MACTAN v.

GERMO

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated August 8, 2016 and the
Resolution[3] dated October 14, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 104431, which
affirmed the Decision[4] dated January 14, 2015 of the Regional Trial Court of Muntinlupa City, Branch 276
(RTC) in Civil Case No. 11-029, finding petitioners Mactan Rock Industries, Inc. (MRII) and Antonio
Tompar (Tompar) solidarily liable to pay respondent Benfrei S. Germo (Germo) the amount of
P4,499,412.84 plus interest, damages, and attorney's fees.

The Facts

This case stemmed from a Complaint[5] for sum of money and damages filed by Germo against MRII – a
domestic corporation engaged in supplying water, selling industrial maintenance chemicals, and water
treatment and chemical cleaning services[6] – and its President/Chief Executive Officer (CEO), Tompar. The
complaint alleged that on September 21, 2004, MRII, through Tompar, entered into a Technical
Consultancy Agreement (TCA)[7] with Germo, whereby the parties agreed, inter alia, that: (a) Germo shall
stand as MRII's marketing consultant who shall take charge of negotiating, perfecting sales, orders,
contracts, or services of MRII, but there shall be no employer-employee relationship between them;
and (b) Germo shall be paid on a purely commission basis, including a monthly allowance of P5,000.00. [8]

On May 2, 2006 and during the effectivity of the TCA, Germo successfully negotiated and closed with
International Container Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic meters of purified
water per day. Accordingly, MRII commenced supplying water to ICTSI on February 22,  2007, and in
tum, the latter religiously paid MRII the corresponding monthly fees.[9] Despite the foregoing, MRII
allegedly never paid Germo his rightful commissions amounting to P2,225,969.56 as of December 2009,
inclusive of interest.[10] Initially, Germo filed a complaint before the National Labor Relations Commission
(NLRC), but the same was dismissed for lack of jurisdiction due to the absence of employer-employee
relationship between him and MRII. He then filed a civil case before the Regional Trial Court of
Muntinlupa, Branch 256, but the same was dismissed without prejudice to its re-filing due to his counsel's
failure to mark all his documentary evidence at the pre-trial conference.[11] Hence, Germo filed the instant
complaint praying that MRII and Tompar be made to pay him the amounts of P2,225,969.56 as unpaid
commissions with legal interest from the time they were due until fully paid, P1,000,000.00 as moral
damages, P1,000,000.00 as exemplary damages, and the costs of suit.[12]

In their Answer,[13] MRII and Tompar averred, among others, that: (a) there was no employer-employee
relationship between MRII and Germo as the latter was hired as a mere consultant; (b) Germo failed to
prove that the ICTSI account materialized through his efforts as he did not submit the required periodic
reports of his negotiations with prospective clients; and (c) ICTSI became MRII's client through the efforts
of a certain Ed Fornes.[14] Further, MRII and Tompar claimed that Germo should be made to pay them
litigation expenses and attorney's fees as they were compelled to litigate and engage the services of
counsel to protect their interest.[15]

Due to MRII, Tompar, and their counsel's multiple absences at the various schedules for pre-trial
conference, the RTC considered them as "in default," thereby allowing Germo to present his evidence ex-
parte.[16]

The RTC Ruling

In a Decision[17] dated January 14, 2015, the RTC ruled in Germo's favor, and accordingly, ordered MRII
and Tompar to solidarily pay him the amounts of: (a) P4,499,412.84 representing Germo's unpaid
commissions from February 2007 until March 2012 with legal interest from judicial demand until fully
satisfied; (b) P100,000.00 as moral damages; (c) P100,000.00 as exemplary damages;
and (d) P50,000.00 as attorney's fees.[18]

The RTC found that MRII and Germo validly entered into a TCA whereby the latter shall act as the former's
marketing consultant, to be paid on a commission basis. [19] It also found that MRII's contract with ICTSI
was made possible through Germo's negotiation and marketing skills, and as such, the latter should be
paid the commissions due to him. In this regard, Germo presented various sales invoices spanning the
period of February 2007 to March 2012, wherein he should have been paid commissions in the amount of
P4,499,412.84.[20] Further, based on the evidence presented and in order to deter those who intend to
negate the fulfillment of an obligation to the prejudice of another, the RTC found it appropriate to award
Germo moral damages, exemplary damages, and attorney's fees in the foregoing amounts. [21] Finally, the
RTC imposed a lien equivalent to the appropriate legal fees on the monetary awards in Germo's favor,
noting that the latter litigated the instant suit as an indigent. [22]

Aggrieved, MRII and Tompar appealed[23] to the CA, this time claiming, among others, that: (a) the
jurisdiction over the case lies before the NLRC as the same is a monetary dispute arising from an
employer-employee relationship; and (b) Germo had no legal personality to pursue the instant case since
he only signed the TCA as a representative of another entity. [24]

The CA Ruling

In a Decision[25] dated August 8, 2016, the CA affirmed the RTC ruling. [26] It held that Germo had
sufficiently proven through the required quantum of evidence that: (a) he and MRII, through Tompar,
entered into a TCA and thus, the provisions thereof are binding between them; (b) MRII's contract with
ICTSI was realized through Germo's efforts; and (c) MRII failed to pay Germo the commissions due to him
pursuant to the TCA and the ICTSI contract. [27]

Anent MRII and Tompar's additional arguments, the CA held that the same constitutes a new case theory,
which cannot be introduced for the first time on appeal. The CA further pointed out that such new theory
is directly contradictory to the judicial admissions they made in their Answer, [28] which are already binding
on them.[29]

Undaunted, MRII and Tompar moved for reconsideration, [30] but the same was denied in a
Resolution[31] dated October 14, 2016; hence, this petition.[32]

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA correctly upheld MRII and Tompar's solidary
liability to Germo.

The Court's Ruling

The petition is partly meritorious.

In the instant petition, MRII and Tompar insist, among others that: (a) the regular courts have no
jurisdiction over the case as the present dispute involves an employment dispute cognizable by the NLRC;
and (b) Germo had no legal personality to pursue the case as he signed the TCA not in his personal
capacity, but as a representative of another entity.[33]

Such insistence is untenable.

As aptly pointed out by the CA, the foregoing constitutes a new theory raised for the first time on appeal,
considering that in their Answer[34] before the RTC, MRII and Tompar admitted, inter alia, the: (a) lack of
employer-employee relationship between MRII and Germo as the latter was hired as a mere consultant;
and (b) genuineness, authenticity, and due execution of the TCA, among other documents proving
Germo's claims.[35] "As a rule, a party who deliberately adopts a certain theory upon which the  case is
tried and decided by the lower court, will not be permitted to change theory on appeal. Points of law,
theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily
will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage.
It would be unfair to the adverse party who would have no opportunity to present further evidence
material to the new theory, which it could have done had it been aware of it at the time of the hearing
before the trial court."[36] While this rule admits of an exception,[37] such is not applicable in this case.

More importantly, MRII and Tompar's statements in their Answer constitute judicial admissions, [38] which
are legally binding on them.[39] Case law instructs that even if such judicial admissions place a party at a
disadvantageous position, he may not be allowed to rescind them unilaterally and that he must assume
the consequences of such disadvantage,[40] as in this case.

As to the merits of the case, the courts a quo correctly found that: (a) Germo entered into a valid and
binding TCA with MRII where he was engaged as a marketing consultant; (b) aside from the P5,000.00
monthly allowance, Germo was going to be paid on a purely commission basis; (c) during the effectivity of
the TCA and in the performance of his duties as marketing consultant of MRII, Germo successfully
brokered MRII's contract of services with ICTSI, obviously resulting in revenues in MRII's
favor; (d) despite the foregoing and demands from Germo, MRII refused to pay Germo's rightful
commission fees; and (e) MRII's refusal to pay Germo resulted – or at the very least, contributed to –
Germo's financial hardships. In light of the foregoing, the courts a quo correctly found MRII liable to
Germo for the various monetary obligations as stated in their respective rulings. Time and again, it has
been consistently held that the factual findings of the trial court, especially when affirmed by the CA,
deserve great weight and respect and will not be disturbed on appeal unless it appears that there are facts
of weight and substance that were overlooked or misinterpreted and that would materially affect the
disposition of the case;[41] none of which are present insofar as this matter is concerned.

Be that as it may, the Court finds that the courts a quo erred in concluding that Tompar, in his capacity as
then-President/CEO of MRII, should be held solidarily liable with MRII for the latter's obligations to Germo.
It is a basic rule that a corporation is a juridical entity which is vested with legal and personality separate
and distinct from those acting for and in behalf of, and from the people comprising it. As a general rule,
directors, officers, or employees of a corporation cannot be held personally liable for the obligations
incurred by the corporation, unless it can be shown that such director/officer/employee is guilty of
negligence or bad faith, and that the same was clearly and convincingly proven. Thus, before a director or
officer of a corporation can be held personally liable for corporate obligations, the following requisites
must concur: (1) the complainant must allege in the complaint that the director or officer assented to
patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith;
and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
[42]
 In this case, Tompar's assent to patently unlawful acts of the MRII or that his acts were tainted by
gross negligence or bad faith was not alleged in Germo's complaint, much less proven in the course of
trial. Therefore, the deletion of Tompar's solidary liability with MRII is in order.

Further, the Court deems it proper to adjust the interests imposed on the monetary awards in Germo's
favor. To recapitulate, he was awarded the amounts of P4,499,412.84 representing his unpaid
commissions from February 2007 to March 2012, P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P50,000.00 as attorney's fees. Pursuant to prevailing jurisprudence, his unpaid
commissions shall earn legal interest at the rate of twelve percent (12%) per annum from judicial
demand, i.e., the filing of the complaint on February 28, 2011 until June 30, 2013, and thereafter, at the
rate of six percent (6%) per annum from July 1, 2013 until the finality of this Decision. Thereafter, all
monetary awards due to him shall then earn legal interest at the rate of six percent (6%) per annum from
the finality of this ruling until fully paid.[43]

Finally, since Germo litigated the instant suit as an indigent party as defined in Section 21, Rule 3 [44] of the
Rules of Court, it is only proper that the appropriate filing fees be considered as a lien on the monetary
awards due to him, pursuant to the second paragraph of Section 19, Rule 141[45] of the same Rules.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated August 8, 2016 and the Resolution
dated October 14, 2016 of the Court of Appeals in CA-G.R. CV No. 104431 are
hereby AFFIRMED with MODIFICATION, DELETING petitioner Antonio Tompar's solidary liability with
petitioner Mactan Rock Industries, Inc. (MRII). Accordingly, MRII is solely liable to respondent Benfrei S.
Germo (Germo) for the following amounts: (a) P4,499,412.84 representing his unpaid commissions from
February 2007 to March 2012 with legal interest at the rate of twelve percent (12%) per annum from
judicial demand, i.e., the filing of the complaint on February 28, 2011 until June 30, 2013, and thereafter,
at the rate of six percent (6%) per annum from July 1, 2013 until the finality of this
Decision; (b) P100,000.00 as moral damages; (c) P100,000.00 as exemplary damages;
and (d) P50,000.00 as attorney's fees. The total monetary awards shall then earn legal interest at the rate
of six percent (6%) per annum from the finality of this ruling until fully paid.

Finally, let the appropriate filing fees be considered as a lien on the monetary awards due to Germo, who
litigated the instant case as an indigent party, in accordance with Section 19, Rule 141 of the Rules of
Court.

