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Case Digest on Eastern Assurance and Surety Corporation vs.

Court of
Appeals (322 SCRA 73)

July 27, 2010

Eastern Assurance and Surety Corporation v. CA [322 SCRA 73 (Jan. 18,


2000)]

Rate of Legal Interest

Facts: Private Respondent Tan insured his building in Dumaguete against fire
with petitioner Eastern Assurance (EASCO). In 1981, the building was
destroyed by fire. Tan’s claim for indemnity was refused and therefore he
filed a complaint for breach of contract with damages. The RTC order EASCO
to pay Tan the sum of the insurance policy plus legal rate of interest from
June 26 until fully paid.

The CA affirmed the decision. No further appeal was taken and the same
became final and executory on Aug, 25 1993. EASCO thereafter tendered the
full amount of the policy plus interest of 6% per annum from June 1981 to July
1993. Tan refused the accept on the ground that the legal rate of interest is
12%. EASCO filed with the RTC to fix the legal rate of interest. The RTC
issued a resolution fixing it at 12%. The CA set the interest at 6% from June
26, 1981 to Aug. 24,1993 and 12% from Aug. 25, 1993 until money judgment
is fully paid.

Issue: What is the legal rate of interest for money judgments?

Held: In Eastern Shipping Line v CA the Court held (at pp. 95-97)

“II. With regard particularly to an award of interest in the concept of actual


and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum


of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12 per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is


breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6 per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12 per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit

This case falls under paragraph 3. When the judgment awarding a sum of
money becomes final and executory, the monetary award shall earn interest
at 12% per annum from the date of such finality until its satisfaction,
regardless of whether the case involves a loan or forbearance of money. The
reason is that this interim period is deemed to be by then equivalent to a
forbearance of credit

Case Digest on Spouses Ong vs. Court of Appeals

July 27, 2010

SPS. ONG v. CA (GR. No. 121494, June 8, 2000.)

Securities Transactions; Mortgage, Foreclosure

As a rule, any question regarding the validity of the mortgage or its


foreclosure cannot be a legal ground for refusing the issuance of a writ of
possession. Regardless of whether or not there is a pending suit for
annulment of the mortgage or the foreclosure itself, the purchaser is entitled
to a writ of possession, without prejudice of course to the eventual outcome
of said case. Hence, an injunction to prohibit the issuance of writ of
possession is entirely out of place.

Case Digest on PHILBANCOR, Finance, Inc. and Vicente Hizon, Jr. vs. Court of
Appeals, Et. Al.
July 27, 2010

PHILBANCOR FINANCE, INC. AND VICENTE HIZON, JR. vs. COURT OF APPEALS,
THE HONORABLE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD
(DARAB), ALFREDO PARE, PABLO GALANG and AMADO VIE (G.R. No. 129572,
June 26, 2000)

Sectrans; Right of Redemption

Republic Act No. 3844, Section 12, provides as follows:

“In case the landholding is sold to a third person without the knowledge of
the agricultural lessee, the latter shall have the right to redeem the same at
a reasonable price and consideration. Provided, that the entire landholding
sold must be redeemed. Provided further, that where there are two or more
agricultural lessees, each shall be entitled to said right of redemption only to
the extent of the area actually cultivated by him. The right of redemption
under this section may be exercised within two (2) years from the registration
of the sale and shall have priority over any other right of legal redemption.”

In this case, the certificate of sale of the subject property, which was sold at
public auction, was registered with the Register of Deeds of Pampanga on
July 31, 1985. The two-year redemption period thus expired on July 31, 1987.
The complaint for redemption was filed by respondents only on July 14, 1992,
five (5) years after expiration of the redemption period prescribed by law.

Nonetheless, private respondents may continue in possession and enjoyment


of the land in question as legitimate tenants because the right of tenancy
attaches to the landholding by operation of law. The leasehold relation is not
extinguished by the alienation or transfer of the legal possession of the
landholding.Case Digest on Philippine National Bank vs. Court of Appeals

July 27, 2010

Philippine National Bank vs. Court of Appeals [337 SCRA 381 (Aug. 8, 2000)]

Preference of Credit: Maritime Lien

Facts: To finance the acquisition of 7 shipping vessels, the Philippine


International Shipping Corporation (PISC) applied for and was granted by
National Investment Development Corporation (NIDC) guaranty
accomodations. As security for these guaranty accomodations, PISC
executed chattel mortgages on the vessels to be acquired by it. Meanwhile,
PISC entered into a contract with Hong Kong United Dockyards, Ltd. for the
repair and conversion of one of the vessels, M/V Asean Liberty. The Central
Bank of the Phils. authorized PISC to open with China Banking Corporation
(CBC) a standby letter of credit for US$545,000 in favor of Citibank, N.A. to
cover the repair and partial conversion of the vessel M/V Asean Liberty.

PISC executed an Application and Agreement for Commercial Letter of Credit


for US$545,000 with CBC in favor of Citibank. CBC then issued its Irrevocable
Standby Letter of Credit for US$545,000 in favor of Citibank for the account
of PISC. PISC executed a promissory note for US$545,000 in favor of Citibank
pursuant to the Loan Agreement between PISC and Citibank. Upon failure of
PISC to fulfill its obligations, Citibank sent CBC a letter drawing on the Letter
of Credit. CBC then instructed its correspondent Irving Trust Co. to pay to
Citibank the amount of US$242,225. Subsequently, for failure of PISC to
settle its obligations under the guaranty accommodations, the Philippine
National Bank (PNB) conducted an auction sale of the mortgaged vessels.
NIDC emerged as the highest bidder in these auctions. PISC, claiming that
the foreclosure sale of its mortgaged vessels was illegal and irregular,
instituted a civil case for the annulment of the foreclosure and auction sale.
CBC filed a complaint in intervention for recovery upon a maritime lien
against the proceeds of the sale of the foreclosed vessels.

Issue: Whether or not CBC’s claim as evidenced by its Irrevocable Letter of


Credit is in the nature of a maritime lien under the provisions of P.D. No.
1521; and if so, whether or not said maritime lien is preferred over the
mortgage lien of PNB/NIDC on the foreclosed vessel M/V Asean Liberty

Held: Under the provisions of P.D. No. 1521, any person furnishing repairs,
supplies, or other necessities to a vessel on credit will have a maritime lien.
Such maritime lien, if it arose prior to the recording of a preferred mortgage
lien, shall have priority over the said mortgage lien. In this case, it was
Hongkong United Dockyards, Ltd. which originally possessed a maritime lien
over the vessel M/V Asean Liberty by virtue of its repair of the said vessel on
credit. CBC, however, stands as guarantor of the loan extended by Citibank
to PISC. It was Citibank which advanced the money to PISC. It was only upon
the failure of PISC to fulfill its obligations under its promissory note to
Citibank that CBC was called upon by Citibank to exercise its duties under the
Standby Letter of Credit. The applicable law, which is the Shipping Mortgage
Decree of 1978, was patterned closely after the U.S. Ship Mortgage Act of
1920. Being of foreign origin, the provisions of the Ship Mortgage Decree of
1978 may thus be construed with the aid of foreign jurisprudence. Under
American jurisprudence, “furnishing money to a master in good faith to
obtain repairs or supplies or to remove liens, in order to forward the voyage
of the vessel, raises a lien just as though the things for which money was
obtained to pay for had been furnished by the lender”. This is in accord with
Art5. 1302 of the Civil Code which provides that there is legal subrogation
“when a third person, not interested in the fulfillment of the obligation, pays
with the express or tacit approval of the debtor”. In this case, the amount for
the repair of vessel M/V Asean Liberty was advanced by Citibank and was
used for the purpose of paying off the original maritime lienor, Hongkong
United Dockyards, Ltd. As a person not interested in the fulfillment of the
obligation between PISC and Hongkong United Dockyards, Ltd., Citibank was
subrogated to the rights of Hongkong United Dockyards, Ltd. as maritime
lienor over the vessel. CBC, as guarantor, was itself subrogated to all the
rights of Citibank as against PISC, the latter’s debtor. Art. 2067 of the civil
Code provides that “the guarantor who pays is subrogated by virtue thereof
to all the rights which the creditor had against the debtor”.

