Digest
Digest
In March 1960, Idonah Perkins died in New York. She left behind properties here and
abroad. One property she left behind were two stock certificates covering 33,002 shares of
stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the
possession of the Country Trust Company of New York (CTC-NY). CTC-NY was the
domiciliary administrator of the estate of Perkins (obviously in the USA). Meanwhile, in
1963, Renato Tayag was appointed as the ancillary administrator (of the properties of
Perkins she left behind in the Philippines).
A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess
the stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn
over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a
petition to have said stock certificates be declared lost and to compel BCI to issue new
stock certificates in replacement thereof. The trial court granted Tayags petition.
BCI assailed said order as it averred that it cannot possibly issue new stock certificates
because the two stock certificates declared lost are not actually lost; that the trial court as
well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY;
that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost,
stolen, or destroyed certificates of stocks, only after court of law has issued a final and
executory order as to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of Benguet Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine
laws. It has been given rights and privileges under the law. Corollary, it also has obligations
under the law and one of those is to follow valid legal court orders. It is not immune from
judicial control because it is domiciled here in the Philippines. BCI is a Philippine
corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as immune from lawful court
orders. Further, to allow BCIs opposition is to render the court order against CTC-NY a
mere scrap of paper. It will leave Tayag without any remedy simply because CTC-NY, a
foreign entity refuses to comply with a valid court order. The final recourse then is for our
local courts to create a legal fiction such that the stock certificates in issue be declared lost
even though in reality they exist in the hands of CTC-NY. This is valid. As held time and
again, fictions which the law may rely upon in the pursuit of legitimate ends have played an
important part in its development.
Further still, the argument invoked by BCI that it can only issue new stock certificates in
accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the
order of the court it simply refused to turn over the stock certificates hence ownership can
be said to have been settled in favor of estate of Perkins here. Also, assuming that there
really is a conflict between BCIs bylaws and the court order, what should prevail is the
lawful court order. It would be highly irregular if court orders would yield to the bylaws of a
corporation. Again, a corporation is not immune from judicial orders.
ROXAS VS. CA
G.R. No. 118436
March 21, 1997
FACTS: This is a petition for review of the CA decision dated December 8,
1994alleging reversible error committed by respondent appellate court when
it affirmed the decision of the RTC of Cavite.
Notices of the initial hearing were sent by the Land Registration Authority
(LRA) on the basis of Maguesun Corporations application for registration
enumerating adjoining owners, occupants or adverse claimants; Since
Trinidad de Leon vda. de Roxas was not named therein, she was not sent a
notice of the proceedings. After an Order of general default was issued, the
trial court proceeded to hear the land registration case. Eventually, on
February 1991 the RTC granted Maguesun Corporations
application for registration.
It was only when the caretaker of the property was being asked to vacate the
land that petitioner Trinidad de Leon Vda. de Roxas learned of its sale and the
registration of the lots in Maguesun Corporations name.
Hence, on April 1991, petitioner filed a petition for review before the RTC to
set aside the decree of registration on the ground that Maguesun Corporation
committed actual fraud. She alleged that the lots were among the properties
she inherited from her husband, former President Manuel A. Roxas and that
her family had been in open, continuous, adverse and uninterrupted
possession of the subject property in the concept of owner for more than thirty
years before they applied for its registration under the Torrens System of land
titling (in which no decision has been rendered thereon). Petitioner further
denied that she sold the lots to Zenaida Melliza whom she had never met
before and that her signature was forged in both the Deed of Sale and the
Affidavit of Self-Adjudication. She also claimed that Maguesun Corporation
intentionally omitted her name as an adverse claimant, occupant or adjoining
owner in the application for registration submitted to the LRA such that the
latter could not send her a Notice of Initial Hearing.
A document examiner from the PNP concluded that there was no
forgery.Upon petitioners motion, the signatures were re-examined by another
expert from NBI. The latter testified that the signatures on the questioned and
sample documents were, however, not written by the same person.
Despite the foregoing testimonies and pronouncements, the trial
court dismissed the petition for review of decree of registration. Placing
greater weight on the findings and testimony of the PNP document examiner,
it concluded that the questioned documents were not forged and if they were,
it was Zenaida Melliza, and not Maguesun Corporation, who was responsible.
Accordingly, Maguesun Corporation did not commit actual fraud.
In a decision dated December 8, 1994, respondent court denied the
petition for review and affirmed the findings of the trial
court. The CA held that petitioner failed to and demonstrate
that there was actual or extrinsic fraud, not merely
constructive or intrinsic fraud, a prerequisite for purposes of
annuling a judgment or reviewing a decree of registration.
Hence, the instant petition for review where it is alleged that the CA erred in
ruling that Maguesun Corporation did not commit actual fraud warranting the
setting aside of the registration decree and in resolving the appeal on the basis
of Maguesun Corporations good faith. Petitioners pray that the registration of
the subject lots in the name of Maguesun Corporation be cancelled, that said
The highlighted words are typed in with a different typewriter, with the first
five letters of the word provincial typed over correction fluid. Maguesun
Corporation, however, annexed a differently-worded application for
the petition to review case. In the copy submitted to the trial court, the
answer to the same number is as follows:
Hilario Luna, Jose Gil, Leon Luna, Roxas.
The discrepancy which is unexplained appears intentional. If the word
Roxas were indeed erased and replaced with Provincial Road all at Tagaytay
City (no house No.) in the original application submitted in LRC No.
TG-373 BUT the copy with the word Roxas was submitted to the trial court,
it is reasonable to assume that the reason is to mislead the court into thinking
that Roxas was placed in the original application as an adjoining owner,
encumbrancer, occupant or claimant, the same application which formed the
basis for the LRA Authority in sending out notices of initial hearing. (Section
15 of PD No. 1529 actually requires the applicant for registration to state the
full names and addresses of all occupants of the land and those of adjoining
owners, if known and if not known, the extent of the search made to find
them. Respondent corporation likewise failed to comply with this requirement
of law.)
Respondent corporations intentional concealment and representation of
petitioners interest in the subject lots as possessor, occupant and
claimant constitutes actual fraud justifying the reopening and
review of the decree of registration. Through such misfeasance, the
Roxas family was kept ignorant of the registration proceedings involving their
property, thus effectively depriving them of their day in court
The truth is that the Roxas family had been in possession of the property
uninterruptedly through their caretaker, Jose Ramirez. Respondent
Maguesun Corporation also declared in number 5 of the same application that
the subject land was unoccupied when in truth and in fact, the Roxas family
caretaker resided in the subject property.
To conclude, it is quite clear that respondent corporation cannot tack its
possession to that of petitioner as predecessor-in-interest. Zenaida Melliza
conveyed not title over the subject parcels of land to Maguesun Corporation as
she was not the owner thereof. Maguesun Corporation is thus not
entitled to the registration decree which the trial court
granted in its decision.
Petitioner has not been interrupted in her more than thirty years of open,
uninterrupted, exclusive and notorious possession in the concept of an owner
over the subject lots by the irregular transaction to Zenaida Melliza. She
therefore retains title proper and sufficient for original registration over
the two parcels of land in question pursuant to Section 14 of PD No. 1529.
NOTES:
1.
1.
Registration of untitled land under the Torrens System is done
pursuant to PD No. 1529, the Property Registration Decree which
amended and codified laws relative to registration of
property. 15 Adjudication of land in a registration (or cadastral)
case does not become final and incontrovertible until the
expiration of one year after the entry of the final decree. Before
such time, the decision remains under the control and sound
discretion of the court rendering the decree, which court after
hearing, may set aside the decision or decree and adjudicate the
land to another party. 16 Absence, minority or other disability of
any person affected, or any proceeding in court for reversing
judgments, are not considered grounds to reopen or revise said
decree. s. 17 It is further required that a petition for reopening and
review of the decree of registration be filed within one year from
the date of entry of said decree, that the petitioner has a real and
dominical right and the property has not yet been transferred to
an innocent purchaser.
2.
2.
Fraud is of two kinds: actual or constructive. Actual or positive
fraud proceeds from an intentional deception practiced by means
of the misrepresentation or concealment of a material
fact. 19 Constructive fraud is construed as a fraud because of
its detrimental effect upon public interests and public or
private confidence, even though the act is not done or committed
with an actual design to commit positive fraud or injury upon
other persons.