CAROLINA QUE VILLONGCO v. CAROLINA QUE VILLONGCO 

TIJAM, J.:

Before Us are separate Petitions for Review on Certiorari[1] assailing the Decision[2] dated September 4,
2015 and Amended Decision[3] dated June 8, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 134666
declaring the annual stockholder's meeting held by Cecilia Que Yabut, Eumir Carlo Que and Ma. Corazon
Que Garcia (Cecilia Que, et al.) on January 25, 2014 void for lack of quorum and declared all acts
performed by Cecilia Que, et al. as ultra vires acts as they were not legally clothed with corporate
authority to do so.
The pertinent facts of the case as found by the CA are as follows:

Phil-Ville Development and Housing Corporation (Phil-Ville) is a family corporation founded by Geronima
Gallego Que (Geronima) that is engaged in the real estate business. The authorized capital stock of Phil-
Ville is Twenty Million Pesos (P20,000,000) divided into Two Hundred Thousand (200,000) shares with a
par value of One Hundred Pesos (P100.00) per share. During her lifetime, Geronima owned 3,140 shares
of stock while the remaining 196,860 shares were equally distributed among Geronima's six children,
namely: Carolina Que Villongco, Ana Maria Que Tan, Angelica Que Gonzales, Cecilia Que Yabut, Ma.
Corazon Que Garcia, and Maria Luisa Que Camara, as follows:

(a) Carolina Que Villongco- 32,810 shares;

(b) Ana Maria Que Tan- out of her 32,810 shares, she retained 17,710 shares and transferred the rest to
her six children, thus: Edmund Williams Que Tan- 2,600 shares; Edward Williams Que Tan- 2,500
[shares]; Edison Williams Que Tan- 2,500 shares; Elaine Victoria Que Tan[-] 2,500 shares; Eloisa Victoria-
2,500 shares; and Elinor Victoria- 2,500 shares;
(c) Angelica Que Gonzales- 32,810;
(d) Cecilia Que Yabut- out of her 32,810 shares, she retained 22,810 shares and transferred the rest to
her four children, thus: Geminiano Que Yabut III- 2,500 shares; Carlos Que Yabut- 2,500 shares;
Geronimo Que Yabut- 2,500 shares; and Jose Elston Que Yabut- 2,500 shares;
(e) Ma. Corazon Que Garcia- out of her 32,810 shares, she retained 21,460 shares and transferred the
rest to her four children, thus: Anthony Que Garcia- 2,500 shares; Geronima Que Garcia- 2,950 shares;
Michelle Que Garcia- 2,950 shares; and Ma. Christina Que Garcia- 2,950 shares;
(f) Maria Luisa Que Camara- upon her death, her shares were divided among her children: Eumir Que
Camara- 10,936.67 shares; Pablo Que Camara- 10,936.67 shares; and Abimar Que Camara- 10,936.66
shares.
Geronima died on August 31, 2007. By virtue of the Sale of Shares of Stocks dated June 11, 2005
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, to wit:

(a) Carolina's children were given a total of 523 shares distributed as follows: Francis Villongco- 131
shares; Carlo Villongco- 131 shares; Michael Villongco- 131 shares; and Marcelia Villongco- 130 shares;
(b) Ana Maria's daughter Elaine Victoria Que Tan was given 523 shares;
(c) Angelica- 523 shares;
(d) Cecilia's children were given a total of 524 shares distributed as follows: Geminiano Yabut- 131
shares; Carlos Yabut- 131 shares; Geronimo Yabut- 131 shares; and John Elston Yabut- 131 shares;
(e) Ma. Corazon's son Anthony Garcia was given 523 shares;
(f) Maria Luisa's children were given a total of 524 shares distributed as follows: Eumir Carlo Camara- 174
shares; Paolo Camara- 175 shares; Abimar Camara-175 shares[.]
Accordingly, the distribution of Geronima's shares in accordance with the Sale of Shares of Stocks was
reflected in the General Information Sheets filed by Phil-Ville in 2010 and 2011, x x x

On January 18, 2013, Cecilia, Eumir Carlo Que Camara and Ma. Corazon [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, on January 21, 2013, 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, x x x

xxxx

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 dated January 21, 2013. Ana Maria, in her capacity as Corporate Secretary and Director of Phil-Ville
likewise gave notice to the Securities and Exchange Commission (SEC) with regard to the postponement
of the meeting.

xxxx

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 new
members of the Board of Directors and officers of Phil-Ville namely: Cecilia, Ma. Corazon and Eumir,
Chairman/Vice President/Treasurer, President/General Manager, and Secretary, respectively.

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 against Cecilia, Eumir Carlo and Ma. Corazon. They subsequently filed an Amended
and Supplemental Complaint for Annulment of Sale/Distribution or Settlement of Shares of
Stock/Annulment of Meeting/Injunction (with Prayer for the Issuance of Temporary Restraining Order and
Writ of Preliminary Prohibitory and Mandatory Injunction). x x x

xxxx

While Civil Case No. CV-940-MN was still pending, on January 15, 2014, 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 on January 25, 2014 at 5:00 P.M. at Max's Restaurant, Gov. Pascual comer
M.H. Del Pilar Streets, Tugatog, Malabon City. During the meeting, Cecilia, Ma. Corazon and Eumir Carlo
were elected as directors and later elected themselves to the following positions: Cecilia as
Chairperson/Vice President/Treasurer; Ma. Corazon as Vice Chairperson/President/General Manager; and
Eumir Carlo as Corporate Secretary/Secretary.

xxxx

Consequently, on February 10, 2014, Carolina, Ana Maria, Angelica, Elaine and Edison Williams [Carolina,
et al.] filed the instant election case against [Cecilia Que, et al.] before the RTC of Malabon City docketed
as SEC Case No. 14-001-MN. The Complaint prayed that the election of Cecilia, Ma. Corazon and Eumir
Carlo as directors 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. [Carolina, et
al.] also questioned the election of Cecilia, Ma. Corazon and Eumir Carlo as officers of the corporation.
They likewise prayed that all the actions taken by the petitioners in relation to their election as directors
and officers of the corporation be declared void, including but not limited to the filing of the General
Information Sheet with the Securities and Exchange Commission on January 27, 2014.[4]
Cecilia Que, et al., filed a Motion for Additional Time to file Answer on March 7, 2014 arguing that the
summons was not properly served on them. The RTC however denied said motion since it should have
been filed within ten (10) days or on March 2, 2014, in accordance with Section 5; Rule 6[5] of the Interim
Rules of Procedure for Intra-Corporate Controversies. [6]

Thus, On March 14, 2014, the RTC rendered a Decision[7] declaring the election of Cecilia Que, et al. as
void and of no effect considering the lack of quorum during the annual stockholders' meeting conducted
by the latter, thus:

WHEREFORE, judgment is hereby rendered:

a. On the First Cause of Action, declaring as null and void and of no effect whatsoever the election of
defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara as Directors of Phil-Ville
considering the lack of quorum during the alleged annual meeting of the stockholders on 25 January 2014
at Max's Restaurant, Gov. Pascual cor. M.H. Del Pilar, Tugatog, Malabon City at 5:00 o'clock in the
afternoon;

b. On the Second Cause of Action, declaring as null and void and of no effect whatsoever the election of
defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara to the positions of
Chairperson, Vice Chairperson and Corporate Secretary, respectively in the Board of Directors of Phil-Ville,
as well as their election as Vice-President/Treasurer, President/General Manager and Secretary,
respective[ly], of PhilVille, considering the invalidity of the proclamation of the winners in the election
supposedly conducted on that date, the alleged "Annual Meeting of the Board of Directors of Phil-Ville held
at Max's Restaurant, Gov. Pascual cor. M.H. Del Pilar, Tugatog, Malabon City on 25 January 2014 at 6:30
o'clock in the evening being null and void; and

c. On the Third Cause of Action, declaring as null and void and of no effect whatsoever any and all actions
taken by defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara in relation to their
alleged election as Directors, their alleged elecion to certain positions in the Board of Directors, and their
alleged election as officers of Phil-Ville including but not limited to the filing of the General Information
Sheet with the Securities and Exchange Commission on 27 January 2014.

SO ORDERED.[8]
On appeal to the CA, the latter in its Decision dated September 4, 2015, while it declared the RTC decision
void for violating Section 14, Article VIII of the Constitution[9], the CA however declared the annual
stockholders meeting conducted by Cecilia Que, et al. void for lack of quorum. The dispositive portion
reads:

WHEREFORE, the instant Petition for Review is DENIED for lack of merit. The Decision dated March 14,
2014 Decision[sic] of the Regional Trial Court of the City of Malabon, Branch 74, in SEC Case No. SEC14-
00l-MN is declared VOID for failure to comply with the constitutional requirement of a valid judgment and
a new one is ENTERED declaring as invalid for lack of quorum the Phil-Ville Development and Housing
Corporation's stockholders annual meeting conducted by petitioners Cecilia Que Yabut, Eumir Carlo Que
Camara and Ma. Corazon Que Garcia on January 14, 2014. The election of the members of the board of
directors and officers of Phil-Ville that emanated from the said invalid meetings is likewise struck as void.

SO ORDERED.[10]
On the parties' separate Motions for Partial Reconsideration, the CA issued an Amended Decision dated
June 8, 2016 ruling as follows:

WHEREFORE, petitioner's Motion for Partial Reconsideration is DENIED for lack of merit while that of
respondents' is PARTLY GRANTED with respect to the ultra vires acts committed by petitioners after the
invalidation of the election conducted on January 25, 2014. The dispositive portion of the assailed Decision
dated September 4, 2015 is hereby amended to reflect the following modifications and shall read as
follows:

WHEREFORE, the instant Petition for Review is DENIED for lack of merit The Decision dated March 14,
2014 Decision[sic] of the Regional Trial Court of the City of Malabon, Branch 74, in SEC Case No. SEC14-
001-MN is declared VOID for failure to comply with the constitutional requirement of a valid judgment and
a new one is ENTERED declaring as invalid for lack of quorum the Phil-Ville Development and Housing
Corporation's stockholders annual meeting conducted by petitioners Cecilia Que Yabut, Eumir Carlo Que
Camara and Ma. Corazon Que Garcia on January 25, 2014. The election of the members of the board of
directors and officers of Phil-Ville that emanated from the said invalid meetings is likewise struck as
void. All acts performed by petitioners by reason of said election, including but not limited to the filing of
the General Information Sheet with the SEC on January 27, 2014, were  ultra vires  as they were not
legally clothed with corporate authority to do so.

SO ORDERED.
SO ORDERED.[11]
Both parties filed before Us their separate Petitions for Review on Certiorari.

Carolina, et al., raised in their petition the following assignment of errors:

I. The Honorable Court of Appeals committed manifest error in not upholding that the applicability of
Section 14, Article VIII of the Constitution ensconed in Section 1, Rule 36 of the Revised Rules of Court
was adhered to by the RTC-Malabon City, Branch 74 in the rendition of its decision as warranted by the
facts alleged in the complaint.
II. The Honorable Court of Appeals committed manifest error in not upholding the applicability of the
exception to the general rule in the determination of a quorum. [12]
While Cecilia Que, et al., raised the following in their petition, to wit:

I. The Court of Appeals gravely erred when it ruled that petitioners were barred from filing an answer.
II. The Court of Appeals gravely erred in ruling on the merits, despite the finding that there was a need to
remand the case.
III. At any rate, the issues raised in the case are being litigated in another case, barring its resolution on
the merits here.[13]
Ultimately, the issues to be resolved are: 1) whether the CA was correct in holding that the RTC decision
violated Section 14, Article VIII of the Constitution; 2) whether the total undisputed shares of stocks in
Phil-Ville should be the basis in determining the presence of a quorum; and 3) whether Cecilia et al., were
barred from filing an answer.

Both petitions are unmeritorious.

The Procedural Aspect

The Motion for Extension of Time to file Answer

is a voluntary appearance on the part of
Cecilia, et al.
Cecilia Que, et al., alleged the CA erred in holding that the Motion for Extension of Time to File
Answer filed by them was a voluntary appearance on their part.[14] We do not agree.

