7.
QUORUM IN NON-STOCK CORPORATIONS
G.R. No. 206038 January 25, 2017
MARY E. LIM Petitioner, vs. MOLDEX LAND, INC., and JEFFREY JAMINOLA,
EDGARDO MACALINTAL, JOJI MILANES, and CLOTHILDA ANNE ROMAN, in
their capacity as purported members of the Board of Directors of 1322 Golden
Empire Corporation, Respondents.
MENDOZA, J.:
FACTS: Lim is a registered unit owner of Golden Empire Tower, a condominium project
of Moldex Land. Condocor is the registered condominium corporation for the Golden
Empire Tower. Lim, as a unit owner of Golden Empire Tower, is a member of Condocor.
Lim claimed that the individual respondents are non-unit buyers, but all are members of
the Board of Directors, having been elected during its organizational meeting in 2008
and in 2012. Moldex became a member of Condocor on the basis of its ownership of
the unsold units in the Golden Empire Tower. The individual respondents acted as its
representatives.
Condocor held its annual general membership meeting in 2012. Its corporate secretary
certified, and Jaminola, as Chairman, declared the existence of a quorum even though
only 29 of the 108 unit buyers were present. The declaration of quorum was based on
the presence of the majority of the voting rights. Lim, through her attorney-in-fact,
objected to the validity of the meeting. The objection was denied. Thus, Lim and all the
other unit owners present, except for one, walked out and left the meeting.
Despite the walkout, the respondents proceeded with the annual general membership
meeting and elected the new members of the Board. All four individual respondents
were voted as members of the board. Thereafter, the newly elected members of the
board conducted an organizational meeting and proceeded with the election of its
officers. The individual respondents were elected as officers.
Consequently, Lim filed an election protest before the RTC. RTC, however, dismissed
the complaint holding that the presence or absence of a quorum in the subject meeting
was determined on the basis of the voting rights of all the units owned by the members
in good standing. As certified by the corporate secretary, 83.33% of the voting rights in
good standing were present in the said meeting.
ISSUES:
1. Whether the meeting was valid. – NO, there is no quorum.
2. Whether Moldex can be deemed a member of Condocor. – YES.
3. Whether a non-unit owner can be elected as a member of the Board. – NO.
RULING:
Mode of Appeal
Doubtless, this case involves intra-corporate controversies and, thus, jurisdiction lies
with the RTC, acting as a special commercial court. Pursuant to A.M. No. 04-9-07-SC,
all decisions and final orders in cases falling under the Interim Rules of Corporate
Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate
Controversies shall be appealable to the CA through a petition for review under
Rule 43 of the Rules of Court.
Lim is still a member of Condocor
Respondents argued that Lim had no cause of action to file the subject action because
she was no longer the owner of a condominium unit by virtue of a Deed of
Assignment she executed. Section 90 of the Corporation Code states that membership
in a non-stock corporation and all rights arising therefrom are personal and non-
transferable, unless the articles of incorporation or the by-laws otherwise provide.
Nothing in the records showed that the alleged transfer made by Lim was registered
with the Register of Deeds or was reported to the corporation. Logically, until and
unless the registration is effected, Lim remains to be the registered owner of the
condominium unit and thus, continues to be a member of Condocor. Moreover,
she still owns the condominium unit and there has been no transfer of ownership over
the said property to her nephew, but only a mere assignment of rights to the latter.
In non-stock corporations, quorum is determined by the majority of its actual
members
The term "meeting" applies to every duly convened assembly either of stockholders,
members, directors, trustees, or managers for any legal purpose, or the transaction of
business of a common interest.25 A stockholders' or members' meeting must comply
with the following requisites to be valid:
1. The meeting must be held on the date fixed in the By-Laws or in accordance with
law;
2. Prior written notice of such meeting must be sent to all stockholders/members of
record;
3. It must be called by the proper party;
4. It must be held at the proper place; and
5. Quorum and voting requirements must be met.
The existence of a quorum is crucial. Any act or transaction made during a meeting
without quorum is rendered of no force and effect, thus, not binding on the
corporation or parties concerned. Section 52 provides that, for stock corporations,
the quorum is based on the number of outstanding voting stocks while for non-stock
corporations, only those who are actual, living members with voting rights shall be
counted.
To be clear, the basis in determining the presence of quorum in non-stock corporations
is the numerical equivalent of all members who are entitled to vote, unless some
other basis is provided by the By-Laws of the corporation. To include members without
voting rights in the total number of members for purposes of quorum would be
superfluous for although they may attend a particular meeting, they cannot cast their