Fraud may also be either extrinsic or intrinsic. Fraud is regarded as intrinsic
where the fraudulent acts pertain to an issue involved in the original action, or
where the acts constituting the fraud were or could have been litigated therein,
and is regarded as extrinsic where it prevents a party from having a trial or
from presenting his entire case to the court, or where it operates upon matters
pertaining not to the judgment itself but to the manner in which it is procured,
so that there is not a fair submission of the controversy. 21 Extrinsic fraud is
also actual fraud, but collateral to the transaction sued upon. 22
The distinctions are significant because only actual fraud or extrinsic fraud
has been accepted as grounds for a judgment to be annulled or, as in this case,
a decree of registration reopened and reviewed.
1.
1.
2.
5.
6.
7.
8.
Facts: Respondents issued, on different dates, 42 search warrants against petitioners personally,
and/or corporations for which they are officers directing peace officers to search the persons of
petitioners and premises of their offices, warehouses and/or residences to search for personal
properties books of accounts, financial records, vouchers, correspondence, receipts, ledgers,
journals, portfolios, credit journals, typewriters, and other documents showing all business
transactions including disbursement receipts, balance sheets and profit and loss statements and
Bobbins(cigarettes) as the subject of the offense for violations of Central Bank Act, Tariff and
Customs Laws, Internal Revenue Code, and Revised Penal Code.
Upon effecting the search in the offices of the aforementioned corporations and on the
respective residences of the petitioners, there seized documents, papers, money and
other records. Petitioners then were subjected to deportation proceedings and were
constrained to question the legality of the searches and seizures as well as the
admissibility of those seized as evidence against them.
On March 20, 1962, the SC issued a writ of preliminary injunction and partially lifted the
same on June 29, 1962 with respect to some documents and papers.
Held:
a. Search warrants issued were violative of the Constitution and the Rules, thus,
illegal or being general warrants. There is no probable cause and warrant did not
particularly specify the things to be seized. The purpose of the requirement is to
avoid placing the sanctity of the domicile and the privacy of communication and
correspondence at the mercy of the whims, caprice or passion of peace officers.
b. Document seized from an illegal search warrant is not admissible in court as
a fruit of a poisonous tee. However, they could not be returned, except if
warranted by the circumstances.
c. Petitioners were not the proper party to question the validity and return of those
taken from the corporations for which they acted as officers as they are treated
as personality different from that of the corporation.
i.
j.
k.
l.
m.
n.
o.
p.
peace, good order, comfort, convenience and general welfare of the city and its
inhabitants and to fix penalties for the violation of ordinances.
Petitioners argued that the ordinance is unconstitutional and void since it
violates the right to privacy and freedom of movement; it is an invalid exercise
of police power; and it is unreasonable and oppressive interference in their
business.
CA, in turn, reversed the decision of RTC and affirmed the constitutionality of
the ordinance. First, it held that the ordinance did not violate the right to
privacy or the freedom of movement, as it only penalizes the owners or
operators of establishments that admit individuals for short time stays. Second,
the virtually limitless reach of police power is only constrained by having a
lawful object obtained through a lawful method. The lawful objective of the
ordinance is satisfied since it aims to curb immoral activities. There is a lawful
method since the establishments are still allowed to operate. Third, the adverse
effect on the establishments is justified by the well-being of its constituents in
general.
Hence, the petitioners appeared before the SC.
Issue:
Whether Ordinance No. 7774 is a valid exercise of police power of the State.
Held:
No. Ordinance No. 7774 cannot be considered as a valid exercise of police
power, and as such, it is unconstitutional.
The facts of this case will recall to mind not only the recent City of Manila v
Laguio Jr ruling, but the 1967 decision in Ermita-Malate Hotel and Motel
Operations Association, Inc., v. Hon. City Mayor of Manila. The common
thread that runs through those decisions and the case at bar goes beyond the
singularity of the localities covered under the respective ordinances. All three
ordinances were enacted with a view of regulating public morals including
particular illicit activity in transient lodging establishments. This could be
described as the middle case, wherein there is no wholesale ban on motels and
hotels but the services offered by these establishments have been severely
restricted. At its core, this is another case about the extent to which the State
can intrude into and regulate the lives of its citizens
The test of a valid ordinance is well established. A long line of decisions
including City of Manila has held that for an ordinance to be valid, it must not
only be within the corporate powers of the local government unit to enact and
pass according to the procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene the Constitution or
any statute; (2) must not be unfair or oppressive; (3) must not be partial or
discriminatory; (4) must not prohibit but may regulate trade; (5) must be
general and consistent with public policy; and (6) must not be unreasonable.
q. The ordinance in this case prohibits two specific and distinct business practices,
namely wash rate admissions and renting out a room more than twice a day.
The ban is evidently sought to be rooted in the police power as conferred on
local government units by the Local Government Code through such
implements as the general welfare clause.
r. Police power is based upon the concept of necessity of the State and its
corresponding right to protect itself and its people. Police power has been used
as justification for numerous and varied actions by the State.
s. The apparent goal of the ordinance is to minimize if not eliminate the use of the
covered establishments for illicit sex, prostitution, drug use and alike. These
goals, by themselves, are unimpeachable and certainly fall within the ambit of
the police power of the State. Yet the desirability of these ends do not sanctify
any and all means for their achievement. Those means must align with the
Constitution.
t. SC contended that if they were to take the myopic view that an ordinance
should be analyzed strictly as to its effect only on the petitioners at bar, then it
would seem that the only restraint imposed by the law that they were
capacitated to act upon is the injury to property sustained by the petitioners.
Yet, they also recognized the capacity of the petitioners to invoke as well the
constitutional rights of their patrons those persons who would be deprived of
availing short time access or wash-up rates to the lodging establishments in
question. The rights at stake herein fell within the same fundamental rights to
liberty. Liberty as guaranteed by the Constitution was defined by Justice
Malcolm to include the right to exist and the right to be free from arbitrary
restraint or servitude. The term cannot be dwarfed into mere freedom from
physical restraint of the person of the citizen, but is deemed to embrace the
right of man to enjoy the facilities with which he has been endowed by his
Creator, subject only to such restraint as are necessary for the common welfare,
u. Indeed, the right to privacy as a constitutional right must be recognized and the
invasion of it should be justified by a compelling state interest. Jurisprudence
accorded recognition to the right to privacy independently of its identification
with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal
life of the citizen.
v. An ordinance which prevents the lawful uses of a wash rate depriving patrons
of a product and the petitioners of lucrative business ties in with another
constitutional requisite for the legitimacy of the ordinance as a police power
measure. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with
private rights and the means must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive of private rights. It
must also be evident that no other alternative for the accomplishment of the
purpose less intrusive of private rights can work. More importantly, a
reasonable relation must exist between the purposes of the measure and the
means employed for its accomplishment, for even under the guise of protecting
the public interest, personal rights and those pertaining to private property will
not be permitted to be arbitrarily invaded.
w. Lacking a concurrence of these requisites, the police measure shall be struck
down as an arbitrary intrusion into private rights.
The behavior which the ordinance seeks to curtail is in fact already prohibited
and could in fact be diminished simply by applying existing laws. Less
intrusive measures such as curbing the proliferation of prostitutes and drug
dealers through active police work would be more effective in easing the
situation. So would the strict enforcement of existing laws and regulations
penalizing prostitution and drug use. These measures would have minimal
intrusion on the businesses of the petitioners and other legitimate merchants.
Further, it is apparent that the ordinance can easily be circumvented by merely
paying the whole day rate without any hindrance to those engaged in illicit
activities. Moreover, drug dealers and prostitutes can in fact collect wash
rates from their clientele by charging their customers a portion of the rent for
motel rooms and even apartments.
x. SC reiterated that individual rights may be adversely affected only to the extent
that may fairly be required by the legitimate demands of public interest or
public welfare. The State is a leviathan that must be restrained from needlessly
intruding into the lives of its citizens. However well-intentioned the ordinance
may be, it is in effect an arbitrary and whimsical intrusion into the rights of the
establishments as well as their patrons. The ordinance needlessly restrains the
operation of the businesses of the petitioners as well as restricting the rights of
their patrons without sufficient justification. The ordinance rashly equates wash
rates and renting out a room more than twice a day with immorality without
accommodating innocuous intentions.
y. WHEREFORE, the Petition is GRANTED. The Decision of the Court of
Appeals is REVERSED, and the Decision of the Regional Trial Court of
Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is hereby declared
UNCONSTITUTIONAL. No pronouncement as to costs.
z. ADELIO
C.
CRUZ, complainant,
vs.
QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.
aa.
ab. R E S O L U T I O N
ac. FERNAN, J.:
ad. In a sworn complaint dated July 23, 1984, Adelio C. Cruz charged Quiterio L.
