others:
________________
_________________________
_
Other Instructions:
_______________________________________________
_____________________________________________________________
____
_____________________________________________________________
____
Specimen of signature:
(Ruben (Wilfrido
1. Sgd. 3. Sgd.
Martinez) Martinez)
(Ruben (Miguel J.
2. Sgd. 4. Sgd.
Martinez) Lacson)
The respondent has no one but itself to blame for its failure to deduct
the US$340,000 from the foreign currency and deposit accounts and
money market placements of the CLL. The evidence on record
shows that the respondent was supposed to deduct the said amount
from the money market placements of the CLL in MMP Nos. 063 and
084, but failed to do so. The respondent remitted the amount from its
own funds and, by its negligence, merely posted the amount in the
account of the CLL. Worse, the respondent allowed the CLL and
Wilfrido Martinez to withdraw the entirety of the deposits in the said
accounts, without first deducting the US$340,000. By the time the
respondent realized its mistakes, the funds in the said accounts had
already been withdrawn solely by the CLL and/or Wilfrido Martinez.
This was the testimony of Michael Sung, the witness for the
respondent.
A: Yes.
MMP – 063
Statement of Accounts (Deposit)
Value
Funds In Funds Out Remarks
Date
_____________ _____________
US$443,975.85 US$443,975.85 65
============ ============
…
MMP – 084
Statement of Accounts (Deposit)
Value
Funds In Funds Out Remarks
Date
Transfer to A/C
" US$250,000.00
of Cintas Largas
Transfer to Cintas
" 200,000.00
Largas’ A/R.
T/T to Chase
" 200,000.00
Manhattan NY
Transfer to A/C
" 20,470.74
of Grand Solid
Transfer to A/C
" 60,000.00
of Trinisia Ltd.
T/T to Nitto
" 45,286.26
Trading & Josho
Transfer to A/C
" 2,028.02
Receivable
(MMP-084)
_____________ _____________
US$777,815.02 US$777,815.02 66
============ ============
…
CINTAS LARGAS
Statement of Accounts (Deposit)
Transfer to A/C
" 350,000.00
of Grand Solid
Remittance from
" 81,415.00
C. Itoh & Co., NY
Transfer to
" 129,529.26 Grand Solid’s
A/C Receivable
Transfer from
02/04/81 143,000.00 CL’s Statement
A/C
Transfer from
19/05/81 178,465.18 CL’s A/C
Receivable
Remittance from
C. Itoh & Co., NY
22/05/81 46,472.00
Re. Pacific
Geory.
Remittance from
08/01/82 70,360.00
C. Itoh & Co., NY
Transfer to A/C
" 5,952.38
of Trinisia Ltd.
_____________ ______________
TOTAL : US$1,756,387.32 US$1,732,103.25
Outstanding
- 24,284.07
deposits
______________ ______________
US$1,756,387.32 US$1,756,387.32 67
============== ==============
Clearly from the foregoing, the withdrawals from the deposit and
foreign currency accounts and MMP Nos. 063 and 084 of the CLL,
after the respondent remitted the US$340,000, were for the account
of the CLL and/or Wilfrido Martinez, and not of the petitioner.
SO ORDERED.
Secosa vs. Heirs of Erwin Suarez Francisco (433 SCRA 273 [2004])
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking
the reversal of the decision34[1] of the Court of Appeals dated
February 27, 2003 in CA-G.R. CV No. 61868, which affirmed in toto
the June 19, 1998 decision35[2] of Branch 20 of the Regional Trial
Court of Manila in Civil Case No. 96-79554.
On June 19, 1998, after a full-blown trial, the court a quo rendered a
decision in favor of herein respondents, the dispositive portion of
which states:
SO ORDERED.
I.
II.
III.
Our view that the evidence for petitioner MMTC falls short of the
required evidentiary quantum as would convincingly and
undoubtedly prove its observance of the diligence of a good father
of a family has its precursor in the underlying rationale pronounced in
the earlier case of Central Taxicab Corp. vs. Ex-Meralco Employees
Transportation Co., et al.,44[11] set amidst an almost identical
factual setting, where we held that:
Although testimonies were offered that in the case of Pedro Musa all
these precautions were followed, the records of his interview, of the
results of his examinations, and of his service were not presented. . .
[T]here is no record that Musa attended such training programs and
passed the said examinations before he was employed. No proof
was presented that Musa did not have any record of traffic
violations. Nor were records of daily inspections, allegedly
conducted by supervisors, ever presented. . . The failure of MMTC to
present such documentary proof puts in doubt the credibility of its
witnesses.
The records of this case are bereft of any evidence tending to show
the presence of any grounds enumerated above that will justify the
piercing of the veil of corporate fiction such as to hold the president
of Dassad Warehousing and Port Services, Inc. solidarily liable with it.
The Isuzu cargo truck which ran over Erwin Francisco was registered
in the name of Dassad Warehousing and Port Services, Inc., and not
in the name of El Buenasenso Sy. Raymundo Secosa is an employee
of Dassad Warehousing and Port Services, Inc. and not of El
Buenasenso Sy. All these things, when taken collectively, point
toward El Buenasenso Sys exclusion from liability for damages arising
from the death of Erwin Francisco.
Q: (Atty. Balanag): What did you do when you learned that your
son was killed on June 27, 1996?
Q: Mr. Witness, how did you feel when you learned of the untimely
death of your son, Erwin Suares (sic)?
A: Masakit po ang mawalan ng anak. Its really hard for me, the
thought that my son is dead.
Since the petitioners did not question the other damages adjudged
against them by the court a quo, we affirm the award of these
damages to the respondents.
SO ORDERED.
Issues:
Held:
(1) No. Dassad Warehousing and Port Services, Inc. did not exercise
the required diligence of a good father of a family in the selection
and supervision of its employees. Hence, it cannot be held solidary
liable with the negligence of its employee.
In the case at bar, Dassad Warehousing and Port Services, Inc. failed
to conclusively prove that it had exercised the requisite diligence of
a good father of a family in the selection and supervision of its
employees. Dassad Warehousing and Port Services, Inc. failed to
support the testimony of its lone witness, Edilberto Duerme, with
documentary evidence which would have strengthened its claim of
due diligence in the selection and supervision of its employees. Such
an omission is fatal on account of which, Dassad can be rightfully
held solidarily liable with its co-petitioner Secosa for the damages
suffered by the heirs of Francisco.
The records of the case does not point toward the presence of any
grounds enumerated above that will justify the piercing of the veil of
corporate entity such as to hold Sy, the president of Dassad
Warehousing and Port Services, Inc., solidarily liable with it.
Furthermore, the Isuzu cargo truck which ran over Francisco was
registered in the name of Dassad and not in the name of Sy. Secosa
is an employee of Dassad and not of Sy. These facts showed Sy’s
exclusion from liability for damages arising from the death of
Francisco.
DECISION
YNARES-SANTIAGO, J.:
On March 28, 1979, the spouses Manuel and Alicia Gala, their
children Guia Domingo, Ofelia Gala, Raul Gala, and Rita Benson,
and their encargados Virgilio Galeon and Julian Jader formed and
organized the Ellice Agro-Industrial Corporation.3 The total
(b) Nullifying the election of the new sets of Board of Directors and
Officers of Ellice and Margo from June 23, 1990 to the present, and
that of Ellice from August 24, 1990 to the present.
(c) Ordering the respondent Raul Gala to return all the titles of real
properties in the names of Ellice and Margo which were unlawfully
taken and held by him.
SO ORDERED. 22
(1) jointly and solidarily pay ELLICE and/or MARGO the amount of
P700,000.00 representing the consideration for the unauthorized sale
of a parcel of land to Lucky Homes and Development Corporation
(Exhs. "N" and "CCC");
(2) jointly and severally pay ELLICE and MARGO the proceeds of
sales of agricultural products averaging P120,000.00 per month from
February 17, 1988;
(6) desist and refrain from interfering with the management of ELLICE
and MARGO.
SO ORDERED. 23
II
III
IV
The petitioners’ allegation that Ellice and Margo were run without
any of the typical corporate formalities, even if true, would not merit
the grant of any of the relief set forth in their prayer. We cannot
disregard the corporate entities of Ellice and Margo on this ground.
At most, such allegations, if proven to be true, should be addressed
in an administrative case before the SEC. 34
Next, petitioners make much of the fact that the Court of Appeals
promulgated its assailed Decision a mere two days from the time the
respondents filed their Comment. They alleged that the appellate
court could not have made a deliberate study of the factual
questions in the case, considering the sheer volume of evidence
available. 35 In support of this allegation, they point out that the
Court of Appeals merely adopted the factual findings of the SEC En
Banc verbatim, without deliberation and analysis. 36
However, in the interest of equity, this Court has reviewed the factual
findings of the SEC En Banc, which were affirmed in toto by the Court
of Appeals, and has found no cogent reason to disturb the same.
Indeed, we are convinced that the arguments raised by the
petitioners are nothing but unwarranted conclusions of law.
Specifically, they insist that the Gala spouses never meant to part
Corporation Law/alfred0 Page 188 of 1509
suigeneris
with the ownership of the shares which are in the names of their
children and encargados, and that all transfers of property to these
individuals are supposedly void for being absolutely simulated for
lack of consideration.41 However, as correctly held by the SEC En
Banc, the transfers were only relatively simulated, inasmuch as the
evident intention of the Gala spouses was to donate portions of their
property to their children and encargados. 42
Finally, the petitioners pray that the veil of corporate fiction that
shroud both Ellice and Margo be pierced, consistent with their earlier
allegation that both corporations were formed for purposes contrary
to law and public policy. In sum, they submit that the respondent
corporations are mere business conduits of the deceased Manuel
Gala and thus may be disregarded to prevent injustice, the distortion
or hiding of the truth or the "letting in" of a just defense. 46
Curiously, the petitioners never raised this issue before the SEC
Hearing Officer, the SEC En Banc or the Court of Appeals. Thus, we
are precluded from passing upon the same for, as a rule, no
question will be entertained on appeal unless it has been raised in
the court below, for points of law, theories, issues and arguments not
brought to the attention of the lower court need not be, and
ordinarily will not be, considered by a reviewing court, as they
cannot be raised for the first time at that late stage. Basic
considerations of due process impel this rule.48 Furthermore, even if
these allegations were proven to be true, such facts would not
render the underlying transactions void, for these instruments would
not be the sole means, much less the best means, by which the
existence of these transactions could be proved. For this purpose,
the books and records of a corporation, which include the stock and
transfer book, are generally admissible in evidence in favor of or
against the corporation and its members. They can be used to prove
corporate acts, a corporation’s financial status and other matters,
including one’s status as a stockholder. Most importantly, these
books and records are, ordinarily, the best evidence of corporate
acts and proceedings.49 Thus, reference to these should have been
made before the SEC Hearing Officer, for this Court will not entertain
this belated questioning of the evidence now.
SO ORDERED.
Facts:
The spouses Manuel and Alicia Gala and their children Guia
Domingo, Ofelia Gala, Raul Gala and Rita Benson, and their
encargados (rough translation; representatives) VirgilioGaleon and
Julian Jader, formed and organized Ellice Agro Industrial Corporation
(Ellice). As payment for their subscriptions the Spouses Gala
transferred several parcles of land to Ellice. Subsequently, the
children and the encargados formed and organized another
corporation, Margo Management and Development Corporation
(Margo). The father, Manuel Gala, sold his shares in Ellice to Margo.
Subsequently, Alicia transferred her shares to Margo.
Issue:
Held:
at “…the legal
Gala v. Ellice
Justice Ynares-Santiago
Facts: The spouses Manuel and Alicia Gala, their children Guia
Domingo, Ofelia Gala, Raul Gala, and Rita Benson, and their
encargados Virgilio Galeon and Julian Jader formed and organized
the Ellice Agro-Industrial Corporation. The total subscribed capital
stock of the corporation was apportioned as follows:
Issue: WON the lower court erre in ruling that the organization of
Ellice and Margo was not illegeal for depriving Rita G. Benson, one of
the petitioners, her legitime.
DECISION
PANGANIBAN, J.:
The Case
"[Latag] got sick in January 1995 and was forced to apply for partial
disability with the SSS, which was granted. When he recovered, he
reported for work in September 1998 but was no longer allowed to
continue working on account of his old age.
‘SO ORDERED.’
"On January 21, 2000, [Respondent Avelina Latag,] with her then
counsel[,] was invited to the office of [petitioners’] counsel and was
offered the amount of P38,500.00[,] which she accepted.
[Respondent] was also asked to sign an already prepared quitclaim
and release and a joint motion to dismiss the case.
"On January 24, 2000, [petitioners] filed the quitclaim and motion to
dismiss. Thereafter, on May 23, 2000, the Labor Arbiter issued an
order, the relevant portion of which states:
‘SO ORDERED.’
‘SO ORDERED.’
The CA held that the labor arbiter’s May 23, 2000 Order had referred
to the earlier January 10, 2000 Decision awarding respondent
P277,500 as retirement benefit.
Issues
"I
Whether or not the Court should respect the findings of fact [of] the
NLRC as against [those] of the labor arbiter.
"II
"III
"IV
Whether or not the appeal of petitioners from the Order of the labor
arbiter to the NLRC involves [a] monetary award." 8
First Issue:
The very same reason that behooved the CA to review the factual
findings of the NLRC impels this Court to take its own look at the
findings of fact. Normally, the Supreme Court is not a trier of facts.18
However, since the findings of fact in the present case are
conflicting,19 it waded through the records to find out if there was
enough basis for the appellate court’s reversal of the NLRC Decision.
Petitioners do not dispute the fact that the late Pedro M. Latag is
entitled to retirement benefits. Rather, the bone of contention is the
number of years that he should be credited with in computing those
benefits. On the one hand, we have the findings of the labor
arbiter,20 which the CA affirmed. According to those findings, the 23
years of employment of Pedro with La Mallorca Taxi must be added
to his 14 years with R & E Transport, Inc., for a total of 37 years. On the
other, we also have the findings of the NLRC21 that Pedro must be
credited only with his service to R & E Transport, Inc., because the
evidence shows that the aforementioned companies are two
different entities.
Furthermore, basic is the rule that the corporate veil may be pierced
only if it becomes a shield for fraud, illegality or inequity committed
against a third person.24 We have thus cautioned against the
inordinate application of this doctrine. In Philippine National Bank v.
Andrada Electric & Engineering Company,25 we said:
"x x x x x x x x x
"Unless the parties provide for broader inclusions, the term one half-
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of
the 13th month pay and the cash equivalent of not more than five
(5) days of service incentive leaves.
It is accepted that taxi drivers do not receive fixed wages, but retain
only those sums in excess of the "boundary" or fee they pay to the
owners or operators of their vehicles.34 Thus, the basis for computing
their benefits should be the average daily income. In this case, the
CA found that Pedro was earning an average of five hundred pesos
(P500) per day. We thus compute his retirement pay as follows: P500
x 15 days x 14 years of service equals P105,000. Compared with this
amount, the P38,850 he received, which represented just over one
third of what was legally due him, was unconscionable.
Second Issue:
Also assailed are the twin appeals that two different lawyers filed for
respondent before the CA. Petitioners argue that instead of
accepting her explanation, the appellate court should have
dismissed the appeals outright for violating the rule on forum
shopping.
Third Issue:
Monetary Award
SO ORDERED.
Footnotes
1 Rollo, pp. 8-33.
The rules implementing the New Retirement Law similarly provide the
above-mentioned formula for computing the one-half month salary.
Since Pedro was paid according to the "boundary" system, he is not
entitled to the 13th month 32 and the service incentive pay; hence,
his retirement pay should be computed on the sole basis of his
salary.
It is accepted that taxi drivers do not receive fixed wages, but retain
only those sums in excess of the "boundary" or fee they pay to the
owners or operators of their vehicles. Thus, the basis for computing
their benefits should be the average daily income. In this case, the
CA found that Pedro was earning an average of five hundred pesos
DECISION
CORONA, J.:
SO ORDERED.3
On appeal, the NLRC set aside the labor arbiter’s award of one-
month salary for every year of service for being excessive. It ruled
that under RA 7641, respondent Cabotaje was entitled to retirement
pay equivalent only to one-half month salary for every year of
service. Thus:
SO ORDERED.4
On May 25, 2000, petitioner filed a special civil action for certiorari 6
with the Court of Appeals.
(a) Fifteen (15) days salary of the employee based on his latest
salary rate. x x x;
(b) The cash equivalent of not more than five (5) days of
service incentive leave;
The foregoing rules are clear that the whole 5 days of SIL are
included in the computation of a retiring employees’ pay.
The consistent rulings of the labor arbiter, the NLRC and the
appellate court should be respected and petitioner’s veil of
corporate fiction should likewise be pierced. These are based on the
following uncontroverted facts: (1) respondent worked with ESIA and
petitioner ESSI; (2) his employment with both security agencies was
continuous and uninterrupted; (3) both agencies were owned by the
Enriquez family and (4) petitioner ESSI maintained its office in the
same place where ESIA previously held office.14
SO ORDERED.
Petitioners,
Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus -
CARPIO MORALES,
TINGA, and
Respondents.
February 14, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - -x
DECISION
QUISUMBING, J.:
SO ORDERED.72[14]
On April 30, 2003, the Court of Appeals denied both appeals for
lack of merit and affirmed the trial courts decision, with the slight
modification of including an award of exemplary damages of
P10,000.00 in favor of respondents. The Court of Appeals, applying
the doctrine of piercing the veil of corporate fiction, considered ASJ
Corp. and San Juan as one entity, after finding that there was no
bona fide intention to treat the corporation as separate and distinct
from San Juan and his wife Iluminada. The fallo of the Court of
Appeals decision reads:
SO ORDERED.73[15]
I.
II.
III.
IV.
V.
VI.
Plainly, the issues submitted for resolution are: First, did the Court
of Appeals err when (a) it ruled that petitioners withheld or failed to
release the chicks and by-products covered by Setting Report Nos.
108 and 109; (b) it admitted the testimony of Maura; (c) it did not
find that it was respondents who failed to return to the hatchery to
pick up the chicks and by-products covered by Setting Report Nos.
110 to 113; and (d) it pierced the veil of corporate fiction and held
ASJ Corp. and Antonio San Juan as one entity? Second, was it
In our view, there are two sets of issues that the petitioners have
raised.
xxxx
No pronouncement as to costs.
SO ORDERED.
DECISION
SANDOVAL-GUTIERREZ, J.:
The petition alleges inter alia that on August 7, 1985, the Board of
Directors of Technical Video, Inc. (TVI) passed a Resolution
authorizing its President, Eduardo A. Yotoko, petitioner, or its General
Manager-Secretary-Treasurer, Manuel M. Mendoza, also a petitioner,
to apply for and secure a loan from the Pasay City Banco Real
On October 3, 1986, TVI and two other video firms, Fox Video and
Galactica Video, organized a new corporation named FGT Video
Network Inc. (FGT). It was registered with the Securities and
Exchange Commission.3 Petitioner Mendoza was the concurrent
President of FGT and Operating General Manager of TVI. Thus, the
office of TVI had to be transferred to the building of FGT for easier
monitoring of the distribution and marketing aspects of the business.
For TVI’s failure to pay its loan upon maturity, respondent bank, on
January 26, 1987, filed with the Office of the Clerk of Court of the
Regional Trial Court (RTC), Pasay City, a petition for Extra Judicial
Foreclosure and Sale of Chattel Mortgage.
On July 13, 1990, respondent bank filed with the RTC, Branch 110,
Pasig City,7 a complaint for collection of a sum of money8 against
TVI, FGT and petitioners. Only petitioners filed their joint answer to the
complaint.
On April 29, 1991, the trial court rendered a Decision, holding that:
"As by these considerations, the Court finds that TVI was the mere
alter ego or business conduit of Yotoko and Mendoza, and
additionally considering 1) that Mendoza disclaimed knowledge of
the whereabouts of the TVI mortgaged property at the time
plaintiff’s petition for extrajudicial foreclosure was being effected,
and 2) that Mendoza and Yotoko transferred the mortgaged
property to FGT without first securing plaintiff’s consent despite their
awareness that under the chattel mortgage, such consent was
necessary, the doctrine of corporate entity must be pierced and the
two must be held personally liable for TVI’s obligation to plaintiff for
said doctrine cannot be used to defeat public convenience, justify
wrong, protect fraud or avoid a legal obligation."
SO ORDERED."
The basic issue for our resolution is whether herein petitioners are
personally liable for TVI’s indebtedness of P500,000.00 with
respondent bank.
Both the trial court and the Appellate Court found that the
petitioners transferred the Beta video machines from TVI to FGT
without the consent of respondent bank. Also, upon inquiry of the
sheriff, petitioner Mendoza declined knowledge of the whereabouts
of the mortgaged video machines. Moreover, the fact that the NBI
seized the video machines from FGT glaringly shows that petitioners
transferred the same from TVI. More importantly, a comparison of the
list of video machines in the Chattel Mortgage Contract and the list
of video machines seized by the NBI from FGT shows that they have
the same serial numbers.
The courts below also found that TVI is petitioners’ mere alter ego or
business conduit. They control the affairs of TVI. Among its
stockholders or directors, they were the only ones who became
incorporators of FGT. They transferred the assets of TVI to FGT.
Both the trial court and the Court of Appeals thus concluded that
petitioners succeeded to hide the chattels, preventing the sheriff to
foreclose the mortgage. Obviously, they acted in bad faith to
defraud respondent bank.
SO ORDERED.
DECISION
PANGANIBAN, J.:
The Case
The Facts
Petitioners alleged that CCC, through Lim and Mariano, had filed
the "baseless" Complaint in Civil Case No. Q-00-41103 and procured
the Writ of Attachment in bad faith. Relying on this Court's
pronouncement in Sapugay v. CA,5 petitioners prayed that both Lim
and Mariano be held "jointly and solidarily" liable with Respondent
CCC.
On behalf of Lim and Mariano who had yet to file any responsive
pleading, CCC moved to dismiss petitioners' compulsory
counterclaims on grounds that essentially constituted the very issues
for resolution in the instant Petition.
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80)
dismissed petitioners' counterclaims for several reasons, among
which were the following: a) the counterclaims against Respondents
Lim and Mariano were not compulsory; b) the ruling in Sapugay was
not applicable; and c) petitioners' Answer with Counterclaims
violated procedural rules on the proper joinder of causes of action.6
Issues
"[a] Whether or not the RTC gravely erred in refusing to rule that
Respondent CCC has no personality to move to dismiss
"[b] Whether or not the RTC gravely erred in ruling that (i)
petitioners' counterclaims against Respondents Lim and
Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is
inapplicable here; and (iii) petitioners violated the rule on
joinder of causes of action."9
For clarity and coherence, the Court will resolve the foregoing in
reverse order.
First Issue:
The spouses exerted all efforts to secure a bond, but the bonding
companies required a copy of the Dealership Agreement, which
respondent continued to withhold from them. Later, petitioners
discovered that respondent and its manager, Ricardo P. Cardenas,
had intended all along to award the dealership to Island Air Product
Corporation.
Suability and liability are two distinct matters. While the Court does
rule that the counterclaims against Respondent CCC's president and
manager may be properly filed, the determination of whether both
can in fact be held jointly and severally liable with respondent
corporation is entirely another issue that should be ruled upon by the
trial court.
The correct procedure in instances such as this is for the trial court,
per Section 12 of Rule 6 of the Rules of Court, to "order [such
impleaded parties] to be brought in as defendants, if jurisdiction over
them can be obtained," by directing that summons be served on
them. In this manner, they can be properly appraised of and answer
the charges against them. Only upon service of summons can the
trial court obtain jurisdiction over them.
(a) The party joining the causes of action shall comply with the
rules on joinder of parties; x x x"
Second Issue:
"It may be stated as a general rule that joint tort feasors are all
the persons who command, instigate, promote, encourage,
advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if
done for their benefit. They are each liable as principals, to the
same extent and in the same manner as if they had performed
the wrongful act themselves. x x x
"Joint tort feasors are not liable pro rata. The damages can not
be apportioned among them, except among themselves. They
cannot insist upon an apportionment, for the purpose of each
paying an aliquot part. They are jointly and severally liable for
the whole amount. x x x
"A payment in full for the damage done, by one of the joint tort
feasors, of course satisfies any claim which might exist against
the others. There can be but satisfaction. The release of one of
the joint tort feasors by agreement generally operates to
discharge all. x x x
"Of course the court during trial may find that some of the
alleged tort feasors are liable and that others are not liable. The
courts may release some for lack of evidence while
condemning others of the alleged tort feasors. And this is true
even though they are charged jointly and severally."
SO ORDERED.
GR No. L-155173
FACTS:
i. CONTINE
NTAL had allegedly made the same claim it was raising in Civil Case
No. Q-00-41103 in another action, which involved the same parties
and which was filed earlier before the International Chamber of
Commerce.
ii. Trial
court denied LAFARGE’s Motion to Dismiss
ISSUE:
HELD:
ii. LIMITATIONS:
d. COMPULSORY OR PERMISSIVE?
2. The spouses exerted all efforts to secure a bond, but the bonding
companies required a copy of the Dealership Agreement, which
respondent continued to withhold from them.
b. CASE AT HAND:
1. COURT DISAGREES.
General Credit Corp. vs. Alsons Dev. & Investment Corp. (513
SCRA 225 [2007])
Sicam vs. Jorge, 529 SCRA 443 , G.R. No. 159617, August 08, 2007
vs.
DECISION
AUSTRIA-MARTINEZ, J.:
On October 19, 1987, two armed men entered the pawnshop and
took away whatever cash and jewelry were found inside the
pawnshop vault. The incident was entered in the police blotter of
the Southern Police District, Parañaque Police Station as follows:
Investigation shows that at above TDPO, while victims were inside the
office, two (2) male unidentified persons entered into the said office
with guns drawn. Suspects(sic) (1) went straight inside and poked his
gun toward Romeo Sicam and thereby tied him with an electric wire
while suspects (sic) (2) poked his gun toward Divina Mata and
Isabelita Rodriguez and ordered them to lay (sic) face flat on the
floor. Suspects asked forcibly the case and assorted pawned
jewelries items mentioned above.
Petitioner Sicam filed his Answer contending that he is not the real
party-in-interest as the pawnshop was incorporated on April 20, 1987
and known as Agencia de R.C. Sicam, Inc; that petitioner
corporation had exercised due care and diligence in the
safekeeping of the articles pledged with it and could not be made
liable for an event that is fortuitous.
After trial on the merits, the RTC rendered its Decision6 dated
January 12, 1993, dismissing respondents’ complaint as well as
petitioners’ counterclaim. The RTC held that petitioner Sicam could
not be made personally liable for a claim arising out of a corporate
transaction; that in the Amended Complaint of respondents, they
asserted that "plaintiff pawned assorted jewelries in defendants'
pawnshop"; and that as a consequence of the separate juridical
personality of a corporation, the corporate debt or credit is not the
debt or credit of a stockholder.
The RTC further ruled that petitioner corporation could not be held
liable for the loss of the pawned jewelry since it had not been
rebutted by respondents that the loss of the pledged pieces of
jewelry in the possession of the corporation was occasioned by
armed robbery; that robbery is a fortuitous event which exempts the
victim from liability for the loss, citing the case of Austria v. Court of
Appeals;7 and that the parties’ transaction was that of a pledgor
and pledgee and under Art. 1174 of the Civil Code, the pawnshop
Hence, the instant petition for review with the following assignment
of errors:
Anent the first assigned error, petitioners point out that the CA’s
finding that petitioner Sicam is personally liable for the loss of the
pawned jewelries is "a virtual and uncritical reproduction of the
arguments set out on pp. 5-6 of the Appellants’ brief."10
(2) The issue resolved against petitioner Sicam was not among those
raised and litigated in the trial court; and
Anent the second error, petitioners point out that the CA finding on
their negligence is likewise an unedited reproduction of respondents’
brief which had the following defects:
Thus, the general rule that a judicial admission is conclusive upon the
party making it and does not require proof, admits of two
exceptions, to wit: (1) when it is shown that such admission was
made through palpable mistake, and (2) when it is shown that no
such admission was in fact made. The latter exception allows one to
contradict an admission by denying that he made such an
admission.17
x x x that the party can also show that he made no "such admission",
i.e., not in the sense in which the admission is made to appear.
That is the reason for the modifier "such" because if the rule simply
states that the admission may be contradicted by showing that "no
admission was made," the rule would not really be providing for a
contradiction of the admission but just a denial.18 (Emphasis
supplied).
The next question is whether petitioners are liable for the loss of the
pawned articles in their possession.
Petitioners insist that they are not liable since robbery is a fortuitous
event and they are not negligent at all.
The burden of proving that the loss was due to a fortuitous event
rests on him who invokes it.24 And, in order for a fortuitous event to
exempt one from liability, it is necessary that one has committed no
negligence or misconduct that may have occasioned the loss. 25
Moreover, petitioners failed to show that they were free from any
negligence by which the loss of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does
not foreclose the possibility of negligence on the part of herein
petitioners. In Co v. Court of Appeals,27 the Court held:
Art. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.29
Court:
Q. Then how come that the robbers were able to enter the premises
when according to you there was a security guard?
A. Sir, if these robbers can rob a bank, how much more a pawnshop.
Q. I am asking you how were the robbers able to enter despite the
fact that there was a security guard?
A. At the time of the incident which happened about 1:00 and 2:00
o'clock in the afternoon and it happened on a Saturday and
everything was quiet in the area BF Homes Parañaque they
pretended to pawn an article in the pawnshop, so one of my
Q. It is clear now that at the time of the robbery the vault was open
the reason why the robbers were able to get all the items pawned to
you inside the vault.
A. Yes sir.32
The diligence with which the law requires the individual at all times to
govern his conduct varies with the nature of the situation in which he
is placed and the importance of the act which he is to perform.34
Thus, the cases of Austria v. Court of Appeals,35 Hernandez v.
Chairman, Commission on Audit36 and Cruz v. Gangan37 cited by
petitioners in their pleadings, where the victims of robbery were
exonerated from liability, find no application to the present case.
In contrast, the robbery in this case took place in 1987 when robbery
was already prevalent and petitioners in fact had already foreseen it
as they wanted to deposit the pawn with a nearby bank for
safekeeping. Moreover, unlike in Austria, where no negligence was
committed, we found petitioners negligent in securing their
pawnshop as earlier discussed.
SO ORDERED.
On October 19, 1987, two armed men entered the pawnshop and
took away whatever cash and jewelry were found inside the
pawnshop vault.
On the same date, Sicam sent Lulu a letter informing her of the loss
of her jewelry due to the robbery incident in the pawnshop.
Corporation Law/alfred0 Page 275 of 1509
suigeneris
Respondent Lulu then wroteback expressing disbelief, then
requested Sicam to prepare the pawned jewelry for withdrawal on
November 6, but Sicam failed to return the jewelry.
ISSUE: are the petitioners liable for the loss of the pawned articles in
their possession? (Petitioners insist that they are not liable since
robbery is a fortuitous event and they are not negligent at all.)
YES
The burden of proving that the loss was due to a fortuitous event
rests on him who invokes it. And, in order for a fortuitous event to
Moreover, petitioners failed to show that they were free from any
negligence by which the loss of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does
not foreclose the possibility of negligence on the part of herein
petitioners.
Art. 1170. Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
**
Article 2123 of the Civil Code provides that with regard to
pawnshops and other establishments which are engaged in making
loans secured by pledges, the special laws and regulations
concerning them shall be observed, and subsidiarily, the provisions
on pledge, mortgage and antichresis.
NOTES:
Facts:
On October 19, 1987, two armed men entered the pawnshop and
took away whatever cash and jewelry were found inside the
pawnshop vault.
Corporation Law/alfred0 Page 279 of 1509
suigeneris
Sicam sent respondent Lulu a letter informing her of the loss of her
jewelry due to the robbery incident in the pawnshop. Respondent
Lulu expressed disbelief stating that when the robbery happened, all
jewelry pawned were deposited with Far East Bank near the
pawnshop since it had been the practice that before they could
withdraw, advance notice must be given to the pawnshop so it
could withdraw the jewelry from the bank. Respondent Lulu then
requested petitioner Sicam to prepare the pawned jewelry for
withdrawal on but petitioner Sicam failed to return the jewelry.
Issue:
WON Sicam is liable for the loss of the pawned articles in their
possession? YES
Held:
Robbery per se, just like carnapping, is not a fortuitous event. It does
not foreclose the possibility of negligence on the part of herein
petitioners.
Sicam’s admission that the vault was open at the time of robbery is
clearly a proof of petitioners’ failure to observe the care, precaution
and vigilance that the circumstances justly demanded. Petitioner
Sicam testified that once the pawnshop was open, the combination
was already off. Instead of taking the precaution to protect them,
they let open the vault, providing no difficulty for the robbers to cart
away the pawned articles.
Jardine Davies, Inc. vs. JRB Realty, Inc. (463 SCRA 555 [2005])
DECISION
4. Granting plaintiff such other and further relief as shall be just and
equitable in the premises.7
Of the four defendants, only the petitioner filed its Answer. The court
did not acquire jurisdiction over Aircon because the latter ceased
operations, as its corporate life ended on December 31, 1986.8 Upon
motion, defendants Fedders Air Conditioning USA and Maxim were
declared in default.9
On May 17, 1996, the RTC rendered its Decision, the dispositive
portion of which reads:
Corporation Law/alfred0 Page 282 of 1509
suigeneris
WHEREFORE, judgment is hereby rendered ordering defendants
Jardine Davies, Inc., Fedders Air Conditioning USA, Inc. and Maxim
Industrial and Merchandising Corporation, jointly and severally:
1. To deliver, install and place into operation the two (2) brand new
units of Fedders unitary packaged airconditioning units each of 10
tons capacity with rotary compressors to deliver 30,000 kcal or
120,000 BTUH to the second floor of the Blanco Center building, or to
pay plaintiff the current price for two such units;
4. Cost of suit.10
The petitioner filed its notice of appeal with the CA, alleging that the
trial court erred in holding it liable because it was not a party to the
contract between JRB Realty, Inc. and Aircon, and that it had a
personality separate and distinct from that of Aircon.
On March 23, 2000, the CA affirmed the trial court’s ruling in toto;
hence, this petition.
I.
II.
III.
IV.
V.
VI.
The trial court ruled that Aircon was a subsidiary of the petitioner,
and concluded, thus:
The respondent court arrived at the same conclusion basing its ruling
on the following documents, to wit:
(c) Letter dated March 26, 1981 of A.G. Morrison, President of Aircon,
to Atty. J.R. Blanco (Exh. J);
(d) News items of Bulletin Today dated August 30, 1982 (Exh. L);
The records bear out that Aircon is a subsidiary of the petitioner only
because the latter acquired Aircon’s majority of capital stock. It,
however, does not exercise complete control over Aircon; nowhere
can it be gathered that the petitioner manages the business affairs
of Aircon. Indeed, no management agreement exists between the
petitioner and Aircon, and the latter is an entirely different entity
from the petitioner.19
SO ORDERED.
WE CONCUR:
PUNO, J.:
This case stemmed from a complaint for illegal dismissal, unfair labor
practice and refund of cash bond filed by petitioners against
respondents before the Arbitration Branch of the National Labor
Relations Commission (NLRC). The petition at bar seeks the
annulment of the resolution of the NLRC dated July 5, 1993 reversing
the decision of the Labor Arbiter finding respondents liable for the
charges, and its resolution dated August 10, 1993 denying petitioners'
motion for reconsideration.
The Labor Arbiter found respondents liable for the charges. Rejecting
FTC's argument that there was no employer-employee relationship
between FTC and petitioners, he ruled that FISI and FTC should be
considered as a single employer. He observed that the two
corporations have common stockholders and they share the same
business address. In addition, FISI had no client other than FTC and
other corporations belonging to the group of companies owned by
Lucio Tan. The Labor Arbiter thus found respondents guilty of union
busting and illegal dismissal. He observed that not long after the
On appeal, the NLRC reversed and set aside the decision of the
Labor Arbiter. First, it held that the Labor Arbiter erred in applying the
"single employer" principle and concluding that there was an
employer-employee relationship between FTC and FISI on one hand,
and petitioners on the other hand. It found that at the time of the
termination of the contract of security services on October 15, 1991,
FISI which, at that time, had been renamed Magnum Integrated
Services, Inc. had a different set of stockholders and officers from
that of FTC. They also had separate offices. The NLRC held that the
principle of "single employer" and the doctrine of piercing the
corporate veil could not apply under the circumstances. It further
ruled that the proximate cause for the displacement of petitioners
was the termination of the contract for security services by FTC on
October 15, 1991. FISI could not be faulted for the severance of
petitioners' assignment at the premises of FTC. Consequently, the
NLRC held that the charge of illegal dismissal had no basis. As
regards the charge of unfair labor practice, the NLRC found that
petitioners who had the burden of proof failed to adduce any
evidence to support their charge of unfair labor practice against
respondents. Hence, it ordered the dismissal of petitioners'
complaint.5
We gave due course to the petition on May 15, 1995. Thus, the ruling
in St. Martin Funeral Home vs. NLRC7 remanding all petitions for
certiorari from the decision of the NLRC to the Court of Appeals does
not apply to the case at bar.
SO ORDERED.
----------------------------------------
PARDO, J.:
What is before the Court is a joint petition1 to annul and set aside the
decision2 of the Sandiganbayan dismissing petitioners’ complaint for
injunction with damages against Victor A. Africa, Jose L. Africa, +
Manuel H. Nieto, Jr. and Juan de Ocampo3 and the resolution4
denying petitioners’ motion for reconsideration.
The Facts
(b) The writs of sequestration, dated June 15, 1988, were issued
by the PCGG against Aerocom, Polygon on August 3, 1988 or
one day after the constitutional deadline as provided in
Section 26, Article XVIII of the 1987 Constitution. Furthermore, no
court case has been filed against Aerocom, Polygon, Belgor
Investment Corp., Silangan Investors & Manages, Inc. and
OWNI.
On July 30, 1991, Manuel H. Nieto, Jr. and Jose L. Africa+ circularized
a letter to the staff and employees of OWNI informing them of the
new set of board of directors.
On July 29, 1991, PCGG, acting for itself and in behalf of OWNI, filed
with the Sandiganbayan a complaint for injunction with damages
against Victor A. Africa, Jose L. Africa, + Manuel H. Nieto, Jr. and
Juan de Ocampo.5 PCGG sought to enjoin the defendants from
interfering with PCGG’s management of OWNI and/or representing
themselves as directors.
"(3) declaring as null and void the acts and conduct of PCGG,
its agents, nominees and representatives in reorganizing and
taking over the Board of Directors and management of OWNI,
including the acts of calling and holding a special
stockholders’ meeting of OWNI on September 17, 1990, the
election therein of OWNI chairman and directors, president,
acting secretary and acting treasurer and the appointment of
PCGG nominees as corporate officers of OWNI;
(d) from making any expenditures for the use and benefit
of Digitel and pursuing any and all papers/com-
munications filed by OWNI with the National
Telecommunications Commission relative to the
requirements of Digitel to comply with Digitel’s franchise;
First: the OWNI board was dormant and inactive necessitating the
PCGG takeover. And in reorganizing the OWNI board on September
17, 1990, PCGG merely performed its duty of preventing further
dissipation of the assets of OWNI in light of a 5.7 million peso payroll
anomaly committed by the former Finance Manager of OWNI;
The Issue
"1) Section 26, Article XVIII of the Constitution does not, by its
terms or any fair interpretation thereof, require that
corporations or business enterprises alleged to be repositories of
"ill-gotten wealth," as the term is used in said provision, be
actually and formally impleaded in the actions for the recovery
thereof, in order to maintain in effect existing sequestrations
thereof;
The Fallo
No costs.
SO ORDERED.
ISSUE:
HELD:
SANDIGANBAYAN
Castro from the unissued shares and to record the transfer in the
the OWNI board on the ground that they were not stockholders of
place, were another election of directors for Class “A” shares were
held. Thus, the PCGG sought to enjoin the new directors from
OWNI.
ISSUE
RULING
over said property; does not make the PCGG the owner thereof.”
because the civil suit filed against its stockholders is not a suit against
OWNI. This Court has held that “failure to implead these corporations
a hearing.”
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the
petitioner, J.G. Summit Holdings, Inc. for reconsideration of our
Resolution dated September 24, 2003 and to elevate this case to the
Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed
and set aside a Decision of the Court of Appeals promulgated on
July 18, 1995.
I. Facts
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [PHILSECO] to any third party without giving the other
under the same terms the right of first refusal. This provision shall not
apply if the transferee is a corporation owned or controlled by the
GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and interest
in PHILSECO to the Philippine National Bank (PNB). Such interests
were subsequently transferred to the National Government pursuant
to Administrative Order No. 14. On December 8, 1986, President
Corazon C. Aquino issued Proclamation No. 50 establishing the
Committee on Privatization (COP) and the Asset Privatization Trust
(APT) to take title to, and possession of, conserve, manage and
dispose of non-performing assets of the National Government.
Thereafter, on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the latter
was named the trustee of the National Government's share in
PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO
to settle its huge obligations to PNB, the National Government's
shareholdings in PHILSECO increased to 97.41% thereby reducing
KAWASAKI's shareholdings to 2.59%.
1.0 The subject of this Asset Privatization Trust (APT) sale through
public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of
PHILSECO's outstanding capital stock), which will be sold as a whole
block in accordance with the rules herein enumerated.
2.0 The highest bid, as well as the buyer, shall be subject to the final
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
6.0 The highest qualified bid will be submitted to the APT Board of
Trustees at its regular meeting following the bidding, for the purpose
of determining whether or not it should be endorsed by the APT
Board of Trustees to the COP, and the latter approves the same. The
APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT
within which to exercise their "Option to Top the Highest Bid" by
offering a bid equivalent to the highest bid plus five (5%) percent
thereof.
On February 2, 1994, petitioner was notified that PHI had fully paid
the balance of the purchase price of the subject bidding. On
February 7, 1994, the APT notified petitioner that PHI had exercised its
option to top the highest bid and that the COP had approved the
same on January 6, 1994. On February 24, 1994, the APT and PHI
executed a Stock Purchase Agreement. Consequently, petitioner
filed with this Court a Petition for Mandamus under G.R. No. 114057.
On May 11, 1994, said petition was referred to the Court of Appeals.
On July 18, 1995, the Court of Appeals denied the same for lack of
merit. It ruled that the petition for mandamus was not the proper
remedy to question the constitutionality or legality of the right of first
refusal and the right to top that was exercised by KAWASAKI/PHI,
and that the matter must be brought "by the proper party in the
proper forum at the proper time and threshed out in a full blown
trial." The Court of Appeals further ruled that the right of first refusal
and the right to top are prima facie legal and that the petitioner, "by
participating in the public bidding, with full knowledge of the right to
top granted to KAWASAKI/[PHILYARDS] is…estopped from
questioning the validity of the award given to [PHILYARDS] after the
latter exercised the right to top and had paid in full the purchase
price of the subject shares, pursuant to the ASBR." Petitioner filed a
Motion for Reconsideration of said Decision which was denied on
March 15, 1996. Petitioner thus filed a Petition for Certiorari with this
Court alleging grave abuse of discretion on the part of the appellate
court.
SO ORDERED.
II. Issues
Court En Banc
The petitioner prays for the elevation of the case to the Court en
banc on the following grounds:
In insisting that its Motion to Elevate This Case to the Court En Banc
should be granted, J.G. Summit further argued that: its Opposition to
the Office of the Solicitor General’s Motion to Refer is different from
its own Motion to Elevate; different grounds are invoked by the two
motions; there was unwarranted "executive interference"; and the
change in ponente is merely noted in asserting that this case should
be decided by the Court en banc.15
Like the condition in the Bureau Veritas case, the right to top was a
condition imposed by the government in the bidding rules which
was made known to all parties. It was a condition imposed on all
bidders equally, based on the APT’s exercise of its discretion in
deciding on how best to privatize the government’s shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from
the ether and inserted in the bidding rules but a condition which the
APT approved as the best way the government could comply with its
contractual obligations to KAWASAKI under the JVA and its
mandate of getting the most advantageous deal for the
government. The right to top had its history in the mutual right of first
refusal in the JVA and was reached by agreement of the
government and KAWASAKI.
For all the foregoing reasons, we find no basis to elevate this case to
the Court en banc.
J.G. Summit’s insistence that the right to top cannot be sourced from
the right of first refusal is not new and we have already ruled on the
issue in our Resolution of September 24, 2003. We upheld the mutual
right of first refusal in the JVA.34 We also ruled that nothing in the JVA
prevents KAWASAKI from acquiring more than 40% of PHILSECO’s
total capitalization.35 Likewise, nothing in the JVA or ASBR bars the
conversion of the right of first refusal to the right to top. In sum,
nothing new and of significance in the petitioner’s pleading warrants
a reconsideration of our ruling.
We uphold the validity of the mutual rights of first refusal under the
JVA between KAWASAKI and NIDC. First of all, the right of first refusal
is a property right of PHILSECO shareholders, KAWASAKI and NIDC,
under the terms of their JVA. This right allows them to purchase the
shares of their co-shareholder before they are offered to a third
party. The agreement of co-shareholders to mutually grant this right
to each other, by itself, does not constitute a violation of the
provisions of the Constitution limiting land ownership to Filipinos and
Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still
owns land, the right of first refusal can be validly assigned to a
qualified Filipino entity in order to maintain the 60%-40% ratio. This
transfer, by itself, does not amount to a violation of the Anti-Dummy
Laws, absent proof of any fraudulent intent. The transfer could be
made either to a nominee or such other party which the holder of
the right of first refusal feels it can comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which case
KAWASAKI, in exercising its right of first refusal, can exceed 40% of
PHILSECO’s equity. In fact, it can even be said that if the foreign
shareholdings of a landholding corporation exceeds 40%, it is not the
foreign stockholders’ ownership of the shares which is adversely
affected but the capacity of the corporation to own land – that is, the
corporation becomes disqualified to own land. This finds support
under the basic corporate law principle that the corporation and its
stockholders are separate juridical entities. In this vein, the right of first
refusal over shares pertains to the shareholders whereas the
capacity to own land pertains to the corporation. Hence, the fact
that PHILSECO owns land cannot deprive stockholders of their right
of first refusal. No law disqualifies a person from purchasing shares in
a landholding corporation even if the latter will exceed the allowed
foreign equity, what the law disqualifies is the corporation from
owning land. This is the clear import of the following provisions in the
Constitution:
The petitioner further argues that "an option to buy land is void in
itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]).
The right of first refusal granted to KAWASAKI, a Japanese
corporation, is similarly void. Hence, the right to top, sourced from
the right of first refusal, is also void."43 Contrary to the contention of
petitioner, the case of Lui She did not that say "an option to buy land
is void in itself," for we ruled as follows:
But if an alien is given not only a lease of, but also an option to buy,
a piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of ownership
whereby the owner divests himself in stages not only of the right to
enjoy the land (jus possidendi, jus utendi, jus fruendi and jus
abutendi) but also of the right to dispose of it (jus disponendi) —
rights the sum total of which make up ownership. It is just as if today
the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which
ownership is made up are consolidated in an alien. And yet this is just
exactly what the parties in this case did within this pace of one year,
with the result that Justina Santos'[s] ownership of her property was
reduced to a hollow concept. If this can be done, then the
Constitutional ban against alien landholding in the Philippines, as
29.2 Petitioner has consistently pointed out in the past that private
respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under
the law, it continues to own real property…
32.1 This provision is the same as Section 7, Article XII of the 1987
Constitution.
III.
SO ORDERED.
Jose P. Laurel for appellant and William H. Quasha in his own behalf.
Office of the Solicitor General Juan R. Liwag and Assistant Solicitor
General Francisco Carreon for appellee.
REYES, J.:
A. Yes.
The foregoing consideration can not but lead to the conclusion that
the defendant can not be held guilty of the crime charged. The
majority of the court, however, are also of the opinion that, even
supposing that the act imputed to the defendant constituted
falsification at the time it was perpetrated, still with the approval of
the Party Amendment to the Constitution in March, 1947, which
placed Americans on the same footing as Filipino citizens with
respect to the right to operate public utilities in the Philippines, thus
doing away with the prohibition in section 8, Article XIV of the
Constitution in so far as American citizens are concerned, the said
act has ceased to be an offense within the meaning of the law, so
that defendant can no longer be held criminally liable therefor.
FACTS:
Corporation Law/alfred0 Page 331 of 1509
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William H. Quasha
document.
QUISUMBING, J.:
G.R. Nos. 121413 and 121479 are twin petitions for review of the
March 27, 1995 Decision1 of the Court of Appeals in CA-G.R. CV No.
25017, entitled "Ford Philippines, Inc. vs. Citibank, N.A. and Insular
Bank of Asia and America (now Philipppine Commercial
International Bank), and the August 8, 1995 Resolution,2 ordering the
collecting bank, Philippine Commercial International Bank, to pay
the amount of Citibank Check No. SN-04867.
In G.R. No. 128604, petitioner Ford Philippines assails the October 15,
1996 Decision3 of the Court of Appeals and its March 5, 1997
Resolution4 in CA-G.R. No. 28430 entitled "Ford Philippines, Inc. vs.
Citibank, N.A. and Philippine Commercial International Bank,"
affirming in toto the judgment of the trial court holding the
defendant drawee bank, Citibank, N.A., solely liable to pay the
amount of P12,163,298.10 as damages for the misapplied proceeds
of the plaintiff's Citibanl Check Numbers SN-10597 and 16508.
"On October 19, 1977, the plaintiff Ford drew and issued its
Citibank Check No. SN-04867 in the amount of P4,746,114.41, in
favor of the Commissioner of Internal Revenue as payment of
plaintiff;s percentage or manufacturer's sales taxes for the third
quarter of 1977.
Ford, with leave of court, filed a third-party complaint before the trial
court impleading Pacific Banking Corporation (PBC) and Godofredo
Rivera, as third party defendants. But the court dismissed the
complaint against PBC for lack of cause of action. The course
likewise dismissed the third-party complaint against Godofredo
Rivera because he could not be served with summons as the NBI
declared him as a "fugitive from justice".
On June 15, 1989, the trial court rendered its decision, as follows:
SO ORDERED."6
Not satisfied with the said decision, both defendants, Citibank and
PCIBank, elevated their respective petitions for review on certiorari to
the Courts of Appeals. On March 27, 1995, the appellate court issued
its judgment as follows:
IT IS SO ORDERED."7
Separately, PCIBank and Ford filed before this Court, petitions for
review by certiorari under Rule 45.
In G.R. No. 121413, PCIBank seeks the reversal of the decision and
resolution of the Twelfth Division of the Court of Appeals contending
that it merely acted on the instruction of Ford and such casue of
action had already prescribed.
I. Did the respondent court err when, after finding that the
petitioner acted on the check drawn by respondent Ford on
the said respondent's instructions, it nevertheless found the
petitioner liable to the said respondent for the full amount of
the said check.
II. Did the respondent court err when it did not find prescription
in favor of the petitioner.8
Ford drew Citibank Check No. SN-10597 on July 19, 1978 in the
amount of P5,851,706.37 representing the percentage tax due for
the second quarter of 1978 payable to the Commissioner of Internal
On April 20, 1979, Ford drew another Citibank Check No. SN-16508 in
the amount of P6,311,591.73, representing the payment of
percentage tax for the first quarter of 1979 and payable to the
Commissioner of Internal Revenue. Again a BIR Revenue Tax Receipt
No. A-1697160 was issued for the said purpose.
Both checks were "crossed checks" and contain two diagonal lines
on its upper corner between, which were written the words "payable
to the payee's account only."
The checks never reached the payee, CIR. Thus, in a letter dated
February 28, 1980, the BIR, Region 4-B, demanded for the said tax
payments the corresponding periods above-mentioned.
As far as the BIR is concernced, the said two BIR Revenue Tax
Receipts were considered "fake and spurious". This anomaly was
confirmed by the NBI upon the initiative of the BIR. The findings
forced Ford to pay the BIR a new, while an action was filed against
Citibank and PCIBank for the recovery of the amount of Citibank
Check Numbers SN-10597 and 16508.
The Regional Trial Court of Makati, Branch 57, which tried the case,
made its findings on the modus operandi of the syndicate, as follows:
SO ORDERED."15
Note that in these cases, the checks were drawn against the
drawee bank, but the title of the person negotiating the same was
allegedly defective because the instrument was obtained by fraud
and unlawful means, and the proceeds of the checks were not
remitted to the payee. It was established that instead of paying the
Citibank points out that Ford allowed its very own employee,
Godofredo Rivera, to negotiate the checks to his co-conspirators,
instead of delivering them to the designated authorized collecting
bank (Metrobank-Alabang) of the payee, CIR. Citibank bewails the
fact that Ford was remiss in the supervision and control of its own
employees, inasmuch as it only discovered the syndicate's activities
through the information given by the payee of the checks after an
unreasonable period of time.
For its part, Ford denies any negligence in the performance of its
duties. It avers that there was no evidence presented before the trial
court showing lack of diligence on the part of Ford. And, citing the
case of Gempesaw vs. Court of Appeals,17 Ford argues that even if
there was a finding therein that the drawer was negligent, the
drawee bank was still ordered to pay damages.
The Board of Directors of Ford, we note, did not confirm the request
of Godofredo Rivera to recall Citibank Check No. SN-04867. Rivera's
instruction to replace the said check with PCIBank's Manager's
Check was not in theordinary course of business which could have
prompted PCIBank to validate the same.