vote on any matter discussed therein.
Similarly, Condocor's By-Laws stresses that delinquent members are not to be taken
into consideration in determining quorum. It also qualified that only those members in
good standing are entitled to vote. Delinquent members are stripped off their right to
vote.
It must be emphasized that insofar as Condocor is concerned, quorum is different from
voting rights. Applying the law and Condocor's By-Laws, if there are 100 members in a
non-stock corporation, 60 of which are members in good standing, then the presence
of 50% plus 1 of those members in good standing will constitute a quorum. Thus, 31
members in good standing will suffice in order to consider a meeting valid as regards
the presence of quorum. The 31 members will naturally have to exercise their voting
rights. It is in this instance when the number of voting rights each member is entitled to
becomes significant. If 29 out of the 31 members are entitled to 1 vote each, another
member, A, is entitled to 20 votes and the remaining member, B, is entitled to 15 votes,
then the total number of voting rights of all 31 members is 64. Thus, majority of the 64
total voting rights, which is 33 (50% plus 1), is necessary to pass a valid act. Assuming
that only A and B concurred in approving a specific undertaking, then their 35 combined
votes are more than sufficient to authorize such act.
The quorum during the 2012 meeting should have been majority of Condocor's
members in good standing. Accordingly, there was no quorum during the meeting
considering that only 29 of the 108 unit buyers were present.
Moldex is a member of Condocor
Membership in a condominium corporation is limited only to the unit owners of the
condominium project. In this case, Lim argued that Moldex cannot be a member of
Condocor. She insisted that a condominium corporation is an association of
homeowners for the purpose of managing the condominium project, among others. On
these grounds, Lim asserted that only unit buyers are entitled to become members.
Both law and jurisprudence dictate that ownership of a unit entitles one to become a
member of a condominium corporation. The Condominium Act does not provide a
specific mode of acquiring ownership. Thus, whether one becomes an owner of a
condominium unit by virtue of sale or donation is of no moment.
It is erroneous to argue that the ownership must result from a sale transaction between
the owner-developer and the purchaser. Such interpretation would mean that persons
who inherited a unit, or have been donated one, and properly transferred title in their
names cannot become members of a condominium corporation.
Moldex may appoint a duly authorized representative
A corporation can act only through natural persons duly authorized for the purpose or
by a specific act of its board of directors. 45 Thus, in order for Moldex to exercise its
membership rights and privileges, it necessarily has to appoint its representatives.
Individual respondents who are non-members cannot be elected as directors and
officers of the condominium corporation
The governance and management of corporate affairs in a corporation lies with its
board. As the board exercises all corporate powers and authority expressly vested upon
it by law and by the corporations' by-laws, there are minimum requirements set in order
to be a director or trustee, one of which is ownership of a share in one's name or
membership in a non-stock corporation.
While Moldex may rightfully designate proxies or representatives, the latter, however,
cannot be elected as directors or trustees of Condocor. First, the Corporation Code
clearly provides that a trustee must be a member of record of the
corporation. Further, the power of the proxy is merely to vote. If said proxy is not a
member in his own right, he cannot be elected as a director or trustee.
Respondents cannot rely on the SEC Opinions to justify the individual respondents'
election as directors. In Heirs of Gamboa v. Teves,49 the Court En Banc held that
opinions issued by SEC legal officers do not have the force and effect of SEC rules and
regulations because only the SEC en banc can adopt rules and regulations.
Following Section 25, the election of individual respondents, as corporate officers, was
likewise invalid. Section 25 of the Corporation Code mandates that the President shall
be a director. As previously discussed, Jaminola could not be elected as a director.
Consequently, Jaminola's election as President was null and void.
The same provision allows the election of such other officers as may be provided for in
the by-laws. Condocor's By-Laws, however, require that the Vice-President shall
be elected by the Board from among its member-directors in good standing, and the
Secretary may be appointed by the Board under the same circumstance. Like Jaminola,
Milanes and Macalintal were not directors and, thus, could not be elected and appointed
as Vice-President and Secretary, respectively. Insofar as Roman's election as
Treasurer is concerned, the same would have been valid, as a corporate treasurer may
or may not be a director of the corporation's board. The general membership meeting
of Condocor, however, was null and void. As a consequence, Roman's election had no
legal force and effect.
In fine, the 2012 annual general membership meeting of Condocor being null and void,
