GALA, et al v ELLICE of Ellice for alleged mismanagement, diversion

of funds, financial losses and the dissipation of

FACTS:
assets. Petitioners initiated a complaint against
Spouses Gala, their children and their
respondents to nullify the elections of directors
encargados formed and organized Ellice Agro-
and officers of both Margo and Ellice, the
Industrial Corporation. As payment for their
nullification of all board resolutions issued by
subscription, the spouses transferred several
Margo, and return of all titles to real property
parcels of land. The spouses then acquired
in the name of Margo and Ellice, as well as all
additional shares. The children and the
corporate papers and records of both Margo
encargados incorporated Margo. Manuel Gala
and Ellice. The SEC rendered a joint decision, it
sold 13,314 of his shares in Ellice to Margo.
dismissed the petition of the respondent and
Alicia Gala transferred 1,000 of her shares in
granting the petition of petitioners. Upon
Ellice to a certain Victor de Villa who
appeal to the SEC en banc, it upheld the
transferred the same to Margo. Alicia
petition of the respondents and dismissed the
transferred 854.3 of her shares to Ofelia, 500 to
petition of the petitioners.
Guia and 500 to Raul. Later on, Manuel
transferred all his remaining holdings in Ellice ISSUE:
to Raul. Alicia transferred 10,000 of her shares W/N THE LOWER COURT ERRED IN NOT
to Margo. DECLARING AS ILLEGAL AND CONTRARY TO
PUBLIC POLICY THE PURPOSES AND MANNER
A special stockholders meeting of Margo was
IN WHICH RESPONDENT CORPORATIONS WERE
held, where a new BOD was elected. The newly
ORGANIZEDWHICH WERE, E.G. TO (1)PREVENT
elected board elected a new set of officers, in
THE GALA ESTATE FROM BEING BROUGHT
which, Raul was elected as chairman, president,
UNDER THE COVERAGE (SIC) OF THE
and general manager. During the meeting, the
COMPREHENSIVE AGRARIAN REFORM
board approved several actions, including the
PROGRAM (CARP) AND (2) PURPORTEDLY FOR
commencement of proceedings to annul
ESTATE PLANNING.
certain dispositions of Margo property made by
Alicia. It also changed its name to MRG RULING:
Management and Development Corporation. The best proof of the purpose of a corporation
is its articles of incorporation and by-laws. The
A special stockholders meeting was also
articles of incorporation must state the primary
conducted by Ellice to elect a new BOD, Raul
and secondary purposes of the corporation,
was also elected as its chairman, president, and
while the by-laws outline the administrative
general manager.
organization of the corporation, which, in turn,
Respondents filed against petitioners with the is supposed to insure or facilitate the
SEC a petition for the appointment of a accomplishment of said purpose.In the case at
management committee or receiver, bar, a perusal of the Articles of Incorporation
accounting and restitution, and the dissolution of Ellice and Margo shows no sign of the
allegedly illegal purposes that petitioners are
complaining of. It is well to note that, if a
corporations purpose, as stated in the Articles
of Incorporation, is lawful, then the SEC has no
authority to inquire whether the corporation
has purposes other than those stated, and
mandamus will lie to compel it to issue the
certificate of incorporation.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.Thus, even if Ellice and Margo
were organized for the purpose of exempting
the properties of the Gala spouses from the
coverage of land reform legislation and
avoiding estate taxes, we cannot disregard their
separate juridical personalities.
HYATT ELEVATORS AND ESCALATORS
CORPORATION vs. GOLDSTAR ELEVATORS,
PHILS., INC.
G.R. No. 161026; October 24, 2005
Ponente: Panganiban, J.,
FACTS:
Petitioner and Respondent are both engaged in
the business of importing, installing and
maintaining elevators and escalators. Hyatt
filed an unfair competition case against LG and
Goldstar alleging that it was appointed as the
sole distributor of LG elevators and escalators.
Goldstar moved to dismiss the case alleging
that venue was improperly laid as neither the
Hyatt, LG or Goldstar itself resided in
Mandaluyong city where the case was originally
filed. The RTC denied the motion. The CA
dismissed the case and held that Makati was
the principal place of business of both
respondent and petitioner, as stated in the
latter’s Articles of Incorporation, that place was
controlling for purposes of determining the
proper venue.
ISSUE:
Whether or not the “residence” of the
corporation is the same one as stated in the
AOI.
HELD:
Yes. Although 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, 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. This
ruling is important in determining the venue of
an action by or against a corporation, as in the
present case.
ZUELLIG FREIGHT AND CARGO SYSTEMS v.
NLRC and RONALDO SAN MIGUEL
G.R. No. 157900; July 15, 2013; Bersamin, J.
SUMMARY:
In June 1994, San Miguel et. al. were informed
that Zuellig, then known as Zeta Brokerage
Corp. would cease operations and that San
Miguel and other employees would be
separated. San Miguel reluctantly accepted his
separation pay subject to the standing offer to
be hired to his former position by Zuellig.
However, San Miguel was terminated, without
valid cause and in violation of due process, 15
days after the acceptance. San Miguel filed a
complaint for ULP, illegal dismissal, non-
payment of salaries and moral damages against
Zuellig. He contended that the amendments of
the articles of incorporation of Zeta did not
dissolve Zeta as they were for the purpose of
changing the corporate name, broadening of
primary functions and increasing the capital
stock. LA found that Zuellig and Zeta are legally
the same entity and that San Miguel had been
illegally dismissed. NLRC affirmed LA. CA
likewise affirmed LA and NLRC. SC affirmed. SC
ruled that Zeta and Zuellig remained one and
the same corporation. There being no just
cause for termination and no compliance with
due process, Zuellig is guilty of illegal dismissal.
DOCTRINE:
The mere change in the corporate name is not
considered under the law as the creation of a
new corporation; hence, the renamed
corporation remains liable for the illegal
dismissal of its employee separated under that
guise. Thus, the change of name did not give
Zuellig the license to terminate employees of
Zeta like San Miguel without just or authorized
cause. Despite its new name, was the mere
continuation of Zeta's corporate being, and still
held the obligation to honor all of Zeta's
obligations, one of which was to respect San
Miguel's security of tenure. The dismissal of San
Miguel from employment on the pretext that
petitioner, being a different corporation, had
no obligation to accept him as its employee,
was illegal and ineffectual.