Given these circumstances, the mere fact that the forgery was
committed by a drawer-payor's confidential employee or agent,
who by virtue of his position had unusual facilities for perpertrating
the fraud and imposing the forged paper upon the bank, does
notentitle the bank toshift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the
drawer.21 This rule likewise applies to the checks fraudulently
negotiated or diverted by the confidential employees who hold
them in their possession.
Indeed, the crossing of the check with the phrase "Payee's Account
Only," is a warning that the check should be deposited only in the
account of the CIR. Thus, it is the duty of the collecting bank PCIBank
to ascertain that the check be deposited in payee's account only.
Therefore, it is the collecting bank (PCIBank) which is bound to
scruninize the check and to know its depositors before it could make
the clearing indorsement "all prior indorsements and/or lack of
indorsement guaranteed".
'In presenting the checks for clearing and for payment, the
defendant made an express guarantee on the validity of "all
prior endorsements." Thus, stamped at the back of the checks
are the defedant's clear warranty: ALL PRIOR ENDORSEMENTS
AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such
warranty, plaintiff would not have paid on the checks.'
Lastly, banking business requires that the one who first cashes and
negotiates the check must take some percautions to learn whether
or not it is genuine. And if the one cashing the check through
indifference or othe circumstance assists the forger in committing the
fraud, he should not be permitted to retain the proceeds of the
check from the drawee whose sole fault was that it did not discover
the forgery or the defect in the title of the person negotiating the
instrument before paying the check. For this reason, a bank which
cashes a check drawn upon another bank, without requiring proof
as to the identity of persons presenting it, or making inquiries with
regard to them, cannot hold the proceeds against the drawee
when the proceeds of the checks were afterwards diverted to the
hands of a third party. In such cases the drawee bank has a right to
believe that the cashing bank (or the collecting bank) had, by the
usual proper investigation, satisfied itself of the authenticity of the
negotiation of the checks. Thus, one who encashed a check which
had been forged or diverted and in turn received payment thereon
from the drawee, is guilty of negligence which proximately
contributed to the success of the fraud practiced on the drawee
Corporation Law/alfred0 Page 347 of 1509
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bank. The latter may recover from the holder the money paid on the
check.26
The trial court and the Court of Appeals found that PCIBank had no
official act in the ordinary course of business that would attribute to it
the case of the embezzlement of Citibank Check Numbers SN-10597
and 16508, because PCIBank did not actually receive nor hold the
two Ford checks at all. The trial court held, thus:
But in this case, responsibility for negligence does not lie on PCIBank's
shoulders alone.
For its part, Ford contends that Citibank as the drawee bank owes to
Ford an absolute and contractual duty to pay the proceeds of the
subject check only to the payee thereof, the CIR. Citing Section 6232
of the Negotiable Instruments Law, Ford argues that by accepting
the instrument, the acceptro which is Citibank engages that it will
pay according to the tenor of its acceptance, and that it will pay
only to the payee, (the CIR), considering the fact that here the
check was crossed with annotation "Payees Account Only."
The statute of limitations begins to run when the bank gives the
depositor notice of the payment, which is ordinarily when the check
is returned to the alleged drawer as a voucher with a statement of
his account,39 and an action upon a check is ordinarily governed by
the statutory period applicable to instruments in writing.40
Our laws on the matter provide that the action upon a written
contract must be brought within ten year from the time the right of
action accrues.41 hence, the reckoning time for the prescriptive
period begins when the instrument was issued and the
corresponding check was returned by the bank to its depositor
(normally a month thereafter). Applying the same rule, the cause of
action for the recovery of the proceeds of Citibank Check No. SN
04867 would normally be a month after December 19, 1977, when
Citibank paid the face value of the check in the amount of
P4,746,114.41. Since the original complaint for the cause of action
was filed on January 20, 1984, barely six years had lapsed. Thus, we
conclude that Ford's cause of action to recover the amount of
Citibank Check No. SN 04867 was seasonably filed within the period
provided by law.
Finally, we also find thet Ford is not completely blameless in its failure
to detect the fraud. Failure on the part of the depositor to examine
its passbook, statements of account, and cancelled checks and to
give notice within a reasonable time (or as required by statute) of
any discrepancy which it may in the exercise of due care and
diligence find therein, serves to mitigate the banks' liability by
reducing the award of interest from twelve percent (12%) to six
percent (6%) per annum. As provided in Article 1172 of the Civil
Code of the Philippines, respondibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances. In quasi-delicts, the contributory negligence of the
plaintiff shall reduce the damages that he may recover.42
SO ORDERED.
PCIB V. CA
FACTS:
ISSUE:
Has Ford the right to recover the value of the checks intended as
payment to CIR?
HELD:
Note: not only PCIB but also Citibank is responsible for negligen
ce. Citibank was negligent in the performance of its duties as a
drawee
bank. It failed to establish its payments of Ford’s checks were
made in due course and legally in order.
October 19, 1977: Ford drew and issued its Citibank Check of
P4,746,114.41, in favor of the Commissioner of Internal Revenue
(CIR) as payment of percentage or manufacturer's sales taxes
for the third quarter of 1977
trial court: Citibank and IBAA (now PCI Bank), jointly and
severally, to pay the Ford
As far as the BIR is concernced, the said two BIR Revenue Tax
Receipts were considered "fake and spurious".
o forced Ford to pay the BIR anew, while an action was filed
against Citibank and PCIBank for recovery
ISSUE: W/N Ford can hold both PCIB and Citibank liable
Given these circumstances, the mere fact that the forgery was
committed by a drawer-payor's confidential employee or
agent, who by virtue of his position had unusual facilities for
perpertrating the fraud and imposing the forged paper upon
the bank, does not entitle the bank to shift the loss to the
drawer-payor, in the absence of some circumstance raising
estoppel against the drawer.
PCIBank did not actually receive nor hold the 2 Ford checks at
all. Neither is there any proof that defendant PCIBank
contributed any official or conscious participation in the
process of the embezzlement.
o hold them equally liable for the loss of the proceeds of the
checks issued by Ford in favor of the CIR
The statute of limitations begins to run when the bank gives the
depositor notice of the payment, which is ordinarily when the
check is returned to the alleged drawer as a voucher with a
statement of his account, and an action upon a check is
ordinarily governed by the statutory period applicable to
instruments in writing.
There are three cases consolidated here: G.R. No. 121413 (PCIB vs
CA and Ford and Citibank), G.R. No. 121479 (Ford vs CA and
Citibank and PCIB), and G.R. No. 128604 (Ford vs Citibank and PCIB
and CA).
In July 1978 and in April 1979, Ford drew two checks in the amounts
of P5,851,706.37 and P6,311,591.73 respectively. Both checks are
again for tax payments. Both checks are for “Payee’s account only”
or for the CIR’s bank savings account only with Metrobank. Again,
these checks never reached the CIR.
PCIB and Citibank are liable for the amount of the checks on a 50-50
basis.
But the Supreme Court ruled that in the consolidated cases, that
PCIB and Citibank are not the only negligent parties. Ford is also
negligent for failing to examine its passbook in a timely manner
which could have avoided further loss. But this negligence is not the
proximate cause of the loss but is merely contributory. Nevertheless,
this mitigates the liability of PCIB and Citibank hence the rate of
interest, with which PCIB and Citibank is to pay Ford, is lowered from
12% to 6% per annum.
DECISION
Under the receipts, petitioner agreed to hold the goods in trust for
the said bank, with authority to sell but not by way of conditional
sale, pledge or otherwise; and in case such goods were sold, to turn
over the proceeds thereof as soon as received, to apply against the
relative acceptances and payment of other indebtedness to
respondent bank. In case the goods remained unsold within the
specified period, the goods were to be returned to respondent bank
without any need of demand. Thus, said "goods, manufactured
products or proceeds thereof, whether in the form of money or bills,
receivables, or accounts separate and capable of identification"
were respondent bank’s property.
When the trust receipts matured, petitioner failed to return the goods
to respondent bank, or to return their value amounting to
P6,940,280.66 despite demands. Thus, the bank filed a criminal
complaint for estafa6 against petitioner in the Office of the City
Prosecutor of Manila.
On July 13, 1999, the Secretary of Justice issued Resolution No. 250 15
granting the petition and reversing the assailed resolution of the City
Prosecutor. According to the Justice Secretary, the petitioner, as
Senior Vice-President of PBMI, executed the 13 trust receipts and as
such, was the one responsible for the offense. Thus, the execution of
said receipts is enough to indict the petitioner as the official
responsible for violation of P.D. No. 115. The Justice Secretary also
declared that petitioner could not contend that P.D. No. 115 covers
only goods ultimately destined for sale, as this issue had already
been settled in Allied Banking Corporation v. Ordoñez,16 where the
Court ruled that P.D. No. 115 is "not limited to transactions in goods
A.
B.
C.
II
The Court will delve into and resolve the issues seriatim.
The Office of the Solicitor General (OSG) takes the opposite view,
and asserts that indubitably, the certificate of non-forum shopping
incorporated in the petition before the CA is defective because it
failed to disclose essential facts about pending actions concerning
similar issues and parties. It asserts that petitioner’s failure to comply
with the Rules of Court is fatal to his petition. The OSG cited Section 2,
Rule 42, as well as the ruling of this Court in Melo v. Court of
Appeals.24
xxx
The petitioner shall also submit together with the petition a sworn
certification that he has not theretofore commenced any other
action involving the same issues in the Supreme Court, the Court of
Appeals or different divisions thereof, or any other tribunal or
agency; if there is such other action or proceeding, he must state
the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals, or different divisions thereof, or
any other tribunal or agency, he undertakes to promptly inform the
aforesaid courts and other tribunal or agency thereof within five (5)
days therefrom. xxx
On the merits of the petition, the CA ruled that the petitioner failed
to establish that the Secretary of Justice committed grave abuse of
discretion in finding probable cause against the petitioner for
violation of estafa under Article 315, paragraph 1(b) of the Revised
Penal Code, in relation to P.D. No. 115. Thus, the appellate court
ratiocinated:
"In regard to the other assigned errors, we note that the respondent
bound himself under the terms of the trust receipts not only as a
corporate official of PBM but also as its surety. It is evident that these
are two (2) capacities which do not exclude the other. Logically, he
can be proceeded against in two (2) ways: first, as surety as
determined by the Supreme Court in its decision in RCBC vs. Court of
Appeals, 178 SCRA 739; and, secondly, as the corporate official
responsible for the offense under PD 115, the present case is an
appropriate remedy under our penal law.
34. Petitioner further claims that he is not a person responsible for the
offense allegedly because "[b]eing charged as the Senior Vice-
President of Philippine Blooming Mills (PBM), petitioner cannot be
held criminally liable as the transactions sued upon were clearly
entered into in his capacity as an officer of the corporation" and
Corporation Law/alfred0 Page 369 of 1509
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that [h]e never received the goods as an entrustee for PBM as he
never had or took possession of the goods nor did he commit
dishonesty nor "abuse of confidence in transacting with RCBC." Such
argument is bereft of merit.
The entruster shall be entitled to the proceeds from the sale of the
goods, documents or instruments released under a trust receipt to
the entrustee to the extent of the amount owing to the entruster or
as appears in the trust receipt, or to the return of the goods,
documents or instruments in case of non-sale, and to the
enforcement of all other rights conferred on him in the trust receipt;
provided, such are not contrary to the provisions of the document.41
I/we agree to keep the said goods insured to their full value against
loss from fire, theft, pilferage or other casualties as directed by the
BANK, the sum insured to be payable in case of loss to the BANK,
with the understanding that the BANK is, not to be chargeable with
the storage premium or insurance or any other expenses incurred on
said goods.
In case of sale, I/we further agree to turn over the proceeds thereof
as soon as received to the BANK, to apply against the relative
acceptances (as described above) and for the payment of any
other indebtedness of mine/ours to the BANK. In case of non-sale
within the period specified herein, I/we agree to return the goods
under this Trust Receipt to the BANK without any need of demand.
The Court likewise rules that the issue of whether P.D. No. 115
encompasses transactions involving goods procured as a
component of a product ultimately sold has been resolved in the
affirmative in Allied Banking Corporation v. Ordoñez.44 The law
applies to goods used by the entrustee in the operation of its
machineries and equipment. The non-payment of the amount
covered by the trust receipts or the non-return of the goods covered
by the receipts, if not sold or otherwise not disposed of, violate the
entrustee’s obligation to pay the amount or to return the goods to
the entruster.
The Court rules that although petitioner signed the trust receipts
merely as Senior Vice-President of PBMI and had no physical
possession of the goods, he cannot avoid prosecution for violation of
P.D. No. 115.
The penalty clause of the law, Section 13 of P.D. No. 115 reads:
The crime defined in P.D. No. 115 is malum prohibitum but is classified
as estafa under paragraph 1(b), Article 315 of the Revised Penal
Code, or estafa with abuse of confidence. It may be committed by
a corporation or other juridical entity or by natural persons. However,
the penalty for the crime is imprisonment for the periods provided in
said Article 315, which reads:
SO ORDERED.
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
ARTEMIO V. PANGANIBAN
Chief Justice
February 6, 2006
Lessons Applicable: Corp. Officers or employees, through whose act,
default or omission the corp. commits a crime, are themselves
individually guilty of the crime (Corporate Law)
FACTS:
April 22, 2004: CA dismissed the petition for lack of merit and on
procedural grounds
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Ching filed a petition for certiorari, prohibition and mandamus
with the CA
The failure of person to turn over the proceeds of the sale of the
goods covered by the trust receipt to the entruster or to return said
Failure of the entrustee to turn over the proceeds of the sale of the
goods covered by the trust receipts to the entruster or to return said
goods if they were not disposed of in accordance with the terms of
the trust receipt is a crime under P.D. No. 115, without need of
proving intent to defraud.—In Colinares v. Court of Appeals, the
Court declared that there are two possible situations in a trust
DECISION
NACHURA, J.:
On January 13, 1989, TEC and TPC filed a complaint for damages
against petitioner and Ultra17 before the Regional Trial Court (RTC) of
Pasig. The case was raffled to Branch 162 and was docketed as Civil
Case No. 56851.18 Upon the filing of the parties' answer to the
complaint, pre-trial was scheduled.
2. Whether or not the plaintiff is liable for (sic) the defendant for
the differential billings in the amount of P7,040,401.01.
SO ORDERED.20
SO ORDERED.24
Petitioner now comes before this Court in this petition for review on
certiorari contending that:
2. In not finding that the issue is: whether or not, based on the
tampered meters, whether or not petitioner is entitled to
differential billing, and if so, how much.
5. In finding that TEC should not be held liable for the tampering
of this electric meter in its DCIM Building.
Even more revealing is the fact that TEC's meters registered 9,300
kwh and 19,200 kwh consumption on the first and second accounts,
respectively, a month prior to the inspection. On the first month after
the meters were corrected, TEC's electric consumption registered at
9,300 kwh and 22,200 kwh on the respective accounts. These figures
clearly show that there was no palpably drastic difference between
the consumption before and after the inspection, casting a cloud of
doubt over petitioner's claim of meter-tampering. Indeed, Ultra's
explanation that the corporation was losing; thus, it had lesser
consumption of electric power appear to be the more plausible
reason for the drop in electric consumption.
Petitioner likewise claimed that when the subject meters were again
inspected on June 7, 1988, they were found to have been tampered
anew. The Court notes that prior to the inspection, TEC was informed
about it; and months before the inspection, there was an unsettled
controversy between TEC and petitioner, brought about by the
disconnection of electric power and the non-payment of differential
billing. We are more disposed to accept the trial court's conclusion
that it is hard to believe that a customer previously apprehended for
tampered meters and assessed P7 million would further jeopardize
itself in the eyes of petitioner.34 If it is true that there was evidence of
tampering found on September 28, 1987 and again on June 7, 1988,
the better view would be that the defective meters were not
actually corrected after the first inspection. If so, then Manila Electric
Company v. Macro Textile Mills Corporation35 would apply, where
we said that we cannot sanction a situation wherein the defects in
TEC also sufficiently established its claim for the reimbursement of the
amount paid as rentals for the generator set it was constrained to
rent by reason of the illegal disconnection of electrical service. The
official receipts and purchase orders submitted by TEC as evidence
sufficiently show that such rentals were indeed made. However, the
amount of P150,000.00 per month for five months, awarded by the
CA, is excessive. Instead, a total sum of P150,000.00, as found by the
RTC, is proper.
SO ORDERED.
PURISIMA, J.:
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:
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.
Undaunted, petitioner has come before this court via the present
petition, theorizing that:
A.
B.
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 Mayor has the authority to impose, as he did,
special conditions in the grant of business permits.
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.
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
Respondents, on the other hand, agree with the ruling of the Court
of Appeals that the business permit in question is in the nature of a
contract between Iligan City and the herein petitioner, the terms
and conditions of which are binding upon agreement, and that
petitioner is estopped from questioning the 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.
SO ORDERED.
Footnotes
1Annex A to Memorandum of Respondent City Mayor and City
Legal Officer of Iligan, Rollo, p. 231-232.
2Associate Justice Luis Javellana, ponente; Associate Justice
Alfredo Marigomen and Associate Justice Artemon Luna,
members.
3 Binay vs. Domingo, 201 SCRA 508.
4 Tatel vs. Municipality of Virac, 207 SCRA 157.
5Procter and Gamble Phils. vs. The Municipality of Jagna, 94
SCRA 894.
6 Balacuit vs. CFI of Agusan del Norte, 163 SCRA 182.
7 69 SCRA 564.
8 Comment by the Solicitor General, p. 8; Rollo, p. 78.
9 270 SCRA 298.
10 Ibid, p. 306.
11Saturday, June 3, 1995, "Approval of the Conference
Committee Report on S. No. 1998 and H. No. 14100, Record of
the Senate, p. 847.
12 Ibid.
Separate Opinions
II
III
In this connection, I do not fully share with the view that the exercise
of the optometrists' specialization is no different from the practice of
other regulated professions which can be done individually or in
association with duly-licensed colleagues only.
. . . Both in the case of the physician and the lawyer, the person
seeking his services must break down the barriers of reserve
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which otherwise serve to protect him and deliberately reveal to
his professional adviser secrets of physical or mental disability or
secrets of business of the most intimate nature. These necessary
disclosures create the personal relationship which cannot exist
between patient or client and a profit-seeking corporation. The
universal recognition of this immediate, unbroken, and
confidential association between doctor and lawyer and those
who engage their services early created and still justifies the
rule that their allegiance must be wholeheartedly to the patient
or the client, not to another. Nothing of this nature applies to
the practice of optometry. 12
The U.S. Court of Appeals for the District of Columbia to which the
aforementioned case was appealed, did concede that in their view,
. . . but that fact is not enough to bring the rule into effect.
There is no more reason to prohibit a corporation, organized for
the purpose, from employing licensed optometrists, than there
is to prohibit similar employment of accountants, architects or
engineers. We know of no instance in which the right in any of
these cases has ever been challenged, though universally all
are deemed professions. 15
IV
Under the rubric of general welfare, what is the specific public policy
involved in the exercise of police power in this case? Or in
constitutional language, what is the end sought to be achieved?
The City Mayor in its comment to the petition cites the "safety and
well-being of the people of Iligan — especially the poor and naive
among them." 22 The Solicitor General, on the other hand, cites
protection of "public morals, health, safety or welfare" 23 and "to
promote the prosperity and general welfare of the local government
unit and its inhabitants." 24 With the lack of discussion in the pleadings
on how these general concerns will be served by the specific means
adapted, we can only speculate.
Footnotes
1 270 SCRA 298, 306 (1997).
NE2d 70 (1941).
21 Akron v. McElligott, 166 Iowa 297, 147 NW 773 (1914).
22 Rollo, p. 55.
23 Id., at 77.
24 Id., at 78.
25See for example E.W.H., Annotation, Constitutionality of
Statutes and Validity of Regulations Relating to Optometry, 98
A.L.R. 905 (1935); L.S. Tellier, Annotation, Validity of
Governmental Regulation of Optometry, 22 A.L.R. 2d 939
(1952).
26 Neil v. Gimbel Bros. 330 Pa 213, 199A 179 (1938).
27Deborah Hass-Wilson, The Effect of Commercial Practice
Restrictions. The Case of Optometry, 29 J.L. & ECon. 165 (1986)
28 Ibid. In the US, Professional Corporations differ from non-
professional corporations in that Professional Corporation law
requires each stockholder of a professional corporation to be a
licensed member of the profession for which the corporation is
organized to practice.
29 Id., at 170-172.
30Id., at 183. However, the study found that commercial
practice restrictions increase the price of opthalmic goods and
services without statistically significant effect on quality. In plain
language, these commercial restrictions are not protecting the
consumers.
In the petition for certiorari, prohibition, and mandamus filed with the
Court of Appeals, petitioner sought to set aside the assailed order of
dismissal, aforementioned, ascribing grave abuse of discretion on
the part of the trial court. The appellate court, on 24 January 1991,
dismissed the petition for lack of merit. It also rejected, in its
Resolution of 15 May 1991, a motion for the reconsideration of the
dismissal.
A.
B.
Petitioner, in fine, does not now dispute its having violated the
conditions stated in the business permit 1 issued by the City Mayor
but would instead assail the authority of the mayor to impose the
aforesaid conditions.
Petitioner argues that respondent City Mayor has acted beyond his
authority in imposing the conditions expressed in Acebedo's permit.
The contention is bereft of merit. The city Mayor has merely restated
what the Optometry Law mandates. Under Section 171, paragraph
2(n), of the then Local Government Code, 6 the City Mayor, being
the Chief Executive of the Local Government, has had the authority
to "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." Its equivalent provision in
the Local Government Code of 1991 is now found in Section 445,
paragraph 3(iv), which empowers city mayors to "issue licenses and
permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits (are) issued, pursuant
to law or ordinance." Municipal corporations are agencies of the
State for the promotion and maintenance of local self-governance
and are endowed with police power in order to effectively
accomplish the declared objects of their creation. 7 An attribute of
sovereignty, police power has been defined to be the power to
Facts: 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) It cannot examine
and/or prescribe reading and similar optical glasses for patients,
because these are functions of optical clinics; (3) It cannot sell
reading and similar eyeglasses without a prescription having first
been made by an independent optometrist or independent optical
clinic. Acebedo can only sell directly to the public, without need of
a prescription, Ray-Ban and similar eyeglasses; (4) It cannot advertise
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optical lenses and eyeglasses, but can advertise Ray-Ban and similar
glasses and frames; (5) It is allowed to grind lenses but only upon the
prescription of an independent optometrist.
On December 5, 1988, private respondent Samahan ng Optometrist
Sa Pilipinas (SOPI lodged a complaint against the petitioner alleging
that Acebedo had violated the conditions set forth in its business
permit and requesting the cancellation and/or revocation of such
permit. 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.
Issue: Whether the City Mayor has the authority to impose special
conditions, as a valid exercise of police power, in the grant of
business permits
DECISION
CHICO-NAZARIO, J.:
When CAMEC failed to pay despite the given extension, the bank,
now referred to as the AIIBP, discovered that TCT No. N-130671 was
spurious, the property described therein non-existent, and that the
property covered by TCT No. C-52576 had a prior existing mortgage
in favor of one Divina Pablico.
On 16 June 1995, the instant petition was filed with the Honorable
Supreme Court on the following assignment of errors:
III. Both the Islamic Bank and the Civil Service Commission erred
in finding petitioner Sawadjaan of having deliberately reporting
false information and therefore guilty of Dishonesty and
Conduct Prejudicial to the Best Interest of the Service and
penalized with dismissal from the service.
Section 26. Powers of the Board. The Board of Directors shall have the
broadest powers to manage the Islamic Bank, x x x The Board shall
adopt policy guidelines necessary to carry out effectively the
provisions of this Charter as well as internal rules and regulations
necessary for the conduct of its Islamic banking business and all
matters related to personnel organization, office functions and salary
administration. (Italics ours)
The above two (2) provisions relied upon by petitioner does not
require the Islamic Bank [AIIBP] to promulgate rules of procedure
before administrative discipline may be imposed upon its
employees. The internal rules of procedures ordained to be adopted
by the Board refers to that necessary for the conduct of its Islamic
banking business and all matters related to "personnel organization,
office functions and salary administration." On the contrary, Section
26 of RA 6848 gives the Board of Directors of the Islamic Bank the
"broadest powers to manage the Islamic Bank." This grant of broad
powers would be an idle ceremony if it would be powerless to
discipline its employees.
The second assignment of error must likewise fail. The issue is raised
for the first time via this petition for certiorari. Petitioner submitted
himself to the jurisdiction of the CSC. Although he could have raised
the alleged lack of jurisdiction in his Motion for Reconsideration of
Resolution No. 94-4483 of the CSC, he did not do so. By filing the
Motion for Reconsideration, he is estopped from denying the CSC’s
jurisdiction over him, as it is settled rule that a party who asks for an
affirmative relief cannot later on impugn the action of the tribunal as
without jurisdiction after an adverse result was meted to him.
Although jurisdiction over the subject matter of a case may be
objected to at any stage of the proceedings even on appeal, this
particular rule, however, means that jurisdictional issues in a case
can be raised only during the proceedings in said case and during
the appeal of said case (Aragon v. Court of Appeals, 270 SCRA 603).
The case at bar is a petition [for] certiorari and not an appeal.
But even on the merits the argument must falter. Item No. 1 of CSC
Resolution No. 93-2387 dated 29 June 1993, provides:
Petitioner’s efforts are unavailing, and we deny his petition for its
procedural and substantive flaws.
It is settled that a special civil action for certiorari will not lie as a
substitute for the lost remedy of appeal,37 and though there are
instances38 where the extraordinary remedy of certiorari may be
resorted to despite the availability of an appeal,39 we find no special
reasons for making out an exception in this case.
The AIIBP was created by Rep. Act No. 6848. It has a main office
where it conducts business, has shareholders, corporate officers, a
board of directors, assets, and personnel. It is, in fact, here
represented by the Office of the Government Corporate Counsel,
"the principal law office of government-owned corporations, one of
which is respondent bank."42 At the very least, by its failure to submit
its by-laws on time, the AIIBP may be considered a de facto
corporation43 whose right to exercise corporate powers may not be
inquired into collaterally in any private suit to which such
corporations may be a party.44
Moreover, a corporation which has failed to file its by-laws within the
prescribed period does not ipso facto lose its powers as such. The
SEC Rules on Suspension/Revocation of the Certificate of Registration
of Corporations,45 details the procedures and remedies that may be
availed of before an order of revocation can be issued. There is no
showing that such a procedure has been initiated in this case.
...
From the foregoing, we find that the CSC and the court a quo
committed no grave abuse of discretion when they sustained
Sawadjaan’s dismissal from service. Grave abuse of discretion
implies such capricious and whimsical exercise of judgment as
equivalent to lack of jurisdiction, or, in other words, where the power
is exercised in an arbitrary or despotic manner by reason of passion
or personal hostility, and it must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law.50 The records
show that the respondents did none of these; they acted in
accordance with the law.
SO ORDERED.
PUNO, J.:
This petition for certiorari seeks to annul and set aside the decision of
the Regional Trial Court, Branch 58, Angeles City which ordered the
Municipal Circuit Trial Court, Mabalacat and Magalang, Pampanga
to dismiss Civil Case No. 1214 for lack of jurisdiction.
The first element requires that the controversy must arise out of
intracorporate or partnership relations between and among
stockholders, members, or associates; between any or all of them
and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State in so far
as it concerns their individual franchises. 10 The second element
requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation, partnership or
association or deal with the internal affairs of the corporation,
partnership or association. 11 After all, the principal function of the
SEC is the supervision and control of corporations, partnership and
associations with the end in view that investments in these entities
may be encouraged and protected, and their entities may be
encouraged and protected, and their activities pursued for the
promotion of economic development. 12
SO ORDERED.
Footnotes
HELD: No. The regular courts have jurisdiction over the case. The case
between Lozano and Anda is not an intra-corporate dispute.
UMAJODA is not yet incorporated. It is yet to submit its articles of
incorporation to the SEC. It is not even a dispute between KAMAJDA
or SAMAJODA. The controversy between Lozano and Anda does not
arise from intra-corporate relations but rather from a mere conflict
from their plan to merge the two associations.
DECISION
KAPUNAN, J.:
This prompted petitioner to file a civil case before the Regional Trial
Court of Manila. Petitioner sued Henri Kahn in his personal capacity
and as President of the Federation and impleaded the Federation as
an alternative defendant. Petitioner sought to hold Henri Kahn liable
for the unpaid balance for the tickets purchased by the Federation
on the ground that Henri Kahn allegedly guaranteed the said
obligation.6
Henri Kahn filed his answer with counterclaim. While not denying the
allegation that the Federation owed the amount P207,524.20,
representing the unpaid balance for the plane tickets, he averred
that the petitioner has no cause of action against him either in his
personal capacity or in his official capacity as president of the
Federation. He maintained that he did not guarantee payment but
merely acted as an agent of the Federation which has a separate
and distinct juridical personality.7
On the other hand, the Federation failed to file its answer, hence,
was declared in default by the trial court.8
In due course, the trial court rendered judgment and ruled in favor
of the petitioner and declared Henri Kahn personally liable for the
unpaid obligation of the Federation. In arriving at the said ruling, the
trial court rationalized:
xxx
x x x9
Petitioner now seeks recourse to this Court and alleges that the
respondent court committed the following assigned errors:13
xxx
Clearly the above cited provisions require that before an entity may
be considered as a national sports association, such entity must be
recognized by the accrediting organization, the Philippine Amateur
Athletic Federation under R.A. 3135, and the Department of Youth
and Sports Development under P.D. 604. This fact of recognition,
however, Henri Kahn failed to substantiate. In attempting to prove
the juridical existence of the Federation, Henri Kahn attached to his
motion for reconsideration before the trial court a copy of the
constitution and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation has
indeed been recognized and accredited by either the Philippine
Amateur Athletic Federation or the Department of Youth and Sports
Development. Accordingly, we rule that the Philippine Football
Federation is not a national sports association within the purview of
the aforementioned laws and does not have corporate existence of
its own.
Thus being said, it follows that private respondent Henry Kahn should
be held liable for the unpaid obligations of the unincorporated
Philippine Football Federation. It is a settled principal in corporation
law that any person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such privileges
and becomes personally liable for contract entered into or for other
acts performed as such agent.14 As president of the Federation,
Henri Kahn is presumed to have known about the corporate
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existence or non-existence of the Federation. We cannot subscribe
to the position taken by the appellate court that even assuming that
the Federation was defectively incorporated, the petitioner cannot
deny the corporate existence of the Federation because it had
contracted and dealt with the Federation in such a manner as to
recognize and in effect admit its existence.15 The doctrine of
corporation by estoppel is mistakenly applied by the respondent
court to the petitioner. The application of the doctrine applies to a
third party only when he tries to escape liability on a contract from
which he has benefited on the irrelevant ground of defective
incorporation.16 In the case at bar, the petitioner is not trying to
escape liability from the contract but rather is the one claiming from
the contract.
SO ORDERED.
x---------------------------------------------------------x
BELLOSILLO, J.:
The trial court ruled that the contracts of lease executed between
FIRESTONE and NDC were interrelated and inseparable because
"each of them forms part of the integral system of plaintiff's brick
manufacturing plant x x x if one of the leased premises will be taken
apart or otherwise detached from the two others, the purpose of the
lease as well as plaintiff's business operations would be rendered
useless and inoperative."16 It thus decreed that FIRESTONE could
exercise its option to purchase the property until 2 June 1999
inasmuch as the 22 December 1978 contract embodied a covenant
to renew the lease for another ten (10) years at the option of the
lessee as well as an agreement giving the lessee the right of first
refusal.
We do not see it the way PUP and NDC did. It is elementary that a
party to a contract cannot unilaterally withdraw a right of first refusal
that stands upon valuable consideration. That principle was clearly
upheld by the Court of Appeals when it denied on 6 June 2000 the
twin motions for reconsideration filed by PUP and NDC on the ground
that the appellants failed to advance new arguments substantial
enough to warrant a reversal of the Decision sought to be
reconsidered.23 On 28 June 2000 PUP filed an urgent motion for an
additional period of fifteen (15) days from 29 June 2000 or until 14
July 2000 within which to file a Petition for Review on Certiorari of the
Decision of the Court of Appeals.
On the last day of the extended period PUP filed its Petition for
Review on Certiorari assailing the Decision of the Court of Appeals of
6 December 1999 as well as the Resolution of 6 June 2000 denying
reconsideration thereof. PUP raised two issues: (a) whether the courts
a quo erred when they "conjectured" that the transfer of the leased
property from NDC to PUP amounted to a sale; and, (b) whether
FIRESTONE can rightfully invoke its right of first refusal. Petitioner
posited that if we were to place our imprimatur on the decisions of
the courts a quo, "public welfare or specifically the constitutional
priority accorded to education" would greatly be prejudiced.24
On the other hand, NDC separately filed its own Petition for Review
and advanced arguments which, in fine, centered on whether or
not the transaction between petitioners NDC and PUP amounted to
a sale considering that "ownership of the property remained with the
government."29 Petitioner NDC introduced the novel proposition that
if the parties involved are both government entities the transaction
cannot be legally called a sale.
We believe that the courts a quo did not hypothesize, much less
conjure, the sale of the disputed property by NDC in favor of
petitioner PUP. Aside from the fact that the intention of NDC and PUP
to enter into a contract of sale was clearly expressed in the
Memorandum Order No. 214,31 a close perusal of the circumstances
of this case strengthens the theory that the conveyance of the
property from NDC to PUP was one of absolute sale, for a valuable
consideration, and not a mere paper transfer as argued by
petitioners.
Contrary to what petitioners PUP and NDC propose, there is not just
one party involved in the questioned transaction. Petitioners NDC
and PUP have their respective charters and therefore each
possesses a separate and distinct individual personality.33 The
inherent weakness of NDC's proposition that there was no sale as it
was only the government which was involved in the transaction thus
reveals itself. Tersely put, it is not necessary to write an extended
dissertation on government owned and controlled corporations and
their legal personalities. Beyond cavil, a government owned and
controlled corporation has a personality of its own, distinct and
separate from that of the government.34 The intervention in the
transaction of the Office of the President through the Executive
Secretary did not change the independent existence of these
entities. The involvement of the Office of the President was limited to
brokering the consequent relationship between NDC and PUP. But
the withdrawal of the appeal by the Executive Secretary is
considered significant as he knew, after a review of the records, that
the transaction was subject to existing liens and encumbrances,
particularly the priority to purchase the leased premises in favor of
FIRESTONE.
True that there may be instances when a particular deed does not
disclose the real intentions of the parties, but their action may
All three (3) essential elements of a valid sale, without which there
can be no sale, were attendant in the "disposition" and "transfer" of
the property from NDC to PUP - consent of the parties, determinate
subject matter, and consideration therefor.
Should the LESSOR desire to sell the leased premises during the term
of this Agreement, or any extension thereof, the LESSOR shall first give
to the LESSEE, which shall have the right of first option to purchase
the leased premises subject to mutual agreement of both parties.38
In the instant case, the right of first refusal is an integral and indivisible
part of the contract of lease and is inseparable from the whole
contract. The consideration for the right is built into the reciprocal
obligations of the parties. Thus, it is not correct for petitioners to insist
that there was no consideration paid by FIRESTONE to entitle it to the
exercise of the right, inasmuch as the stipulation is part and parcel of
the contract of lease making the consideration for the lease the
same as that for the option.
SO ORDERED.
Bellosilo, J.:
Facts:
Issue:
Ruling
A contract of sale, as defined in the Civil Code, is a contract where
one of the parties obligates himself to transfer the ownership of and
to deliver a determinate thing to the other or others who shall pay
therefore a sum certain in money or its equivalent. It is therefore a
general requisite for the existence of a valid and enforceable
contract of sale that it be mutually obligatory, i.e., there should be a
concurrence of the promise of the vendor to sell a determinate thing
and the promise of the vendee to receive and pay for the property
so delivered and transferred. The Civil Code provision is, in effect, a
"catch-all" provision which effectively brings within its grasp a whole
gamut of transfers whereby ownership of a thing is ceded for a
consideration.
All three (3) essential elements of a valid sale, without which there
can be no sale, were attendant in the "disposition" and "transfer" of
the property from NDC to PUP - consent of the parties, determinate
subject matter, and consideration therefor.
SO ORDERED.1âwphi1.nêt
Facts: During a spot audit in 1977, the auditors from the Philippine
National Red Cross (PNRC) headquarters discovered a case
shortage in the funds of its Bohol chapter. The chapter administrator,
petitioner Baluyot, was held accountable and thereafter,
respondent Holganza as member of the board Bohol chapter, filed a
complaint with the Ofc. of the Ombudsman for malversation. Upon
recommendation of respondent Militante, an administratiave docket
of dishonesty was also opened against Baluyot. Baluyot raised the
defense that the Ombudsman had no jurisdiction as he had
authority only over government owned or controlled corporations
which the PNRC was not. She gives as evidence of its private
character 1) it does not receive budgetary support from the
government and all money given to it by the latter and its
instrumentalities become private funds of the organization. 2) funds
for the payment of personnel’s salaries and other emoluments come
from yearly fund campaigns, private contributions and rentals from
its properties. 3) it is not audited by COA. PNRC, petitioner claims
falls under the International Federation of Red Cross, Swiss-based
organization.
DECISION
QUISUMBING, J.:
Only holders of Class A shares have the right to vote and the
right to be elected as directors or as corporate officers.3
(Emphasis supplied)
On March 22, 2001, after their protest was given short shrift, herein
petitioners filed a Complaint for Injunction, Accounting and
Damages, docketed as Civil Case No. CV-01-0140 before the RTC of
Parañaque City, Branch 258. Said complaint was founded on two (2)
principal causes of action, namely:
Before the trial court, the herein petitioners alleged that they were
deprived of their right to vote and to be voted on as directors at the
annual stockholders’ meeting held on February 9, 2001, because
respondents had erroneously relied on Article VII of the Articles of
Incorporation of MCPI, despite Article VII being contrary to the
Corporation Code, thus null and void. Additionally, respondents
were in estoppel, because in the past, petitioners were allowed to
vote and to be elected as members of the board. They further
claimed that the privilege granted to the Class "A" shareholders was
more in the nature of a right granted to founder’s shares.
At the pre-trial, the trial court ruled that a partial judgment could be
rendered on the first cause of action and required the parties to
submit their respective position papers or memoranda.
On November 26, 2001, the RTC rendered the Partial Judgment, the
dispositive portion of which reads:
SO ORDERED.6
In finding for the respondents, the trial court ruled that corporations
had the power to classify their shares of stocks, such as "voting and
non-voting" shares, conformably with Section 67 of the Corporation
Code of the Philippines. It pointed out that Article VII of both the
original and amended Articles of Incorporation clearly provided that
only Class "A" shareholders could vote and be voted for to the
exclusion of Class "B" shareholders, the exception being in instances
provided by law, such as those enumerated in Section 6, paragraph
6 of the Corporation Code. The RTC found merit in the respondents’
theory that the Articles of Incorporation, which defines the rights and
limitations of all its shareholders, is a contract between MCPI and its
shareholders. It is thus the law between the parties and should be
strictly enforced as to them. It brushed aside the petitioners’ claim
that the Class "A" shareholders were in estoppel, as the election of
Class "B" shareholders to the corporate board may be deemed as a
mere act of benevolence on the part of the officers. Finally, the
court brushed aside the "founder’s shares" theory of the petitioners
for lack of factual basis.
Hence, this petition submitting the sole legal issue of whether or not
the Court a quo, in rendering the Partial Judgment dated November
The issue for our resolution is whether or not holders of Class "B" shares
of the MCPI may be deprived of the right to vote and be voted for
as directors in MCPI.
The respondents then take the tack that the phrase "except when
otherwise provided by law" found in the amended Articles is only a
handwritten insertion and could have been inserted by anybody
and that no board resolution was ever passed authorizing or
approving said amendment.
Said contention is not for this Court to pass upon, involving as it does
a factual question, which is not proper in this petition. In an appeal
via certiorari, only questions of law may be reviewed.13 Besides,
respondents did not adduce persuasive evidence, but only bare
allegations, to support their suspicion. The presumption that in the
amendment process, the ordinary course of business has been
followed14 and that official duty has been regularly performed15 on
the part of the SEC, applies in this case.
SO ORDERED.
LEONARDO A. QUISUMBING
Footnotes
* On Leave.
** Sometimes "Arceli" in some parts of the records.
1 Rollo, pp. 44-47. Penned by Hon. Judge Raul E. De Leon.
2 Id. at 128-129.
3 Id. at 83-84.
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4 Id. at 71-72.
5 Id. at 377.
6 Rollo, p. 47.
7 SEC. 6. Classification of shares. – The shares of stock of stock
corporations may be divided into classes or series of shares, or
both, any of which classes or series of shares may have such
rights, privileges or restrictions as may be stated in the articles of
incorporation: Provided, That no share may be deprived of
voting rights except those classified and issued as "preferred" or
"redeemable" shares, unless otherwise provided in this Code:
Provided, further, That there shall always be a class or series of
shares which have complete voting rights. Any or all of the
shares or series of shares may have a par value or have no par
value as may be provided for in the articles of incorporation:
Provided, however, That banks, trust companies, insurance
companies, public utilities, and building and loan associations
shall not be permitted to issue no-par value shares of stock.
MARTINEZ, J.:
A day after Don Andres died, ANSCOR increased its capital stock to
P20M 16 and in 1966 further increased it to P30M. 17 In the same year
(December 1966), stock dividends worth 46,290 and 46,287 shares
were respectively received by the Don Andres estate 18 and Doña
Carmen from ANSCOR. Hence, increasing their accumulated
shareholdings to 138,867 and 138,864 19 common shares each. 20
AMNESTY:
We will deal first with the issue of tax amnesty. Section 1 of P.D. 67 46
provides:
General Rule
Sec. 83(b) of the 1939 NIRC was taken from the Section 115(g)(1) of
the U.S. Revenue Code of 1928. 60 It laid down the general rule
known as the proportionate test 61 wherein stock dividends once
issued form part of the capital and, thus, subject to income tax. 62
Specifically, the general rule states that:
The Exception
It is not the stock dividends but the proceeds of its redemption that
may be deemed as taxable dividends. Here, it is undisputed that at
the time of the last redemption, the original common shares owned
by the estate were only 25,247.5 91 This means that from the total of
108,000 shares redeemed from the estate, the balance of 82,752.5
(108,000 less 25,247.5) must have come from stock dividends.
Besides, in the absence of evidence to the contrary, the Tax Code
presumes that every distribution of corporate property, in whole or in
part, is made out of corporate profits 92 such as stock dividends. The
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capital cannot be distributed in the form of redemption of stock
dividends without violating the trust fund doctrine — wherein the
capital stock, property and other assets of the corporation are
regarded as equity in trust for the payment of the corporate
creditors. 93 Once capital, it is always capital. 94 That doctrine was
intended for the protection of corporate creditors. 95
The three
FIRST DIVISION
vs.
DECISION
MARTINEZ, J.:
A day after Don Andres died, ANSCOR increased its capital stock to
P20M 16 and in 1966 further increased it to P30M. 17 In the same year
(December 1966), stock dividends worth 46,290 and 46,287 shares
were respectively received by the Don Andres estate 18 and Doña
Carmen from ANSCOR. Hence, increasing their accumulated
shareholdings to 138,867 and 138,864 19 common shares each. 20
AMNESTY:
We will deal first with the issue of tax amnesty. Section 1 of P.D.
67 46 provides:
Sec. 83(b) of the 1939 NIRC was taken from the Section 115(g)(1) of
the U.S. Revenue Code of 1928. 60 It laid down the general rule
known as the proportionate test 61 wherein stock dividends once
issued form part of the capital and, thus, subject to income
tax. 62 Specifically, the general rule states that:
The Exception
The three elements in the imposition of income tax are: (1) there
must be gain or and profit, (2) that the gain or profit is realized or
received, actually or constructively, 108 and (3) it is not exempted by
law or treaty from income tax. Any business purpose as to why or
how the income was earned by the taxpayer is not a requirement.
Income tax is assessed on income received from any property,
activity or service that produces the income because the Tax Code
stands as an indifferent neutral party on the matter of where income
comes from. 109
The ruling in the American cases cited and relied upon by ANSCOR
that “the redeemed shares are the equivalent of dividend only if the
shares were not issued for genuine business purposes”, 111 or the
“redeemed shares have been issued by a corporation bona
fide” 112 bears no relevance in determining the non-taxability of the
proceeds of redemption ANSCOR, relying heavily and applying said
cases, argued that so long as the redemption is supported by valid
corporate purposes the proceeds are not subject to tax. 113 The
adoption by the courts below 114 of such argument is misleading if
not misplaced. A review of the cited American cases shows that the
presence or absence of “genuine business purposes” may be
material with respect to the issuance or declaration of stock
dividends but not on its subsequent redemption. The issuance and
the redemption of stocks are two different transactions. Although the
existence of legitimate corporate purposes may justify a
corporation’s acquisition of its own shares under Section 41 of the
Corporation Code, 115 such purposes cannot excuse the stockholder
from the effects of taxation arising from the redemption. If the
issuance of stock dividends is part of a tax evasion plan and thus,
without legitimate business reasons, the redemption becomes
suspicious which exempting clause. The substance of the whole
transaction, not its form, usually controls the tax consequences.116
The two purposes invoked by ANSCOR, under the facts of this case
are no excuse for its tax liability. First, the alleged “filipinization” plan
cannot be considered legitimate as it was not implemented until the
BIR started making assessments on the proceeds of the redemption.
Such corporate plan was not stated in nor supported by any Board
Resolution but a mere afterthought interposed by the counsel of
ANSCOR. Being a separate entity, the corporation can act only
through its Board of Directors. 117 The Board Resolutions authorizing
the redemptions state only one purpose — reduction of foreign
Both the Tax Court and the Court of Appeals found that ANSCOR
reclassified its shares into common and preferred, and that parts of
the common shares of the Don Andres estate and all of Doña
Carmen’s shares were exchanged for the whole 150.000 preferred
shares. Thereafter, both the Don Andres estate and Doña Carmen
remained as corporate subscribers except that their subscriptions
now include preferred shares. There was no change in their
proportional interest after the exchange. There was no cash flow.
Both stocks had the same par value. Under the facts herein, any
difference in their market value would be immaterial at the time of
exchange because no income is yet realized — it was a mere
corporate paper transaction. It would have been different, if the
exchange transaction resulted into a flow of wealth, in which case
income tax may be imposed. 125
SO ORDERED.
Footnotes
6 Ibid.
13 Rollo, p. 65.
22 Rollo, p. 68.
23 Annex “G”, Folder I, CTA Records, pp. 89-90; Rollo, pp. 69, 106.
27 Rollo, p. 70.
29 Rollo, p. 70.
34 Rollo, p. 72.
35 Rollo, p. 24.
38 The original provision was retained in R.A. 8424 except that the
reference to the year was deleted.
44 Binalay v. Manalo, 195 SCRA 374, 380 citing Sese v. IAC, 152 SCRA
585.
45 See Manila Bay Club Corp. v. CA , 62 SCAD 435; 315 Phil. 807
(1995); Pilar Development Corporation v. IAC, 146 SCRA 215 (1986).
53 Phil. Guaranty v. CIR, supra. See also Sec. 53 (c) 1939 Tax Code,
as amended by R.A. No. 2343 which provided in part that “. . . . Every
such person is made personally, liable for such tax . . . .”
55 Ibid.
WHEREAS, tax evaders who wish to relent and are willing to reform
may be reluctant to disclose their liability for income taxes because
of the criminal and civil penalties attendant to tax evasion;
65 Towne v. Eisner.
68 Ibid.
83 Bains v. United States, 289 F2d 644, 646 (1961); See also Ferro v.
Comm., 242 F2d 838; Callan Court Co. v. Cobb, 274 F2d 532.
85 Himmel v. Comm., 338 F2d 815; Blount v. Comm., 425 F2d 921;
Comm. v. Berenbaum, 369 F2d 337.
89 West Tax Law Dictionary, 1993 ed., p. 691; Seda v. CIR, 82 T.C. 484
(1984).
90 33A Am Jur 2d, Federal Taxation (1995) Par. 4852; Income Tax
Techniques, J.K. Lasser Institute, vol. IV, Chapter 11, 11, 02.
92 Sec. 83 (c) [1939 NIRC] later Sec. 66(c) [1977 NIRC, as amended]
and now Sec. 73 (c) [1997 Tax Code] provides that; “Dividends
distributed are deemed made from most recently accumulated
profits. — Any distribution made to the shareholders or members of a
corporation in the year nineteen hundred and thirty-nine or
subsequent tax years, shall be deemed to have been made from
the most recently accumulated profits or surplus, and shall constitute
a part of the annual income of the distributee for the year in which
received: . . . .”; See also Hyman v. Helvering, 71 F2d 342, 344.
96 Ibid.
98 Bradbury v. Comm., 298 F2d 111; Bloch v. U.S., 386 F2d 839.
99 Asmussen v. CIR, 36 B.T.A. (F) 878; See also Neff v. U.S., 301 F2d
330; Cohen v. U.S. , 192 F Supp. 216; Herman v. Comm., 283 F2d 227;
Kessner v. Comm., 248 F2d 943; Comm. v. Pope, 239 F2d 881; U.S. v.
Fewel, 255 F2d 496.
104 Bloch v. U.S., 261 F Supp. 597, 386 F2d 839; Boyle v. Comm., 187
F2d 557; Commissioner v. Estate of Bedford, 325 U.S. 283, 89 L ed
1611, 65 S Ct 1157; See also the cases of Hirsch, Flanagan and
Davis, supra.
108 Some authorities add that the gain or profit must not only
realized but must also recognized. (33A Am Jur 2d, Federal Taxation
[1995] par. 10000).
114 CTA Decision, pp. 31-32; Rollo, pp. 91-92; CA Decision, pp. 11-
13; Rollo, pp. 114-116.
117 Sec. 23 of B.P. 68, also known as the Corporation Code of the
Philippines.
121 See 1986 and 1997 Tax Code where exchange of stocks is
subject to a capital gains tax.
122 US v. Paire, 31 F. Supp. 898, 900; Kessler v. US, 124 F2d 152, 154.
124 McDonald Restaurant v. CIR, 688 F2d 520, (1982); West Tax Law
Dictionary, 1993 ed., Minn., West Publishing Co., pp. 676, 780.
128 2 Fletcher Cyc. Corp., p. 831 citing Best v. Oklahoma Mill Co., 14
Okla 135 Par 1005.
129 Sec. 5 par. 1, last sentence of Act 1459 [Old Corporation Law]
now Sec. 6 of B.P. 68 requires that the distinguishing features be
stated also in the Certificate of Stock.
ASC averred that it is not duty bound to withhold tax from the estate
because it redeemed the said shares for purposes of “Filipinization”
of ASC and also to reduce its remittance abroad.
HELD: No. The reason behind the redemption is not material. The
proceeds from a redemption is taxable and ASC is duty bound to
withhold the tax at source. The Soriano Estate definitely profited from
the redemption and such profit is taxable, and again, ASC had the
duty to withhold the tax. There was a total of 108,000 shares
redeemed from the estate. 25,247.5 of that was original issue from
the capital of ASC. The rest (82,752.5) of the shares are deemed to
have been from stock dividend shares. Sale of stock dividends is
taxable. It is also to be noted that in the absence of evidence to the
contrary, the Tax Code presumes that every distribution of corporate
property, in whole or in part, is made out of corporate profits such as
stock dividends.
It cannot be argued that all the 108,000 shares were distributed from
the capital of ASC and that the latter is merely redeeming them as
such. The capital cannot be distributed in the form of redemption of
stock dividends without violating the trust fund doctrine — wherein
the capital stock, property and other assets of the corporation are
regarded as equity in trust for the payment of the corporate
creditors. Once capital, it is always capital. That doctrine was
intended for the protection of corporate creditors.
Herein parties debate only legal issues, no issues of fact having been
raised by them in the court a quo. For ready reference, however, the
following narration of pertinent transactions and events is in order:
We come now to the merits of the case. The petitioner argues that it
cannot be compelled to redeem the preferred shares issued to the
private respondent. We agree. Respondent judge, in ruling that
petitioner must redeem the shares in question, stated that:
The respondent judge also stated that since the stock certificate
granted the private respondents the right to receive a quarterly
dividend of One Per Centum (1%) cumulative and participating, it
"clearly and unequivocably (sic) indicates that the same are "interest
bearing stocks" or stocks issued by a corporation under an
agreement to pay a certain rate of interest thereon. As such,
plaintiffs (private respondents herein) become entitled to the
payment thereof as a matter of right without necessity of a prior
declaration of dividend." 26 There is no legal basis for this observation.
Both Sec. 16 of the Corporation Law and Sec. 43 of the present
Corporation Code prohibit the issuance of any stock dividend
without the approval of stockholders, representing not less than two-
thirds (2/3) of the outstanding capital stock at a regular or special
meeting duly called for the purpose. These provisions underscore the
fact that payment of dividends to a stockholder is not a matter of
right but a matter of consensus. Furthermore, "interest bearing
stocks", on which the corporation agrees absolutely to pay interest
before dividends are paid to common stockholders, is legal only
when construed as requiring payment of interest as dividends from
net earnings or surplus only. 27 Clearly, the respondent judge, in
compelling the petitioner to redeem the shares in question and to
Anent the issue of prescription, this Court so holds that the claim of
private respondent is already barred by prescription as well as
laches. Art. 1144 of the New Civil Code provides that a right of
action that is founded upon a written contract prescribes in ten (10)
years. The letter-demand made by the private respondents to the
petitioner was made only on January 5, 1979, or almost eighteen
years after receipt of the written contract in the form of the stock
certificate. As noted earlier, this letter-demand, significantly, was not
formally offered in evidence, nor were any other evidence of
demand presented. Therefore, we conclude that the only time the
private respondents saw it fit to assert their rights, if any, to the
preferred shares of stock, was after the lapse of almost eighteen
years. The same clearly indicates that the right of the private
respondents to any relief under the law has already prescribed.