all acts and resolutions emanating therefrom are likewise null and void.
11. QUORUM IN STOCK CORPORATIONS; TRANSFER OF SHARES
G.R. No. 225022, February 05, 2018
CAROLINA QUE VILLONGCO, ANA MARIA QUE TAN, ANGELICA QUE
GONZALES, ELAINE VICTORIA QUE TAN AND EDISON WILLIAMS QUE
TAN, Petitioners, v. CECILIA QUE YABUT, EUMIR CARLO QUE CAMARA AND MA.
CORAZON QUE GARCIA, Respondents.
TIJAM, J.:
FACTS: Phil-Ville is a family corporation owned by Geronima that is engaged in the real
estate business. Geronima died on August 31, 2007. By virtue of the Sale of Shares of
Stocks purportedly executed by Cecilia as the attorney-in-fact of Geronima, Cecilia
allegedly effected an inequitable distribution of the 3,140 shares that belonged to
Geronima.
Cecilia Que, et. al. wrote a letter to Ana Maria, Corporate Secretary of Phil-Ville, to send
out notices for the holding of the annual stockholders' meeting. However, before Ana
Maria could reply thereto, several letters were sent to Phil-Ville's stockholders
containing a document captioned "Notice of Annual Stockholders' Meeting" signed by
Cecilia and Ma. Corazon as directors.
Thereafter, Carolina, Ana Maria, and Angelica, comprising the majority of the Board of
Directors of Phil-Ville held an emergency meeting and made a decision, by concensus,
to postpone the annual stockholders' meeting of Phil-Ville until the issue of the
distribution of the 3,140 shares of stocks in the name of certain stockholders is settled.
All the stockholders were apprised of the decision to postpone the meeting in a letter.
Despite the postponement, however, Cecilia Que, et al. proceeded with the scheduled
annual stockholder's meeting participated only by a few stockholders. In the said
meeting, they elected the respondents as the new members of the Board and officers
of Phil-Ville.
Meantime, two days prior to the stockholders' meeting, Carolina, Ana Maria, and
Angelica, together with several others, had already filed a Complaint for Annulment of
Sale/Distribution or Settlement of Shares of Stock/Injunction.
While the case was still pending, Eumir Carlo sent a Notice of Annual Stockholders'
Meeting to all the stockholders of Phil-Ville, notifying them of the setting of the annual
stockholders' meeting. During the meeting, Cecilia, Ma. Corazon and Eumir Carlo were
elected as directors and later elected themselves as officers.
Consequently, Carolina, et al. filed the instant election case. The Complaint prayed that
the election be declared void considering the invalidity of the holding of the meeting at
Max's Restaurant for lack of quorum therein, the questionable manner by which it was
conducted, including the invalid inclusion in the voting of the shares of the late
Geronima, the questionable validation of proxies, the representation and exercise of
voting rights by the alleged proxies representing those who were not personally present
at the said meeting, and the invalidity of the proclamation of the winners. They also
questioned the election of officers. They likewise prayed that all the actions taken by
the respondents in relation to their election as directors and officers of the corporation
be declared void.
ISSUE: Whether the total undisputed shares of stocks in Phil-Ville should be the basis
in determining the presence of a quorum. – NO.
RULING:
[Quorum]
Total outstanding capital stocks, without distinction as to disputed or undisputed
shares of stock, is the basis in determining the presence of quorum.
Carolina et. al., claimed that the basis for determining quorum should have been the
total number of undisputed shares of stocks of Phil-Ville due to the exceptional nature
of the case since the 3,140 shares of the late Geronima and the fractional .67, .67, and
.66 shares of Eumir, Paolo and Abimar are the subject of another dispute filed before
the RTC. Thus, excluding the 3,142 shares from the 200,000 outstanding capital stock,
the proper basis of determining the presence of quorum.22 We do not agree.
Section 52 of the Corporation Code states that a quorum shall consist of the
stockholders representing a majority of the outstanding capital stock, while Section
137 defines "outstanding capital stock" as the total shares of stock issued under
binding subscription agreements to subscribers or stockholders, whether or not fully or
partially paid, except treasury shares.
The right to vote is inherent in and incidental to the ownership of corporate
stocks. It is settled that unissued stocks may not be voted or considered in determining
whether a quorum is present in a stockholders' meeting. Only stocks actually issued
and outstanding may be voted.23 Thus, for stock corporations, the quorum is based
on the number of outstanding voting stocks.24 The distinction of undisputed or
disputed shares of stocks is not provided for in the law or the jurisprudence. When the
law does not distinguish we should not distinguish. Thus, the 200,000 outstanding
capital stocks of Phil-Ville should be the basis for determining the presence of a quorum,
without any distinction. Therefore, to constitute a quorum, the presence of 100,001
shares of stocks in Phil-Ville is necessary.
We agree with the CA when it held that only 98,430 shares of stocks were present
during the 2014 stockholders meeting at Max's Restaurant, therefore, no quorum had
been established.