It is well-settled that jurisdiction over the person of the defendant in a civil case is obtained through a
valid service of summons. When there is no service of summons upon the defendant, the court acquires
no jurisdiction over his person, and a judgment rendered against him is null and void. [15]

However, the invalidity of the service of summons is cured by the voluntary appearance of the defendant
in court and their submission to the court's authority. As held in the case of Carson Realty & Management
Corporation v. Red Robin Security Agency, et al.,[16] this Court has repeatedly held that the filing of a
motion of time to file answer is considered voluntary appearance on the part of the defendant, such that
the trial court nevertheless acquired jurisdiction over his person despite the defectiveness of the service of
summons, to wit:

We have, time and again, held that the filing of a motion for additional time to file answer is considered
voluntary submission to the jurisdiction of the court. If the defendant knowingly does an act inconsistent
with the right to object to the lack of personal jurisdiction as to him, like voluntarily appearing in the
action, he is deemed to have submitted himself to the jurisdiction of the court. Seeking an affirmative
relief is inconsistent with the position that no voluntary appearance had been made, and to ask for such
relief, without the proper objection, necessitates submission to the Court's jurisdiction. [17] In the instant
case, Cecilia Que, et al., filed a motion for extension to file an answer. Thus, is deemed to be a voluntary
submission to the authority of the trial court over their persons.
The Substantive Aspect

The RTC Decision dated March 14, 2014 is void

for violating Section 14, Article VIII of the
Constitution.
Carolina, et al., alleged in their petition that the RTC Decision did not violate Section 14, Article VIII of the
Constitution since the decision clearly stated the facts and the law on which it was based. They alleged
that "the decision thoroughly passed upon all the allegations in the complaint, vis-a-vis the Judicial
affidavit of x x x Carolina x x x, which remams unrebutted."[18] We are not persuaded.

The RTC decision is hereby quoted in toto:

Before the Court is the Election Contest filed by plaintiffs stockholders/board members/officers of Phil-Ville
Housing and Development Corporation questioning the validity of the election held by defendants on
January 25, 2014 at Max's Restaurant, Malabon City.

Having been served with Summons on February 20, 2014, and not having filed an Answer but instead filed
a Motion for Extension of Time to the Answer on March 7, 2014 by registered mail, which was received by
this Court only on March 13, 2014, the Court is duty bound to render judgment motu proprio within ten
(10) days from the lapse of the period to file an Answer, as may be warranted by the allegations of the
Complaint, as well as the affidavits, documentary and other evidence on record, awarding relief, if any,
only as prayed for.

After thoroughly passing upon all and[sic] the allegations in the Complaint, vis-a-vis the Judicial Affidavit
of plaintiff Carolina Que Villongco, which remains unrebutted, the Court finds that plaintiffs have fully
established that there was no quorum during the annual stockholder's meeting held on 25 January 2014
at Max's Restaurant, Malabon City. Only 98,428 voting shares out of the 200,000 outstanding shares were
represented. Therefore, no valid election of board members/officers of Phil-Ville could have taken place.

Necessarily, the organizational meeting supposedly conducted thereafter is likewise null and void and
could not possibly binding[sic] to the said corporation.

WHEREFORE, judgment is hereby rendered:

a. On the First Cause of Action, declaring as null and void and of no effect whatsoever the election of
defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara as Directors of Phil-Ville
considering the lack of quorum during the alleged annual meeting of the stockholders on 25 January 2014
at Max's Restaurant, Gov. Pascual cor. M.H. Del Pilar, Tugatog, Malabon City at 5:00 o'clock in the
afternoon;

b. On the Second Cause of Action, declaring as null and void and of no effect whatsoever the election of
defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara to the positions of
Chairperson, Vice-Chairperson and Corporate Secretary, respectively in the Board of Directors of Phil-Ville,
as well as their election as Vice President/Treasurer, President/General Manager and Secretary,
respectively, of Phil-Ville, considering the invalidity of the proclamation of the winners in the election
supposedly conducted on that date, the alleged "Annual Meeting of the Board of Directors of Phil-Ville held
at Max's Restaurant, Gov. Pascual cor. M.H. Del Pilar, Tugatog, Malabon City on 25 January 2014 at 6:30
o'clock in the evening being null and void; and

c. On the Third Cause of Action, declaring as null and void and of no effect whatsoever any and all actions
taken by defendants Cecilia Que Yabut, Ma. Corazon Que Garcia and Eumir Que Camara in relation to their
alleged election as Directors, their alleged elecion to certain positions in the Board of Directors, and their
alleged election as officers of Phil-Ville including but not limited to the filing of the General Information
Sheet with the Securities and Exchange Commission on 27 January 2014.

SO ORDERED.[19]
In the case of De Leon v. People[20] this Court held that:

Under Section 14, Article VIII of the Constitution, no decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on which it is based. Section 1 of Rule 36 of
the Rules of Court provides that a judgment or final order determining the merits of the case shall be in
writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law
on which it is based, signed by him and filed with the clerk of the court.

Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is indisputably a
paramount component of due process and fair play. A decision that does not clearly and distinctly state
the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is
precisely prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for
review by a higher tribunal. More than that, the requirement is an assurance to the parties that, in
arriving at a judgment, the judge did so through the processes of legal reasoning. It is, thus, a safeguard
against the impetuosity of the judge, preventing him from deciding ipse dixit.

The standard "expected of the judiciary" is that the decision rendered makes clear why either party
prevailed under the applicable law to the facts as established. Nor is there any rigid formula as to the
language to be employed to satisfy the requirement of clarity and distinctness. The discretion of the
particular judge in this respect, while not unlimited, is necessarily broad. There is no sacramental form of
words which he must use upon pain of being considered as having failed to abide by what the Constitution
directs.[21]
Thus, Section 14, Article VIII of the Constitution mandates Us to craft Our decisions stating clearly and
distinctly the facts and the law on which We based Our decisions. It should be emphasized that the mere
fact that the defendant was not able to file an answer does not automatically mean that the trial court will
render a judgment in favor of the plaintiff. The trial court must still determine whether the plaintiff is
entitled to the reliefs prayed for. Thus, it is incumbent upon the RTC to clearly and distinctly state the
facts and the legal basis on which it based its decision. This is sadly not followed by the RTC in its Decision
dated March 14, 2014. The RTC merely adopted the allegations of Carolina et al. without any rhyme or
reason. The decision merely stated that quorum was not established during the annual stockholders
meeting conducted by Cecilia Que, et al. and that only 98,428 shares were present during the said
meeting without any explanation or justification as to why the trial court ruled that way. Therefore, We
agree with the CA that the RTC decision is null and void for violating the constitutional provision.

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 Que Camara, Paolo Que
Camara and Abimar Que Camara 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 should be 196,858 shares of stocks.[22] We do not agree.

Section 52 of the Corporation Code states that:

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a
quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a
majority of the members in the case of non-stock corporations.
While Section 137 of the same Code defines "outstanding capital stock", thus:

Section 137. Outstanding capital stock defined. - The term "outstanding capital stock", as used in this
Code, means 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. Ubi lex non
distinguit nec nos distinguere debemus — 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 January 25,
2014 stockholders meeting at Max's Restaurant, therefore, no quorum had been established.

There is no evidence that the 3,140 shares which allegedly had been transferred to 1) Carolina's children,
namely: Francis Villongco, Carlo Villongco, Michael Villongco and Marcelia Villongco; 2) Ana Maria's
daughter, namely: Elaine Victoria Que Tan; 3) Angelica Que; 4) Cecilia's children, namely: Geminiano,
Carlos, Geronimo and John Elston; 5) Ma. Corazon's son, Anthony; and, 6) Maria Luisa's children, namely:
Eumir Carlo Camara, Paolo Camara, and Abimar Camara; where transferred and recorded in the stocks
and transfer book of Phil-Ville.

Section 63[25] of the Corporation Code states that "No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded in the books of the corporation showing the names of the parties
to the transaction, the date of the transfer, the number of the certificate or certificates and the number of
shares transferred. "

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. From this time, the consequent
obligation on the part of the corporation to recognize such rights as it is mandated by law to recognize
arises.[27]
The contention of Cecilia Que, 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 Que Tan,
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,[28] 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. [29]

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.

DE LA SALLE MONTESSORI INTERNATIONAL OF MALOLOS VS. DE LA SALLE

The Supreme Court (SC) has affirmed the Securities and Exchange Commission Office of the General
Counsel’s (SEC-OGC) May 2010 order for De La Salle Montessori International, Inc., to change its
corporate name to avoid confusion with the famous university and its affiliates.

In a recent 10-page decision, the SC 1st Division rejected De La Salle Montessori’s contention that it
should be allowed to keep its name because Lyceum of the Philippines had lost its bid to exclusively use
the word “lyceum.”

The SC noted that unlike the word “lyceum,” which denotes a place of learning similar to the word
“university,” the phrase “De La Salle” was “not generic.”

It added that De La Salle Brothers, Inc., was registered in 1961 and the group had used the name for
decades before that; De La Salle Montessori was only registered in 2007.

“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. It has authority to de-register at all
times, and under all circumstances, corporate names which in its estimation are likely to generate
confusion,” read the decision penned by Associate Justice Francis Jardeleza.
LUIS JUAN L. VIRATA v. ALEJANDRO NG WEE, GR No. 220926, 2017-07-05

Facts:

Ng Wee was a valued client of Westmont Bank. Sometime in 1998, he was enticed by the bank manager
to make money placements with Westmont Investment Corporation (Wincorp)... corporation organized
and licensed to operate as an investment house, and one of the bank's affiliates.

Offered to him were "sans recourse" transactions

Lured by representations that the "sans recourse" transactions are safe, stable, high-yielding, and involve
little to no risk, Ng Wee, sometime in 1998, placed investments thereon under accounts in his own name,
or in those of his trustees: Angel Archangel, Elizabeth Ng Wee, Roberto Tabada Tan, and Alex Lim Tan.[6]
In exchange, Wincorp issued Ng Wee and his trustees Confirmation Advices informing them of the identity
of the borrower with whom they were matched, and the terms under which the said borrower would repay
them

The contents of a Confirmation Advice are typically as follows:This is to confirm that pursuant to your
authority, we have acted in your behalf and/or for your benefit, risk or account without recourse or
liability, real or contingent, to Westmont Investment Corporation in respect of the loan granted to the
Borrower named and under the terms specified hereunder

Special Power of Attorneys (SPAs) are also prepared for the signature of the lender investor.

Ng Wee's initial investments were matched with Hottick Holdings Corporation (Hottick), one of Wincorp's
accredited borrowers, the majority shares of which was owned by a Malaysian national by the name of Tan
Sri Halim Saad (Halim Saad). Halim Saad was then the controlling shareowner of UEM-MARA, which has
substantial interests in the Manila Cavite Express Tollway Project (Cavitex)

Hottick was extended a credit facility[10] with a maximum drawdown of P1,500,908,026.87 in

consideration of the following securities it issued in favor of Wincorp: (1) a Suretyship Agreement[11]
executed by herein petitioner Luis Juan Virata (Virata); (2) a Suretyship Agreement[12] executed by
YBHG Tan Sri Halim Saad; and (3) a Third Party Real Estate Mortgage[13] executed by National Steel
Corporation (NSC).

Hottick fully availed of the loan facility extended by Wincorp, but it defaulted in paying its outstanding
obligations when the Asian financial crisis struck.