Moreover, the claim of the private respondents is also barred by
laches. Laches has been defined as the failure or neglect, for an
unreasonable length of time, to do that which by exercising due
diligence could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned
it or declined to assert it. 28
Considering that the terms and conditions set forth in the stock
certificate clearly indicate that redemption of the preferred shares
may be made at any time after the lapse of two years from the date
of issue, private respondents should have taken it upon themselves,
after the lapse of the said period, to inquire from the petitioner the
reason why the said shares have not been redeemed. As it is, not
only two years had lapsed, as agreed upon, but an additional
sixteen years passed before the private respondents saw it fit to
demand their right. The petitioner, at the time it issued said preferred
shares to the private respondents in 1961, could not have known that
it would be suffering from chronic reserve deficiency twelve years
later. Had the private respondents been vigilant in asserting their
rights, the redemption could have been effected at a time when the
petitioner bank was not suffering from any financial crisis.
Footnotes
Held:
1. A preferred share of stock is one which entitles the holder thereof
to certain preferences over the holders of common stock. The
preferences are designed to induce persons to subscribe for shares
DECISION
TINGA, J.:
For their part, petitioners claim that the principle of res judicata does
not apply to the instant case. They argue that the instant petition is
separate and distinct from G.R. No. 131315, there being no identity
of parties, and more importantly, the parties in the two petitions
have their own distinct rights and interests in relation to the subject
matter in litigation. For the same reasons, they claim that counsel for
petitioners cannot be found guilty of forum-shopping.14
The petition must be denied, not on res judicata, but on the ground
that like the petition in G.R. No. 131315 it fails to impute reversible
error to the challenged Court of Appeals’ Decision.
Absolute identity of parties is not a condition sine qua non for res
judicata to apply—a shared identity of interest is sufficient to invoke
the coverage of the principle.22 However, there is no identity of
parties between the two cases. The parties in the two petitions have
their own rights and interests in relation to the subject matter in
litigation. As stated by petitioners in their Reply to Respondents’
Memorandum,23 there are no two separate actions filed, but rather,
two separate petitions for review on certiorari filed by two distinct
parties with the Court and represented by their own counsels, arising
from an adverse consolidated decision promulgated by the Court of
Appeals in one action or proceeding.24 As such, res judicata is not
present in the instant case.
The petition in this case involves the same facts and substantially the
same issues and arguments as those in G.R. No. 131315 which the
First Division has long denied with finality. The First Division found the
petition before it inadequate in failing to raise any reversible error on
the part of the Court of Appeals. We reach a similar conclusion as
regards the present petition.
The crucial issue in this case is whether it is the company’s stock and
transfer book, or its 1952 Articles of Incorporation, which determines
stockholders’ shareholdings, and provides the basis for computing
the quorum.
....
....
8. That the amount of the entire capital stock which has been
actually subscribed is TWENTY ONE THOUSAND SIX HUNDRED
PESOS (P21,600.00) and the following persons have subscribed
for the number of shares and amount of capital stock set out
after their respective names:
700 P 14,000.00
76 P7,600.0030
On the other hand, a stock and transfer book is the book which
records the names and addresses of all stockholders arranged
alphabetically, the installments paid and unpaid on all stock for
which subscription has been made, and the date of payment
thereof; a statement of every alienation, sale or transfer of stock
made, the date thereof and by and to whom made; and such other
entries as may be prescribed by law.31 A stock and transfer book is
necessary as a measure of precaution, expediency and
convenience since it provides the only certain and accurate
method of establishing the various corporate acts and transactions
and of showing the ownership of stock and like matters.32 However, a
stock and transfer book, like other corporate books and records, is
not in any sense a public record, and thus is not exclusive evidence
of the matters and things which ordinarily are or should be written
therein.33 In fact, it is generally held that the records and minutes of a
corporation are not conclusive even against the corporation but are
prima facie evidence only,34 and may be impeached or even
contradicted by other competent evidence.35 Thus, parol evidence
may be admitted to supply omissions in the records or explain
ambiguities, or to contradict such records.36
This is precisely the reason why the Stock and Transfer Book was
not given probative value. Did the shares, which were not
recorded in the Stock and Transfer Book, but were recorded in
the Articles of Iincorporation just vanish into thin air? . . . .39
As shown above, at the time the corporation was set-up, there were
already seven hundred seventy-six (776) issued and outstanding
shares as reflected in the articles of incorporation. No proof was
adduced as to any transaction effected on these shares from the
time PMMSI was incorporated up to the time the instant petition was
filed, except for the thirty-three (33) shares which were recorded in
the stock and transfer book in 1978, and the additional one hundred
thirty-two (132) in 1982. But obviously, the shares so ordered recorded
in the stock and transfer book are among the shares reflected in the
articles of incorporation as the shares subscribed to by the
incorporators named therein.
SO ORDERED.
Lanuza vs. CA
Facts:
Petitioners seek to nullify the Court of Appeals’ Decision in CA–
G.R. SP No. 414731 promulgated on 18 August 1997, affirming the
SEC Order dated 20 June 1996, and the Resolution2 of the Court of
Appeals dated 31 October 1997 which denied petitioners’ motion
for reconsideration.
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was
incorporated, with seven hundred (700) founders’ shares and
seventy-six (76) common shares as its initial capital stock subscription
reflected in the articles of incorporation
Onrubia et. al, who were in control of PMMSI registered the
company’s stock and transfer book for the first time in 1978,
recording thirty-three (33) common shares as the only issued and
outstanding shares of PMMSI.
In 1979, a special stockholders’ meeting was called and held on
the basis of what was considered as a quorum of twenty-seven (27)
common shares, representing more than two-thirds (2/3) of the
common shares issued and outstanding.
In 1982, Juan Acayan, one of the heirs of the incorporators filed
a petition for the registration of their property rights was filed before
the SEC over 120 founders’ shares and 12 common shares owned by
their father
SEC Hearing Officer: heirs of Acayan were entitled to the
claimed shares and called for a special stockholders’ meeting to
elect a new set of officers.
SEC en banc: affirmed the decision
As a result, the shares of Acayan were recorded in the stock and
transfer book.
On May 6, 1992, a special stockholders’ meeting was held to
elect a new set of directors
Onrubia et al filed a petition with SEC questioning the validity of
said meeting alleging that the quorum for the said meeting should
not be based on the 165 issued and outstanding shares as per the
stock and transfer book, but on the initial subscribed capital stock of
seven hundred seventy-six (776) shares, as reflected in the 1952
Articles of Incorporation
Petition was dismissed
SC en banc: shares of the deceased incorporators should be
duly represented by their respective administrators or heirs
concerned. Called for a stockholders meeting on the basis of the
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stockholdings reflected in the articles of incorporation for the
purpose of electing a new set of officers for the corporation
Lanuza, Acayan et al, who are PMMSI stockholders, filed a
petition for review with the CA, raising the following issues:
1. whether the basis the outstanding capital stock and accordingly
also for determining the quorum at stockholders’ meetings it should
be the 1978 stock and transfer book or if it should be the 1952 articles
of incorporation
(They contended that the basis is the stock and transfer book, not
articles of incorporation in computing the quorum)
2. whether the Espejo decision (decision of SEC en banc ordering
the recording of the shares of Jose Acayan in the stock and transfer
book) is applicable to the benefit of Onrubia et al
CA decision:
1. For purposes of transacting business, the quorum should be
based on the outstanding capital stock as found in the articles of
incorporation
2. To require a separate judicial declaration to recognize the shares
of the original incorporators would entail unnecessary delay and
expense. Besides. the incorporators have already proved their
stockholdings through the provisions of the articles of incorporation.
Appeal was made by Lanuza et al before the SC
Lanuza et al’ contention:
Ruling:
Articles of Incorporation
- Defines the charter of the corporation and the contractual
relationships between the State and the corporation, the
stockholders and the State, and between the corporation and its
stockholders.
- Contents are binding, not only on the corporation, but also on its
shareholders.
Stock and transfer book
- Book which records the names and addresses of all stockholders
arranged alphabetically, the installments paid and unpaid on all
stock for which subscription has been made, and the date of
payment thereof; a statement of every alienation, sale or transfer of
stock made, the date thereof and by and to whom made; and such
other entries as may be prescribed by law
- necessary as a measure of precaution, expediency and
convenience since it provides the only certain and accurate
method of establishing the various corporate acts and transactions
and of showing the ownership of stock and like matters
- Not public record, and thus is not exclusive evidence of the
matters and things which ordinarily are or should be written therein
In this case, the articles of incorporation indicate that at the time
of incorporation, the incorporators were bona fide stockholders of
700 founders’ shares and 76 common shares. Hence, at that time,
the corporation had 776 issued and outstanding shares.
According to Sec. 52 of the Corp Code, “a quorum shall consist
of the stockholders representing a majority of the outstanding
capital stock.” As such, quorum is based on the totality of the shares
which have been subscribed and issued, whether it be founders’
shares or common shares
To base the computation of quorum solely on the obviously
deficient, if not inaccurate stock and transfer book, and completely
disregarding the issued and outstanding shares as indicated in the
articles of incorporation would work injustice to the owners and/or
successors in interest of the said shares.
The stock and transfer book of PMMSI cannot be used as the
sole basis for determining the quorum as it does not reflect the
totality of shares which have been subscribed, more so when the
articles of incorporation show a significantly larger amount of shares
issued and outstanding as compared to that listed in the stock and
transfer book.
Ang Mga Kaanib sa Iglesia ng Dios vs. Iglesia ng Dios Kay Kristo
Hesus (372 SCRA 171 [2001])
YNARES-SANTIAGO, J.:
On July 16, 1979, respondent corporation filed with the SEC a petition
to compel the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng
Katotohanan to change its corporate name, which petition was
docketed as SEC Case No. 1774. On May 4, 1988, the SEC rendered
judgment in favor of respondent, ordering the Iglesia ng Dios Kay
Kristo Hesus, Haligi at Saligan ng Katotohanan to change its
corporate name to another name that is not similar or identical to
any name already used by a corporation, partnership or association
registered with the Commission.5 No appeal was taken from said
decision.
It appears that during the pendency of SEC Case No. 1774, Soriano,
et al., caused the registration on April 25, 1980 of petitioner
corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus,
H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi at
Saligan ng Katotohanan.6
SO ORDERED.7
II
III
IV
Likewise, the issue of prescription, which petitioner raised for the first
time on appeal to the Court of Appeals, is untenable. Its failure to
raise prescription before the SEC can only be construed as a waiver
of that defense.16 At any rate, the SEC has the authority to de-
register at all times and under all circumstances corporate names
which in its estimation are likely to spawn confusion. It is the duty of
the SEC to prevent confusion in the use of corporate names not only
The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas,
Inc." in petitioner's name are, as correctly observed by the SEC,
merely descriptive of and also referring to the members, or kaanib,
of respondent who are likewise residing in the Philippines. These
words can hardly serve as an effective differentiating medium
necessary to avoid confusion or difficulty in distinguishing petitioner
from respondent. This is especially so, since both petitioner and
respondent corporations are using the same acronym — H.S.K.;19 not
to mention the fact that both are espousing religious beliefs and
operating in the same place. Parenthetically, it is well to mention
that the acronym H.S.K. used by petitioner stands for "Haligi at
Saligan ng Katotohanan."20
SO ORDERED.
RULING: The additional words "Ang Mga Kaanib " and "Sa Bansang
Pilipinas, Inc." in petitioner's name are, as correctly observed by the
SEC, merely descriptive of and also referring to the members, or
kaanib, of respondent who are likewise residing in the Philippines.
These words can hardly serve as an effective differentiating medium
necessary to avoid confusion or difficulty in distinguishing petitioner
from respondent. This is especially so, since both petitioner and
respondent corporations are using the same acronym — H.S.K.; not
to mention the fact that both are espousing religious beliefs and
operating in the same place. The fact that there are other non-stock
religious societies or corporations using the names Church of the
Hyatt Elevators vs. Goldstar Elevators, Phils. (473 SCRA 705 [2005]
DECISION
PANGANIBAN, J.:
The Case
The Facts
The relevant facts of the case are summarized by the CA in this wise:
"On February 23, 1999, HYATT filed a Complaint for unfair trade
practices and damages under Articles 19, 20 and 21 of the Civil
Code of the Philippines against LG Industrial Systems Co. Ltd. (LGISC)
and LG International Corporation (LGIC), alleging among others,
that: in 1988, it was appointed by LGIC and LGISC as the exclusive
distributor of LG elevators and escalators in the Philippines under a
‘Distributorship Agreement’; x x x LGISC, in the latter part of 1996,
made a proposal to change the exclusive distributorship agency to
that of a joint venture partnership; while it looked forward to a
healthy and fruitful negotiation for a joint venture, however, the
various meetings it had with LGISC and LGIC, through the latter’s
representatives, were conducted in utmost bad faith and with
malevolent intentions; in the middle of the negotiations, in order to
put pressures upon it, LGISC and LGIC terminated the Exclusive
Distributorship Agreement; x x x [A]s a consequence, [HYATT]
suffered P120,000,000.00 as actual damages, representing loss of
earnings and business opportunities, P20,000,000.00 as damages for
its reputation and goodwill, P1,000,000.00 as and by way of
exemplary damages, and P500,000.00 as and by way of attorney’s
fees.
"On March 17, 1999, LGISC and LGIC filed a Motion to Dismiss raising
the following grounds: (1) lack of jurisdiction over the persons of
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defendants, summons not having been served on its resident agent;
(2) improper venue; and (3) failure to state a cause of action. The
[trial] court denied the said motion in an Order dated January 7,
2000.
"On March 6, 2000, LGISC and LGIC filed an Answer with Compulsory
Counterclaim ex abundante cautela. Thereafter, they filed a ‘Motion
for Reconsideration and to Expunge Complaint’ which was denied.
"On December 18, 2000, LG OTIS (LGISC) and LGIC filed their
opposition to HYATT’s motion to amend the complaint. It argued
that: (1) the inclusion of GOLDSTAR as party-defendant would lead
to a change in the theory of the case since the latter took no part in
the negotiations which led to the alleged unfair trade practices
subject of the case; and (b) HYATT’s move to amend the complaint
at that time was dilatory, considering that HYATT was aware of the
existence of GOLDSTAR for almost two years before it sought its
inclusion as party-defendant.
The CA ruled that the trial court had committed palpable error
amounting to grave abuse of discretion when the latter denied
respondent’s Motion to Dismiss. The appellate court held that the
venue was clearly improper, because none of the litigants "resided"
in Mandaluyong City, where the case was filed.
Sole Issue:
Venue
This Court has also definitively ruled that for purposes of venue, the
term "residence" is synonymous with "domicile."14 Correspondingly,
the Civil Code provides:
"Art. 51. When the law creating or recognizing them, or any other
provision does not fix the domicile of juridical persons, the same shall
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be understood to be the place where their legal representation is
established or where they exercise their principal functions." 15
Petitioner argues that the Rules of Court do not provide that when
the plaintiff is a corporation, the complaint should be filed in the
location of its principal office as indicated in its articles of
incorporation.17 Jurisprudence has, however, settled that the place
where the principal office of a corporation is located, as stated in
the articles, indeed establishes its residence.18 This ruling is important
in determining the venue of an action by or against a corporation,19
as in the present case.
"x x x. To insist that the proper venue is the actual principal office and
not that stated in its Articles of Incorporation would indeed create
confusion and work untold inconvenience. Enterprising litigants may,
out of some ulterior motives, easily circumvent the rules on venue by
the simple expedient of closing old offices and opening new ones in
another place that they may find well to suit their needs."23
"The rules on venue, like the other procedural rules, are designed to
insure a just and orderly administration of justice or the impartial and
evenhanded determination of every action and proceeding.
Obviously, this objective will not be attained if the plaintiff is given
unrestricted freedom to choose the court where he may file his
complaint or petition.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Associate Justice
W E C O N C U R:
ATTESTATION
ARTEMIO V. PANGANIBAN
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairman’s Attestation, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
Chief Justice
DECISION
CARPIO, J.:
The Case
This is a petition for review1 seeking to set aside the Decision2 dated
30 March 2001 of the Court of Appeals ("appellate court") in CA-G.R.
Antecedent Facts
BGC then filed a complaint for injunction on 21 April 1988 before the
trial court. On 26 May 1988, BGC amended its complaint to include
MSBF as its co-plaintiff.
The trial court agreed with BGC and MSBF that Proclamation No.
1670 gave MSBF the right to conduct the survey, which would
establish the seven-hectare area covered by MSBF’s usufructuary
rights. However, the trial court held that MSBF failed to act
seasonably on this right to conduct the survey. The trial court ruled
that the previous surveys conducted by MSBF covered 16 hectares,
and were thus inappropriate to determine the seven-hectare area.
The trial court concluded that to allow MSBF to determine the seven-
hectare area now would be grossly unfair to the grantor of the
usufruct.
SO ORDERED.5
Not content with the trial court’s ruling, BGC appealed the trial
court’s Decision to the appellate court. Initially, the appellate court
agreed with the trial court that Proclamation No. 1670 granted MSBF
the right to determine the location of the seven-hectare area
No costs.
SO ORDERED.6
The NHA filed a motion for reconsideration, which was denied by the
appellate court on 25 June 2001.
The Issues
BGC claims that the issue is now moot due to NHA’s demolition of
BGC’s facilities after the trial court dismissed BGC’s complaint for
We disagree.
BGC may have lost interest in this case due to the demolition of its
premises, but its co-plaintiff, MSBF, has not. The issue for resolution has
a direct effect on MSBF’s usufructuary rights. There is yet the central
question of the exact location of the seven-hectare area granted by
Proclamation No. 1670 to MSBF. This issue is squarely raised in this
petition. There is a need to settle this issue to forestall future disputes
and to put this 20-year litigation to rest.
The entire area bounded by Agham Road to the east, EDSA to the
west, Quezon Avenue to the south and by a creek to the north
measures approximately 16 hectares. Proclamation No. 1670 gave
MSBF a usufruct over only a seven-hectare area. The BGC’s leased
portion is located along EDSA.
MSBF’s survey shows that BGC’s stall is within the seven-hectare area.
On the other hand, NHA’s survey shows otherwise. The entire
controversy revolves on the question of whose land survey should
prevail.
ART. 565. The rights and obligations of the usufructuary shall be those
provided in the title constituting the usufruct; in default of such title,
or in case it is deficient, the provisions contained in the two following
Chapters shall be observed.
In the present case, Proclamation No. 1670 is the title constituting the
usufruct. Proclamation No. 1670 categorically states that the seven-
hectare area shall be determined "by future survey under the
administration of the Foundation subject to private rights if there be
any." The appellate court and the trial court agree that MSBF has the
latitude to determine the location of its seven-hectare usufruct
portion within the 16-hectare area. The appellate court and the trial
court disagree, however, whether MSBF seasonably exercised this
right.
To prefer the NHA’s survey to MSBF’s survey will strip MSBF of most of
its main facilities. Only the main building of MSBF will remain with
MSBF since the main building is near the corner of EDSA and Quezon
Avenue. The rest of MSBF’s main facilities will be outside the seven-
hectare area.
ART. 601. The usufructuary shall be obliged to notify the owner of any
act of a third person, of which he may have knowledge, that may
be prejudicial to the rights of ownership, and he shall be liable should
he not do so, for damages, as if they had been caused through his
own fault.
SO ORDERED.
DECISION
YNARES-SANTIAGO, J.:
Thus, Yumul filed on October 3, 1996, before the SEC a petition for
mandamus with damages, with prayer that the Deed of Trust and
Assignment be recorded in the Stock and Transfer Book of Nautica
and that the certificate of stocks corresponding thereto be issued in
his name.10
On October 12, 2000, the SEC En Banc rendered the Decision,11 the
dispositive portion of which reads:
SO ORDERED.12
In the case at bar, the SEC and the Court of Appeals correctly found
Yumul to be a stockholder of Nautica, of one share of stock
recorded in Yumul’s name, although allegedly held in trust for Dee.
Nautica’s Articles of Incorporation and By-laws, as well as the
General Information Sheet filed with the SEC indicated that Yumul
was an incorporator and subscriber of one share.16 Even granting
that there was an agreement between Yumul and Dee whereby the
former is holding the share in trust for Dee, the same is binding only
as between them. From the corporation’s vantage point, Yumul is its
stockholder with one share, considering that there is no showing that
Yumul transferred his subscription to Dee, the alleged real owner of
the share, after Nautica’s incorporation.
... [A] transfer of shares of stock not recorded in the stock and
transfer book of the corporation is non-existent as far as the
corporation is concerned. As between the corporation on one
hand, and its shareholders and third persons on the other, the
corporation looks only to its books for the purpose of determining
who its shareholders are. It is only when the transfer has been
recorded in the stock and transfer book that a corporation may
rightfully regard the transferee as one of its stockholders. From this
time, the consequent obligation on the part of the corporation to
recognize such rights as it is mandated by law to recognize arises.
Thus, from the point of view of the corporation, Yumul was the owner
of one share of stock. As such, the SEC correctly ruled that he has
the right to inspect the books and records of Nautica,24 pursuant to
Section 74 of BP Blg. 68 which states that the records of all business
transactions of the corporation and the minutes of any meetings
shall be open to inspection by any director, trustee, stockholder or
member of the corporation at reasonable hours on business days
and he may demand, in writing, for a copy of excerpts from said
records or minutes, at his expense.
Anent this issue, the SEC did not make a categorical finding on
whether Yumul exercised his option and also on the validity of the
Deed of Trust and Assignment. Instead, it held that:
Neither did the Court of Appeals rule on the issue as it only held that:
Considering that the issue of the validity of the Deed of Trust and
Assignment is civil in nature, thus, under the competence of the
regular courts, and the failure of the SEC and the Court of Appeals
to make a determinative finding as to its validity, we are constrained
to refrain from ruling on whether or not Yumul can compel the
corporate secretary to register said deed. It is only after an
appropriate case is filed and decision rendered thereon by the
proper forum can the issue be resolved.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
KAPUNAN, J.:
The sudden turn of events sent VGCCI to seek redress from the Court
of Appeals. On 15 August 1994, the Court of Appeals rendered its
decision nullifying and setting aside the orders of the SEC and its
hearing officer on ground of lack of jurisdiction over the subject
matter and, consequently, dismissed petitioner's original complaint.
The Court of Appeals declared that the controversy between CBC
and VGCCI is not intra-corporate. It ruled as follows:
SO ORDERED. 20
II
ISSUES
The basic issue we must first hurdle is which body has jurisdiction over
the controversy, the regular courts or the SEC.
In this case, the need for the SEC's technical expertise cannot be
over-emphasized involving as it does the meticulous analysis and
correct interpretation of a corporation's by-laws as well as the
We have laid down the rule that the remand of the case
or of an issue to the lower court for further reception of
evidence is not necessary where the Court is in position to
resolve the dispute based on the records before it and
particularly where the ends of justice would not be
subserved by the remand thereof. Moreover, the Supreme
Court is clothed with ample authority to review matters,
even those not raised on appeal if it finds that their
consideration is necessary in arriving at a just disposition of
the case.
In the case at bar, since we already have the records of the case
(from the proceedings before the SEC) sufficient to enable us to
render a sound judgment and since only questions of law were
raised (the proper jurisdiction for Supreme Court review), we can,
The general rule really is that third persons are not bound
by the by-laws of a corporation since they are not privy
thereto (Fleischer v. Botica Nolasco, 47 Phil. 584). The
exception to this is when third persons have actual or
constructive knowledge of the same. In the case at bar,
petitioner had actual knowledge of the by-laws of private
respondent when petitioner foreclosed the pledge made
by Calapatia and when petitioner purchased the share
foreclosed on September 17, 1985. This is proven by the
fact that prior thereto, i.e., on May 14, 1985 petitioner
even quoted a portion of private respondent's by-laws
which is material to the issue herein in a letter it wrote to
private respondent. Because of this actual knowledge of
such by-laws then the same bound the petitioner as of the
time when petitioner purchased the share. Since the by-
laws was already binding upon petitioner when the latter
purchased the share of Calapatia on September 17, 1985
then the petitioner purchased the said share subject to
the right of the private respondent to sell the said share for
reasons of delinquency and the right of private
respondent to have a first lien on said shares as these
rights are provided for in the by-laws very very clearly. 36
SO ORDERED.
ROMERO, J.:
Admittedly, the right to amend the by-laws lies solely in the discretion
of the employer, this being in the exercise of management
prerogative or business judgment. However this right, extensive as it
may be, cannot impair the obligation of existing contracts or rights.
SO ORDERED.
Footnotes
2 Ibid., p. 59.
3 Id., p. 61.
8 Id., p. 10.
10 Id., p. 255.
ROMERO, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules
of Court is the resolution 1 of public respondent National Labor
Relations Commission 2 rendered on August 4, 1995, affirming in toto
the December 7, 1994 decision 3 of Labor Arbiter Pablo C. Espiritu
declaring petitioner PMI Colleges liable to pay private respondent
Alejandro Galvan P405,000.00 in unpaid wages and P40,532.00 as
attorney's fees.
III. Whether the petitioner was denied its right to procedural due
process; and
Thus, in San Miguel Foods, Inc. Cebu B-Men Feed Plant v. Hon.
Bienvenido Laguesma, 6 we were emphatic in declaring that:
To be sure, this does not mean that the Court would disregard
altogether the evidence presented. We merely declare that the
extent of review of evidence we ordinarily provide in other cases is
different when it is a special civil action of certiorari. The latter
commands us to merely determine whether there is basis established
on record to support the findings of a tribunal and such findings
meet the required quantum of proof, which in this instance, is
substantial evidence. Our deference to the expertise acquired by
quasi-judicial agencies and the limited scope granted to us in the
exercise of certiorari jurisdiction restrain us from going so far as to
probe into the correctness of a tribunal's evaluation of evidence,
unless there is palpable mistake and complete disregard thereof in
which case certiorari would be proper. In plain terms, in certiorari
proceedings, we are concerned with mere "errors of jurisdiction" and
not "errors of judgment." Thus:
In any event, granting that we may have to delve into the facts and
evidence of the parties, we still find no puissant justification for us to
adjudge both the Labor Arbiter's and NLRC's appreciation of such
evidence as indicative of any grave abuse of discretion.
Second. Petitioner bewails the fact that both the Labor Arbiter and
the NLRC accorded due weight to the documents prepared by
private respondent since they are said to be self-serving. "Self-serving
evidence" is not to be literally taken as evidence that serves one's
selfish interest. 12 The fact alone that most of the documents
submitted in evidence by private respondent were prepared by him
does not make them self-serving since they have been offered in the
proceedings before the Labor Arbiter and that ample opportunity
was given to petitioner to rebut their veracity and authenticity.
Petitioner, however, opted to merely deny them which denial,
ironically, is actually what is considered self-serving evidence 13 and,
Sec. 3. . . .
Thus, given the mandate of said rule, petitioner should have foreseen
that the Labor Arbiter, in view of the non-litigious nature of the
proceedings before it, might not proceed at all to trial. Petitioner
cannot now be heard to complain of lack of due process. The
following is apropos:
SO ORDERED.
Footnotes
In 1991, PMI Colleges hired the services of Alejandro Galvan for the
latter to teach in said institution. However, for unknown reasons, PMI
defaulted from paying the remunerations due to Galvan. Galvan
made demands but were ignored by PMI. Eventually, Galvan filed a
labor case against PMI. Galvan got a favorable judgment from the
Labor Arbiter; this was affirmed by the National Labor Relations
Commission. On appeal, PMI reiterated, among others, that the
employment of Galvan is void because it did not comply with its by-
laws. Apparently, the by-laws require that an employment contract
must be signed by the Chairman of the Board of PMI. PMI asserts that
Galvan’s employment contract was not signed by the Chairman of
the Board.
HELD: No. PMI Colleges never even presented a copy of the by-laws
to prove the existence of such provision. But even if it did, the
employment contract cannot be rendered invalid just because it
does not bear the signature of the Chairman of the Board of PMI. By-
Laws operate merely as internal rules among the stockholders, they
cannot affect or prejudice third persons who deal with the
corporation, unless they have knowledge of the same. In this case,
PMI was not able to prove that Galvan knew of said provision in the
by-laws when he was employed by PMI.
DECISION
GARCIA, J.:
On 15 September 1992, the board met and took up Cruz’s letter. The
records do not show what specific action/actions the board had
taken on the letter. Evidently, whatever action/actions the board
took did not sit well with Cruz.
In the same Answer, respondents further averred that Cruz and his
co-petitioner Minterbro, while admittedly stockholders of Filport,
have no authority nor standing to bring the so-called "derivative suit"
for and in behalf of the corporation; that respondent Mary Jean D.
Co has already ceased to be a corporate director and so with
Fortunato V. de Castro, one of those holding an assailed position;
and that no demand to cease and desist from further committing
Corporation Law/alfred0 Page 599 of 1509
suigeneris
the acts complained of was made upon the board. By way of
affirmative defenses, respondents asserted that (1) the petition is not
duly verified by petitioner Filport which is the real party-in-interest; (2)
Filport, as represented by Cruz and Minterbro, failed to exhaust
remedies for redress within the corporation before bringing the suit;
and (3) the petition does not show that the stockholders bringing the
suit are joined as nominal parties. In support of their counterclaim,
respondents averred that Cruz filed the alleged derivative suit in bad
faith and purely for harassment purposes on account of his non-
reelection to the board in the 1991 general stockholders’ meeting.
SO ORDERED.
xxx The Board of Directors shall fix the compensation of the officers
and agents of the corporation. (Emphasis supplied.)
There is, however, a factual matter over which the CA and the trial
court parted ways. We refer to the accommodation angle.
The trial court was with petitioner Cruz in saying that the creation of
the positions of the three (3) AVPs for Corporate Planning, Special
Assistant to the President and Special Assistant to the Board
Chairman, each with a salary of P13,050.00 a month, was merely for
accommodation purposes considering that Filport is not a big
corporation requiring multiple executive positions. Hence, the trial
court’s order for said officers to return the amounts they received as
compensation.
On the other hand, the CA took issue with the trial court and ruled
that Cruz’s accommodation theory is not based on facts and
without any evidentiary substantiation.
We concur with the line of the appellate court. For truly, aside from
Cruz’s bare and self-serving testimony, no other evidence was
presented to show the fact of "accommodation." By itself, the
This brings us to the respondents’ claim that the case filed by the
petitioners before the SEC, which eventually landed in RTC-Davao
City as Civil Case No. 28,552-2001, is not a derivative suit, as
maintained by the petitioners.
No pronouncement as to costs.
SO ORDERED.
FACTS:
RTC: BOD have the power to create positions not in the by-laws
and can increase salaries. But Edgar C. Trinidad under the third
and fourth causes of action to restore to the corporation the
total amount of salaries he received as assistant vice president
for corporate planning; and likewise ordering Fortunato V. de
Castro and Arsenio Lopez Chua under the fourth cause of
action to restore to the corporation the salaries they each
received as special assistants respectively to the president and
board chairman. In case of insolvency of any or all of them, the
members of the board who created their positions are
subsidiarily liable.
ISSUES:
HELD: CA Affirmed
1. NO
2. YES
- he wrote a letter
FACTS:
The Trial Court sided with the respondent and ruled that the creation
of the executive committee and the additional position was
legitimate given that it was provided by the corporation’s by-law.
However, the prayer for the return of salaries received was granted,
even if the positions and the committee were valid, for the court
Cruz did not take the decision sitting down, hence the petition.
ISSUE:
Was the case filed by Cruz, on behalf of Filipinas Port Services Inc., a
derivative suit?
HELD:
YES.
Were the petitioners denied due process of law in the lower court?
After the cases were re-raffled to the sala of Presiding Judge Odilon
Bautista of Branch 37 the following events transpired:
On July 3, 1986, the lower court issued an Order setting the hearing
of the cases on July 21, 1986. Petitioner Rebecca V. Roxas received
a copy of the Order on July 15, 1986, while petitioner Guillermo Roxas
received his copy on July 18, 1986. Atty. Conrado Manicad, the
petitioners' counsel received another copy of the Order on July 11,
1986. (Original Records, p. 260)
At the hearing held on August 11, 1986, only Atty. Benito P. Fabie,
counsel for the respondent corporation appeared. Neither the
petitioners nor their counsel appeared despite notice of hearing. The
lower court then issued an Order on the same date, to wit:
ORDER
Copies of the Order were sent and received by the petitioners and
their counsel on the following dates — Rebecca Boyer-Roxas on
August 20, 1986, Guillermo Roxas on August 26, 1986, and Atty.
Conrado Manicad on September 19, 1986. (Original Records, pp.
288-290)
The scheduled hearing on September 29, 1986 did not push through
as the petitioners and their counsel were not present prompting Atty.
Benito Fabie, the respondent corporation's counsel to move that the
cases be submitted for decision. The lower court denied the motion
and set the cases for hearing on October 22, 1986. However, in its
Order dated September 29, 1986, the court warned that in the event
the petitioners and their counsel failed to appear on the next
scheduled hearing, the court shall consider the cases submitted for
decision based on the evidence on record. (Original Records, p. 429,
430 and 431)
ORDER
On the same day, February 4, 1987, the lower court issued an Order
setting the hearing on February 13, 1987 on the ground that it
received the motion for reconsideration late. Copies of this Order
were sent separately to the petitioners and their counsel. The records
show that Atty. Manicad received his copy on February 11, 1987. As
regards the petitioners, the records reveal that Rebecca Boyer-
Roxas did not receive her copy while as regards Guillermo Roxas,
somebody signed for him but did not indicate when the copy was
received. (Original Records, pp. 481-483)
At the scheduled February 13, 1987 hearing, the counsels for the
parties were present. However, the hearing was reset for March 6,
1987 in order to allow the respondent corporation to file its
opposition to the motion for reconsideration. (Order dated February
13, 1987, Original Records, p. 486) Copies of the Order were sent and
received by the petitioners and their counsel on the following dates:
Rebecca Boyer-Roxas on February 23, 1987; Guillermo Roxas on
February 23, 1987 and Atty. Manicad on February 19, 1987. (Original
Records, pp. 487, 489-490)
The records are not clear as to whether or not the scheduled hearing
on March 6, 1987 was held. Nevertheless, the records reveal that on
March 13, 1987, the lower court issued an Order denying the motion
for reconsideration.
The petitioners are to be blamed for the October 22, 1986 order
issued by the lower court submitting the cases for decision. They
received notices of the scheduled hearings and yet they did not do
anything. More specifically, the parties received notice of the Order
dated September 29, 1986 with the warning that if they fail to attend
the October 22, 1986 hearing, the cases would be submitted for
decision based on the evidence on record. Earlier, at the scheduled
hearing on September 29, 1986, the counsel for the respondent
corporation moved that the cases be submitted for decision for
failure of the petitioners and their counsel to attend despite notice.
The lower court denied the motion and gave the petitioners and
their counsel another chance by rescheduling the October 22, 1986
hearing.
Indeed, the petitioners knew all along that their counsel was not
attending the scheduled hearings. They did not take steps to
change their counsel or make him attend to their cases until it was
too late. On the contrary, they continued to retain the services of
Atty. Manicad knowing fully well his lapses vis-a-vis their cases. They,
therefore, cannot raise the alleged gross negligence of their counsel
resulting in their denial of due process to warrant the reversal of the
lower court's decision. In a similar case, Aguila v. Court of First
Instance of Batangas, Branch 1 (supra), we ruled:
The petitioners point out that their occupancy of the staff house
which was later used as the residence of Eriberto Roxas, husband of
petitioner Rebecca Boyer-Roxas and the recreation hall which was
converted into a residential house were with the blessings of
Eufrocino Roxas, the deceased husband of Eugenia V. Roxas, who
was the majority and controlling stockholder of the corporation. In
his lifetime, Eufrocino Roxas together with Eriberto Roxas, the
husband of petitioner Rebecca Boyer-Roxas, and the father of
petitioner Guillermo Roxas managed the corporation. The Board of
Directors did not object to such an arrangement. The petitioners
argue that . . . the authority thus given by Eufrocino Roxas for the
conversion of the recreation hall into a residential house can no
longer be questioned by the stockholders of the private respondent
and/or its board of directors for they impliedly but no leas explicitly
delegated such authority to said Eufrocino Roxas. (Rollo, p. 12)
In the present case, the record shows that Eufrocino V. Roxas who
then controlled the management of the corporation, being the
majority stockholder, consented to the petitioners' stay within the
questioned properties. Specifically, Eufrocino Roxas gave his consent
to the conversion of the recreation hall to a residential house, now
occupied by petitioner Guillermo Roxas. The Board of Directors did
not object to the actions of Eufrocino Roxas. The petitioners were
allowed to stay within the questioned properties until August 27,
1983, when the Board of Directors approved a Resolution ejecting
the petitioners, to wit:
R E S O L U T I O N No. 83-12
If there was bad faith, not only on the part of the person
who built, planted or sown on the land of another but also
on the part of the owner of such land, the rights of one
and the other shall be the same as though both had
acted in good faith.
In such a case, the provisions of Article 448 of the Civil Code govern
the relationship between petitioner Rebecca-Boyer-Roxas and the
respondent corporation, to wit:
SO ORDERED.
AF Realty & Dev., Inc. vs. Dieselman Freight Services Co. (373 SCRA
385 [2002])
SANDOVAL-GUTIERREZ, J.:
Felicisima Noble then offered for sale the property to AF Realty &
Development, Inc. (AF Realty) at P2,500.00 per square meter.5
Zenaida Ranullo, board member and vice-president of AF Realty,
accepted the offer and issued a check in the amount of P300,000.00
payable to the order of Dieselman. Polintan received the check and
signed an "Acknowledgement Receipt"6 indicating that the amount
of P300,000.00 represents the partial payment of the property but
refundable within two weeks should AF Realty disapprove Ranullo's
action on the matter.
On June 29, 1988, AF Realty confirmed its intention to buy the lot.
Hence, Ranullo asked Polintan for the board resolution of Dieselman
authorizing the sale of the property. However, Polintan could only
give Ranullo the original copy of TCT No. 39849, the tax declaration
and tax receipt for the lot, and a photocopy of the Articles of
Incorporation of Dieselman.7
However, on August 13, 1988, Mr. Cruz, Sr. terminated the offer and
demanded from AF Realty the return of the title of the lot earlier
delivered by Polintan.10
After trial, the lower court rendered the challenged Decision holding
that the acts of Cruz, Jr. bound Dieselman in the sale of the lot to AF
Realty.14 Consequently, the perfected contract of sale between
Dieselman and AF Realty bars Midas' intervention. The trial court also
held that Midas acted in bad faith when it initially paid Dieselman
P500,000.00 even without seeing the latter's title to the property.
Moreover, the notarial report of the sale was not submitted to the
Clerk of Court of the Quezon City RTC and the balance of
P5,300,000.00 purportedly deposited in escrow by Midas with a bank
was not established.1âwphi1.nêt
"SO ORDERED."15
AF Realty alleged that the trial court erred in not holding Dieselman
liable for moral, compensatory and exemplary damages, and in
dismissing its counterclaim against Midas.
Upon the other hand, Dieselman and Midas claimed that the trial
court erred in finding that a contract of sale between Dieselman
and AF Realty was perfected. Midas further averred that there was
no bad faith on its part when it purchased the lot from Dieselman.
"SO ORDERED."17
AF Realty now comes to this Court via the instant petition alleging
that the Court of Appeals committed errors of law.
Involved in this case is a sale of land through an agent. Thus, the law
on agency under the Civil Code takes precedence. This is well
stressed in Yao Ka Sin Trading vs. Court of Appeals:23
"ART. 1409. The following contracts are inexistent and void from
the very beginning:
xxx
SO ORDERED.
However, it appeared that DFS did not authorize Cruz, Jr. to sell the
said land. Nevertheless, Manuel Cruz, Sr. (father) and president of
DFS, accepted the check but modified the offer. He increased the
selling price to P4,000.00 per sq. m. AF Realty, in its response, did not
exactly agree nor disagree with the counter-offer but only said it is
willing to pay the balance (but was not clear at what rate).
Eventually, DFS sold the property to someone else.
ISSUE: Whether or not the sale made through an agent was ratified.
HELD: No. There was no valid agency created. The Board of Directors
of DFS never authorized Cruz, Jr. to sell the land. Hence, the
agreement between Cruz, Jr. and Polintan, as well as the
subsequent agreement between Polintan and Noble, never bound
the corporation. Therefore the sale transacted by Noble purportedly
on behalf of Polintan and ultimately purportedly on behalf of DFS is
void.
Being a void sale, it cannot be ratified even if Cruz, Sr. accepted the
check and made a counter-offer. (Cruz, Sr. returned the check
anyway). Under Article 1409 of the Civil Code, void transactions can
never be ratified because they were void from the very beginning.
PANGANIBAN, J.:
The Case
The petition also challenges the June 10, 1997 CA Resolution denying
reconsideration. 5
The Facts
AGREEMENT
— and —
WITNESSETH, That:
TRANSFEROR TRANSFEREE
[SGD.] [SGD.]
Treasurer President
[SGD.] [SGD.]
————————————— ——————————— 6
The Issues
The Court synthesized the foregoing and will thus discuss them
seriatim as follows:
Petitioner San Juan Structural and Steel Fabricators, Inc. alleges that
on February 14, 1989, it entered through its president, Andres Co, into
the disputed Agreement with Respondent Motorich Sales
Corporation, which was in turn allegedly represented by its treasurer,
Nenita Lee Gruenberg. Petitioner insists that "[w]hen Gruenberg and
Co affixed their signatures on the contract they both consented to
Furthermore, the Court has also recognized the rule that "persons
dealing with an assumed agent, whether the assumed agency be a
general or special one bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the
Art. 1874 and 1878 of the Civil Code of the Philippines provides:
Art. 1318 of the Civil Code lists the requisites of a valid and perfected
contract: "(1) consent of the contracting parties; (2) object certain
which is the subject matter of the contract; (3) cause of the
obligation which is established." As found by the trial court 21 and
affirmed by the Court of Appeals, 22 there is no evidence that
Gruenberg was authorized to enter into the contract of sale, or that
the said contract was ratified by Motorich. This factual finding of the
two courts is binding on this Court. 23 As the consent of the seller was
not obtained, no contract to bind the obligor was perfected.
Therefore, there can be no valid contract of sale between petitioner
and Motorich.
Second Issue:
Piercing the Corporate Veil Not Justified
Thus, the Court has consistently ruled that "[w]hen the fiction is used
as a means of perpetrating a fraud or an illegal act or as vehicle for
the evasion of an existing obligation, the circumvention of statutes,
the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers
and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an
aggregation of individuals." 33
The Court is not unaware that there are exceptional cases where "an
action by a director, who singly is the controlling stockholder, may
be considered as a binding corporate act and a board action as
nothing more than a mere formality." 40 The present case, however, is
not one of them.
A Yes, sir. 45
Petitioner claims that the answer "Yes" was crossed out, and, in its
place was written a "No" with an initial scribbled above it. 46 This,
A Yes, sir.
A Yes, sir.
Q But you also did not say that you were not
authorized to sell the property, you did not tell
that to Mr. Co, is that correct?
Clearly then, Nenita Gruenberg did not testify that Motorich had
authorized her to sell its property. On the other hand, her testimony
demonstrates that the president of Petitioner Corporation, in his
great desire to buy the property, threw caution to the wind by
offering and paying the earnest money without first verifying
Gruenberg's authority to sell the lot.
As already stated, we sustain the findings of both the trial and the
appellate courts that the foregoing allegations lack factual bases.
Hence, an award of damages or attorney's fees cannot be justified.
The amount paid as "earnest money" was not proven to have
redounded to the benefit of Respondent Motorich. Petitioner claims
that said amount was deposited to the account of Respondent
Motorich, because "it was deposited with the account of Aren
Commercial c/o Motorich Sales Corporation." 50 Respondent
Gruenberg, however, disputes the allegations of petitioner. She
testified as follows:
Q In your account?
A Yes, sir. 51
SO ORDERED.
In 1989, San Juan Structural and Steel Fabricators, Inc. (San Juan)
alleged that it entered into a contract of sale with Motorich Sales
Corporation (Motorich) through the latter’s treasurer, Nenita
Gruenberg. The subject of the sale was a parcel of land owned by
Motorich. San Juan advanced P100k to Nenita as earnest money.
San Juan raised the issue that Nenita was actually the wife of the
President of Motorich; that Nenita and her husband owns 98% of the
corporation’s capital stocks; that as such, it is a close corporation
and that makes Nenita and the President as principal stockholders
HELD: No. Motorich is right in invoking that it is not bound by the acts
of Nenita because her act in entering into a contract with San Juan
was not authorized by the board of directors of Motorich. Nenita is
however ordered to return the P100k.
DECISION
QUISUMBING, J.:
On July 8, 1996, the SEC issued Order No. 104, series of 1996,
enjoining petitioner from imposing the new fees:
SO ORDERED.4
On June 17, 1998, the appellate court dismissed the petition. It ruled
that the power to regulate petitioner’s fees was included in the
general power given to the SEC under Section 405 of The Revised
Securities Act to regulate, supervise, examine, suspend or otherwise
discontinue, the operation of securities-related organizations like
petitioner.
Corporation Law/alfred0 Page 657 of 1509
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The appellate court likewise denied petitioner’s motion for
reconsideration. Hence, this appeal.
While this case was pending, The Revised Securities Act by authority
of which the assailed orders were issued was repealed by Republic
Act No. 8799 or The Securities Regulation Code,6 which became
effective on August 8, 2000. Nonetheless, we find it pertinent to rule
on the parties’ submissions considering that the effects of the July 11,
1996 Order had not been obliterated by the repeal of The Revised
Securities Act and there is still present a need to rule on whether
petitioner was liable for the fees imposed upon it.
I.
WHEN [IT] FAILED TO RULE THAT THE SEC AND CHAIRMAN YASAY,
IN ISSUING THE COMMISSION’S CONTROVERTED ORDERS DATED
JULY 8 AND JULY 11, 1996, VIOLATED PASTRA’S CONSTITUTIONAL
RIGHT TO DUE PROCESS OF LAW;
II.
WHEN [IT] FAILED TO RULE THAT THE SEC AND CHAIRMAN YASAY
COMMITTED GRAVE ABUSE OF DISCRETION AND IN EXCESS OF
THEIR JURISDICTION WHEN THEY ISSUED THE COMMISSION’S
CONTROVERTED ORDERS DATED JULY 8 AND JULY 11, 1996;
AND,
III.
WHEN [IT] RULED THAT THE SEC AND CHAIRMAN YASAY HAVE
LEGAL BASIS IN ISSUING THE COMMISSION’S CONTROVERTED
ORDERS DATED JULY 8 AND JULY 11, 1996.7
Essentially, the issue for our resolution is whether the SEC acted with
grave abuse of discretion or lack or excess of jurisdiction in issuing
the controverted Orders of July 8 and 11, 1996.
For its part, the Office of the Solicitor General (OSG) counters that
petitioner’s allegations of denial of due process are baseless. The
OSG cites that petitioner was given ample opportunity to present its
case at the July 11, 1996 hearing and was adequately heard
through the series of letters it sent to the SEC to explain its refusal to
obey the latter’s directives. Also, there is no evidence to support its
allegation that the July 11, 1996 Order was prepared in advance or
that it was issued without considering the evidence for the parties.
As regards the SEC’s power over petitioner’s stock transfer fees, the
OSG argues that the power to determine said fees was necessarily
implied in the SEC’s general power under Section 40 of The Revised
Securities Act to regulate and supervise the operations of transfer
agents such as petitioner’s member-corporations. The OSG adds
that petitioner’s discretion to increase its fees was not purely a
management prerogative and was properly the subject of
regulation considering that it significantly affects the market for
securities.9
We find the instant petition bereft of merit. The Court notes that
before its repeal, Section 47 of The Revised Securities Act clearly
gave the SEC the power to enjoin the acts or practices of securities-
related organizations even without first conducting a hearing if,
upon proper investigation or verification, the SEC is of the opinion
that there exists the possibility that the act or practice may cause
grave or irreparable injury to the investing public, if left unrestrained.
Section 47 clearly provided,
xxxx
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
ATTESTATION
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
Footnotes
1Rollo, pp. 110-121-A. Penned by Associate Justice Bernardo Ll.
Salas, with Associate Justices Eloy R. Bello, Jr. and Candido V.
Rivera concurring.
2 Id. at 130.
3 Id. at 52.
xxxx
xxxx
xxxx
12Springfield Development Corporation, Inc. v. Hon. Presiding
Judge of Regional Trial Court of Misamis Oriental, G.R. No.
142628, February 6, 2007, 514 SCRA 326, 343.
13 G.R. No. 125469, October 27, 1997, 281 SCRA 232.
The subject of this petition for review is the Decision of the public
respondent Court of Appeals, 1 dated October 28, 1994, setting
aside the portion of the Decision of the Securities and Exchange
Commission (SEC, for short) in SEC Case No. 4012 which declared null
and void the sale of two (2) parcels of land in Quezon City covered
by the Deed of Absolute Sale entered into by and between private
respondent Iglesia Ni Cristo (INC, for short) and the Islamic
Directorate of the Philippines, Inc., Carpizo Group, (IDP, for short).
Towards this end, that is, in the same year, the Libyan government
donated money to the IDP to purchase land at Culiat, Tandang
Sora, Quezon City, to be used as a Center for the Islamic populace.
The land, with an area of 49,652 square meters, was covered by two
titles: Transfer Certificate of Title Nos. RT-26520 (176616) 3 and RT-
26521 (170567), 4 both registered in the name of IDP.
SO ORDERED. 9
On May 30, 1991, the petitioner 1971 IDP Board of Trustees headed
by former Senator Mamintal Tamano, or the Tamano Group, filed a
petition before the SEC, docketed as SEC Case No. 4012, seeking to
declare null and void the Deed of Absolute Sale signed by the
Carpizo Group and the INC since the group of Engineer Carpizo was
not the legitimate Board of Trustees of the IDP.
Private respondent INC opposed the motion arguing, inter alia, that
the issue sought to be litigated by way of intervention is an intra-
corporate dispute which falls under the jurisdiction of the SEC. 14
SO ORDERED. 18
In the meantime, the SEC, on July 5, 1993, finally came out with a
Decision in SEC Case No. 4012 in this wise:
No pronouncement as to cost.
SO ORDERED. 24
INC elevated SEC Case No. 4012 to the public respondent Court of
Appeals by way of a special civil action for certiorari, docketed as
CA-G.R SP No. 33295. On October 28, 1994, the court a quo
promulgated a Decision in CA-G.R. SP No. 33295 granting INC's
petition. The portion of the SEC Decision in SEC Case No. 4012 which
declared the sale of the two (2) lots in question to INC as void was
ordered set aside by the Court of Appeals.
Thus, the IDP-Tamano Group brought the instant petition for review,
dated December 21, 1994, submitting that the Court of Appeals
gravely erred in:
While the above petition was pending, however, the Supreme Court
rendered judgment in G.R. No. 107751 on the petition filed by Mrs.
Leticia P. Ligon. The Decision, dated June 1, 1995, denied the Ligon
petition and affirmed the October 28, 1992 Decision of the Court of
Appeals in CA-G.R. No. SP-27973 which sustained the Order of Judge
Reyes compelling mortgagee Ligon to surrender the owner's
duplicate copies of TCT Nos. RT-26521 (170567) and RT-26520
(176616) to the Register of Deeds of Quezon City so that the Deed of
Absolute Sale in INC's favor may be properly registered.
Before we rule upon the main issue posited in this petition, we would
like to point out that our disposition in G.R. No. 107751 entitled, "Ligon
v. Court of Appeals," promulgated on June 1, 1995, in no wise
constitutes res judicata such that the petition under consideration
would be barred if it were the ease. Quite the contrary, the requisites
or res judicata do not obtain in the case at bench.
The main question though in this petition is: Did the Court of Appeals
commit reversible error in setting aside that portion of the SEC's
Decision in SEC Case No. 4012 which declared the sale of two (2)
parcels of land in Quezon City between the IDP-Carpizo Group and
private respondent INC null and void?
If the SEC can declare who is the legitimate IDP Board, then by
parity of reasoning, it can also declare who is not the legitimate
IDP Board. This is precisely what the SEC did in SEC Case No.
4012 when it adjudged the election of the Carpizo Group to
It must be noted that SEC Case No. 4012 is not the first case wherein
the SEC had the opportunity to pass upon the status of the Carpizo
Group. As far back as October 3, 1986, the SEC, in Case No. 2687, 36
in a suit between the Carpizo Group and the Abbas Group, already
declared the election of the Carpizo Group (as well as the Abbas
Group) to the IDP Board as null and void for being violative of the
Articles of Incorporation. 37 Nothing thus becomes more settled than
that the IDP-Carpizo Group with whom private respondent INC
contracted is a fake Board.