Dalisay, Senior Deputy Sheriff of Manila, with malfeasance in office, corrupt
practices and serious irregularities allegedly committed as follows:
ae. 1. Respondent sheriff attached and/or levied the money belonging to complainant
Cruz when he was not himself the judgment debtor in the final judgment of NLRC
NCR Case No. 8-12389-91 sought to be enforced but rather the company known as
Qualitrans Limousine Service, Inc., a duly registered corporation; and,
af. 2. Respondent likewise caused the service of the alias writ of execution upon
complainant who is a resident of Pasay City, despite knowledge that his territorial
jurisdiction covers Manila only and does not extend to Pasay City.
ag. In his Comments, respondent Dalisay explained that when he garnished
complainants cash deposit at the Philtrust bank, he was merely performing a
ministerial duty. While it is true that said writ was addressed to Qualitrans Limousine
Service, Inc., yet it is also a fact that complainant had executed an affidavit before
the Pasay City assistant fiscal stating that he is the owner/president of said
corporation and, because of that declaration, the counsel for the plaintiff in the labor
case advised him to serve notice of garnishment on the Philtrust bank.
ah. On November 12, 1984, this case was referred to the Executive Judge of the
Regional Trial Court of Manila for investigation, report and recommendation.
ai. Prior to the termination of the proceedings, however, complainant executed an
affidavit of desistance stating that he is no longer interested in prosecuting the case
against respondent Dalisay and that it was just a misunderstanding between them.
Upon respondents motion, the Executive Judge issued an order dated May 29, 1986
recommending the dismissal of the case.
aj. It has been held that the desistance of complainant does not preclude the taking of
disciplinary action against respondent. Neither does it dissuade the Court from
imposing the appropriate corrective sanction. One who holds a public position,
especially an office directly connected with the administration of justice and the
execution of judgments, must at all times be free from the appearance of
impropriety.1
ak. We hold that respondents actuation in enforcing a judgment against complainant
who is not the judgment debtor in the case calls for disciplinary action. Considering
the ministerial nature of his duty in enforcing writs of execution, what is incumbent
upon him is to ensure that only that portion of a decision ordained or decreed in the
dispositive part should be the subject of execution. 2 No more, no less. That the title of
the case specifically names complainant as one of the respondents is of no moment
as execution must conform to that directed in the dispositive portion and not in the
title of the case.
al. The tenor of the NLRC judgment and the implementing writ is clear enough. It
directed Qualitrans Limousine Service, Inc. to reinstate the discharged employees
and pay them full backwages. Respondent, however, chose to pierce the veil of
corporate entity usurping a power belonging to the court and assumed improvidently
that since the complainant is the owner/president of Qualitrans Limousine Service,
Inc., they are one and the same. It is a well-settled doctrine both in law and in equity
that as a legal entity, a corporation has a personality distinct and separate from its
individual stockholders or members. The mere fact that one is president of a
corporation does not render the property he owns or possesses the property of the
corporation, since the president, as individual, and the corporation are separate
entities.3
am.
Anent the charge that respondent exceeded his territorial jurisdiction, suffice it
to say that the writ of execution sought to be implemented was dated July 9, 1984,
or prior to the issuance of Administrative Circular No. 12 which restrains a sheriff
from enforcing a court writ outside his territorial jurisdiction without first notifying in
writing and seeking the assistance of the sheriff of the place where execution shall
take place.
an. ACCORDINGLY,
we
find
Respondent
Deputy
Sheriff
Quiterio
L.
Dalisay NEGLIGENT in the enforcement of the writ of execution in NLRC Case-No.
8-12389-91, and a fine equivalent to three [3] months salary is hereby imposed with
a stern warning that the commission of the same or similar offense in the future will
merit a heavier penalty. Let a copy of this Resolution be filed in the personal record
of the respondent.
ao. SO ORDERED.
ap. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
13 Scra 84
Facts: In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we found plaintiff entitled to
damages (for breach of contract) but reduced the amount from P23, 000.00 to P15, 000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275, October 24, 1960, we held that the
judgment for P15,000.00 which had become final and executory, should be executed to its full amount,
since in fixing it, payment already made had been considered.
15 years ago, Mariano Albert entered into a contract with University Publishing Co., Inc. through Jose
M. Aruego, its President, whereby University would pay plaintiff for the exclusive right to publish his
revised Commentaries on the Revised Penal Code. The contract stipulated that failure to pay one
installment would render the rest of the payments due. When University failed to pay the second
installment, Albert sued for collection and won.
However, upon execution, it was found that the records of this Commission do not show the
registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership. Albert
petitioned for a writ of execution against Jose M. Aruego as the real defendant. University opposed, on
the ground that Aruego was not a party to the case.
Issue: WON the non-registration of University Publishing Co., Inc. in the SEC is an existing corporation
with an independent juridical personality.
Held: No.
In the case at bar, Aruego represented a non-existent entity and induced not only Albert but the court
to believe in such representation. He signed the contract as President of University Publishing Co.,
Inc., stating that this was a corporation duly organized and existing under the laws of the
Philippines.
A person acting or purporting to act on behalf of a corporation which has no valid existence assumes
such privileges and obligations and becomes personally liable for contracts entered into or for other
acts performed as such agent.
Aruego, acting as representative of such non-existent principal, was the real party to the contract sued
upon, and thus assumed such privileges and obligations and became personally liable for the contract
entered into or for other acts performed as such agent.
The Supreme Court likewise held that the doctrine of corporation by estoppel cannot be set up against
Albert since it was Aruego who had induced him to act upon his (Aruegos) willful representation that
University had been duly organized and was existing under the law.
Petition Denied.
Facts:
Petitioner Sappari K. Sawadjaan was among the first employees of the
Philippine Amanah Bank (PAB) when it was created by virtue of Presidential
Decree No. 264. Sometime in 1988, while still designated as
appraiser/investigator, he was assigned to inspect the properties offered as
collaterals by Compressed Air Machineries and Equipment Corporation
(CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The
properties consisted of two parcels of land covered by Transfer Certificates of
Title (TCTs). On the basis of his Inspection and Appraisal Report, the PAB
granted the loan application. When the loan matured, CAMEC requested an
extension to repay the loan.
In January 1990, Congress passed Republic Act 6848 creating the AIIBP and
repealing P.D. No. 264 (which created the PAB). All assets, liabilities and
capital accounts of the PAB were transferred to the AIIBP, and the existing
personnel of the PAB were to continue to discharge their functions unless
discharged. In the ensuing reorganization, Sawadjaan was among the
personnel retained by the AIIBP.
When CAMEC failed to pay despite the given extension, the bank, now
referred to as the AIIBP, discovered that one of the TCT was spurious, the
property described therein non-existent, and that the property covered by the
other TCT had a prior existing mortgage.
The Board of Directors of the AIIBP created an Investigating Committee to
look into the CAMEC transaction, which had cost the bank Six Million Pesos
The AIIBP was created by Rep. Act No. 6848. It has a main office where it
conducts business, has shareholders, corporate officers, a board of directors,
assets, and personnel. It is, in fact, here represented by the Office of the
Government Corporate Counsel, the principal law office of governmentowned corporations, one of which is respondent bank. At the very least, by its
failure to submit its by-laws on time, the AIIBP may be considered
a de facto corporation whose right to exercise corporate powers may not be
inquired into collaterally in any private suit to which such corporations may be
a party.
Moreover, a corporation which has failed to file its by-laws within the
prescribed period does not ipso facto lose its powers as such. The SEC Rules
on Suspension/Revocation of the Certificate of Registration of Corporations,
details the procedures and remedies that may be availed of before an order of
revocation can be issued. There is no showing that such a procedure has been
initiated in this case.
Wherefore, the petition is dismissed.
FACTS: The petitioner, who was hired by Sceptre as a security guard, was asked by Karen Therese Tan,
Sceptre's Operations Manager, to submit a resignation letter as the same was supposedly required for
applying for a position at Royale.
Martin informed him that he would no longer be given any assignment per the instructions
of Aida Sabalones-Tan, general manager of Sceptre. This prompted him to file a complaint for illegal
dismissal. While complainant is entitled to backwages, we are aware that his stint with respondent Royale
lasted only for one (1) month and three (3) days such that it is our considered view that his backwages
should be limited to only three (3) months. The petitioner does not deny that he has received the full
amount of his backwages and separation pay as provided under the NLRC's November 2005 Decision.
However, he claims that this does not preclude this Court from modifying a decision that is tainted with
grave abuse of discretion or issued without jurisdiction.