When CBC honored its contract of guaranty with Citibank on March 30, 1983,
it also acquired by subrogation the maritime lien over the vessel which
attached to it on March 12, 1979 in favor of Hongkong United Drydocks, Ltd.
The maritime lien of CBC thus arose prior to the recording of PNB/NIDC’s
mortgage on September 25, 1979. As such, the said maritime lien has
priority over the said mortgage lien.

Case Digest on Huerta Alba Resort, Inc. vs. Court of Appeals and Syndicated
Management Group, Inc.

July 27, 2010

HUERTA ALBA RESORT INC. vs. COURT OF APPEALS and SYNDICATED


MANAGEMENT GROUP INC. (G.R. No. 128567, September 1, 2000)

Security Transactions: Equity of Redemption and Right of Redemption;


Estoppel

The right of redemption in relation to a mortgage – understood in the sense


of a prerogative to re-acquire mortgaged property after registration of the
foreclosure sale – exists only in the case of the extrajudicial foreclosure of the
mortgage. No such right is recognized in a judicial foreclosure except only
where the mortgagee is the Philippine National Bank or a bank or banking
institution.

Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the


mortgagor the right of redemption within one (1) year from the registration of
the sheriff’s certificate of foreclosure sale. Where the foreclosure is judicially
effected, however, no equivalent right of redemption exists. The law declares
that a judicial foreclosure sale ‘when confirmed be an order of the court. . . .
shall operate to divest the rights of all the parties to the action and to vest
their rights in the purchaser, subject to such rights of redemption as may be
allowed by law.’ Such rights exceptionally ‘allowed by law’ (i.e., even after
confirmation by an order of the court) are those granted by the charter of the
Philippine National Bank (Acts No. 2747 and 2938), and the General Banking
Act (R.A. 337). These laws confer on the mortgagor, his successors in interest
or any judgment creditor of the mortgagor, the right to redeem the property
sold on foreclosure — after confirmation by the court of the foreclosure sale
— which right may be exercised within a period of one (1) year, counted from
the date of registration of the certificate of sale in the Registry of Property.

To repeat, no such right of redemption exists in case of judicial foreclosure of


a mortgage if the mortgagee is not the PNB or a bank or banking institution.
In such a case, the foreclosure sale, ‘when confirmed by an order of the
court. . . shall operate to divest the rights of all the parties to the action and
to vest their rights in the purchaser.’ There then exists only what is known as
the equity of redemption. This is simply the right of the defendant mortgagor
to extinguish the mortgage and retain ownership of the property by paying
the secured debt within the 90-day period after the judgment becomes final,
in accordance with Rule 68, or even after the foreclosure sale but prior to its
confirmation.

Case Digest on Melvin Colinares and Veloso vs. Court of Appeals

July 27, 2010

MELVIN COLINARES and LORDINO VELOSO vs. HONORABLE COURT OF


APPEALS, and THE PEOPLE OF THE PHILIPPINES (G.R. No. 90828, September
5, 2000)

Sectrans; Trust receipts

Section 4, P.D. No. 115, the Trust Receipts Law, defines a trust receipt
transaction as any transaction by and between a person referred to as the
entruster, and another person referred to as the entrustee, whereby the
entruster who owns or holds absolute title or security interest over certain
specified goods, documents or instruments, releases the same to the
possession of the entrustee upon the latter’s execution and delivery to the
entruster of a signed document called a “trust receipt” wherein the entrustee
binds himself to hold the designated goods, documents or instruments with
the obligation to turn over to the entruster the proceeds thereof to the extent
of the amount owing to the entruster or as appears in the trust receipt or the
goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified
in the trust receipt.

There are two possible situations in a trust receipt transaction. The first is
covered by the provision which refers to money received under the obligation
involving the duty to deliver it (entregarla) to the owner of the merchandise
sold. The second is covered by the provision which refers to merchandise
received under the obligation to “return” it (devolvera) to the owner.

Failure of the entrustee to turn over the proceeds of the sale of the goods,
covered by the trust receipt to the entruster or to return said goods if they
were not disposed of in accordance with the terms of the trust receipt shall
be punishable as estafa under Article 315 (1) of the Revised Penal Code, 34
without need of proving intent to defraud.

Case Digest on Philippine National Bank vs. Spouses Francisco Merced Rabat

July 27, 2010

PHILIPPINE NATIONAL BANK vs. SPOUSES FRANCISCO and MERCED RABAT

(G.R. No. 134406. November 15, 2000)

Extrajudicial Foreclosure Sale

In extrajudicial foreclosure sales, personal notice to the mortgagor is not


necessary Section 3 of Act No. 3135 reads:

Section 3. Notice shall be given by posting of the sale for not less than twenty
days in at least three public places of the municipality or city where the
property is situated, and if such property is worth more than four hundred
pesos, such notice shall be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality
or city.

Clearly personal notice to the mortgagor is not required.

The requirements of posting and publication in a newspaper of general


circulation were duly complied with by the PNB as correctly found by the trial
court, to which we accord great respect. A question of non-compliance with
the notice and publication requirements of an extrajudicial foreclosure sale is
a factual issue and the resolution thereof by the trial court is binding and
conclusive upon us absent any showing of grave abuse of discretion.

Case Digest on Project Builders, Inc. vs. Court of Appeals

July 27, 2010

Project Builders, Inc. v. CA [June 19, 2001]

Usury Law

Facts: On August 21, 1975, plaintiff-respondent Industrial Finance


Corporation (ICF) and defendant-petitioner Project Builders Inc. (PBI) entered
into an agreement whereby it was agreed that plaintiff would provide a
maximum amount of P2,000,000.00 (which was subsequently increased to
5,000,000) against which said defendant would discount and assign to
plaintiff on a ‘with recourse non-collection basis’ its (PBI’s) accounts
receivable under the contracts to sell specified in said agreement. Against
the credit line, defendant PBI discounted with plaintiff on different dates
accounts receivables with different maturity dates from different
condominium-unit buyers.

To secure compliance with the terms and conditions of the agreement,


defendants on the same date executed a Deed of Real Estate Mortgage in
favor of plaintiff. When defendants allegedly defaulted in the payment of the
subject account, plaintiff foreclosed the mortgage and plaintiff was the
highest bidder in the amount of P3,500,000.00.’