As a result, Wincorp filed a collection suit against Hottick, Halim Saad, and NSC for the repayment of the
loan and related costs.[14] A Writ of Preliminary Attachment was then issued against Halim Saad's
properties, which included the assets of UEM-MARA Philippines Corporation (UEM-MARA)

To induce the parties to settle, petitioner Virata offered to guarantee the full payment of the loan. The
guarantee was embodied in the July 27, 1999 Memorandum of Agreement[16] between him and Wincorp.
Virata was then able to broker a compromise between Wincorp and Halim Saad that paved the way for the
execution of a Settlement Agreement[17] dated July 28, 1999. In the Settlement Agreement, Halim Saad
agreed to pay USD1,000,000.00 to Wincorp in satisfaction of any and all claims the latter may have
against the former under the Surety Agreement that secured Hottick's loan. As a result, Wincorp dropped
Halim Saad from the case and the Writ of Preliminary Attachment over the assets of UEM-MARA was
dissolved.[18]

Thereafter, Wincorp executed a Waiver and Quitclaim[19] dated December 1, 1999 in favor ofVirata,
releasing the latter from any obligation arising from the Memorandum of Agreement, except for his
obligation to transfer forty percent (40%) equity of UEM Development Philippines, Inc. (UPDI) and forty
percent (40%) ofUPDI's interest in the tollway project to Wincorp. Apparently, the Memorandum of
Agreement is a mere accommodation that is not meant to give rise to any legal obligation in Wincorp's
favor as against Virata, other than the stipulated equity transfer.Alarmed by the news of Hottick's default
and financial distress, Ng Wee confronted Wincorp and inquired about the status of his investments.
Wincorp assured him that the losses from the Hottick account will be absorbed by the company and that
his investments would be transferred instead to a new borrower account. In view of these representations,
Ng Wee continued making money placements, rolling over his previous investments in Hottick and even
increased his stakes in the new borrower account Power Merge Corporation (Power Merge)

Power Merge... primary purpose of which is to "invest in, purchase, or otherwise acquire and own, hold,
use, sell, assign, transfer, mortgage, pledge, exchange or otherwise dispose of real or personal property
of every kind and description."[22] Petitioner Virata is the majority stockholder of the corporation, owning
374,996 out of its 375,000 subscribed capital stock

In a special meeting ofWincorp's board of directors held on February 9, 1999, the investment house
resolved to file the collection case against Halim Saad and Hottick,[24] and, on even date, approved
Power Merge's application for a credit line, extending a credit facility to the latter in the maximum amount
of P1,300,000,000.00.

Thus, on February 15, 1999, Wincorp President Ong and Vice-President for Operations petitioner Anthony
Reyes (Reyes) executed a Credit Line Agreement[28] in favor of Power Merge with petitioner Virata's
conformity.Barely a month later, on March 11, 1999, Wincorp, through another board meeting allegedly
attended by the same personalities, increased Power Merge's maximum credit limit to P2,500,000,000.00.
[29] Accordingly, an Amendment to the Credit Line Agreement[30] (Amendment) was executed on March
15, 1999 by the same representatives of the two parties.

Power Merge made a total of six (6) drawdowns from the amended Credit Line Agreement in the
aggregate amount of P2,183,755,253.11.[31]

After receiving the promissory notes from Power Merge, Wincorp, in turn, issued Confirmation Advices
toNg Wee and his trustees, as well as to the other investors who were matched with Power Merge.

Unknown to Ng Wee, however, was that on the very same dates the Credit Line Agreement and its
subsequent Amendment were entered into by Wincorp and Power Merge, additional contracts (Side
Agreements) were likewise executed by the two corporations absolving Power Merge of liability as regards
the Promissory Notes it issued. Pertinently, the Side Agreement dated February 15, 1999
reads:WHEREAS, Powermerge has entered into the Credit Line Agreement with Wincorp as an
accommodation in order to allow Wincorp to hold Powermerge paper instead of the obligations of Hottick
which are right now held by Wincorp.x x x xPowermerge hereby agrees to execute promissory notes in the
aggregate principal sum of P1,200,000,000.00 in favor ofWincorp and in exchange therefore, Wincorp
hereby assigns, transfers, and conveys to Powermerge all of its rights, titles and interests by way of a
subparticipation over the promissory notes and other obligations executed by Hottick in favor of Wincorp;
Provided however that the only obligation of Powermerge to Wincorp shall be to return and deliver to
Wincorp all the rights, title and interests conveyed by Wincorp hereby to Powermerge over the Hottick
obligations. Powermerge shall have no obligation to pay under its promissory notes executed in favor of
Wincorp but shall be obligated merely to return whatever [it] may have received from Wincorp pursuant to
this agreement.

x x x xWincorp confirms and agrees that this accommodation being entered into by the parties is not
intended to create a payment obligation on the part of Powermerge.[35] (emphasis added)Save for the
amount, identical provisions were included in the March 15, 1999 Side Agreement.[36] By virtue of these
contracts, Wincorp was able to assign its rights to the uncollected Hottick obligations and hold Power
Merge papers instead.[37] However, this also meant that if Power Merge subsequently defaults in the
payment of its obligations, it would refuse, as it did in fact refuse, payment to its investors.

Despite repeated demands,[38] Ng Wee was not able to collect Power Merge's outstanding obligation
under the Confirmation Advices in the amount of P213,290,410.36. This prompted Ng Wee, on October
19, 2000, to institute a Complaint for Sum of Money with Damages with prayer for the issuance of a Writ
of Preliminary Attachment (Complaint),[39] docketed as Civil Case No. 00-99006 before the Regional Trial
Court (RTC), Branch 39 of Manila (RTC)

Ng Wee claimed that he fell prey to the intricate scheme of fraud and deceit that was hatched by Wincorp
and Power Merge. As he later discovered, Power Merge's default was inevitable from the very start since it
only had subscribed capital in the amount of P37,500,000.00, of which only P9,375,000.00 is actually paid
up. He then attributed gross negligence, if not fraud and bad faith, on the part of Wincorp and its directors
for approving Power Merge's credit line application and its subsequent increase to the amount of
P2,500,000,000.00 despite its glaring inability to pay.
g Wee also sought to pierce the separate juridical personality of Power Merge since Virata owns almost all
of the company's stocks. It was further alleged that Virata acquired interest in UEM-MARA using the funds
swindled from the Wincorp investors.

Wincorp admitted that it brokered Power Merge Promissory Notes to investors through "sans recourse"
transactions. It contended, however, that its only role was to match an investor with corporate borrowers
and, hence, assumed no liability for the monies that Ng Wee loaned to Power Merge. As proof thereof,
Wincorp brought to the attention of the RTC the language of the SPAs executed by the investors."Sans
recourse" transactions, Wincorp added, are perfectly legal under Presidential Decree No. 129 (PD 129),
otherwise known as the Investment Houses Law, and forms part of the brokering functions of an
investment house. As a duly licensed investment house, it was authorized to offer the "sans recourse"
transactions to the public, even without a license to perform quasi-banking functions.

Wincorp directors argued that they can only be held liable under Section 31 of Batas Pambansa Blg. (BP)
68,[49] the Corporation Code, if they assented to a patently unlawful act, or are guilty of either gross
negligence or bad faith in directing the affairs of the corporation. They explained that the provision is
inapplicable since the approval of Power Merge's credit line application was done in good faith and that
they merely relied on the vetting done by the various departments of the company

To implement this arrangement, Wincorp and Power Merge entered into a Credit Line Agreement with the
understanding that Power Merge and Virata's only obligation thereunder would be to collect payments on
the Hottick papers. The Credit Line Agreement and the issuance of the promissory notes, according to
Virata, were mere accommodations to help Wincorp enforce the outstanding obligations of Hottick.

RTC... in favor of Ng Wee

The RTC ratiocinated that the "sans recourse" transactions were used to conceal Wincorp's direct
borrowing; that Wincorp negated its acts and practices under the "sans recourse" transactions when it
advanced the accrued interest due to the investors to conceal the fact that their borrowers have already
defaulted in their obligations; that Wincorp is a vendor in bad faith since it knew that the Power Merge
notes were uncollectible from the beginning by virtue of the Side Agreements; and that, in any event,
Wincorp violated its fiduciary responsibilities as the investors' agent. The RTC held Power Merge equally
guilty because Wincorp could not have perpetrated the fraud without its indispensable participation as a
conduit for the scheme

CA promulgated the challenged ruling substantially affirming the findings of the trial court

CA likewise found that Wincorp and Power Merge perpetrated an elaborate scheme of fraud to inveigle Ng
Wee into investing funds. Ng Wee would not have placed his investments in the "sans recourse"
transactions had he not been deceived into believing that Power Merge is financially capable of paying the
returns on his investments. In sync with the RTC, the CA found that Wincorp misrepresented Power
Merge's fmancial capacity when it accredited Power Merge as a corporate borrower and granted it a
P2,500,000,000.00 credit facility despite the telling signs that the latter would not be able to perform its
obligations, to wit: (1) Power Merge had only been in existence for two years when it was granted the
credit facility; (2) Power Merge was thinly capitalized with only P37,500,000.00 subscribed capital; (3)
Power Merge was not an on-going concern since it never secured the necessary permits and licenses to
conduct business, it never engaged in any lucrative business, and it did not file the necessary reports with
the SEC; and (4) No security was demanded by Wincorp or was furnished by Power Merge in relation to
the latter's drawdowns

The intent of Wincorp to deceive became even more manifest when it entered into the Side Agreements
with Power Merge. The Side Agreements rendered worthless Power Merge's Promissory Notes that Wincorp
offered to Ng Wee and the other investors. Meanwhile, the "sans recourse" nature of the transactions
prevented the investors from recovering their investments from the investment house.

Because of the foregoing fraudulent acts, Wincorp was held liable to Ng Wee as a vendor of security in bad
faith, and for acting beyond the scope of its authority as Ng Wee's agent when it knowingly purchased
worthless securities for him and his co-investors

Issues:

Whether or not Ng Wee was able to establish his cause/s of action against Wincorp and Power Merge;
Ruling:

evidence on record would belie petitioners' claim that Ng Wee is not the real party in interest. Elizabeth Ng
Wee, Alex Lim Tan and Angel Archangel were straightforward in their testimonies that the funds invested
in Power Merge belonged to Ng Wee, albeit recorded under their names. They likewise executed
documents denominated as "Declaration of Trust" wherein they categorically stated that they merely held
the funds in trust for Ng Wee, the beneficial owner.

The only question that remains now is: from whom can Ng Wee recover the P213,290,410.36 investment?

Only Wincorp is liable toNg Wee for fraud; Power Merge is liable based on contract

Ng Wee] would not have placed funds or invested [in] the "sans recourse" transactions under the Power
Merge borrower account had he not been deceived into believing that Power Merge is financially capable of
paying the returns of his investments/money placements.

he intent to defraud and deceive [Ng Wee] of his investments/money placements was manifest from the
very start

Wincorp and Power Merge entered into a Credit Line Agreement on February 15, 1999 and an Amendment
to Credit Line Agreement on March 15, 1999. It is interesting to note that they simultaneously executed
two Side Agreements which are peculiar because: (1) The dates of execution of the two Side Agreements
coincide with the dates of execution of the credit agreements; (2) [The] two Side Agreements were
executed by the same exact parties: Antonio Ong and Anthony Reyes for and on behalf of Wincorp and
[Virata] and Augusto Geluz for and on behalf of Power Merge; (3) The Credit Line Agreement dated
February 15, 1999 and the First Side Agreement dated February 15, 1999 were both acknowledged before
notary public, Atty. Fina De La Cuesta-Tantuico while the Amendment to Credit Line Agreement dated
March 15, 1999 and the Second Side Agreement dated March 15, 1999 were both acknowledged before
notary public, Atty. Eric R.G. Espiritu; (4) The two Side Agreements have the same exact provisions as the
two credit agreements insofar as it purports to extend a credit line and increase the credit line of Power
Merge but the two Side Agreements relieve Power Merge from any liability arising from the execution of
the agreements and promissory notes

Even as an agent, Wincorp can still be held liableThe argument that Wincorp is a mere agent that could
not be held liable for Power Merge's unpaid loan is equally unavailing... gency, in Wincorp's case, is not a
veritable defense.

Agency, in Wincorp's case, is not a veritable defense.