[Transfer of Shares]

There is no evidence that the 3,140 shares which allegedly had been transferred since
it was not recorded in the stocks and transfer book of Phil-Ville as required by Section
63. As held in the case of Interport Resources Corporation v. Securities Specialist,
Inc.,26 held that:

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 the 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.

The contention of Cecilia, et al., that they should not be faulted for their failure to present
the stock and transfer book because the same is in the possession of the corporate
secretary, Ana Maria, who has an interest adverse from them, is devoid of merit. It is
basic that a stockholder has the right to inspect the books of the corporation, and if the
stockholder is refused by an officer of the corporation to inspect or examine the books
of the corporation, the stockholder is not without any remedy. The Corporation Code
grants the stockholder a remedy—to file a case in accordance with Section 144.

In this case, there is no evidence that the 3,140 shares of the late Geronima were
recorded in the stocks and transfer book of Phil-Ville. Thus, insofar as Phil-Ville is
concerned, the 3,140 shares of the late Geronima allegedly transferred to several
persons is non-existent. Therefore, the transferees of the said shares cannot exercise
the rights granted unto stockholders of a corporation, including the right to vote and to
be voted upon.

WHEREFORE, premises considered, the instant Petitions for Review

on Certiorari are DENIED. The Decision dated September 4, 2015 and Amended
Decision dated June 8, 2016 of the Court of Appeals in CA-G.R. SP No. 134666 are
hereby AFFIRMED in toto.