ISSUE: Whether the petitioner's backwages should be limited to his salary for three (3) months
RULING: No. In case separation pay is awarded and reinstatement is no longer feasible, backwages shall
be computed from the time of illegal dismissal up to the finality of the decision should separation pay not
be paid in the meantime. It is the employee's actual receipt of the full amount of his separation pay that
will effectively terminate the employment of an illegaly dismissed employee. Otherwise, the employeremployee relationship subsists and the illegally dismissed employee is entitled to backwages, taking into
account the increases and other benefits, including the 13 th month pay, that were received by his coemployees who are not dismissed. It is the obligation of the employer to pay an illegally dismissed
employee or worker the whole amount of the salaries or wages, plus all other benefits and bonuses and
general increases, to which he would have been normally entitled had he not been dismissed and had not
stopped working.
negligence in the performance of her duties such that the lifting of the corporate mask would be
merited. What the complaint simply stated is that she, together with her errant husband Chua, acted
as surety of Hammer, as evidenced by her signature on the Surety Agreement which was later found
by the RTC to have been forged.
Considering that the only basis for holding Uy liable for the payment of the loan was proven to be a
falsified document, there was no sufficient justification for the RTC to have ruled that Uy should be
held jointly and severally liable to iBank for the unpaid loan of Hammer. Neither did the CA explain its
affirmation of the RTCs ruling against Uy. The Court cannot give credence to the simplistic
declaration of the RTC that liability would attach directly to Uy for the sole reason that she was an
officer and stockholder of Hammer.
Francisco Motors
Corporation vs Court of
Appeals
In 1985, Francisco Motors Corporation (FMC) sued Atty. Gregorio Manuel to recover from a
him a sum of money in the amount of P23,000.00+. Said amount was allegedly owed to
them by Manuel for the purchase of a jeep body plus repairs thereto. Manuel filed a
counterclaim in the amount of P50,000.00. In his counterclaim, Manuel alleged that he was
the Assistant Legal Officer for FMC; that the Francisco Family, owners of FMC, engaged his
services for the intestate estate proceedings of one Benita Trinidad; that he was not paid for
his legal services; that he is filing the counterclaim against FMC because said corporation
was merely a conduit of the Francisco Family. The trial court as well as the Court of Appeals
granted Manuels counterclaim on the ground that the legal fees were owed by the
incorporators of FMC (an application of the doctrine of piercing the veil of corporation fiction
in a reversed manner).
ISSUE: Whether or not the doctrine of piercing the veil of corporate fiction was properly
used by the Court of Appeals.
HELD: No. In the first place, the doctrine is to be used in disregarding corporate fiction and
making the incorporators liable in appropriate circumstances. In the case at bar, the doctrine
is applied upside down where the corporation is held liable for the personal obligations of
the incorporators such was uncalled for and erroneous. It must be noted that that Atty.
Manuels legal services were secured by the Francisco Family to represent them in the
intestate proceedings over Benita Trinidads estate. The indebtedness was incurred by the
Francisco Family in their separate and personal capacity. These estate proceedings did not
involve any business of FMC. The proper remedy is for Manuel to sue the concerned
members of the Francisco Family in their individual capacity.
The NLRC dismissed the complaint for lack of merit and ruled that since EEMI
cessation of business operation was due to serious business losses, the employees
were not entitled to separation pay. Respondents moved for reconsideration of the
NLRC decision, but the NLRC denied the motion in its March 23, 2009 Resolution.
Unperturbed, respondents elevated the case before the CA via a petition for
certiorari under Rule 65. The appellate court granted the petition and nullified the
decision of the NLRC and reinstated the LA decision.
ISSUES:
1. Whether the CA erred in finding that the closure of EEMI operation was not due to
business losses?
2. Whether the CA erred in finding Vicente Go solidarily liable with EEMI?
HELD: The petition is partly meritorious.
LABOR LAW
Article 283 of the Labor Code identifies closure or cessation of operation of the
establishment as an authorized cause for terminating an employee. Similarly, the
said provision mandates that employees who are laid off from work due to closures
that are not due to business insolvency should be paid separation pay equivalent to
one-month pay or to at least one-half month pay for every year of service, whichever
is higher. A fraction of at least six months shall be considered one whole year.
Although business reverses or losses are recognized by law as an authorized
cause, it is still essential that the alleged losses in the business operations be
proven convincingly; otherwise, this ground for termination of employment would be
susceptible to abuse by conniving employers, who might be merely feigning
business losses or reverses in their business ventures in order to ease out
employees.
In this case, EEMI failed to establish that the main reason for its closure was
business reverses. As aptly observed by the CA, the cessation of EEMI business
was not directly brought about by serious business losses or financial reverses, but
by reason of the enforcement of a judgment against it. Thus, EEMI should be
required to pay separation pay to its affected employees.
LABOR LAW
As a general rule, corporate officers should not be held solidarily liable with the
corporation for separation pay for it is settled that a corporation is invested by law
with a personality separate and distinct from those of the persons composing it as
well as from that of any other legal entity to which it may be related. Mere ownership
by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality.
The LA was of the view that Go, as President of the corporation, actively participated
in the management of EEMI corporate obligations, and, accordingly, rendered
judgment ordering EEMI and Go "in solidum to pay the complainants" their due. He
explained that "[r]espondent Go negligence in not paying the lease rental of the plant
in behalf of the lessee EGO Electrical Supply, Inc., where EEMI was operating and
reimburse expenses of UCPB for real estate taxes and the like, prompted the bank
to file an unlawful detainer case against the lessee, EGO Electrical Supply Co. The
CA affirmed the LA decision citing the case of Restaurante Las Conchas v.
Llego,where it was held that "when the employer corporation is no longer existing
and unable to satisfy the judgment in favor of the employees, the officers should be
held liable for acting on behalf of the corporation."
A study of Restaurante Las Conchas case, however, bares that it was an application
of the exception rather than the general rule. As stated in the said case, "as a rule,
the officers and members of a corporation are not personally liable for acts done in
the performance of their duties." The Court therein explained that it applied the
exception because of the peculiar circumstances of the case. If the rule would be
applied, the employees would end up in an empty victory because as the restaurant
had been closed for lack of venue, there would be no one to pay its liability as the
respondents therein claimed that the restaurant was owned by a different entity, not
a party in the case.
In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to apply the
ruling in Restaurante Las Conchas because there was no evidence that the
respondent therein, Henry Uytrengsu, acted in bad faith or in excess of his authority.
It stressed that a corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of any other
legal entity to which it may be related. For said reason, the doctrine of piercing the
veil of corporate fiction must be exercised with caution.Citing Malayang Samahan ng
mga Manggagawa sa M. Greenfield v. Ramos, the Court explained that corporate
directors and officers are solidarily liable with the corporation for the termination of
employees done with malice or bad faith. It stressed that bad faith does not connote
bad judgment or negligence; it imports a dishonest purpose or some moral obliquity
and conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud.
In Pantranco Employees Association, the Court also rejected the invocation of
Restaurante Las Conchas and refused to pierce the veil of corporate fiction. It
explained:
corporation for the termination of employment only if done with malice or in bad faith.
Bad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a
known duty through some motive or interest or ill will; it partakes of the nature of
fraud.
In the present case, Go may have acted in behalf of EEMI but the company failure to
operate cannot be equated to bad faith. Cessation of business operation is brought
about by various causes like mismanagement, lack of demand, negligence, or lack
of business foresight. Unless it can be shown that the closure was deliberate,
malicious and in bad faith, the Court must apply the general rule that a corporation
has, by law, a personality separate and distinct from that of its owners. As there is no
evidence that Go, as EEMI President, acted maliciously or in bad faith in handling
their business affairs and in eventually implementing the closure of its business, he
cannot be held jointly and solidarily liable with EEMI.