The Carpizo Group-INC sale is further deemed null and void ab initio
because of the Carpizo Group's failure to comply with Section 40 of
the Corporation Code pertaining to the disposition of all or
substantially all assets of the corporation:
Furthermore, the Court observes that the INC bought the questioned
property from the Carpizo Group without even seeing the owner's
duplicate copy of the titles covering the property. This is very strange
considering that the subject lot is a large piece of real property in
Quezon City worth millions, and that under the Torrens System of
Registration, the minimum requirement for one to be a good faith
buyer for value is that the vendee at least sees the owner's duplicate
copy of the title and relies upon the same. 41 The private respondent,
presumably knowledgeable on the aforesaid workings of the Torrens
System, did not take heed of this and nevertheless went through with
the sale with undue haste. The unexplained eagerness of INC to buy
SO ORDERED.
Footnotes
In 1993, the SEC ruled that the sale was null and void . On appeal CA
reversed the SEC ruling.
MAIN ISSUE: W/N the sale between the Carpizo group and INC is null
and void.
RULING: YES.
Since the SEC has declared the Carpizo group as a void Board of
In this case, the IDP, never gave its consent, through a legitimate
Board of Trustees, to the disputed Deed of Absolute Sale executed in
favor of INC. Therefore, this is a case not only of vitiated consent, but
one where consent on the part of one of the supposed contracting
parties is totally wanting. Ineluctably, the subject sale is void and
produces no effect whatsoever.
The subject lot constitutes the only property of IDP. Hence, its sale to
a third-party is a sale or disposition of all the corporate property and
assets of IDP. For the sale to be valid, the majority vote of the
legitimate Board of Trustees, concurred in by the vote of at least 2/3
of the bona fide members of the corporation should have been
obtained. These twin requirements were not met in the case at bar.
RULING: NO.
In the meantime, the SEC, on 5 July 1993, finally came out with a
Decision in SEC Case 4012, Declaring the by-laws submitted by the
IDP-Caprizo group as unauthorized, and hence, null and void;
declaring the sale of the two (2) parcels of land in Quezon City
covered by the Deed of Absolute Sale entered into by Iglesia ni
Held: As far back as 3 October 1986, the SEC, in Case 2687, in a suit
between the Carpizo Group and the Abbas Group, already
declared the election of the Carpizo Group (as well as the Abbas
Group) to the IDP Board as null and void for being violative of the
Articles of Incorporation. Nothing thus becomes more settled than
that the IDP-Carpizo Group with whom INC contracted is a fake
Board. Premises considered, all acts carried out by the Carpizo
Board, particularly the sale of the Tandang Sora property, allegedly
in the name of the IDP, have to be struck down for having been
done without the consent of the IDP thru a legitimate Board of
From the records of the instant case, the following antecedent facts
appear:
On July 18, 1988, the petitioners filed their answer to the third party
complaint.
Meanwhile, on July 12, 1988, the trial court issued an order requiring
the issuance of an alias summons upon ALFA through the DBP as a
consequence of the petitioner's letter informing the court that the
summons for ALFA was erroneously served upon them considering
that the management of ALFA had been transferred to the DBP.
In a manifestation dated July 22, 1988, the DBP claimed that it was
not authorized to receive summons on behalf of ALFA since the DBP
On August 4, 1988, the trial court issued an order advising the private
respondents to take the appropriate steps to serve the summons to
ALFA.
On January 2, 1989, the trial court upheld the validity of the service
of summons on ALFA through the petitioners, thus, denying the
latter's motion for reconsideration and requiring ALFA to filed its
answer through the petitioners as its corporate officers.
On April 25, 1989, the trial court reversed itself by setting aside its
previous Order dated January 2, 1989 and declared that service
upon the petitioners who were no longer corporate officers of ALFA
cannot be considered as proper service of summons on ALFA.
On October 17, 1989, the trial court, not having been notified of the
pending petition for certiorari with public respondent issued an Order
declaring as final the Order dated April 25, 1989. The private
respondents in the said Order were required to take positive steps in
prosecuting the third party complaint in order that the court would
not be constrained to dismiss the same for failure to prosecute.
Subsequently, on October 25, 1989 the private respondents filed a
motion for reconsideration on which the trial court took no further
action.
On March 19, 1990, after the petitioners filed their answer to the
private respondents' petition for certiorari, the public respondent
rendered its decision, the dispositive portion of which reads:
In the instant case, the point of controversy arises from the effects of
the creation of the voting trust agreement. The petitioners maintain
that with the execution of the voting trust agreement between them
and the other stockholders of ALFA, as one party, and the DBP, as
the other party, the former assigned and transferred all their shares in
ALFA to DBP, as trustee. They argue that by virtue to of the voting
trust agreement the petitioners can no longer be considered
directors of ALFA. In support of their contention, the petitioners
invoke section 23 of the Corporation Code which provides, in part,
that:
The private respondents, on the contrary, insist that the voting trust
agreement between ALFA and the DBP had all the more
safeguarded the petitioners' continuance as officers and directors of
ALFA inasmuch as the general object of voting trust is to insure
permanency of the tenure of the directors of a corporation. They
cited the commentaries by Prof. Aguedo Agbayani on the right and
status of the transferring stockholders, to wit:
Both under the old and the new Corporation Codes there is no
dispute as to the most immediate effect of a voting trust agreement
on the status of a stockholder who is a party to its execution — from
legal titleholder or owner of the shares subject of the voting trust
agreement, he becomes the equitable or beneficial owner.
(Salonga, Philippine Law on Private Corporations, 1958 ed., p. 268;
Pineda and Carlos, The Law on Private Corporations and Corporate
Practice, 1969 ed., p. 175; Campos and Lopez-Campos, The
Corporation Code; Comments, Notes & Selected Cases, 1981, ed.,
p. 386; Agbayani, Commentaries and Jurisprudence on the
Commercial Laws of the Philippines, Vol. 3, 1988 ed., p. 536). The
penultimate question, therefore, is whether the change in his status
deprives the stockholder of the right to qualify as a director under
section 23 of the present Corporation Code which deletes the
phrase "in his own right." Section 30 of the old Code states that:
Every director must own in his own right at least one share
of the capital stock of the stock corporation of which he is
a director, which stock shall stand in his name on the
books of the corporation. A director who ceases to be the
owner of at least one share of the capital stock of a stock
corporation of which is a director shall thereby cease to
be a director . . . (Emphasis supplied)
With the omission of the phrase "in his own right" the election of
trustees and other persons who in fact are not beneficial owners of
the shares registered in their names on the books of the corporation
becomes formally legalized (see Campos and Lopez-Campos,
supra, p. 296) Hence, this is a clear indication that in order to be
eligible as a director, what is material is the legal title to, not
beneficial ownership of, the stock as appearing on the books of the
corporation (2 Fletcher, Cyclopedia of the Law of Private
Corporations, section 300, p. 92 [1969] citing People v. Lihme, 269 Ill.
351, 109 N.E. 1051).
The facts of this case show that the petitioners, by virtue of the voting
trust agreement executed in 1981 disposed of all their shares through
assignment and delivery in favor of the DBP, as trustee.
Consequently, the petitioners ceased to own at least one share
standing in their names on the books of ALFA as required under
Section 23 of the new Corporation Code. They also ceased to have
anything to do with the management of the enterprise. The
petitioners ceased to be directors. Hence, the transfer of the
petitioners' shares to the DBP created vacancies in their respective
positions as directors of ALFA. The transfer of shares from the
stockholder of ALFA to the DBP is the essence of the subject voting
trust agreement as evident from the following stipulations:
Considering that the voting trust agreement between ALFA and the
DBP transferred legal ownership of the stock covered by the
agreement to the DBP as trustee, the latter became the stockholder
of record with respect to the said shares of stocks. In the absence of
a showing that the DBP had caused to be transferred in their names
one share of stock for the purpose of qualifying as directors of ALFA,
the petitioners can no longer be deemed to have retained their
status as officers of ALFA which was the case before the execution of
the subject voting trust agreement. There appears to be no dispute
from the records that DBP has taken over full control and
management of the firm.
The petitioners in this case do not fall under any of the enumerated
officers. The service of summons upon ALFA, through the petitioners,
therefore, is not valid. To rule otherwise, as correctly argued by the
petitioners, will contravene the general principle that a corporation
Corporation Law/alfred0 Page 694 of 1509
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can only be bound by such acts which are within the scope of the
officer's or agent's authority. (see Vicente v. Geraldez, 52 SCRA 210
[1973]).
SO ORDERED.
FACTS:
July 12, 1988: trial court issued an order requiring the issuance of
an alias summons upon ALFA through the DBP
July 22, 1988: DBP claimed that it was not authorized to receive
summons on behalf of ALFA
April 25, 1989: trial court reversed itself by setting aside its
previous Order dated January 2, 1989 and declared that
service upon the petitioners who were no longer corporate
officers of ALFA cannot be considered as proper service of
summons on ALFA
October 17, 1989: trial court (NOT notified of the petition for
certiorari) declared final its decision on April 25, 1989
ISSUE: W/N the voting trust agreement is valid despite being contrary
to the general principle that a corporation can only be bound by
such acts which are within the scope of its officers' or agents'
authority
HELD:
Assailed in the instant petition for review is the decision 1 of the Court
of Appeals in CA-G.R. CV No. 16810 dated September 28, 1990
which affirmed the trial court's dismissal of petitioners' complaint for
damages.
The antecedents:
A few days after Premium filed the said case, Printline Corporation, a
sister company of Premium also filed an action for damages against
International Corporate Bank docketed as Civil Case No. 14444.
Thereafter, both civil cases were consolidated.
The issues raised in Civil Case No. 14444 are similar to those
raised in Civil Case No. 14413. This Court is of the opinion
that before SEC Case No. 2688 could be decided, neither
the set of officers represented by Atty. Dumadag nor that
set represented by the Siguion Reyna, Montecillo and
Ongsiako Law Office, may prosecute cases in the name
of the plaintiff corporation.
II
III
IV
The only issue in this case is whether or not the filing of the case for
damages against private respondent was authorized by a duly
constituted Board of Directors of the petitioner corporation.
Petitioner, through the first set of officers, viz., Mario Zavalla, Oscar
Gan, Lionel Pengson, Jose Ma. Silva, Aderito Yujuico and Rodolfo
Millare, presented the Minutes 5 of the meeting of its Board of
Directors held on April 1, 1982, as proof that the filing of the case
While the Minutes of the Meeting of the Board on April 1, 1982 states
that the newly elected officers for the year 1982 were Oscar Gan,
Mario Zavalla, Aderito Yujuico and Rodolfo Millare, petitioner failed
to show proof that this election was reported to the SEC. In fact, the
last entry in their General Information Sheet with the SEC, as of 1986
appears to be the set of officers elected in March 1981.
SO ORDERED.
Raniel vs. Jochico (517 SCRA 221 [2007]); See SEC Opinion No.21,
s.2003, addressed to Atty. Juan de Ocampo
DECISION
AUSTRIA-MARTINEZ, J.:
On October 27, 2000, the SEC rendered its Decision, the dispositive
portion of which reads:
The corporation acting thru its Board of Directors can validly remove
its corporate officers, particularly complainant Nectarina S. Raniel as
corporate secretary, treasurer and administrator of the Dialysis Clinic.
The claim for attorney's fees and damages of both parties are
likewise denied for lack of merit, as neither party should be punished
for vindicating a right, which he/she believes should be protected or
enforced.
SO ORDERED.2
On April 30, 2002, the CA rendered the assailed Decision, with the
following dispositive portion:
SO ORDERED.3
Both the SEC and the CA held that Pag-ong's removal as director
and Raniel's removal as director and officer of Nephro were valid.
For its part, the SEC ruled that the Board of Directors had sufficient
ground to remove Raniel as officer due to loss of trust and
confidence, as her abrupt and unauthorized leave of absence
exhibited her disregard of her responsibilities as an officer of the
corporation and disrupted the operations of Nephro. The SEC also
held that the Special Board Meeting held on February 2, 1998 was
valid and the resolutions adopted therein are binding on petitioners.6
The CA upheld the SEC's conclusions, adding further that the special
stockholders' meeting on February 16, 1998 was likewise validly held.
The CA also ruled that Pag-ong's removal as director of Nephro was
justified as it was due to her "undenied delay in the release of
Nephro's medical supplies from the warehouse of the Fly-High
Brokerage where she was an officer, on top of her and her co-
petitioner Raniel's absence from the aforementioned directors' and
stockholders' meetings of Nephro despite due notice."7
Raniel's letter of January 26, 1998 speaks for itself. Her request for an
indefinite leave, immediately effective yet without prior notice,
reveals a disregard of the critical responsibilities pertaining to the
sensitive positions she held in the corporation. Prior to her hasty
departure, Raniel did not make a proper turn-over of her duties and
had to be expressly requested to hand over documents and
records, including keys to the office and the cabinets (Exh. 15).
xxxx
xxxx
SO ORDERED.
DECISION
PANGANIBAN, CJ.:
The Case
The present Petition for Review on Certiorari [1] under Rule 45 of the
Rules of Court seeks the reversal of the January 23 2 and May 7, 2002,
3 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 68202.
The Facts
The hearing officer also opined that Article III (2) 11 of the By-Laws of
GCHS, insofar as it prescribed the mode of filling vacancies in the
board of trustees, must be interpreted in conjunction with Section 29
12 of the Corporation Code. The SEC en banc denied the appeal of
Issues
"Petitioners have maintained before the courts below that the DEAD
members should no longer be counted in computing quorum
primarily on the ground that members’ rights are ‘personal and non-
transferable’ as provided in Sections 90 and 91 of the Corporation
Code of the Philippines.
"The SEC ruled against the petitioners solely on the basis of a 1989
SEC Opinion that did not even involve a non-stock corporation as
petitioner GCHS.
"Petitioners humbly submit that the action of both the SEC and the
Court of Appeals are not in accord with law particularly the
pronouncements of this Honorable Court in Escorpizo v. University of
Baguio (306 SCRA 497), Robern Development Corporation v. Quitain
(315 SCRA 150,) and MC Engineering, Inc. v. NLRC, (360 SCRA 183).
Due course should have been given the petition below and the
merits of the case decided in petitioners’ favor." 17
In sum, the issues may be stated simply in this wise: 1) whether the CA
erred in denying the Petition below, on the basis of a defective
Verification and Certification; and 2) whether dead members should
still be counted in the determination of the quorum, for purposes of
conducting the annual members’ meeting.
Procedural Issue:
Main Issue:
Stock Corporations
xxxxxxxxx
Nonstock Corporations
of a Member or Shareholder
Vacancy in the
Board of Trustees
SO ORDERED.
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson, First Division
W E C O N C U R:
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
Footnotes
1 Dated June 25, 2002; rollo, pp. 10-24.
2Annex "A" of the Petition; rollo, p. 35. Penned by Justice B.A.
Adefuin-de la Cruz (Division chair) and concurred in by Justices
Wenceslao I. Agnir Jr. and Josefina Guevara-Salonga.
Corporation Law/alfred0 Page 718 of 1509
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3 Annex "B" of the Petition; rollo, p. 37.
4 Art. II (1), Amended By-Laws of GCHS, provides:
See SEC Order dated July 6, 2001, Annex "D" of Petition; rollo,
13
pp. 46-51.
14"Section 52. Quorum in meetings. – Unless otherwise provided
for in this Code or in the by-laws, a quorum shall consist of the
stockholders representing a majority of the outstanding capital
stock or a majority of the members in the case of non-stock
corporations." (Underscoring supplied)
15 SEC Order dated July 6, 2001, p. 3; rollo, p. 48.
16To resolve old cases, the Court created the Committee on
Zero Backlog of Cases on January 26, 2006. Consequently, the
Court resolved to prioritize the adjudication of long-pending
cases by redistributing them among all the justices. This case
was recently re-raffled and assigned to the undersigned
ponente for study and report.
17 Petitioner’s Memorandum, pp. 6-7; rollo, pp. 96-97.
18 Ateneo De Naga University v. Manalo, 458 SCRA 325, May 9,
2005; Vicar International Construction, Inc. v. FEB Leasing and
Finance Corporation, 456 SCRA 588, April 22, 2005; Alternative
Center for Organizational Reforms and Development, Inc.
(ACORD) v. Zamora, 459 SCRA 578, June 8, 2005.
19 Estares v. Court of Appeals, 459 SCRA 604, June 8, 2005; Torres
v. Specialized Packaging Development Corporation, 433 SCRA
455, July 6, 2004; National Steel Corp. v. CA, 436 Phil. 656,
In this case, the law refers to the "majority of the members" and
not the "majority of all the members." Thus, we can use the
same reasoning that the "majority of the members" requires a
lesser number than the "majority of all the members."
42See the Decision dated June 21, 2000, SEC Case No. 08-98-
6065, pp. 3-4; rollo, pp. 41-42.
Corporation Law/alfred0 Page 722 of 1509
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43 R. Lopez, supra note 33 at 973.
44SEC Letter-Opinion to Ms. Rosevelinda E. Calingasan, et al.,
(R. Lopez) May 14, 1993; Corporation Code, Sec. 55.
45 Corporation Code, Sec. 90.
46See Petition, p. 11 (citing Art. III, Amended By-Laws of GCHS
on Termination of Membership); rollo, p. 20.
47Excluding Atty. Antonio C. Pacis (proxy for Anita So), who left
the meeting in protest of the alleged lack of quorum.
48SEC Letter-Opinion to Mr. Noe S. Andaya (R. Lopez)
September 20, 1990.
49 J. Campos, Jr. and M.C. Campos, supra note 26 at 465.
50Article III (2), By-laws of GCHS (cited in the Decision dated
June 21, 2000, SEC Case No. 08-98-6065, p. 6); rollo, p. 43.
FACTS:
DECISION
The Antecedents
ETI filed a motion to dismiss the complaint on the ground that Atty.
Aguinaldo was not authorized to execute the verification and
certificate of non-forum shopping as required by Section 5, Rule 7 of
the Rules of Court. KAL opposed the motion, contending that Atty.
Aguinaldo was its resident agent and was registered as such with the
Securities and Exchange Commission (SEC) as required by the
Corporation Code of the Philippines. It was further alleged that Atty.
Aguinaldo was also the corporate secretary of KAL. Appended to
the said opposition was the identification card of Atty. Aguinaldo,
showing that he was the lawyer of KAL.
During the hearing of January 28, 2000, Atty. Aguinaldo claimed that
he had been authorized to file the complaint through a resolution of
the KAL Board of Directors approved during a special meeting held
On April 12, 2000, the trial court issued an Order4 denying the motion
to dismiss, giving credence to the claims of Atty. Aguinaldo and Suk
Kyoo Kim that the KAL Board of Directors indeed conducted a
teleconference on June 25, 1999, during which it approved a
resolution as quoted in the submitted affidavit.
ETI then filed a petition for certiorari and mandamus, assailing the
orders of the RTC. In its comment on the petition, KAL appended a
certificate signed by Atty. Aguinaldo dated January 10, 2000,
worded as follows:
(Sgd.)
MARIO A. AGUINALDO
Resident Agent
ETI filed a motion for reconsideration of the said decision, which the
CA denied. Thus, ETI, now the petitioner, comes to the Court by way
of petition for review on certiorari and raises the following issue:
The respondent, for its part, avers that the issue of whether modern
technology is used in the field of business is a factual issue; hence,
cannot be raised in a petition for review on certiorari under Rule 45
of the Rules of Court. On the merits of the petition, it insists that Atty.
Aguinaldo, as the resident agent and corporate secretary, is
authorized to sign and execute the certificate of non-forum
shopping required by Section 5, Rule 7 of the Rules of Court, on top
of the board resolution approved during the teleconference of June
25, 1999. The respondent insists that "technological advances in this
time and age are as commonplace as daybreak." Hence, the courts
may take judicial notice that the Philippine Long Distance Telephone
Company, Inc. had provided a record of corporate conferences
and meetings through FiberNet using fiber-optic transmission
technology, and that such technology facilitates voice and image
transmission with ease; this makes constant communication between
a foreign-based office and its Philippine-based branches faster and
easier, allowing for cost-cutting in terms of travel concerns. It points
out that even the E-Commerce Law has recognized this modern
technology. The respondent posits that the courts are aware of this
development in technology; hence, may take judicial notice thereof
without need of hearings. Even if such hearing is required, the
requirement is nevertheless satisfied if a party is allowed to file
pleadings by way of comment or opposition thereto.
In its reply, the petitioner pointed out that there are no rulings on the
matter of teleconferencing as a means of conducting meetings of
board of directors for purposes of passing a resolution; until and after
teleconferencing is recognized as a legitimate means of gathering a
quorum of board of directors, such cannot be taken judicial notice
of by the court. It asserts that safeguards must first be set up to
…
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… For who else knows of the circumstances required in the
Certificate but its own retained counsel. Its regular officers, like
its board chairman and president, may not even know the
details required therein.
In this case, the petitioner, as the defendant in the RTC, assailed the
authority of Atty. Aguinaldo to execute the requisite verification and
certificate of non-forum shopping as the resident agent and counsel
of the respondent. It was, thus, incumbent upon the respondent, as
the plaintiff, to allege and establish that Atty. Aguinaldo had such
authority to execute the requisite verification and certification for
and in its behalf. The respondent, however, failed to do so.
MARIO A. AGUINALDO
Affiant
CITY OF MANILA
The respondent knew that its counsel, Atty. Aguinaldo, as its resident
agent, was not specifically authorized to execute the said
certification. It attempted to show its compliance with the rule
subsequent to the filing of its complaint by submitting, on March 6,
2000, a resolution purporting to have been approved by its Board of
Directors during a teleconference held on June 25, 1999, allegedly
with Atty. Aguinaldo and Suk Kyoo Kim in attendance. However,
such attempt of the respondent casts veritable doubt not only on its
claim that such a teleconference was held, but also on the approval
by the Board of Directors of the resolution authorizing Atty.
Aguinaldo to execute the certificate of non-forum shopping.
In its April 12, 2000 Order, the RTC took judicial notice that because
of the onset of modern technology, persons in one location may
confer with other persons in other places, and, based on the said
premise, concluded that Suk Kyoo Kim and Atty. Aguinaldo had a
teleconference with the respondent’s Board of Directors in South
Korea on June 25, 1999. The CA, likewise, gave credence to the
respondent’s claim that such a teleconference took place, as
contained in the affidavit of Suk Kyoo Kim, as well as Atty.
Aguinaldo’s certification.
Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim
participated in a teleconference along with the respondent’s Board
of Directors, the Court is not convinced that one was conducted;
even if there had been one, the Court is not inclined to believe that
a board resolution was duly passed specifically authorizing Atty.
Aguinaldo to file the complaint and execute the required
certification against forum shopping.
The records show that the petitioner filed a motion to dismiss the
complaint on the ground that the respondent failed to comply with
Section 5, Rule 7 of the Rules of Court. The respondent opposed the
motion on December 1, 1999, on its contention that Atty. Aguinaldo,
its resident agent, was duly authorized to sue in its behalf. The
respondent, however, failed to establish its claim that Atty.
Aguinaldo was its resident agent in the Philippines. Even the
identification card25 of Atty. Aguinaldo which the respondent
appended to its pleading merely showed that he is the company
lawyer of the respondent’s Manila Regional Office.
But then, in the same affidavit, Suk Kyoo Kim declared that the
respondent "do[es] not keep a written copy of the aforesaid
Resolution" because no records of board resolutions approved
during teleconferences were kept. This belied the respondent’s
earlier allegation in its February 10, 2000 motion for extension of time
to submit the questioned resolution that it was in the custody of its
main office in Korea. The respondent gave the trial court the
impression that it needed time to secure a copy of the resolution
kept in Korea, only to allege later (via the affidavit of Suk Kyoo Kim)
that it had no such written copy. Moreover, Suk Kyoo Kim stated in
his affidavit that the resolution was embodied in the
Secretary’s/Resident Agent’s Certificate signed by Atty. Aguinaldo.
However, no such resolution was appended to the said certificate.
The Court is, thus, more inclined to believe that the alleged
teleconference on June 25, 1999 never took place, and that the
resolution allegedly approved by the respondent’s Board of Directors
during the said teleconference was a mere concoction purposefully
foisted on the RTC, the CA and this Court, to avert the dismissal of its
complaint against the petitioner.
SO ORDERED.
Footnotes
1Penned by Associate Justice Elvi John S. Asuncion, with
Associate Justices Romeo A. Brawner (now Presiding Justice)
and Juan Q. Enriquez, Jr., concurring; Rollo, pp. 27-30.
2 Rollo, pp. 53-56.
3 Rollo, p. 109.
4 Id. at 47-50.
5 Rollo, pp. 51-52.
6 Rollo, p. 108.
7 Id. at 18.
EXPERTRAVEL & TOURS, INC. (ETI) vs. CA and KOREAN AIRLINES (KAL)
Facts:
ETI filed a motion to dismiss the complaint on the ground that Atty.
Aguinaldo has no authority to execute the said verification and
certificate of non-forum shopping and to file the complaint.
Thus, ETI filed a petition for certiorari and mandamus, assailing the
orders of the RTC. It contended that it was inappropriate for the RTC
to take judicial notice of the said teleconference without any prior
hearing. It also alleged that the teleconference and the resolution
adverted to by KAL was a mere fabrication.
The CA, on the other hand, dismissed the petition of ETI. Hence, ETI
filed a petition for review on certiorari.
In the said petition, ETI pointed out that there are no rulings on the
matter of teleconferencing as a means of conducting meetings of
board of directors for purposes of passing a resolution; until and after
teleconferencing is recognized as a legitimate means of gathering a
quorum of board of directors, such cannot be taken judicial notice
of by the court. It asserts that safeguards must first be set up to
prevent any mischief on the public or to protect the general public
Issue:
Ruling:
FACTS:
The petitioner on the other hand, maintains that the RTC cannot take
judicial notice of the said teleconference without prior hearing, nor
any motion therefore. Finally, KAL submitted on March 6, 2000 an
Affidavit of even date, executed by its general manager Suk Kyoo
Kim, alleging that the board of directors conducted a special
teleconference on June 25, 1999, which he and Atty. Aguinaldo
attended. It was also averred that in that same teleconference, the
board of directors approved a resolution authorizing Atty. Aguinaldo
to execute the certificate of non-forum shopping and to file the
complaint. Suk Kyoo Kim also alleged, however, that the corporation
had no written copy of the aforesaid resolution.
But, the petitioner pointed out that there are no rulings on the matter
of teleconferencing as a means of conducting meetings of board of
directors for purposes of passing a resolution; until and after
teleconferencing is recognized as a legitimate means of gathering a
quorum of board of directors, such cannot be taken judicial notice
of by the court. The RTC and CA dismiss the petition, hence this
appeal.
HELD:
No. In this age of modern technology, the courts may take judicial
notice that business transactions may be made by individuals
through teleconferencing. Teleconferencing is interactive group
communication (three or more people in two or more locations)
through an electronic medium. In general terms, teleconferencing
can bring people together under one roof even though they are
separated by hundreds of miles.
Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim
participated in a teleconference along with the respondent’s Board
of Directors, the Court is not convinced that one was conducted;
even if there had been one, the Court is not inclined to believe that
a board resolution was duly passed specifically authorizing Atty.
Aguinaldo to file the complaint and execute the required
certification against forum shopping.
Petition Granted.
Expertravel & Tours Inc. vs. Court of Appeals, etc. G.R. No. 152392, 26
May 2005
Facts:
ETI filed a motion to dismiss the complaint on the ground that Atty.
Aguinaldo was not authorized to execute the above-mentioned
verification and non-forum shopping as required by Section 5, Rule 7
of the Rules of Court. KAL, thereafter, opposed the motion
contending that Atty. Aguinaldo was its resident agent and was
registered as such with the Securities and Exchange Commission
(SEC). It was also alleged that Atty. Aguinaldo also served as the
company's corporate secretary.
Issue:
Held:
(1) generally known within the territorial jurisdiction of the trial court;
or
Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim
participated in a teleconference along with the respondent’s Board
of Directors, the Court is not convinced that one was conducted;
even if there had been one, the Court is not inclined to believe that
a board resolution was duly passed specifically authorizing Atty.
Aguinaldo to file the complaint and execute the required
certification against forum shopping.
The Court is, thus, more inclined to believe that the alleged
teleconference on June 25, 1999 never took place, and that the
resolution allegedly approved by the respondent’s Board of Directors
during the said teleconference was a mere concoction purposefully
foisted on the RTC, the CA and this Court, to avert the dismissal of its
complaint against the petitioner.
Petition granted.
PARAS, J.:
(4) July 24, 1958 — Res. No. 57, amending Resolution No.
49 (FY 1958) and granting to each Director a monthly
commutable allowance of P200.00 in lieu of waiting time
per them and commutable transportation allowance of
P20.00 for attending meetings in Manila (Exh- H, p. 124);
(5) June 11, 1959 — Res. No. 39, increasing the monthly
commutable allowance of each CCE Director from
P300.00 to P500.00 per month but cancelling the
authorized per diems and transportation expenses for
FACOMA visitations (Exh. F, p. 75); and
As shown by the payrolls and petty cash and check vouchers of the
CCE Nicolas T. Enciso, as director of said Exchange, received as
compensation in the form of commutable per diem, per them
Facoma visitations, kilometrage allowance, commutable
discretionary funds and representation expenses in the total amount
of P10,967.85 for the period 1958 to 1960 (CA-G.R. No. 32593-R; Rollo,
p. 19).
On October 22, 1960, CCE filed a complaint with prayer for a writ of
attachment verified by its Officer-in-Charge, against Nicolas T. Enciso
for the recovery of said amount, the same having been collected
and received by Enciso in violation of Section 8, Article V of CCE's By-
Laws, which reads:
In the resolution of October 16, 1972, this Court gave due course to
the petition. The brief for the petitioner was filed on November 22,
1972 (Rollo, p. 37), while the brief for the private respondent was filed
on April 27, 1973 (Rollo, p. 53).
II
III
IV
The main issue in this case is whether or not the said of directors of
the petitioner had the power and authority to adopt the resolutions
above-enumerated which appropriated finds of the corporation for
per diems, transportation allowance and discretionary funds for the
members of its Board of Directors.
Laches was also ruled out by this Court in the same case the tribunal
holding that the board of directors under the By-Laws of the
Corporation, had the control of the affairs of the corporation and it is
not to be expected that the board would sue its members to
recover the sums of money voted by and for themselves. Thus, under
the circumstances, where the corporation was virtually immobilized
from commencing suit against its directors, laches does not begin to
attach against the corporation until the directors cease to be such.
(Ibid., pp. 597-598).
In resume, almost all the issues raised in the case at bar have already
been resolved in Central Cooperative Exchange, Inc. v. Tibe, Sr.
(supra) and there appears to be no logical reason why the ruling in
said case which has long become final, should not apply to the
instant case.
Concerning the point that the complaint was verified by the officer-
in-charge who is not of the category of a General Manager, it win
be noted that said officer-in-charge took over the functions and
duties of the deposed general manager. In general, the authority to
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supervise the business and affairs of the corporation includes the
authority to institute proceedings against all accountable persons in
order to protect and preserve the assets of the corporation and to
prevent their dissipation (In re Winston, 122 Fed. 187).
SO ORDERED.
Footnotes
DECISION
AUSTRIA-MARTINEZ, J.:
In a Decision dated September 30, 1998, the Labor Arbiter (LA) held
petitioner and its manager, Jose Luis Bondoc, liable for
underpayment as complainants were regular employees of
petitioner. They were also held guilty of illegal dismissal with regard to
complainants Joselito Tinghil and Pedro Emperado.
Hence, the present petition for review under Rule 45 of the Rules of
Court based on the following grounds:
II
xxxx
xxxx
Indeed, it was only after this NLRC Decision was issued that the
petitioners harped on the separate personality of the
Pamplona Plantation Co., Inc., vis-à-vis the Pamplona
Plantation Leisure Corporation.
The CA's finding finds sufficient basis from the records of this case. In
his Affidavit executed on October 9, 1997, Tinghil stated that some
time in May 3, 1997, he, together with other union officers and
company employees, were called personally by the project
manager, Lito Bundok,11 who expressed his "disgust" with their union
activities. They were then informed that they will not be allowed to
report for work anymore.12 Petitioner did not at all contest Tinghil's
allegations. Instead, it merely countered that Tinghil's narration in his
affidavit are vague.13
It is well-settled that the employer has the burden of proving that the
dismissal was for a valid and just cause. Failure to discharge this
burden of proof substantially means that the dismissal was not
justified and therefore, illegal.14 Given petitioner's failure to discharge
Lastly, petitioner believes that its manager, Jose Luis Bondoc, should
not have been held solidarily liable with the company for the wage
differentials awarded to respondents. Petitioner argues that Bondoc
is merely an employee of the company and not a corporate
director or officer who can be held personally liable therefor.
The rule is that officers of a corporation are not personally liable for
their official acts unless it is shown that they have exceeded their
authority. However, the legal fiction that a corporation has a
personality separate and distinct from stockholders and members
may be disregarded if it is used as a means to perpetuate fraud or
an illegal act or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, or to confuse legitimate issues.15
SO ORDERED.
FACTS
This stems from a case before the Labor Arbiter for underpayment,
overtime pay, premium pay for rest day and holiday, service
incentive leave pay, damages, attorney’s fees, and 13th month pay.
The complainants claimed that they were regular rank and file
employees of petitioner Pamplona Plantation Co., Inc. with different
hiring periods, work designations, and salary rates.
The NLRC reversed the LA’s decision, dismissing all the complaints,
finding that the complaint should have been directed against the
Pamplona Plantation Leisure Corporation since complainants’
individual affidavits contained the allegations that their tasks
pertained to their work “in the golf course.”
The Court of Appeals (CA) set aside the NLRC’s dismissal and
reinstated the LA’s Decision with modification.
ISSUES
RULING
It is also a fact that respondents all received their pay from the same
person, Bondoc -- the managing director of the company. True,
Pamplona Plantation Co., Inc., and the Pamplona Plantation Leisure
Corporation appear to be separate corporate entities. But it is
settled that this fiction of law cannot be invoked to further an end
subversive of justice. The corporations have basically the same
incorporators and directors and are headed by the same official.
Both use only one office and one payroll and are under one
management. The attempt to make the two corporations appear as
two separate entities, insofar as the workers are concerned, should
be viewed as a devious but obvious means to defeat the ends of
the law. Such a ploy should not be permitted to cloud the truth and
perpetrate an injustice. Also, just because they worked at the golf
course did not necessarily mean that they were not employed to do
other tasks, especially since the golf course was merely a portion of
the coconut plantation. Thus, petitioner cannot now deny that
respondents are its employees.
Lastly, petitioner believes that its manager, Jose Luis Bondoc, should
not have been held solidarily liable with the company for the wage
differentials awarded to respondents. Petitioner argues that Bondoc
is merely an employee of the company and not a corporate
director or officer who can be held personally liable therefor.
Kwok vs. Philippine Carpet Mfg. Corp. (457 SCRA 465 [2005])
DECISION
The Antecedents
The respondent corporation denied all these, claiming that upon the
petitioner’s retirement, he received the amount of P6,902,387.19
representing all the benefits due him. Despite this, the petitioner
again demanded P7,080,546.00, which demand was without factual
and legal basis. The respondent corporation asserted that the
chairman of its board of directors and its president/vice-president
had unlimited discretion in the use of their time, and had never been
required to file applications for vacation and sick leaves; as such, the
said officers were not entitled to vacation and sick leave benefits.
The respondent corporation, likewise, pointed out that even if the
petitioner was entitled to the said additional benefits, his claim had
already prescribed. It further averred that it had no policy to grant
vacation and sick leave credits to the petitioner.6
In his Affidavit7 dated May 19, 1998, Lim denied making any such
verbal promise to his son-in-law on the grant of unlimited vacation
and sick leave credits and the cash conversion thereof. Lim averred
that the petitioner had received vacation and sick leave benefits
from 1994 to 1996. Moreover, assuming that he did make such
promise to the petitioner, the same had not been confirmed or
approved via resolution of the respondent corporation’s board of
directors.
SO ORDERED.9
For his part, the petitioner made the following averments in his
memorandum:
Aggrieved, the petitioner filed a petition for review with the CA, on
the following grounds:
II
III
IV
V
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THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION
OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT RULED THAT THE MEMORANDUM
DATED APRIL 26, 1997 APPLICABLE TO MR. RAOUL RODRIGO WAS
ALSO APPLICABLE TO PETITIONER.18
The petitioner, thus, filed the instant petition for review on certiorari
with this Court, assailing the decision and resolution of the CA on the
following claims:
II
The Hon. Court of Appeals gravely erred in ruling that even if private
respondent’s (sic) Mr. Lim did make him such promise, the same
cannot be enforced.22
III
The petitioner further argues that his complaint was not time-barred
since he filed it on December 5, 1996. Even if this were so, he is,
nevertheless, entitled to the cash value of his vacation and sick
leave credits for three years before his retirement. Moreover, the
evidence on record shows that officers belonging to Category I had
been granted the cash conversion of their earned leave credits after
the lapse of three years.
The respondent corporation, for its part, asserts that the petitioner
failed to adduce substantial evidence to the claims in his complaint.
Even if Lim had made such verbal promise to the petitioner, the
same is not binding on the respondent corporation absent its
conformity through board resolution. Moreover, the petitioner is not
covered by the Memorandum dated November 6, 1981 because he
had unlimited leave credits; hence, it cannot be gainsaid that he still
had unused leave credits to be converted. According to the
respondent corporation, the petitioner himself admitted that he was
not included in the Memorandum dated November 6, 1981; and
even assuming that he was covered by the said memorandum, the
fact that his complaint was filed only in 1996 precludes him from
claiming the cash conversion of such leave credits for the years 1966
to 1993.
Except for his bare assertions, petitioner has not adduced sufficient
evidence to support his claim that he was, indeed, promised the
The CA made short shift of the claim of the petitioner that per
Memorandum dated November 6, 1981, he was not entitled to the
benefits of the company policy of commutation of leave credits.
Indeed, the company policy of conversion into equivalent cash of
unused vacation and sick leave credits applied only to its regular
employees. The petitioner failed to offer evidence to rebut the
testimony of Nel Gopez, Chief Accountant of the respondent, that
the petitioner was not among the regular employees covered by the
policy for the simple reason that he had unlimited vacation leave
benefits. As stated by the CA, the petitioner no less corroborated the
testimony of Gopez, thus:
ATTY. PIMENTEL
Yes.
ATTY. PIMENTEL
Category One employees are from the rank and of Senior Vice-
President and Assistant General Manager and below, up to the level
of department managers.
ATTY. PIMENTEL
How about the complainant, Mr. Kwok, does he falling (sic) to the
category one?
WITNESS
ATTY. PIMENTEL
WITNESS
Yes, Ma’am.
ATTY. PIMENTEL
And would you know, Mr. Witness, why he is (sic) not given the
conversion of the vacation leave benefits at the time category one
employees sectors (sic) are given?
WITNESS
ATTY. PIMENTEL
WITNESS
Yes, right.
ATTY. PIMENTEL
WITNESS
And, fourth, even assuming that PCMC President Patricio Lim did
promise petitioner the cash conversion of his leaves, we agree with
respondent that this cannot bind the company in the absence of
any Board resolution to that effect. We must stress that the personal
act of the company president cannot bind the corporation. As
explicitly stated by the Supreme Court in People’s Aircargo and
Warehousing Co., Inc. v. Court of Appeals:
Anent the third assigned error, petitioner maintains that the PCMC
Board of Directors has granted its President, Patricio Lim, awesome
powers to grant benefits to its employees, adding that the Board has
always given its consent to the way Lim ran the affairs of the
company especially on matters relating to the benefits that its
corporate officers enjoyed.
As to the last assigned error, petitioner faults the NLRC for holding as
applicable to petitioner, the April 26, 1997 Memorandum issued by
PCMC to Raoul Rodrigo, Donald Kwok’s successor as company
executive vice-president. The said memo granted Rodrigo unlimited
sick and vacation leave credits but disallowed the cash conversion
thereof. Before he became executive vice-president, Rodrigo was
senior vice-president and enjoyed the commutation of his unused
vacation and sick leaves.
We note that the April 26, 1997 memo was issued to Rodrigo when
petitioner was already retired from PCMC. While said memorandum
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was particularly directed to Rodrigo, however, this does not
necessarily mean that petitioner, as former executive vice-president,
was then not prohibited from converting his earned vacation and
sick leaves into cash since he was not issued a similar memo. On the
contrary, the memo simply affirms the long-standing company
practice of excluding PCMC’s top two positions, that of president
and executive vice-president, from the commutation of leaves. As
heretofore discussed, among the perks of those occupying these
posts is the privilege of having unlimited leaves, which is totally
incompatible with the concept of converting unused leave credits
into their cash equivalents.28
SO ORDERED.
FACTS:
ISSUE:
RULING:
DECISION
SANDOVAL-GUTIERREZ, J.:
On May 7, 1976, the SEC, in its Resolution No. 260,6 granted Eduardo
Santos’ application.
In an Order dated April 22, 199624 in SEC Case No. 09-95-5135, SEC
Hearing Officer Manuel P. Perea dismissed Rovel’s petition on the
grounds of lack of cause of action, res judicata, estoppel, laches
and prescription. This Order was affirmed by the SEC en banc in its
Decision dated January 20, 199725 in SEC AC No. 560.
Upon a petition for review, docketed as CA-G.R. SP. No. 43260, the
Court of Appeals, in its Decision dated June 5, 1998,26 affirmed the
January 20, 1997 SEC en banc Decision. Rovels’ motion for
reconsideration was likewise denied.27
Hence, the instant petition for review on certiorari,28 alleging that the
Court of Appeals erred:
II
The pertinent portions of Rovels petition filed with the SEC read:
"9. x x x the relation between the Silva faction and the Santos faction
became adversarial. The Silva faction attempted to form an alleged
new board of directors and repealed the Board Resolution dated
December 29, 1975 Resolution regarding the ‘debt’ to equity swap.
Thus, it resolved:
"10. That what is clear from the above Resolution of March 1, 1976 is
the admission that indeed TTTDC owes certain amount of money
from its creditors. The creditors became stockholders of record as a
result of shares of stock issued in implementation of the ‘debt to
equity’ conversion. Corresponding shares of stock were issued and
signed by then president of the corporation Roberto Roxas and then
corporate secretary Francisco N. Carreon, Jr.
"PRAYER
The requisites of res judicata,34 also known as the rule on bar by prior
judgment, are:
The first three (3) requisites of res judicata are present in this case. This
is not disputed by the parties and is, in fact, established by the
record. The controversy arises as to whether there is identity of the
parties in the present SEC Case No. 09-95-5135, on the one hand,
and in prior SEC Case Nos. 1322 and 3806, on the other.
"In the case at bench, there can be no question that the rights
claimed by petitioner and its stockholders/directors/officers who
were parties in SEC Case Nos. 1322 and 3806 are identical in that
they are both based on the December 29, 1975 Resolution. Stated
The doctrine of res judicata states that a final judgment on the merits
rendered by a court of competent jurisdiction is conclusive as to the
rights of the parties and their privies, and constitutes an absolute bar
to subsequent actions involving the same claim, demand or cause
of action.38 This is founded on public policy and necessity, which
makes it to the interest of the State that there should be an end to
litigations, and on the principle that an individual should not be
vexed twice for the same cause.39
In sum, this Court finds that the Court of Appeals did not commit any
reversible error in its challenged Decision.
SO ORDERED.
Footnotes
DECISION
NACHURA, J.:
Petitioner posits that this Court should grant the petition because –
We disagree.
Probable cause has been defined as the existence of such facts and
circumstances as would lead a person of ordinary caution and
prudence to entertain an honest and strong suspicion, that the
person charged is guilty of the crime for which he is sought to be
prosecuted. Being based merely on opinion and reasonable belief, it
does not import absolute certainty.16 A finding of probable cause
merely binds over the suspect to stand trial; it does not impose a
guilty verdict. However, it requires more than bare suspicion.17
Art. 293. Who are guilty of robbery.—Any person who, with intent to
gain, shall take any personal property belonging to another, by
means of violence against or intimidation of any person, or using
force upon anything shall be guilty of robbery.
Or if –
xxxx
SO ORDERED.
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
ATTESTATION
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
DECISION
AUSTRIA-MARTINEZ, J.:
On July 16, 2001, a month shy of her 64th birthday,3 respondent opted
for early retirement and received the corresponding monetary
benefits.4
Sec. 13. x x x
xxxx
Thus, the Court is confronted with the following issues: whether the
courts may determine the proper classification of a position in
government; and whether the position of corporate secretary in a
GOCC is primarily confidential in nature.
Positions that do not fall under the career service are considered
non-career positions, which are characterized by: (1) entrance on
bases other than those of the usual tests of merit and fitness utilized
for the career service; and (2) tenure which is limited to a period
specified by law, or which is co-terminous with that of the appointing
authority or subject to his pleasure, or which is limited to the duration
of a particular project for which purpose employment was made.21
MR. FOZ. Does not Commissioner Bernas agree that the general
rule should be that the merit system or the competitive system
should be upheld?
FR. BERNAS. I agree that that it should be the general rule; that
is why we are putting this as an exception.
FR. BERNAS. The Supreme Court has always said that, but if the
law of the administrative agency says that a position is primarily
confidential when in fact it is not, we can always challenge that
in court. It is not enough that the law calls it primarily
confidential to make it such; it is the nature of the duties which
makes a position primarily confidential.
However, Salas declared that since the enactment of R.A. No. 2260
and Piñero,38 it is the nature of the position which finally determines
whether a position is primarily confidential or not, without regard to
existing executive or legislative pronouncements either way, since
the latter will not bind the courts in case of conflict.
xxxx
It is from De los Santos that the so-called "proximity rule" was derived.
A position is considered to be primarily confidential when there is a
primarily close intimacy between the appointing authority and the
appointee, which ensures the highest degree of trust and unfettered
communication and discussion on the most confidential of matters.47
This means that where the position occupied is already remote from
that of the appointing authority, the element of trust between them
is no longer predominant.48 On further interpretation in Griño, this was
clarified to mean that a confidential nature would be limited to
those positions not separated from the position of the appointing
authority by an intervening public officer, or series of public officers,
in the bureaucratic hierarchy.49
The loss of such trust or confidence could easily result in the board's
termination of the secretary's services and ending of his term. This is
understandably justified, as the board could not be expected to
function freely with a suspicious officer in its midst. It is for these same
reasons that jurisprudence, as earlier cited, has consistently
characterized personal or private secretaries, and board secretaries,
as positions of a primarily confidential nature.75
The Court is aware that this decision has repercussions on the tenure
of other corporate secretaries in various GOCCs. The officers likely
assumed their positions on permanent career status, expecting
protection for their tenure and appointments, but are now re-
classified as primarily confidential appointees. Such concern is
unfounded, however, since the statutes themselves do not classify
the position of corporate secretary as permanent and career in
nature. Moreover, there is no absolute guarantee that it will not be
classified as confidential when a dispute arises. As earlier stated, the
Court, by legal tradition, has the power to make a final
determination as to which positions in government are primarily
confidential or otherwise. In the light of the instant controversy, the
Court's view is that the greater public interest is served if the position
of a corporate secretary is classified as primarily confidential in
nature.
No costs.
SO ORDERED.
WE CONCUR:
REYNATO S. PUNO
Chief Justice
(No Part)
ANTONIO EDUARDO B.
NACHURA RUBEN T. REYES
Associate Justice Associate Justice
REYNATO S. PUNO
Chief Justice
----------------------------------------
PARDO, J.:
What is before the Court are separate appeals from the decision of
the Court of Appeals,1 ruling that Hi-Cement Corporation is not liable
for four checks amounting to P2 million issued to E.T. Henry and Co.
and discounted to Atrium Management Corporation.
After due proceedings, on July 20, 1989, the trial court rendered a
decision ordering Lourdes M. de Leon, her husband Rafael de Leon,
E.T. Henry and Co., Inc. and Hi-Cement Corporation to pay
petitioner Atrium, jointly and severally, the amount of P2 million
corresponding to the value of the four checks, plus interest and
attorney's fees.4
SO ORDERED."8
Lourdes M. de Leon submitted that the trial court erred in ruling that
she was solidarilly liable with Hi-Cement for the amount of the check.
Also, that the trial court erred in ruling that Atrium was an ordinary
holder, not a holder in due course of the rediscounted checks.10
Hi-Cement on its part submitted that the trial court erred in ruling that
even if Hi-Cement did not authorize the issuance of the checks, it
could still be held liable for the checks. And assuming that the
checks were issued with its authorization, the same was without any
consideration, which is a defense against a holder in due course and
that the liability shall be borne alone by E.T. Henry.11
(2) ordering the defendants E.T. Henry and Co., Inc. and
Lourdes M. de Leon, jointly and severally to pay the plaintiff the
sum of TWO MILLION PESOS (P2,000,000.00) with interest at the
legal rate from the filling of the complaint until fully paid, plus
P20,000.00 for attorney's fees.
(3) Ordering the plaintiff and defendants E.T. Henry and Co.,
Inc. and Lourdes M. de Leon, jointly and severally to pay
defendant Hi-Cement Corporation, the sum of P20,000.00 as
and for attorney's fees.
So ordered."12
We first resolve the issue of whether the issuance of the checks was
an ultra vires act. The record reveals that Hi-Cement Corporation
issued the four (4) checks to extend financial assistance to E.T. Henry,
not as payment of the balance of the P30 million pesos cost of hydro
oil delivered by E.T. Henry to Hi-Cement. Why else would petitioner
de Leon ask for counterpart checks from E.T. Henry if the checks
were in payment for hydro oil delivered by E.T. Henry to Hi-Cement?
Hi-Cement, however, maintains that the checks were not issued for
consideration and that Lourdes and E.T. Henry engaged in a "kiting
It is, however, our view that there is basis to rule that the act of issuing
the checks was well within the ambit of a valid corporate act, for it
was for securing a loan to finance the activities of the corporation,
hence, not an ultra vires act.
"An ultra vires act is one committed outside the object for which a
corporation is created as defined by the law of its organization and
therefore beyond the power conferred upon it by law"16 The term
"ultra vires" is "distinguished from an illegal act for the former is merely
voidable which may be enforced by performance, ratification, or
estoppel, while the latter is void and cannot be validated." 17
The next issue is whether or not petitioner Atrium was a holder of the
checks in due course. The Negotiable Instruments Law, Section 52
defines a holder in due course, thus:
In the instant case, the checks were crossed checks and specifically
indorsed for deposit to payee's account only. From the beginning,
Atrium was aware of the fact that the checks were all for deposit
only to payee's account, meaning E.T. Henry. Clearly, then, Atrium
could not be considered a holder in due course.
We need not rule on the other issues raised, as they merely follow as
a consequence of the foregoing resolutions.
No costs.
SO ORDERED.
HELD: No, the act is not ultra vires but De Leon is still personally liable.
The act is not ultra vires because the act of issuing the checks was
well within the ambit of a valid corporate act. De Leon as treasurer is
authorized to sign checks. When the checks were issued, Hi-Cement
has sufficient funds to cover the P2 million.
In the case at bar, De Leon is negligent. She was aware that the
checks were only payable to E.T. Henry’s account yet she sent a
confirmation to Atrium to the effect that the checks can be
negotiated to them (Atrium) by E.T. Henry. Therefore, she may be
held personally liable along with E.T. Henry (but not with Hi-Cement
where she is an officer).
x ----------------------------- x
PANGANIBAN, J.:
The Case
Before us are two Petitions for Review1 under Rule 45 of the Rules of
Court, assailing the March 23, 2001 Decision 2 and the August 17, 2001
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 63561. The
decretal portion of the assailed Decision reads as follows:
The Facts
Total -- P 782,600.006
Issues
In GR No. 149454, Petitioner BPI submits the following issues for our
consideration:
These issues can be narrowed down to three. First, was there forgery
under the Negotiable Instruments Law (NIL)? Second, were any of
the parties negligent and therefore precluded from setting up
forgery as a defense? Third, should moral and exemplary damages,
attorney’s fees, and interest be awarded?
First Issue:
In the present case, we hold that there was forgery of the drawer’s
signature on the check.
First, both the CA17 and the RTC18 found that Respondent Yabut
himself had voluntarily admitted, through an Affidavit, that he had
forged the drawer’s signature and encashed the checks.19 He never
refuted these findings.20 That he had been coerced into admission
was not corroborated by any evidence on record.21
Second, the appellate and the trial courts also ruled that the PNP
Crime Laboratory, after its examination of the said checks,22 had
concluded that the handwritings thereon -- compared to the
standard signature of the drawer -- were not hers.23 This conclusion
was the same as that in the Report24 that the PNP Crime Laboratory
had earlier issued to BPI -- the drawee bank -- upon the latter’s
request.
Therefore, to fall within the ambit of Section 12, quoted above, there
must be an arrest or a deprivation of freedom, with "questions
propounded on him by the police authorities for the purpose of
eliciting admissions, confessions, or any information." 30 The said
constitutional provision does "not apply to spontaneous statements
made in a voluntary manner"31 whereby an individual orally admits
to authorship of a crime.32 "What the Constitution proscribes is the
compulsory or coercive disclosure of incriminating facts."33
Second Issue:
Furthermore, there is always the audit risk that errors would not be
detected87 for various reasons. One, materiality is a consideration in
audit planning;88 and two, the information obtained from such a
substantive test is merely presumptive and cannot be the basis of a
valid waiver.89 BPI has no right to impose a condition unilaterally and
Every right has subjects -- active and passive. While the active
subject is entitled to demand its enforcement, the passive one is
duty-bound to suffer such enforcement.92
On the one hand, BPI could not have been an active subject,
because it could not have demanded from CASA a response to its
notice. Besides, the notice was a measly request worded as follows:
"Please examine x x x and report x x x."93 CASA, on the other hand,
could not have been a passive subject, either, because it had no
obligation to respond. It could -- as it did -- choose not to respond.