SO ORDERED.
16. EFFECTS OF MERGER/CONSOLIDATION
G.R. No. 190187, September 28, 2016
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION, Petitioner, v. UNOCAL
PHILIPPINES, INC. (NOW KNOWN AS CHEVRON GEOTHERMAL PHILIPPINES
HOLDINGS, INC.), Respondent.
LEONEN, J.:
FACTS: Unocal Corporation executed a Merger Agreement with Chevron and Blue
Merger. Blue Merger is a wholly owned subsidiary of Chevron. Under the Merger
Agreement, Unocal Corporation merged with Blue Merger, and Blue Merger became
the surviving corporation. Chevron then became the parent corporation of the merged
corporations. After the merger, Blue Merger, as the surviving corporation, changed its
name to Unocal Corporation.13
Unocal executed a Collective Bargaining Agreement with the Union. 14 However, the
Union wrote Unocal asking for the separation benefits provided for under the CBA.
According to the Union, the Merger Agreement resulted in the closure and cessation of
operations of Unocal and the implied dismissal of its employees. 15 Unocal refused the
Union's request and asserted that the employee-members were not terminated and that
the merger did not result in its closure or the cessation of its operations.16
Petitioner claims that the merger resulted in (a) "the severance of the juridical tie that
existed between the employees and its original employer, Unocal Corporation," and (b)
the implied termination of the employment of the Union's members, who had the right
to waive their continued employment with the absorbing corporation. 47 Petitioner insists
that the the "cessation of operations" contemplated in the CBA and the Memorandum
of Agreement must be liberally interpreted to include mergers,48 and that doubts must
be resolved in favor of labor.49
Respondent argues that in any case, petitioner's members still did not lose their
employment as to warrant the award of separation pay. 55 The Memorandum of
Agreement, the CBA, and the contemporaneous acts of the parties show that
respondent shall pay separation pay only in case the employees actually lose their jobs
due to redundancy, retrenchment or installation of labor-saving devices, or closure and
cessation of operation.56 As these circumstances did not occur, respondent cannot
grant petitioner's members separation pay.
ISSUES:
1. Whether the Merger Agreement resulted in the termination of the employment of
petitioner's members – NO.
2. Whether petitioner's members are entitled to separation benefits. – NO.
RULING:
1. We find that, whether or not respondent is a party to the Merger Agreement, there is
no implied dismissal of its employees as a consequence of the merger.
A merger is a consolidation of two or more corporations, which results in one or more
corporations being absorbed into one surviving corporation.69 The separate existence
of the absorbed corporation ceases, and the surviving corporation "retains its identity
and takes over the rights, privileges, franchises, properties, claims, liabilities and
obligations of the absorbed corporation(s)."
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of Unocal
Corporation, then the merger of Unocal Corporation with Blue Merger and Chevron does
not affect respondent or any of its employees. Respondent has a separate and distinct
personality from its parent corporation. Nonetheless, if respondent is indeed a party to
the merger, the merger still does not result in the dismissal of its employees.
SEC. 80. Effects of merger or consolidation. — The merger or consolidation, as
provided in the preceding sections shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of
merger, shall be the surviving corporation designated in the plan of merger; and, in case
of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the
surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of a
corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises of each of the constituent
corporations; and all property, real or personal, and all receivables due on whatever
account, including subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent corporation, shall be taken
and deemed to be transferred to and vested in such surviving or consolidated
corporation without further act or deed; and
5. The surviving or the consolidated corporation shall be responsible and liable for all
the liabilities and obligations of each of the constituent corporations in the same manner
as if such surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any claim, action or proceeding pending by or against any of such
constituent corporations may be prosecuted by or against the surviving or consolidated
corporation, as the case may be. Neither the rights of creditors nor any lien upon the
property of any of such constituent corporations shall be impaired by such merger or
consolidation. (Emphasis supplied)
Although this provision does not explicitly state the merger's effect on the employees of
the absorbed corporation, BPI v. BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank71 has ruled that the surviving corporation automatically
assumes the employment contracts of the absorbed corporation, such that the
absorbed corporation's employees become part of the manpower complement of
the surviving corporation, since it is more in keeping with the dictates of social justice
and the State policy of according full protection to labor to deem employment contracts
as automatically assumed by the surviving corporation in a merger, even in the absence
of an express stipulation in the articles of merger or the merger plan.
The rationale for this ruling is anchored on the nature and effects of a merger as
provided under Section 80 of the Corporation Code, as well as the policies on work and
labor enshrined in the Constitution.73 To reiterate, Section 80 of the Corporation Code
provides that the surviving corporation shall possess all the rights, privileges, properties,
and receivables due of the absorbed corporation. The surviving corporation likewise
acquires all the liabilities and obligations of the absorbed corporation as if it had itself
incurred these liabilities or obligations.75
This acquisition of all assets, interests, and liabilities of the absorbed corporation
necessarily includes the rights and obligations of the absorbed corporation under its
employment contracts. Consequently, the surviving corporation becomes bound by the
employment contracts entered into by the absorbed corporation. These employment
contracts are not terminated. They subsist unless their termination is allowed by law.
keep in its payroll more employees than are necessary for the operation of its
business.90
Retrenchment, on the other hand, is the reduction of personnel to save on costs on
salaries and wages due to a considerable decline in the volume of business.91
Cessation and closure of business contemplates the stopping of business operations of
the employer whether on the employer's prerogative or on account of severe business
losses.92
None of these instances are present here. The terms do not provide that a merger is
one of the instances where petitioner may claim separation benefits for its members.
Neither can these circumstances be interpreted as to contemplate a merger with
another corporation. In any case, if title parties intended that petitioner ought to be
granted separation pay in case of a merger, it should have been explicitly provided for
in the contract. Absent this express intention, petitioner cannot claim separation pay.
WHEREFORE, the Decision dated July 23, 2009 and the Resolution dated November
9, 2009 of the Court of Appeals in CA-G.R. SP No. 102184 are AFFIRMED. The Petition
for Review is DENIED considering that no reversible error was committed by the Court
of Appeals.