‘The foreclosed property was redeemed a year later, but after application of
the redemption payment, plaintiff claims that there is still a deficiency in the
amount of P1,323,053.08.

Issue: WON the agreement forged by petitioners and private respondent is a


simple loan or a financing transaction governed by the provisions of Republic
Act No. 5980; and

WON there was a violation of the Usury law.

HELD:

It is a financing agreement. private respondent is a financing company as so


defined by the Financing Company Act.

(a) “Financing companies,” x x x organized for the purpose of extending


credit facilities to consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial papers or accounts
receivable, or by buying and selling contracts, leases, chattel mortgages, or
other evidences of indebtedness or by leasing of motor vehicles, heavy
equipment and industrial machinery, business and office machines and
equipment, appliances and other movable property.

An insistence of petitioners that the subject transaction should be considered


a simple loan since private respondent did not communicate with the
debtors, condominium unit buyers, to collect payment from them, is
untenable. In an assignment of credit, the consent of the debtor is not
essential for its perfection, his knowledge thereof or lack of it affecting only
the efficaciousness or inefficaciousness of any payment he might make.
Since it is a financing agreement, plaintiff can still recover the deficiency.

Petitioners’ claim that private respondent is proscribed from imposing


interest and other charges beyond the limits set out by the Financing
Company Act lacks merit. The law states:

“SEC. 5. Limitation on purchase discount, fees, service and other Charges.


— In the case of assignments of credit or the buying of installment papers,
accounts receivables and other evidences of indebtedness by financing
companies, the purchase discount, exclusive of interest and other charges,
shall be limited to fourteen (14%) per cent of the value of the credit assigned
or the value of the installment papers, accounts receivable and other
evidence of indebtedness purchased based on a period of twelve (12) months
or less, and to one and one-sixth (1 1/6%) per cent for each additional month
or fraction thereof in excess of twelve months, regardless of the terms and
conditions of the assignment or purchase.”

Clearly, the 14% ceiling provided for purchase discount is exclusive of


interest and other charges. A purchase discount is distinct from interest. The
term purchase discount refers to the difference between the value of the
receivable purchased or credit assigned, and the net amount paid by the
finance company for such purchase or assignment, exclusive of fees, service
charges, interests and other charges incident to the extension of credit, and
it is akin to “time price differential,” or the increase in price to cover the
expense generally entailed by transactions on credit. There is thus no
impingement of the Usury Law.

Case Digest on Grace Christian High School vs. Court of Appeals

July 27, 2010


Grace Christian High School v CA [(October 23, 1997)]

Right of Share Holders to Vote for the Board of Directors

Right of Share Holders to Be Voted to the Board of Directors

Facts: Petitioner Grace Christian High School is an educational institution


offering preparatory, kindergarten and secondary courses at the Grace
Village in Quezon City. Private respondent Grace Village Association, Inc., on
the other hand, is an organization of lot and/or building owners, lessees and
residents at Grace Village. In 1968, the by-laws of the association provided in
Article IV, as follows: “The annual meeting of the members of the Association
shall be held on the first Sunday of January in each calendar year at the
principal office of the Association at 2:00 P.M. where they shall elect by
plurality vote and by secret balloting, the Board of Directors, composed of
eleven (11) members to serve for one year until their successors are duly
elected and have qualified.”

On December 20, 1975, a committee of the board of directors prepared a


draft of an amendment to the by-laws, reading as follows: “The Annual
Meeting of the members of the Association shall be held on the second
Thursday of January of each year. Each Charter or Associate Member of the
Association is entitled to vote. He shall be entitled to as many votes as he has
acquired thru his monthly membership fees only computed on a ratio of TEN
(P10.00) PESOS for one vote. The Charter and Associate Members shall elect
the Directors of the Association. The candidates receiving the first fourteen
(14) highest number of votes shall be declared and proclaimed elected until
their successors are elected and qualified. GRACE CHRISTIAN HIGH SCHOOL
representative is a permanent Director of the ASSOCIATION.”

This draft was never presented to the general membership for approval.
Nevertheless, from 1975, after it was presumably submitted to the board, up
to 1990, petitioner was given a permanent seat in the board of directors of
the association. From 1975 until 1989 petitioner’s representative had been
recognized as a “permanent director” of the association. But on February 13,
1990, petitioner received notice from the association’s committee on election
that the latter was “reexamining” (actually, reconsidering) the right of
petitioner’s representative to continue as an unelected member of the board.
As the board denied petitioner’s request to be allowed representation without
election, petitioner brought an action for mandamus in the Home Insurance
and Guaranty Corporation. Its action was dismissed by the hearing officer
whose decision was subsequently affirmed by the appeals board. Petitioner
appealed to the Court of Appeals, which in turn upheld the decision of the
HIGC’s appeals board. Hence this petition for review.

1. The Petitioner herein has already acquired a vested right to a permanent


seat in the Board of Directors of Grace Village Association;

2. The amended By-laws of the Association drafted and promulgated by a


Committee on December 20, 1975 is valid and binding; and

3. The Practice of tolerating the automatic inclusion of petitioner as a


permanent member of the Board of Directors of the Association without the
benefit of election is allowed under the law.

Issue: (1) WON the 1975 Amendment is valid despite not having been
approved by the General Assembly

(2) WON the Corporate Code grants Grace Christian High School a right to a
seat at the Board

Held: (1) This provision of the by-laws actually implements §22 of the
Corporation Law which provides that the owners of a majority of the
subscribed capital stock, or a majority of the members if there be no capital
stock, may, at a regular or special meeting duly called for the purpose,
amend or repeal any by-law or adopt new by-laws. The owners of two-thirds
of the subscribed capital stock, or two-thirds of the members if there be no
capital stock, may delegate to the board of directors the power to amend or
repeal any by-law or to adopt new by-laws: Provided, however, That any
power delegated to the board of directors to amend or repeal any by-law or
adopt new by-laws shall be considered as revoked whenever a majority of the
stockholders or of the members of the corporation shall so vote at a regular
or special meeting.

The proposed amendment to the by-laws was never approved by the majority
of the members of the association as required by these provisions of the law
and by-laws. But petitioner contends that the members of the committee
which prepared the proposed amendment were duly authorized to do so and
that because the members of the association thereafter implemented the
provision for fifteen years, the proposed amendment for all intents and
purposes should be considered to have been ratified by them. Petitioner
contends: Considering, therefore, that the “agents” or committee were duly
authorized to draft the amended by-laws and the acts done by the “agents”
were in accordance with such authority, the acts of the “agents” from the
very beginning were lawful and binding on the homeowners (the principals)
per se without need of any ratification or adoption. The more has the
amended by-laws become binding on the homeowners when the homeowners
followed and implemented the provisions of the amended by-laws. This is not
merely tantamount to tacit ratification of the acts done by duly authorized
“agents” but express approval and confirmation of what the “agents” did
pursuant to the authority granted to them.

(2) The present Corporation Code (B.P. Blg. 68) provides:

“§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 one (1) year and until
their successors are elected and qualified.”