Facts:
Zuellig vs nlrc (change of corponame)PRIVATE
respondent Ronaldo V. San Miguel was
employed as a checker/customs representative
of Zeta Brokerage Corp. (Zeta) since Dec. 15,
1985.In January 1994, he and other employees
of Zeta were informed that Zeta would cease
operations and that all affected employees,
including him, would be separated from the
service effective March 31, 1994. He reluctantly
accepted separation pay subject to the
outstanding offer to be hired for his former
position by the petitioner.PetitionerZuellig
Freight and Cargo Systems contended that San
Miguel’s termination from Zeta had been for a
cause authorized by the Labor Code. Zeta, its
predecessor-in-interest, had complied with the
requirements for termination due to the
cessation of business operations. Did this
contention find merit?
The Supreme Court ruling: No
The unanimous conclusions of the Court of
Appeals (CA), the National Labor Relations
Commission (NLRC) and the Labor Arbiter,
being in accord with law, were not tainted with
any abuse of discretion, least of all grave, on
the part of the NLRC.
The amendments of the articles of
incorporation of Zeta to change the corporate
name to Zuellig Freight and Cargo Systems, Inc.
did not produce the dissolution of the former
as a corporation. For sure, the Corporation
Code defined and delineated the different
modes of dissolving a corporation, and
amendment of the articles of incorporation was
not one of such modes.The effect of the change
of name was not a change of the corporate
being, for, as well stated in Philippine First
Insurance Co., Inc. v. Hartigan, No. L-86370, July
31, 1970, 34 SCRA 252, 266, citing Pacific Bank
v. De Ro, 37 Cal. 538: “The changing of the
name ofa corporation is no more the creation
of a corporation than the changing of the name
of anatural person is begetting of a natural
person. The act, in both cases, would seem to
bewhat the language which we use to
designate it imports – a change of name, and
not a change of being.”
x xx
In short, Zeta and petitioner remained one and
the same corporation. The change of name did
not give petitioner the license to terminate
employees of Zeta like San Miguel without just
or authorized cause.The situation was not
similar to that of an enterprise buying the
business of another company where the
purchasing company had no obligation to
rehire terminated employees of the
latter.Petitioner, despite its new name, was the
mere continuation of Zeta’s corporate being,
and still held the obligation to honor all of
Zeta’s obligations, one of which was to
respectSan Miguel’s security of tenure. The
dismissal of San Miguel from employment on
the pretext that petitioner, being a different
corporation, had no obligation to accept him as
its employee, was illegal and ineffectual (Zuellig
Freight and Cargo Systems vs. NationalLabor
Relations Commission and Ronaldo V. San
Miguel, G.R. No. 157900, July 22, 2013)
UNITED CHURCH OF CHRIST IN THE
PHILIPPINES, INC., VS BRADFORD UNITED
CHURCH OF CHRIST, INC.,
FACTS: Petitioner United Church of
Christ in the Philippines, Inc. (UCCP) is a
religious corporation duly organized and
existing under the laws of the Philippines. It is a
national confederation of incorporated and
unincorporated self-governing Evangelical
churches of different denominations, devised
for fellowship, mutual counsel and
cooperation. It is the ecclesiastical successor of
the Evangelical Church of the Philippines, the
Philippine Methodist Church and the United
Evangelical Church of the Philippines.[4]
Respondent Bradford United Church of
Christ, Inc. (BUCCI), formerly known as
Bradford Memorial Church, is likewise a
religious corporation with a personality
separate and distinct from UCCP.
Respondents Patrizio Ezra, Geronimo
Nazareth, Ruperto Mayuga, Sr., Robert Schaare,
Henry Cariat, Reynaldo Ferrenal and other John
Does are members of BUCCI.
UCCP has three (3) governing bodies namely:
the General Assembly, the Conference and the
Local Church, each having distinct and separate
duties and powers. As a UCCP local church
located in Cebu, BUCCI belonged to the Cebu
Conference Inc. (CCI) with whom it enjoyed
peaceful co-existence until late 1989 when
BUCCI started construction of a fence that
encroached upon the right-of way allocated by
UCCP for CCI and Visayas jurisdiction.[6]
UCCP General Assembly attempted to settle the
dispute. The Cebu Conference Judicial
Commission rendered a decision in favor of CCI.
This unfavorable decision triggered a series of
events[8] which further increased the enmity
between the parties and led to the formal
break-up of BUCCI from UCCP.[9]
In a Church Council Resolution BUCCI
disaffiliated from UCCP.
Consequently, BUCCI filed its Amended Articles
of Incorporation and By-Laws which provided
for and effected its disaffiliation from
UCCP. SEC approved the same.
Thereafter, UCCP filed before SEC a
complaint/protest for rejection/annulment of
Amended Articles and Incorporation and
Injunction. UCCP also prayed for the
disallowance of the continued use of BUCCI as
corporate name.
UCCP later on filed an Amended
Complaint/Protest abandoning the original
Complaint/Protest. The Amended
Complaint/Protest added BUCCI as one of the
respondents; alleged that the separate
incorporation and registration of BUCCI is not
allowed under the UCCP Constitution and By-
laws; and sought to enjoin BUCCI and the
respondents from using the name BUCCI, both
in its Amended Articles of Incorporation and its
dealings with the public, and from using its
properties.
Thereafter, the SEC en banc dismissed UCCPs
petition to declare as null and void the
amendments made to the Articles of
Incorporation of BUCCI.
ISSUE: WON private respondents are entitled
to the use of the name Bradford United Church
of Christ, Inc.(BUCCI).
HELD: YES.
An ecclesiastical affair is one that concerns
doctrine, creed or form of worship of the
church, or the adoption and enforcement
within a religious association of needful laws
and regulations for the government of the
membership, and the power of excluding from
such associations those deemed unworthy of
membership.[32] Based on this definition, an
ecclesiastical affair involves the relationship
between the church and its members and
relate to matters of faith, religious doctrines,
worship and governance of the
congregation. To be concrete, examples of this
so-called ecclesiastical affairs to which the
State cannot meddle are proceedings for
excommunication, ordinations of religious
ministers, administration of sacraments and
other activities attached with religious
significance.
UCCP contends that respondents have severed
their UCCP membership and consequently,
have lost their BUCCI membership. As such,
they have neither the power to bring about the
amendments to BUCCIs Articles of
Incorporation nor right to continue the usage of
BUCCIs name.
The Church Council Resolution duly
ratified by BUCCIs members in a referendum,
carried out BUCCIs corporate act of
disaffiliating from UCCP.By virtue of this
disaffiliation, BUCCI members, including
respondents, severed their ties from UCCP but
maintained their membership with
BUCCI. UCCPs contention that the severance of
UCCP ties amounts to severance of ties to the
local church does not hold water.
Local church autonomy takes
precedence in the UCCP polity. Section 4 of the
1974 UCCP Constitution provides:
SECTION 4. The
autonomy of the local church or
congregation in matters
pertaining to its life in its own
particular community shall be
respected, consistent with its
relation to the Conference,
Jurisdiction, and General
Assembly.