Through the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.[119] As the basis of
agency is representation, there must be, on the part of the principal, an actual intention to appoint, an
intention naturally inferable from the principal's words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent,
there is generally no agency.[120]

There is no dearth of statutory provisions in the New Civil Code that aim to preserve the fiduciary
character of the relationship between principal and agent. Of the established rules under the code, one
cannot be more basic than the obligation of the agent to carry out the purpose of the agency within the
bounds of his authority.[121] Though he may perform acts in a manner more advantageous to the
principal than that specified by him,[122] in no case shall the agent carry out the agency if its execution
would manifestly result or damage to the principal.[123]

In the instant case, the SPAs executed by Ng Wee constituted Wincorp as agent relative to the borrowings
of Power Merge, allegedly without risk of liability on the part of Wincorp. However, the SPAs, as couched,
do not specifically include a provision empowering Wincorp to excuse Power Merge from repaying the
amounts it had drawn from its credit line via the Side Agreements. They merely authorize Wincorp "to
agree, deliver, sign, execute loan documents" relative to the borrowing of a corporate borrower.
Otherwise stated, Wincorp had no authority to absolve Power Merge from the latter's indebtedness to its
lenders. Doing so therefore violated the express terms of the SPAs that limited Wincorp's authority to
contracting the loan.
In no way can the execution of the Side Agreements be considered as part and parcel of Wincorp's
authority since it was not mentioned with specificity in the SPAs. As far as the investors are concerned,
the Side Agreements amounted to a gratuitous waiver of Power Merge's obligation, which authority is
required under the law to be contained in an SPA for its accomplishment.[124]Finally, the benefit from the
Side Agreements, if any, redounded instead to the agent itself, Wincorp, which was able to hold Power
Merge papers that are more valuable than the outstanding Hottick obligations that it exchanged. In
discharging its duties as an alleged agent, Wincorp then elected to put primacy over its own interest than
that of its principal, in clear contravention of the law.[125] And when Wincorp thereafter concealed from
the investors the existence of the Side Agreements, the company became liable for fraud even as an
agent.[126]

G.R. No. 212034

COLEGIO MEDICOFARMACEUTICO DE FILIPINAS, INC., Petitioner

vs.
LILY LIM AND ALL PERSONS CLAIMING UNDER HER, Respondent

DECISION

DEL CASTILLO, J.:

"In the absence of a charter or byr-law provision to the contrary, the president is presumed to have the
authority to act within the domain of the general objectives of its business and within the scope of his or
her usual duties."1

Before us is a Petition for Review on Certiorari2 filed under Rule 45 of the Rules of Court assailing the June
13, 2013 Decision3 and the April 7, 2014 Resolution 4 of the Court of Appeals (CA) in CA-G.R SP No.
114856.

Factual Antecedents

Petitioner Colegio Medico Farmaceutico de Filipinas, Inc. (petitioner) is the registered owner of a building
located in Sampaloc, Manila.5

On June 19, 2008, petitioner filed before the Metropolitan Trial Court (MeTC) of Manila, Branch 24, a
Complaint for Ejectment with Damages,6 docketed as Civil Case No. 185161-CV, against respondent Lily
Lim (respondent), the President/Officer-in-charge of St. John Berchman School of Manila Foundation (St.
John). Petitioner alleged, that in June 2005, it entered into a Contract of Lease 7 for the period June 2005
to May 2006 with respondent; that after expiration of the lease period, petitioner, represented by its then
President Dr. Virgilio C. Del Castillo (Del Castillo), sent respondent another Contract of Lease for the
period June 2006 to May 2007 for her approval; that despite several follow-ups, respondent failed to
return the Contract of Lease; that during a board meeting in December 2007, petitioner informed
respondent of the decision of the Board of Directors (Board) not to renew the Contract of Lease; that on
March 5, 2008, Del Castillo wrote a letter8 to respondent demanding the payment of her back rentals and
utility bills in the total amount of ₱604,936.35, with a request to vacate the subject property on or before
March 16, 2008; and that respondent refused to comply with the demand.

For her part, respondent alleged that in May 2003, St. John, represented by Jean Li Yao, entered into a
10-year Contract of Lease with petitioner; that on May 3, 2005, due to financial difficulties, the Board of
Trustees of St. John assigned the rights and interest of the school in her favor; that the assignment of
rights was with the knowledge and approval of petitioner; that to ensure advance payment of the rentals,
petitioner persuaded her to execute a one-year Contract of Lease for the period of June 2005 to May
2006, with advance payment of rentals for the said period; that the said contract was executed with no
intention of amending, repealing, or shortening the original 10-year lease; that she occupied the subject
property even after May 2006 without any objection from petitioner because, as agreed by the parties, the
term of the lease would continue until the year 2013; that she sent several letters to petitioner for the
immediate repairs of the library, the toilets of the school building, and the basketball court; and that she
suspended the payment of the rentals due to the refusal of petitioner to act on all her letters.

The Ruling of the Metropolitan Trial Court

On June 1, 2009, the MeTC rendered a Decision9 dismissing the Complaint for lack of a valid demand
letter. The MeTC considered the demand letter dated March 5, 2008 as legally non-existent for failure of
petitioner to show that Del Castillo was duly authorized by the Board to issue the same. The MeTC
stressed that a demand letter is a jurisdictional requirement the absence of which opens the case
susceptible to dismissal.

Aggrieved, petitioner appealed the dismissal to the Regional Trial Court (RTC) of Manila, Branch 11.

The Ruling of the Regional Trial Court

On May 13, 2010, the RTC rendered a Decision10 reversing the MeTC Decision. The RTC ruled that the
issuance of the demand letter dated March 5, 2008 was done by Del Castillo in the usual course of
business and that the issuance of the same was ratified by petitioner when it passed the Board Resolution
dated May 13, 2008 authorizing Del Castillo to file a case against respondent. Thus –

WHEREFORE, premises considered, the Decision of the Metropolitan Trial Court Branch 24, Manila in Civil
Case No. 185161-CV dated June 1, 2009 is REVERSED and SET ASIDE and judgment is hereby rendered
in favor of [petitioner] and against [respondent], as follows:

1. Ordering [respondent] and all persons claiming rights under her, to vacate the leased unit
located at Building C, Colegio Compound, R. Papa and S.H. Loyola Street, Sampaloc, Manila;

2. Ordering [respondent] to pay [petitioner] the amount of Six Hundred Four Thousand Nine
Hundred Thirty-Six Pesos and Thirty-Five Centavos (Php 604,936. 35) representing unpaid utility
bills as of February 2008;

3. Ordering [respondent] to pay [petitioner] the amount of Fifty Thousand Pesos (Php50,000,00)
per month for and as the reasonable value for the use of the subject property, to be reckoned from
March 2008 up to the time the possession of the subject property is restored to [petitioner].

4. Ordering [respondent] to pay [petitioner] the amount of One Hundred Fifty Thousand Pesos
(Php150,000.00) for and as attorney's fees, plus Four Thousand Pesos (Php4,000.00) for every
appearance in court as well as the costs of suit.

SO ORDERED. 11

Petitioner moved for the issuance of a writ of execution while respondent moved for reconsideration.

On June 23, 2010, the RTC issued an Order granting the writ of execution. The RTC denied respondent's
motion for reconsideration.

Respondent moved to quash the writ of execution but the same was unavailing.

This prompted respondent to elevate the matter to the Court of Appeals via a Petition for Review under
Rule 42 of the Rules of Court.

The Ruling of the Court of Appeals

On June 13, 2013, the CA rendered the assailed Decision reversing the RTC Decision, and consequently,
dismissing the Complaint. The CA opined that petitioner's failure to attach a copy of the Board Resolution
dated May 13, 2008 to the Complaint was a fatal defect.12
Petitioner moved for reconsideration but the CA denied the same in its April 7, 2014 Resolution for lack of
merit. 13

Hence, petitioner filed the instant Petition for Review on Certiorari questioning the dismissal of its
Complaint.

Petitioner's Arguments

Petitioner seeks the reversal of the CA Decision and the reinstatement of the RTC Decision ordering
respondent to vacate the subject property and to pay actual damages and attorney's fees plus costs of
suit. Petitioner maintains that its failure to attach a copy of the Board Resolution dated May 13, 2008 to
the Complaint was not a fatal defect considering that, under prevailing jurisprudence, the president of a
corporation is duly authorized to sign the verification and certification without need of a board
resolution. 14 As to the demand letter dated March 5, 2008 by Del Castillo, petitioner argues that it was
validly issued as it was an authorized act done in the usual course of business. 15 Thus, no board
resolution was required. 16 And even if it were unauthorized, the demand letter dated March 5, 2008 was
not repudiated by the corporation but was even ratified when it issued the Board Resolution dated May 13,
2008 authorizing Del Castillo to file the instant case. 17 In any case, petitioner contends that demand to
vacate was not necessary as the case for unlawful detainer was based on the expiration of the lease
contract. 18 Lastly, petitioner prays that the monthly rental of ₱50,000.00 awarded by the RTC be
increased to ₱55,000.00 as stipulated in the Contract of Lease and that it be awarded exemplary and
moral damages. 19

Respondent's Arguments

Respondent, on the other hand, argues that the certification of non-forum shopping is a jurisdictional
requirement and that the failure of petitioner to attach to the Complaint a copy of the Board Resolution
dated May 13, 2008 authorizing Del Castillo to sign on behalf of petitioner was a fatal defect. 20 Petitioner
further argues that the demand letter dated March 5, 2008 was premature and without legal basis
considering that it was issued by Del Castillo without an express authority from the Board in the form of a
board resolution.21 As to the period of lease, respondent insists that the Contract of Lease entered into by
petitioner and St. John was for a period of 10 years or from June 1, 2003 to May 31, 2013. 22 Respondent
also puts in issue the fact that the instant case was filed against respondent, not against St. John, despite
the fact that demand letter dated March 5, 2008 was addressed to St. John, through respondent. 23

Our Ruling

The Petition is meritorious.

The president of a corporation may sign

the verification and certification of non-
forum shopping.

A corporation exercises its powers and transacts its business through its board of directors or
trustees.24 Accordingly, unless authorized by the board of directors or trustees, corporate officers and
agents cannot exercise any corporate power pertaining to the corporation. 25 A board resolution expressly
authorizing the officers and agents is therefore required.26 However, in filing a suit, jurisprudence has
allowed the president of a corporation to sign the verification and the certification of non-forum shopping
even without a board resolution as said officer is presumed to have sufficient knowledge to swear to the
truth of the allegations stated in the complaint or petition. 27

In view of the foregoing jurisprudential exception, the CA gravely erred in dismissing the Complaint on the
mere failure of petitioner to present a copy of the Board Resolution dated May 13, 2008. With or without
the said Board Resolution, Del Castillo, as the President of petitioner, was authorized to sign the
verification and the certification of non-forum shopping.
All the essential requisites of an
unlawful detainer are present.

Now, as to whether respondent may be validly ejected from the subject property, the Court rules in the
affirmative.

To justify an action for unlawful detainer, the following essential requisites must concur:

(1) the fact of lease by virtue of an implied or expressed contract;

(2) the expiration or termination of the possessor's right to hold possession;

(3) withholding of the possession of the land or building after the expiration or the termination of the right
to possession by the lessee;

(4) written demand upon lessee to pay the rental or comply with the terms of the lease and vacate the
premises;

(5) the action must be filed within one (1) year from date of last demand received by the lessee. 28

In this case, requisites 1, 2, 3, and 5 have been duly established. It is undisputed that a Contract of Lease
was entered into by petitioner with St. John, which contract was later assigned to respondent; that
respondent failed to pay the monthly rentals; that non-payment of the monthly rentals is a ground for the
termination of the Contract of Lease;29 that respondent continued to possess the subject property despite
the termination of the Contract of Lease; and that the Complaint was filed within one (1) year from March
5, 2008 or the date of the last demand received by respondent. 30 Thus, the only question to be resolved
is whether there was a valid written demand upon respondent to pay the unpaid rentals and vacate the
subject property.

The Court does not agree with the reasoning of respondent.

In People's Aircargo and Warehousing Co., Inc. v. Court of Appeals, 31 the Court laid down an exception to
the general rule that no person, not even its officers, can validly bind a corporation without an express
authority from the board of directors. In that case, the Court sustained the authority of the president to
bind the corporation for the reason that the president has the power to perform acts within the scope of
his or her usual duties. The Court explained that:

Being a juridical entity, a corporation may act through its board of directors, which exercises almost all
corporate powers, lays down all corporate business policies and is responsible for the efficiency of
management, as provided in Section 23 of the Corporation Code of the Philippines:

SEC. 23. The Board of Directors or Trustees. - Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees x x x.