It is a non sequitur to say that the person who receives the monthly
bank statements, together with the cancelled checks and other
debit/credit memoranda, shall examine the contents and give
notice of any discrepancies within a reasonable time. Awareness is
not equipollent with discernment.
There is also a cutoff period such that checks issued during a given
month, but not presented for payment within that period, will not be
reflected therein.135 An experienced auditor with intent to defraud
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can easily conceal any devious scheme from a client unwary of the
accounting processes involved by manipulating the cash balances
on record -- especially when bank transactions are numerous, large
and frequent. CASA could only be blamed, if at all, for its
unintelligent choice in the selection and appointment of an auditor -
- a fault that is not tantamount to negligence.
Clearly then, Yabut was able to perpetrate the wrongful act through
no fault of CASA. If auditors may be held liable for breach of
contract and negligence,146 with all the more reason may they be
charged with the perpetration of fraud upon an unsuspecting client.
CASA had the discretion to pursue BPI alone under the NIL, by
reason of expediency or munificence or both. Money paid under a
mistake may rightfully be recovered,147 and under such terms as the
injured party may choose.
Third Issue:
Interest Allowed
For the failure of BPI to pay CASA upon demand and for compelling
the latter to resort to the courts to obtain payment, legal interest
may be adjudicated at the discretion of the Court, the same to run
from the filing175 of the Complaint.176 Since a court judgment is not a
loan or a forbearance of recovery, the legal interest shall be at six
percent (6%) per annum.177 "If the obligation consists in the payment
of a sum of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the
payment of x x x legal interest, which is six percent per annum."178
The actual base for its computation shall be "on the amount finally
adjudged,"179 compounded180 annually to make up for the cost of
money181 already lost to CASA.
SO ORDERED.
Footnotes
* On official leave.
** Working Chairman.
1 GR No. 149454 rollo, pp. 20-40; GR No. 149507 rollo, pp. 3-20.
2Id., pp. 44-52 & 22-30. Penned by Justice Portia Aliño-
Hormachuelos, with the concurrence of Justices Fermin A.
Martin Jr. (Second Division chairman) and Mercedes Gozo-
Dadole (member).
3Id., pp. 54 & 32. Penned by Justice Portia Aliño-Hormachuelos,
with the concurrence of Justices Ramon A. Barcelona (Special
Former Second Division chairman) and Mercedes Gozo-Dadole
(member).
4Assailed CA Decision, pp. 8-9; GR No. 149454 rollo, pp. 51-52;
GR No. 149507 rollo, pp. 29-30.
5 This is also referred to in the records as Casa Montessori
Internationale or Casa Montessori International, Inc.
6 The amount was earlier stated in the CA Decision as P782,000.
7The total amount of the encashed checks was earlier
computed in the CA Decision to be P782,600.
Associated Bank v. CA, 322 Phil. 677, 697, January 31, 1996,
104
per Romero, J.; citing The Great Eastern Life Insurance Co. v.
Hongkong & Shanghai Banking Corp., supra, and Banco de
Oro Savings and Mortgage Bank v. Equitable Banking Corp.,
157 SCRA 188, 198, January 20, 1988.
per Montemayor, J.
August 25, 1989; citing Guita v. CA, 139 SCRA 576, 580,
November 11, 1985.
150Rubio v. CA, 141 SCRA 488, 515-516, March 12, 1986; citing
R&B Surety & Insurance Co., Inc. v. IAC, 214 Phil. 649, 657, June
22, 1984.
Filinvest Credit Corp. v. Mendez, 152 SCRA 593, 601, July 31,
151
1987.
152 Article 2216 of the Civil Code.
153 Silva v. Peralta, 110 Phil. 57, 64, November 25, 1960.
154 Article 2217 of the Civil Code.
November 23, 1966; citing Fores v. Miranda, 105 Phil. 266, 274,
276, March 4, 1959 and Necesito v. Paras, 104 Phil. 75, 82-83,
June 30, 1958.
1990; citing Sabena Belgian World Airlines v. CA, 171 SCRA 620,
629, March 31, 1989.
159Cathay Pacific Airways, Ltd. v. Vazquez, 399 SCRA 207, 220,
March 14, 2003, per Davide Jr., CJ; citing Francisco v. Ferrer Jr.,
353 SCRA 261, 265, February 28, 2001. See also Morris v. CA, 352
SCRA 428, 437, February 21, 2001; Magat Jr. v. CA, 337 SCRA
298, 307, August 4, 2000; and Tan v. Northwest Airlines, Inc., 383
Phil. 1026, 1032, March 3, 2000.
LBC Express, Inc. v. CA, 236 SCRA 602, 607, September 21,
160
1994. See Layda v. CA, 90 Phil. 724, 730, January 29, 1952.
161 Article 2217 of the Civil Code.
162Morales, The Philippine General Banking Law (Annotated
2002), pp. 3-4; citing Simex International (Manila), Inc. v. CA,
supra, and Mambulao Lumber Co. v. Philippine National Bank,
130 Phil. 366, 391, January 30, 1968.
163 Sangco, supra, p. 989.
164Grapilon v. Municipal Council of Carigara, Leyte, 112 Phil. 24,
29, May 30, 1961.
165 Article 2229 of the Civil Code.
166Ledesma v. CA, 160 SCRA 449, 456, April 15, 1988,
Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440,
450, March 16, 1987; and Lopez v. Pan American World Airways,
123 Phil. 256, 267, March 30, 1966.
167De Leon v. CA, 165 SCRA 166, 176, August 31, 1988; Sweet
Lines, Inc. v. CA, 206 Phil. 663, 669, April 28, 1983; Octot v.
Ybañez, 197 Phil. 76, 82, January 18, 1982; and Ventanilla v.
Centeno, 110 Phil. 811, 816, January 28, 1961, citing Article 2233
of the Civil Code.
& Co., Ltd., 124 Phil. 947, 950, October 19, 1966, citing Heirs of
Basilisa Justiva vs. Gustilo, 117 Phil. 71, 73, January 31, 1963. See
Tan Ti (alias Tan Tico) v. Alvear, 26 Phil. 566, 571, January 16,
1914.
234.
182 Article 2210 of the Civil Code.
183The law merchant refers to the body of law relating to
mercantile transactions and instruments of widespread use. Its
usage as adopted by the courts is the origin of the law
merchant on negotiable securities. Agbayani, supra, pp. 11-12.
DIGEST
RTC granted the Complaint for Collection with Damages against BPI
ordering to reinstate the amount in the account, with interest. CA
took account of CASA’s contributory negligence and apportioned
the loss between CASA and BPI, and ordred Yabut to reimburse
both.
Every right has subjects -- active and passive. While the active
subject is entitled to demand its enforcement, the passive one is
duty-bound to suffer such enforcement. On the one hand, BPI could
not have been an active subject, because it could not have
demanded from CASA a response to its notice. CASA, on the other
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hand, could not have been a passive subject, either, because it had
no obligation to respond. It could -- as it did -- choose not to
respond.
ANTONIO, J.:
By reason of the foregoing, on April 28, 1977, petitioner filed with the
SEC an urgent motion for the issuance of a writ of preliminary
injunction to restrain private respondents from taking up Item 6 of the
Agenda at the annual stockholders' meeting, requesting that the
same be set for hearing on May 3, 1977, the date set for the second
hearing of the case on the merits. Respondent Commission,
however, cancelled the dates of hearing originally scheduled and
reset the same to May 16 and 17, 1977, or after the scheduled
annual stockholders' meeting. For the purpose of urging the
Commission to act, petitioner filed an urgent manifestation on May
3, 1977, but this notwithstanding, no action has been taken up to the
date of the filing of the instant petition.
(1) Order No. 449, Series of 1977 (SEC Case No. 1375); denying
petitioner's motion for reconsideration, with its supplement, of the
order of the Commission denying in part petitioner's motion for
production of documents, petitioner's motion for reconsideration of
the order denying the issuance of a temporary restraining order
(2) Order No. 450, Series of 1977 (SEC Case No. 1375), allowing
petitioner to run as a director of respondent corporation but stating
that he should not sit as such if elected, until such time that the
Commission has decided the validity of the bylaws in dispute, and
denying deferment of Item 6 of the Agenda for the annual
stockholders' meeting; and
(3) Order No. 451, Series of 1977 (SEC Case No. 1375), denying
petitioner's motion for reconsideration of the order of respondent
Commission denying petitioner's motion for summary judgment;
On May 17, 1977, respondent SEC, Andres M. Soriano, Jr. and Jose M.
Soriano filed their comment, alleging that the petition is without merit
for the following reasons:
(2) that the amended by law were adopted to preserve and protect
respondent SMC from the clear and present danger that business
competitors, if allowed to become directors, will illegally and unfairly
utilize their direct access to its business secrets and plans for their
own private gain to the irreparable prejudice of respondent SMC,
and, ultimately, its stockholders. Further, it is asserted that
membership of a competitor in the Board of Directors is a blatant
disregard of no less that the Constitution and pertinent laws against
combinations in restraint of trade;
(3) that by laws are valid and binding since a corporation has the
inherent right and duty to preserve and protect itself by excluding
competitors and antogonistic parties, under the law of self-
preservation, and it should be allowed a wide latitude in the
selection of means to preserve itself;
(4) that the delay in the resolution and disposition of SEC Cases Nos.
1375 and 1423 was due to petitioner's own acts or omissions, since he
failed to have the petition to suspend, pendente lite the amended
by-laws calendared for hearing. It was emphasized that it was only
on April 29, 1977 that petitioner calendared the aforesaid petition for
suspension (preliminary injunction) for hearing on May 3, 1977. The
instant petition being dated May 4, 1977, it is apparent that
respondent Commission was not given a chance to act "with
deliberate dispatch", and
(5) that, even assuming that the petition was meritorious was, it has
become moot and academic because respondent Commission has
acted on the pending incidents, complained of. It was, therefore,
prayed that the petition be dismissed.
It is only the Solicitor General who contends that the case should be
remanded to the SEC for hearing and decision of the issues involved,
invoking the latter's primary jurisdiction to hear and decide case
involving intra-corporate controversies.
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It is an accepted rule of procedure that the Supreme Court should
always strive to settle the entire controversy in a single proceeding,
leaving nor root or branch to bear the seeds of future litigation. 4
Thus, in Francisco v. City of Davao, 5 this Court resolved to decide the
case on the merits instead of remanding it to the trial court for further
proceedings since the ends of justice would not be subserved by the
remand of the case. In Republic v. Security Credit and Acceptance
Corporation, et al., 6 this Court, finding that the main issue is one of
law, resolved to decide the case on the merits "because public
interest demands an early disposition of the case", and in Republic v.
Central Surety and Insurance Company, 7 this Court denied remand
of the third-party complaint to the trial court for further proceedings,
citing precedent where this Court, in similar situations resolved to
decide the cases on the merits, instead of remanding them to the
trial court where (a) the ends of justice would not be subserved by
the remand of the case; or (b) where public interest demand an
early disposition of the case; or (c) where the trial court had already
received all the evidence presented by both parties and the
Supreme Court is now in a position, based upon said evidence, to
decide the case on its merits. 8 It is settled that the doctrine of
primary jurisdiction has no application where only a question of law is
involved. 8a Because uniformity may be secured through review by a
single Supreme Court, questions of law may appropriately be
determined in the first instance by courts. 8b In the case at bar, there
are facts which cannot be denied, viz.: that the amended by-laws
were adopted by the Board of Directors of the San Miguel
Corporation in the exercise of the power delegated by the
stockholders ostensibly pursuant to section 22 of the Corporation
Law; that in a special meeting on February 10, 1977 held specially for
that purpose, the amended by-laws were ratified by more than 80%
of the stockholders of record; that the foreign investment in the
Hongkong Brewery and Distellery, a beer manufacturing company in
Hongkong, was made by the San Miguel Corporation in 1948; and
that in the stockholders' annual meeting held in 1972 and 1977, all
foreign investments and operations of San Miguel Corporation were
ratified by the stockholders.
II
It being settled that the corporation has the power to provide for the
qualifications of its directors, the next question that must be
considered is whether the disqualification of a competitor from
being elected to the Board of Directors is a reasonable exercise of
corporate authority.
Thus, in McKee & Co. v. First National Bank of San Diego, supra the
court sustained as valid and reasonable an amendment to the by-
laws of a bank, requiring that its directors should not be directors,
officers, employees, agents, nominees or attorneys of any other
banking corporation, affiliate or subsidiary thereof. Chief Judge
Parker, in McKee, explained the reasons of the court, thus:
III
Some state courts recognize the right under certain conditions, while
others do not. Thus, it has been held that where a corporation owns
approximately no property except the shares of stock of subsidiary
corporations which are merely agents or instrumentalities of the
holding company, the legal fiction of distinct corporate entities may
be disregarded and the books, papers and documents of all the
corporations may be required to be produced for examination, 60
and that a writ of mandamus, may be granted, as the records of the
subsidiary were, to all incontents and purposes, the records of the
parent even though subsidiary was not named as a party. 61
mandamus was likewise held proper to inspect both the subsidiary's
and the parent corporation's books upon proof of sufficient control
or dominion by the parent showing the relation of principal or agent
or something similar thereto. 62
IV
Chief Justice Fred Ruiz Castro reserved his vote on the validity of the
amended by-laws, pending hearing by this Court on the applicability
of section 13(5) of the Corporation Law to petitioner.
Separate Opinions
II
III
2. With the same twelve (12) votes, the Court has also unanimously
rendered judgment declaring that until and after petitioner shall
have been given due process and proper hearing by the
respondent board of directors as to the question of his
disqualification under the questioned amended by- laws (assuming
that the respondent Securities and Exchange Commission ultimately
upholds the validity of said by laws), and such disqualification shall
have been sustained by respondent Securities and Exchange
Commission and ultimately by final judgment of this Court petitioner
is deemed eligible for all legal purposes and effect to be nominated
and voted and if elected to sit as a member of the board of
directors of respondent San Miguel Corporation. Accordingly,
respondent commission's Order No. 450, Series of 1977 to the
contrary has likewise been set aside; and
As stated in said judgment itself, for lack of the necessary votes, the
petition, insofar as it assails the validity of the questioned by-laws,
was dismissed.
We hold on our part that the doctrine of the law of the case invoked
by Mr. Justice Barredo has no applicability for the following reasons:
The Court through the decision of April 11, 1979, by the unanimous
votes of the twelve participating Justices headed by the Chief
Justice, ruled that petitioner Gokongwei was entitled to a "new and
proper hearing" by the SMC board of directors on the matter of his
disqualification under the questioned by-laws and that the board's
"decision shall be appealable to the respondent Securities and
Exchange Commission deliberating and acting en banc and
ultimately to this Court (and) unless disqualified in the manner herein
provided, the prohibition in the aforementioned amended by-laws
shall not apply to petitioner."
The entire Court, therefore, recognized that petitioner had not been
given procedural due process by the SMC board on the matter of his
disqualification and that he was entitled to a "new and proper
hearing". It stands to reason that in such hearing, petitioner could
raise not only questions of fact but questions of law, particularly
questions of law affecting the investing public and their right to
representation on the board as provided by law — not to mention
that as borne out by the fact that no restriction whatsoever appears
in the court's decision, it was never contemplated that petitioner was
to be limited to questions of fact and could not raise the
fundamental questions of law bearing on the invalidity of the
questioned amended by-laws at such hearing before the SMC
board. Furthermore, it was expressly provided unanimously in the
Court's decision that the SMC board's decision on the disqualification
of petitioner ("assuming the board of directors of San Miguel
Corporation should, after the proper hearing, disqualify him" as
qualified in Mr. Justice Barredo's own separate opinion, at page 2)
shall be appealable to respondent Securities and Exchange
Commission "deliberating and acting en banc and "untimately to this
Court." Again, the Court's judgment as set forth in its decision of April
11, 1979 contains nothing that would warrant the opinion now
expressed that respondent Securities and Exchange Commission
may not pass anymore on the question of the invalidity of the
amended by-laws. Certainly, it cannot be contended that the Court
in dismissing the petition for lack of necessary votes actually by-
passed the Securities and Exchange Commission and directly ruled
itself on the invalidity of the questioned by-laws when it itself could
It is very clear that under the decision herein, the issue of validity is a
settled matter for the parties herein as the law of the case, and it is
I concur with the observation of Justice Barredo that despite that less
than six votes are for upholding the validity of the by-laws, their
validity is deemed upheld, as constituting the "law of the case." It
could not be otherwise, after the present petition is dismissed with
the relief sought to declare null and void the said by-laws being
denied in effect. A vicious circle would be created if, should
petitioner Gokongwei be barred or disqualified from running by the
Board of Directors of San Miguel Corporation and the Securities and
Exchange Commission sustain the Board, petitioner could come
Corporation Law/alfred0 Page 898 of 1509
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again to Us, raising the same question he has raised in the present
petition, unless the principle of the "law of the case" is applied.
I concur with the observation of Justice Barredo that despite that less
than six votes are for upholding the validity of the by-laws, their
validity is deemed upheld, as constituting the "law of the case." It
could not be otherwise, after the present petition is dimissed with the
relief sought to declare null and void the said by-laws being denied
in effect. A vicious circle would be created if, should petitioner
Gokongwei be barred or disqualified from running by the Board,
petitioner could come again to Us, raising the same question he has
raised in the present petition, unless the principle of the "law of the
case" is applied.
Separate Opinions
II
III
2. With the same twelve (12) votes, the Court has also unanimously
rendered judgment declaring that until and after petitioner shall
have been given due process and proper hearing by the
respondent board of directors as to the question of his
disqualification under the questioned amended by- laws (assuming
that the respondent Securities and Exchange Commission ultimately
upholds the validity of said by laws), and such disqualification shall
have been sustained by respondent Securities and Exchange
Commission and ultimately by final judgment of this Court petitioner
is deemed eligible for all legal purposes and effect to be nominated
and voted and if elected to sit as a member of the board of
directors of respondent San Miguel Corporation. Accordingly,
respondent commission's Order No. 450, Series of 1977 to the
contrary has likewise been set aside; and
As stated in said judgment itself, for lack of the necessary votes, the
petition, insofar as it assails the validity of the questioned by-laws,
was dismissed.
We hold on our part that the doctrine of the law of the case invoked
by Mr. Justice Barredo has no applicability for the following reasons:
b) The contention of Mr. Justice Barredo that the result of the dismiss
of the case was that "petitioner Gokongwei may not hereafter act
on the assumption that he can revive the issue of the validity
whether in the Securities and Exchange Commission, in this Court or
in any other forum, unless he proceeds on the basis of a factual
milieu different from the setting of this case Not even the Securities
and Exchange Commission may pass on such question anymore at
The Court through the decision of April 11, 1979, by the unanimous
votes of the twelve participating Justices headed by the Chief
Justice, ruled that petitioner Gokongwei was entitled to a "new and
proper hearing" by the SMC board of directors on the matter of his
disqualification under the questioned by-laws and that the board's
"decision shall be appealable to the respondent Securities and
Exchange Commission deliberating and acting en banc and
ultimately to this Court (and) unless disqualified in the manner herein
provided, the prohibition in the aforementioned amended by-laws
shall not apply to petitioner."
The entire Court, therefore, recognized that petitioner had not been
given procedural due process by the SMC board on the matter of his
disqualification and that he was entitled to a "new and proper
hearing". It stands to reason that in such hearing, petitioner could
raise not only questions of fact but questions of law, particularly
questions of law affecting the investing public and their right to
representation on the board as provided by law — not to mention
that as borne out by the fact that no restriction whatsoever appears
in the court's decision, it was never contemplated that petitioner was
to be limited to questions of fact and could not raise the
fundamental questions of law bearing on the invalidity of the
questioned amended by-laws at such hearing before the SMC
board. Furthermore, it was expressly provided unanimously in the
Court's decision that the SMC board's decision on the disqualification
of petitioner ("assuming the board of directors of San Miguel
Corporation should, after the proper hearing, disqualify him" as
qualified in Mr. Justice Barredo's own separate opinion, at page 2)
shall be appealable to respondent Securities and Exchange
Commission "deliberating and acting en banc and "untimately to this
Court." Again, the Court's judgment as set forth in its decision of April
11, 1979 contains nothing that would warrant the opinion now
expressed that respondent Securities and Exchange Commission
may not pass anymore on the question of the invalidity of the
amended by-laws. Certainly, it cannot be contended that the Court
in dismissing the petition for lack of necessary votes actually by-
passed the Securities and Exchange Commission and directly ruled
itself on the invalidity of the questioned by-laws when it itself could
not reach a final and conclusive vote (a minimum of eight votes) on
the issue and three other Justices (the Chief Justice and Messrs.
Justices Fernando and Aquino) had expressly reserved their vote until
after further hearings (first before the Securities and Exchange
Commission and ultimately in this Court).
It is very clear that under the decision herein, the issue of validity is a
settled matter for the parties herein as the law of the case, and it is
only the actual implementation of the impugned amended by-laws
in the particular case of petitioner that remains to be passed upon
by the Securities and Exchange Commission, and on appeal
therefrom to Us, assuming the board of directors of San Miguel
Corporation should, after the proper hearing, disqualify him.
I concur with the observation of Justice Barredo that despite that less
than six votes are for upholding the validity of the by-laws, their
validity is deemed upheld, as constituting the "law of the case." It
could not be otherwise, after the present petition is dismissed with
the relief sought to declare null and void the said by-laws being
denied in effect. A vicious circle would be created if, should
petitioner Gokongwei be barred or disqualified from running by the
Board of Directors of San Miguel Corporation and the Securities and
Exchange Commission sustain the Board, petitioner could come
again to Us, raising the same question he has raised in the present
petition, unless the principle of the "law of the case" is applied.
# Separate Opinions
II
III
2. With the same twelve (12) votes, the Court has also unanimously
rendered judgment declaring that until and after petitioner shall
have been given due process and proper hearing by the
respondent board of directors as to the question of his
disqualification under the questioned amended by- laws (assuming
that the respondent Securities and Exchange Commission ultimately
upholds the validity of said by laws), and such disqualification shall
have been sustained by respondent Securities and Exchange
Commission and ultimately by final judgment of this Court petitioner
As stated in said judgment itself, for lack of the necessary votes, the
petition, insofar as it assails the validity of the questioned by-laws,
was dismissed.
We hold on our part that the doctrine of the law of the case invoked
by Mr. Justice Barredo has no applicability for the following reasons:
b) The contention of Mr. Justice Barredo that the result of the dismiss
of the case was that "petitioner Gokongwei may not hereafter act
on the assumption that he can revive the issue of the validity
whether in the Securities and Exchange Commission, in this Court or
in any other forum, unless he proceeds on the basis of a factual
milieu different from the setting of this case Not even the Securities
and Exchange Commission may pass on such question anymore at
the instance of herein petitioner or anyone acting in his stead or on
his behalf, " appears to us to be untenable.
The Court through the decision of April 11, 1979, by the unanimous
votes of the twelve participating Justices headed by the Chief
Justice, ruled that petitioner Gokongwei was entitled to a "new and
proper hearing" by the SMC board of directors on the matter of his
disqualification under the questioned by-laws and that the board's
"decision shall be appealable to the respondent Securities and
Exchange Commission deliberating and acting en banc and
ultimately to this Court (and) unless disqualified in the manner herein
provided, the prohibition in the aforementioned amended by-laws
shall not apply to petitioner."
The entire Court, therefore, recognized that petitioner had not been
given procedural due process by the SMC board on the matter of his
disqualification and that he was entitled to a "new and proper
hearing". It stands to reason that in such hearing, petitioner could
raise not only questions of fact but questions of law, particularly
questions of law affecting the investing public and their right to
representation on the board as provided by law — not to mention
that as borne out by the fact that no restriction whatsoever appears
in the court's decision, it was never contemplated that petitioner was
to be limited to questions of fact and could not raise the
fundamental questions of law bearing on the invalidity of the
questioned amended by-laws at such hearing before the SMC
board. Furthermore, it was expressly provided unanimously in the
Court's decision that the SMC board's decision on the disqualification
of petitioner ("assuming the board of directors of San Miguel
Corporation should, after the proper hearing, disqualify him" as
qualified in Mr. Justice Barredo's own separate opinion, at page 2)
shall be appealable to respondent Securities and Exchange
The motion was opposed by Soriano, et. al. The Corporation, Soriano,
et. al. filed their answer, and their opposition to the petition,
respectively. Meanwhile, on 10 December 1976, while the petition
was yet to be heard, the corporation issued a notice of special
stockholders' meeting for the purpose of "ratification and
confirmation of the amendment to the By-laws", setting such
meeting for 10 February 1977. This prompted Gokongwei to ask the
SEC for a summary judgment insofar as the first cause of action is
concerned, for the alleged reason that by calling a special
stockholders' meeting for the aforesaid purpose, Soriano, et. al.
admitted the invalidity of the amendments of 18 September 1976.
Issue:
Held:
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing
During the meetings dated April 4, 1997 and May 30, 1997 of the
CCCI Board of Directors, action on respondent’s application for
proprietary membership was deferred. In another Board meeting
held on July 30, 1997, respondent’s application was voted upon.
Subsequently, or on August 1, 1997, respondent received a letter
from Julius Z. Neri, CCCI’s corporate secretary, informing him that the
Board disapproved his application for proprietary membership.
After trial, the RTC rendered its Decision dated February 14, 2001 in
favor of respondent, thus:
5. Costs of suit.
SO ORDERED.2
SO ORDERED.3
For his part, respondent maintains that the petition lacks merit,
hence, should be denied.
(c) After the expiration of the aforesaid thirty (30) days, the
Board may, by unanimous vote of all directors present at a
regular or special meeting, approve the inclusion of the
candidate in the "Eligible-for-Membership List".
Article 19. Every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith.
SO ORDERED.
PURISIMA, J.:
-and-
Art. IX
On September 12, 1986, a local union election was held under the
auspices of the ULGWP wherein the herein petitioner, Beda
Magdalena Villanueva, and the other union officers were
proclaimed as winners. Minutes of the said election were duly filed
with the Bureau of Labor Relations on September 29, 1986.
(c) Advising that their union did not commit any act of
disloyalty as it has remained an affiliate of ULGWP;
(d) Giving ULGWP a period of five (5) days to cease and desist
from further committing acts of coercion, intimidation and
harassment.8
On that same day, the expelled union officers assigned in the first
shift were physically or bodily brought out of the company premises
by the company's security guards. Likewise, those assigned to the
second shift were not allowed to report for work. This provoked some
of the members of the local union to demonstrate their protest for
the dismissal of the said union officers. Some union members left their
work posts and walked out of the company premises.
(a) Discrimination
On March 10, 1989, the thirty (30) dismissed union officers filed an
urgent petition, docketed as Case No. NCMB-NCR-NS-03-216-89, with
the Office of the Secretary of the Department of Labor and
Employment praying for the suspension of the effects of their
termination from employment. However, the petition was dismissed
by then Secretary Franklin Drilon on April 11, 1989, the pertinent
portion of which stated as follows:
SO ORDERED.11
By:
The complaint for unfair labor practice was assigned to Labor Arbiter
Manuel Asuncion but was thereafter reassigned to Labor Arbiter
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Cresencio Ramos when respondents moved to inhibit him from
acting on the case.
The First Division affirmed the Labor Arbiter's disposition. With the
denial of their motion for reconsideration on January 28, 1994,
petitioners elevated the case to this Court, attributing grave abuse
of discretion to public respondent NLRC in:
Before delving into the main issue, the procedural flaw pointed out
by the petitioners should first be resolved.
Going into the merits of the case, the court finds that the Complaint
for unfair labor practice filed by the petitioners against respondent
company which charges union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats,
intimidation, coercion, violence, and oppression actually proceeds
from one main issue which is the termination of several employees by
respondent company upon the demand of the labor federation
pursuant to the union security clause embodied in their collective
bargaining agreement.
This ruling of the NLRC is erroneous. Although this Court has ruled that
union security clauses embodied in the collective bargaining
agreement may be validly enforced and that dismissals pursuant
In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.17, the Court held the company liable for the payment of
backwages for having acted in bad faith in effecting the dismissal of
the employees.
Thus, notwithstanding the fact that the dismissal was at the instance
of the federation and that it undertook to hold the company free
from any liability resulting from such a dismissal, the company may
The Labor Arbiter found that petitioner union officers were justifiably
expelled from the federation for committing acts of disloyalty when it
"undertook to disaffiliate from the federation by charging ULGWP
with failure to provide any legal, educational or organizational
support to the local. . . . and declared autonomy, wherein they
prohibit the federation from interfering in any internal and external
affairs of the local union."20
In its decision, the Labor Arbiter declared that the act of disaffiliation
and declaration of autonomy by the local union was part of its "plan
to take over the respondent federation." This is purely conjecture and
speculation on the part of public respondent, totally unsupported by
the evidence.
A local union has the right to disaffiliate from its mother union or
declare its autonomy. A local union, being a separate and voluntary
association, is free to serve the interests of all its members including
the freedom to disaffiliate or declare its autonomy from the
federation to which it belongs when circumstances warrant, in
accordance with the constitutional guarantee of freedom of
association.22
Thus, a local union which has affiliated itself with a federation is free
to sever such affiliation anytime and such disaffiliation cannot be
considered disloyalty. In the absence of specific provisions in the
federation's constitution prohibiting disaffiliation or the declaration of
autonomy of a local union, a local may dissociate with its parent
union.24
The evidence on hand does not show that there is such a provision in
ULGWP's constitution. Respondents' reliance upon Article V, Section
6, of the federation's constitution is not right because said section, in
fact, bolsters the petitioner union's claim of its right to declare
autonomy:
With regard to the issue of the legality or illegality of the strike, the
Labor Arbiter held that the strike was illegal for the following reasons:
(1) it was based on an intra-union dispute which cannot properly be
the subject of a strike, the right to strike being limited to cases of
bargaining deadlocks and unfair labor practice (2) it was made in
violation of the "no strike, no lock-out" clause in the CBA, and (3) it
was attended with violence, force and intimidation upon the
persons of the company officials, other employees reporting for work
and third persons having legitimate business with the company,
resulting to serious physical injuries to several employees and
damage to company property.
On the submission that the strike was illegal for being grounded on a
non-strikeable issue, that is, the intra-union conflict between the
federation and the local union, it bears reiterating that when
respondent company dismissed the union officers, the issue was
transformed into a termination dispute and brought respondent
company into the picture. Petitioners believed in good faith that in
dismissing them upon request by the federation, respondent
company was guilty of unfair labor practice in that it violated the
petitioner's right to self-organization. The strike was staged to protest
respondent company's act of dismissing the union officers. Even if
Another reason why the Labor Arbiter declared the strike illegal is
due to the existence of a no strike no lockout provision in the CBA.
Again, such a ruling is erroneous. A no strike, no lock out provision
can only be invoked when the strike is economic in nature, i.e. to
force wage or other concessions from the employer which he is not
required by law to grant.26 Such a provision cannot be used to assail
the legality of a strike which is grounded on unfair labor practice, as
was the honest belief of herein petitioners. Again, whether or not
there was indeed unfair labor practice does not affect the strike.
Furthermore, this Court has ruled that an employee who took steps
to protest his lay-off cannot be said to have abandoned his work.30
The filing of a complaint for illegal dismissal is inconsistent with the
allegation of abandonment. In the case under consideration, the
petitioners did, in fact, file a complaint when they were refused
reinstatement by respondent company.
It has come to the attention of this Court that the 30-day prior notice
requirement for the dismissal of employees has been repeatedly
violated and the sanction imposed for such violation enunciated in
Wenphil Corporation vs. NLRC32 has become an ineffective
deterrent. Thus, the Court recently promulgated a decision to
reinforce and make more effective the requirement of notice and
hearing, a procedure that must be observed before termination of
employment can be legally effected.
SO ORDERED.
FACTS:
fines without going against certain laws. The imposition of the fine
became the subject of a bitter disagreement between the
Federation and the local
ISSUES:
was
A: Yes. That petitioner did file a motion within the period is supported
by the following:
3. The same person notarized both the motion and the appeal on
the same date.
11. That under date 3 June 1986, almost a year later, Mr.
Romeo A. Perlado, NPC VP-Visayas Region, addressed a
Memo to Ms. C.V. Daplas, NPC Manager, Procurement
Division, [that the Pielstick Engine Piston Rings for PDPP-
Dingle Panay under] Indent Order No. N-07600 did not
reach its normal expected life of 12,000 RH and [that Ms.
Daplas is] to . . . check and verify who was the supplier of
these materials and . . . request them to replace their
15. That six (6) months later herein petitioner was in receipt
of a letter dated October 16, 1987 from NPC VP-
Administrator, Ms. P. A. Segovia (Ms. Segovia was among
those previously furnished the Caballero Report dated
April 6, 1987, to the effect that the 4 pieces of the
damaged rings are now available for release with the
demand that all rejected piston ring[s] be now
18. That the rejected exhaust valve body items still remain
at the NPC Warehouse, Port Area, Manila;
The trial court found the NPC guilty of gross evident bad faith in its
dealings with Growth Link as its duly accredited supplier.
Consequently, it ordered the NPC and its officers and members of
the Board of Directors, to jointly and severally pay Growth Link the
following amounts:
n) Costs of suit. 10
II
III
IV
But while the respondent appellate court affirmed the trial court's
finding of gross evident bad faith on the part of NPC, it reversed the
trial court insofar as it found NPC liable for amounts claimed by
Growth Link to be unrealized commissions properly accruing to them
had the NPC recognized them as the lowest and most
advantageous bidder under several foreign inquiries. The Court of
Appeals ruled:
From the Decision of the Court of Appeals, both Growth Link and the
NPC and its officers and members of the Board of Directors invoke
this court's review powers: Growth Link prays for the restoration of the
amounts awarded by the trial court as unrealized commissions in
bids where it was the lowest and most advantageous bidder but
which were disregarded in the face of NPC's unilateral and arbitrary
blacklisting of Growth Link, for the upgrading of the amounts
granted as compensatory, moral and exemplary damages to their
original amounts as awarded by the trial court and for the
reinstatement of the finding of solidary liability among NPC and its
officers and members of the Board of Directors; while NPC prays only
for the reduction of the amount granted as and by way of attorney's
fees, which prayer, we should point out, is significantly premised on
the acceptance of all the other findings and conclusions of the
Court of Appeals, including its affirmance of the trial court's finding of
gross evident bad faith on the part of NPC.
A cursory review of the above errors raised by the NPC before the
Court of Appeals, shows that the NPC never assigned the issue of the
exorbitant amount awarded to Growth Link as and by way of
attorney's fees, as an error on appeal. Thus, insofar as the amount of
the attorney's fees granted by the trial court is concerned, the same
must be deemed no longer open to modification, much less,
reduction, the person supposedly aggrieved thereby having
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resonantly been silent on this issue in its appeal before the
respondent court.
At any rate, this court, in at least two (2) occasions, has allowed an
award of 20% 14 to 25% 15 of the total indebtedness involved in the
litigation. In fact, the NPC cites these cases in its Petition.
In this case, Growth Link prayed for and was awarded by the trial
court, the amount of P30,000.00 and 30% of the amount
recoverable, as and by way of attorney's fees. While said amount
may itself be huge by ordinary standards, we believe that the same
is warranted when tested against the criteria that serve as
reglementary guide for the courts to determine the proper amount
of attorney's fees due the winning party.
Anent the claim of NPC that the decision of the trial court does not
contain any discussion of the basis for the award of attorney's fees,
suffice it to say that the trial court undisputedly awarded exemplary
damages, which award is itself a legal justification, under Article 2208
17 of the Civil Code, for the award of attorney's fees.
II
This submission, however, is, in the first place, belied by the caption
of the Notice of Appeal in question, which states, "NATIONAL POWER
CORPORATION, ET AL., Respondents." This same caption can be
found in NPC's Motion for Reconsideration. Significantly, Growth Link's
Opposition to the Motion for Reconsideration made reference to the
NPC officers and members of the Board of Directors, in its arguments.
At any rate, technicalities that defeat substantial justice are, by this
court's policy, an unpreferred basis to deprive parties of their
statutory right to appeal a decision that is fatally flawed in certain
respects.
In the second place, the finding of solidary liability among the NPC
and its officers and members of the Board of Directors, is patently
baseless. The decision of the trial court contains no such allegation,
finding or conclusion regarding particular acts committed by said
officers and members of the Board of Directors that show them to
have been individually guilty of unmistakable malice, bad faith, or ill-
motive in their personal dealings with Growth Link. In fact, it was only
in the dispositive portion of the decision of the court a quo that
solidary liability as such was first mentioned.
We disagree.
Growth Link insists that because the NPC allegedly, in its Answer,
failed to deny the claims for unrealized commissions as laid out in
Growth Link's petition, it had, in effect, admitted the existence and
merit of such claims. Growth Link apparently relied on the general
rule that non-denial of allegations in the complaint results in
admissions thereof. This rule, however, is, just like any other rule, not
absolute and correspondingly admits of exceptions.
In fine, NAPOCOR has the right to reject any and all bids,
not only of [Growth Link] but of all other bidders, as well, if
warranted. 24
And then there is Growth Link's submission that its claims for
unrealized commissions are made proceeding not from facts
founded on contract but from facts establishing NPC's culpability
under quasi-delict.
No pronouncement as to costs.
SO ORDERED.
DECISION
PANGANIBAN, J.:
The Case
This is the main principle used in denying the present Petition for
Review under Rule 45 of the Rules of Court. Petitioner assails the
December 22, 1998 Decision1 of the Court of Appeals (CA) in CA-GR
CV No. 56203, the dispositive portion of which reads as follows:
SO ORDERED."
The Facts
‘JOINT CONDITIONS:
"On 26 November 1981, four (4) days prior to the expiration of the
period of effectivity of the P8M-Credit Loan Facility, appellant SIMC
made a first drawdown from its credit line with [Petitioner] SBTC in the
amount of [s]ix [m]illion [o]ne [h]undred [t]housand [p]esos
(P6,100,000.00). To cover said drawdown, SIMC duly executed
promissory Note No. TD/TLS-3599-81 for said amount (Exhibit ‘C’).
RL/74/596/88 P8,800,000.00
TOTAL P12,200,000.00
(Exhibits ‘H’ and ‘I’, Expediente, at Vol. II, pp. 338 to 343).
It further held that the restructuring of Sta. Ines’ obligation under the
1989 Loan Agreement was tantamount to a grant of an extension of
time to the debtor without the consent of the surety. Under Article
2079 of the Civil Code, such extension extinguished the surety.
The CA also opined that the surety was entitled to notice, in case the
bank and Sta. Ines decided to materially alter or modify the principal
obligation after the expiry date of the credit accommodation.
The Issues
Distilling the foregoing, the Court will resolve the following issues: (a)
whether the 1989 Loan Agreement novated the original credit
accommodation and Cuenca’s liability under the Indemnity
Agreement; and (b) whether Cuenca waived his right to be notified
of and to give consent to any substitution, renewal, extension,
increase, amendment, conversion or revival of the said credit
accommodation. As preliminary matters, the procedural questions
raised by respondent will also be addressed.
"We note finally that because the doctrine relating to pro forma
motions for reconsideration impacts upon the reality and substance
of the statutory right of appeal, that doctrine should be applied
reasonably, rather than literally. The right to appeal, where it exists, is
an important and valuable right. Public policy would be better
served by according the appellate court an effective opportunity to
review the decision of the trial court on the merits, rather than by
aborting the right to appeal by a literal application of the
procedural rules relating to pro forma motions for reconsideration."
Respondent maintains that the present Petition for Review does not
contain a sufficient written explanation why it was served by
registered mail.
Since the 1989 Loan Agreement had extinguished the original credit
accommodation, the Indemnity Agreement, an accessory
obligation, was necessarily extinguished also, pursuant to Article 1296
of the Civil Code, which provides:
Alleged Extension
Petitioner insists that the 1989 Loan Agreement was a mere renewal
or extension of the P8 million original accommodation; it was not a
novation.25
"Rodolfo M. Cuenca of legal age, with postal address c/o Sta. Ines
Malale Forest Products Corp., Alco Bldg., 391 Buendia Avenue Ext.,
Makati Metro Manila for and in consideration of the credit
accommodation in the total amount of eight million pesos
(P8,000,000.00) granted by the SECURITY BANK AND TRUST
COMPANY, a commercial bank duly organized and existing under
and by virtue of the laws of the Philippine, 6778 Ayala Avenue,
Makati, Metro Manila hereinafter referred to as the BANK in favor of
STA. INES MELALE FOREST PRODUCTS CORP., x x x ---- hereinafter
referred to as the CLIENT, with the stipulated interests and charges
thereon, evidenced by that/those certain PROMISSORY NOTE[(S)],
made, executed and delivered by the CLIENT in favor of the BANK
hereby bind(s) himself/themselves jointly and severally with the
CLIENT in favor of the BANK for the payment , upon demand and
without benefit of excussion of whatever amount or amounts the
CLIENT may be indebted to the BANK under and by virtue of
aforesaid credit accommodation(s) including the substitutions,
renewals, extensions, increases, amendment, conversions and
revivals of the aforesaid credit accommodation(s), as well as of the
amount or amounts of such other obligations that the CLIENT may
owe the BANK, whether direct or indirect, principal or secondary, as
appears in the accounts, books and records of the BANK, plus
interest and expenses arising from any agreement or agreements
that may have heretofore been made, or may hereafter be
executed by and between the parties thereto, including the
substitutions, renewals, extensions, increases, amendments,
conversions and revivals of the aforesaid credit accommodation(s),
and further bind(s) himself/themselves with the CLIENT in favor of the
BANK for the faithful compliance of all the terms and conditions
contained in the aforesaid credit accommodation(s), all of which
are incorporated herein and made part hereof by reference."
"5. The Bank reserves the right to amend any of the aforementioned
terms and conditions upon written notice to the Borrower." 33
Continuing Surety
Accordingly, the surety of Cuenca secured only the first loan of P6.1
million obtained on November 26, 1991. It did not secure the
subsequent loans, purportedly under the 1980 credit
accommodation, that were obtained in 1986. Certainly, he could
not have guaranteed the 1989 Loan Agreement, which was
executed after November 30, 1981 and which exceeded the
stipulated P8 million ceiling.
Petitioner, however, cites the Dino ruling in which the Court found
the surety liable for the loan obtained after the payment of the
original one, which was covered by a continuing surety agreement.
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At the risk of being repetitious, we hold that in Dino, the surety
Agreement specifically provided that "each suretyship is a
continuing one which shall remain in full force and effect until this
bank is notified of its revocation." Since the bank had not been
notified of such revocation, the surety was held liable even for the
subsequent obligations of the principal borrower.
Indeed, the stipulation in the 1989 Loan Agreement providing for the
surety of respondent, without even informing him, smacks of
negligence on the part of the bank and bad faith on that of the
principal debtor. Since that Loan Agreement constituted a new
indebtedness, the old loan having been already liquidated, the spirit
of fair play should have impelled Sta. Ines to ask somebody else to
act as a surety for the new loan.
In the same vein, a little prudence should have impelled the bank to
insist on the JSS of one who was in a position to ensure the payment
of the loan. Even a perfunctory attempt at credit investigation would
have revealed that respondent was no longer connected with the
corporation at the time. As it is, the bank is now relying on an unclear
Indemnity Agreement in order to collect an obligation that could
Corporation Law/alfred0 Page 1013 of 1509
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have been secured by a fairly obtained surety. For its defeat in this
litigation, the bank has only itself to blame.
In this light, we find no more need to resolve the issue of whether the
loan obtained before the expiry date of the credit accommodation
has been paid.
SO ORDERED.
Footnotes
1Written by Justice Jorge S. Imperial (Division chairman), with
the concurrence of Justices Hector L. Hofileña and Omar U.
Amin (members).
2 CA Decision, pp. 32-33; rollo, pp. 52-53.
3Rollo, p. 56. Penned by Justice Amin with the concurrence of
Justices Hofilena and Marina L. Buzon.
4Written by Judge Eriberto U. Rosario Jr. (now a member of the
Court of Appeals)
5 CA Decision, pp. 4-9; rollo, pp. 24-29.
6According to the RTC, Sta. Ines’ Timber License Agreement,
which was supposed to expire on July 15, 1998, was suspended
by the Department of Environment and Natural Resources on
December 6, 1989 and eventually cancelled on May 4, 1990.
(RTC Decision, p. 3; rollo, p. 12.)
7 This case was deemed submitted for decision on May 8, 2000,
upon receipt by this Court of respondent’s Reply Memorandum
signed by Attys. Elvira C. Oquendo and Vissia Concepcion C.
Calderon of Carpio Villaraza & Cruz. Filed earlier on March 3,
Cruz v. CA, 293 SCRA 239, July 27, 1998; citing Vitug,
16
A.C. Ransom Labor Union vs. NLRC (142 SCRA 269 [1986])
MELENCIO-HERRERA, J.:
4. The strike became the subject of Cases Nos. 2848 — ULP and 2880
— ULP of the Court of Industrial Relations which, on December 19,
1972, ordered RANSOM "its officers and agents to reinstate the 22
strikers with back wages from July 25, 1969.
8. Directly related to this case is the last Motion for Execution, dated
December 18, 1978, filed by petitioner UNION wherein it asked that
officers and agents of RANSOM be held personally liable for
payment of the back wages. That Motion was granted by Labor
Arbiter, Tito F. Genilo, on March 11, 1980 (The GENILO ORDER),
wherein he expressly authorized a Writ of Execution to be issued for
P164,984.00 (the back wages) against RANSOM and seven officers
and directors of the Company who are the named individual
respondents herein. RANSOM took an appeal to NLRC which
affirmed the GENILO ORDER, except as modified in the body of its
decision of July 31, 1984.
RANSOM and the seven individual respondents in this case have not
appealed from the ruling of the NLRC that Section 6, Rule 39, is not
invocable by them in regards to the execution of the decision of
December 19, 1972. Hence, the issue can no longer be raised herein.
Even if the said section were applicable, the 5-year period therein
mentioned may not have expired by December 18, 1978 because
the period should be counted only from the time the back wages
were determined, which could have been in early 1974.
(c) If the policy of the law were otherwise, the corporation employer
can have devious ways for evading payment of back wages. in the
instant case, it would appear that RANSOM, in 1969, foreseeing the
possibility or probability of payment of back wages to the 22 strikers,
organized ROSARIO to replace RANSOM, with the latter to be
eventually phased out if the 22 strikers win their case. RANSOM
actually ceased operation on May 1, 1973, after the December 19,
1972 Decision of the Court of Industrial Relations was promulgated
against RANSOM.
(d) The record does not clearly Identify "the officer or officers" of
RANSOM directly responsible for failure to pay the back wages of the
22 strikers. In the absence of definite proof in that regard, we believe
it should be presumed that the responsible officer is the President of
the corporation who can be deemed the chief operation officer
Corporation Law/alfred0 Page 1020 of 1509
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thereof. Thus, in RA 602, criminal responsibility is with the "Manager" or
in his default, the person acting as such. In RANSOM, the President
appears to be the Manager.
SO ORDERED.
and the Labor Arbiter ruled in favor of the labor union stating that
the strike was legal and
members of the union which the NLRC reversed the decision. Hence
the special civil action of
Issue #1: Whether or not ROSARIO Company should be held liable for
the claims of AC
backwages?
that Rosario Industrial Corporation and its officers and agents are
hereby held jointly and
22 union members.
(1) month salary for every year of service actually rendered by them
with A.C. Ransom (Phils).
disregarded.
fiction whose veil in the present case could, and should, be pierced
as it was deliberately and
The inclusion of the officers and agents was but proper since a
corporation, as an
DECISION
CARPIO, J.:
The Case
The Facts
The provision was culled from Section 2, Republic Act 602, the
Minimum Wage Act. If the employer is an artificial person, it must
have an officer who can be presumed to be the employer, being
"the person acting in the interest of the employer." The corporation is
the employer, only in the technical sense. (A.C. Ransom Labor Union
CCLU VS. NLRC, G.R. 69494, June 10, 1986). Where the employer-
corporation, AS IN THE PRESENT CASE, is no longer existing and
unable to satisfy the judgment in favor of the employee, the officer
should be held liable for acting on behalf of the corporation. (Gudez
vs. NLRC, G.R. 83023, March 22, 1990). Also in the recent celebrated
case of Camelcraft Corporation vs. NLRC, G.R. 90634-35 (June 6,
1990), Carmen contends that she is not liable for the acts of the
company, assuming it had [acted] illegally, because Camelcraft in a
distinct and separate entity with a legal personality of its own. She
claims that she is only an agent of the company carrying out the
decisions of its board of directors, "We do not agree," said the
Supreme Court. "She is, in fact and legal effect, the corporation,
being not only its president and general manager but also its owner."
The responsible officer of an employer can be held personally liable
not to say even criminally liable for nonpayment of backwages. This
is the policy of the law. If it were otherwise, corporate employers
would have devious ways to evade paying backwages. (A.C.
Ransom Labor Union-CCLU V. NLRC, G.R. 69494, June 10, 1986). If no
definite proof exists as to who is the responsible officer, the president
of the corporation who can be deemed to be its chief operation
officer shall be presumed to be the responsible officer. In Republic
Act 602, for example, criminal responsibility is with the "manager" or
in his default, the person acting as such (Ibid.)7 (Emphasis supplied)
This case was originally raffled to the sala of Labor Arbiter Adolfo V.
Creencia. When the latter went on sick leave, his cases were re-
raffled and the instant case was assigned to the sala of the
undersigned. Upon receipt of the record of the case, the parties
were summoned for them to be able to explore options for
settlement. The respondents however did not appear prompting this
Office to submit the case for resolution based on extant pleadings,
thus this decision.
Respondents pray for the dismissal of the present complaint and the
denial of complainants' motion to implead Atty. Antonio C. Carag
and Mr. Armando David as party respondents.
The complainants claim that Atty. Antonio Carag and Mr. Armando
David should be held jointly and severally liable with respondent
corporation. This bid is premised on the belief that the impleader of
the aforesaid officers will guarantee payment of whatever may be
adjudged in complainants' favor by virtue of this case. It is a basic
principle in law that corporations have personality distinct and
separate from the stockholders. This concept is known as corporate
fiction. Normally, officers acting for and in behalf of a corporation
are not held personally liable for the obligation of the corporation. In
instances where corporate officers dismissed employees in bad faith
or wantonly violate labor standard laws or when the company had
already ceased operations and there is no way by which a
judgment in favor of employees could be satisfied, corporate
officers can be held jointly and severally liable with the company.
This Office after a careful consideration of the factual backdrop of
the case is inclined to grant complainants' prayer for the impleader
of Atty. Antonio Carag and Mr. Armando David, to assure that valid
claims of employees would not be defeated by the closure of
respondent company.
The claims for moral, actual and exemplary damages are dismissed
for lack of evidence.
SO ORDERED.10
The Issues
xxx
It is true that Labor Arbiters are not bound by strict rules of evidence
and of procedure. The manner by which Arbiters dispose of cases
before them is concededly a matter of discretion. However, that
discretion must be exercised regularly, legally and within the
confines of due process. They are mandated to use every
reasonable means to ascertain the facts of each case, speedily,
objectively and without regard to technicalities of law or procedure,
all in the interest of justice and for the purpose of accuracy and
correctness in adjudicating the monetary awards.
In this case, Carag was in a far worse situation. Here, Carag was not
issued summons, not accorded a conciliatory conference, not
ordered to submit a position paper, not accorded a hearing, not
given an opportunity to present his evidence, and not notified that
the case was submitted for resolution. Thus, we hold that Arbiter
Corporation Law/alfred0 Page 1035 of 1509
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Ortiguerra's Decision is void as against Carag for utter absence of
due process. It was error for the NLRC and the Court of Appeals to
uphold Arbiter Ortiguerra's decision as against Carag.
This case also raises this issue: when is a director personally liable for
the debts of the corporation? The rule is that a director is not
personally liable for the debts of the corporation, which has a
separate legal personality of its own. Section 31 of the Corporation
Code lays down the exceptions to the rule, as follows:
xxxx
After stating what she believed is the law on the matter, Arbiter
Ortiguerra stopped there and did not make any finding that Carag is
guilty of bad faith or of wanton violation of labor standard laws.
Arbiter Ortiguerra did not specify what act of bad faith Carag
committed, or what particular labor standard laws he violated.
Complainants did not allege or prove, and Arbiter Ortiguerra did not
make any finding, that Carag approved or assented to any patently
unlawful act to which the law attaches a penalty for its commission.
On this score alone, Carag cannot be held personally liable for the
separation pay of complainants.
xxx
"Any person violating any of the provisions of Article 265 of this Code
shall be punished by a fine of not exceeding five hundred pesos
and/or imprisonment for not less than one (1) day nor more than six
(6) months."
xxxx
(c) If the policy of the law were otherwise, the corporation employer
can have devious ways for evading payment of back wages. In the
instant case, it would appear that RANSOM, in 1969, foreseeing the
possibility or probability of payment of back wages to the 22 strikers,
organized ROSARIO to replace RANSOM, with the latter to be
eventually phased out if the 22 strikers win their case. RANSOM
actually ceased operations on May 1, 1973, after the December 19,
1972 Decision of the Court of Industrial Relations was promulgated
against RANSOM.
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/
Decisions/2007/jan2007.zip%3E9,df%7C2007/jan2007/146667.htm -
(Emphasis supplied)
The basic rule is still that which can be deduced from the Court's
pronouncement in Sunio vs. National Labor Relations Commission,
thus:
Thus, the rule is still that the doctrine of piercing the corporate veil
applies only when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud, or defend crime. In the
absence of malice, bad faith, or a specific provision of law making a
corporate officer liable, such corporate officer cannot be made
We concur with the CA that these two respondents are not liable.