According to respondent, UCCP adopted a
congregationalist system where a local church
has the right to govern itself by its own laws,
rules and regulations for the furtherance of its
own general welfare and the freedom to
practice its own faith and polity of
denominational origin.[40] This congregationalist
system was shown in the Basis of Union, the
Declaration of Union and UCCPs Constitution
and By-laws.
Anent the continued use by respondents of
BUCCI, the Court likewise sustains the rulings of
SEC and Court of Appeals. Pertinently, the
Court of Appeals ruled as follows:
As held in Philips Export B.V. vs.
Court of Appeals [206 SCRA 457,
463], to fall within the
prohibition of the law, two
requisites must be proven, to
wit: (1) that the complainant
corporation acquired a prior
right over the use of such
corporate name; and (2) the
proposed name is either: (a)
identical, or (b) deceptively
or confusingly similar to that of
any existing corporation or to
any other name already
protected by law; or (c) patently
deceptive, confusing or contrary
to existing law.
The respondent BUCCIs church
history would show that it has a
better right to use its corporate
name on the ground of priority
of adoption. As thoroughly
discussed by the SEC in its
assailed decision, the evolution
of respondent BUCCI to what it is
today undoubtedly establishes
that it had acquired the right to
make use of its corporate name.
As to whether or not BUCCI is
confusingly or deceptively
similar to UCCP, We find in the
negative. In determining the
existence of confusing similarity
in corporate names, the test is
whether the similarity is such as
to mislead a person using
ordinary care and
discrimination.[49]
Furthermore, Section 2, Article I of the UCCP
Constitution[50] states that, All local churches
and church-owned entities shall bear
prominently the name: United Church of Christ
in the Philippines. For this reason, BUCCI is
evidently distinct from UCCP and from all other
UCCP local churches and church-owned
entities.
P.C. JAVIER & SONS, INC., SPS. PABLO C. JAVIER,
SR. and ROSALINA F. JAVIER,
vs.
HON. COURT OF APPEALS, PAIC SAVINGS &
MORTGAGE BANK, INC., SHERIFFS GRACE
BELVIS, SOFRONIO VILLARIN, PIO MARTINEZ
and NICANOR BLANCO
Facts:
May 1984: PC Javier and Sons and Spouses
Javier filed a complaint for annulment of
mortgage and foreclosure with prelim
injunction against PAIC Savings and Mortgage
Bank and a supplemental complaint to include
defendants (sheriffs)
Feb 1981: PC Javier and Sons applied with First
Summa Savings and Mortgage Bank later
renamed PAIC Savings a loan accommodation RTC: declared First Summa and PAIC as one and
under Industrial Guarantee Loan Fund (P1.5M) the same + Javier Corp liable to bank for unpaid
balance of loans + extrajudicial foreclosure
March 1981: Javier was advised that loan
justified because loans were due and
application was approved and same to be
demandable when foreclosure proceedings
forwarded to Central Bank for processing and
commenced in April 1984, hence this appeal by
release. Central Bank released loan to PAIC in
certiorai.
two tranches of P750k each released to Javier
Corp, but from second tranche release, P250k
was deducted and deposited in name of Javier
Corp under time deposit. Javier Corp claims
loan releases were delayed, P250k was Issue:
deducted from IGLF (Industrial Guarantee Loan
Fund) loan and placed under time deposit. They WON First Summa Savings and Mortgage Bank
were never allowed to withdraw the proceeds and PAIC Savings are one and the same entity;
of the item deposit because PAIC intended this whether their obligation is already due and
time deposit as automatic payments on demandable at the time commencement of
accrued principal and interest due on loan. extrajudicial foreclosure took place.

PAIC claims that only final proceeds of the loan Is Javier corp legally justified in withholding
was delayed, because of shortfall in collateral amortized payments to respondent bank until
cover of Javier Corp’s loan second tranche was they have been properly notified of change
then released after firm commitment by Javier incorporate name?
Corp to cover collateral deficiency through
(claim never having received formal notice of
opening time deposit using portion of loan
alleged change of name + first notice of change
proceeds (P250k) and in compliance with their
of name was when bank presented witness
commitment to submit additional security and
Michael Caguioa on April 1990, where he
open time deposit, Javier executed chattel
presented SEC Certificate of Filing Amended
mortgage over some machineries in favor of
Articles of Incorporation of respondent bank)?
PIAC and when Javier Corp defaulted in
payment of its loan, PAIC sent demand letter; Ruling: No
sent a second, informing foreclosure; finally
There exists no requirement under law or
initiated extrajudicial foreclosure of real estate
regulation ordering a bank that changes its
mortgage and accordingly auction sale was
corporate name to formally notify all its
executed by sheriffs Instant complaint to
debtors. Court cannot impose on bank that
forestall extrajudicial foreclosure of sale of
changes in corporate name must notify debtor
piece of land = temporarily restrained by RTC
of such change = tantamount to judicial
legislation; such notification is discretionary on
bank
Although no evidence showing bank furnished
Javier Corp with official documents of change
of name, evidence abound that they had notice
Letter of accountant of Javier Corp addressed
to bank: “we obtained from the FORMER First
Summa” Board of resolution of Javier Corp
signed by Pablo Javier Sr authorizing him to
execute a chattel mortgage over certain
machinery in favor of PAIC Savings and
Mortgage Bank
Secretary’s certificate signed by Fortunato
Gabriel, Corp Secretary of Javier Corp, certifying
that a board resolution was passed authorizing
Pablo Javier Sr to execute a chattel mortgage
on corporation’s equipment to serve as
collateral to cover IGLF Loan with PAIC Savings
Undated letter signed by Pablo Javier Sr and
addressed to PAIC Savings authorizing Mr
Victor Javier, Gen Manager, to secure from
PAIC Savings certain documents for his
signature
DOCTRINE:
A change in the corporate name does not make
a new corporation, whether effected by a
special act or under a general law. It has no
effect on the identity of the corporation, or on
its property, rights, or liabilities. The
corporation, upon such change in its name, is in
no sense a new corporation nor the successor
of the original corporation. It is the same
corporation with a diff name, and its character
is in no respect changed.