Under this provision, the power and the responsibility to decide whether the corporation should enter into
a contract that will bind the corporation is lodged in the board, subject to the articles of incorporation, by-
laws, or relevant provisions of law. However, just as a natural person may authorize another to do certain
acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to
officers, committees or agents. The authority of such individuals to bind the corporation is generally
derived from law, corporate by laws or authorization from the board, either expressly or impliedly by
habit, custom or acquiescence in the general course of business, viz.:

A corporate officer or agent may represent and bind the corporation in transactions with third persons to
the extent that [the] authority to do so has been conferred upon him, and this includes powers which have
been intentionally conferred, and also such powers as, in the usual course of the particular business, are
incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and
usage, as usually pertaining to the particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent to believe that it has conferred.

Accordingly, the appellate court ruled in this case that the authority to act for and to bind a corporation
may be presumed from acts of recognition in other instances, wherein the power was in fact exercised
without any objection from its board or shareholders. Petitioner had previously allowed its president to
enter into the First Contract with private respondent without a board resolution expressly authorizing him;
thus, it had clothed its president with apparent authority to execute the subject contract.

Petitioner rebuts, arguing that a single isolated agreement prior to the subject contract does not constitute
corporate practice, which Webster defines as 'frequent or customary action.' It cites Board of Liquidators
v. Kalaw, in which the practice of NACOCO allowing its general manager to negotiate and execute contract
in its copra trading activities for and on its behalf, without prior board approval, was inferred from sixty
contracts - not one, as in the present case - previously entered into by the corporation without such board
resolution.

Petitioner's argument is not persuasive. Apparent authority is derived not merely from
practice.1âwphi1 Its existence may be ascertained through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act or, in other words, the apparent
authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular
nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary
powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of
other parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of
a corporate officer with the power to bind the corporation.

xxxx

Inasmuch as a corporate president is often given general supervision and control over corporate
operations, the strict rule that said officer has no inherent power to act for the corporation is slowly giving
way to the realization that such officer has certain limited powers in the transaction of the usual and
ordinary business of the corporation. In the absence of a charter or by[-]law provision to the contrary, the
president is presumed to have the authority to act within the domain of the general objectives of its
business and within the scope of his or her usual duties.

Hence, it has been held in other jurisdictions that the president of a corporation possesses the power to
enter into a contract for the corporation, when the 'conduct on the part of both the president and the
corporation [shows] that he had been in the habit of acting in similar matters on behalf of the company
and that the company had authorized him so to act and had recognized, approved and ratified his former
and similar actions.32

In this case, the issuance of the demand letter dated March 5, 2008 to collect the payment of unpaid
rentals from respondent and to demand the latter to vacate the subject property was done in the ordinary
course of business, and thus, within the scope of the powers of Del Castillo. In fact, it was his duty as
President to manage the affairs of petitioner, which included the collection of receivables. Article IV,
Section 2 of the By-laws of petitioner expressly states that the President has the power to:

xxxx

b. Exercise general [supervision], control and direction of the business and affairs of the Colegio;

xxxx

e. Execute in behalf of the Colegio, bonds, mortgages, and all other contracts and agreements which the
Colegio may enter into;

xxxx
j. Exercise or perform such other duties as are incident to his office or such powers and duties as the
Board may from time to time [prescribe]. 33

Accordingly, even without a board resolution, Del Castillo had the power and authority to issue the
demand letter dated March 5, 2008.

In any case, even if, for the sake of argument, Del Castillo acted beyond the scope of his authority in
issuing the demand letter dated March 5, 2008, the subsequent issuance of the Board Resolution dated
May 13, 2008 cured any defect possibly arising therefrom as it was a clear indication that the Board
agreed to, consented to, acquiesced in, or ratified the issuance of the said demand letter.

All told, the Court agrees with the findings of the RTC that all the requisites of an unlawful detainer were
present in the instant case, and thus, petitioner was entitled to the possession of the subject property.

However, as to the amount of reasonable compensation for the use of the subject property, the Court
finds that the amount should be ₱55,000.00 per month as stipulated in the Contract of Lease,34 not just
₱50,000.00 as awarded by the RTC.

In addition, the award of actual damages shall earn interest at the rate of 12% per annum from March 5,
2008, the date of extrajudicial demand, to June 30, 2013. From July 1, 2013 until full satisfaction of the
monetary award, the rate of interest shall be six percent (6%). 35

WHEREFORE, the Petition is hereby GRANTED. The assailed June 13, 2013 Decision and the April 7,
2014 Resolution of the Court of Appeals in CA-G .R. SP No. 114856 are hereby REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Manila, Branch 11, dated May 13, 2010 is
hereby REINSTATED and AFFIRMED with MODIFICATION that the amount of reasonable
compensation for the use of the subject property be increased to 1155,000.00 as stipulated in the
Contract of Lease. In addition, the award of actual damages shall earn interest at the rate of 12% per
annum from March 5, 2008, the date of extrajudicial demand, to June 30, 2013. From July 1, 2013 until
full satisfaction of the monetary award, the rate of interest shall be six percent (6%) per annum.

AYALA LAND v. ASB REALTY CORPORATION, GR No. 210043, 2018-09-26

Facts:

Ayala Land, Inc. (ALI)

E.M. Ramos & Sons, Inc. (EMRASON)

ASB Realty Corporation (ASBRC)

ALI and ASBRC are domestic corporations engaged in real estate development. On the other hand,
EMRASON is a domestic corporation principally organized to manage a 372- hectare property located in
Dasmariñas, Cavite

Version of the Petitioner

ALI claimed that, sometime in August 1992, EMRASON's brokers sent a proposal for a joint venture
agreement (JVA) between ALI and EMRASON for the development of EMRASON's Dasmariñas Property.

ALI initially declined but eventually negotiated with Ramos, Jr., Antonio B. Ramos (Antonio), and Januario
to discuss the terms of the JVA.

According to ALI, EMRASON made it appear that Ramos, Jr., Antonio, and Januario had full authority to
act on EMRASON's behalf in relation to the JVA.

Emerita Ramos, Sr. (Ramos, Sr.), then EMRASON's President and Chairman, wrote to ALI and therein
acknowledged that Ramos, Jr. and Antonio were fully authorized to represent EMRASON

ALI and the Ramos children subsequently entered into a Contract to Sell dated May 18, 1994, under which
ALI agreed to purchase the Dasmariñas Property.
ALI alleged that it came to know that a Letter-Agreement[12] dated May 21, 1994 (Letter-Agreement)
and a Real Estate Mortgage[13] respecting the Dasmariñas Property[14] had been executed by Ramos,
Sr. and Antonio for and in behalf of EMRASON, on one hand, and ASBRC on the other

Version of the Respondents... respondents averred that ALI submitted to EMRASON and Ramos, Sr. its
proposal to purchase the Dasmariñas Property which proposal was however rejected.

EMRASON, through Ramos, Sr., informed ALI that it had decided to accept the proposal of ASBRC

ASBRC and EMRASON entered into a Letter-Agreement on May 21, 1994.[19] The following day, or on
May 22, 1994, EMRASON executed a Real Estate Mortgage in compliance with its obligations under the
said Letter-Agreement

Prior to the execution of the Letter-Agreement, a special stockholders' meeting was held on May 17, 1994
during which EMRASON's stockholders "authorized, approved, confirmed and ratified"[21] the Resolution
of EMRASON's Board of Directors... which approved the Letter-Agreement and authorized Ramos, Sr. and
Antonio to sign the same

After ASBRC learned about the Contract to Sell executed between ALI and the Ramos children

ASBRC and EMRASON filed a Complaint[24] for the nullification of Contract to sell and the cancellation of
the annotations on the TCTs

RTC declared the Contract to Sell between ALI and the Ramos children void because of the latter's lack of
authority to sign the Contract to Sell on behalf of EMRASON

RTC ruled that the annotations on the TCTs covered by the said Contract to Sell must likewise be
cancelled.

RTC declared valid the Letter-Agreement deeding the Dasmariñas Property to ASBRC.

RTC held that Ramos, Sr., as President of EMRASON, had the authority to enter into the Letter-Agreement
because "the president is presumed to have the authority to act within the domain of the general
objectives of [a company's] business and within the scope of [the president's] usual duties.

RTC further explained that, assuming arguendo that the signing of the Letter-Agreement "was outside the
usual powers of Emerito Ramos, Sr., as president," EMRASON's ratification of the Letter-Agreement via a
stockholders' meeting on March 6, 1995, cured the defect... the CA dismissed the appeal and affirmed the
RTC's findings.

Citing ALI's letters addressed to Ramos, Sr. and the latter's uncontroverted deposition "that he is the
corporation's sole and exclusive authorized representative in the sale of the Dasmariñas Property"[36] vis-
a-vis the Ramos children's limited authority to negotiate for the best terms of a sale,... the CA then
declared that ALI knew or was aware of the Ramos children's lack of authority.

Issues:

THE COURT OF APPEALS GRAVELY ERRED IN ANNULLING THE CONTRACT TO SELL BETWEEN PETITIONER
AND EMRASON NOTWITHSTANDING CLEAR EVIDENCE CONSISTENT WITH STATUTE AND CASE LAW
SHOWING EMRASON'S OWN CONFIRMATION THAT THE RAMOS CHILDREN WITH WHOM PETITIONER
DEALT, HAD BOTH AUTHORITY AND CAPACITY TO CLOSE THE SALE BETWEEN THEM.

Ruling:

We deny the Petition

For juridical entities, consent is given through its board of directors.

a juridical entity, like EMRASON, "cannot act except through its board of directors as a collective body,
which is vested with the power and responsibility to decide whether the corporation should enter in a
contract that will bind the corporation, subject to the articles incorporation, by-laws, or relevant provisions
of law."
Although the general rule is that "no person, not even its officers, can validly bind a corporation "...
without the authority of the corporation's board of directors, this Court has recognized instances where
third persons' actions bound a corporation under the doctrine of apparent authority or ostensible agency.

A perusal of the August 3, 1993 letter shows that EMRASON, through Ramos, Sr. authorized Ramos, Jr.
and Antonio merely to "collaborate and continue negotiating and discussing with [ALI] terms and
conditions that are mutually beneficial" to the parties therein. Nothing more, nothing less. To construe the
letter as a virtual carte blanche for the Ramos children to enter into a Contract to Sell regarding the
Dasmariñas Property would be unduly stretching one's imagination.

What is clear from the letter is that EMRASON authorized the Ramos children only to negotiate the terms
of a potential sale over the Dasmariñas Property, and not to sell the property in an absolute way or act as
signatories in the contract.

For, indeed, ALI never mentioned or pointed to certain palpable acts by the Ramos children which were
indicative of a habit, custom, or acquiescence in the general course of business that compel the conclusion
that EMRASON must be deemed to have been bound thereby implacably and irretrievably. ALI's bare
allegation that "the Ramos children submitted corporate documents to [ALI] to convince it that it was
negotiating with the controlling shareholders of EMRASON"[59] is gratuitous and self-serving, hence, does
not merit this Court's consideration. As an established business entity engaged in real estate, ALI should
know that a corporation acts through its Board of Directors and not through its controlling shareholders.

Inasmuch as a corporate president is often given general supervision and control over corporate
operations, the strict rule that said officer has no inherent power to act for the corporation is slowly giving
way to the realization that such officer has certain limited powers in the transaction of the usual and
ordinary business of the corporation. In the absence of a charter or bylaw provision to the contrary. the
president is presumed to have the authority to act within the domain of the general objectives of its
business and within the scope of his or her usual duties.

Ramos, Sr.'s authority to execute and enter into the Letter-Agreement with ASBRC was clearly proven.

ALI's argument that "respondents failed to establish that [Ramos], Sr. had been in the habit of executing
contracts on behalf of EMRASON"[63] is negated by the fact that correspondences between ALI and
EMRASON had always been addressed to Ramos, Sr.[64] In fact, ALI must be deemed to have
acknowledged the authority of Ramos, Sr. to act on behalf of EMRASON when ALI relied on the August 3,
1993 letter of Ramos, Sr.