This provision leave no room for doubt as to the meaning: the board of
directors of corporations must be elected from among the stockholders or
members. There may be corporations in which there are unelected members
in the board but it is clear that in the examples cited by petitioner the
unelected members sit as ex officio members, i.e., by virtue of and for as
long as they hold a particular office. But in the case of petitioner, there is no
reason at all for its representative to be given a seat in the board. Nor does
petitioner claim a right to such seat by virtue of an office held. In fact it was
not given such seat in the beginning. It was only in 1975 that a proposed
amendment to the by-laws sought to give it one.

Since the provision in question is contrary to law, the fact that for fifteen
years it has not been questioned or challenged but, on the contrary, appears
to have been implemented by the members of the association cannot
forestall a later challenge to its validity. Neither can it attain validity through
acquiescence because, if it is contrary to law, it is beyond the power of the
members of the association to waive its invalidity. For that matter the
members of the association may have formally adopted the provision in
question, but their action would be of no avail because no provision of the by-
laws can be adopted if it is contrary to law.

It is probable that, in allowing petitioner’s representative to sit on the board,


the members of the association were not aware that this was contrary to law.
It should be noted that they did not actually implement the provision in
question except perhaps insofar as it increased the number of directors from
11 to 15, but certainly not the allowance of petitioner’s representative as an
unelected member of the board of directors. It is more accurate to say that
the members merely tolerated petitioner’s representative and tolerance
cannot be considered ratification.

Nor can petitioner claim a vested right to sit in the board on the basis of
“practice.” Practice, no matter how long continued, cannot give rise to any
vested right if it is contrary to law. Even less tenable is petitioner’s claim that
its right is “coterminus with the existence of the association.”

Case Digest on Garcia vs. Court of Appeals (GR No. 123639)

July 27, 2010

Garcia vs. CA [GR 123639, June 10, 1997]

Jurisdiction of SEC

Facts: ARCI and Chiudian (major stockholders of Dynetics) acquired a foreign


loan with Philguarantee as guarantor. They defaulted in the payment of the
loan causing a collapse in the business of Dynetics. Garcia (president of
Dynetics), ARCI and Chiudian eventually entered into a Settlement and
Mutual Release Agreement (SMRA) in order to settle the financial condition of
the company and to rehabilitate it. Philguarantee allegedly reneged on its
commitment and Garcia filed a case against it in the regular courts.
Philguarantee questioned the jurisdiction of the regular courts and insisted
that the case should have been filed with SEC.

Issue: W/N SEC has jurisdiction.

Held: Yes. SC stated thus: “To determine which body has jurisdiction over
the present controversy, we rely on the sound judicial principle that
jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted therein. We have
judiciously gone over petitioner’s original complaint and are convinced that
the case at bar is a classic illustration of a dispute between stockholders —
private respondent, the current majority and controlling stockholder of
Dynetics and petitioner, the erstwhile majority stockholder of said corporation
. Petitioner’s stubborn insistence that he brought the case for damages in his
capacity as an aggrieved surety and not as a stockholder is belied by the
opening statement in his complaint.”

The case of Lozano vs. de los Santos, GR 125221, June 19, 1997, likewise
held as follows:

“The grant of jurisdiction to the SEC must be viewed in the light of its nature
and function under the law. This jurisdiction is determined by a concurrence
of 2 elements, (1) the status or relationship of the parties; (2) the nature of
the question that is the subject of their controversy.”
Case Digest on Aguenza vs. Metrobank (GR No. 74336)

July 27, 2010

Aguenza v. Metrobank [GR 74336, April 7, 1997]

Effects of Unauthorized Acts of Corporate Officers

Facts: Intertrade Corp authorized and empowered Aguenza and Arrieta (its
president and EVP, respectively) to jointly apply for open credit lines with
Metrobank. The two officers executed a Continuing Suretyship Agreement
whereby both bound themselves jointly and severally with Intertrade to pay
Metrobank whatever obligation Intertrade occurs. Subsequently, Arrieta and
Perez, Intertrade’s bookkeeper, obtained another loan from Metrobank and
they also promised to pay the loan, jointly and severally. Arrieta and Perez
defaulted in the payment. Metrobank sued Intertrade, impleading Aguenza
on the basis of the Continuing Suretyship Agreement executed earlier.
(Incidentally, Intertrade made an admission that the loan obtained by
Arrieta and Perez was a corporate liability.)

Issue: WIN Aguenza is liable.

Held: No. Arrieta’s subsequent action (of obtaining the loan together with
Perez) was ultra vires, and to bind the corporation, it had to be ratified
through a board resolution. Emphatically, Intertrade has a distinct
personality separate from its members. The corporation transacts its
business only through its corporate officers or agents. Whatever authority
these officers or agents may have is derived from the Board of Directors or
other governing body unless conferred by the charter of the corporation. An
officer’s power as an agent of the corporation must be sought from the
statute, charter, the by laws, as in a delegation of authority to such officer, or
the acts of the Board of Directors formally expressed, or implied from a habit
or custom of doing business.

Case Digest on Samahan ng Optometrists sa Pilipinas vs. Acebedo


International Corp. (270 SCRA 298)

July 27, 2010

Samahan ng Optometrists sa Pilipinas v. Acebedo International Corp. [270


SCRA 298 (March 21, 1997)]

Powers of the Corporation

Facts: Respondent Acebedo Optical applied for a permit with the Office of
the Mayor of Cancion, Ilocos Sur for the operation of a branch office. Said
application was opposed by herein petitioner on the ground that respondent
is a juridical entity. Said application was denied.

Issue: WIN a corporation engaged in the business of selling optical wares,


supplies, etc. which as an incident to and in the ordinary course of business
hire optometrists be said to be practicing the profession of optometry which
may only be engaged in by natural persons.

Held: Respondent is a corporation created and organized for the purpose of


conducting the business of selling optical lenses, etc. The determination of
proper lenses to sell entails the employment of optometrists. Under R.A. 8050
(Revised Optometry Law), there is no prohibition against hiring by
corporation of optometrists or considers the hiring by the corporation of
optometrists as a practice by the corporation itself of the profession of
optometry.

Case Digest on Republic Planters Bank vs. Agana, Sr.

July 27, 2010

Republic Planters Bank vs. Agana, Sr. [March 3, 1997]

Rights of Holders of Perferred Shares

Legality of Interest Bearing Shares

1. Private respondent Robes Francisco Realty & Dev’t Corp. secured a loan
from petitioner in the amount of P120,000.00. As part of the proceeds of the
loan, preferred shares of stocks were issued to private respondent
corporation. In other words, instead of giving the legal tender totaling to the
full amount of the loan which is P120,000.00, petitioner lent such amount
partially in the form of stock certificates numbered 3204 and 3205, each for
400 shares with a par value of P10.00 per share, or for P4,000 each, for a
total of P8,000.00. Said stock certificates were in the name of private
respondent Adalia Robes and Carlos Robes, who, however, subsequently
endorsed his shares in favor of Adalia Robes.

Said certificates of stock bear the following terms and conditions:


1. The right to receive a quarterly dividend of 1%, cumulative and
participating.

2. That such preferred shares may be redeemed, by the system of drawing


lots, at any time after 2 years from the date of issue at the option of the
Corporation.

Private respondents proceeded against petitioner and filed a complaint


anchored on private respondents’ alleged rights to collect dividends under
the preferred shares in question and to have petitioner redeem the same
under the terms and conditions of the stock certificates.