Industrial Refractories Corporation of the
Philippines vs. Court of Appeals
[GR 122174, 3 October 2002]
Second Division, Austria-Martinez (J): 3 concur,
1 on official leave
Facts: Refractories Corporation of the
Philippines (RCP) is a corporation duly
organized on 13 October 1976 for the purpose
of engaging in the business of manufacturing,
producing, selling, exporting and otherwise
dealing in any and all refractory bricks, its by-
products and derivatives. On 22 June 1977, it
registered its corporate and business name
with the Bureau of Domestic Trade. Industrial
Refractories Corp. of the Philippines (IRCP) on
the other hand, was incorporated on 23 August
1979 originally under the name "Synclaire
Manufacturing Corporation". It amended its
Articles of Incorporation on 23 August 1985 to
change its corporate name to "Industrial
Refractories Corp. of the Philippines". It is
engaged in the business of manufacturing all
kinds of ceramics and other products, except
paints and zincs. Both companies are the only
local suppliers of monolithic gunning mix.
Discovering that IRCP was using such corporate
name, RCP filed on 14 April 1988 with the
Securities and Exchange Commission (SEC) a
petition to compel IRCP to change its corporate
name on the ground that its corporate name is
confusingly similar with that of RCP's such that
the public may be confused or deceived into
believing that they are one and the same
corporation. The SEC decided in favor of RCP in
its judgment of 23 July 1993. IRCP appealed to
the SEC En Banc, arguing that it does not have
any jurisdiction over the case, and that RCP has
no right to the exclusive use of its corporate
name as it is composed of generic or common
words. In its Decision dated 23 July 1993, the
SEC En Banc modified the appealed decision in
that IRCP was ordered to delete or drop from
its corporate name only the word
"Refractories". IRCP elevated the decision of
the SEC En Banc through a petition for review
on certiorari to the Court of Appeals which then
rendered the decision, denying to give due
course the petition filed by IRCP by upholding
the jurisdiction of the SEC over the case, and
ruling that the corporate names of IRCP and
RCP are confusingly or deceptively similar, and
that RCP has established its prior right to use
the word "Refractories" as its corporate name.
The appellate court also found that the petition
was filed beyond the reglementary period. IRCP
filed the petition for review on certiorari.
Issue [1]: Whether the corporate names of IRCP
and RCP are confusingly similar.
Held [1]: The jurisdiction of the SEC is not
merely confined to the adjudicative functions
provided in Section 5 of PD 902-A, as amended.
It is the SEC's duty to prevent confusion in the
use of corporate names not only for the
protection of the corporations involved but
more so for the protection of the public, and it
has authority to de-register at all times and
under all circumstances corporate names which
in its estimation are likely to generate
confusion. Section 18 of the Corporation Code
expressly prohibits the use of a corporate name
which is "identical or deceptively or confusingly
similar to that of any existing corporation or to
any other name already protected by law or is
patently deceptive, confusing or contrary to
existing laws". The policy behind the foregoing
prohibition is to avoid fraud upon the public
that will have occasion to deal with the entity
concerned, the evasion of legal obligations and
duties, and the reduction of difficulties of
administration and supervision over
corporation. Pursuant thereto, the Revised
Guidelines in the Approval of Corporate and
Partnership Names 25 specifically requires that:
(1) a corporate name shall not be identical,
misleading or confusingly similar to one already
registered by another corporation with the
Commission; and (2) if the proposed name is
similar to the name of a registered firm, the
proposed name must contain at least one
distinctive word different from the name of the
company already registered. To fall within the
prohibition of the law, two requisites must be
proven: (1) that the complainant corporation
acquired a prior right over the use of such
corporate name; and (2) the proposed name is
either: (a) identical, or (b) deceptively or
confusingly similar to that of any existing
corporation or to any other name already
protected by law; or (c) patently deceptive,
confusing or contrary to existing law. As
regards the first requisite, it has been held that
the right to the exclusive use of a corporate
name with freedom from infringement by
similarity is determined by priority of adoption.
Herein, being the prior registrant, RCP has
acquired the right to use the word
"Refractories" as part of its corporate name.
Anent the second requisite, in determining the
existence of confusing similarity in corporate
names, the test is whether the similarity is such
as to mislead a person using ordinary care and
discrimination and the Court must look to the
record as well as the names themselves.
Herein, the only word that distinguishes IRCP
from RCP is the word "Industrial" which merely
identifies a corporation's general field of
activities or operations. The two corporate
names are patently similar that even with
reasonable care and observation, confusion
might arise. It must be noted that both cater to
the same clientele, i.e., the steel industry. In
fact, the SEC found that there were instances
when different steel companies were actually
confused between the two, especially since
they also have similar product packaging.
Issue [2]: Whether the generic word rule would
apply to support IRCP’s cause.
Held [2]: Refractories are structural materials
used at high temperatures to [sic] industrial
furnaces. They are supplied mainly in the form
of brick of standard sizes and of special shapes.
Refractories also include refractory cements,
bonding mortars, plastic firebrick, castables,
ramming mixtures, and other bulk materials
such as dead-buried grain magneside, chrome
or ground ganister and special clay. While the
word "refractories" is a generic term, its usage
is not widespread and is limited merely to the
industry/trade in which it is used, and its
continuous use by RCP for a considerable
period has made the term so closely identified
with it. Moreover, IRCP's appropriation of RCP's
corporate name cannot find justification under
the generic word rule. A contrary ruling would
encourage other corporations to adopt
verbatim and register an existing and protected
corporate name, to the detriment of the public.
LAUREANO INVESTMENT & DEVELOPMENT
CORPORATION, petitioner, vs. THE
HONORABLE COURT OF APPEALS and
BORMAHECO, INC., respondents.|
FACTS:
Spouses Reynaldo and Florence Laureano are
majority stockholders of petitioner Corporation
who entered into a series of loan and credit
transactions with Philippine National
Cooperative Bank. To secure payment of the
loans, they executed Deeds of Real Estate for
the following amounts: P100,000.00,
P20,000.00, P70,000.00 and P13,424.04,
respectively. In view of their failure to pay their
indebtedness, PNCB applied for extrajudicial
foreclosure of the real estate mortgages. The
bank was the purchaser of the properties in
question in the foreclosure sale and titles
thereof were consolidated in PNCB's name on
February 20, 1984. PNCB did not secure a writ
of possession nor did it file ejectment
proceedings against the Laureano spouses,
because there were then pending cases, such
as x xx involving the titles of ownership of
subject two lots, which are situated at Bel-Air
Subdivision, Makati, Metro Manila.
Private respondent Bormaheco, Inc. became
the successor of the obligations and liabilities of
PNCB over subject lots by virtue of a Deed of
Sale/Assignment on September 26, 1988
wherein Bormaheco bought from PNCB under a
bulk sale 114 titled and untitled properties
including the two parcels of land in question,
formerly registered in the name of the
Laureano spouses. Transfer Certificate of Title
Nos. 157724 and 157725 over the lots in
question were issued on October 12, 1988 in
the name of Bormaheco.