Petition is DENIED.

Principles:

U]nder the doctrine of apparent authority, the question in every case is whether the principal has by his
[/her] voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant
with business usages and the nature of the particular business, is justified in presuming that such agent
has authority to perform the particular act in question.

G.R. No. 223321, April 02, 2018

ROGELIO M. FLORETE, SR., THE ESTATE OF THE LATE TERESITA F. MENCHAVEZ,

REPRESENTED BY MARY ANN THERESE F. MENCHAVEZ, ROSIE JILL F. MENCHAVEZ, MA.
ROSARIO F. MENCHAVEZ, CRISTINE JOY F. MENCHAVEZ, AND EPHRAIM MENCHAVEZ, AND
DIANE GRACE F. MENCHAVEZ, Petitioners, v. MARCELINO M. FLORETE, JR. AND MA. ELENA F.
MUYCO, Respondents.

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari seeking to nullify the Decision1 dated August 3, 2015 of
the Court of Appeals in CA-G.R. SP No. 07673, as well as the Resolution 2 dated February 19, 2016
denying the motion for reconsideration thereof.
On October 7, 1966, Marsal & Co., Inc. (Marsal) was organized as a close corporation by Marcelino
Sr., Salome, Rogelio, Marcelino Jr., Ma. Elena, and Teresita (all surnamed Florete). Since its
incorporation, the Articles of Incorporation (AOI) had been amended3 several times to increase its
authorized capital stocks of P500,000.00 to P5,000,000.00. Notwithstanding the amendments,
paragraph 7 of their AOI which provides for the procedure in the sale of the shares of stocks of a
stockholder remained the same, to wit:

SEVENTH. - x x x Any stockholder who desires to sell his share of stock in the company must notify
in writing the Board of Directors of the company of his intention to sell. The Board of Directors upon
receipt of such notice must immediately notify all stockholders of record within five days upon receipt
of the letter of said stockholder. Any stockholder of record has the preemptive right to buy any share
offered for sale by any stockholder of the company on book value base[d] on the balance sheet
approved by the Board of Directors. The aforementioned preemptive right must be exercised by any
stockholder of the company within ten (10) days upon his receipt of the written notice sent to him by
the Board of Directors of the offer to sell. Any sale or transfer in violation of the above terms and
conditions shall be null and void. The above terms and conditions must be printed at the back of the
stock certificate.4

And as of June 1, 1982, the capital profile of Marsal was as follows:

Name Shareholdings
Marcelino M. Florete, Sr. 7,569 shares
Rogelio M. Florete 3,489 shares
Ma. Elena F. Muyco 3,489 shares
Marcelino M. Florete, Jr. 3,489 shares
Teresita F. Menchavez 3,464 shares5

On September 19, 1989, Teresita Florete Menchavez died. In 1992, Ephraim Menchavez, Teresita's
husband, filed a Petition for Issuance of Letters of Administration 6 over her estate. An Amended
Opposition was filed by petitioner Rogelio Florete, Sr. and Marsal, represented by petitioner as
President thereof, with Atty. Raul A. Muyco, the husband of respondent Ma. Elena, as counsel, on the
ground of Ephraim's incompetency. Ephraim, however, was later granted letters of administration. In
1995, Ephraim, the special administrator, entered into a Compromise Agreement and Deed of
Assignment7 with petitioner Rogelio ceding all the shareholdings of Teresita in various corporations
owned and controlled by the Florete family, which included the 3,464 shares in Marsal corporation, as
well as her shares, interests and participation as heir in all the real and personal properties of her
parents to petitioner Rogelio. A Motion to Approve Compromise Agreement and Deed of Assignment
was filed by respondent Ephraim, through counsel Atty. Henry Villegas, with the conformity of Atty.
Raul Muyco, the oppositors' counsel. The motion was granted and approved by the Probate Court in
its Order8 dated February 14, 1995.

On October 3, 1990, Marcelino Florete Sr., patriarch of the Florete family, died. An intestate
proceeding to settle his estate was filed by petitioner Rogelio, who was later appointed as
administrator of the estate. Petitioner Rogelio filed a project of partition enumerating herein all the
properties of the estate of Marcelino Sr. in accordance with the inventory earlier filed with the
intestate court. In the Order9 dated May 16, 1995, the court approved the project of partition
adjudicating to petitioner Rogelio one-half (½) share of the whole estate; and to respondents Ma.
Elena and Marcelino Jr., the undivided one-fourth (¼) share each of the enumerated properties. In
the same Order, the Probate Court had noted the sale of all the shares of the late Teresita which she
inherited from her deceased parents to petitioner Rogelio. 10
On February 21, 2012, respondents Marcelino Jr. and Ma. Elena filed with the Regional Trial Court
(RTC), Branch 39, Iloilo City, a case11 for annulment/rescission of sale of shares of stocks and the
exercise of their preemptive rights in Marsal corporation and damages against petitioners Rogelio
Florete, Sr. and the estate of the late Teresita F. Menchavez, herein represented by her heirs,
namely, Mary Ann Therese Menchavez, Christine Joy F. Menchavez, Ma. Rosario F. Menchavez, Diane
Grace Menchavez, Rosie Jill F. Menchavez, and Ephraim Menchavez. Respondents claimed that the
sale of Teresita's 3,464 Marsal shares of stocks made by petitioner estate to petitioner Rogelio
was void ab initio as it violated paragraph 7 of Marsal's AOI since the sale was made sans written
notice to the Board of Directors who was not able to notify respondents in writing of the petitioner
estate and heirs' intention to sell and convey the Marsal shares and depriving respondents of their
preemptive rights.

On April 26, 2013, the RTC, as a Special Commercial Court, dismissed the complaint. 12 It found that
the sale of Teresita's Marsal shares of stocks to petitioner Rogelio, being one of the incorporators and
stockholders of Marsal at the time of sale, was not a sale to a third party or outsider as would justify
the restriction on transfer of shares in the AOI. The RTC also found that laches and estoppel had
already set in as respondents' inaction for 17 years constituted a neglect for an unreasonable time to
question the same; and that respondents could not feign ignorance of the transactions as they knew
of the same and yet they did not do anything at that time.

Respondents filed with the CA a petition for review under, Rule 43 with prayer for the issuance of a
temporary restraining order and/or writ of preliminary injunction. Petitioners filed their Comment
thereto.

On August 3, 2015, the CA rendered its assailed Decision, the decretal portion of which reads:

WHEREFORE, in view of the foregoing, the instant appeal is GRANTED, the Decision dated April 26,
2013 of the Regional Trial Court, 6th Judicial Region, Branch 39, Iloilo City, in SCC Case No. 12-049
for Annulment/Rescission of Sale of Shares of Stocks, Pre-Emptive Rights and Damages is hereby
REVERSED and SET ASIDE. Let a new one be entered declaring the conveyance of 3,464 Marsal
shares of respondents in favor of Rogelio M. Florete Sr., NULL and VOID, in violation of Paragraph 7
of Marsal's Articles of Incorporation.13

In so ruling, the CA found that Teresita's 3,464 Marsal shares of stocks were conveyed by petitioner
estate to petitioner Rogelio in a Compromise Agreement and Deed of Assignment without first
offering them to the existing stockholders as provided under paragraph 7 of the AOI; that since the
AOI is considered a contract between the corporation and its stockholders, the sale of Teresita's
shares in favor of petitioner Rogelio constituted a breach of contract on the part of petitioner estate,
hence, null and void; and that it is inconsequential whether the transfer was made to one of the
existing stockholders of the closed corporation. Anent Atty. Muyco's acting as counsel of petitioner
Rogelio and Marsal in Teresita's intestate proceedings and who was presumed to have transmitted to
respondents his knowledge regarding the sale of Teresita's Marsal shares to petitioner Rogelio, the
CA ruled that the notice acquired from a third person even if true was not the notice meant under
paragraph 7 of the AOI; and that Atty. Muyco admitted that he did not know of petitioner Rogelio's
plan of acquiring Teresita's shares. A void contract has no effect from the beginning, thus, the action
for its nullity even if filed 17 years later after its execution, cannot be barred by prescription for it is
imprescriptible; and the defense of laches is unavailing as it had been jurisprudentially provided that
courts should never apply the doctrine of laches earlier than the expiration of time limited for the
commencement of action at law.

Petitioners filed a motion for reconsideration, which was denied by the CA in a Resolution dated
February 19, 2016.

Hence, this petition filed by petitioners alleging the following assignment of errors:
 I

THE COURT OF APPEALS GRIEVOUSLY ERRED IN REFUSING TO RULE ON WHETHER OR NOT THE
VERY INVALIDATION CLAUSE IN THE SUBJECT SHARE TRANSFER RESTRICTION IS VOID FROM
WHICH NO CAUSE OF ACTION MAY ORIGINATE.

II

THE COURT OF APPEALS GRIEVOUSLY ERRED IN REFUSING TO RULE ON WHETHER OR NOT THE
SUBJECT SHARE TRANSFER RESTRICTION CAN BE ENFORCED IN LIGHT OF THE CORPORATION
CODE PROVISION WHICH RECOGNIZES AS VALID ONLY SUCH RESTRICTIONS IN A CLOSE
CORPORATION AS DEFINED IN THE CODE, WHICH SUBJECT CORPORATION IS NOT.

III

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT ASSUMING  ARGUENDO THE
SUBJECT SHARE TRANSFER RESTRICTIONS ARE VALID, THE SAME CANNOT BE APPLIED TO THE
QUESTIONED TRANSFER OR SALE OF STOCK. IT NOT BEING A SALE TO OUTSIDERS, AMONG OTHER
MATTERS.

IV

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT RESPONDENTS' CAUSE OF
ACTION, IF ANY, IS BARRED BY PRESCRIPTION.

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT RESPONDENTS' CAUSE OF
ACTION, IF ANY, IS BARRED BY LACHES.

VI

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT RESPONDENTS ARE ESTOPPED
BY THEIR DEEDS OR CONDUCT FROM PURSUING THEIR CLAIM.

VII

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT RESPONDENTS' CAUSE OF
ACTION, IF ANY, IS BARRED BY RES JUDICATA.14

The pivotal issue for resolution is whether the CA erred in ruling that the sale of Teresita's 3,464
Marsal shares of stocks made by petitioner estate of Teresita to petitioner Rogelio was in violation of
paragraph 7 of Marsal's Article of Incorporation and hence null and void and must be annulled or
rescinded.

We rule in the affirmative.

The issue raised is factual. As a rule, the re-examination of the evidence proffered by the contending
parties during the trial of the case is not a function that this Court normally undertakes inasmuch as
the findings of fact of the Court of Appeals are generally binding and conclusive on the Supreme
Court.15 The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law. A reevaluation of factual issues by
this Court is justified when the findings of fact complained of are devoid of support by the evidence
on record, or when the assailed judgment is based on misapprehension of facts, which we find in the
case at bar.

Preliminarily, petitioners' claim that Marsal is not a close corporation deserves scant consideration as
they had already admitted that it is. In his Affidavit 16 filed in this case, petitioner Rogelio alleged,
among others:

10. That MARSAL & CO., INC. is a close family corporation, the stockholder of which are now three,
since Teresita Menchavez is already dead, and so is our father Marcelino Florete, Sr. x x x.

and in his Answer with Compulsory Counterclaim, 17 he stated:

2. That answering defendant admits the allegations set forth in paragraphs 5, 6, 7, 8, 9, 10, 11,12,
13, 14, 15 of the complaint; 18

xxxx

16. That MARSAL & CO., INC., being a close family corporation, the presence of the said provision of
pre-emptive right did not invalidate the acquisition by one stockholder of the share of another
stockholder who exercised his pre-emptive right in view of the knowledge of the same by the other
stockholders and their inaction which is equivalent to consent and acquiescence to the said
acquisition.19

The allegations under paragraph 6 of the complaint which petitioner Rogelio admitted stated:

6. MARSAL is a close corporation duly organized and registered with the Securities and Exchange
Commission (SEC) on 07 October 1966 with the authorized capital stock of Five Hundred Thousand
Pesos (P500,000.00). x x x.

