Doctrine: Solidary liability cannot attach to an officer and stockholder who was not served with

summons and not impleaded in the case with the corporation. Solidary liability must be rooted
on a satisfactory showing of fraud, bad faith or malice, or the presence of any of the
justifications for disregarding the corporate fiction.

REYNO C. DIMSON vs. GERRY T. CHUA

G.R. No. 192318. December 5, 2016

Facts
The instant case filed by the petitioner is an offshoot of the labor case entitled "Reyno Dimson,
et al. v. SEASUMCO, MAC, United Coconut Planters Bank (UPCB), and Cotabato Sugar
Central Co., Inc. (COSUCECO)." The said labor case for illegal dismissal with monetary claims
was decided in favor of the complainants. Hence, SEASUMCO and MAC, as well as the
members of their board of directors, were ordered to pay jointly and severally.

The LA's decision became final and executory but the judgment remained unsatisfied.
Consequently, the petitioner filed an Ex-parte Motion for the issuance of an amended alias writ
of execution asking for the inclusion of the board of directors and corporate officers of
SEASUMCO and MAC to hold them liable for satisfaction of the said decision.

Hence, the case at bar.

Issue
Whether the respondent can be held solidarily liable with the corporation, of which he was an
officer and a stockholder, when he was not served with summons and was never impleaded as
a party to the case.

Ruling
No. Following the explicit language of the NLRC Rules, notices or summons shall be served on
the parties to the case personally. The same rule allows under special circumstances, that
service of summons may be effected in accordance with the provisions of the Rules of Court.
The service of summons in cases before the LAs shall be served on the parties personally or by
registered mail, provided that in special circumstances, service of summons may be effected in
accordance with the pertinent provisions of the Rules of Court.

It is basic that the LA cannot acquire jurisdiction over the person of the respondent without the
latter being served with summons. However, if there is no valid service of summons, court can
still acquire jurisdiction over the person of the defendant by virtue of the latter's voluntary
appearance. In this case, since the respondent is one of the officers of SEASUMCO, service of
summons must be made to him personally or by registered mail. However, as borne by the
records, it is evident that no service of summons and notices were served on the respondent
and he was not impleaded. He was hauled to the case after he reacted to the improper
execution of his properties and was actually dragged to court by mere motion of the petitioner
with whom he has no privity of contract and after the decision in the main case had already
become final and executory.
More so, the respondent did not voluntarily appear before the LA as to submit himself to its
jurisdiction. Contrary to the petitioner's position, the validity of a judgment or order of a court or
quasi-judicial tribunal which has become final and executory may be attacked when the records
show that it lacked jurisdiction to render the judgment. For a judgment rendered against one in a
case where jurisdiction over his person was not acquired is void, and a void judgment maybe
assailed or impugned at any time either directly or collaterally by means of a petition filed in the
same or separate case, or by resisting such judgment in any action or proceeding wherein it is
invoked.

Considering that the respondent was never impleaded as a party respondent and was never
validly served with summons, the LA never acquired jurisdiction over his person. Perforce, the
proceedings conducted and the decision rendered are nugatory and without effect. This utter
lack of jurisdiction voids any liability of the respondent for any monetary award or judgment in
favor of the petitioner.
Doctrine: The assignment of subscription agreements is a form of novation by substitution of a
new debtor and which required the consent of or notice to the creditor.

INTERPORT RESOURCES CORPORATION vs. SECURITIES SPECIALIST, INC., AND R.C.

LEE SECURITIES INC.
G.R. No. 154069. June 6, 2016

Facts
Oceanic Oil & Mineral Resources, Inc. entered into a subscription agreement with R.C. Lee
covering 5,000,000 of its shares with par value of P0.01 per share. R.C.Lee paid 25% of the
subscription, leaving 75% unpaid. Consequently, Oceanic issued five subscription agreements
to R.C. Lee.

Subsequently, Oceanic merged with Interport, with the later as the surviving corporation. Under
the terms of the merger, each share of Oceanic was exchanged for a share of Interport. SSI
received through stock assignment, five Oceanic Subscription Agreements, indorsed in blank by
R.C Lee. Later on, R.C Lee requested Interport for a list of subscription agreements and stock
certificates issued in the name of R.C. Lee and other individuals named in the request.

Upon finding no record showing any transfer or assignment of the Oceanic subscription
agreements and stock certificates of Interport as contained in the list, R.C Lee paid its unpaid
subscriptions and was accordingly issued stock certificates corresponding thereto. SSI however
tendered payment for the balance of the 5M shares covered by the Oceanic Subscription
Agreements.

Interport refused to honor the Oceanic subscriptions and rejected tender of payment.

Issue
Whether Interport is liable to deliver the Oceanic shares of stock or the value thereof to SSI.

Ruling
Yes. Under the Civil Code, obligations may be modified by: (l) changing their object or principal
conditions; (2) substituting the person of the debtor; or (3) subrogating a third person in the
rights of the creditor. In this case, the SEC correctly categorized the assignment of the
subscription agreements as a form of novation by substitution of a new debtor which required
the consent of or notice to the creditor even without the knowledge or against the will of the
former. The change of debtor took place when R.C. Lee assigned the Oceanic shares under
subscription agreement to SSI such that that the latter became obliged to settle the 75% unpaid
balance on the subscription.