Five (5) days after securing titles over the said
properties, Bormaheco filed an Ex-Parte
Petition for the Issuance of Writ of Possession
of Lots 4 and 5, Block 4 situated at Bel-Air
Village, Makati, Metro Manila and embraced in
TCT Nos. 157724 and 157725 of the Registry of
Deeds of Makati, Metro Manila, docketed as
LRC Case No. M-1530 before respondent Court.
Petitioner Corporation filed on January 18,
1989 its Motion for Intervention and to Admit
Attached Complaint in Intervention in said case
(GRANTED)
Bormaheco filed its Motion to Strike out the
Complaint in Intervention and all related
pleadings filed by LIDECO Corporation.
(GRANTED)
"Intervenor LIDECO Corporation and
LAUREANO INVESTMENT AND DEVELOPMENT
CORPORATION, to the mind of this Court, are
two (2) separate and distinct entities. Inasmuch
as the documents in support of its complaint in
intervention -- tax declarations -- are in the
names of Laureano Investment and
Development Corporation, and it appearing
that LIDECO Corporation is not a corporation or
partnership duly organized and registered with
the SEC, there is, therefore, no way whatsoever
that LIDECO Corporations interests will be
adversely affected by the outcome of the
instant case."
Corporation filed its Urgent Motion to
Substitute Party Intervenor and to Adopt
Complaint in Intervention and All Pleadings.
(DENIED)
"The movant-corporation not having shown
documentary evidence showing that it has
interest on the two lots subject of the
complaint and the improvements found
therein, it has, therefore, no personality to file
the instant motion."
Petitioner Corporation contends that
respondent Bormahecos motion to strike out
the complaint in intervention and all related
pleadings filed by LIDECO Corporation was
based on misleading and confusing assertions
that LIDECO Corporation is not a registered
corporation despite its admission and/or use of
the word LIDECO as acronym for Laureano
Investment and Development Corporation. The
contention is untenable. BORMAHECO has
shown that LIDECO Corporation is not
organized and existing under Philippine laws.
Neither has it been registered with the
Securities and Exchange Commission. In
support of said claim, BORMAHECO presented
a certification to the effect that the records of
the Commission do not show the registration of
LIDECO, INC. either as a corporation or as
partnership.
ISSUE: W/N Bormaheco, Inc. is estopped from
contesting the legal personality to sue of
Lideco Corporation
Petitioner contends that private respondent is
estopped from, and is in bad faith for, denying
its knowledge that Lideco Corporation and
Laureano Investment and Development
Corporation are one and the same entity since
it has previously used LIDECO as an acronym for
the latter corporation.
RULING: Examining the records of the case, we
observe that the motion adverted to indeed
made use of LIDECO as an acronym for
Laureano Investment and Development
Corporation. But said motion distinctly
specified that LIDECO was the shorter term for
Laureano Investment and Development
Corporation. It is obvious that no false
representation or concealment can be
attributed to private respondent. Neither can it
be charged with conveying the impression that
the facts are other than, or inconsistent with,
those which it now asserts since LIDECO, as an
acronym, is clearly different from Lideco
Corporation which represented itself as a
corporation duly registered and organized in
accordance with law. Nor can it be logically
inferred that petitioner relied or acted upon
such representation of private respondent in
thereafter referring to itself as Lideco
Corporation; for petitioner is presumed to
know by which name it is registered, and the
legal provisions on the use of its corporate
name.
Section 1, Rule 3 of the Rules of Court provides
that only natural or juridical persons or entities
authorized by law may be parties to a civil
action. Under the Civil Code, a corporation has
a legal personality of its own (Article 44), and
may sue or be sued in its name, in conformity
with the laws and regulations of its
organization (Article 46). Additionally, Article 36
of the Corporation Code similarly provides:
Article 36.Corporate powers and capacity. --
Every corporation incorporated under this Code
has the power and capacity:
1. To sue and be sued in its corporate name;
As the trial and appellate courts have held,
Lideco Corporation had no personality to
intervene since it had not been duly registered
as a corporation. If petitioner legally and truly
wanted to intervene, it should have used its
corporate name as the law requires and not
another name which it had not registered.
Indeed, as the Respondent Court found,
nowhere in the motion for intervention and
complaint in intervention does it appear that
Lideco Corporation stands for Laureano
Investment and Development Corporation.
Bormaheco, Inc., thus, was not estopped from
questioning the juridical personality of Lideco
Corporation, even after the trial court had
allowed it to intervene in the case.
The trial court concluded, and we have no
reason to disagree, that the intervention of
Lideco or petitioner corporation was not proper
because neither had any legal interest in the
subject of litigation. The evidence (tax
declarations) attached to the petition for
intervention and the complaint for intervention
pertained to properties not being litigated in
the instant case. Lideco and petitioner
corporation both claimed to have an interest in
two houses constructed in Lot 3, Block 4 in Bel
Air Village, Makati. 24 The subject matter of the
instant petition, on the other hand, are Lots 4
and 5, Block 4, of Bel Air Village. This factual
finding was affirmed by the Court of Appeals.
WHEREFORE, premises considered, the
petition is hereby DENIED for its failure to
show any reversible error on the part of
Respondent Court. The questioned Decision of
the Court of Appeals is AFFIRMED. Costs
against petitioner.
Pison-Arceo Agricultural and Development
Corporation vs National Labor Relations
Commission
Facts:
On June 13, 1988, a labor case for illegal
dismissal, reinstatement, payment of
backwages and attorney’s fees was filed against
Jose Edmundo Pison and Hacienda Lanutan.
The executive labor arbiter rendered a decision
in favor of the dismissed workers. Pison
appealed and the National Labor Relations
Commission (NLRC) affirmed the labor arbiter.
However, in the NLRC ruling, it ordered Pison-
Arceo Agricultural and Development
Corporation (PADC) as solidarily liable together
with Pison and the Hacienda, PADC being the
owner of the Hacienda and in which Pison is a
majority stockholder. PADC assails the order of
the NLRC on due process grounds as it averred
that it was not issued summons hence it was
not able to defend itself in court and therefore
the judgment against it is void.
Issue:
Whether or not the NLRC acted without or in
excess of jurisdiction or with grave abuse of
discretion when it it included motuproprio the
corporation solidarily liable with Pison.
Held:
No. The Supreme Court emphasized that in
labor cases and other administrative cases, the
Rule of Civil Procedure are not strictly applied
especially so in the interest of laborers. So long
as there is a substantial compliance, a party can
be placed under the jurisdiction of the labor
court. In the case at bar, there is substantial
compliance when summons was served to Jose
Edmundo Pison who was also the administrator
of the Hacienda. Hacienda Lanutan is an arm of
PADC, the organism of which it is an integral
part. Ineluctably, the real party in interest in
this case is petitioner, not “Hacienda Lanutan”
which is merely its non-juridical arm. In dealing
with private respondents, petitioner
represented itself to be “Hacienda Lanutan.”