The trial court ordered the petitioner to pay private respondents the face
value of the stock certificates as redemption price, plus 1% quarterly interest.
Hence this petition.

Issue: W/N respondents have the right to collect dividends and whether they
can compel petitioner to redeem the preferred shares.

Held:

1. A preferred share of stock is one which entitles the holder thereof to


certain preferences over the holders of common stock. The preferences are
designed to induce persons to subscribe for shares of a corporation. Preferred
shares take a multiplicity of forms. The most common forms may be
classified into two: (1) preferred shares as to assets; and (2) preferred as to
dividends. The former is a share which gives the holder thereof the
preference in the distribution of the assets of the corporation in case of
liquidation; the latter is a share the holder of which is entitled to receive
dividends on said share to the extent agreed upon before any dividends at all
are paid to the holders of common stock. There is no guarantee, however,
that the share will receive any dividends.

2. Preferences granted to preferred stockholders do not give them a lien


upon the property of the corporation nor make them creditors of the
corporation, the right of the former being always subordinate to the latter.
Shareholders, both common and preferred are considered risk takers who
invest capital in the business arid who can look only to what is left after
corporate debts and liabilities are fully paid.

3. Redeemable shares are shares usually preferred, which by their terms


are redeemable at a fixed date, or at the option of either issuing corporation,
or the stockholder, or both at certain redemption price; redemption may not
be made where the corporation is insolvent or if such redemption will cause
insolvency or inability of the corporation to meet its debts as they mature.

4. While the stock certificates in the case at bar does allow redemption, the
option to do so was clearly vested in the petitioner bank. The redemption is
therefore optional.

5. The redemption of said shares cannot be allowed. The Central Bank


made a finding that said petitioner has been suffering from chronic reserve
deficiency, and that such finding resulted in the directive prohibiting the
petitioner bank from redeeming any preferred share, on the ground that said
redemption would reduce the assets of the Bank to the prejudice of its
depositors and creditors. Redemption of preferred shares was prohibited for
a just and valid reason.

6. ”Interest bearing stocks”, on which the corporation agrees absolutely to


pay interest before dividends are paid to common stockholders, is legal only
when construed as requiring payment of interest as dividends from net
earnings or surplus only.

Case Digest on Eriks PTE, Ltd vs. Court of Appeals

July 27, 2010

Eriks PTE., Ltd. v. Court of Appeals [February 6, 1997]

Effect of Doing Business in Philippines without a License: Barred From Access


to Courts

Facts:

1. Petitioner Eriks Pte., Ltd. is a non¬resident foreign corporation engaged


in the manufacture and sale of elements used in sealing pumps, valves and
pipes for industrial purposes, and PVC pipes and fittings for industrial uses.

2. Private respondent Delfin Enriquez, Jr., doing business under the name
and style of Delrene EB Controls Center and/or EB Karmine Commercial,
ordered and received from petitioner various elements used in sealing
pumps, valves, pipes and control equipment, PVC pipes and fittings.

3. The transfer of goods were perfected in Singapore for private


respondent’s account with a 90-day credit term. Subsequently, demands
were made by petitioner upon private respondent to settle his account, but
the latter failed/refused to do so.

4. Petitioner corporation filed with the RTC a complaint for the recovery of
US$41,939.63. Private respondent responded with a Motion to Dismiss,
contending that petitioner corporation had no legal capacity to sue. The trial
court dismissed the action on the ground that petitioner is a foreign
corporation doing business in the Philippines without a license.

5. On appeal, the respondent court affirmed the RTC as it deemed the


series of transactions between petitioner corporation and private respondent
not to be an “isolated or casual transaction.” Thus, respondent court found
petitioner to be without legal capacity to sue.

Issue: Is a foreign corporation which sold its products 16 times over a 5-


month period to the same Filipino buyer without first obtaining a license to do
business in the Philippines, prohibited from maintaining an action to collect
payment therefor in Philippine courts? In other words, is such foreign
corporation “doing business” in the Philippines without the required license
and thus barred access to our court system?

Held:

1.The Corporation Code provides:

“Section 133. Doing business without a license — No foreign corporation


transacting business in the Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under
Philippine laws.” The aforementioned provision prohibits, not merely absence
of the prescribed license, but it also bars a foreign corporation “doing
business” in the Philippines without such license access to our courts. A
foreign corporation without such license is not ipso facto incapacitated from
bringing an action. A license is necessary only if it is “transacting or doing
business” in the country.

2. The test to determine whether a foreign company is “doing business” in


the Philippines, thus: “x x x The true test, however, seems to be whether the
foreign corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially retired
from it and turned it over to another. The term implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent,
the performance of acts or works or the exercise of some of the functions
normally incident to, and in progressive prosecution of, the purpose and
object of its organization (Mentholaturn Co., Inc. v. Mangaliman).

3. The accepted rule in jurisprudence is that each case must be judged in


the light of its environmental circumstances. It should be kept in mind that
the purpose of the law is to subject the foreign corporation doing business in
the Philippines to the jurisdiction of our courts. It is not to prevent the foreign
corporation from performing single or isolated acts, but to bar it from
acquiring a domicile for the purpose of business without first taking the steps
necessary to render it amenable to suits in the local courts.

4. Thus, we hold that the series of transactions in question could not have
been isolated or casual transactions. What is determinative of “doing
business” is not really the number or the quantity of the transactions, but
more importantly, the intention of an entity to continue the body of its
business in the country. The number and quantity are merely evidence of
such intention. The phrase “isolated transaction” has a definite and fixed
meaning, i.e. a transaction or series of transactions set apart from the
common business of a foreign enterprise in the sense that there is no
intention to engage in a progressive pursuit of the purpose and object of the
business organization. Whether a foreign corporation is “doing business”
does not necessarily depend upon the frequency of its transactions, but more
upon the nature and character of the transactions.

5. Accordingly, petitioner must be held to be incapacitated to maintain the


action a quo against private respondent. By this judgment, we are not
foreclosing petitioner’s right to collect payment. Res judicata does not set in
a case dismissed for lack of capacity to sue, because there has been no
determination on the merits. Moreover, this Court has ruled that subsequent
acquisition of the license will cure the lack of capacity at the time of the
execution of the contract. By securing a license, a foreign entity would be
giving assurance that it will abide by the decisions of our courts, even if
adverse to it.

Case Digest on Hann vs. Court of Appeals

July 27, 2010

Hahn v. Court of Appeals [266 SCRA 537 (January 22, 1997)]

Jurisdiction Over Foreign Corporation

Doing Business in the Philippines Without a License

Facts: Petitioner is a Filipino citizen doing business under the name of “Hahn-
Manila”. Private respondent BMW is a non-resident corporation incorporated
in Germany. Petitioner executed in favor of private respondent a “Deed of
Assignment with a Special Power of Attorney” which constituted petitioner as
the exclusive dealer of private respondent as long as the assignment of its
trademark and device subsisted. However, no formal contract was drawn
between the two parties. Thereafter, petitioner was informed that BMW was
arranging to grant the exclusive dealership of BMW cars and products to
Columbia Motors Corp. (CMC). BMW expressed dissatisfaction with various
aspect of petitioner’s business but nonetheless also expressed willingness to
continue business relations with petitioner on the basis of a standard BMW
contract otherwise, if said offer was unacceptable to petitioner then BMW
would terminate petitioner’s exclusive dealership. Petitioner refused BMWs
offer in which case BMW withdrew its alternative offer and terminated
petitioner’s exclusive dealership. Petitioner therefore filed an action for
specific performance and damages against BMW to compel it to continue the
exclusive dealership.