PARTIALLY GRANTED
CA AFFIRMED AND MODIFIED
Philippine National Bank vs. Andrada Electric & Engineering Co. [GR 142936, 17
April 2002] Third Division, Panganiban (J): 3 concur, 1 on official leave Facts: On 26
August 1975, the Philippine national Bank (PNB) acquired the assets of the
Pampanga Sugar Mills (PASUMIL) that were earlier foreclosed by the Development
Bank of the Philippines (DBP) under LOI 311. The PNB organized the ational Sugar
Development Corporation (NASUDECO) in September 1975, to take ownership and
possession of the assets and ultimately to nationalize and consolidate its interest in
other PNB controlled sugar mills. Prior to 29 October 1971, PASUMIL engaged the
services of the Andrada Electric & Engineering Company (AEEC) for electrical
rewinding and repair, most of which were partially paid by PASUMIL, leaving several
unpaid accounts with AEEC. On 29 October 1971, AEEC and PASUMIL entered into a
contract for AEEC to perform the (a) Construction of a power house building; 3
reinforced concrete foundation for 3 units 350 KW diesel engine generating sets, 3
reinforced concrete foundation for the 5,000 KW and 1,250 KW turbo generator sets,
among others. Aside from the work contract, PASUMIL required AEEC to perform
extra work, and provide electrical equipment and spare parts. Out of the total
obligation of P777,263.80, PASUMIL had paid only P250,000.00, leaving an unpaid
balance, as of 27 June 1973, amounting to P527,263.80. Out of said unpaid balance
of P527,263.80, PASUMIL made a partial payment to AEEC of P14,000.00, in broken
amounts, covering the period from 5 January 1974 up to 23 May 1974, leaving an
unpaid balance of P513,263.80. PASUMIL and PNB, and now NASUDECO, allegedly
failed and refused to pay AEEC their just, valid and demandable obligation (The
President of the NASUDECO is also the Vice-President of the PNB. AEEC besought
said official to pay the outstanding obligation of PASUMIL, inasmuch as PNB and
NASUDECO now owned and possessed the assets of PASUMIL, and these defendants
all benefited from the works, and the electrical, as well as the engineering
Commercial Law - Corporation Law, 2005 ( 9 ) Narratives (Berne Guerrero) and
repairs, performed by AEEC). Because of the failure and refusal of PNB, PASUMIL
and/or NASUDECO to pay their obligations, AEEC allegedly suffered actual damages
in the total amount of P513,263.80; and that in order to recover these sums, AEEC
was compelled to engage the professional services of counsel, to whom AEEC
agreed to pay a sum equivalent to 25% of the amount of the obligation due by way
of attorney's fees. PNB and NASUDECO filed a joint motion to dismiss on the ground
that the complaint failed to state sufficient allegations to establish a cause of action
against PNB and NASUDECO, inasmuch as there is lack or want of privity of contract
between the them and AEEC. Said motion was denied by the trial court in its 27
November order, and ordered PNB nad NASUDECO to file their answers within 15
days. After due proceedings, the Trial Court rendered judgment in favor of AEEC and
against PNB, NASUDECO and PASUMIL; the latter being ordered to pay jointly and
severally the former (1) the sum of P513,623.80 plus interest thereon at the rate of
14% per annum as claimed from 25 September 1980 until fully paid; (2) the sum of
P102,724.76 as attorney's fees; and, (3) Costs. PNB and NASUDECO appealed. The
Court of Appeals affirmed the decision of the trial court in its decision of 17 April
2000 (CA-GR CV 57610. PNB and NASUDECO filed the petition for review. Issue:
Whether PNB and NASUDECO may be held liable for PASUMILs liability to AEEC.
Held: Basic is the rule that a corporation has a legal personality distinct and
separate from the persons and entities owning it. The corporate veil may be lifted
only if it has been used to shield fraud, defend crime, justify a wrong, defeat public
convenience, insulate bad faith or perpetuate injustice. Thus, the mere fact that the
Philippine National Bank (PNB) acquired ownership or management of some assets
of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and
purchased at the resulting public auction by the Development Bank of the
Philippines (DBP), will not make PNB liable for the PASUMIL's contractual debts to
Andrada Electric & Engineering Company (AEEC). Piercing the veil of corporate
fiction may be allowed only if the following elements concur: (1) control not mere
stock control, but complete domination not only of finances, but of policy and
business practice in respect to the transaction attacked, must have been such that
the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own; (2) such control must have been used by the defendant to
commit a fraud or a wrong to perpetuate the violation of a statutory or other
positive legal duty, or a dishonest and an unjust act in contravention of plaintiff's
legal right; and (3) the said control and breach of duty must have proximately
caused the injury or unjust loss complained of. The absence of the foregoing
elements in the present case precludes the piercing of the corporate veil. First,
other than the fact that PNB and NASUDECO acquired the assets of PASUMIL, there
is no showing that their control over it warrants the disregard of corporate
personalities. Second, there is no evidence that their juridical personality was used
to commit a fraud or to do a wrong; or that the separate corporate entity was
farcically used as a mere alter ego, business conduit or instrumentality of another
entity or person. Third, AEEC was not defrauded or injured when PNB and
NASUDECO acquired the assets of PASUMIL. Hence, although the assets of
NASUDECO can be easily traced to PASUMIL, the transfer of the latter's assets to
PNB and NASUDECO was not fraudulently entered into in order to escape liability for
its debt to AEEC. Neither was there any merger or consolidation with respect to
PASUMIL and PNB. The procedure prescribed under Title IX of the Corporation Code
59 was not followed. In fact, PASUMIL's corporate existence had not been legally
extinguished or terminated. Further, prior to PNB's acquisition of the foreclosed
assets, PASUMIL had previously made partial payments to AEEC for the former's
obligation in the amount of P777,263.80. As of 27 June 1973, PASUMIL had paid
P250,000 to AEEC and, from 5 January 1974 to 23 May 1974, another P14,000.
Neither did PNB expressly or impliedly agree to assume the debt of PASUMIL to
AEEC. LOI 11 explicitly provides that PNB shall study and submit recommendations
on the claims of PASUMIL's creditors. Clearly, the corporate separateness between
PASUMIL and PNB remains, despite AEEC's insistence to the contrary.
occupants of the said property and Durano & Co. purchased the adjacent
property for mining coal.
The RTC ordered in their ruling that the petitioners are to pay damages to the
respondent and the return of the properties of Venancia Repaso, Hermogenes
Tito, and Marcelino Gonzales as well as the property of Angeles Sepulveda Uy
with respect to the are found outside of the Cepoc property. On appeal, the CA
affirmed the decision but modified the judgement ordering the return of all
properties to the respondents.
Issue:
Whether or not the respondents are builders in good faith.
Decision:
The court ruled that the records indicated that the respondents possession
has already ripened into ownership by acquisitive prescription. Acquisitive
prescription is acquired by possession in good faith with just tittle for a period
of ten years. One is considered in good faith when he is not aware of any flaw
in his tittle or mode of acquisition of the property and there is just title when
the adverse claimant came into possession of the property through one of the
modes of acquiring ownership provided by law.
In the case at bar, the respondents acquired the properties by purchase or
inheritance and ever since were in actual, continuous, open, and adverse
possession. The records showed that they were unaware of any claims over the
properties until the notices given on August 1970.
The petitioners on the other hand cannot claim good faith. The validity of the
certificates of title obtained by them were doubted by the courts as there was a
lack of registered title of Cepoc and the deed of sale between Cepoc and
Durano & Co. were not notarised and therefore unregisterable. Furthermore, a
buyer could not have been ignorant that the property they bought were
adversely possessed by the respondents nor did they investigate the property
the petitioners cannot be held to be buyers in good faith, nor builders in good
faith.
Under the Article 449 of the New Civil Code, he who builds etc. in bad faith on
the land of another, loses what is built etc. without right of indemnity.
Furthermore, Article 450 gives the landowner over which something was built
in bad faith the power to demolish the works to replace the property in their
former condition at the expense of the builder. And Article 451 gives him the
right to damages.
***non property issue: piercing the veil of corporate fiction
Test in determining the applicability of the doctrine of piercing the veil of
corporate fiction:
1. Control
2. Control myst have been used to commit fraud or a wrong
3. Control and breach of duty must proximately cause the injury or unjust loss
complained off.
Yao Ca sin vs ca
In 1973, Constancio Maglana, president of Prime White Cement Corporation, sent an offer
letter to Yao Ka Sin Trading. The offer states that Prime White is willing to sell 45,000 bags
of cement at P24.30 per bag. The offer letter was received by Yao Ka Sins manager, Henry
Yao. Yao accepted the letter and pursuant to the letter, he sent a check in the amount of
P243,000.00 equivalent to the value of 10,000 bags of cement. However, the Board of
Directors of Prime White rejected the offer letter sent by Maglana but it considered Yaos
acceptance letter as a new contract offer hence the Board sent a letter to Yao telling him
that Prime White is instead willing to sell only 10,000 bags to Yao Ka Sin and that he has
ten days to reply; that if no reply is made by Yao then they will consider it as an acceptance
and that thereafter Prime White shall deposit the P243k check in its account and then
deliver the cements to Yao Ka Sin. Henry Yao never replied.
Later, Yao Ka Sin sued Prime White to compel the latter to comply with what Yao Ka Sin
considered as the true contract, i.e., 45,000 bags at P24.30 per bag. Prime White in its
defense averred that although Maglana is empowered to sign contracts in behalf of Prime
White, such contracts are still subject to approval by Prime Whites Board, and then it still
requires further approval by the National Investment and Development Corporation (NIDC),
a government owned and controlled corporation because Prime White is a subsidiary of
NIDC.