Hacienda Lanutan is roughly equivalent to its
trade name or even nickname or alias. The
names may have been different, but the
IDENTITY of the petitioner is not in dispute.
Thus, it may be sued under the same by which
it made itself known to the workers.PADC is
therefore adequately represented by Pison in
the proceedings in the labor tribunal. If at all,
the non-inclusion of the corporate name of
PADC in the case before the executive labor
arbiter was a mere procedural error which did
not at all affect the jurisdiction of the labor
tribunals.
Purpose clause
Luneta Motor vs AD Santos
Facts: To secure payment of a loan evidenced
by a promissory note executed by Nicolás
Concepción and guaranteed by one Placido
Esteban in favor of petitioner, Concepcion
executed a chattel mortgage covering the
certificate of public convenience issued to
Concepcionin favor of petitioner.
To secure payment of a subsequent
loan obtained by Concepción from the
Rehabilitation Finance Corporation (now
Development Bank of the Philippines) he
constituted a second mortgage on the same
certificate. This second mortgage was
approved by the respondent Commission,
subject to the mortgage lien in favor of
petitioner.
The certificate was later sold to
Francisco Benitez, Jr., who resold it to Redi
Taxicab Company. Both sales were made with
assumption of the mortgage in favor of the
RFC, and were also approved provisionally by
the Commission, subject to petitioner's lien.
Petitioner filed an action to foreclose
the chattel mortgage executed in its favor by
Concepción in view of the failure of the latter
and his guarantor, Placido Esteban, to pay
their overdue account.
While the above case was pending,
the RFC also instituted foreclosure
proceedings on its second chattel mortgage
and, as a result of the decision in its favor
therein rendered, the certificate of public
convenience was sold at public auction in
favor of Amador D. Santos. Santos
immediately applied with the Commission for
the approval of the sale, and the same was
approved, subject to the mortgage lien in
favor of petitioner.
The Court of First Instance of Manila
rendered judgment adjudging Concepcion
indebted to petitioner and ordered that the
certificate of public convenience subject
matter of the chattel mortgage be sold at
public auction in accordance with law. Said
certificate was sold at public auction to
petitioner, and six days thereafter the Sheriff
of the City of Manila issued in its favor the
corresponding certificate of sale. Thereupon
petitioner filed the application mentioned
heretofore for the approval of the sale. In the
meantime and before his death, Amador D.
Santos sold and transferred all his rights and
interests in the certificate of public
convenience in question in favor of the now
respondent A. D. Santos, Inc., who opposed
petitioner's application.
The record discloses that in the course
of the hearing on said application and after
petitioner had rested its case, the respondent
A. D. Santos, Inc., with leave of court, filed a
motion to dismiss based on the following
grounds:
"a) under the
petitioner's Articles of
Incorporation, it was not
authorized to engage in the
taxicab business or operate as
a common carrier;
"b) the decision in Civil
Case No. 20853 of the Court of
First Instance of Manila did not
affect the oppositor nor its
predecessor Amador D. Santos
inasmuch as neither of them
had been impleaded into the
case;
"c) that what was sold
to the petitioner were only the
'rights, interest and
participation' of Nicolas
Concepcion in the certificate
that had been granted to him
which were no longer existing
at the time of the sale."
Respondent Commission, after
considering the memoranda submitted by the
parties, rendered the appealed decision
sustaining the first ground relied upon in
support thereof, namely, that under
petitioner's articles of incorporation it had no
authority to engage in the taxicab business or
operate as a common carrier, and that, as a
result, it could not acquire by purchase the
certificate of public convenience referred to
above.
Hence the present appeal interposed
by petitioner who claims that, in accordance
with the Corporation Law and its articles of
incorporation, it can acquire by purchase the
certificate of public convenience in question,
maintaining inferentially that, after acquiring
said certificate, it could make use of it by
operating a taxicab business or operate as a
common carrier by land.
Issue: w/n petitioner can purchase the
certificate of public convenience
Held: Under Section 13(5) of the Corporation
Law, a corporation created thereunder may
purchase, hold and otherwise deal in such
real and personal property as the purpose for
which the corporation was formed may
permit, and the transaction of its lawful
business may reasonably and necessarily
require. A corporation authorized under its
articles of incorporation to operate and
otherwise deal in automobiles and
automobile accessories and to engage in the
transportation of persons by water, may not
engage in the business of land transportation,
which is an entirely different line of business,
and, for this reason, may not acquire any
certificate of public convenience to operate a
taxicab service, because such acquisition
would be without purpose and would have no
necessary connection with the corporation's
legitimate business.
Petitioner claims in this regard that its
corporate purposes are to carry on a general
mercantile and commercial business, etc.,
and that it is authorized in its articles of
incorporation to operate and otherwise deal
in and concerning automobiles and
automobile accessories' business in all its
multifarious ramification (petitioner's brief, p.
7) and to operate, etc. and otherwise dispose
of vessels and boats, etc., and to own and
operate steamship and sailing ships and other
floating craft and deal in the same and
engage in the Philippine Islands and
elsewhere in the transportation of persons,
merchandise and chattels by water; all this
incidental to the transportation of
automobiles.
We find nothing in the legal provision
and the provisions of petitioner's articles of
incorporation relied upon that could justify
petitioner's contention in this case. To the
contrary, they are precisely the best evidence
that it has no authority at all to engage in the
business of land transportation and operate a
taxicab service. That it may operate and
otherwise deal in automobiles and
automobile accessories; that it may engage in
the transportation of persons by water does
not mean that it may engage in the business
of land transportation — an entirely different
line of business. If it could not thus engage in
this line of business, it follows that it may not
acquire any certificate of public convenience
to operate a taxicab service, such as the one
in question, because such acquisition would
be without purpose and would have no
necessary connection with petitioner's
legitimate business.
John Sy v Tyson Enterprises
FACTS: In 1979, Tyson Enterprises, Inc. filed a
collection suit against Universal Parts Supply
Corporation and its president John Sy. The suit
was filed in Pasig, Rizal. John Sy filed a motion
to file for a bill of particulars which was denied.
Subsequently, Sy filed a motion to dismiss on
the ground of improper venue. Sy alleged that
Tyson Enterprises should have filed the case
either in Bacolod City (business address of
Universal Parts) or in Manila (business address
of Tyson Enterprises). Sy alleged that it is
improper for Tyson Enterprises to file the case
in Pasig even if it is the residence of Tyson’s
president and general manager, Dominador Ti.