7. As close corporation, all stocks issued by MARSAL are subject to restrictions on transfer. x x x 20

Petitioners judicially admitted that Marsal is a close corporation. Section 4, Rule 129 of the Revised
Rules of Court provides:

Sec. 4.  Judicial admissions. An admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof. The admission may be contradicted only by
showing that it was made through palpable mistake or that no such admission was made.

A party may make judicial admissions in (a) the pleadings, (b) during the trial, either by verbal or
written manifestations or stipulations, or (c) in other stages of the judicial proceeding. 21 In Alfelor v.
Halasan,22 we held that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a
waiver of proof; production of evidence is dispensed with. A judicial admission also removes an
admitted fact from the field of controversy. Consequently, an admission made in the pleadings
cannot be controverted by the party making such admission and are conclusive as to such party, and
all proofs to the contrary or inconsistent therewith should be ignored, whether objection is interposed
by the party or not. The allegations, statements or admissions contained in a pleading are conclusive
as against the pleader. A party cannot subsequently take a position contrary of or inconsistent with
what was pleaded.23

As Marsal is a close corporation, it is allowed under the Corporation Code to provide for restrictions
on the transfer of its stocks. We quote the pertinent provisions of the Code as follows:

Sec. 97. Articles of incorporation. - The articles of incorporation of a close corporation may provide:
1. For a classification of shares or rights and the qualifications for owning or holding the same and
restrictions on their transfers as may be stated therein, subject to the provisions of the following
section;

xxxx

Sec. 98. Validity of restrictions on transfer of shares. - Restrictions on the right to transfer shares
must appear in the articles of incorporation and in the by-laws as well as in the certificate of stock;
otherwise, the same shall not be binding on any purchaser thereof in good faith. Said restrictions
shall not be more onerous than granting the existing stockholders or the corporation the option to
purchase the shares of the transferring stockholder with such reasonable terms, conditions or period
stated therein. If upon the expiration of said period, the existing stockholders or the corporation fails
to exercise the option to purchase, the transferring stockholder may sell his shares to any third
person.

The AOI of Marsal provides for the procedure for the sale of shares of stock of a stockholder which
we quote again for easy reference, to wit:

SEVENTH. x x x Any stockholder who desires to sell his share of stock in the company must notify in
writing the Board of Directors of the company of his intention to sell. The Board of Directors upon
receipt of such notice must immediately notify all stockholders of record within five days upon receipt
of the letter of said stockholder. Any stockholder of record has the preemptive right to buy any share
offered for sale by any stockholder of the company on book value based on the balance sheet
approved by the Board of Directors. The aforementioned preemptive right must be exercised by any
stockholder of the company within 10 days upon his receipt of the written notice sent to him by the
Board of Directors of the offer to sell. Any sale or transfer in violation of the above terms and
conditions shall be null and void. The above terms and conditions must be printed at the back of the
stock certificate.24

Thus, the stockholder seller must notify in writing the Board of Directors of his intention to sell, who,
in turn, must notify all the stockholders of records within 5 days upon receipt of such letter, and the
stockholder must exercise the preemptive right within ten days from notice of the Board, otherwise,
the sale shall be null and void. Here, Teresita's 3,464 Marsal shares were sold by petitioner estate to
petitioner Rogelio in a Compromise Agreement and Deed of Assignment they entered into which was
approved by the Probate Court. The CA found that such sale of stocks was null and void as it violated
Paragraph 7 of their AOI.

We do not agree.

While it would appear that petitioner estate of Teresita, through its administrator Ephraim and
petitioner Rogelio, did not comply with the procedure on the sale of Teresita's Marsal shares as
stated under paragraph 7 of the AOI, however, it appeared in the records that respondents had
nonetheless been informed of such sale to which they had already given their consent thereto as
shown by the following circumstances:

First. Teresita died on September 19, 1989. Her husband Ephraim filed a petition for letters of
administration of her estate in 1992, and alleged the following:

xxxx

6. That the herein petitioner, as one of the legal heirs of the deceased, Teresita Florete Menchavez,
had on several occasions, requested decedent's brothers and sisters to make a settlement and
liquidation of the estate left by the said deceased Teresita Florete Menchavez and to deliver it to all
the legal heirs what is due to each and every one of them, but this has not been done. x x x 25
Petitioner Rogelio filed an Opposition thereto which was later amended to include MARSAL & CO.,
INC. as represented by its President, herein petitioner. Notably, Atty. Raul A. Muyco was the
oppositors' counsel and he is also the husband of respondent Ma. Elena. Subsequently, a
Compromise Agreement and Deed of Assignment was entered into between petitioner estate through
Ephraim and petitioner Rogelio with respect to Teresita's shares of stocks in various corporations
which included the 3,464 shares in Marsal. A Motion to Approve Compromise Agreement and Deed of
Assignment was filed by administrator Ephraim, through counsel, with the conformity of Atty. Muyco
which was approved by the probate court. It bears stressing that Atty. Muyco was not only acting as
counsel of petitioner Rogelio but also of Marsal. Thus, it would be impossible for Atty. Muyco, who
had the duty to protect Marsal's interest in the intestate proceedings of Teresita's estate, not to have
informed respondents of such compromise agreement since they are the stockholders and Board of
Directors of Marsal who would be deprived of their preemptive right to the Marsal shares.

Second. The sale of all of Teresita's shares which she inherited from her deceased parents which
were sold to petitioner Rogelio, and which included the 3,464 Marshal shares, had also been made
known to respondents in the intestate proceedings to settle the estate of Marcelino Florete, Sr., who
died on October 3, 1990. Petitioner Rogelio was later appointed as the administrator of the estate. In
the Order dated May 16, 1995, the probate court stated, among others, that:

x x x The said deceased left the following heirs, namely :

Rogelio M. Florete, Ma. Elena Florete Muyco and Marcelino Florete Jr.

Further the deceased had a daughter by the name of Teresita Florete-Menchavez who predeceased
him, having died on September 8, 1989 in the City of Iloilo leaving the following heirs;

xxxx

On February 24, 1995, this Court has noted, as prayed by the counsel for the petitioner, of the sale
by Ephraim Menchavez, the special administrator of the intestate estate of the late Teresita F.
Menchavez, of all the shares of the late Teresita F. Menchavez inherited from her deceased parents
Marcelino and Salome Florete, to Rogelio M. Florete.

xxxx

On May 5, 1995, no other heirs aside from those mentioned earlier have appeared in court to file
their claim with regard to the property owned by the late Marcelino Florete, Sr. This Court, therefore,
declared that Marcelino Florete, Sr. who died intestate in the City of Iloilo on October 3, 1990 had left
only the following heirs, namely; 1. Rogelio M. Florete, 2. Ma. Elena Florete Muyco; 3. Marcelino
Florete Jr.; 4. Teresita Florete-Menchavez. The last named heir predeceased the decedent and left
the following children, namely; 1. Mary Ann Therese Menchavez; 2. Christine Joy Menchavez; 3.
Rosie Jill Menchavez; 4. Diane Grace Menchavez; and 5. Ma. Rosario Menchavez.

All the shares of Teresita F. Menchavez, however, which she inherited from her parents were sold by
Ephraim Menchavez, the special administrator of the estate of Teresita Menchavez, to petitioner
Rogelio M. Florete. The sale was duly approved by the intestate court.

As stated earlier, on April 27, 1995, the administrator, through counsel, filed a Project of Partition
enumerating therein all the properties of the estate in accordance with the inventory filed before this
Court on March 3, 1995, which properties are enumerated as follows:

I. REAL PROPERTIES

 x x x x
 II. PERSONAL PROPERTIES

 x x x x 

This court hereby adjudicates the above-mentioned properties to the following heirs:

1. Rogelio M. Florete, married to Imelda Florete, the one half share of the whole estate;

2. Ma. Elena Florete Muyco, married to Raul Muyco, the undivided ¼ share of the above-enumerated
properties;

3. Marcelino M. Florete, Jr., married to Susan Florete, the undivided ¼ share of all the properties as
above enumerated.

This proceeding is hereby considered closed and terminated.

Furnish the Register of Deeds of the province of Iloilo and the province of Rizal with copies of this
Order.26

There was already substantial compliance with paragraph 7 of the AOI when respondents obtained
actual knowledge of the sale of Teresita's 3,464 Marsal shares to petitioner Rogelio as early as 1995.
In fact, respondents had already given their consent and conformity to such sale by their inaction for
17 years despite knowledge of the sale. Moreover, they had already waived the procedure of the
stockholder's sale of stocks as provided under Paragraph 7 of the AOI. In People v. Judge
Donato,27 We explained the doctrine of waiver as follows:

Waiver is defined as "a voluntary and intentional relinquishment or abandonment of a known existing
legal right, advantage, benefit, claim or privilege, which except for such waiver the party would have
enjoyed; the voluntary abandonment or surrender, by a capable person, of a right known by him to
exist, with the intent that such right shall be surrendered and such person forever deprived of its
benefit; or such conduct as warrants an inference of the relinquishment of such right; or the
intentional doing of an act inconsistent with claiming it."

As to what rights and privileges may be waived, the authority is settled:

x x x the doctrine of waiver extends to rights and privileges of any character, and, since the word
"waiver" covers every conceivable right, it is the general rule that a person may waive any matter
which affects his property, and any alienable right or privilege of which he is the owner or which
belongs to him or to which he is legally entitled, whether secured by contract, conferred with
statute, or guaranteed by constitution, provided such rights and privileges rest in the individual, are
intended for his sole benefit, do not infringe on the rights of others, and further provided the waiver
of the right or privilege is not forbidden by law, and does not contravene public policy; and the
principle is recognized that everyone has a right to waive, and agree to waive, the advantage of a
law or rule made solely for the benefit and protection of the individual in his private capacity, if it can
be dispensed with and relinquished without infringing on any public right, and without detriment to
the community at large x x x.28

Moreover, Section 99 of the Corporation Code provides for the effects of transfer of stock in breach of
qualifying conditions, to wit:

Sec. 99. Effects of issuance or transfer of stock in breach of qualifying conditions. -

xxxx
3. If a stock certificate of any close corporation conspicuously shows a restriction on transfer of stock
of the corporation, the transferee of the stock is conclusively presumed to have notice of the fact that
he has acquired stock in violation of the restriction, if such acquisition violates the restriction.

4. Whenever any person to whom stock of a close corporation has been issued or transferred has, or
is conclusively presumed under this section to have, notice either (a) that he is a person not eligible
to be a holder of stock of the corporation, or (b) that transfer of stock to him would cause the stock
of the corporation to be held by more than the number of persons permitted by its articles of
incorporation to hold stock of the corporation, or (c) that the transfer of stock is in violation of a
restriction on transfer of stock, the corporation may, at its option, refuse to register the transfer of
stock in the name of the transferee.

5. The provisions of subsection (4) shall not applicable if the transfer of stock, though contrary to
subsections (1), (2) of (3), has been consented to by all the stockholders of the close corporation, or
if the close corporation has amended its articles of incorporation in accordance with this Title.

Clearly, under the above-quoted provision, even if the transfer of stocks is made in violation of the
restrictions enumerated under Section 99, such transfer is still valid if it has been consented to by all
the stockholders of the close corporation and the corporation cannot refuse to register the transfer of
stock in the name of the transferee. In this case, We find that the sale of Teresita's 3,464 Marsal
shares had already been consented to by respondents as We have discussed, and may be registered
in the name of petitioner Rogelio.

We find that there is indeed no violation of paragraph 7 of Marsal's Articles of Incorporation. We need
not discuss the other issues raised in the petition.

WHEREFORE, premises considered, the petition for review is GRANTED. The Decision dated August
3, 2015 and the Resolution dated February 19, 2016 rendered by the Court of Appeals in CA-G.R. SP
No. 07673 are hereby REVERSED and SET ASIDE.