The effect of the assignment was to extinguish the obligation of R.C. Lee to Oceanic, now
Interport, to settle the unpaid balance on the subscription. As a result of the assignment,
Interport was no longer obliged to accept any payment from R.C. Lee because the latter had
ceased to be privy to subscription agreements. On the other hand, Interport was legally bound
to accept SSI's tender of payment for the 75% balance on the subscription price because SSI
had become the new debtor. As such, the issuance of the stock certificates in the name of R.C.
Lee had no legal basis in the absence of a contractual agreement between R.C. Lee and
Interport.

Under Section 63 of the Corporation Code, no transfer of shares of stock shall be valid, except
as between the parties, until the transfer is recorded in the books of the corporation. This
statutory rule cannot be strictly applied herein because lnterport had unduly refused to
recognize the assignment of the shares between R.C. Lee and SSI. The subscription
agreements were now binding between Interport and SSI only, and only such parties were
expected to comply with the terms thereof.
Doctrine: The 15-day reglementary period within which to file an election contest under the
Interim Rules is meant to hasten the submission and resolution of corporate election
controversies, so that the state of uncertainty in the corporate leadership is settled; and that the
said period not meant to block suits questioning the unlawful acts of winning directors, including
the legitimacy of their authority.

FRANCISCO C. EIZMENDI JR., JOSE S. TAYAG JR., JOAQUIN L. SAN AGUSTIN,

EDUARDO D. FRANCISCO, EDMIDIO V. RAMOS, JR., ALBERT G. BLANCAFLOR, REY
NATHANIEL C. IFURUNG, MANUEL H. ACOSTA JR., and VALLE VERDE COUNTRY CLUB,
INC., vs. TEODORICO P. FERNANDEZ.
G.R. No. 215280. September 5, 2018

Facts
On November 28, 2013, Fernandez filed a Compalint for Invalidation of Corporate Acts and
Resolutions with Application for Writ of Preliminary Injunction against the individual petitioners
who allegedly constituted themselves as new members of the Board of Directors (BOD) of Valle
Verde Country Club, Inc. (VVCCI), despite lack of quorum during the annual members' meeting
on February 23, 2013.

VVCCI is a duly organized non-stock corporation engaged in promoting sports, recreational and
social activities, and the operation and maintenance of a sports and clubhouse, among other
matters.

Fernandez asserted that since petitioners were not validly constituted as the new BOD in the
place of the hold-over BOD of VVCCI, they had no legal authority to act as such BOD, to find
him guilty and to suspend him.

The RTC denied the Urgent Motion or Request for Production/Copying of Documents. The trial
court reiterated its position that the case is not an election contest since it was filed way beyond
the reglementary period under the Interim Rules of Procedure Governing Intra-Corporate
Controversies for election contests to be brought to court, considering that the only issue that
remains to be resolved is with respect to whether due process was observed in suspending
Fernandez.

Issue
Whether or not Fernandez may question the authority of the petitioners to act as the BOD of
VVCCI and approve the board resolution suspending his club membership.

Ruling

To allow Fernandez to indirectly question the validity of the February 23, 2013 election would be
a clear violation of the 15-day reglementary period to file an election contest under the Interim
Rules. As aptly pointed out by the RTC, what cannot be legally done directly cannot be done
indirectly. This rule is basic and, to a reasonable mind, does not need explanation; if acts that
cannot be legally done directly can be done indirectly, then all laws would be illusory.
The Court agrees with Fernandez that the 15-day reglementary period within which to file an
election contest under the Interim Rules is meant to hasten the submission and resolution of
corporate election controversies, so that the state of uncertainty in the corporate leadership is
settled; and that the said period not meant to block suits questioning the unlawful acts of
winning directors, including the legitimacy of their authority. However, if the Court were to
entertain one of the causes of action in Fernandez's complaint, which is partly an election
contest raised beyond the said reglementary period, then the salutary purposes of the said
period under the Interim Rules would be rendered futile; the floodgates to election contests
would be opened, to the detriment of the regime of efficient and stable corporate governance.

The RTC committed no grave abuse of discretion in disallowing Fernandez from presenting
evidence during the hearing of his application for preliminary injunction, relative to the lack of
authority of the individual petitioners to suspend him because it would inevitably question the
validity of the February 23, 2013 election.

The RTC's action of virtually dismissing the first cause of action in Fernandez's complaint for
being an election contest filed beyond the 15-day reglementary period, is indeed consistent with
the following provisions of the Interim Rules: (a) Section 3, Rule 1, because such act promotes
the objective of securing a just, summary, speedy and inexpensive determination of every action
or proceeding; and (b) Section 4, Rule 6, which authorizes the court to dismiss outright the
complaint if the allegations thereof is not sufficient in form and substance.

The RTC's action is, likewise, consistent with the inherent power of courts to amend and control
its process and orders so as to make them conformable to law and justice, under Section 5,
Rule 135 of the Rules of Court.