BMW moved to dismiss the case contending that the trial court did not
acquire jurisdiction over it through the service of summons on DTI because
BMW is a foreign corporation and is not doing business in the Philippines. The
trial court deferred the resolution of the motion for dismissal until after trial
on the merits for the reason that the grounds advanced by BMW did not
seem indubitable. BMW appealed said order to the CA. The CA resolved that
BMW was not doing business in the country and therefore jurisdiction over it
could not have been acquired through the service of summons on DTI and it
dismissed the petition.

Issue: W/N BMW is doing business in the Philippines so as to enable the court
to acquire jurisdiction over it through the service of summons on the DTI.

HeId: RA 7042 enumerates what acts are considered as “doing business”.


Section 3(d) enumerating such acts includes the phrase “appointing
representatives or distributors in the Philippines” but not when the
representative or distributor “transacts” business in his own name for his own
account. In the case at bar, petitioner is private respondent BMW’s agent and
not merely a broker. The record reveals that private respondent exercised
control over petitioner’s activities as a dealer and made regular inspections
of petitioner’s premises to enforce its standards. Since BMW is considered as
doing business in the Philippines, the trial court validly acquired jurisdiction
over it by virtue of the service of summons on the DTI. Furthermore, it is now
settled that, for purposes of having summons served on a foreign corporation
in accordance with the Rules of Court, it is sufficient that it be alleged in the
complaint that the foreign corporation is doing business in the Philippines.
The court need not go beyond the allegations in the complaint in order to
determine whether or not it acquired jurisdiction. Such determination that
the foreign corporation is doing business in the Philippines is only tentative
and only for the purpose of enabling the court to acquire jurisdiction. A
contrary determination may be made based on the court’s findings or
evidence presented.
Case Digest on People’s Aircargo and Warehousing, Inc. vs. CA

July 27, 2010

People’s Aircargo and Warehousing Co., Inc. vs. CA [297 SCRA 170 (Oct 7
1998)]

Power of Board of Directors to Bind Corporation

Facts: People’s Aircargo is a domestic corporation organized to operate a


customs bonded warehouse. To obtain a license for the corporation from the
Bureau of Customs, Punsalan, its President, solicited a proposal from Sano for
the preparation of a feasibility study. Sano submitted a letter proposal to
Punsalan of the terms and conditions of the contract, amounting to
P350,000.00. Punsalan sent a letter to Sano confirming to their agreement.
Accordingly, Sano prepared the feasibility study. Sano was paid in full.

Thereafter, a 2nd contract was entered into for consultancy services. Hence,
the Bureau of Customs issued a license to People’s Aircargo. Sano was not
paid for this 2nd contract. Hence, he filed a collection case against the
corporation. Meanwhile, Punsalan sold his shares in People’s Aircargo
andresigned as president.

People’s Aircargo denied that there were consultancy services rendered by


Sano. It alleged that the 2nd contract entered into between him and
Punsalan was without authority.

RTC adjudged in favor of Sano. CA affirmed. Hence, this petition.

Issue: Whether or not the Punsalan had apparent authority to bind People’s
Aircargo to the 2nd contract.

Held: Yes. The general rule is that, in the absence of authority from the BoD,
no person, not even its officers, can validly bind a corporation. A corporation
is a juridical person, separate and distinct from its stockholders and
members, having powers, attributes and properties expressly authrized by
law or incident to its existence. Being a juridical entity, a corporation may
act through its BoD, which exercises almost all corporate powers, lays down
all corporate business policies and is responsible for the efficiency of
management as is under Sec. 23 of the Corporation Code.

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

In the case at bar, since the corporation had previously allowed Punsalan to
enter into the first contract with Sano without a board resolution expressly
authorizing him, thus, it had clothed its president with apparent authority to
execute the subject 2nd contract.

If a corporation knowingly permits one of its officers, or any other agent, to


act within the scope of an apparent authority, it holds him out to the public as
possessing the power to do those acts, and 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.

Case Digest on San Juan Structural and Steel Fabricators vs. CA

July 27, 2010

San Juan Structural and Steel Fabricators Inc. vs. CA [296 SCRA 631 (Sept 29
1998)]

Effect of Unauthorized Acts of Corporate Officer

Sufficiency of Proof to Pierce Veil of Corporate Fiction

Facts: San Juan Structural and Steel Fabricators entered into an agreement
with Motorich Sales Corporation through Nenita Gruenberg, corporate
treasurer of Motorich, for the transfer to the former a parcel of land upon a
P100,000 earnest money, balance to be payable within March 2, 1989. Upon
payment of the earnest money, and on March 1, 1989, San Juan allegedly
asked to be submitted a computation of the balance due to Motorich. The
latter, despite repeated demands, refused to execute the Deed of
Assignment of the land. San Juan discovered that Motorich entered into a
Deed of Absolute Sale of the land to ACL Development Corporation. Hence,
San Juan filed a complaint with the RTC.

On the other hand, Motorich contends that since Nenita Gruenberg was only
the treasurer of said corporation, and that its president, Reynaldo Gruenberg,
did not sign the agreement entered into by San Juan and Motorich, the
treasurer’s signature was inadequate to bind Motorich to the agreement.
Furthermore, Nenita contended that since San Juan was not able to pay
within the stipulated period, no deed of assignment could be made. The
deed was agreed to be executed only after receipt of the cash payment, and
since according to Nenita, no cash payment was made on the due date, no
deed could have been executed.

RTC dismissed the case holding that Nenita Gruenberg was not authorized by
Motorich to enter into said contract with San Juan, and that a majority vote of
the BoD was necessary to sell assets of the corporation in accordance with
Sec. 40 of the Corporation Code. CA affirmed this decision. Hence, this
petition with SC.

Issues: (1) Whether or not there was a valid contract existing between San
Juan and Motorich.

(2) Whether or not the veil of corporate fiction could be pierced.

Held: (1) No. The contract entered into between Nenita and San Juan
cannot bind Motorich, because the latter never authorized nor ratified such
sale. A corporation is a juridical person separate and distinct from its
stockholders or members. Accordingly, the property of the corporation is not
the property of its stockholders and may not be sold by them without express
authorization from the corporation’s BoD. This is in accordance with Sec. 23
of the Corporation Code.

Indubitably, a corporation can only act through its BoD or, when authorized
either by its by laws or by its board resolution, through its officers or agents
in the normal course of business. The general principles of agency govern
the relation between the corporation and its officers or agents, subject to the
AoI, by laws, or relevant provisions of law. A corporate officer or agent may
represent and bind the corporation in transactions with 3rd persons to the
extent that the authority to do so has been conferred upon him, and this
includes powers which have been intentionally conferred, and also such
powers as, in the usual course of the particular business, are incidental to, or
may be implied from, the powers intentionally conferred, powers added by
custom and usage, as usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has caused persons dealing
with the officer or agent to believe that it has conferred. Furthermore,
persons dealing with an assumed agent, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature
and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it. Unless duly authorized, a treasurer, whose
powers are limited, cannot bind the corporation in a sale of its assets.
In the case at bar, San Juan had the responsibility of ascertaining the extent
of Nenita’s authority to represent the corporation. Selling is obviously foreign
to a corporate treasurer’s function. Neither was real estate sale shown to be
a normal business activity of Motorich. The primary purpose of said
corporation is marketing, distribution, import and export relating to a general
merchandising business. Unmistakably, its treasurer is not cloaked with
actual or apparent authority to buy or sell real property, an activity which
falls way beyond the scope of her general authority.