The trial court as well as the Court of Appeals
denied Sy’s motion on the ground that he
waived the defense of improper venue when he
filed his motion to file for a bill of particulars;
that the prior motion placed Sy under the
jurisdiction of the trial court.
ISSUE: Whether or not a plaintiff-corporation
may file a civil case not in its business address
nor the business address/residence of the
defendant but in the place of residence of its
incorporators/officers.
HELD: No. A corporation has a separate and
distinct personality from its incorporators. Its
place of business is its residence and not the
residence of its president or any other officer.
Hence, venue is improperly laid in this case. The
trial court of Pasig has no jurisdiction.
Anent the issue that there was a waiver, as a
rule, the defense of improper venue is waived if
it is not alleged in a motion to dismiss. In the
case at bar, Sy was able to file his motion to
dismiss in a timely manner. It is of no moment
that there was a prior motion for a bill of
particulars that was filed. There is nothing in
the rule that states that no other motion should
have been filed prior to filing a motion to
dismiss before a motion to dismiss grounded on
improper venue may be allowed.
CLAVECILLA RADIO SYSTEM, petitioner-
appellant, vs. HON. AGUSTIN . HON. AGUSTIN
ANTILLON, as City Judge of the Municipal
Court of Cagayan de Oro ANTILLON, as City
Judge of the Municipal Court of Cagayan de
Oro City and NEW CAGAYAN GROCERY City
and NEW CAGAYAN GROCERY, respondents-
appellees
FACTS:
New Cagayan Grocery filed a complaint in Court
of First Instance of Cagayan De Oro against the
Clavecilla Radio System alleging that its
Cagayan Branch omitted some words in the
message for it causing it to suffer damages.
Petitioner filed a motion to dismiss on the
ground that the venue is improperly laid.
Lower court’s decision: the Clavecilla Radio
System may be sued either in Manila where it
has its principal office or in Cagayan de Oro City
where it may be served, as in fact it was served,
with summons through the Manager of its
branch office in said city.
On appeal, Clavecilla Radio System contends
that the suit against it should be filed in Manila
where it holds its principal office.
ISSUE: Whether a corporation shall be sued in
the place where it holds its principal office
HELD: YES.
Settled is the principle in corporation law that
the residence of a corporation is the place
where its principal office is established. Since it
is not disputed that the Clavecilla Radio system
has its principal office in Manila, it follows that
the suit against it may properly be filed in the
City of Manila. Clavecilla Radio System
maintains a residence which is Manila in this
case, and a person can have only one residence
at a time. The fact that it maintains branch
offices in some parts of the country does not
mean that it can be sued in any of these places.
To allow an action to be instituted in any place
where a corporate entity has its branch offices
would create confusion and work untold
inconvenience to the corporation.
The term "may be served with summons" does
not apply when the defendant resides in the
Philippines for, in such case, he may be sued
only in the municipality of his residence,
regardless of the place where he may be found
and served with summons. As any other
corporation, the Clavecilla Radio System
maintains a residence which is Manila in this
case, and a person can have only one residence
at a time. The fact that it maintains branch
offices in some parts of the country does not
mean that it can be sued in any of these places.
To allow an action to be instituted in any place
where a corporate entity has its branch offices
would create confusion and work untold
inconvenience to the corporation.||
the laying of the venue of an action is not left
to plaintiff's caprice because the matter is
regulated by the Rules of Court. Applying the
provision of the Rules of Court, the venue in
this case was improperly laid.
The order appealed from is therefore reversed,
but without prejudice to the filing of the action
in which the venue shall be laid properly. With
costs against the respondents-appellees.
Place of principal office
Chua vsSamahangMagsasaka
Facts: The complaint alleges that the
defendant Samahang Magsasaka, Inc. is a
corporation duly organized under the laws of
the Philippine Islands with principal office in
Cabanatuan, Nueva Ecija, and that the
individual defendants are the president,
secretary and treasurer respectively of the
same; that Gonzalo H. Co Toco was the owner
of 5,894 shares of the capital stock of the said
corporation represented by nine certificates
having a par value of P5 per share; that
Gonzalo H. Co Toco, a resident of Manila,
mortgaged said 5,894 shares to Chua Chiu to
guarantee the payment of a debt of P20,000.
The said certificates of stock were delivered
with the mortgage to the
mortgagee, Chua Chiu. The said mortgage
was duly registered in the office of the
registered of deeds and in the office of the
said corporation.
Chua Chiu assigned all his right and
interest in said mortgage to the plaintiff and
the assignment in the office of the register of
deeds and in the office of the said
corporation.
The debtor, Gonzalo H. Co Toco,
having defaulted in the payment of said debt
at maturity, the plaintiff foreclosed said
mortgage and delivered the certificates of
stock and copies of the mortgage and
assignment to the sheriff of the City of Manila
in order to sell the said shares at public
auction. The sheriff auctioned said 5,894
shares of stock and the plaintiff having been
the highest bidder for the sum of P14,390,
the sheriff executed in his favor a certificate
of sale of said shares.
The plaintiff tendered the certificates
of stock standing in the name of Gonzalo H.
Co to the proper officers of the corporation
for cancellation and demanded that they
issue new certificates in the name of the
plaintiff. The said officers (the individual
defendants) refused and still refuse to issue
said new shares in the name of the plaintiff.
The prayer is that a writ of mandamus
be issued requiring the defendants to transfer
the said 5,894 shares of stock to the plaintiff
by cancelling the old certificates and issuing
new ones in their stead.
The special defenses set up in the
answer are as follows, that the defendants
refuse to cancel said certificates standing in
the name of Gonzalo H. Co Toco on the books
of the corporation and to issue new ones in
the name of the plaintiff because prior to the
date when the plaintiff made his demand,
nine attachments had been issued and served
and noted on the books of the corporation
against the shares of Gonzalo H. Co Toco and
the plaintiff objected to having these
attachments noted on the new certificates
which he demanded.
It will be noted that the first eight of
the said writs of attachments were served on
the corporation and noted on its records
before the corporation received from the
mortgagee Chua Chiu of the mortgage of said
shares. No question is raised as to the validity
of said mortgagee or of said writs of
attachment as the sole question presented
for decision is whether the said mortgage
takes priority over the said writs of
attachments.
Issue: w/n the registration of said chattel
mortgage give constructive notice to the said
attaching creditors
Held: The registration of the chattel mortgage
in the office of the corporation was not
necessary and had no legal effect.
(Monserrat vs. Ceron, 58 Phil., 469) The long
mooted question as to whether or not shares
of a corporation could be hypothecated by
placing a chattel mortgage on the certificate
representing such shares we now regard as
settled by the case above cited of
Monserrat vs. Ceron.