Henry Yao asserts that the letter from Maglana is a binding contract because it was made
under the apparent authority of Maglana. The trial court ruled in favor of Yao Ka Sin. The
Court of Appeals reversed the trial court.
ISSUE: Whether or not the president of a corporation is clothed with apparent authority to
enter into binding contracts with third persons without the authority of the Board.
HELD: No. The Board may enter into contracts through the president. The president may
only enter into contracts upon authority of the Board. Hence, any agreement signed by the
president is subject to approval by the Board. Unlike a general manager (like the case of
Francisco vs GSIS), the president has no apparent authority to enter into binding contracts
with third persons. Further, if indeed the by-laws of Prime White did provide Maglana with
apparent authority, this was not proven by Yao Ka Sin.
As a rule, apparent authority may result from (1) the general manner, by which the
corporation holds out an officer or agent as having power to act or, in other words, the
apparent authority with which it clothes him to act in general or (2) acquiescence in his acts
of a particular nature, with actual or constructive knowledge thereof, whether within or
without the scope of his ordinary powers. These are not present in this case.
Also, the subsequent letter by Prime White to Yao Ka Sin is binding because Yao Ka Sins
failure to respond constitutes an acceptance, per stated in the letter itself which was not
contested by Henry Yao during trial.
April 21, 1988: Spouses Eduardo and Ma. Pilar Vaca (spouses Vaca) executed a Real Estate Mortgage
(REM) in favor of the Associated Bank (Associated) over their parcel of residential land and house
Due to failure to pay its obligation, Associated won its bidding in the public auction and was issued
the title thereto
spouses Vaca commenced an action for the nullification of the REM and the foreclosure sale.
CA: favored Associated
During the pendency of the cases, Associated advertised the subject property for sale to interested
buyers for P9,700,000.00
Rafael and Monaliza Pronstroller (Pronstrollers) bought it for P7.5M with 10% as downpayment
March 18, 1993: Associated, through Atty. Soluta, and the Pronstrollers, executed a Letter-Agreement
Prior to the expiration of the 90-day period within which to make the escrow deposit, in view
of the pendency of the cases the Pronstrollers requested that the balance be payable upon service on them
of a final decision affirming Associated's right to possess the property
Atty. Soluta referred respondents' proposal to Associated's Asset Recovery and
Remedial Management Committee (ARRMC) who deferred action
July 14, 1993 (a month after they made the request and after the payment deadline had lapsed): Atty.
Soluta executed another Letter-Agreement allowing the request
Early 1994: Associated reorganized its management
Atty. Braulio Dayday (Atty. Dayday) became Assist. VP and Head of the Documentation
Section, while Atty. Soluta was relieved of his responsibilities
Atty. Dayday discovered that the Pronstrollers failed to deposit the balance and the request
March 4, 1994: It was resubmitted and disapproved at its ARRMC meeting
ARRMC referred the matter to the Legal Department for rescission or
cancellation due to breach of contract
May 5, 1994: Atty. Dayday informed the disapproval, rescinding and deposit forfeiture. They were
also asked to submit their new proposal if they were still interested
The Pronstrollers went to talked to Atty. Dayday and showed him the Letter-Agreement
showing that they were granted extension but Atty. Dayday told them it was a mistake and Atty. Soluta
was not authorized to give such extension
June 6, 1994: The Pronstrollers proposed to pay the balance with P3M upon the approval of their
proposal and the balance after 6 months but it was disapproved by Associated's President
June 9, 1994: They were advised that their proposal will be accepted if they will pay 24.5% per annum
interest and if they do not agree, they are allowed to refund the 750 K
July 14, 1994: Vaca Case: court upheld Associated's right to possess the subject property
July 28, 1994: The Pronstrollers commenced the instant suit by filing a Complaint for Specific
Performance before the RTC
During the pendency of the case, Associated sold the subject property to the spouses Vaca who started
demolishing the house which, however, was not completed by virtue of the writ of preliminary injunction
issued by the court
November 14, 1997:trial court favored the Pronstrollers (rescission of the Agreement to Sell to be null
and void for being contrary to law and public policy)
CA affirmed RTC
ISSUE: W/N Associated can rescind the contract
GR: in the absence of authority from the board of directors, no person, not even its officers, can
validly bind a corporation
EX: board may validly delegate some of its functions and powers to officers, committees and agents
Admittedly, during the pendency of the case, respondents timely registered a notice of lis pendens to
warn the whole world that the property was the subject of a pending litigation:
1.
to keep the subject matter of the litigation within the power of the court until the entry of the final
judgment to prevent the defeat of the final judgment by successive alienations; and
2.
to bind a purchaser, bona fide or not, of the land subject of the litigation to the judgment or decree that
the court will promulgate subsequently.
o
This registration gives the court clear authority to cancel the title of the spouses Vaca, since
the sale of the subject property was made after the notice of lis pendens
MWSS V. CA
143 SCRA 20
FACTS:
MWSS had an account from PNB.
authorized to sign checks. During a period of time, 23 checks were drawn and debited against
the account of petitioner. Bearing the same check numbers, the amounts stated therein were
again
debited from the account of petitioner. The amounts drawn were deposited in the accounts of the
payees in PCIB. It was found out though that the names stated in the drawn checks were all
fictitious. Petitioner demanded the return of the amounts debited but the bank refused to do so.
Thus, it filed a complaint.
HELD:
There was no categorical finding that the 23 checks were signed by persons other than
those authorized to sign.
On the contrary, the NBI reports shows that the fraud was an inside
job and that the delay in the reconciliation of the bank statements and the laxity and loss of
records
control in the printing of the personalized checks facilitated the fraud. It further doesnt provide that
the signatures were forgeries.
Forgery cannot be presumed. It should be proven by clear, convincing and positive evidence. This
wasnt done in the present case.
The petitioner cannot invoke Section 23 because it was guilty of negligence not only before the
questioned checks but even after the same had already been negotiated.
FACTS:
The evidence presented by the respondents through the testimony of Marife O. Nio, shows
that she is the daughter of Francisca Ocfemia and the late Renato Ocfemia who died on July
23, 1994. The parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and
Felicisimo
Ocfemia.
Marife O. Nio knows the five (5) parcels of land which are located in Bombon, Camarines
Sur and that they are the ones possessing them which were originally owned by her
grandparents. During the lifetime of her grandparents, respondents mortgaged the said five
(5) parcels of land and two (2) others to the Rural Bank of Milaor.
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the
mortgaged properties consisting of 7 parcels of land and so the mortgage was foreclosed
and thereafter ownership thereof was transferred to the bank. Out of the 7 parcels that were
foreclosed, 5 of them are in the possession of the respondents because these 5 parcels of
land were sold by the bank to the parents of Marife O. Nio as evidenced by a Deed of Sale
executed
in
January
1988.
The aforementioned 5 parcels of land subject of the deed of sale, have not been, however
transferred in the name of the parents of Merife O. Nio after they were sold to her parents
by the bank because according to the Assessor's Office the five (5) parcels of land, subject of
the sale, cannot be transferred in the name of the buyers as there is a need to have the
document of sale registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Nio went to the Register of Deeds of Camarines Sur with
the Deed of Sale in order to have the same registered. The Register of Deeds, however,
informed her that the document of sale cannot be registered without a board resolution of
the Bank. Marife Nio then went to the bank, showed to it the Deed of Sale, the tax
declaration and receipt of tax payments and requested the bank for a board resolution so
that the property can be transferred to the name of Renato Ocfemia the husband of
petitioner Francisca Ocfemia and the father of the other respondents having died already.
Despite several requests, the bank refused her request for a board resolution and made
many alibis. She was told that the bank had a new manager and it had no record of the
sale.
ISSUE:
Whether the board of directors of a rural banking corporation be compelled to confirm a
deed of absolute sale of real property which deed of sale was executed by the bank manager
without prior authority of the board of directors of the rural banking corporation
HELD:
Yes, the board of directors can be compelled to confirm a deed of absolute sale even though
the bank manager executed such deed without prior authority from the banking corporation.
The Supreme Court ruled that the bank acknowledged, by its own acts or failure to act, the
authority of the manager to enter into binding contracts. After the execution of the Deed of
Sale, respondents occupied the properties in dispute and paid the real estate taxes due
thereon. If the bank management believed that it had title to the property, it should have
taken some measures to prevent the infringement or invasion of its title thereto and
possession
thereof.