Section 31 of the Corporation Code (Batas Pambansa Blg. 68)
provides:
Thus, it was error for Arbiter Ortiguerra, the NLRC, and the Court of
Appeals to hold Carag personally liable for the separation pay owed
by MAC to complainants based alone on Article 212(e) of the Labor
Code. Article 212(e) does not state that corporate officers are
personally liable for the unpaid salaries or separation pay of
employees of the corporation. The liability of corporate officers for
corporate debts remains governed by Section 31 of the Corporation
Code.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
CONSUELO YNARES-
LEONARDO A. QUISUMBING
SANTIAGO
Associate Justice
Asscociate Justice
CONCHITA CARPIO
RENATO C. CORONA
MORALES
Associate Justice
Asscociate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the
Court.
REYNATO S. PUNO
Chief Justice
Footnotes
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
Corporation Law/alfred0 Page 1043 of 1509
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2Rollo, pp. 66-87. Penned by Associate Justice Teodoro P.
Regino, with Associate Justices Conchita Carpio Morales (now
Associate Justice of this Court) and Jose L. Sabio, Jr.,
concurring.
3Id. at 89-90. Penned by Associate Justice Teodoro P. Regino,
with Associate Justices Conchita Carpio Morales (now
Associate Justice of this Court ) and Jose L. Sabio, Jr.,
concurring.
4 Id. at 169-175.
5 Id. at 201-204.
6 Id. at 149-150.
7 Id. at 153-155.
8 Id. at 169-175.
9 Id. at 193-194.
10 Id. at 203.
11 356 Phil. 811 (1998).
12 Rollo, p. 86.
13 Id. at 89-90.
14 Id. at 15.
15 Section 2. Mandatory Conference/Conciliation. - Within two
(2) days from receipt of an assigned case, the Labor Arbiter
shall summon the parties to a conference for the purpose of
amicably settling the case upon a fair compromise or
determining the real parties in interest, defining and simplifying
the issues in the case, entering into admissions and/or
stipulations of facts, and threshing out all other preliminary
matters. The notice or summons shall specify the date, time and
place of the preliminary conference/pretrial and shall be
accompanied by a copy of the complaint.
xxxx
Conference/Hearings. - x x x x
xxxx
October 1990.
21 Section 3, Rule V of The New Rules of Procedure of the NLRC.
22 372 Phil. 873, 877-879 (1999).
23 Rollo, p. 173.
24 McLeod v. NLRC, G.R. No. 146667, 23 January 2007, citing Lim
v. Court of Appeals, 380 Phil. 60 (2000) and Del Rosario v. NLRC,
G.R. No. 85416, 24 July 1990, 187 SCRA 777.
25 Id.
26 Id.
27 G.R. No. 103575, 5 April 1993, 221 SCRA 9, 14.
FACTS:
down in the Labor Law of the Philippines. The Labor Arbiter decided
in favor of the Labor Union
and held that Antonio Carag being the owner of the corporation be
solidarily liable for the
questioned the decision of the Labor Arbiter and alleged that the
Corporation and its officers
have separate and distinct personality and the latter cannot be held
liable solidarily in cases of
payment of damages.
Issue:
dismissed employees.
Held:
The Supreme Court held that the rule is that a director is not
personally liable for the
persons.
xxxx
MAC. Neither did Arbiter Ortiguerra make any finding to this effect in
her Decision.
acts. There must be a law declaring the act unlawful and penalizing
the act.
Yao Ka Sin
Tacloban City
Gentlemen:
PRIME WHITE
CEMENT
CORPORATION
BY: (SGD)
CONSTANCIO
B. MAGLANA
President &
Chairman
CONFORME:
WITNESSES:
PRIME WHITE
CEMENT
CORPORATION
BY:
(SGD)
CONSTANCIO
B. MAGLANA
President &
Chairman 4
The principal issue raised in this case is whether or not the aforesaid
letter-offer, as accepted by YKS, is a contract that binds the PWCC.
The trial court rule in favor of the petitioner, but the respondent Court
held otherwise.
On 4 March 1974, YKS filed with the then Court of First Instance of
Leyte a complaint for Specific Performance with Damages against
PWCC. The complaint 16 was based on Exhibit "A" and was docketed
as Civil Case No. 5064.
During the trial, PWCC presented evidence to prove that Exhibit "A" is
not binding upon it because Mr. Maglana was not authorized to
make the offer and sign the contract in behalf of the corporation.
Per its By-Laws (Exhibit "8"), only the Board of Directors has the power
. . . (7) To enter into (sic) agreement or contract of any kind with any
person in the name and for and in behalf of the corporation through
its President, subject only to the declared objects and purpose of the
corporation and the existing provisions of law. 24 Among the powers
of the President is "to operate and conduct the business of the
corporation according to his own judgment and discretion,
whenever the same is not expressly limited by such orders, directives
or resolutions." 25 Per standard practice of the corporation, contracts
should first pass through the marketing and intelligence unit before
they are finalized. Because of its interest in the PWCC, the NIDC,
through its comptroller, goes over contracts involving funds of and
white cement produced by the PWCC. Finally, among the duties of
its legal counsel is to review proposed contracts before they are
submitted to the Board. While the president. may be tasked with the
preparation of a contract, it must first pass through the legal counsel
and the comptroller of the corporation. 26
SO ORDERED. 27
The trial court, however, ruled that the option to sell is not valid
because it is not supported by any consideration distinct from the
price; it was exercised before compliance with the original contract
by PWCC; and the repudiation of the original contract by PWCC
was deemed a withdrawal of the option before acceptance by the
petitioner.
II
II
III
IV
SO ORDERED.
Before going any further, this Court must first resolve an issue which,
although raised in the Answer of private respondent, was neither
pursued in its appeal before the respondent Court nor in its
Comment and Memorandum in this case. It also eluded the
attention of the trial court and the respondent Court. The issue,
which is of paramount importance, concerns the lack of capacity of
plaintiff/petitioner to sue. In the caption of both the complaint and
the instant petition, the plaintiff and the petitioner, respectively, is:
The respondent Court correctly ruled that Exhibit "A" is not binding
upon the private respondent. Mr. Maglana, its President and
Chairman, was not empowered to execute it. Petitioner, on the
other hand, maintains that it is a valid contract because the
Maglana has the power to enter into contracts for the corporation
as implied from the following provisions of the By-Laws of private
respondent:
And even admitting, for the sake of argument, that Mr. Maglana
was not so authorized under the By-Laws, the private respondent,
pursuant to the doctrine laid down by this Court in Francisco vs.
Government Service Insurance
System 49 and Board of Liquidators vs. Kalaw, 50 is still bound by his
act for clothing him with apparent authority.
The cases then of Francisco vs. GSIS and Board of Liquidators vs.
Kalaw are hopelessly unavailing to the petitioner. In said cases, this
Court found sufficient evidence, based on the conduct and
actuations of the corporations concerned, of apparent authority
conferred upon the officer involved which bound the corporations
on the basis of ratification. In the first case, it was established that the
offer of compromise made by plaintiff in the letter, Exhibit "A", was
validly accepted by the GSIS. The terms of the trial offer were clear,
and over the signature of defendant's general manager Rodolfo
Andal, plaintiff was informed telegraphically that her proposal had
been accepted. It was sent by the GSIS Board Secretary and
defendant did not disown the same. Moreover, in a letter remitting
the payment of P30,000 advanced by her father, plaintiff quoted
verbatim the telegram of acceptance. This was in itself notice to the
corporation of the terms of the allegedly unauthorized telegram.
Notwithstanding this notice, GSIS pocketed the amount and kept
silent about the telegram. This Court then ruled that:
Later, Yao Ka Sin sued Prime White to compel the latter to comply
with what Yao Ka Sin considered as the true contract, i.e., 45,000
bags at P24.30 per bag. Prime White in its defense averred that
although Maglana is empowered to sign contracts in behalf of Prime
White, such contracts are still subject to approval by Prime White’s
Board, and then it still requires further approval by the National
Investment and Development Corporation (NIDC), a government
owned and controlled corporation because Prime White is a
subsidiary of NIDC.
Henry Yao asserts that the letter from Maglana is a binding contract
because it was made under the apparent authority of Maglana. The
trial court ruled in favor of Yao Ka Sin. The Court of Appeals reversed
the trial court.
As a rule, apparent authority may result from (1) the general manner,
by which the corporation holds out an officer or agent as having
power to act or, in other words, the apparent authority with which it
clothes him to act in general or (2) acquiescence in his acts of a
particular nature, with actual or constructive knowledge thereof,
whether within or without the scope of his ordinary powers. These are
not present in this case.
KAPUNAN, J.:
In Yutivo Sons Hardware vs. Court of Tax Appeals,9 cited by the Court
of Appeals in its decision,10 this Court declared:
Thus, PNB and DBP did not only have a right, but the duty under said
law, to foreclose upon the subject properties. The banks had no
choice but to obey the statutory command.
The import of this mandate was lost on the Court of Appeals, which
reasoned that under Article 19 of the Civil Code, "Every person must,
in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good
faith." The appellate court, however, did not point to any fact
evidencing bad faith on the part of the Marinduque Mining and its
transferees. Indeed, it skirted the issue entirely by holding that the
question of actual fraudulent intent on the part of the interlocking
directors of DBP and Marinduque Mining was irrelevant because:
Remington also asserted in its third amended complaint that the use
of Nonoc Mining, Maricalum and Island Cement of the premises of
Marinduque Mining and the hiring of the latter's officers and
personnel also constitute badges of bad faith.
The Court of Appeals also held that there exists in Remington's favor
a "lien" on the unpaid purchases of Marinduque Mining, and as
transferee of these purchases, DBP should be held liable for the
value thereof.
x x x Rosario Cruzado sold all her right, title, and interest and
that of her children in the house and lot herein involved to Pura
L. Villanueva for P19,000.00. The purchaser paid P1,500 in
advance, and executed a promissory note for the balance of
P17,500.00. However, the buyer could only pay P5,500 on
account of the note, for which reason the vendor obtained
judgment for the unpaid balance. In the meantime, the buyer
Villanueva was able to secure a clean certificate of title (No.
32626), and mortgaged the property to appellant Magdalena
C. Barretto, married to Jose C. Baretto, to secure a loan of
P30,000.03, said mortgage having been duly recorded.
"(2) For the unpaid price of real property sold, upon the
immovable sold"; and
Article 2249 of the same Code provides that "if there are two or
more credits with respect to the same specific real property or
real rights, they shall be satisfied pro-rata, after the payment of
the taxes and assessments upon the immovable property or
real rights."
"If there are two or more credits with respect to the same
specific real property or real rights, they shall be satisfied pro
rata, after the payment of the taxes and assessments upon the
immovable property or real rights."
This explains the rule of Article 2243 of the new Civil Code that
—
The ruling in Barretto was reiterated in Phil. Savings Bank vs. Hon.
Lantin, Jr., etc., et al.,18 and in two cases both entitled Development
Bank of the Philippines vs. NLRC.19
SO ORDERED.
AZCUNA, J.:
On April 11, 1988, BLC filed a claim for a refund with the CIR for the
amount of P777,117.05, representing the difference between the
P1,139,041.49 it had paid as "contractor’s percentage tax" and
P361,924.44 it should have paid for "gross receipts tax." 5 Four days
later, to stop the running of the prescriptive period for refunds,
petitioner filed a petition for review with the CTA.6
In a decision dated May 13, 1994,7 the CTA dismissed the petition
and denied BLC’s claim of refund. The CTA held that Revenue
Regulation 19-86, as amended, may only be applied prospectively
such that it only covers all leases written on or after January 1, 1987,
as stated under Section 7 of said revenue regulation:
The CTA ruled that, since BLC’s rental income was all received prior
to 1986, it follows that this was derived from lease transactions prior
to January 1, 1987, and hence, not covered by the revenue
regulation.
A motion for reconsideration of the CTA’s decision was filed, but was
denied in a resolution dated July 26, 1995.8 BLC then appealed the
In seeking to reverse the denial of its claim for tax refund, BLC submits
that the Court of Appeals and the CTA erred in not ruling that
Revenue Regulation 19-86 may be applied retroactively so as to
allow BLC’s claim for a refund of P777,117.05.
In a resolution dated March 29, 2000,10 the petition was given due
course and the Court required the parties to file their respective
Memoranda. Upon submission of the Memoranda, the issues in this
case were delineated, as follows:11
It is also apt to add that tax refunds are in the nature of tax
exemptions. As such, these are regarded as in derogation of
sovereign authority and are to be strictly construed against the
person or entity claiming the exemption. The burden of proof is upon
him who claims the exemption and he must be able to justify his
claim by the clearest grant under Constitutional or statutory law, and
he cannot be permitted to rely upon vague implications.21 Nothing
that BLC has raised justifies a tax refund.
SO ORDERED.
FACTS:
For the calendar year 1986, BPI Leasing Corporation, Inc. (BLC)
paid the Commissioner of Internal Revenue (CIR) a
P27,783,725.42.
tax" under Section 205 but are, instead, subject to "gross receipts
tax" under Section 260 (now Section 122) of the
The CTA dismissed the petition and denied BLC’s claim of refund
and held that RR 19-86, may only be applied
rental income was all received prior to 1986, it follows that this was
derived from lease transactions prior to
Court of Appeals. BLC submits that the Court of Appeals and the
CTA erred in not ruling that RR 19-86 may be
ISSUES:
RULE:
in fact, is invoking RR 19-86 as the very basis of its claim for refund.
If it were invalid, then petitioner all
SO ORDERED.
DECISION
AZCUNA, J.:
In the action before the SEC, private respondent averred that Saag
(S) Pte. Ltd. is a foreign corporation organized and existing under the
laws of Singapore, and is fully owned by Saag Corporation (Bhd). On
July 1, 1994, he was appointed as Area Sales Manager in the
Philippines by Thiang Shiang Hiang, Manager of Saag (S) Pte. Ltd.
Pursuant to his appointment, respondent was authorized to organize
a local joint venture corporation to be known as Saag Philippines,
Inc. for the wholesale trade and service of industrial products for oil,
gas and power industries in the Philippines.
His motion for reconsideration having been denied by the trial court
in its order issued on October 29, 1999, respondent filed with the CA
the petition for certiorari[6] assailing the aforesaid orders.
If the SEC should rule that the dissolution of Saag Phils. is proper, or
that the appointments of private respondents are invalid, the
criminal case will eventually be dismissed due to the absence of one
of the essential elements of the crime of estafa.
SO ORDERED.7
SO ORDERED.12
II
1. The action before the SEC and the criminal case before the
trial court do not involve any prejudicial question.13 SEC Case
No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte.
Ltd., the appointment of a receiver, the distribution of profits,
and the authority of petitioner and Tan to represent Saag Phils.,
Inc. The entity which is being sued is Saag (S) Pte. Ltd., a foreign
corporation over which the SEC has yet to acquire jurisdiction.
Hence, any decision that may be rendered in the SEC case will
neither be determinative of the innocence or guilt of the
accused nor bind Saag Phils., Inc. because the same was not
made a party to the action even if the former is its holding
corporation;
No costs.
SO ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION
REYNATO S. PUNO
Chief Justice
Footnotes
1 Under Rule 65 of the Rules of Court.
Corporation Law/alfred0 Page 1100 of 1509
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2 Rollo, p. 42.
3 Id. at 51.
4 Id. at 55.
5 Id. at 59.
6 Under Rule 65 of the Rules of Court.
7 Id. at 48.
8 Now docketed as SEC Case No. MC-01-024.
9"Resolution Designating Certain Branches of Regional Trial
Courts to Try and Decide Cases Formerly Cognizable by the
Securities and Exchange Commission," promulgated on
November 21, 2000.
10Amended Section 5 of Presidential Decree No. 902-A which
granted extensive powers to the Securities and Exchange
Commission (SEC), a quasi-judicial body charged with the
enforcement of all laws affecting corporations.
11SECTION 1. Cases covered. – These Rules shall govern the
procedure to be observed in civil cases involving the following:
DECISION
The Antecedents
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-
A-3-B-2 covered by TCT No. 78086 on which it planned to construct
its warehouse building, and a portion of the adjoining lot, Lot No.
491-A-3-B-1, so that its 45-foot container van would be able to readily
enter or leave the property. In a Letter to Roxas dated June 21, 1991,
WHI President Jonathan Y. Dy offered to buy Lot No. 491-A-3-B-2
under stated terms and conditions for P1,000 per square meter or at
the price of P7,213,000.4 One of the terms incorporated in Dy's offer
was the following provision:
The Vendor agrees that in the event that the right of way is
insufficient for the Vendee's use (ex entry of a 45-foot
container) the Vendor agrees to sell additional square meters
from its current adjacent property to allow the Vendee full
access and full use of the property.
On March 31, 1992, WHI and WBI executed a Letter-Contract for the
construction of the warehouse building for P11,804,160.13 The
contractor started construction in April 1992 even before the building
officials of Antipolo City issued a building permit on May 28, 1992.
After the warehouse was finished, WHI issued on March 21, 1993 a
certificate of occupancy by the building official. Earlier, or on March
18, 1993, WHI, as lessor, and Ponderosa, as lessee, executed a
contract of lease over a portion of the property for a monthly rental
of P300,000 for a period of three years from March 1, 1993 up to
February 28, 1996.14
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-
B-1 covered by TCT No. 78085 for its beneficial use within 72 hours
from notice thereof, otherwise the appropriate action would be filed
against it. RECCI rejected the demand of WHI. WHI reiterated its
demand in a Letter dated May 29, 1992. There was no response from
RECCI.
In its amended answer to the complaint, the RECCI alleged that the
delay in the construction of its warehouse building was due to the
failure of the WHI's contractor to secure a building permit thereon.18
During the trial, Dy testified that he told Roxas that the petitioner was
buying a portion of Lot No. 491-A-3-B-1 consisting of an area of 500
square meters, for the price of P1,000 per square meter.
SO ORDERED.19
The trial court ruled that the RECCI was estopped from disowning the
apparent authority of Roxas under the May 17, 1991 Resolution of its
Board of Directors. The court reasoned that to do so would prejudice
the WHI which transacted with Roxas in good faith, believing that he
had the authority to bind the WHI relating to the easement of right of
way, as well as the right to purchase a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085.
I.
II.
III.
IV.
V.
VI.
The threshold issues for resolution are the following: (a) whether the
respondent is bound by the provisions in the deed of absolute sale
granting to the petitioner beneficial use and a right of way over a
portion of Lot
On the first issue, the petitioner avers that, under its Resolution of May
17, 1991, the respondent authorized Roxas, then its president, to
grant a right of way over a portion of Lot No. 491-A-3-B-1 in favor of
the petitioner, and an option for the respondent to buy a portion of
the said property. The petitioner contends that when the respondent
sold Lot No. 491-A-3-B-2 covered by TCT No. 78086, it (respondent)
was well aware of its obligation to provide the petitioner with a
means of ingress to or egress from the property to the Sumulong
Highway, since the latter had no adequate outlet to the public
highway. The petitioner asserts that it agreed to buy the property
covered by TCT No. 78085 because of the grant by the respondent
of a right of way and an option in its favor to buy a portion of the
property covered by TCT No. 78085. It contends that the respondent
never objected to Roxas' acceptance of its offer to purchase the
property and the terms and conditions therein; the respondent even
allowed Roxas to execute the deed of absolute sale in its behalf. The
petitioner asserts that the respondent even received the purchase
price of the property without any objection to the terms and
conditions of the said deed of sale. The petitioner claims that it
acted in good faith, and contends that after having been benefited
by the said sale, the respondent is estopped from assailing its terms
and conditions. The petitioner notes that the respondent's Board of
Directors never approved any resolution rejecting the deed of
For its part, the respondent posits that Roxas was not so authorized
under the May 17, 1991 Resolution of its Board of Directors to impose
a burden or to grant a right of way in favor of the petitioner on Lot
No. 491-A-3-B-1, much less convey a portion thereof to the petitioner.
Hence, the respondent was not bound by such provisions contained
in the deed of absolute sale. Besides, the respondent contends, the
petitioner cannot enforce its right to buy a portion of the said
property since there was no agreement in the deed of absolute sale
on the price thereof as well as the specific portion and area to be
purchased by the petitioner.
Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
Central to the issue at hand is the May 17, 1991 Resolution of the
Board of Directors of the respondent, which is worded as follows:
Powers of attorney are generally construed strictly and courts will not
infer or presume broad powers from deeds which do not sufficiently
include property or subject under which the agent is to deal.29 The
general rule is that the power of attorney must be pursued within
legal strictures, and the agent can neither go beyond it; nor beside
it. The act done must be legally identical with that authorized to be
done.30 In sum, then, the consent of the respondent to the assailed
provisions in the deed of absolute sale was not obtained; hence, the
assailed provisions are not binding on it.
SO ORDERED.
Footnotes
1Penned by Associate Justice Salome A. Montoya, with
Associate Justices Conrado M. Vasquez, Jr. and Teodoro P.
Regino, concurring.
2 Penned by Judge Francisco X. Velez.
3 Exhibit "L," Records, p. 213.
4 Exhibit "M," Id. at 214.
5 Ibid.
6 Exhibit "N," Id. at 216.
7 Exhibit "C," Id. at 192-195.
8 Id. at 193-194.
Corporation Law/alfred0 Page 1116 of 1509
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9 Exhibit "D," Id. at 196.
10 Exhibit "D-1," Id. at 197.
11 Exhibit "G," Id. at 201.
12 Exhibit "E," Id. at 198.
13 Exhibit "F," Id. at 199.
14 Exhibit "H," Id. at 202-206.
15 Records, pp. 2-4.
16 Id. at 4-5.
17 Id. at 24-25.
18 Id. at 247.
19 Id. at 482.
20 Rollo, pp. 22-23.
21 296 SCRA 631 (1998).
22 Id. at 644-645.
23Art. 1403. The following contracts are unenforceable, unless
they are ratified:
(1) Acts and contracts which have for their object the
creation, transmission, modification or extinguishment of
real rights over immovable property; sales of real property
or of an interest therein are governed by articles 1403, No.
2, and 1405;
Facts:
Issue:
Whether or not Engr. David is personally liable to the Spouses
Quiambao.
Held:
The SC held that an exception to the doctrine of corporate entity is
when there is bad faith in the performance of the duty of the officer.
In the instant case, bad faith was proven when Engr. David
categorically admitted that the company deviated from the original
structural plan in order to lower the cost of construction. By his act,
Engr. David violated Sec 31 of the Corporation Code which provides
that directors or trustees who are guilty of gross negligence or bad
faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such
directors or trustees shall be liable jointly and severally for all
damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons. Therefore, the SC
deemed that equity demand that he should be liable to Spouses
Quiambao.
DECISION
CORONA, J.:
During the pendency of the case in the RTC-Br. 148, de Villa died.
Petitioner consequently amended the complaint and impleaded
the heirs of de Villa as defendants.6
After the case was re-heard, the RTC of Makati City, Branch 139
(RTC-Br. 139) rendered judgment on November 13, 1998 in favor of
petitioner and against respondent corporation. It ordered
respondent corporation to pay petitioner P1.3 million plus legal
interest, attorney’s fees, liquidated damages and costs of suit. The
complaint was dismissed against respondent heirs.7
The corporation can also act through its corporate officers who may
be authorized either expressly by the by-laws or board resolutions or
impliedly such as by general practice or policy or as are implied from
express powers.10 The general principles of agency govern the
relation between the corporation and its officers or agents.11 When
authorized, their acts can bind the corporation. Conversely, when
unauthorized, their acts cannot bind it.
Therefore, on the first issue, the loan was personal to de Villa. There
was no basis to hold the corporation liable since there was no
authority, express, implied or apparent, given to de Villa to borrow
money from petitioner. Neither was there any subsequent ratification
of his act.
Petitioner cannot blame anyone but himself. He did not check if the
person he was dealing with had the authority to mortgage the
property being offered as collateral.
Given that the loan and mortgage were not binding on respondent
corporation, the latter cannot be held liable for interest, attorney’s
fees and liquidated damages arising from the loan.
The liability arising from the loan was the sole indebtedness of de
Villa (or of his estate after his death). Petitioner vigorously sought to
make respondent corporation liable but exerted no effort at all to
SO ORDERED.
RENATO C. CORONA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairperson
CANCIO C. GARCIA
Associate Justice
ATTESTATION
REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson’s Attestation, I certify that the conclusions in the above
decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
Chief Justice
Footnotes
* On official business.
1 Under Rule 45 of the Rules of Court.
2Penned by Associate Justice Eloy R. Bello, Jr. and concurred in
by Associate Justices Perlita J. Tria-Tirona (retired) and Amelita
G. Tolentino of the Special Eighth Division of the Court of
Appeals; rollo, pp. 34-46.
3 Id., pp. 35-36.
4 Docketed as Civil Case No. 90-1837.
5 Rollo, pp. 13, 35.
6 Id., p. 35.
7 Id., p. 34.
8 Id., p. 15.
9 Batas Pambansa Blg. 68.
10Rural Bank of Milaor (Camarines Sur) v. Ocfemia, 381 Phil. 911
(2000), concurring opinion of J. Vitug.
DECISION
TINGA, J.:
The facts culled from the Decision of the Court of Appeals are
undisputed:
On April 14, 1992, NPC and FUCC entered into a contract for
the construction of power facilities (civil works) – Schedule 1 –
1x20 MW Bacon-Manito II Modular Geothermal Power Plant
(Cawayan area) and Schedule 1A – 1x20 MW Bacon-Manito II
SCHEDULE
1 – Cawayan P
area 52,081,421.00
1A – Botong P
area 56,412,545.30
P
108,493,966.30
On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for
Temporary Restraining Order and Preliminary Injunction before
STAGE 1
STAGE 2
SO ORDERED.
In its assailed Decision, the appellate court declared that the court a
quo did not commit grave abuse of discretion considering that the
Arbitration Board acted pursuant to its powers under the
Compromise Agreement and that its award has factual and legal
bases.
Further, the Court of Appeals found that blasting is not part of the
unit price for grading and structural excavation provided for in the
contract for the BACMAN II Project, and that there was no perfected
contract between the parties for an extra work order for blasting.
Nonetheless, since FUCC relied on the representation of petitioner's
officials that the extra work order would be submitted to its Board of
Directors for approval and that the blasting works would be paid, the
Court of Appeals ruled that FUCC is entitled to just compensation on
grounds of equity and promissory estoppel.
Anent the issue of just compensation, the appellate court took into
account the estimate prepared by a certain Mr. Lauro R. Umali (Mr.
Umali), Project Manager of the BACMAN II Project, which itemized
the various costs involved in blasting works and came up with
P1,310.82 per cubic meter, consisting of the direct cost for drilling,
blasting excavation, stockpiling and hauling, and a 30% mark up for
overhead, contractor's tax and contingencies. This estimate was
later changed to P983.75 per cubic meter to which FUCC agreed.
The Court of Appeals, however, held that just compensation should
cover only the direct costs plus 10% for overhead expenses. Thus, it
declared that the amount of P763.007 per cubic meter is sufficient.
Since the total volume of blasted rocks as computed by Dr.
Petitioner avers that FUCC's claim for blasting works was not
approved by authorized officials in accordance with Presidential
Decree No. 1594 (P.D. 1594) and its implementing rules which
specifically require the approval of the extra work by authorized
officials before an extra work order may be issued in favor of the
contractor. Thus, it should not be held liable for the claim. If at all,
only the erring officials should be held liable. Further, FUCC did not
present evidence to prove the actual expenses it incurred for the
blasting works. What the Arbitration Board relied upon was the
memorandum of Mr. Umali which was neither identified or
authenticated during the arbitration proceedings nor marked as
evidence for FUCC. Moreover, the figures indicated in Mr. Umali's
memorandum were allegedly mere estimates and were
recommendatory at most.
Finally, it asserts that the award of P763.00 per cubic meter has no
factual and legal basis as the sub-contract between FUCC and its
blasting sub-contractor, Dynamic Blasting Specialists of the
Philippines (Dynamic), was only P430.00 per cubic meter.
In its Comment13 dated October 15, 2001, FUCC points out that
petitioner's arguments are exactly the same as the ones it raised
before the Arbitration Board, the trial court and the Court of
Appeals. Moreover, in the Compromise Agreement between the
Corporation Law/alfred0 Page 1137 of 1509
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parties, petitioner committed to abide by the decision of the
Arbitration Board. It should not now be allowed to question the
decision.
FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one
of the members of the Arbitration Board, was nominated by
petitioner itself. If there was any irregularity in its proceedings such as
the bias and prejudgment petitioner imputes upon Mr. Sison, Atty.
Samonte would have complained. As it is, Atty. Samonte concurred
in the decision of the Arbitration Board and dissented only as to the
award of attorney's fees.
As regards the issue of interest, FUCC claims that the case involves
forbearance of money and not a claim for damages for breach of
an obligation in which case interest on the amount of damages
awarded may be imposed at the rate of six percent (6%) per
annum.
Petitioner filed a Reply14 dated March 18, 2002 reiterating its earlier
submissions.
CI - Contract Implementation:
It is petitioner's submission, and FUCC does not deny, that the claim
for payment of blasting works in Botong alone was approximately
P170,000,000.00, a figure which far exceeds the original contract
price of P80,000,000.00 for two (2) project sites. Under the foregoing
implementing rules, for an extra work order which exceeds 5% of the
original contract price, no blasting work may be commenced
without the approval of the Secretary or his duly authorized
representative. Moreover, the procedure for the preparation and
approval of the extra work order outlined under Contract
Implementation (CI) 1(7) above should have been complied with.
Accordingly, petitioner's officials should not have authorized the
commencement of blasting works nor should FUCC have
proceeded with the same.
Thank you for your timely action and we look forward to the
immediate issuance of the extra work order.
5. Respondent received the letters but did not reply thereto nor
countermand the earlier instructions given to claimant to
proceed with the blasting works. The due execution and
authenticity of these letters (Exhs. "D-1" and "E-1") and the fact
10. Mr. Campos created a task force (i.e., the Technical Task
Force on the Study and Review of Extra Work Order No. 2; Exh.
"FFF") to review claimant's blasting works. After several meetings
with the task force, claimant agreed to the lower price of
P458.07 per cubic meter, in exchange for quick payment
(Testimony of witness Dumaliang, 7 November 1996, p. 30).
13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC
President, who proposed that claimant accept the price of
P458.07 per cubic meter for its blasting works with the balance
of its claim to be the subject of arbitration. Claimant accepted
the offer and sent the letter dated 28 September 1993 (Exh. "O")
to formalize said acceptance. However, no variation order was
issued and the promised payment never came. (Testimony of
witness Dumaliang, 7 November 1996, p. 58).
14. After some time, claimant met Mr. Viray on 19 October 1993
at the project site, and with some NPC officers in attendance,
particularly Mr. Gilberto A. Pastoral, Vice-President for
Engineering Design, who was instructed by Mr. Viray to prepare
the necessary memorandum (i.e., that claimant would be paid
P458.07 per cubic meter with the balance of its claim to be the
In the present case, the foregoing events clearly evince that the
promise that the blasting works would be paid was predicated on
the approval of the extra work order by petitioner's Board. Even
FUCC acknowledged that the blasting works should be an extra
work order and requested that the extra work order be confirmed as
such and approved by the appropriate officials. Notably, even as
the extra work order allegedly promised to it was not yet
forthcoming, FUCC commenced blasting.
Petitioner contends that the Arbitration Board, trial court and the
appellate court unduly relied on the memorandum of Mr. Umali
which was allegedly not marked as an exhibit. We note, however,
that this memorandum actually forms part of the record of the case
as Exhibit "DDD."31 Moreover, both the Arbitration Board and the
Court of Appeals found that Mr. Umali's proposal is the best
evidence on record as it is supported by detailed cost estimates that
will serve as basis to determine just compensation.
While the Arbitration Board found that FUCC did not present
evidence showing the amount it paid to its blasting sub-contractor, it
did present testimony to the effect that it incurred other costs and
expenses on top of the actual blasting cost. Hence, the amount of
Corporation Law/alfred0 Page 1149 of 1509
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P430.00 per cubic meter indicated in FUCC's Contract of Agreement
with Dynamic is not controlling.
Even so, the Court allows a judgment which had become final and
executory to be clarified when there is an ambiguity caused by an
omission or mistake in the dispositive portion of the decision.37 In
Corporation Law/alfred0 Page 1150 of 1509
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Reinsurance Company of the Orient, Inc. v. Court of Appeals,38 we
held:
SO ORDERED.
Footnotes
1 Rollo, pp. 9-56.
2Id. at 58-87; Penned by Associate Justice Eugenio S. Labitoria
and concurred in by Associate Justices Eloy R. Bello, Jr. and
Perlita J. Tria-Tirona.
3 Id. at 88-92.
4 Id. at 93.
5 Id. at 59-67.
6 Id. at 71-72.
7Representing direct costs of P693.65 and 10% mark up for
overhead of P69.36.
8The technical consultant engaged by both parties to
compute the volume of blasted rocks.
9 Rollo, p. 83.
10 Id. at 86-87. The dispositive portion reads:
SO ORDERED."
11 Supra note 1 at 33-35.
12 Sec. 20. – Form of contents of award.
………
PANGANIBAN, J.:
The Case
The Facts
======================================
=
Market Study
Technical Study
_____________________________________________
==============================================
=======
---------------------------------------------------------------------------------
Thank you.
Industrial Engineering
Very
truly
yours
,
(S)A
NTO
NIO
C.
PUNS
ALA
N
(T)A
NTO
NIO
C.
PUNS
ALA
N
(S)STEFANI C. SAÑO
(T)STEFANI C. SAÑO
President
15 March1987 53,333.00
Yours truly,
(S)STEFANI C. SAÑO
(T)STEFANI C. SAÑO
CONFORME:
During the trial, the lower court observed that the Second Contract
bore, at the lower right portion of the letter, the following notations in
pencil:
1. Operations Manual
The lower left corner of the letter also contained the following
notations:
"Hinanakit".
Rejecting the finding of the trial court that the December 4, 1986
contract was simulated or unenforceable, the CA ruled in favor of its
validity and enforceability. According to the Court of Appeals, the
evidence on record shows that the president of petititoner-
corporation had entered into the First Contract, which was similar to
the Second Contract. Thus, petitioner had clothed its president with
apparent authority to enter into the disputed agreement. As it had
also become the practice of the petitioner-corporation to allow its
president to negotiate and execute contracts necessary to secure its
license as a customs bonded warehouse without prior board
approval, the board itself, by its acts and through acquiescence,
practically laid aside the normal requirement of prior express
Corporation Law/alfred0 Page 1160 of 1509
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approval. The Second Contract was declared valid and binding on
the petitioner, which was held liable to private respondent in the full
amount of P400,000.
Disagreeing with the CA, petitioner lodged this petition before us. 19
The Issues
The Court will overlook the lapse of petitioner in alleging grave abuse
of discretion as its ground for seeking reversal of the assailed
Decision. Although the Rules of Court specify "reversible errors" as
grounds for a petition for review under Rule 45, the Court will lay
aside for the nonce this procedural lapse and consider the
allegations of "grave abuse" as statements of reversible errors of law.
Petitioner does not contest its liability; it merely disputes the amount
of such accountability. Hence, the resolution of this petition rests on
the sole issue of the enforceability and validity of the Second
Contract, more specifically: (1) whether the president of the
petitioner-corporation had apparent authority to bind petitioner to
the Second Contract; and (2) whether the said contract was valid
and not merely simulated.
First Issue:
The general rule is that, in the absence of authority from the board of
directors, no person, not even its officers, can validly bind a
corporation. 21 A corporation is a juridical person, separate and
distinct from its stockholders and members, "having . . . powers,
attributes and properties expressly authorized by law or incident to its
existence." 22
A: Yes, sir.
Second Issue:
Alleged Simulation of the First Contract
SO ORDERED.
Footnotes
6 Petition, p. 2; rollo, p. 3.
8 Records, p. 38.
10 Ibid., p. 6.
14 TSN, June 13, 1988, p. 18; TSN, June 14, 1988, pp. 5-12.
20 Rollo, p. 104.
28 Ibid., p. 784.
People’s Aircargo and Warehousing Co., Inc. vs. CA [297 SCRA 170
(Oct 7 1998)]
Power of Board of Directors to Bind Corporation
Held: Yes. The general rule is that, in the absence of authority from
the BoD, no person, not even its officers, can validly bind a
corporation. A corporation is a juridical person, separate and
distinct from its stockholders and members, having powers, attributes
and properties expressly authrized by law or incident to its
Corporation Law/alfred0 Page 1170 of 1509
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existence. Being a juridical entity, a corporation may act through its
BoD, which exercises almost all corporate powers, lays down all
corporate business policies and is responsible for the efficiency of
management as is under Sec. 23 of the Corporation Code.
The power and responsibility to decide whether the corporation
should enter into a contract that will bind the corporation is lodged
in the board, subject to AoI, by laws, or relevant provisions of
law. However, just as a natural person may authorize another to do
certain acts for and on his behalf, the BoD may validly delegate
some of its functions and powers to officers, committees or
agents. The authority of such individuals to bind the corporation is
generally derived from law, corporate by laws or authorization from
the board, either expressly or impliedly by habit, custom or
acquiescence in the general course of business.
In the case at bar, since the corporation had previously allowed
Punsalan to enter into the first contract with Sano without a board
resolution expressly authorizing him, thus, it had clothed its president
with apparent authority to execute the subject 2nd contract.
If a corporation knowingly permits one of its officers, or any other
agent, to act within the scope of an apparent authority, it holds him
out to the public as possessing the power to do those acts, and thus,
the corporation will, as against anyone who has in good faith dealt
with it through such agent, be estopped from denying the agent’s
authority.
DECISION
Before the Court is the petition for review on certiorari filed by the
Lapulapu Foundation, Inc. and Elias Q. Tan seeking to reverse and
set aside the Decision1 dated June 26, 1996 of the Court of Appeals
(CA) in CA-G.R. CV No. 37162 ordering the petitioners, jointly and
solidarily, to pay the respondent Allied Banking Corporation the
amount of P493,566.61 plus interests and other charges. Likewise,
sought to be reversed and set aside is the appellate court’s
After due trial, the court a quo rendered judgment the dispositive
portion of which reads:
Finally, like the court a quo, the CA applied the doctrine of piercing
the veil of corporate entity in holding the petitioners jointly and
solidarily liable. The evidence showed that petitioner Tan had
represented himself as the President of the petitioner Foundation,
opened savings and current accounts in its behalf, and signed the
loan documents for and in behalf of the latter. The CA, likewise,
found that the petitioner Foundation had allowed petitioner Tan to
act as though he had the authority to contract the loans in its
behalf. On the other hand, petitioner Tan could not escape liability
as he had used the petitioner Foundation for his benefit.
The petitioners assail the appellate court’s finding that the loans had
become due and demandable in view of the two demand letters
sent to them by the respondent Bank. The petitioners insist that there
was no prior demand as they vigorously deny receiving those letters.
According to petitioner Tan, the signatures on the registry return
cards were not his.
Exhibits "R" and "S" are two letters of demand, respectively dated
January 3, 1979 and January 30, 1979, asking settlement of the
obligations covered by the promissory notes. The first letter was
written by Ben Tio Peng Seng, Vice-President of the bank, and
addressed to Lapulapu Foundation, Inc., attention of Mr. Elias Q. Tan,
President, while the second was a final demand written by the
appellee’s counsel, addressed to both defendants-appellants, and
giving them five (5) days from receipt within which to settle or judicial
action would be instituted against them. Both letters were duly
received by the defendants, as shown by the registry return cards,
marked as Exhibits "R-2" and "S-1," respectively. The allegation of Tan
that he does not know who signed the said registry return receipts
merits scant consideration, for there is no showing that the addresses
thereon were wrong. Hence, the disputable presumption "that a
letter duly directed and mailed was received in the regular course of
mail" (per par. V, Section 3, Rule 131 of the Revised Rules on
Evidence) still holds.8
In this case, the promissory notes are the law between the petitioners
and the respondent Bank. These promissory notes contained
maturity dates as follows: February 5, 1978, March 28, 1978, April 11,
1978 and May 5, 1978, respectively. That these notes were to be paid
on these dates is clear and explicit. Nowhere was it stated therein
that they would be renewed on a year-to-year basis or "rolled-over"
annually until paid from the proceeds of petitioner Tan’s shares in the
Lapulapu Industries Corp. Accordingly, this purported unwritten
agreement could not be made to vary or contradict the terms and
conditions in the promissory notes.
Finally, the appellate court did not err in holding the petitioners jointly
and solidarily liable as it applied the doctrine of piercing the veil of
corporate entity. The petitioner Foundation asserts that it has a
personality separate and distinct from that of its President, petitioner
Tan, and that it cannot be held solidarily liable for the loans of the
latter.1âwphi1
The Court agrees with the CA that the petitioners cannot hide
behind the corporate veil under the following circumstances:
The evidence shows that Tan has been representing himself as the
President of Lapulapu Foundation, Inc. He opened a savings
account and a current account in the names of the corporation,
and signed the application form as well as the necessary specimen
signature cards (Exhibits "A," "B" and "C") twice, for himself and for the
foundation. He submitted a notarized Secretary’s Certificate (Exhibit
"G") from the corporation, attesting that he has been authorized,
inter alia, to sign for and in behalf of the Lapulapu Foundation any
and all checks, drafts or other orders with respect to the bank; to
transact business with the Bank, negotiate loans, agreements,
obligations, promissory notes and other commercial documents; and
to initially obtain a loan for P100,000.00 from any bank (Exhibits "G-1"
and "G-2"). Under these circumstances, the defendant corporation is
liable for the transactions entered into by Tan on its behalf.20
Per its Secretary’s Certificate, the petitioner Foundation had given its
President, petitioner Tan, ostensible and apparent authority to inter
alia deal with the respondent Bank. Accordingly, the petitioner
Foundation is estopped from questioning petitioner Tan’s authority to
obtain the subject loans from the respondent Bank. It is a familiar
doctrine that if a corporation knowingly permits one of its officers, or
any other agent, to act within the scope of an apparent authority, it
holds him out to the public as possessing the power to do those acts;
and thus, the corporation will, as against anyone who has in good
faith dealt with it through such agent, be estopped from denying the
agent’s authority.21
SO ORDERED.
Footnotes
1Penned by Associate Justice Delilah Vidallon-Magtolis with
Associate Justices Quirino D. Abad Santos and Artemio G.
Tuquero concurring.
2 Rollo, p. 24.
3 Id. at 25.
4 Exhibit "R."
5 Exhibit "S."
6 Exhibits "R-2" and "S-1."
7 Rollo, p. 14.
8 Id. at 30.
9 Gold Line Transit, Inc. v. Ramos, 363 SCRA 262 (2001).
10 Section 3(V), Rule 131 of the Revised Rules of Court.
11 Exhibits "H" to "L."
12 Rollo, p. 26.
13 Exhibit "D."
14 Exhibits "A" and "B."
15 Exhibit "C."
16 Ibid.
Held: NO. The Court agrees with the CA that the petitioners
cannot hide behind the corporate veil under the following
circumstances:
The evidence shows that Tan has been representing himself as the
President of Lapulapu Foundation, Inc. He opened a savings
account and a current account in the names of the corporation,
and signed the application form as well as the necessary
specimen signature cards twice, for himself and for the
foundation. He submitted a notarized Secretary’s Certificate from
the corporation, attesting that he has been authorized, inter alia,
to sign for and in behalf of the Lapulapu Foundation any and all
checks, drafts or other orders with respect to the bank; to transact
business with the Bank, negotiate loans, agreements, obligations,
promissory notes and other commercial documents; and to
initially obtain a loan for P100, 000.00 from any bank. Under these
circumstances, the Foundation is liable for the transactions
entered into by Tan on its behalf.
After due trial, the court rendered judgment (1) requiring Tan and
the Foundation to pay jointly and solidarily to the Bank the amount
of P493,566.61 as principal obligation for the four promissory notes,
including all other charges included in the same, with interest at 14%
per annum, computed from 24 January 1979, until the same are fully
paid, plus 2% service charges and 1% monthly penalty charges; (2)
requiring Tan and the Foundation to pay jointly and solidarily,
attorney’s fees in the equivalent amount of 25% of the total amount
due from them on the promissory notes, including all charges; and
(3) requiring Tan and the Foundation to pay jointly and solidarily
litigation expenses of P1,000.00 plus costs of the suit. On appeal, the
CA affirmed with modification the judgment of the court a quo by
deleting the award of attorney’s fees in favor of the Bank for being
without basis. Tan and the foundation filed the petition for review on
certiorari.
Issue:
Held:
1. The appellate court did not err in holding Tan and the foundation
jointly and solidarily liable as it applied the doctrine of piercing the
veil of corporate entity. Tan and the foundation cannot hide behind
the corporate veil under the following circumstances: "The evidence
shows that Tan has been representing himself as the President of
Lapulapu Foundation, Inc. He opened a savings account and a
current account in the names of the corporation, and signed the
-----------------------------
Sincerely,.
s/ Vicente J. Francisco
t/ VICENTE J. FRANCISCO
VICENTE FRANCISCO
SAMANILLO BLDG. ESCOLTA.
ANDAL"
Then the System sent three (3) letters, one dated 29 January 1960,
which was signed by its assistant general manager, and the other
two letters, dated 19 and 26 February 1960, respectively, which were
signed by Andal, asking the plaintiff for a proposal for the payment
of her indebtedness, since according to the System the one-year
period for redemption had expired.
Hence, even if it were the board secretary who sent the telegram,
the corporation could not evade the binding effect produced by
the telegram..
The defendant's assertion that the telegram came from it but that it
was incorrectly worded renders unnecessary to resolve the other
point on controversy as to whether the said telegram constitutes an
actionable document..
As to attorneys' fees, we agree with the trial court's stand that in view
of the absence of gross and evident bad faith in defendant's refusal
to satisfy the plaintiff's claim, and there being none of the other
grounds enumerated in Article 2208 of the Civil Code, such absence
precludes a recovery. The award of attorneys' fees is essentially
discretionary in the trial court, and no abuse of discretion has been
shown.
Then in 1960, GSIS demanded Francisco to pay off the loan. Vicente
then reminded GSIS that the agreement in 1959 which is actually a
compromise is binding upon GSIS. GSIS then averred that the letter
sent to Vicente in response to his offer was not sent in error because
Andal’s secretary sent the poorly worded response without Andal’s
knowledge.
Issue: WON the System is liable for the acts of its employees
regarding the telegram?
Held: Yes. There was nothing in the telegram that hinted at any
anomaly, or gave ground to suspect its veracity, and the plaintiff,
therefore, can not be blamed for relying upon it. There is no denying
that the telegram was within Andal’s apparent authority. Hence,
even if it were the board secretary who sent the telegram, the
corporation could not evade the binding effect produced by the
telegram. Knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment, and in
relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not. Yet,
notwithstanding this notice, the defendant System pocketed the
amount, and kept silent about the telegram not being in
accordance with the true facts, as it now alleges. This silence, taken
together with the unconditional acceptance of three other
subsequent remittances from plaintiff, constitutes in itself a binding
ratification of the original agreement.
Nyco Sales Corp. vs. BA Finance Corp. (200 SCRA 637 [1991])
PARAS, J.:p
SO ORDERED.
There are only two ways which indicate the presence of novation
and thereby produce the effect of extinguishing an obligation by
another which substitutes the same. First, novation must be explicitly
stated and declared in unequivocal terms as novation is never
presumed (Mondragon v. Intermediate Appellate Court, G.R. No.
71889, April 17, 1990; Caneda Jr. v. Court of Appeals, G.R. No. 81322,
February 5, 1990). Secondly, the old and the new obligations must
be incompatible on every point. The test of incompatibility is whether
or not the two obligations can stand together, each one having its
independent existence If they cannot, they are incompatible and
the latter obligation novates the first (Mondragon v. Intermediate
Appellate Court, supra; Caneda Jr. v. Court of Appeals, supra). In
the instant case, there was no express agreement that BA Finance's
acceptance of the SBTC check will discharge Nyco from liability.
Neither is there incompatibility because both checks were given
precisely to terminate a single obligation arising from Nyco's sale of
credit to BA Finance. As novation speaks of two distinct obligations,
such is inapplicable to this case.
SO ORDERED.
Nyco Sales’ pretension that it had not been notified of the fact of
dishonor is belied not only by the formal demand letter issued by BA
Finance but also by the fact that Nyco Sales and Sanshell had
frequent contacts before, during and after the dishonor. More
importantly, as long as the credit remains outstanding, Nyco Sales
shall continue to be liable to BA Finance as its assignor. The dishonor
of an assigned check simply stresses its liability and the failure to give
a notice of dishonor will not discharge it from such liability. This is
because the cause of action stems from the breach of the
warranties embodied in the Deed of Assignment, and not from the
dishonoring of the check alone.
FACTS:
HELD:
BPI Family Savings Bank vs. First Metro Investment Corp. (429 SCRA
30 [2004])
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing
the Decision1 dated July 4, 1997 and Resolution2 dated January 28,
1998 of the Court of Appeals in CA-G.R. CV No. 44986, "First Metro
Investment Corporation vs. BPI Family Bank."
The facts as found by the trial court and affirmed by the Court of
Appeals are as follows:
c. the cost.
SO ORDERED."
SO ORDERED."
BPI FB then filed a motion for reconsideration but was denied by the
Court of Appeals.
We hold that the parties did not intend the deposit to be treated as
a demand deposit but rather as an interest-earning time deposit not
withdrawable any time. This is quite obvious from the
communications between Jaime Sebastian, petitioner’s Branch
Manager, and Antonio Ong, respondent’s Executive Vice President.
Both agreed that the deposit of P100 million was non-withdrawable
for one year upon payment in advance of the 17% per annum
interest. Respondent’s time deposit of P100 million was accepted by
petitioner as shown by a deposit slip prepared and signed by Ong
himself who indicated therein the account number to which the
deposit is to be credited, the name of FMIC as depositor or account
holder, the date of deposit, and the amount of P100 million as
deposit in check. Clearly, when respondent FMIC invested its money
with petitioner BPI FB, they intended the P100 million as a time
deposit, to earn 17% per annum interest and to remain intact until its
maturity date one year thereafter.
While it may be true that barely one month and seven days from the
date of deposit, respondent FMIC demanded the withdrawal of
P86,057,646.72 through the issuance of a check payable to itself, the
same was made as a result of the fraudulent and unauthorized
transfer by petitioner BPI FB of its P80 million deposit to Tevesteco’s
savings account. Certainly, such was a normal reaction of
respondent as a depositor to petitioner’s failure in its fiduciary duty to
treat its account with the highest degree of care.
Under Central Bank Circular No. 22, Series of 1994, "demand deposits
shall not be subject to any interest rate ceiling." This, in effect, is an
open authority to pay interest on demand deposits, such interest not
being subject to any rate ceiling.
Likewise, time deposits are not subject to interest rate ceiling. In fact,
the rate ceiling was abolished and even allowed to float depending
on the market conditions. Sections 1244 and 1244.1 of the Manual of
Regulations of the Central Bank of the Philippines provide:
At this point, we must emphasize that this Court is not a trier of facts.
Thus, we uphold the finding of both lower courts that petitioner failed
to exercise that degree of diligence required by the nature of its
obligations to its depositors. A bank is under obligation to treat the
accounts of its depositors with meticulous care, whether such
account consists only of a few hundred pesos or of million of pesos.10
Here, petitioner cannot claim it exercised such a degree of care
required of it and must, therefore, bear the consequence.
SO ORDERED.
Footnotes
* Owned by petitioner BPI Family Savings Bank, Inc.
1 Annex "A", Petition for Review on Certiorari, Rollo at 67-79.
2 Annex "B", id. at 80-90.
3 10 Am Jur 2d § 652, citing 12 CFR § 204.2 (c) (1).
4See Section 58, Republic Act No. 7653 "The New Central Bank
Act."
5Francisco vs. GSIS¸ G.R. No. L-18287, March 30, 1963, 117 Phil
587, 593.
6 G.R. No. 108957, June 14, 1993, 223 SCRA 350.
7 Supra.
8Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No.
97412, July 17, 1994, 234 SCRA 78; Eastern Assurance and Surety
Corporation vs. Court of Appeals¸ G.R. No. 127135, January 18,
2000, 322 SCRA 73, cited in Rizal Commercial Banking
Corporation vs. Alfa RTW Manufacturing Corporation¸ G.R. No.
133877, November 14, 2001, 368 SCRA 611, 619.
9Robleza vs. Court of Appeals, G.R. No. 80364, June 28, 1989,
174 SCRA 354.
Issues:
Whether or not the deposit in question may be treated as demand
deposit or time deposit.
If it is to be considered a demand deposit, is it legally proscribed
from earning interest?
Held:
The deposit in question is a time deposit because the deposit of Php
100 million is not withdrawable for one year provided that an
advance interest of 17% is paid.
No. Demand Deposits are not legally proscribed from earning
interest. Under CB Cir 22 s 1994, demand deposits shall not be
subject to any rate ceiling. This, according to the SC is an open
authority to pay interest even on demand deposit and with more
reason because interest is not even subject to any ceiling.
Addendum:
Time Deposit – is one where the payment of which cannot be legally
required within a specified number of days.
Demand Deposit (Current Account) – is one where the liability of the
bank is denominated in Philippine currency subject to payment in
legal tender upon presentation of the depositor’s check.