It is a common but not accurate
generalization that the situs of shares of stock
is at the domicile of the owner. The term situs
is not one of fixed or invariable meaning of
usage. The situs of shares of stock for some
purposes may be at the domicile of the owner
and for others at the domicile of the
corporation; and even elsewhere.
It is a general rule that for purposes of
execution, attachment and garnishment, it is
not the domicile of the owner of a certificate
but the domicile of the corporation which is
decisive.
By analogy with the foregoing and
considering the ownership of shares in a
corporation as property distinct from the
certificate which are merely the evidence of
such ownership, it is a reasonable
construction of section 4 of Act No. 1508 to
hold that the property in the shares may be
deemed to be situated in the province in
which the corporation has its principal office
or place of business. If this province is also
the province of the owner's domicile, a single
registration is sufficient. If not the chattel
mortgage should be registered both at the
owner's domicile and in the province where
the corporation has its principal office or
place of business. In this sense the property
mortgaged is not the certificate but the
participation and share of the owner in the
assets of the corporation.
The only safe way to accomplish the
hypothecation of shares of stock of a
Philippine corporation is for the creditor to
insist on the assignment and delivery of the
certificate and to obtain the transfer of the
legal title to him on the books of the
corporation by the cancellation of the
certificate and the issuance of a new one to
him.
Section 35 of the Corporation Law (Act
No. 1459) enacts that shares of stock "may be
transferred by delivery of the certificate
endorsed by the owner or his attorney in fact
or other person legally authorized to make
the transfer." The use of the verb "may" does
not exclude the possibility that a transfer may
be made in a different manner, thus leaving
the creditor in an insecure position even
though he has the certificate in his
possession. The shares still standing in the
name of the debtor on the books of the
corporation will be liable to seizure by
attachment or levy on execution at the
instance of other creditors.
We are fully conscious of the fact
that our decisions in the case of
Monserrat vs. Ceron, supra, and in the
present case have done little perhaps to
ameliorate the present uncertain and
unsatisfactory state of our law applicable to
pledges and chattel mortgages of shares of
stock of Philippine corporations. The
remedy lies with the legislature.
In view of the premises, the
attaching creditors are entitled to priority
over the defectively registered mortgage of
the appellant and the judgment appealed
from must be affirmed special
pronouncement as to costs in this instance.
NAUTICA CANNINGCORPORATION, FIRST
DOMINION PRIME HOLDINGS,INC. and
FERNANDO R. ARGUELLES, JR., v. ROBERTO C.
YUMUL
G.R. No. 164588, October 19, 2005, YNARES-
SANTIAGO
FACTS:Yumul was one of the incorporators of
Nautica Canning Corporation. Under the AOI,
Yumul has subscribed to 1 share with par value
of Php 100. Yumul was appointed Chief
Operating Officer/General Manager of Nautica.
First Dominion Prime Holdings, Inc. (FDPHI),
Nautica’s parent company, through its
Chairman Alvin Y. Dee, granted Yumul
an Option to Purchase up to 15% of the total
stocks it subscribed from Nautica. A Deed of
Trust and Assignment was executed between
FDPHI and Yumul whereby the former assigned
14,999 of its subscribed shares in Nautica to the
latter. The deed stated that the 14,999 “shares
were acquired and paid for in the name of the
ASSIGNOR only for convenience, but actually
executed in behalf of and in trust for the
ASSIGNEE.”
When Nautica declared dividends, Yumul
received his cash dividend representing his 15%
share. Upon resignation, Yumul requested Dee
to formalize his offer to buy Yumul’s 15% share
in Nautica and demanding the issuance of the
corresponding certificate of shares in his name
should Dee refuse to buy the same. Dee,
through Nautica’s corporate secretary, denied
the request claiming that Yumul was not a
stockholder of Nautica and that he was just a
nominal owner of one share as the beneficial
ownership belonged to Dee who paid for said
share when Nautica was incorporated. Yumul
requested that the Deed of Trust and
Assignment be recorded in the Stock and
Transfer Book of Nautica, and that he, as a
stockholder, be allowed to inspect its books
and records.
Yumul’s requests were denied allegedly
because he neither exercised the option to
purchase the shares nor paid for the acquisition
price of the 14,999 shares. Atty. Arguelles
maintained that the cash dividend received by
Yumul is held by him only in trust for First
Dominion Prime Holdings, Inc.
Yumul filed a petition for mandamus with the
SEC, praying 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. The SEC ruled in favor of
Yumul. Upon appeal, the CA affirmed the SEC
ruling.
ISSUES:
1) WON Yumul has transferred his
subscription to Dee and has thereby
ceased to be a stockholder of Nautica.
2) WON the Corporate Secretary of
Nautica may be compelled to record the
Deed of Assignment in the Stock and
Transfer Book of the corporation.
HELD:
1) NO. The validity of its incorporation is
not affected when such individual gives
nominal ownership of only one share of
stock to each of the other four
incorporators. Incorporators continue to
be stockholders of a corporation unless,
subsequent to the incorporation, they
have validly transferred their
subscriptions to the real parties in
interest. A transfer of shares of stock
not recorded in the stock and transfer
 book of the corporation is non-existent concerning the application of the Civil
as far as the corporation is Code are properly cognizable by courts
concerned. As between the corporation of general jurisdiction. The SC refrained
on the one hand, and its shareholders from ruling on whether or notYumul can
and third persons on the other, the compel the corporate secretary to
corporation looks only to its books for register said deed. It is only after an
the purpose of determining who its appropriate case is filed and decision
shareholders are. Without such rendered thereon by the proper forum
recording, the transferee may not be can the issue be resolved.
regarded by the corporation as one
among its stockholders and the
corporation may legally refuse the
issuance of stock certificates. 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 thus, the SEC and the
Court of Appeals correctly found Yumul
to be a stockholder of Nautica.

The conduct of the parties also

constitute sufficient proof of Yumul’s
status as a stockholder. He was elected
as a director, thereafter, he was elected
as president. Thus, Nautica and its
stockholders knowingly held Yumul out
to the public as an officer and a
stockholder of the corporation.

2) NO. Petitioners allege that Yumul failed

to exercise the option to purchase
shares of stocks in Nautica, thus there
was no cause or consideration for
the Deed of Trust and Assignment,
which makes it void for being simulated
or fictitious. Anent the validity of the
Deed of Trust and Assignment, the
Court ruled that the determination of
whether a contract is simulated or not is
an issue that could be resolved by
applying pertinent provisions of the Civil
Code, particularly those relative to
obligations and contracts. Disputes