Acts of corporate officers within the scope of their authority are binding on
the corporation. But when these officers exceed their authority, their actions
cannot bind the corporation, unless it has ratified such acts or is estopped
from disclaiming them.

(2) No. San Juan argues that the veil of corporate fiction should be pierced
because the spouses Reynaldo and Nenita Gruenberg own 99.96% of the
subscribed capital stock, they needed no authorization from the BoD to enter
into the said contract.

The veil can only be disregarded when it is utilized as a shield to commit


fraud, illegality or inequity, defeat public convenience, confuse legitimate
issues, or serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation. Hence, the
question of piercing the veil becomes a matter of proof. In the case at bar,
SC found no reason to pierce the veil. San Juan failed to establish that said
corporation was formed for the purpose of shielding any fraudulent act of its
officers and stockholders.

Case Digest on Nicario vs. NLRC (295 SCRA 619)

July 27, 2010

Nicario vs. NLRC [295 SCRA 619 (Sept 17 1998)]

Corporate Officers not personally liable for Authorized Corporate Acts

Separate Corporate Personality

Facts: Nicario was employed as a salesgirl, later promoted to supervisor,


with Mancao Supermarket. She was terminated in 1989. Nicario filed a
complaint for illegal dismissal with NLRC. The Labor Arbiter dismissed the
case. Nicario appealed to the NLRC. NLRC remanded the case back to the
Labor Arbiter for lack of due process. Labor Arbiter adjudged in favor of
Nicario, ordering Mancao Supermarket to pay unpaid service incentive leave,
13th month pay, overtime pay and rest day pay, but dismissed Nicario’s
claims for holiday premium pay and unpaid salaries.

Nicario appealed to NLRC. It affirmed in toto the decision of the Labor


Arbiter. In its motion for reconsideration, NLRC deleted the award of
overtime pay and ruled that Antonio Mancao is not jointly and severally liable
with Mancao Supermarket in paying Nicario. Hence, this certiorari
proceeding.

Issue: Whether or not Antonio Mancao is solidarily liable with Mancao


Supermarket as manager.

Held: NO. The general rule is that officers of a corporation are not personally
liable for their official acts unless it is shown that they have exceeded their
authority. However, the legal fiction that a corporation has a personality
separate and distinct from stockholders and members may be disregarded if
it is used as a means to perpetuate fraud or an illegal act or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, or to
confuse legitimate issues.

In this case, there is no showing that Antonio Mancao, as manager of the


company, deliberately and maliciously evaded the company’s financial
obligation to Nicario. Hence, there appearing to be no evidence on record
that Antonio Mancao acted maliciously or deliberately in the non-payment of
benefits to Nicario, he cannot be held jointly and severally liable with Mancao
supermarket.

Case Digest on Bitong vs. CA (292 SCRA 503)

July 27, 2010

Bitong vs. CA [292 SCRA 503 (July 13 1998)]

Ownership of Corporate Shares/ Stock Certificates: Valid Issuance

Facts: Bitong was the treasurer and member of the BoD of Mr. & Mrs.
Corporation. She filed a complaint with the SEC to hold respondent spouses
Apostol liable for fraud, misrepresentation, disloyalty, evident bad faith,
conflict of interest and mismanagement in directing the affairs of the
corporation to the prejudice of the stockholders. She alleges that certain
transactions entered into by the corporation were not supported by any
stockholder’s resolution.
The complaint sought to enjoin Apostol from further acting as president-
director of the corporation and from disbursing any money or funds. Apostol
contends that Bitong was merely a holder-in-trust of the JAKA shares of the
corporation, hence, not entitled to the relief she prays for. SEC Hearing Panel
issued a writ enjoining Apostol.

After hearing the evidence, SEC Hearing Panel dissolved the writ and
dismissed the complaint filed by Bitong. Bitong appealed to the SEC en banc.
The latter reversed SEC Hearing Panel decision. Apostol filed petition for
review with the CA. CA reversed SEC en banc ruling holding that Bitong was
not the owner of any share of stock in the corporation and therefore, not a
real party in interest to prosecute the complaint. Hence, this petition with
the SC.

Issue: Whether or not Bitong was the real party in interest.

Held: Based on the evidence presented, it could be gleaned that Bitong was
not a bona fide stockholder of the corporation. Several corporate documents
disclose that the true party in interest was JAKA.

Although her buying of the shares were recorded in the Stock and Transfer
Book of the corporation, and as provided by Sec. 63 of the Corp Code that no
transfer shall be valid except as between the parties until the transfer is
recorded in the books of the corporation, and upon its recording the
corporation is bound by it and is estopped to deny the fact of transfer of said
shares, this provision is not conclusive even against the corporation but are
prima facie evidence only. Parol evidence may be admitted to supply the
omissions in the records, explain ambiguities, or show what transpired where
no records were kept, or in some cases where such records were
contradicted. Besides, the provision envisions a formal certificate of stock
which can be issued only upon compliance with certain requisites: (1)
certificates must be signed by the president or vice president, countersigned
by the secretary or assistant secretary, and sealed with the seal of the
corporation, (2) delivery of the certificate; (3) the par value, as to par value
shares, or the full subscription as to no par value shares, must be first fully
paid; (4) the original certificate must be surrendered where the person
requesting the issuance of a certificate is a transferee from a stockholder.

These considerations are founded on the basic principle that stock issued
without authority and in violation of the law is void and confers no rights on
the person to whom it is issued and subjects him to no liabilities. Where
there is an inherent lack of power in the corporation to issue the stock,
neither the corporation nor the person to whom the stock is issued is
estopped to question its validity since an estoppel cannot operate to create
stock which under the law cannot have existence.
Case Digest on Rubberworld Inc. vs. NLRC (305 SCRA 721)

July 27, 2010

Rubberworld Inc. vs. NLRC [305 SCRA 721 (April 14 1999)]

Effect of Petition for Suspension of Payments on all other claims

Facts: Rubberworld filed with the SEC a petition for suspension of payments.
SEC ruled favorably on the request and accordingly, it issued an order for the
creation of a management committee; and all actions for claims against the
corporation pending before any court, tribunal, office, board, body were
suspended.

The employees of Rubberworld filed against the corporation a complaint for


illegal dismissal and unfair labor practice. Rubberworld moved to suspend
the proceedings relying on the SEC order. The Labor Arbiter denied
Rubberworld’s motion ruling that claims as regards labor cases are not
included in the SEC order. Rubberworld appealed to the NLRC, which
affirmed the Labor Arbiter’s decision. Hence, this petition for certiorari.

Issue: Whether or not a petition for suspension of payments filed under P.D.
902-A effectively suspends all actions against a corporation including labor
claims.