In this light, the bank is estopped from questioning the authority of the bank manager to
enter into the contract of sale. If a corporation knowingly permits one of its officers or any
other agent to act within the scope of an apparent authority, it holds the agent out to the
public as possessing the power to do those acts; thus, the corporation will, as against
anyone who has in good faith dealt with it through such agent, be estopped from denying
the
agent's
authority.
Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it
has a clear legal duty to issue the board resolution sought by respondents. Having
authorized her to sell the property, it behooves the bank to confirm the Deed of Sale so that
the buyers may enjoy its full use.
resulting from such removal was under the jurisdiction of the SEC,
pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.
Issue: Whether or not the respondent is a corporate officer within
the jurisdiction of the regular courts.
Held: No. As a rule, the illegal dismissal of an officer or other
employee of a private employer is properly cognizable by the LA.
This is pursuant to Article 217 (a) 2 of the Labor Code, as amended,
which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the
Commission. (a) Except as otherwise provided under this Code,
the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1.
Unfair
labor
practice
cases;
2.
Termination
disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and
other
terms
and
conditions
of
employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising
from
the
employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand
pesos (P 5,000.00) regardless of whether accompanied with a claim
for reinstatement.
FACTS: Respondent Alfredo Joson was the General Manager, incorporator, director and stockholder of
Marc II Marketing (petitioner corporation). Before petitioner corporation was officially incorporated,
respondent has already been engaged by petitioner Lucila Joson, in her capacity as President of Marc
Marketing Inc., to work as the General Manager of petitioner corporation through a management contract.
However, petitioner corporation decided to stop and cease its operation wherein respondent's services
were then terminated. Feeling aggrieved, respondent filed a Complaint for Reinstatement and Money
Claim against petitioners before the Labor Arbiter which ruled in favor of respondent. The National Labor
and Relations Commission (NLRC) reversed said decision. The Court of Appeals (CA) however, upheld
the ruling of the Labor Arbiter. Hence, this petition.
ISSUE: Whether or nor the Labor Arbiter has jurisdiction over the controversy at bar
RULING: Yes. While Article 217(a) 229 of the Labor Code, as amended, provides that it is the
Labor Arbiter who has the original and exclusive jurisdiction over cases involving termination or dismissal
of workers when the person dismissed or terminated is a corporate officer, the case automatically falls
within the province of the Regional Trial Court (RTC). The dismissal of a corporate officer is always
regarded as a corporate act and/or an intra-corporate controversy.
In conformity with Section 25 of the Corporation Code, whoever are the corporate officers enumerated in
the by-laws are the exclusive officers of the corporation and the Board has no power to create other
officers
without
amending
first
the
corporate
by-laws.
However,
the
Board
may
create
appointive positions other than the positions of the corporate officers, but the persons occupying
such positions are not considered as corporate officers within the meaning of Section 25 of the
Corporation Code and are not empowered to exercise the functions of the corporate officers, except those
functions lawfully delegated to them. Their functioning and duties are to be determined by the Board of
Directors/Trustees.
In the case at bar, the respondent was not a corporate officer of petitioner corporation because his
position as General Manager was not specifically mentioned in the roster of corporate officers in its
corporate by-laws. Thus respondent, can only be regarded as its employee or subordinate official.
Accordingly, respondent's dismissal as petitioner corporation's General Manager did not amount to an
intra-corporate controversy. Jurisdiction therefore properly belongs with the Labor Arbiter and not with the
RTC.
Tan vs sycip
The meeting was convened and chaired by Atty. Sabino Padilla Jr.
over the objection of Atty. Antonio C. Pacis, who argued that there was no
quorum.
In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith
Tan were voted to replace the 4 deceased member-trustees.
SEC: meeting void due to lack of quorum (NOT living but based on AIC)
Except as provided, the vote necessary to approve a particular corporate act as provided
in this Code shall be deemed to refer only to stocks with voting rights:
Lanuza vs. CA
GR No. 131394 | March 28, 2005
Facts:
Petitioners seek to nullify the Court of Appeals Decision in CAG.R. SP No. 414731 promulgated on 18
August 1997, affirming the SEC Order dated 20 June 1996, and the Resolution2 of the Court of Appeals
dated 31 October 1997 which denied petitioners motion for reconsideration.
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred
(700) founders shares and seventy-six (76) common shares as its initial capital stock subscription
reflected in the articles of incorporation
Onrubia et. al, who were in control of PMMSI registered the companys stock and transfer book for the
first time in 1978, recording thirty-three (33) common shares as the only issued and outstanding
shares of PMMSI.
In 1979, a special stockholders meeting was called and held on the basis of what was considered as a
quorum of twenty-seven (27) common shares, representing more than two-thirds (2/3) of the common
shares issued and outstanding.
In 1982, Juan Acayan, one of the heirs of the incorporators filed a petition for the registration of their
property rights was filed before the SEC over 120 founders shares and 12 common shares owned by
their father
SEC Hearing Officer: heirs of Acayan were entitled to the claimed shares and called for a special
stockholders meeting to elect a new set of officers.
As a result, the shares of Acayan were recorded in the stock and transfer book.
On May 6, 1992, a special stockholders meeting was held to elect a new set of directors
Onrubia et al filed a petition with SEC questioning the validity of said meeting alleging that the
quorum for the said meeting should not be based on the 165 issued and outstanding shares as per the
stock and transfer book, but on the initial subscribed capital stock of seven hundred seventy-six (776)
shares, as reflected in the 1952 Articles of Incorporation
SC en banc: shares of the deceased incorporators should be duly represented by their respective
administrators or heirs concerned. Called for a stockholders meeting on the basis of the stockholdings
reflected in the articles of incorporation for the purpose of electing a new set of officers for the
corporation
Lanuza, Acayan et al, who are PMMSI stockholders, filed a petition for review with the CA, raising the
following issues:
1.
whether the basis the outstanding capital stock and accordingly also for determining the quorum at
stockholders meetings it should be the 1978 stock and transfer book or if it should be the 1952
articles of incorporation
(They contended that the basis is the stock and transfer book, not articles of incorporation in
computing the quorum)
2.
whether the Espejo decision (decision of SEC en banc ordering the recording of the shares of Jose
Acayan in the stock and transfer book) is applicable to the benefit of Onrubia et al
CA decision:
1.
For purposes of transacting business, the quorum should be based on the outstanding capital stock as
found in the articles of incorporation
2.
To require a separate judicial declaration to recognize the shares of the original incorporators would
entail unnecessary delay and expense. Besides. the incorporators have already proved their
stockholdings through the provisions of the articles of incorporation.
Lanuza et al contention:
a.
1992 stockholders meeting was valid and legal
b.
Reliance on the 1952 articles of incorporation for determining the quorum negates the
existence and validity of the stock and transfer book Onrubia et al prepared
c.
Onrubia et al must show and prove entitlement to the founders and common shares in a
separate and independent action/proceeding in order to avail of the benefits secured by the heirs of
Acayan
Onrubia et als contention, based on the Memorandum: petition should be dismissed on the ground of
res judicata
Another appeal was made
Lanuza et als contention: instant petition is separate and distinct from G.R. No. 131315, there being
no identity of parties, and more importantly, the parties in the two petitions have their own distinct
rights and interests in relation to the subject matter in litigation
Onrubia et als manifestation and motion: moved for the dismissal of the case
Issue: What should be the basis of quorum for a stockholders meetingthe outstanding capital stock
as indicated in the articles of incorporation or that contained in the companys stock and transfer
book?
Ruling:
Articles of Incorporation
Defines the charter of the corporation and the contractual relationships between the State and the
corporation, the stockholders and the State, and between the corporation and its stockholders.
Contents are binding, not only on the corporation, but also on its shareholders.
Stock and transfer book
Book which records the names and addresses of all stockholders arranged alphabetically, the
installments paid and unpaid on all stock for which subscription has been made, and the date of
payment thereof; a statement of every alienation, sale or transfer of stock made, the date thereof and
by and to whom made; and such other entries as may be prescribed by law
necessary as a measure of precaution, expediency and convenience since it provides the only certain
and accurate method of establishing the various corporate acts and transactions and of showing the
ownership of stock and like matters
Not public record, and thus is not exclusive evidence of the matters and things which ordinarily are or
should be written therein
In this case, the articles of incorporation indicate that at the time of incorporation, the incorporators
were bona fide stockholders of 700 founders shares and 76 common shares. Hence, at that time, the
corporation had 776 issued and outstanding shares.
According to Sec. 52 of the Corp Code, a quorum shall consist of the stockholders representing a
majority of the outstanding capital stock. As such, quorum is based on the totality of the shares which
have been subscribed and issued, whether it be founders shares or common shares
To base the computation of quorum solely on the obviously deficient, if not inaccurate stock and
transfer book, and completely disregarding the issued and outstanding shares as indicated in the
articles of incorporation would work injustice to the owners and/or successors in interest of the said
shares.