Petitioner insists that this is contrary to its freedom to contract, considering its members SO ORDERED.
did not enter into employment contracts with the surviving corporation. However,
petitioner is not precluded from leaving the surviving corporation. Although the absorbed
employees are retained as employees of the merged corporation, the employer retains
the right to terminate their employment for a just or authorized cause. Likewise, the
employees are not precluded from severing their employment through resignation or
retirement. The freedom to contract and the prohibition against involuntary servitude is
still, thus, preserved in this sense.84 This is the manner by which the consent of the
employees is considered by the law.

2. Given these considerations, we rule that petitioner is not entitled to the separation
benefits it claims from respondent. Separation benefits are not granted to petitioner by
law in case of voluntary resignation, or by any contract it entered into with respondent.

Merger is not one of the circumstances where the employees may claim separation pay.
The only instances where separation pay may be awarded to petitioner are: (a)
reduction in workforce as a result of redundancy; (b) retrenchment or installation of
labor-saving devices; or (c) closure and cessation of operations.

Redundancy has been defined by this Court as follows:

Redundancy exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The employer has no legal obligation to
21. LIABILITIES – VIOLATION OF A LAW
G.R. No. 202639 November 9, 2016
FEDERATED LPG DEALERS ASSOCIATION, Petitioner vs. MA. CRISTINA L. DEL
ROSARIO, CELSO E. ESCOBIDO II, SHIELA M. ESCOBIDO, and RESTY P. CAPILI,
Respondents
DEL CASTILLO, J.:
FACTS: Petitioner, through counsel Atty. Adarlo, sought assistance from the PNP in the
surveillance, investigation, apprehension, and prosecution of establishments reportedly
committing acts violative of B.P. 33, as amended, to wit: (1) refilling of LPG cylinders
branded as Shellane, Petron Gasul, Caltex, Totalgaz and Superkalan Gaz without any
written authorization from the companies which own the said brands; (2) underfilling of
LPG products or possession of underfilled LPG cylinders for the purpose of sale,
distribution, transportation, exchange or barter; and (3) refilling LPG cylinders without
giving any receipt therefor, or giving out receipts without indicating the brand name, tare
weight, gross weight and/or price thereof.
A few days later, Atty. Adarlo again wrote the PNP informing the latter of its confirmation
that ACCS, which allegedly has been refilling branded LPG cylinders in its refilling plant,
has no authority to refill per certifications from gas companies owning the branded LPG
cylinders. After a series of surveillance, the group observed that various vehicles and
individuals carrying branded LPG cylinders have been going in and out of ACCS refilling
plant. Hence, they conducted a test-buy operation.
Having reasonable grounds to believe that ACCS was in violation of BP 33, P/Supt.
Esguerra filed with the RTC of Manila applications for search warrant against the officers
of ACCS. This resulted in the seizure of an electric motor, a hose with filling head,
scales, v-belt, vapor compressor, booklets of various receipts, and 73 LPG cylinders of
various brands and sizes, four of which were filled. Esguerra filed with the DOJ
Complaints-Affidavits against Antonio and respondents for illegal trading of petroleum
products and for underfilling of LPG cylinders.
Antonio admitted that he was the General Manager of ACCS but denied that the
company was engaged in illegal trading and underfilling. He likewise asserted that the
herein respondents were merely incorporators of ACCS who have no active
participation in the operation of the business of the corporation. Respondents filed a
Joint Counter-Affidavit21 corroborating the statements of Antonio.
P/Supt. Esguerra stressed that pursuant to B.P. 33, the President, General Manager,
Managing Partner, or such other officer charged with the management of the business
affairs of the corporation, or the employee responsible for the violation shall be criminally
liable. Thus, Antonio, being the General Manager, is criminally liable. Anent the
respondents, P/Supt. Esguerra averred that the Articles of Incorporation (AOI) of ACCS
provides that there shall be five incorporators who shall also serve as the directors.
Considering that respondents were listed in the AOI as incorporators, they are thus
deemed as the directors of ACCS. And since the By-Laws of ACCS provides that all
business shall be conducted and all property of the corporation controlled and held by