Facts:
Issues:
Decisions:
1.We hold that the parties did not intend the deposit to be treated
as a demanddeposit but rather as an interest-earning time deposit
not withdrawable anytime. When respondent FMIC invested its
money with petitioner BPI FB, they intended the P100 million as a time
deposit, to earn 17% per annum interest and to remain intactuntil its
maturity date one year thereafter.
While it may be true that barely one month and seven days from the
date of deposit, respondent FMIC demanded the withdrawal of
P86,057,646.72 through the issuance of a check payable to itself, the
same was made as a result of the fraudulent and unauthorized
transfer by petitioner BPI FB of its P80 million deposit to Tevesteco’s
savings account. Certainly, such was a normal reaction of
respondent as a depositor to petitioner’s failure in its fiduciary duty to
treat its account with the highest degree of care.
Indeed, the public has the right to rely on the trustworthiness of bank
managers and their acts. Obviously, confidence in the banking
system, which necessarily includes reliance on bank managers, is
vital in the economic life of our society. Significantly, the transaction
was actually acknowledged and ratified by petitioner when it paid
respondent in advance the interest for one year. Thus, petitioner is
estopped from denying that it authorized its Branch Manager to
enter into anagreement with respondent’s Executive Vice President
concerning the deposit withthe corresponding 17% interest per
annum.
SANCHEZ, J.:
... Provided, however, That the life of said corporation shall not
be extended by said amendment beyond the time fixed in the
original articles: ...
The common law rule, at the beginning, was rigid and inflexible in
that upon its dissolution, a corporation became legally dead for all
purposes. Statutory authorizations had to be provided for its
continuance after dissolution "for limited and specified purposes
incident to complete liquidation of its affairs".3 Thus, the moment a
corporation's right to exist as an "artificial person" ceases, its
corporate powers are terminated "just as the powers of a natural
person to take part in mundane affairs cease to exist upon his
death".4 There is nothing left but to conduct, as it were, the
settlement of the estate of a deceased juridical person.
All these dilute Alhambra's position that it could revivify its corporate
life simply because when it attempted to do so, Alhambra was still in
the process of liquidation. It is surely impermissible for us to stretch the
law — that merely empowers a corporation to act in liquidation — to
inject therein the power to extend its corporate existence.
3. Not that we are alone in this view. Fletcher has written: "Since the
privilege of extension is purely statutory, all of the statutory conditions
precedent must be complied with in order that the extension may
be effectuated. And, generally these conditions must be complied
with, and the steps necessary to effect the extension must be taken,
during the life of the corporation, and before the expiration of the
term of existence as original fixed by its charter or the general law,
since, as a rule, the corporation is ipso facto dissolved as soon as
Corporation Law/alfred0 Page 1217 of 1509
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that time expires. So where the extension is by amendment of the
articles of incorporation, the amendment must be adopted before
that time. And, similarly, the filing and recording of a certificate of
extension after that time cannot relate back to the date of the
passage of a resolution by the stockholders in favor of the extension
so as to save the life of the corporation. The contrary is true,
however, and the doctrine of relation will apply, where the delay is
due to the neglect of the officer with whom the certificate is
required to be filed, or to a wrongful refusal on his part to receive it.
And statutes in some states specifically provide that a renewal may
be had within a specified time before or after the time fixed for the
termination of the corporate existence".5
... But section 561 (section 2147) provides that, when any
corporation expires by the terms of its articles of incorporation,
it may be thereafter continued to act for the purpose of closing
up its business, but for no other purpose. The corporate life of
the Home Building Association expired on May 3, 1905. After
that date, by the mandate of the statute, it could continue to
act for the purpose of closing up its business, but for no other
purpose. The proposed amendment was not made until
January 16, 1908, or nearly three years after the corporation
expired by the terms of the articles of incorporation. When the
corporate life of the corporation was ended, there was nothing
to extend. Here it was proposed nearly three years after the
corporate life of the association had expired to revivify the
dead body, and to make that relate back some two years and
eight months. In other words, the association for two years and
eight months had only existed for the purpose of winding up its
business, and, after this length of time, it was proposed to
revivify it and make it a live corporation for the two years and
eight months daring which it had not been such.
The law gives a certain length of time for the filing of records in
this court, and provides that the time may be extended by the
court, but under this provision it has uniformly been held that
when the time was expired, there is nothing to extend, and that
the appeal must be dismissed... So, when the articles of a
corporation have expired, it is too late to adopt an
amendment extending the life of a corporation; for, the
corporation having expired, this is in effect to create a new
corporation ..."7
The situation here presented is not one where the law under
consideration is ambiguous, where courts have to put in harness
extrinsic aids such as a look at another statute to disentangle doubts.
It is an elementary rule in legal hermeneutics that where the terms of
the law are clear, no statutory construction may be permitted. Upon
the basic conceptual scheme under which corporations operate,
and with Section 77 of the Corporation Law particularly in mind, we
find no vagueness in Section 18, as amended by Republic Act 3531.
As we view it, by directing attention to Republic Act 1932, Alhambra
would seek to create obscurity in the law; and, with that, ask of us a
ruling that such obscurity be explained. This, we dare say, cannot be
done.
The way the whole case shapes up then, the only possible
drawbacks of Alhambra might be that, instead of the new
corporation (Alhambra Industries, Inc.) being written off, the old one
(Alhambra Cigar & Cigarette Manufacturing Company, Inc.) has to
Corporation Law/alfred0 Page 1221 of 1509
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be wound up; and that the old corporate name cannot be retained
fully in its exact form.17 What is important though is that the word
Alhambra, the name that counts [it has goodwill], remains.
FOR THE REASONS GIVEN, the ruling of the Securities and Exchange
Commission of November 18, 1963, and its order of September 8,
1964, both here under review, are hereby affirmed.
Footnotes
1Rule 43, Rules of Court.
2Emphasis supplied.
319 C.J.S., p. 1487.
4Id.,
p. 1485, at footnote 76, citing Sharp vs. Eagle Lake Lumber
Co., 212 P. 933, 60 Cal. App. 386.
58Fletcher, Cyclopedia Corporations, Perm, ed., 1931, pp. 559-
560, citing cases. Emphasis supplied.
6Home Bldg. Ass'n vs. Bruner, 120 S.W. 306, 307.
7Citing cases; emphasis supplied.
8Rayburn vs. Guntersville Realty Company, 93 A.L.R. 1055, 1059-
1060, cited by petitioner.
9At p. 1059.
10Fletcher, p. 535. In 18 Am. Jur. 2d., p. 612, we find at footnote
14 the following: "Loeffler v. Federal Supply Co. 187 Okla 373,
102 P2d 862, wherein the court notes a distinction between the
words "extend" and "renew." The court said that the word
"extend" means to prolong or lengthen in time, whereas the
word "renew" means to restore to existence, to revive, re-
establish, or recreate.
HELD: No. Alhambra cannot avail of the new law because it has
already expired at the time of its passage. When a corporation is
liquidating pursuant to the statutory period of three years to
liquidate, it is only allowed to continue for the purpose of final
closure of its business and no other purposes. In fact, within that
period, the corporation is enjoined from “continuing the business for
which it was established”. Hence, Alhambra’s board cannot validly
amend its articles of incorporation to extend its lifespan.
Caltex (Phils.), Inc. vs. PNOC Shipping and Transport Corp. (498
SCRA 400 [2006])
DECISION
CARPIO, J.:
The Case
(a) P126,771.22 under the first cause of action, with legal interest until
fully paid;
(b) P103,659.44 under the second cause of action with legal interest
until fully paid;
SO ORDERED.6
On 1 June 1994, the trial court rendered its Decision, the dispositive
portion of which reads:
(a) P126,771.22 under the first cause of action, with legal interest
from the date of the promulgation of the decision on November 12,
1985 until fully paid;
(b) P103,659.44 under the second cause of action with legal interest
from the date of the promulgation of the decision on November 12,
1985 until fully paid;
(c) 10% of the sums due as and for attorney’s fees; and
SO ORDERED.7
In its 31 May 2001 Decision, the Court of Appeals found the appeal
meritorious. The Court of Appeals ruled that Caltex has no
SO ORDERED.8
The Issues
Caltex May Recover from PSTC Under the Terms of the Agreement
Caltex may recover the judgment debt from PSTC not because of a
stipulation in Caltex’s favor but because the Agreement provides
that PSTC shall assume all the obligations of LUSTEVECO.
AGREEMENT OF ASSUMPTION
OF OBLIGATIONS
- and -
WITNESSETH : T h a t -
xxxx
2. A transfer made by a debtor after suit has been begun and while it
is pending against him.
6. The fact that the transfer is made between father and son, when
there are present other of the above circumstances.
In this case, PSTC was aware of the pendency of the case between
Caltex and LUSTEVECO. PSTC assumed LUSTEVECO’s obligations,
including specifically any obligation that might arise from Caltex’s
suit against LUSTEVECO. The Agreement transferred the
unencumbered assets of LUSTEVECO to PSTC, making any money
judgment in favor of Caltex unenforceable against LUSTEVECO. To
allow PSTC to renege on its obligation under the Agreement will
allow PSTC to defraud Caltex. This militates against the statutory
policy of protecting creditors from fraudulent contracts.
Article 1313 of the Civil Code provides that "[c]reditors are protected
in cases of contracts intended to defraud them." Further, Article 1381
of the Civil Code provides that contracts entered into in fraud of
creditors may be rescinded when the creditors cannot in any
manner collect the claims due them.16 Article 1381 applies to
contracts where the creditors are not parties, for such contracts are
usually made without their knowledge. Thus, a creditor who is not a
party to a contract can sue to rescind the contract to prevent fraud
upon him. Or, the same creditor can instead choose to enforce the
contract if a specific provision in the contract allows him to collect
his claim, and thus protect him from fraud.
Caltex may enforce its cause of action against PSTC because PSTC
expressly assumed all the obligations of LUSVETECO pertaining to its
tanker and bulk business and specifically, those relating to AC-G.R.
CV No. 62613. While Caltex is not a party to the Agreement, it has a
real interest in the performance of PSTC’s obligations under the
Agreement because the non-performance of PSTC’s obligations will
defraud Caltex.
SO ORDERED.
Corporation Law/alfred0 Page 1232 of 1509
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ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ATTESTATION
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
Footnotes
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
2Penned by Associate Justice Juan Q. Enriquez, Jr. with
Associate Justices Presbitero J. Velasco, Jr. and Bienvenido L.
Reyes, concurring. Rollo, pp. 41-47.
3Penned by Associate Justice Juan Q. Enriquez, Jr. with
Associate Justices Wenceslao I. Agnir, Jr. and Bienvenido L.
Reyes, concurring. Rollo, p. 49.
(4) Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
x-----------------------------x
DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, BELEN SEE YU, D. TERENCE Y.
TIU, JOHN YU, LOURDES C. TIU, and INTRALAND RESOURCES
DEVELOPMENT CORP., petitioners,
vs.
ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG,
RESOLUTION
CORONA, J.:
Before us are the (1) motion for reconsideration, dated March 15,
2002, of petitioner movants Ong Yong, Juanita Tan Ong, Wilson Ong,
Anna Ong, William Ong, Willie Ong and Julia Ong Alonzo (the Ongs);
(2) motion for partial reconsideration, dated March 15, 2002, of
petitioner movant Willie Ong seeking a reversal of this Court's
Decision,1 dated February 1, 2002, in G.R. Nos. 144476 and 144629
affirming with modification the decision2 of the Court of Appeals,
dated October 5, 1999, which in turn upheld, likewise with
modification, the decision of the SEC en banc, dated September 11,
1998; and (3) motion for issuance of writ of execution of petitioners
David S. Tiu, Cely Y. Tiu, Moly Yu Gow, Belen See Yu, D. Terence Y. Tiu,
John Yu and Lourdes C. Tiu (the Tius) of our February 1, 2002 Decision.
Accordingly, the Ongs paid P100 million in cash for their subscription
to 1,000,000 shares of stock while the Tius committed to contribute to
FLADC a four-storey building and two parcels of land respectively
valued at P20 million (for 200,000 shares), P30 million (for 300,000
shares) and P49.8 million (for 49,800 shares) to cover their additional
Corporation Law/alfred0 Page 1236 of 1509
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549,800 stock subscription therein. The Ongs paid in another P70
million3 to FLADC and P20 million to the Tius over and above their
P100 million investment, the total sum of which (P190 million) was
used to settle the P190 million mortgage indebtedness of FLADC to
PNB.
The business harmony between the Ongs and the Tius in FLADC,
however, was shortlived because the Tius, on February 23, 1996,
rescinded the Pre-Subscription Agreement. The Tius accused the
Ongs of (1) refusing to credit to them the FLADC shares covering
their real property contributions; (2) preventing David S. Tiu and Cely
Y. Tiu from assuming the positions of and performing their duties as
Vice-President and Treasurer, respectively, and (3) refusing to give
them the office spaces agreed upon.
According to the Tius, the agreement was for David S. Tiu and Cely S.
Tiu to assume the positions and perform the duties of Vice-President
and Treasurer, respectively, but the Ongs prevented them from
doing so. Furthermore, the Ongs refused to provide them the space
for their executive offices as Vice-President and Treasurer. Finally,
and most serious of all, the Ongs refused to give them the shares
corresponding to their property contributions of a four-story building,
a 1,902.30 square-meter lot and a 151 square-meter lot. Hence, they
felt they were justified in setting aside their Pre-Subscription
Agreement with the Ongs who allegedly refused to comply with their
undertakings.
In their defense, the Ongs said that David S. Tiu and Cely Y. Tiu had in
fact assumed the positions of Vice-President and Treasurer of FLADC
but that it was they who refused to comply with the corporate duties
assigned to them. It was the contention of the Ongs that they
wanted the Tius to sign the checks of the corporation and undertake
their management duties but that the Tius shied away from helping
them manage the corporation. On the issue of office space, the
Ongs pointed out that the Tius did in fact already have existing
executive offices in the mall since they owned it 100% before the
Ongs came in. What the Tius really wanted were new offices which
were anyway subsequently provided to them. On the most
important issue of their alleged failure to credit the Tius with the
FLADC shares commensurate to the Tius' property contributions, the
Ongs asserted that, although the Tius executed a deed of
assignment for the 1,902.30 square-meter lot in favor of FLADC, they
(the Tius) refused to pay P 570,690 for capital gains tax and
documentary stamp tax. Without the payment thereof, the SEC
would not approve the valuation of the Tius' property contribution
(as opposed to cash contribution). This, in turn, would make it
impossible to secure a new Transfer Certificate of Title (TCT) over the
property in FLADC's name. In any event, it was easy for the Tius to
(c) The plaintiffs to submit with (sic) the Securities and Exchange
Commission amended articles of incorporation of FLADC to
conform with this decision;
(h) The plaintiff David Tiu to pay individual defendants the sum
of P20,000,000.00 representing his loan from said defendants
plus legal interest from the date of receipt of such amount.
SO ORDERED.5
SO ORDERED.9
In their petition docketed as G.R. No. 144476, Ong et al. vs. Tiu et al.,
the Ongs argued that the Tius may not properly avail of rescission
under Article 1191 of the Civil Code considering that the Pre-
Subscription Agreement did not provide for reciprocity of
obligations; that the rights over the subject matter of the rescission
(capital assets and properties) had been acquired by a third party
(FLADC); that they did not commit a substantial and fundamental
breach of their agreement since they did not prevent the Tius from
assuming the positions of Vice-President and Treasurer of FLADC, and
that the failure to credit the 300,000 shares corresponding to the
1,902.30 square-meter property covered by TCT No. 134066 (formerly
15587) was due to the refusal of the Tius to pay the required transfer
taxes to secure the approval of the SEC for the property contribution
and, thereafter, the issuance of title in FLADC's name. They also
argued that the liquidation of FLADC may not legally be ordered by
the appellate court even for so called "practical considerations" or
even to prevent "further squabbles and numerous litigations," since
the same are not valid grounds under the Corporation Code.
Moreover, the Ongs bewailed the failure of the CA to grant interest
on their P70 million and P20 million advances to FLADC and David S.
Tiu, respectively, and to award costs and damages.
In their petition docketed as G.R. No. 144629, Tiu et al. vs. Ong et al.,
the Tius, on the other hand, contended that the rescission should
have been limited to the restitution of the parties' respective
investments and not the liquidation of FLADC based on the
erroneous perception by the court that: the Masagana Citimall was
threatened with incompletion since FLADC was in financial distress;
that the Tius invited the Ongs to invest in FLADC to settle its P190
million loan from PNB; that they violated the Pre-Subscription
Agreement when it was the Lichaucos and not the Tius who
executed the deed of assignment over the 151 square-meter
property commensurate to 49,800 shares in FLADC thereby failing to
pay the price for the said shares; that they did not turn over to the
Ongs the entire amount of FLADC funds; that they were diverting
rentals from lease contracts due to FLADC to their own MATTERCO
account; that the P70 million paid by the Ongs was an advance and
not a premium on capital; and that, by rescinding the Pre-
Subscription Agreement, they wanted to wrestle away the
management of the mall and prevent the Ongs from enjoying the
profits of their P190 million investment in FLADC.
3. the Tius shall be credited with 49,800 shares in FLADC for their
property contribution, specifically, the 151 sq. m. parcel of land.
This Court affirmed the fact that both the Ongs and the Tius violated
their respective obligations under the Pre-Subscription Agreement.
The Ongs prevented the Tius from assuming the positions of Vice-
President and Treasurer of the corporation. On the other hand, the
Decision established that the Tius failed to turn over FLADC funds to
the Ongs and that the Tius diverted rentals due to FLADC to their
MATTERCO account. Consequently, it held that rescission was not
possible since both parties were in pari delicto. However, this Court
agreed with the Court of Appeals that the remedy of specific
performance, as espoused by the Ongs, was not practical and
sound either and would only lead to further "squabbles and
numerous litigations" between the parties.
On March 15, 2002, the Tius filed before this Court a Motion for
Issuance of a Writ of Execution on the grounds that: (a) the SEC
order had become executory as early as September 11, 1998
pursuant to Sections 1 and 12, Rule 43 of the Rules of Court; (b) any
further delay would be injurious to the rights of the Tius since the case
had been pending for more than six years; and (c) the SEC no longer
had quasi-judicial jurisdiction under RA 8799 (Securities Regulation
Code). The Ongs filed their opposition, contending that the Decision
dated February 1, 2002 was not yet final and executory; that no
good reason existed to issue a warrant of execution; and that,
pursuant to Section 5.2 of RA 8799, the SEC retained jurisdiction over
pending cases involving intra-corporate disputes already submitted
for final resolution upon the effectivity of the said law.
Aside from their opposition to the Tius' Motion for Issuance of Writ of
Execution, the Ongs filed their own "Motion for Reconsideration;
Alternatively, Motion for Modification (of the February 1, 2002
Decision)" on March 15, 2002, raising two main points: (a) that
specific performance and not rescission was the proper remedy
under the premises; and (b) that, assuming rescission to be proper,
the subject decision of this Court should be modified to entitle
movants to their proportionate share in the mall.
The Ongs also allege that, in view of the findings of the Court that
both parties were guilty of violating the Pre-Subscription Agreement,
neither of them could resort to rescission under the principle of pari
delicto. In addition, since the cash and other contributions now
sought to be returned already belong to FLADC, an innocent third
party, said remedy may no longer be availed of under the law.
On January 29, 2003, the Special Second Division of this Court held
oral arguments on the respective positions of the parties. On
February 27, 2003, Dr. Willie Ong and the rest of the movants Ong
filed their respective memoranda. On February 28, 2003, the Tius
submitted their memorandum.
This is not the first time that this Court has reversed itself on a motion
for reconsideration. In Philippine Consumers Foundation, Inc. vs.
National Telecommunications Commission,13 this Court, through then
Chief Justice Felix V. Makasiar, said that its members may and do
change their minds, after a re-study of the facts and the law,
illuminated by a mutual exchange of views.14 After a thorough re-
examination of the case, we find that our Decision of February 1,
2002 overlooked certain aspects which, if not corrected, will cause
extreme and irreparable damage and prejudice to the Ongs, FLADC
and its creditors.
Going now to the merits, we resolve whether the Tius could legally
rescind the Pre-Subscription Agreement. We rule that they could not.
In their February 28, 2003 Memorandum, the Tius claim that there are
two contracts embodied in the Pre-Subscription Agreement: a
shareholder's agreement between the Tius and the Ongs defining
and governing their relationship and a subscription contract
between the Tius, the Ongs and FLADC regarding the subscription of
the parties to the corporation. They point out that these two
component parts form one whole agreement and that their terms
and conditions are intrinsically related and dependent on each
other. Thus, the breach of the shareholders' agreement, which was
allegedly the consideration for the subscription contract, was also a
breach of the latter.
Aside from the fact that this is an entirely new angle never raised in
any of their previous pleadings until after the oral arguments on
January 29, 2003, we find this argument too strained for comfort. It is
obviously intended to remedy and cover up the Tius' lack of legal
personality to rescind an agreement in which they were personally
not parties-in-interest. Assuming arguendo that there were two "sub-
agreements" embodied in the Pre-Subscription Agreement, this
Court fails to see how the shareholders agreement between the
Ongs and Tius can, within the bounds of reason, be interpreted as
the consideration of the subscription contract between FLADC and
the Ongs. There was nothing in the Pre-Subscription Agreement even
remotely suggesting such alleged interdependence. Be that as it
The Tius also argue that, since the Ongs represent FLADC as its
management, breach by the Ongs is breach by FLADC. This must
also fail because such an argument disregards the separate juridical
personality of FLADC.
The Tius allege that they were prevented from participating in the
management of the corporation. There is evidence that the Ongs
did prevent the rightfully elected Treasurer, Cely Tiu, from exercising
her function as such. The records show that the President, Wilson
Ong, supervised the collection and receipt of rentals in the
Masagana Citimall;19 that he ordered the same to be deposited in
the bank;20 and that he held on to the cash and properties of the
corporation.21 Section 25 of the Corporation Code prohibits the
President from acting concurrently as Treasurer of the corporation.
The rationale behind the provision is to ensure the effective
monitoring of each officer's separate functions.
All this notwithstanding, granting but not conceding that the Tius
possess the legal standing to sue for rescission based on breach of
contract, said action will nevertheless still not prosper since rescission
will violate the Trust Fund Doctrine and the procedures for the valid
distribution of assets and property under the Corporation Code.
The Trust Fund Doctrine, first enunciated by this Court in the 1923
case of Philippine Trust Co. vs. Rivera,22 provides that subscriptions to
the capital stock of a corporation constitute a fund to which the
creditors have a right to look for the satisfaction of their claims.23 This
doctrine is the underlying principle in the procedure for the
distribution of capital assets, embodied in the Corporation Code,
which allows the distribution of corporate capital only in three
instances: (1) amendment of the Articles of Incorporation to reduce
the authorized capital stock,24 (2) purchase of redeemable shares by
the corporation, regardless of the existence of unrestricted retained
earnings,25 and (3) dissolution and eventual liquidation of the
corporation. Furthermore, the doctrine is articulated in Section 41 on
the power of a corporation to acquire its own shares26 and in Section
122 on the prohibition against the distribution of corporate assets
and property unless the stringent requirements therefor are complied
with.27
In their Memorandum dated February 28, 2003, the Tius claim that
rescission of the agreement will not result in an unauthorized
liquidation of the corporation because their case is actually a
petition to decrease capital stock pursuant to Section 38 of the
Corporation Code. Section 122 of the law provides that "(e)xcept by
decrease of capital stock…, no corporation shall distribute any of its
assets or property except upon lawful dissolution and after payment
of all its debts and liabilities." The Tius claim that their case for
rescission, being a petition to decrease capital stock, does not
violate the liquidation procedures under our laws. All that needs to
be done, according to them, is for this Court to order (1) FLADC to
file with the SEC a petition to issue a certificate of decrease of
capital stock and (2) the SEC to approve said decrease. This new
argument has no merit.
xxx xxx xxx (C)ontracts intra vires entered into by the board of
directors are binding upon the corporation and courts will not
interfere unless such contracts are so unconscionable and
oppressive as to amount to wanton destruction to the rights of
the minority, as when plaintiffs aver that the defendants
(members of the board), have concluded a transaction
among themselves as will result in serious injury to the plaintiffs
stockholders.29
Another very important point follows. The Court of Appeals and, later
on, our Decision dated February 1, 2002, stated that both groups
were in pari delicto, meaning, that both the Tius and the Ongs
committed breaches of the Pre-Subscription Agreement. This may be
true to a certain extent but, judging from the comparative gravity of
the acts separately committed by each group, we find that the
Ongs' acts were relatively tame vis-à-vis those committed by the Tius
in not surrendering FLADC funds to the corporation and diverting
corporate income to their own MATTERCO account. The Ongs were
right in not issuing to the Tius the shares corresponding to the four-
story building and the 1,902.30 square-meter lot because no title for it
could be issued in FLADC's name, owing to the Tius' refusal to pay
the transfer taxes. And as far as the 151 square-meter lot was
concerned, why should FLADC issue additional shares to the Tius for
property already owned by the corporation and which, in the final
analysis, was already factored into the shareholdings of the Tius
before the Ongs came in?
After all is said and done, no one can close his eyes to the fact that
the Masagana Citimall would not be what it has become today
were it not for the timely infusion of P190 million by the Ongs in 1994.
There are no ifs or buts about it.
Without the Ongs, the Tius would have lost everything they originally
invested in said mall. If only for this and the fact that this Resolution
can truly pave the way for both groups to enjoy the fruits of their
investments — assuming good faith and honest intentions — we
The motion for the issuance of a writ of execution, dated March 15,
2002, of petitioners David S. Tiu, Cely Y. Tiu, Moly Yu Gow, Belen See
Yu, D. Terence Y. Tiu, John Yu and Lourdes C. Tiu is hereby DENIED for
being moot.
SO ORDERED.
Footnotes
1Ong Yong, et.al vs. Tiu, et al., G.R. No. 144476; Tiu, et.al. vs.
Ong Yong, et.al., G.R. No. 144629.
2 Rollo of G.R. No. 144476, pp. 111-135.
3 The testimony of Wilson Ong, never refuted by the Tius, was
that the parties' original agreement was to increase FLADC's
authorized capital stock from P50 million to P340 million (which
explains the Ongs' 50% share of P170 million). Later on, the
parties decided to downgrade the proposed new authorized
capital stock to only P200 million but the Ongs decided to
leave the overpayment of P70 million in FLADC to help pay off
the loan to PNB. (TSN at the SEC, January 29, 1997 cited in CA
Upon five (5) days' notice, given after the date on which
the right to file objections as fixed in the order has expired,
the Commission shall proceed to hear the petition and try
any issue made by the objections filed; and if no such
objection is sufficient, and the material allegations of the
petition are true, it shall render judgment dissolving the
corporation and directing such disposition of its assets as
justice requires, and may appoint a receiver to collect
such assets and pay the debts of the corporation. (Rule
104, RCa)
April 8, 2003
FACTS:
CA: Ongs and the Tius were in pari delicto (which would not
have legally entitled them to rescission) but, "for practical
considerations," that is, their inability to work together, it was
best to separate the two groups by rescinding the Pre-
Subscription Agreement, returning the original investment of the
Ongs and awarding practically everything else to the Tius.
The Ongs' shortcomings were far from serious and certainly less
than substantial; they were in fact remediable and correctable
under the law. It would be totally against all rules of justice,
fairness and equity to deprive the Ongs of their interests on
petty and tenuous grounds.
DISSENTING OPINION
CORONA, J.:
Before the Court are consolidated cases involving the Ninoy Aquino
International Airport International Passenger Terminal III (NAIA IPT III).
Corporation Law/alfred0 Page 1259 of 1509
suigeneris
G.R. No. 169914 is a special civil action for mandamus and
prohibition under Rule 65 of the Rules of Court originally filed before
us. G. R. No. 174166 is a petition for certiorari and prohibition also
under Rule 65 seeking to nullify the August 24, 2006 resolution of the
Court of Appeals (CA) in CA-G.R. SP No. 95539 and to enjoin the CA
from proceeding with said case.1
Terminals Co., Inc. (PIATCO) for the development of NAIA IPT III.
2. The DOTC will undertake the [NAIA IPT III] Project under [RA
6957] as amended by [RA 7718] and its IRR. Having officially
secured ICC approval of the unsolicited proposal of AEDC, the
DOTC commits to pursue the project under Rules 10 and 11 of
On April 16, 1997, AEDC filed with the Regional Trial Court of
Pasig a Petition for Declaration of Nullity of the Proceedings,
Mandamus and Injunction against the Secretary of the DOTC,
the Chairman of the PBAC, the voting members of the PBAC
and Pantaleon D. Alvarez, in his capacity as Chairman of the
PBAC Technical Committee.
On July 9, 1997, the DOTC issued the notice of award for the
project to PIATCO.
On March 29, 2006, AEDC filed a motion for leave to admit attached
answer-in-intervention.35
Baterina thus filed a motion for time to file petition for review on
certiorari with this Court praying for an extension of thirty days within
which to file a petition from the CA's December 27, 2006 decision
and May 21, 2007 resolution. This was docketed as G.R. No. 178022.
However, since the issues that he wanted to raise in this petition were
the same as those already raised in G.R. No. 174166, he manifested
that he would no longer pursue G.R. No. 178022. Consequently, the
latter action was terminated.
On the other hand, the Republic raises the following issues in G.R. No.
174166:
The issues that Baterina wants us to decide may be distilled into two:
Corporation Law/alfred0 Page 1269 of 1509
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1. whether NAIA IPT III is owned by BCDA and is a proper object
of expropriation and
For purposes of clarity, the issues in G.R. Nos. 169914 and 174166 will
be tackled separately.
The parties in their joint motion specifically stated that they were
"jointly mov[ing] for the dismissal [of the case] without any of the
parties admitting liability or conceding to the position taken by the
other in the instant case."54 However, the Pasig court still dismissed
the case with prejudice. For this reason, the majority ruled that
AEDC's petition is already barred by res judicata.
I disagree.
Well settled is the rule that only substantial, and not absolute,
identity of parties is required for res judicata to lie. There is
substantial identity of parties when there is a community of
interest between a party in the first case and a party in the
second case albeit the latter was not impleaded in the first
case.59
Procedural rules are mere tools to aid the courts in the speedy, just
and inexpensive resolution of pending cases.62 Substantial justice
remains the primordial and all-important objective and, to this end,
the liberal construction of the rules may be permitted. Jurisprudence
holds that, as much as possible, cases should be decided on their
merits and not on technicalities.63 Indeed, the principle of res
judicata can rightfully be set aside in favor of substantial justice.64
The proposal submitted by AEDC for the NAIA IPT III project was an
unsolicited proposal governed by Section 4-A of RA 6957, as
amended by RA 7718:65
AEDC claims that this evidences its "exclusive, clear and vested
statutory right" to the formal award of the NAIA IPT III project and the
Under Section 4-A, after the original proponent submits its unsolicited
proposal, other proponents may make lower price offers (referred to
as the "swiss challenge"). The original proponent has the right to
match any lower bid submitted – a form of protection and
advantage conferred on the original proponent which has already
"incurred costs in the conceptual design and in the preparation of
the proposal, and which may have adopted an imaginative method
of construction or innovative concept for the proposal."77 Because of
its valuable role in initiating an infrastructure project the government
would otherwise be unable to put up or design out of its own
resources, the original proponent is granted the option to match the
lower price proposal of any challenger.
Senator Gonzales:
Senator Osmeña:
Senator Gonzales:
The majority's reading of the law considerably waters down the rights
accorded to an original proponent. In failing to consider a situation
where either no competitive bid was submitted or a lower bid was
submitted by an entity not qualified to bid, the rights of the original
proponent are unduly subjected to the condition of the presence of
competitive bids. To reiterate, the spirit of the provision is "to protect
project proponents which have already incurred costs in the
conceptual design and in the preparation of the proposal."
Certainly, regardless of the presence of competitive bids, the original
proponent incurs costs. As such, it deserves the protection which the
law seeks to afford it. The law which seeks to encourage private
sector participation should be interpreted in a way that would
recognize, not emasculate, rights of private investors.
However, PIATCO, the lone bidder in the swiss challenge, turned out
to be unqualified. We said so in no uncertain terms in Agan. The
subsequent award of the project to it and the contracts it entered
into with the government were all nullified and voided.83 Since there
was no qualified bidder during the swiss challenge, it followed that
no other proposal(s) could have been considered by respondents
and the original proponent remained unchallenged.
Mandamus Is Proper
Under Rule 65, Section 384 of the Rules of Court, a petition for
mandamus may be filed when any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act
which the law specifically enjoins as a duty resulting from an office,
trust or station. Mandamus is an extraordinary writ to compel the
performance, when refused, of a ministerial duty that is already
imposed on respondent and there is no other plain, speedy and
adequate remedy in the ordinary course of law. Petitioner should
have a well-defined, clear and certain legal right to the
performance of the act and it must be the clear and imperative
duty of respondent to do the act required to be done.85
Respondents argue, and the majority agreed, that there are only
two clear legal rights recognized in favor of the original proponent
under Section 4-A of the BOT Law and Section 10.1 of its IRR: (1) the
right to match the lower price proposal within 30 days and (2) the
right to the award of the project if the original proponent is able to
match the lower price proposal.
In view of AEDC's rights as original proponent, the NAIA IPT III project
cannot be arbitrarily removed from the coverage of the BOT Law to
its prejudice. AEDC, through no fault of its own, obviously can no
longer fulfill its obligation under the law to build the terminal since the
construction of NAIA IPT III is now substantially complete. But it can
pay whatever amount is still due, specifically the fair value of the
facility, pursuant to our ruling in Gingoyon.98
The majority ruled that the BOT Law is neither applicable nor
practicable in view of the fact that the NAIA IPT III is substantially
complete. However, the fact that the terminal is substantially built
should not be a serious hindrance to the recognition of AEDC's rights
under the BOT Law. While AEDC no longer has to build the facility as
one already exists, it will have to assume the payment due to the
builder thereof, PIATCO, and to complete the facility to make it fully
functional. It would essentially undertake the burden of building it.
Why should AEDC be penalized for having been unduly prevented
from building it?
must be taken in the context of the legal right of AEDC to the award
of the project. This necessarily includes the turn-over of possession
and the operation of NAIA IPT III.
Private respondent
has Legal Standing
Baterina counters that the Court in Gingoyon did not actually rule
that he had no legal standing to intervene.105 It simply denied the
motion because it was filed only after the rendition of the decision.106
Moreover, the Court merely "noted" that the proffered value was
derived from money deposited by MIAA and did not make any
conclusion, whether of law or fact.107 In addition, the December 13,
2005 order which recognized his standing to intervene was already
final, thus Acting Presiding Judge Mupas of the expropriation court
committed grave abuse of discretion when he reconsidered this
ruling in his August 8, 2006 order.108
Furthermore, the Court can relax or even suspend its procedural rules
in the exercise of its inherent power under the Constitution "to
promulgate rules concerning … pleading, practice and procedure
in all courts."117 Besides, this Court is the final arbiter of all legal
questions or controversies.
4. NAIA IPT III was built on land owned by the BCDA thus it
belongs to the owner of the land under the Civil Code.123
What private respondent owns are the rail tracks, rolling stocks
like the coaches, rail stations, terminals and the power plant,
not a public utility. xxx What constitutes a public utility is not
their ownership but their use to serve the public.
To construe the BOT law the other way would be highly prejudicial to
the proponent/builder of the project. The proponent/builder who
spends a tremendous amount of money on the facilities has
In recognizing the right of AEDC to the award of the NAIA IPT III
project, would the public purpose of the expropriation be defeated
by the government's taking over a privately owned structure, only to
turn over its operation to another private entity (AEDC)? The answer
is no.
To be valid, the taking must be for public use. The meaning of the
term "public use" has evolved over time in response to changing
public needs and exigencies. Public use which was traditionally
understood as strictly limited to actual "use by the public" has
already been abandoned.128 "Public use" has `now been held to be
synonymous with "public interest," "public benefit," "public welfare"
and "public convenience."129 It includes the broader notion of
indirect public benefit or advantage.130 Whatever may be
beneficially employed for the general welfare satisfies the
requirement of public use.131
DETERMINATION OF
JUST COMPENSATION IS A
JUDICIAL FUNCTION
In Agan, we stated:
Equity is defined as justice outside law, being ethical rather than jural
and belonging to the sphere of morals than of law.150 It is grounded
on the precepts of conscience and not on any sanction of positive
law.151 Hence, equity finds no room for application where there is
law.152 It cannot prevail over an express provision of the law.
However, it is
A Final Note
It may be claimed that maintaining the nature of NAIA IPT III as a BOT
project is inherently incompatible with the continuation of the
expropriation proceedings. I think not. The vested right of AEDC to
be awarded the project should be balanced with the legal authority
of the government to expropriate the terminal. The right of AEDC
does not nullify the authority of the government and vice versa. In
the absence of any prohibition under our laws, this Court should
uphold both.
The finality of this decision will effectively end the first phase of the
expropriation proceedings given that we have categorically upheld
the legal authority of the Republic to expropriate NAIA IPT III. There
should be no more hindrance to the determination by the
expropriation court of the final amount of just compensation (in
accordance with law and equity) to be paid to PIATCO. As we have
also ruled on the issues raised by Baterina, there is no need to
maintain CA-G.R. SP No. 95539. Hence, it is dismissed.
On the other hand, the petition for certiorari and prohibition in G.R.
No. 174166 should be DISMISSED for being moot and academic.
RENATO C. CORONA
Associate Justice
Footnotes
1 Penned by Associate Justice Renato C. Dacudao (retired)
and concurred in by Associate Justices Rosmari D. Carandang
and Estela M. Perlas-Bernabe of the Eighth Division of the CA;
rollo (G.R. No. 174166), pp. 60-61.
2 G.R. Nos. 155001, 155547, 155661 (450 Phil. 744).
3 G.R. No. 166429, 478 SCRA 474.
4 An Act to Facilitate the Acquisition of Right-of-Way, Site or
Location for National Government Infrastructure Projects and
for Other Purposes.
5In his capacity as Secretary of Transportation and
Communication.
6 Rollo (G.R. No. 169914), p. 58.
7This was rendered moot when the CA issued a resolution
dated September 8, 2006 lifting the TRO issued by virtue of the
August 24, 2006 resolution and setting aside the said resolution.
8 Rollo (G.R. No. 174166), pp. 53-54.
9 Supra note 2, at 788-789.
10 Rollo (G.R. No. 169914), pp. 107-108.
11 Supra note 2, at 788-796.
12 Rollo (G.R. No. 169914), p. 297.
Corporation Law/alfred0 Page 1295 of 1509
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13 The causes of action were the following:
SO ORDERED."
15 The motion states in full:
PRAYER
The order and writ of execution both dated March 27, 2006
43
633 (2000).
110 Id.
111 Id.
112Supra note 22, at 58. In his Motion for Intervention and
Motion to Admit the Petition for Prohibition in Intervention he
stated:
No. 117652, 27 April 2000, 331 SCRA 82, 93, citation omitted.
151 Id.
152 Id.
Price and Sulu Dev. Co. vs. Martin (58 Phil. 707 [1933])
HULL, J.:
As far as the record shows, every formal action taken at those three
meetings was unanimous, and Martin at the last two meetings was
accompanied by two members of the Bar of the Philippine Islands as
his counsel.
3. In finding that the plaintiff, W.S. Price, did not appear here as
a plaintiff to depend his own right but for the purpose of giving
aid to the defendant, Harry Martin.
11. In not holding that said mortgage is null and void for want
of legal consideration.
12. In finding that the plaintiffs and appellants herein are legally
bound by the said mortgage contract Exhibit U.
1. The trial court erred in refusing to find that the one hundred
shares of the capital stock of the appellant, the Sulu
Development Company, delivered on November 23, 1922, by
the appellant, H. Martin, to the late Dean C. Worcester, were so
delivered in trust to be held and used for the benefit of the said
H. Martin.
2. The trial court erred in finding that the voting by Mrs. Nanon L.
Worcester, in the meeting held by the stockholders of the
Corporation Law/alfred0 Page 1312 of 1509
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appellant, the Sulu Development Company, on November 12,
17, and 19, 1925, was legal.
We find no merit in the contention that the trial court should have
concerned itself with an alleged parol contract between Martin and
Dean C. Worcester, deceased. The alleged contract not being in
writing or to be executed within a year, it is within the statute of
frauds. The value of the rule is shown in this case as it was some time
after Mr. Worcester's death before anything was heard of such an
alleged agreement. Even if such an agreement had been made
and it had been proper to receive proof thereof, it would not benefit
plaintiffs as the mortgage was executed pursuant to a compromise
agreement to settle the affairs between the two companies, and all
The contention that a new trial should have been granted in order
that plaintiffs could present in evidence a letter from Mr. Worcester
to the late Governor-General Wood, is likewise without merit. The
letter, even if admitted, would not have changed the result of these
proceedings, as a fair reading of the letter is not repugnant to a
single contention of defendant-appellee.
GANCAYCO, J.:
TOTAL 27,211,770
==============
With PCGG voting the corporate shares, the following was the result
of the election for members of the SMC board of directors:
Add:
Votes 408,176,550
Originally divided by 3 Resulting
Stockholder Credited (136,058,850) Votes
1. Mr. Eduardo M.
2,280,618 136,058,850 138,339,468
Cojuangco, Jr.
2. Mr. Manuel M.
2,279,719 136,058,850 138,338,569
Cojuangco
Votes
Less:
Originally Resulting
408,176,550
Stockholder Credited Votes
divided by
5. Mr. Feliciano
132,312,254 27,211,770 105,100,484
Belmonte, Jr.
Hence, this petition for certiorari, the main thrust of which is that the
right to vote sequestered shares of stock is vested in the actual
shareholders not in the PCGG.
In G.R. No. 93005, the facts alleged are substantially similar in nature.
Petitioners are stockholders of SMC as follows ––
On April 17, 1990, the annual meeting of the SMC shareholders was
held. Among the matters taken up was the election of the fifteen
(15) members of the board of directors of SMC for the ensuing year.
Petitioners were among the twenty (20) nominees to the board,
namely ––
TOTAL 108,846,948
==============
TOTAL 7,956,960,120
================
As the petition under G.R. No. 91925 which was decided adversely
by the Sandiganbayan is now before this Court, and since time is of
the essence as petitioners have been denied the right to vote since
1986, instead of seeking relief from the Sandiganbayan, the
petitioners filed this petition for quo warranto (G.R. No. 93005), the
issues in which are the same as those raised in G.R. No. 91925.
Nothing is more settled than the ruling of this Court in BASECO VS.
PCGG,2 that the PCGG cannot exercise acts of dominion over
property sequestered. It may not vote sequestered shares of stock or
elect the members of the board of directors of the corporation
concerned —
Mr. Justice Cruz also dissented, He asserted that the acts of voting
the shares and reorganizing the board of directors are acts of
ownership which clash with the implacable principles of a free
society, foremost of which is due process.7
Besides, there are other means by which the said shares may be
preserved and their dissipation prevented. The PCGG may restrain
their sale, encumbrance, assignment or any other disposition during
the period of sequestration. It may monitor the business operations of
petitioners as to said shares. It need not vote the shares in order to
accomplish its role as conservator.
Corporation Law/alfred0 Page 1335 of 1509
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The rule in this jurisdiction is, therefore, clear. The PCGG cannot
perform acts of strict ownership of sequestered property. It is a mere
conservator. It may not vote the shares in a corporation and elect
the members of the board of directors. The only conceivable
exception is in a case of a takeover of a business belonging to the
government or whose capitalization comes from public funds, but
which landed in private hands as in BASECO.
It is true that in G.R. No. 91925 the term of office of the term of office
of the assailed members of the board of directors, private
respondents therein, for 1989-1990 had expired. To this extent said
petition may be considered moot and academic. However, the
issue of whether public respondent Sandiganbayan committed a
grave abuse of discretion in rendering the resolution dated
November 16, 1989, which affects all subsequent shareholders'
meetings and elections of the members of the board of directors of
SMC, is a justiciable controversy that must be resolved.
Thus, the issue raised in G.R. No. 93005 relating to the election of the
members of the board for 1990-1991 pursuant to sequestered shares
of stock is a justiciable issue which should be determined once and
for all.
In the light of the foregoing discussion, the Court finds and so holds
that the PCGG has no right to vote the sequestered shares of
petitioners including the sequestered corporate shares. Only their
owners, duly authorized representatives or proxies may vote the said
shares. Consequently, the election of private respondents Adolfo
Azcuna, Edison Coseteng and Patricio Pineda as members of the
board of directors of SMC for 1990-1991 should be set aside.
There are, in the main, two (2) types of situations that need to be
addressed. The first situation arises where the sequestered shares of
stock constitute a distinct minority of the voting shares of the
corporation involved, such that the registered owners of such
sequestered shares would in any case be able to vote in only a
Turning to the first situation, the Court considers and so holds that in
order to enable the PCGG to perform its functions as conservator of
the sequestered shares of stock pending final determination by the
courts as to whether or not the same constitute ill-gotten wealth or a
final compromise agreement between the parties, the PCGG must
be represented in the Board of Directors of the corporation and of its
majority-owned subsidiaries or affiliates and in the Executive
Committee (or its equivalent) and the Audit Committee thereof, in at
least an ex officio (i.e., non-voting) capacity. The PCGG
representative must have a right of full access to and inspection of
(including the right to obtain copies of) the books, records and all
other papers of the corporation relating to its business, as well as a
right to receive copies of reports to the Board of Directors, its
Executive (or equivalent) and Audit Committees. By such
representation and rights of full access, the PCGG must be able so
to observe and monitor the carrying out of the business of the
corporation as to discover in a timely manner any move or effort on
the part of the registered owners of the sequestered stock, alone or
in concert with other shareholders, to conceal, waste and dissipate
the assets of the corporation, or the sequestered shares themselves,
and seasonably to bring such move or effort to the attention of the
Sandiganbayan for appropriate action.
In the second situation above referred to, the Court considers and so
holds that the following minimum safeguards must be set in place
and carefully maintained until final judicial resolution of the question
of whether or not the sequestered shares of stock (or, in a proper
case, the underlying assets of the corporation concerned) constitute
ill-gotten wealth or until a final compromise agreement between the
parties is reached:
Whether a particular case falls within the first or the second type of
situation described above, the following safeguards are
indispensably necessary:
SO ORDERED.
Separate Opinions
In all cases (en banc and division) involving San Miguel Corporation
(SMC), I take no part because of personal equity interest in said
corporation. I am taking no part in this case for the same reason
even if the real party-respondents in the case are the PCGG and its
nominees to the SMC board of directors, and SMC itself appears to
be only a nominal party in the case.
At the same time, I will be less than candid if I did not state on this
occasion that in earlier decisions of this Court, I have expressed my
views on sequestration and its implicitness. I refer particularly to my
concurring opinion in BASECO vs. PCGG, 150 SCRA 252 (cited on
page 14 of the present ponencia of Mr. Justice Gancayco) and to
my dissenting opinion in Eduardo M. Cojuangco, Jr. vs. Republic of
the Philippines, et. al., G.R. No. 93278, 4 March 1991.
Footnotes
PANGANIBAN, J.:
The Case
SO ORDERED."2
The Facts
"Five days later (25 September), at which time all the children
had reached the age of majority, their father John Sr.,
requested Gochan Realty to partition the shares of his late wife
by cancelling the stock certificates in his name and issuing in
lieu thereof, new stock certificates in the names of [herein
respondents].
"On 21, 1990, [sic] John, Sr. died, leaving the shares to the
[respondents].
"On 3 March 1995, the SEC en banc ruled for the [petitioners,]
holding that the [respondents'] motion for reconsideration did
not interrupt the 30-day period for appeal because said motion
was pro-forma."4
The Court of Appeals ruled that the SEC had no jurisdiction over the
case as far as the heirs of Alice Gochan were concerned, because
they were not yet stockholders of the corporation. On the other
hand, it upheld the capacity of Respondents Cecilia Gochan Uy
and her spouse, Miguel Uy. It also held that the Intestate Estate of
John Young Sr. was an indispensable party.
The appellate court further ruled that the cancellation of the notice
of lis pendens on the titles of the corporate real estate was not
justified. Moreover, it declared that respondents' Motion for
Reconsideration before the SEC was not pro forma; thus, its filing
tolled the appeal period.
The Issues
First Issue:
Second Issue:
Petitioners also contend that the action filed by the Spouses Uy was
not a derivative suit, because the spouses and not the corporation
were the injured parties. The Court is not convinced. The following
quoted portions of the Complaint readily shows allegations of injury
to the corporation itself:
Third Issue:
It would be useful to point out at this juncture that one of the causes
of action stated in the Complaint filed with the SEC refers to the
registration, in the name of the other heirs of Alice Gochan Young, of
6/14th of the shares still registered under the name of John D. Young
Petitioners further claim that the Estate of John Young Sr. was not
properly represented. They claim that "when the estate is under
administration, suits for the recovery or protection of the property or
rights of the deceased may be brought only by the administrator or
executor as approved by the court."14 The rules relative to this matter
do not, however, make any such categorical and confining
statement.
Fourth Issue
Under the third, fourth and fifth causes of action of the Complaint,
there are allegations of breach of trust and confidence and
usurpation of business opportunities in conflict with petitioners'
fiduciary duties to the corporation, resulting in damage to the
Corporation. Under these causes of action, respondents are asking
for the delivery to the Corporation of possession of the parcels of
land and their corresponding certificates of title. Hence, the suit
necessarily affects the title to or right of possession of the real
property sought to be reconveyed. The Rules of Court17 allows the
annotation of a notice of lis pendens in actions affecting the title or
right of possession of real property.18 Thus, the Court of Appeals was
correct in reversing the SEC Order for the cancellation of the notice
of lis pendens.
The fact that respondents are not stockholders of the Mactan Realty
Development Corporation and the Lapu-Lapu Real Estate
Corporation does not make them non-parties to this case. To repeat,
the jurisdiction of a court or tribunal over the subject matter is
determined by the allegations in the Complaint. In this case, it is
alleged that the aforementioned corporations are mere alter egos
of the directors-petitioners, and that the former acquired the
properties sought to be re conveyed to FGSRC in violation of the
Corporation Law/alfred0 Page 1352 of 1509
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directors-petitioners' fiduciary duty to FGSRC. The notion of
corporate entity will be pierced or disregarded and the individuals
composing it will be treated as identical19 if, as alleged in the present
case, the corporate entity is being used as a cloak or cover for fraud
or illegality; as a justification for a wrong; or as an alter ego, an
adjunct, or a business conduit for the sole benefit of the
stockholders.
Effect of RA 8799
SO ORDERED.
5 The case was deemed submitted for resolution on November 12, 1999, upon receipt by this Court
of respondents' Memorandum filed by Attys. Jose R. Ebro Jr. and Emesto T. Morales. Petitioners had
previously filed their Memorandum, signed by Atty. Victor Basilio N. de Leon of Antonio R. Bautista &
Partners, on October 27, 1999.
7 Otherwise known as "The Securities Regulation Code," it became effective on August 8, 2000.
8 Lim Tay v. Court of Appeals, 293 SCRA 634, August 5, 1998, citing Javelosa v. Court of Appeals,
265 SCRA 493, December 10, 1996.
10 Ruiz v. Court of Appeals, 79 SCRA 525, October 21, 1977; Castillo v. Heirs of Vicente Madrigal,
198 SCRA 556, June 27, 1991.
13 Pascual v. Del Saz Orozco, 19 Phil. 82, March 17, 1911, per Trent, J.; cited in Bitong v. Court of
Appeals, 292 SCRA 503, July 13, 1998.
16 Pascual v. Pascual, 73 Phil. 561 (1942); Velasquez v. George, 125 SCRA 456, October 27, 1983;
Borromeo v. Borromeo et at., 98 Phil. 432 (1956).
18 Alberto v. CA, GR No.119088, June 30, 2000; Viewmaster Construction Cory. v. CA, GR No.
136283, February 29, 2000; Villanueva v. CA, 281 SCRA 298, November 5, 1997.
19 Yutivo Sons Hardware Co. v. Court of Tax Appeals, 1 SCRA 160, January 28, 1961; Umali v. Court
of Appeals, 189 SCRA 529, September 13, 1990.
OSTRAND, J.:
4th. That in the year 1921, the said Teal and Company has
become indebted to the firm of H. W. Peabody and Company
in about the sum of P300,000, being for tractors, plows and
parts which had been ordered and delivered, the Bank and
other banks in Manila held drafts accepted by the Company
under said H. W. Peabody and Company's guarantee. That
said tractors having become unsailable by reason of the
financial and agricultural depression that had overtaken the
Islands, the said tractors were all returned to the said H. W.
Peabody and Company and as these plaintiffs are informed
and verily believes were by it returned to the United States, and
while the events herein set forth were taking place the
Company made payments on its indebtedness through the
Bank to H. W. Peabody and Company, amounting to the sum
of at least P150,000. that at about the same time the Company
had ordered another lot of tractors, etc., from a business house
in the United States, known as Smith, Kirkpatrick and Co., under
a commercial letter of credit which the Company had from the
Bank in New York City, but that shipment of such tractors had
been delayed until the credit had been rescinded by the Bank
and that upon such rescission Smith, Kirkpatrick and Co., had
been advised by telegraph that the order was cancelled and
not to ship the tractors. That nevertheless and contrary to such
advise the said Smith, Kirkpatrick and Co. did ship the tractors
doing so under D/A drafts therefor and that when said tractors
arrived in Manila and in order, if possible to save Smith,
Kirkpatrick and Co. from additional loss, the Company at the
request and on the advice of the said Bank accepted the
drafts and stored the same in a warehouse in Manila rented by
it and gave receipts therefor.