The stock and transfer book of PMMSI cannot be used as the sole basis for determining the quorum as
it does not reflect the totality of shares which have been subscribed, more so when the articles of
incorporation show a significantly larger amount of shares issued and outstanding as compared to that
listed in the stock and transfer book.
One who is actually a stockholder cannot be denied his right to vote by the corporation merely
because the corporate officers failed to keep its records accurately. A corporations records are not the
only evidence of the ownership of stock in a corporation.
It is no less than the articles of incorporation that declare the incorporators to have in their name the
founders and several common shares. Thus, to disregard the contents of the articles of incorporation
would be to pretend that the basic document which legally triggered the creation of the corporation
does not exist and accordingly to allow great injustice to be caused to the incorporators and their heirs
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioners
FACTS:
1997 - 2001: Requisite quorum could not be obtained so they continued in a hold
over capacity
September 1, 1998: Dinglasan resigned, BOD still constituting a quorom elected Eric
Roxas (Roxas)
November 10, 1998: Makalintal resigned
on March 6, 2001: Jose Ramirez (Ramirez) was elected by the remaining BOD
Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas and
Ramirez as members of the VVCC Board with the Securities and Exchange Commission
(SEC) and the Regional Trial Court (RTC) as contrary to:
Sec. 23. The board of directors or trustees. - Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the board of
directors or trustees to be elected from among the holders of stocks, or where there is no
stock, from among the members of the corporation, who shall hold office for 1 year until
their successors are elected and qualified.
Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in
the board of directors or trustees other than by removal by the stockholders or members or by
expiration of term, may be filled by the vote of at least a majority of the remaining directors
or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the
stockholders in a regular or special meeting called for that purpose. A director or trustee so
elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in
office. xxx.
Makalintal's term should have expired after 1996 there being no unexpired term.
The vacancy should have been filled by the stockholders in a regular or special meeting
called for that purpose
term time during which the officer may claim to hold the office as of right
tenure
term during which the incumbent actually holds office.
Section 23 of the Corporation Code: term of BOD only 1 year - fixed and has expired (1
yr after 1996)
2. NO
underlying policy of the Corporation Code is that the business and affairs of a corporation
must be governed by a board of directors whose members have stood for election, and who
have actually been elected by the stockholders, on an annual basis. Only in that way can the
directors' continued accountability to shareholders, and the legitimacy of their decisions that
bind the corporation's stockholders, be assured. The shareholder vote is critical to the theory
that legitimizes the exercise of power by the directors or officers over properties that they do
not own.
theory of delegated power of the board of directors
Section 29 contemplates a vacancy occurring within the directors term of office
(unexpired)
vacancy caused by Makalintals leaving lies with the VVCCs stockholders, not the
remaining members of its board of directors
1994: construction of the Masagana Citimall in Pasay City was threatened with stoppage, when its
owner, the First Landlink Asia Development Corporation (FLADC), owned by the Tius, became heavily
indebted to the Philippine National Bank (PNB) for P190M
To save the 2 lots where the mall was being built from foreclosure, the Tius invited Ong Yong, Juanita
Tan Ong, Wilson T. Ong, Anna L. Ong, William T. Ong and Julia Ong Alonzo (the Ongs), to invest in
FLADC.
Pre-Subscription Agreement: Ongs and the Tius agreed to maintain equal shareholdings in FLADC
Ongs nominate the President, the Secretary and 6 directors (including the chairman) to the board of
directors of FLADC and right to manage and operate the mall.
Tius: contribute to FLADC a 4-storey building P20M (for 200K shares)and 2 parcels of land P30M
(for 300K shares) and P49.8M (for 49,800 shares)
Ongs: paid P190M to settle the mortgage indebtedness of FLADC to PNB (P100M in cash for their
subscription to 1M shares)
February 27, 1996: Tius filed at the Securities and Exchange Commission (SEC) seeking confirmation
of their rescission of the Pre-Subscription Agreement
SEC: confirmed recission of Tius
them to rescission) but, "for practical considerations," that is, their inability to work
together, it was best to separate the two groups by rescinding the Pre-Subscription
Agreement, returning the original investment of the Ongs and awarding practically
everything else to the Tius.
ISSUE: W/N Specific performance and NOT recission is the remedy
HELD: YES. Ongs granted.
providing appropriate offices for David S. Tiu and Cely Y. Tiu as Vice-President and Treasurer,
respectively, had no bearing on their obligations under the Pre-Subscription Agreement since the
obligation pertained to FLADC itself
failure of the Ongs to credit shares of stock in favor of the Tius for their property contributions also
pertained to the corporation and not to the Ongs
the principal objective of both parties in entering into the Pre-Subscription Agreement in 1994 was to
raise the P190 million
law requires that the breach of contract should be so "substantial or fundamental" as to defeat the
primary objective of the parties in making the agreement
since the cash and other contributions now sought to be returned already belong to FLADC, an
innocent third party, said remedy may no longer be availed of under the law.
Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be
formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that
the parties refer to it as a purchase or some other contract
allows the distribution of corporate capital only in three instances: (1) amendment of the Articles of
Incorporation to reduce the authorized capital stock,24 (2) purchase of redeemable shares by the
corporation, regardless of the existence of unrestricted retained earnings,25 and (3) dissolution and eventual
liquidation of the corporation.
The Ongs' shortcomings were far from serious and certainly less than substantial; they were in fact
remediable and correctable under the law. It would be totally against all rules of justice, fairness and
equity to deprive the Ongs of their interests on petty and tenuous grounds.
PLDT vs NTC
In 1958, Felix Alberto & Co., Inc (FACI) was granted by Congress a franchise to build radio
stations (later construed as to include telephony). FACI later changed its name to Express
Telecommunications Co., Inc. (ETCI). In 1987, ETCI was granted by the National
Telecommunications Commission a provisional authority to build a telephone system in
some parts of Manila. Philippine Long Distance Telephone Co. (PLDT) opposed the said
grant as it avers, among others, that ETCI is not qualified because its franchise has already
been invalidated when it failed to exercise it within 10 years from 1958; that in 1987, the
Albertos, owners of more than 40% of ETCIs shares of stocks, transferred said stocks to
the new stockholders (Cellcom, Inc.? not specified in the case); that such transfer
involving more than 40% shares of stocks amounted to a transfer of franchise which is void
because the authorization of Congress was not obtained. The NTC denied PLDT. PLDT
then filed a petition for certiorari and prohibition against the NTC.
ISSUE: Whether or not PLDTs petition should prosper.
HELD: No.
1.
2.
The transfer of more than 40% of the shares of stocks is not tantamount to a transfer
of franchise. There is a distinction here. There is no need to obtain authorization of
Congress for the mere transfer of shares of stocks. Shareholders can transfer their shares
to anyone. The only limitation is that if the transfer involves more than 40% of the
corporations stocks, it should be approved by the NTC. The transfer in this case was shown
to have been approved by the NTC. What requires authorization from Congress is the
transfer of franchise; and the person who shall obtain the authorization is the grantee
(ETCI). A distinction should be made between shares of stock, which are owned by
stockholders, the sale of which requires only NTC approval, and the franchise itself which is
owned by the corporation as the grantee thereof, the sale or transfer of which requires
Congressional sanction. Since stockholders own the shares of stock, they may dispose of
the same as they see fit. They may not, however, transfer or assign the property of a
corporation, like its franchise. In other words, even if the original stockholders had
transferred their shares to another group of shareholders, the franchise granted to the
corporation subsists as long as the corporation, as an entity, continues to exist. The
franchise is not thereby invalidated by the transfer of the shares. A corporation has a
personality separate and distinct from that of each stockholder. It has the right of continuity
or perpetual succession.
Issue: Whether or not the Court made an erroneous interpretation of the term capital in its 2011
decision?
Held/Reason: The Court said that the Constitution is clear in expressing its State policy of developing an
economyeffectively controlled by Filipinos. Asserting the ideals that our Constitutions Preamble want
to achieve, that is to conserve and develop our patrimony , hence, the State should fortify a Filipinocontrolled economy. In the 2011 decision, the Court finds no wrong in the construction of the term capital
which refers to the shares with voting rights, as well as with full beneficial ownership (Art. 12, sec. 10)
which implies that the right to vote in the election of directors, coupled with benefits, is tantamount to an
effective control. Therefore, the Courts interpretation of the term capital was not erroneous. Thus, the
motion for reconsideration is denied.