the Board, and also pursuant to Section 23 of the Corporation Code, respondents are
likewise criminally liable.
Antonio and respondents reiterated, among others, that respondents cannot be held
liable under B.P. 33 as amended since the AOI of ACCS did not state that they were
the President, General Manager, Managing Partner, or such other officer charged with
the management of business affairs. What the AOI plainly indicated was that they were
the incorporating stockholders of the corporation and nothing more.
ISSUE: Whether respondents, as members of the Board of Directors of ACCS, can be
criminally prosecuted for the latter's alleged violation/s of B.P. 33, as amended. – NO.
RULING: Respondents cannot be prosecuted for ACCS' alleged violations of BP 33.
They were thus correctly dropped as respondents in the complaints.
The Court finds no need to belabor this point as it has already made a definite
pronouncement on an identical issue in Ty v. NBI Supervising Agent De Jemil.
Sec. 4 of BP 33. as amended, provides for x x x persons who are criminally liable, thus:
When the offender is a corporation, partnership, or other juridical person,
the president, the general manager, managing partner, or such other officer
charged with the management of the business affairs thereof, or employee
responsible for the violation shall be criminally liable; x x x
As clearly enunciated in Ty, a member of the Board of Directors of a corporation,
cannot, by mere reason of such membership, be held liable for the corporation’s
probable violation of BP 33. If one is not the President, General Manager or Managing
Partner, it is imperative that it first be shown that he/she falls under the catch-all "such
other officer charged with the management of the business affairs," before he/she can
be prosecuted. However, it must be stressed, that the matter of being an officer charged
with the management of the business affairs is a factual issue which must be alleged
and supported by evidence. Here, there is no dispute that neither of the respondents
was the President, General Manager, or Managing Partner of ACCS. Hence, it becomes
incumbent upon petitioner to show that respondents were officers charged with the
management of the business affairs. However, the Complaint-Affidavit39 attached to the
records merely states that respondents were members of the Board of Directors based
on the AOI of ACCS. There is no allegation whatsoever that they were in-charge of the
management of the corporation’s business affairs.
At any rate, the Court has gone through the By-Laws of ACCS and found nothing
therein which would suggest that respondents were directly involved in the day-to-day
operations of the corporation. True, Section 140 of Article ID thereof contains a general
statement that the corporate powers of ACCS shall be exercised, all business
conducted, and all property of the corporation controlled and held by the Board of
Directors. Notably, however, the same provision likewise significantly vests the Board
with specific powers that were generally concerned with policy making from which it can
reasonably be deduced that the Board only concerns itself in the business affairs
by setting administrative and operational policies. It is actually the President, under
the said by-laws, who is vested with wide latitude in controlling the business operations
of the corporation. Among others, the President is specifically empowered to supervise
and manage the business affairs of the corporation, to implement the administrative and
operational policies of the corporation under his supervision and control, to appoint,
remove, suspend or discipline employees of the corporation, prescribe their duties, and
determine their salaries. With these functions, the President appears to be the officer
charged with the management of the business affairs of ACCS. But since there is
no allegation or showing that any of the respondents was the President of ACCS, none
of them, therefore, can be considered as an officer charged with the management
of the business affairs even in so far as the By-Laws of the subject corporation is
concerned.

Clearly, therefore, it is only Antonio, who undisputedly was the General Manager – a
position among those expressly mentioned as criminally liable under the law – can be
prosecuted for ACCS' perceived violations of the said law. Respondents who were mere
members of the Board of Directors and not shown to be charged with the management
of the business affairs were thus correctly dropped as respondents in the complaints.

WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED.

SO ORDERED.