8th. That toward the end of the year 1922, the Bank, through its
manager the defendant Mullen represented to the Company
and its managers that for the protection both of the Bank and
the Company it was advisable for them both that the Bank
should temporarily obtain control of the management and
affairs of the Company in order that the affairs of the Company
could be conducted by the Bank without interference or
hindrance from outside, and to this end that it would be
necessary for the stockholders in the Company to place their
shares therein in a Voting Trust to be held by the Bank would
then finance the Company under its own supervision and that if
and when the same were successful and in position to resume
independent operation the said trust would be terminated and
the stock returned to its true owners, and further represented
that in case at any time the Bank decided to discontinue
operation under the said trust that then the stock also would be
so returned.
10th. That by reason of the facts above set forth and of their
reliance upon the good faith and good-will of the defendants
these plaintiffs were induced to sign the "Memorandum of
Agreement," and "Voting Trust Agreement," Exhibit A,
understanding from the defendant that the same were
intended for the protection of all parties thereto from outside
creditors, but that they were not intended to be enforced
according to the letter thereof, and that they did not contain
the true agreement between the Bank and the Company
which was to finance the Company without interference from
the above named creditors, to hold the voting trust as a
protection to the bank as against the said creditors and for its
own advances, and the further agreement that in case in the
Bank did not operate under the said voting trust because of the
disapproval by its New York headquarters of such action, or for
any other cause, the said trust would be cancelled and the
stock in and control of the Company returned to its true
owners.
13th. That after excluding the real owners from voice in the
management or knowledge of the affairs of the Company, the
said individual defendants and or the Bank by agreement
among themselves or because the individual defendants as
employees were coerced by the Bank, the said defendants
gave pledges and mortgages from the Company to the Bank
The court below sustained the demurrer on all four grounds and held
that the complaint, especially in its paragraphs 4 and 5, is
ambiguous, confusing, unintelligible and vague; that Teal and
Company should have been joined as a party plaintiff; that, as far as
the Philippine Motors Corporation is concerned, the plaintiffs, not
being stockholders in that corporation, had no legal right to proceed
against it in this case; and that the court could not be called upon to
act as investigator of the facts referred to in paragraphs 3 and 4 of
the complaint, but that such investigations fall within the duty of the
interested party, the Attorney-General, the Insular Auditor or the
Insular Treasurer.
If this were an ordinary action at law, the ruling of the court below
would be correct in most respects; it must be conceded that the
complaint violates at least three of the four principal rules as to the
manner or stating facts in complaints in such actions. It suffers from
duplicity, the facts are not stated with certainty, and the statement is
sometimes indirect and partly in the alternative.lawphil.net
The fact that there is no special express provision in the Code of Civil
Procedure for bills of discovery of this character does not necessarily
signify that the remedy does not exist in this jurisdiction. The maxim of
equity that "Equity will not permit a wrong without a remedy" still
holds good, and our liberal Code of Civil Procedure is, if properly
interpreted, sufficiently broad and flexible to enable the courts to
apply all necessary remedies, both legal and equitable.
II
III
The conclusion of the court below that the plaintiffs, not being
stockholders in the Philippine Motors Corporation, had no legal right
to proceed against that corporation in the manner suggested in the
complaint evidently rest upon a misconception of the character of
the action. In this proceeding it was necessary for the plaintiffs to set
forth in full the history of the various transactions which eventually led
to the alleged loss of their property and, in making a full disclosure,
references to the Philippine Motors Corporation appear to have
been inevitable. It is to be noted that the plaintiffs seek no judgment
against the corporation itself at this stage of the proceedings.
IV
The court below also erred in holding that the investigation of the
transaction referred to in the complaint is not within the province of
the courts, but should be conducted by some other agency. That
discovery, such as that demanded in the present action, is one of
the functions of a court of equity is so well established as to require
no discussion.
JOHNSON, J.:
Upon the issue presented by the pleadings above stated, the cause
was brought on for trial, at the conclusion of which, and on August
21, 1924, the Honorable N. Capistrano, judge, held that, in his
opinion, article 12 of the by-laws of the corporation which gives it
preferential right to buy its shares from retiring stockholders, is in
conflict with Act No. 1459 (Corporation Law), especially with section
35 thereof; and rendered a judgment ordering the defendant
corporation, through its board of directors, to register in the books of
said corporation the said five shares of stock in the name of the
plaintiff, Henry Fleischer, as the shareholder or owner thereof, instead
of the original owner, Manuel Gonzalez, with costs against the
defendant.
That Manuel Gonzalez was the original owner of the five shares of
stock in question, Nos. 16, 17, 18, 19 and 20 of the Botica Nolasco,
Inc.; that on March 11, 1923, he assigned and delivered said five
shares to the plaintiff, Henry Fleischer, by accomplishing the form of
endorsement provided on the back thereof, together with other
credits, in consideration of a large sum of money owed by Gonzalez
to Fleischer (Exhibits A, B, B-1, B-2, B-3, B-4); that on March 13, 1923,
Dr. Eduardo Miciano, who was the secretary-treasurer of said
corporation, offered to buy from Henry Fleischer, on behalf of the
corporation, said shares of stock, at their par value of P100 a share,
for P500; that by virtue of article 12 of the by-laws of Botica Nolasco,
Inc., said corporation had the preferential right to buy from Manuel
Gonzalez said shares (Exhibit 2); that the plaintiff refused to sell them
to the defendant; that the plaintiff requested Doctor Miciano to
register said shares in his name; that Doctor Miciano refused to do
It also appears from the record that on the 13th day of March, 1923,
two days after the assignment of the shares to the plaintiff, Manuel
Gonzales made a written statement to the Botica Nolasco, Inc.,
requesting that the five shares of stock sold by him to Henry Fleischer
be noted transferred to Fleischer's name. He also acknowledged in
said written statement the preferential right of the corporation to buy
said five shares (Exhibit 3). On June 14, 1923, Gonzalez wrote a letter
to the Botica Nolasco, withdrawing and cancelling his written
statement of March 13, 1923 (Exhibit C), to which letter the Botica
Nolasco on June 15, 1923, replied, declaring that his written
statement was in conformity with the by-laws of the corporation; that
his letter of June 14th was of no effect, and that the shares in
question had been registered in the name of the Botica Nolasco,
Inc., (Exhibit X).
(7) To make by-laws, not inconsistent with any existing law, for
the fixing or changing of the number of its officers and directors
within the limits prescribed by law, and for the transferring of its
stock, the administration of its corporate affairs, etc.
The by-law now in question was adopted under the power conferred
upon the corporation by section 13, paragraph 7, above quoted;
but in adopting said by-law the corporation has transcended the
limits fixed by law in the same section, and has not taken into
consideration the provisions of section 35 of Act No. 1459.
And moreover, the by-laws now in question cannot have any effect
on the appellee. He had no knowledge of such by-law when the
shares were assigned to him. He obtained them in good faith and for
a valuable consideration. He was not a privy to the contract
created by said by-law between the shareholder Manuel Gonzalez
and the Botica Nolasco, Inc. Said by-law cannot operate to defeat
his rights as a purchaser.
In view of all the foregoing, we are of the opinion, and so hold, that
the decision of the lower court is in accordance with law and should
be and is hereby affirmed, with costs. So ordered.
FACTS:
Nolasco's defense:
QUISUMBING, J.:
Add: Discrepancies:
BALANCE 75,709.00
Compromise penalties
On October 20, 1987, the CIR in a letter addressed to SGV & Co.,
refused to allow the cancellation of the assessment notices and
rendered its resolution, as follows:
Such being the case, you are therefore, requested to urge your
client to pay this Office the aforementioned deficiency income
tax and surtax on undue accumulation of surplus in the
respective amounts of P119,817.00 and P3,774,867.50 inclusive
of interest thereon for the year 1981, within thirty (30) days from
receipt hereof, otherwise this office will be constrained to
enforce collection thereof thru summary remedies prescribed
by law.
In denying the petition, the Court of Tax Appeals made the following
pronouncements:
= P 47,052,535.00 / P21,275,544.00
= 2.21: 1
========
Sec. 259 of the old National Internal Revenue Code of 1977 states:
Other formulas are also used, e.g. the ratio of current assets to
current liabilities and the adoption of the industry standard.23 The
ratio of current assets to current liabilities is used to determine the
sufficiency of working capital. Ideally, the working capital should
equal the current liabilities and there must be 2 units of current assets
for every unit of current liability, hence the so-called "2 to 1" rule.24
In the present case, the Tax Court opted to determine the working
capital sufficiency by using the ratio between current assets to
current liabilities. The working capital needs of a business depend
upon nature of the business, its credit policies, the amount of
inventories, the rate of the turnover, the amount of accounts
receivable, the collection rate, the availability of credit to the
business, and similar factors. Petitioner, by adhering to the "Bardahl"
formula, failed to impress the tax court with the required definiteness
envisioned by the statute. We agree with the tax court that the
burden of proof to establish that the profits accumulated were not
beyond the reasonable needs of the company, remained on the
taxpayer. This Court will not set aside lightly the conclusion reached
by the Court of Tax Appeals which, by the very nature of its function,
is dedicated exclusively to the consideration of tax problems and
has necessarily developed an expertise on the subject, unless there
has been an abuse or improvident exercise of authority.31 Unless
rebutted, all presumptions generally are indulged in favor of the
correctness of the CIR's assessment against the taxpayer. With
petitioner's failure to prove the CIR incorrect, clearly and
conclusively, this Court is constrained to uphold the correctness of
tax court's ruling as affirmed by the Court of Appeals.
SO ORDERED.
Facts:
Held:
KAPUNAN, J.:
On Policies Issued:
Documentary stamp
tax due thereon
(P1,360,054,000.00 P 2,380,094.50
divided by P200.00
multiplied by P0.35)
Deficiency P 464,598.75
On March 30, 1993, the Court of Tax Appeals found no valid basis for
the deficiency tax assessment on the stock dividends, as well as on
the insurance policy. The dispositive portion of the CTA’s decision
reads:
SO ORDERED.1
SO ORDERED.2
The Court of Appeals sustained the CTA’s ruling that there was only
one transaction involved in the issuance of the insurance policy and
that the "automatic increase clause" is an integral part of that policy.
SO ORDERED.
Footnote
1 Court of Appeals (CA) Rollo. p. 16, Annex "B."
FACTS:
ISSUE: W/N the "automatic increase clause" should not be taxed with
the main policy
the amount fixed in the policy is the figure written on its face
and whatever increases will take effect in the future by reason
of the "automatic increase clause" embodied in the policy
without the need of another contract
Facts:
> In the years prior to 1984, Lincoln issued a special kind of life
insurance policy known as the "Junior Estate Builder Policy," the
distinguishing feature of which is a clause providing for an automatic
> Documentary stamp taxes due on the policy were paid to the
petitioner only on the initial sum assured.
Issue:
Held:
YES.
Logically, we believe that the amount fixed in the policy is the figure
written on its face and whatever increases will take effect in the
future by reason of the "automatic increase clause" embodied in the
policy without the need of another contract.
MAKASIAR, J.:
On May 20, 1974, respondent bank filed its answer, denying the
allegations in both the original as well as the supplemental
complaint and contending that Mr. Luna's suspension and
subsequent dismissal from his various positions were for cause and
had nothing to do with his alleged espousal and defense of workers'
rights (pp. 20-21, rec.).
After more discussion, Mr. Luna's motion was ruled as without merit
by the chairman who proceeded to consider the appointment of a
new administrator. At this point, Mr. Luna and Mr. Antonio Canizares
the trustee representing the RB Employees' Union walked out of the
meeting. When they were gone, Mr. Mario Galicia, a management-
appointed trustee, was unanimously elected new administrator by
the three (3) remaining trustees.
PROVIDENT FUND
1. That all loans or any matter that needs the action of the
administrator be forwarded to me for appropriate action.
Administrator
On the same date (February 22, 1974) Mr. Abad caused a notice to
be sent to all members of the Board of Trustees for a special meeting
on February 26, 1974, to take up the following.
2) Loan applications;
3. I did not turn over the records, papers, etc., for reasons
that I stated in my letter addressed to Mr. Abad dated
February 22, received by him February 26, 1974. Since he
did not pursue the matter further I concluded that he
agreed to the contents of my letter.
The investigation of the charges against Mr. Luna was held ex-parte
on March 6, 18, 21 and 25, 1974. Meanwhile, Mr. Luna was
prevented from attending the regular meeting of the PF Board of
Trustees on March 12, 1974.
There are two different versions of the statement made by Mr. Luna
in the meeting of the Board of Trustees of the RB Provident Fund on
February 12, 1974. The management version is that which is quoted
on page 4 thereof, and purportedly appearing in the stenographic
notes of Mrs. Evelyn Unson, the clerk who took down notes of the
meeting Mr. Luna, however, alleges that the transcript of
stenographic notes was not an accurate record of the proceedings,
considering that Mrs. Unson was not a court stenographer. Besides,
at the time of the alleged utterances, the trustees were talking at the
same time.
Mr. Luna further alleges that his utterances were made in his
capacity as trustee representing the Union of Supervisors. it was by
reason of his presidency of the said union that he became a trustee,
and is therefore supposed to guard the interests of its members. It
was precisely in acting out that role that he vehemently opposed
the management-inspired proposal to transfer the funds of the
Provident Fund to the bank's newly-opened money market
department that a heated argument ensued, in the course of which
he made the supposedly libelous statements. Luna now argues that
his statement should be regarded as falling under protected labor
activity and therefore privileged.
1. February 1, 1974: Luna filed with the NLRC an unfair labor practice
case against the management, docketed as Case No. LR-2673.
But the evidence presented in this case does not support the
findings.
This leaves only the testimonial evidence to clinch the case against
Luna. It appears, however, that of the seven (7) witnesses presented,
namely, Abad, Galicia, de Vera, Unson, Canizares Mora and
Vallesteros, only the first three (3) positively testified as to the alleged
derogatory statements. This is understandable, considering that
Abad is the accuser, Galicia is the successor, and de Vera was the
prime mover of Luna's ouster. Thus, the weakness of the evidence for
respondent bank is easily discernible.
Even if it were not so, and had the alleged derogatory or libelous
statements been substantially established, still the same will not justify
Luna's dismissal.
In Republic Savings Bank vs. C.I.R. (21 SCRA 226 [1967] cited with
approval in Philippine Blooming Mills Employees Organization vs.
Philippine Blooming Mills, Inc., 51 SCRA 189 [1973], involving the same
bank where eight (8) union officials were dismissed for having written
and published a patently libelous letter against the bank President,
WE held:
But no, this was not done. Instead, management preferred as many
charges as it could frame against Luna, obviously to make sure that
if one charge could not suffice to bring about his ouster, the other
charges might produce the desired result. Thus, even his having
walked out of the meeting on February 12, 1974, and his absence
from the special meeting on February 26, 1974, were included under
the heading dereliction of duty". It was to the credit of the
Investigating Committee that the latter charges were ruled out.
All the foregoing shows that Luna's dismissal had no legal justification.
In the words of the arbitrator, Flavio P. Aguas, " ... complainant's
dismissal should be considered as without sufficient just cause" (p. 64,
rec.).
In the case of Central Textile Mills, Inc. vs. NLRC, et al. (L-50150, 90
SCRA 9 [1979]). Chief Justice Enrique M. Fernando, speaking for the
Court, ruled:
And in the cited case of Philippine Air Lines vs. PALEA (L-24626, 57
SCRA 489 [1974]), the Court held:
In the case at bar, Luna, the complaining witness had more than 21
years of service with respondent bank, starting on April 2, 1953. The
record is not clear as to what position he first held; but it is
To this, WE may ask the following: Why was not Cañizares cited for
dereliction of duty when he also walked out of the meeting on
February 12, 1974; failed to attend the special meeting on February
26, 1974 despite notice; and walked out of the meeting on March
12, 1974 after Luna was physically ejected therefrom by security
guards? The answers to these questions are obvious: Canizares and
the other union officers were not as active and militant in their
defense of union rights, much less did they pose any threat against
the respondent bank's plan to control the funds of the Provident
Fund which was established as a result of the collective bargaining
agreement. Only Luna posed such threat. Understandably therefore,
management wanted him out. Forgotten were his almost 22 years of
service to the respondent bank without any showing of any
irregularity in the performance of his duties during those long years.
SO ORDERED.
MALCOLM, J.:
It should first be observed that when the case was filed here, it was,
in accordance with settled practice, dismissed without prejudice to
the right of the petitioner to present the action before the Court of
First Instance of Occidental Negros. Thereafter, on a motion of
reconsideration being presented, this order was set aside and the
case was permitted to continue in this court. On further reflection,
we now feel that this was error, and that it would have been the
correct practice to have required the petitioner to present the
action in a court of First Instance which is better equipped for the
taking of testimony and the resolution of questions of fact than is the
appellate court. Only with considerable difficulty, therefore, can we
decide the issues of fact, since none of the members of the court
saw or heard the witnesses testify.
Combining the facts and the law, we do not think that anything
improper occurred when the secretary declined to furnish certified
copies of minutes which had not been approved by the board of
directors, and that while so much of the last resolution of the board
of directors as provides for prior approval of the president of the
corporation before the books of the corporation can be inspected
puts an illegal obstacle in the way of a stockholder or director, that
resolution, so far as we are aware, has not been enforced to the
detriment of anyone. In addition, it should be said that this is a family
dispute, the petitioner and the individual respondents belonging to
the same family; that a test case between the petitioner and the
respondents has not been begun in the Court of First Instance of
Occidental Negros involving hundreds of thousands of pesos, and
that the appellate court should not intrude its views to give an
advantage to either party. We rule that the petitioner has not made
out a case for relief by mandamus.
Separate Opinions
I dissent.
As to the fact that ill-feeling exists between the parties and another
suit between them is now pending, that seems to me only an
For the foregoing reasons, the writ prayed for should be granted.
Facts:
Issue:
Ruling:
We rule that the petitioner has not made out a case for relief
by mandamus. Petition denied with costs.
Directors have the unqualified right to inspect the books and records
of the corp at all reasonable times
VASQUEZ, J.:
The facts that gave rise to the subject controversy have been set
forth by the trial court in the decision herein sought to be reviewed,
as follows:
The petitioner has adopted the above finding of facts made by the
trial court in its brief which he characterized as having been
"correctly stated." (Petitioner-Appellant"s Brief, pp. 57.)
We also find merit in the contention of the respondent bank that the
inspection sought to be exercised by the petitioner would be
violative of the provisions of its charter. (Republic Act No. 1300, as
amended.) Sections 15, 16 and 30 of the said charter provide
respectively as follows:
Held:
R.N. Symaco Trading Corp. vs. Santos (467 SCRA 312 [2005])
DECISION
Plaintiff prays for such other just and equitable remedies proper
under the premises.12
During the hearing of the MFBAI’s plea for injunction, Santos testified
and declared that he was a member of the said corporation. A
market was constructed on the leased property, where he leased
Stall No. 39, but Symaco Corporation had him evicted. When the
contract of lease between Mariano Guison and MFBAI expired, he
asked the corporate secretary, Brigida Bautista, why it was not
renewed, and he was told that nothing could be done about it. He
also inquired from other officers, to no avail. He admitted that he
was not aware of any meeting of the MFBAI Board of Directors
regarding the renewal of the contract of lease. He thus decided to
file the complaint in behalf of MFBAI.
Lino Buhain testified that the MFBAI failed to pay its rentals over the
subject property for four years because of a dispute (between his
group and that of Marcos Valle, Jr.) as to who were its legitimate
members and officers; its members likewise failed to pay their
membership dues. Nonetheless, the MFBAI was able to build a fish
market on the property and leased the stalls therein to its members.
On July 9, 1985, a Deed of Assignment over its leasehold rights under
its contract of lease was executed by Mariano Guison to the MFBAI,
represented by its president, Luzviminda Francisco. On April 9, 1990,
the corporation received a letter from the Heirs of Mariano Guison
informing it that the contract of lease would not be renewed.
SO ORDERED.20
The court ruled that, based on the decisions of the SEC Hearing
Officer, the SEC and the CA on appeal, Santos and most of the
intervenors were not bona fide members of the MFBAI; hence, they
had no cause of action against the petitioners. It also ruled that
Norma Symaco did not violate the doctrine of corporate
opportunity.
II. THE COURT A QUO, WHILE HOLDING THAT THE CONTRACT OF LEASE
BETWEEN DEFENDANTS R.N. SYMACO TRADING WITH DEFENDANT
ESTATE IS VALID, ERRED IN NOT ORDERING SYMACO TO PAY THE
PLAINTIFFS DAMAGES.
III. THE COURT A QUO ERRED IN HOLDING THAT THE PLAINTIFF LUISITO
SANTOS AND THE INTERVENORS CANNOT BRING A DERIVATIVE SUIT
FOR AND IN BEHALF OF THE MALABON FISH BROKERS ASSOCIATION,
INC.21
The records of the case are remanded to the court a quo which is
directed to hear the accounting proceedings and thereafter to
decide the case on the basis of the results of the accounting.23
a.) The Honorable Court, with all due respects, erred in giving due
course to the appeal, despite the lack of personality and authority of
Luisito Santos to initiate the same as a derivative suit, being a non-
member of MFBAI and the abandonment and dismissal of the
appeal of the intervenors;
b.) The Honorable Court, with all due respects, erred in its findings
that defendant-appellee Norma Symaco negotiated for the lease of
the subject property for RN Symaco in 1987, while the lease with
MFBAI was still subsisting;
c.) The Honorable Court, with all due respects, erred in holding
defendant-appellee Norma T. Symaco liable for violation of the
doctrine of corporate opportunity.24
They also alleged that Santos was not a member of the MFBAI;
hence, he "had no legal personality" and "no authority" to appeal
the RTC decision. They averred that petitioner Norma Symaco did
not violate the doctrine of corporate opportunity because:
b) MFBAI has NOT paid its rentals from 1984 up to the expiration of
the contract in 1990. Stated otherwise, the MFBAI was only able to
pay for 4 years out of a 10-year contract. (TSN, Norma Symaco,
January 15, 1992, Pages 18, 35, 38 & 39)
Although the President of MFBAI, Lino Buhain insists that MFBAI failed
to pay rentals only for a period of 4 years. (TSN, Lino Buhain, March 1,
1991, Pages 38, 50 & 51)
SO ORDERED.27
The petitioners filed the instant petition for review on certiorari under
Rule 45 of the Rules of Court, as amended, raising the following
issues:
Corporation Law/alfred0 Page 1448 of 1509
suigeneris
1. Whether respondent Luisito T. Santos was a bona fide member of
the respondent corporation;
On the first three issues, the petitioners aver that, as gleaned from
the Hearing Officer’s Decision in SEC Case No. 2521, the Decision in
SEC-AC No. 205, and the CA ruling, Santos was not a member of
MFBAI. Any admission made by Lino Buhain in the SEC could not bind
it, unless approved by its board of directors or majority of its
members. The petitioners insist that estoppel will apply only when the
party who relied on the admissions of another seeks only to enforce
a purely private right or private interest, and not when an action is to
enforce a corporate right. They claim that respondent Santos’ action
was not a derivative suit, and that the complaint he filed was
premature, considering that he failed to seek redress from MFBAI first
before filing the complaint.
For his part, respondent Santos avers that the petitioners are
estopped from claiming in the CA, and in this case, that he is not a
member of the respondent MFBAI. He insists that the RTC declared in
its decision that, based on the petitioners’ (therein defendants’)
evidence, he was such a member.
On the other hand, while the respondents claimed that MFBAI has
forty-two (42) members, including the thirty-five (35) original
members therein, this fact was, likewise, not proven during the trial.
Hence, We find that since its incorporation, MFBAI has not accepted
any new member and, therefore, it has only thirty-five (35) legitimate
members including that of Virgilio Sarmiento.
The second and third issues are quite interrelated and thus can be
resolved jointly.
From the evidence on hand, it appears that there was but one
meeting for the election of the members of the board of directors
and officers of MFBAI that took place in 1983 and that was the
alleged membership meeting conducted by the petitioners’ group
held on August 13, 1983. Said meeting, however, was not attended
by the majority of the aforesaid thirty-five (35) legitimate members of
MFBAI; hence, there was no quorum (Section 52, Code). In fact,
most of those present then were non-members. Therefore, since
there was no quorum, it follows that all actions taken in said meeting,
including the alleged adoption of the by-laws by the petitioners’
group, are not valid. On the contrary, the respondents have
categorically stated, in their answer, that the organizational meeting
for the election of the members of the Board of Directors and
Officers of MFBAI, which was supposed to be held on September 17,
1983, did not proceed.
Anent the fourth issue, our records show that the By-Laws of MFBAI
was adopted by the majority of its members on August 18, 1983,
certified to by a majority of the original members of its Board of
Directors and countersigned by its Corporate Secretary, Brigida
Bautista. Said By-Laws was filed with, and approved by, the
Commission on September 7, 1983 pursuant to the provisions of
Section 46 of the Code.
The SEC Hearing Officer concluded that from its inception, the MFBAI
had not accepted any new member and, therefore, it had only 35
legitimate members, including Virgilio Sarmiento.29 The Hearing
Officer also ruled that:
For its part, the CA affirmed the rulings of the Hearing Officer and the
SEC on appeal, as follows:
The thirty (30) alleged members were not original members of the
association. They showed up later on, i.e., long after the
incorporation, and they failed to comply with the requirements laid
down in the by-laws aforementioned. They were never accepted as
members even informally by the association. Their acceptance as
members could not be done by the president alone, let alone by
Marcos Valle whose position as president has been successfully
assailed here. There was no quorum in the said meeting held on
August 13, 1983 because those thirty (30) persons who attended
were non-members; and whatever was agreed upon in said
meeting was null and void.31
The Court notes that several MFBAI members, like Brigida Baustista,
Jose Cruz, Constantino Lopez, Eduardo del Rosario, Rogelio Vicente,
Araceli Banaag and Rosalinda Reyes, intervened as plaintiffs.
However, they failed to file their Brief in the CA, which impelled the
appellate court to dismiss their appeal. The resolution of the court,
likewise, became final and executory.
The Court also agrees with the petitioners’ contention that the CA
erred in ordering that all the original members of the MFBAI should
be impleaded as parties in respondent Santos’ complaint. Contrary
to the CA ruling, all the MFBAI members are not indispensable parties
in a derivative suit. It is enough that a member or a minority of such
members file a derivative suit for and in behalf of the corporation.
In light of the foregoing, there is no longer a need for the Court to still
resolve the other issues that were raised in the petition.
SO ORDERED.
DECISION
QUISUMBING, J.:
Petitioner assails the Decision,1 dated June 14, 2001, of the Court of
Appeals in CA-G.R. SP No. 57070, affirming the Order, dated
October 5, 1999, of the Regional Trial Court (RTC) of Manila, Branch
19. The RTC reversed the Order, dated April 26, 1999, of the
Metropolitan Trial Court (MeTC) of Manila, Branch 22. Also
challenged by herein petitioner is the CA Resolution,2 dated
November 20, 2001, denying his Motion for Reconsideration.
CONTRARY TO LAW.5
During the trial in the MeTC, private prosecutors Atty. Evelyn Sua-Kho
and Atty. Ariel Bruno Rivera appeared as private prosecutors and
presented Hao as their first witness.
In an Order, dated April 26, 1999, the MeTC granted Chua's motion
and ordered the complainant's counsels to be excluded from
actively prosecuting Criminal Case No. 285721. Hao moved for
reconsideration but it was denied.
Corporation Law/alfred0 Page 1454 of 1509
suigeneris
Hence, Hao filed a petition for certiorari docketed as SCA No. 99-
94846,7 entitled Lydia C. Hao, in her own behalf and for the benefit
of Siena Realty Corporation v. Francis Chua, and the Honorable
Hipolito dela Vega, Presiding Judge, Branch 22, Metropolitan Trial
Court of Manila, before the Regional Trial Court (RTC) of Manila,
Branch 19.
The RTC gave due course to the petition and on October 5, 1999,
the RTC in an order reversed the MeTC Order. The dispositive portion
reads:
SO ORDERED.8
SO ORDERED.9
For her part, respondent Hao claimed that the suit was brought
under the concept of a derivative suit. Respondent maintained that
The Court of Appeals held that the action was indeed a derivative
suit, for it alleged that petitioner falsified documents pertaining to
projects of the corporation and made it appear that the petitioner
was a stockholder and a director of the corporation. According to
the appellate court, the corporation was a necessary party to the
petition filed with the RTC and even if private respondent filed the
criminal case, her act should not divest the Corporation of its right to
be a party and present its own claim for damages.
The pertinent issues in this petition are the following: (1) Is the criminal
complaint in the nature of a derivative suit? (2) Is Siena Realty
Corporation a proper petitioner in SCA No. 99-94846? and (3) Should
private prosecutors be allowed to actively participate in the trial of
Criminal Case No. 285721.
On the first issue, petitioner claims that the Court of Appeals erred
when (1) it sustained the lower court in giving due course to
respondent's petition in SCA No. 99-94846 despite the fact that the
Corporation was not the private complainant in Criminal Case No.
285721, and (2) when it ruled that Criminal Case No. 285721 was in
the nature of a derivative suit.
Under the Revised Penal Code, every person criminally liable for a
felony is also civilly liable.18 When a criminal action is instituted, the
civil action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action, unless
the offended party waives the civil action, reserves the right to
institute it separately or institutes the civil action prior to the criminal
action.19
In the present case, respondent claims that the complaint was filed
by her not only in her personal capacity, but likewise for the benefit
of the corporation. Additionally, she avers that she has exhausted all
remedies available to her before she instituted the case, not only to
claim damages for herself but also to recover the damages caused
to the company.
We turn now to the third issue. Did the Court of Appeals and the
lower court err in allowing private prosecutors to actively participate
in the trial of Criminal Case No. 285721?
Petitioner cites the case of Tan, Jr. v. Gallardo,28 holding that where
from the nature of the offense or where the law defining and
punishing the offense charged does not provide for an indemnity,
the offended party may not intervene in the prosecution of the
offense.
Under the Rules, where the civil action for recovery of civil liability is
instituted in the criminal action pursuant to Rule 111, the offended
party may intervene by counsel in the prosecution of the offense.31
Rule 111(a) of the Rules of Criminal Procedure provides that, "[w]hen
a criminal action is instituted, the civil action arising from the offense
charged shall be deemed instituted with the criminal action unless
the offended party waives the civil action, reserves the right to
institute it separately, or institutes the civil action prior to the criminal
action."
When the civil action is instituted with the criminal action, evidence
should be taken of the damages claimed and the court should
determine who are the persons entitled to such indemnity. The civil
liability arising from the crime may be determined in the criminal
proceedings if the offended party does not waive to have it
adjudged or does not reserve the right to institute a separate civil
action against the defendant. Accordingly, if there is no waiver or
reservation of civil liability, evidence should be allowed to establish
the extent of injuries suffered.32
In the case before us, there was neither a waiver nor a reservation
made; nor did the offended party institute a separate civil action. It
follows that evidence should be allowed in the criminal proceedings
to establish the civil liability arising from the offense committed, and
the private offended party has the right to intervene through the
private prosecutors.
SO ORDERED.
Footnotes
...
4ART. 171. Falsification by public officer, employee; or notary or
ecclesiastic minister.—The penalty of prision mayor and a fine
not to exceed 5,000 pesos shall be imposed upon any public
officer, employee, or notary who, taking advantage of his
official position, shall falsify a document by committing any of
the following acts:
...
...
5 CA Rollo, p. 59.
6 Criminal Case No. 285721-CR in some parts of the Records.
7 SCA No. 99-94648 in some parts of the Records.
8 CA Rollo, p. 23.
9 Rollo, p. 43.
10 Id. at 18.
11 G.R. No. 113032, 21 August 1997, 278 SCRA 216, 226.
12 Id. at 225-226.
13SEC. 36. Corporate powers and capacity.—Every corporation
incorporated under this Code has the power and capacity:
Corporation Law/alfred0 Page 1462 of 1509
suigeneris
1. To sue and be sued in its corporate name;
...
14 SEC. 23. The Board of directors or trustees.—Unless
otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be
exercised, all business conducted and all property of such
corporations controlled and held by the board of
directors or trustees to be elected from among the holders
of stocks, or where there is no stock, from among the
members of the corporation, who shall hold office for one
(1) year until their successors are elected and qualified.
...
15Tam Wing Tak v. Makasiar, G.R. No. 122452, 29 January 2001,
350 SCRA 475, 485, citing Premium Marble Resources, Inc. v.
Court of Appeals, G.R. No. 96551, 4 November 1996, 264 SCRA
11, 17.
16Gamboa v. Victoriano, No. L-40620, 5 May 1979, 90 SCRA 40,
47.
17 Price v. Gurney, 324 U.S. 100 (1944).
18 Article 100, Revised Penal Code.
19 Section 1(a), Rule 111, Revised Rules of Criminal Procedure.
20Tam Wing Tak v. Makasiar, supra, note 15 at 485-486, citing
Western Institute of Technology, Inc. v. Salas, supra, note 11 at
225.
21Asset Privatization Trust v. Court of Appeals, G.R. No. 121171,
29 December 1998, 300 SCRA 579, 615, citing III A.F. Agbayani,
Commercial Laws of the Philippines, 561-562 (1996).
22 G.R. No. 107888, 4 January 1994, 229 SCRA 71.
23SECTION 1. Petition for certiorari.—When any tribunal, board
or officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of jurisdiction, and
there is no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging
the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such
Chua vs. CA and Hao G.R. No. 150793 November 19, 2004
Coverage under the SSS is compulsory for all employers in the private
sector and their employees who are not over 60 years of age,
whether with permanent or provisional employment status, including
domestic helpers earning at least PhP1,000 a month. All self-
employed persons are also subject to mandatory coverage under
the Regular Self Employed Program for artists, entertainers,
proprietors and professionals, and the Expanded Self Employed
Program for those with monthly earnings of at least PhP1,000
regardless of trade, business or occupation. Farmers and fishermen
earning at least PhP1,500 also fall under the self-employed category.
Coverage under the SSS may also be on a voluntary basis as for the
following: Filipino workers recruited by foreign-based employers for
work abroad, SSS members separated from employment but would
like to continue paying contributions, and non-working spouses of
SSS members (i.e., spouses who devote full time to managing the
household and family affairs).
—————————————
Illustrative Case:
Facts:
Issue:
Held:
RESOLUTION
YNARES-SANTIAGO, J.:
In the case at bar, the records show that SEC Case No. 05-97-5657,
entitled "Philippine Public School Teacher’s Assn., Inc., et al. v. 1992-
1995 Board of Directors of the Philippine Public School Teacher’s
Assn. (PPSTA), et al.," was filed by the PPSTA against its own Board of
Directors. Respondent admits that the ASSA Law Firm, of which he is
the Managing Partner, was the retained counsel of PPSTA. Yet, he
appeared as counsel of record for the respondent Board of Directors
in the said case. Clearly, respondent was guilty of conflict of interest
when he represented the parties against whom his other client, the
PPSTA, filed suit.
SO ORDERED.
Footnotes
1 Record, Vol. 1, p. 1.
2 Rule 15.06 – A lawyer shall not state or imply that he is able to
influence any public official, tribunal or legislative body.
3 Rollo, p. 58.
4 Id., p. 79.
5 Pineda, Legal and Judicial Ethics, p. 199 [1999 ed.].
6Id., citing Hilado v. David, 84 Phil. 569 [1949]; Nombrado v.
Hernandez, 26 SCRA 13 [1968]; Bautista v. Barrios, 9 SCRA 695
[1963].
7Pineda, Legal and Judicial Ethics, supra, p. 199, citing Pierce v.
Palmer, 31 R.I. 432.
8 Agpalo, Legal Ethics, supra, p. 220, citing In re De la Rosa, 27
Phil. 258 [1914]; Grievance Committee v. Rottner, 152 Conn. 59,
203 A 2d 82 [1954] and Titania v. Ocampo, 200 SCRA 472
[1991].
9 Corporation Code, sec. 23.
103 Fletcher, Cyclopedia Corporations (Permanent Ed.) § 8044
(Importance of determining whether officer a trustee or agent).
11 Pascual v. Del Saz Orozco, 19 Phil. 82 (1911), cited in Gochan
v. Young, G.R. No. 131889, 12 March 2001.
12 Asset Privatization Trust v. CA, 360 Phil. 768 (1998).
13Harvard Law Review, Developments in the Law: Conflict of
Interest, 94 Harv. L. Rev. 1244, 1339-1342 (1981), cited in
Solomon, Schwartz, Bauman & Weiss, Corporations: Law and
Policy (3rd ed.) 1129 (1994).
14Cannon v. United States Acoustics Corporation, 398 F. Supp.
209 (N.D. Ill. 1975), affirmed in relevant part per curiam 532 F. 2d
Facts: Hornilla filed a complaint against Atty. Salunat with the IBP
Commission on Bar Discipline for unethical practice regarding
conflict of interests. Said counsel is a member of the ASSA Law Office
and acted as the lawyer for the Philippine Public School Teacher’s
Association.
In the case at bar, the records show that SEC Case No. 05-97-5657,
entitled Philippine Public School Teachers Assn., Inc., et al. v. 1992-
1995 Board of Directors of the Philippine Public School Teachers Assn.
(PPSTA), et al., was filed by the PPSTA against its own Board of
Directors. Respondent admits that the ASSA Law Firm, of which he is
the Managing Partner, was the retained counsel of PPSTA. Yet, he
appeared as counsel of record for the respondent Board of Directors
in the said case. Clearly, respondent was guilty of conflict of interest
when he represented the parties against whom his other client, the
PPSTA, filed suit.
An SEC Case was filed by the PPSTA against its own Board of
Directors. Respondent admits that the ASSA Law Firm, of which he is
the Managing Partner, was the retained counsel of PPSTA. Yet, he
appeared as counsel of record for the respondent Board of Directors
in the said case. Complainants contend that respondent was guilty
of conflict of interest because he was engaged by the PPSTA, of
which complainants were members, and was being paid out of its
corporate funds where complainants have contributed. Despite
being told by PPSTA members of the said conflict of interest,
respondent refused to withdraw his appearance in the said cases.
PANGANIBAN, J.:
The Facts
Ruling that the Supreme Court's TRO was clear, the CA agreed with
the SEC that, pending clarification thereof, there was no need for
the hearing officer to defer ruling on the Motion to Dismiss. The
appellate court stated that the TRO did not prohibit herein
Respondent Patricia Lim-Yu from acting or entering into contracts on
her own behalf or from protecting her rights. The root of the present
controversy -- the Complaint she filed before the SEC -- relates to a
denial of her preemptive right as a shareholder. Thus, her capacity to
file the suit must be sustained. Finally, on the question of the
timeliness of respondent's Petition for Certiorari. before the SEC, the
CA ruled that adherence to strict technical rules should be relaxed
to prevent palpable injustice.
Issues
"I
"II
"III
"IV.
Simply put, the main issue is whether respondent had the legal
capacity to file her Complaint before the SEC. The others are merely
incidental to this main point.
First Issue:
Petitioners point out that both the SEC and the Court of Appeals
considered only the first part of the Supreme Court TRO and
completely ignored the second part. Supposedly, the latter part
barred respondent from entering into agreements that would affect
her family and the corporation. Hence, they claim that the TRO,
taken as a whole, proscribed respondent's "derivative suit," which
sought to "enjoin herein [P]etitioner Gilda C. Lim from further voting
or exercising any and all rights arising from the issuance to her of
15,515 shares of stock of the corporation."9
Simply put, the TRO allows Respondent Patricia Lim-Yu to act for
herself and to enter into any contract on her own behalf. However,
she cannot transact in representation of or for the benefit of her
parents, brothers or sisters, or the Limpan Investment Corporation.
Contrary to what petitioners suggest, all that is prohibited is any
action that will bind them. In short, she can act only on and in her
own behalf, not that of petitioners or the Corporation.
To repeat, the TRO issued by this Court had two components: (1) it
allowed respondent to enter into agreements on her own behalf;
and (2) it clarified that respondent's acts could not bind or affect the
interests of her parents, brothers or sisters, or Limpan. In other words,
respondent was, as a rule, allowed to act; but, as an exception, was
prohibited from doing anything that would bind the corporation or
any of the above-named persons.
In this light, the TRO did not prohibit respondent from filing, on and in
her own behalf; a suit for the alleged violation of her preemptive
rights to purchase additional stock subscriptions. In other words, it did
not restrain respondent from acting and enforcing her own rights. It
merely barred her from acting in representation of the corporation.
Incidental Issues
Petitioners also assail the ruling of the Court of Appeals that the SEC
hearing officer "was bound to interpret the Supreme Court's order
instead of burdening [it] with the responsibility of 'clarifying' what
already appears to be a clear order." Citing Section 5 (5) of Article
VIII13 of the Constitution and Section 5 of Rule 135,14 petitioners
contend that the ruling disregarded the Supreme Court's power to
control and to clarify its own orders, as granted by the Constitution.
Verily, the power of this Court to clarify its own orders does not divest
the SEC of its function to apply those orders to cases before it. If
parties disagree with the SEC, they can file the proper suit in a
regular court in accordance with law." In any event, the seeming
obscurity or ambiguity of a TRO is not an excuse for a quasi-judicial
body, or any regular court or judge, to shirk from the responsibility of
applying and interpreting it.18
Laches
We reject this argument. It has been held that it is the better rule that
courts, under the principle of equity, shall not be bound strictly by
the doctrine of laches, when a manifest wrong or injustice would
result.21 To rule that respondent can no longer question the hearing
officer would deprive her of the opportunity to sue in order to
enforce her preemptive rights, an act that is not proscribed by this
Court's TRO.
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WHEREFORE, the Petition is hereby DENIED and the assailed Decision
AFFIRMED. Costs against petitioners.
SO ORDERED.
Footnote
1 Rollo, pp. 29-49.
2 Rollo, pp. 8-16.
3Fourth Division. Written by Justice Hector L. Hofilena, with the
concurrence of Justices Minerva P. Gonzaga-Reyes (then
Division chairman and currently a member of this Court) and
Omar U. Amin.
4 Rollo, pp. 19-20
5 CA Decision, p. 9; rollo, p. 16.
6 CA Decision, pp. 1-4; rollo, pp. 8-11.
7This case was deemed submitted for resolution on February
14, 2000, upon receipt by this Court of petitioners'
Memorandum signed by Attys. Virgelio T. Nibungco and
Carmela D. Medina. Respondent's Memorandum, signed by:
Atty. Ferdinand R. Silerio, was received earlier on January 10,
2000.
8 Rollo, pp. 411-419.
9 Petitioners' Memoradum, p. 3; rollo p. 413.
10Western Institute of Technology, Inc. v. Salas, 278 SCRA 216,
225, August 21, 1997, per Hermosisima Jr., J.
11 "SEC. 39. Power to deny pre-emptive right. - All stockholders
of a stock corporation shall enjoy pre-emptive right to subscribe
to all issues or disposition of shares of any class, in proportion to
their respective shareholdings, unless such right is denied by the
articles of incorporation or an amendment thereto: Provided,
That such preemptive right shall not extend to shares to be
issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public; or to shares to be
issued in good faith with the approval of the stockholders
representing two-thirds (2/3) of the outstanding capital stock, in
See Ang Ping v. CA, 310 SCRA 343, July 15, 1999; Santiago v.
21
REYES, J.:
The complaint does not give plaintiffs' residence, but, but purposes
of venue, alleges that defendant resides at 2112 Dewey Boulevard,
After hearing, the lower court rendered its order, granting the motion
for dismissal upon the two grounds alleged by defendant, and
reconsideration of this order having been denied, plaintiffs have
appealed to this Court.
The appeal presents two questions. The first refers to venue and the
second, to the right of the plaintiffs to bring this action for their
benefit.
The moving party contends that the venue was properly laid
under section 377 in that was laid in the province where the
defendant was found at the time summons was served on its
president, he having been found and served with process in
the city of Manila. for the purpose of the discussion we
assumed in the main case, as the plaintiff claimed, that the
defendant was in fact and in law found in the city of Manila;
and proceeded to decide the cause upon the theory that,
even if the defendant were found in the city of Manila, that did
not justify, under the facts of the case, the laying of the venue
in the city of Manila.
As to the second question, the complaint shows that the action is for
damages resulting from mismanagement of the affairs and assets of
the corporation by its principal officer, it being alleged that
defendant's maladministration has brought about the ruin of the
corporation and the consequent loss of value of its stocks. The injury
complained of is thus primarily to the corporation, so that the suit for
the damages claimed should be by the corporation rather than by
the stockholders (3 Fletcher, Cyclopedia of Corporation pp. 977-
980). The stockholders may not directly claim those damages for
themselves for that would result in the appropriation by, and the
distribution among them of part of the corporate assets before the
dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done in view of section
16 of the Corporation Law, which provides:
While plaintiffs ask for remedy to which they are not entitled unless
the requirement of section 16 of the Corporation Law be first
complied with, we note that the action stated in their complaint is
susceptible of being converted into a derivative suit for the benefit
of the corporation by a mere change in the prayer. Such
amendment, however, is not possible now, since the complaint has
been filed in the wrong court, so that the same last to be dismissed.
FACTS:
ISSUE:
HELD:
NO. The Court held that despite the genuineness of the Articles
of Co-partnership the same did not express the true intent
and agreement of the parties, however, as the subsequent events
and testimonial evidences indicate otherwise, the Court upheld that
respondent is an industrial partner of the company.
86 P.R. 387
The complaint does not give plaintiffs’ residence, but, for purposes of
venue, alleges that defendant resides at 2112 Dewey Boulevard,
corner Libertad Street, Pasay, province of Rizal. Having been served
with summons at that place, defendant filed a motion for the
dismissal of the complaint on the ground of improper venue and also
on the ground that the complaint did not state a cause of action in
favor of plaintiffs.
Held: The facts in this case show that the objection to the venue is
well-founded. Where the plaintiff is a nonresident and the contract
upon which suit is brought was made in the Philippine Islands it may
safely be asserted that the convenience of the defendant would be
best served by a trial in the province where he resides. The fact that
defendant was sojourning in Pasay at the time he was served with
summons does not make him a resident of that place for purposes of
venue. Residence is “the permanent home, the place to which,
whenever absent for business or pleasure, one intends to return.
DECISION
On 26 June 1992, private respondents Ang Eng Joo, Ang Keong Lan,
and E.J. Ang International Ltd. (hereafter Singaporeans), then
represented by their attorney-in-fact Gonzalo C. Sy, filed their claim
before the liquidating court. Citing Republic Act No. 5186, otherwise
known as the Investment Incentives Act, they claimed to be
preferred creditors and prayed for the return of their equity
investment in the amount of US$2,531,632.18 with interest until the
closure of the PaBC.
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After due hearing or on 11 September 1992, the liquidation court,
through Presiding Judge Regino Veridiano II, issued an order that
reads as follows:
The Liquidator thus filed a petition for certiorari before the Court of
Appeals, which was, however, dismissed on the ground that the
notice of appeal was correctly dismissed by the liquidation court for
having been filed out of time. In our decision3 of 20 March 1995 in
G.R. Nos. 109373 and 112991, we sustained the Court of Appeals, but
on a different ground. We held that while the Liquidator filed the
notice of appeal within the reglementary 30-day period provided in
special proceedings, he failed to file the requisite record on appeal,
and thus the appeal was not perfected on time, causing the 11
September 1992 Order to become final and executory.
Aggrieved by these orders, the BIR, PDIC, and the Liquidator filed
before the Court of Appeals a petition for certiorari, mandamus, and
prohibition with a prayer for a temporary restraining order8 assailing
Judge Reyes’ Orders of 13 April 1998, 12 May 1998, and 15 May 1998.
4.1
4.2
4.3
4.4
Anent the first issue, the Liquidator interprets the affirmation by the
Court of Appeals of the 12 May 1998 Order of Judge Reyes as
amounting to an unlawful grant of undeclared dividends. He argues
that the only fruits that can arise from an equity investment are
dividends declared from unrestricted retained earnings by the Board
of Directors in accordance with the Corporation Code. Absent a
declaration in this case, the interest awarded has no legal basis.
As for the second and third issues, the Liquidator argues that no
actual damages can arise from the closure of the bank. The ruling in
Eastern Shipping Lines, Inc. v. Court of Appeals13 is not applicable
because that case clearly refers to an award of interest in the
concept of actual and compensatory damages in case of breach
of an obligation. The failure of PaBC to return the Singaporeans’
equity investment because of its closure is not a breach of an
obligation – the closure being akin to a force majeure. If indeed
PaBC is liable to the Singaporeans for actual and compensatory
damages, accrual thereof should be reckoned from the date of
demand pursuant to Article 1169 of the Civil Code. Instead of
running from 15 October 1981 when the Singaporeans bought their
shares in PaBC, the 6% interest rate should be reckoned from 26 June
1992, the date the Singaporeans filed their claim in the liquidation
court.
For their part, the Singaporeans assert that the Court of Appeals
committed no error in affirming their entitlement to accrued interests
in the amount of P56,034,877.04 and in ordering its payment less 15%
in taxes as agreed upon by the BIR. The Order of 11 September 1992
included the payment of the principal due the Singaporeans as
preferred creditors, but it deferred the payment of interest on the
principal for study by the Liquidator. Unfortunately, no study and
recommendation was done since September 1992; thus, the
liquidation court took it upon itself to arithmetically compute and fix
the amount of interest at the legal rate of 12% per annum as
reflected in the Order of 12 May 1998. Likewise, the award of 12%
interest has become the law of the case with respect to the
Liquidator and the Singaporeans.
SEC. 2. Time for filing; extension. – The petition shall be filed within
fifteen (15) days from notice of the judgment or final order or
resolution appealed from, or of the denial of the petitioner’s motion
for new trial or reconsideration filed in due time after notice of the
judgment. On motion duly filed and served, with full payment of the
docket and other lawful fees and the deposit for costs before the
expiration of the reglementary period, the Supreme Court may for
justifiable reasons grant an extension of thirty (30) days only within
which to file the petition.
Before delving into the merits of the case, it bears stressing that we
are constrained to make our judgment according to the confines set
by the 11 September 1992 Order of the liquidation court.
A perusal of the 12 May 1998 Order shows that the liquidation court
awarded interest not as a form of accrued dividends or return of
investment, but as actual and compensatory damages.
Categorically, the order states:
The December 16, 1993 decision of the Court of Appeals ruled that
the remittance of earnings of this type of foreign investment is
guaranteed (CA decision, p. 15, emphasis supplied). Legal interests
are earnings and they are provided for by law arising from the
withholding of funds due to a party. They are not computed on the
amount of earnings of a business.19
We take note of the fact that when the trial court, in its Order of 11
September 1992, declared the Singaporeans to have the status of
preferred creditors, it did so only for the purpose of giving them
priority in the order of payment upon the liquidation of the PaBC.
Relying only on the Investment Incentive Act, the trial court did not
decide whether the Singaporeans’ investment was a loan or equity.
Since the Singaporeans were declared preferred creditors for a
limited purpose, it does not follow that the court likewise implied that
the original remittance of the Singaporeans was in the nature of a
loan or forbearance of money, goods, or credit.
However, the grant of the said interest does not bar the
Singaporeans from claiming liquidating dividends which may have
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accrued from their equity investment after being determined by the
Liquidator. In the liquidation of a corporation, after the payment of
all corporate debts and liabilities, the remaining assets, if any, must
be distributed to the stockholders in proportion to their interests in the
corporation. The share of each stockholder in the assets upon
liquidation is what is known as liquidating dividend.22 Verily, the
Singaporeans are entitled to 11% of the total liquidating dividend,
this being in proportion to their 11% interest of the total subscribed
capital stock of PaBC.
Anent the fourth issue, the Court is unable to determine the veracity
of the alleged overpayments in the absence of verified records on
the total payments made in favor of the Singaporeans. The award of
the Court of Appeals of P56,034,877.04 representing uncollected
interest is likewise unsubstantiated because it was not shown how the
amount was derived.
SO ORDERED.
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Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
Footnotes
1 Rollo, 463.
2Pacific Banking Corporation Employees Organization v. Court
of Appeals, G.R. Nos. 109373 and 112991, 20 March 1995, 242
SCRA 492, 498.
3 Id.
4 Rollo, 94, 104.
5 Id., 104.
6 Id., 126-138.
7 Id., 139.
8 Id., 140-171.
9Id., 55-56. Per Associate Justice Bienvenido L. Reyes, with
Presiding Justice Ma. Alicia Austria-Martinez (now Supreme
Court Associate Justice) and Associate Justice Roberto A.
Barrios concurring.
10 Rollo, 82-83.
11 Id., 86-92.
12 Rollo, 24-25.
13 G.R. No. 97412, 12 July 1994, 234 SCRA 78.
14 Section 1, Rule 65, 1997 Rules of Civil Procedure.
15Montecillo v. Civil Service Commission, G.R. No. 131954, 28
June 2001, 360 SCRA 99, 104.
16 SECTION 1. How to compute time. - In computing any period
of time prescribed or allowed by these Rules, or by order of the
court, or by any applicable statute, the day of the act or event
from which the designated period of time begins to run is to be
excluded and the date of performance included. If the last
day of the period, as thus computed falls on a Saturday, a
Sunday, or a legal holiday in the place where the court sits, the
time shall not run until the next working day (Rule 22 of the 1997
Rules of Civil Procedure).
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17Padillo v. Court of Appeals, G.R. No. 119707, 29 November
2001, 371 SCRA 27, citing Zarate v. Director of Lands, 39 Phil.
747, 749-750 (1919).