HELD: YES. P.D. 902-A provides that upon the appointment of a


management committee, rehabilitation receiver, board or body pursuant to
this decree, all actions for claims against corporations, partnerships, or
associations under management or receivership pending before any court,
tribunal, board or body shall be suspended accordingly. The law is clear.
Upon the creation of a management committee or the appointment of a
rehabilitation receiver, all claims for actions shall be suspended. No
exception in favor of labor claims is mentioned in the law. Allowing labor
cases to proceed clearly defeats the purpose of the automatic stay and
severely encumbers the management committee’s time and resources. The
said committee would need to defend against these suits, to the detriment of
its primary and urgent duty to work towards rehabilitating the corporation
and making it viable again.

The preferential right of workers and employees under Article 110 of the
Labor Code may be invoked only upon the institution of insolvency or judicial
liquidation proceedings and not during rehabilitation proceedings, the
purpose of which is to enable the company to gain a new lease on life and
thereby allow creditors to be paid their claims from its earnings.

SC also noted that PD 902-A does not provide for the duration of the
automatic stay. And in the case at bar, the SEC order neither contains such.
Hence, the suspensive effect in this case had no time limit and remained in
force as long as reasonably necessary to accomplish the purpose of the SEC
order.

Case Digest on Neugene Marketing, Inc. vs. CA (303 SCRA 295)

July 27, 2010

Neugene Marketing Inc. vs. CA [303 SCRA 295 (Feb 18 1999)]

Ownership of Corporate Share/Stock Certificates

Facts: Neugene was duly registered with SEC to engage in trading business.
Private Respondents Sy, Yang, and Suen, holders of 5250 shares or 2/3 of the
outstanding capital stock sent notice to the BoD for a board meeting. In this
meeting, they approved a resolution dissolving Neugene.

SEC thus issued a Certificate of Dissolution of Neugene. Petitioners Tan,


Martin, Moreno and Lee brought an action to annul said SEC Certification
contending that they were the majority stockholders of the corporation, and
that prior to the board meeting, the private respondents had already divested
themselves of their stockholdings by endorsing them in blank and delivering
them to the Uy family. The latter in turn awarded said stock certificates to
Johnny Uy, who in turn sold the same to petitioners. Hence, private
respondents could no longer validly vote for the dissolution of Neugene at the
time of the board meeting.

Private respondents contend that the assignment of shares were simulated


and fraudulently effected since the endorsement in blank by them of the
stock certificates to the Uy family was only for safekeeping when they were
stolen from a vault by Johnny Uy.

SEC nullified the Certificate of Dissolution. CA, on the other hand, upheld
Neugene’s dissolution. Hence, this petition with the SC.

Issue: Whether or not private respondents divested themselves of their


stockholdings when they voted for the resolution dissolving Neugene.

Held: No. Entries in the Stock and Transfer Book show that at the time of
dissolution of Neugene, the private respondents owned at least 2/3 of the
outstanding capital stock, in sufficient compliance with Sec. 118 of the
Corporation Code of the Philippines.

Petitioners submitted the same Stock and Transfer Book to show that the
certificates of private respondents were cancelled. But after a careful
examination of the evidence on record, SC found that the stock certificates of
private respondents were stolen and therefore not validly transfered, and the
transfers of stock relied upon by petitioners were fraudulently recorded in the
Stock and Transfer Book of Neugene.

The true relationship between stockholders of Neugene and that of the Uy


family was that they had an understanding that the beneficial ownership of
Neugene would remain with the Uy family, such that the shares of stock were
endorsed in blank, upon issuance, by the shareholders and entrusted to the
Uy family for safekeeping. Such beneficial ownership has been admitted
through the testimonies not only of private respondents but also of
petitioners.

Case Digest on Calma vs. CA (302 SCRA 682)

July 27, 2010

Calma vs. CA [302 SCRA 682 (Feb 9 1999)]

Investigatory Powers of the SEC

Facts: Sometime in 1990, the Hukbalahap Veterans Association (Hukvets)


filed a letter complaint with the SEC alleging that petitioners Calma, Liwanag,
Cayanan and Maglangue surreptitiously arrogated unto themselves the
powers and functions of trustees and officers of Hukvets.

SEC, through its Prosecution and Enforcement Department issued a


resolution directing the Board of Trustees to call within 30 days a general
membership meeting for the election of 7 new members of the board.
Petitioners objected to this. SEC denied their motion for reconsideration.

Petitioners went to the CA contending that the SEC Prosecution and


Enforcement Department was without jurisdiction to entertain and adjudicate
corporate election contests. CA was unpersuaded. Hence, this petition
before the SC.

Issue: Whether or not the Prosecution and Enforcement Department of the


SEC has jurisdiction to investigate the letter complaint filed by Hukvets.

Held: Yes.

(1) SEC has both regulatory and adjudicative functions. Relative to the
latter, SEC has original and exclusive jurisdiction to hear and decide
controversies and cases involving (a) intra-corporate and partnership
relations between the corporation, officers and stockholders, including
elections or appointments; (b) state and corporate affairs in relation to the
legal existence of the corporation, partnership or to their franchises; (c)
investors and corporate affairs; (d) petitions for suspension of payments.

(2) The Prosecution and Enforcement Department of the SEC has the
inherent power, according to Sec. 6 of P.D. 1758 amending P.D. 902-A, to
investigate, on complaint or motu propio, any act or omission of the Board of
Directors/Trustees of corporations, their stockholders, officers or partners,
including any fraudulent devices, schemes or representations, in violation of
any law.

Hence, SEC, under its adjudicative jurisdiction, has the power to hear and
decide controversies involving intra-corporate relations between and among
members and officers of a corporation. The Prosecution and Enforcement
Department was established as its adjudicative arm. As such, it is vested
with the authority to investigate, on complaint or motu propio, any act or
omission of the Board of Directors of corporations, as in the case at bar.

Case Digest on Luxuria Homes, Inc. vs. CA (302 SCRA 315)

July 27, 2010

Luxuria Homes Inc. vs. CA [302 SCRA 315 (Jan 28 1999)]

Ownership in Capital Stock not sufficient to Pierce Veil of Corporate Fiction

Facts: Posadas and her 2 minors co-owned a 1.6 hectare property in Sucat
which was occupied by squatters. Posadas negotiated with Bravo regarding
the development of said property into a residential subdivision. She
authorized Bravo to negotiate with the squatters.

Meanwhile, Posadas assigned the property to Luxuria Homes via a deed of


assignment. Relations with Bravo turned sour. Bravor demanded payment
for services rendered. Posadas refused to pay. Bravo instituted a complaint
for specific performance with the RTC. He included Luxuria Homes, Inc. as
respondent since he alleged that Posadas surreptitiously formed said
corporation and transferred the parcel of land to it to evade payment and
defraud creditors. RTC adjudged in favor of Bravo. CA affirmed. Hence, this
petition for review.

Issue: Whether or not Luxuria Homes, Inc. was a party to the transactions
entered into by Posadas and Bravo and thus could be held jointly and
severally liable with Posadas.

Held: No. It is evident from the records that Bravo sent demand letters more
than a year and a half after the execution of the Deed of Assignment in favor
of Luxuria and the issuance of AoI of Luxuria. The transfer was made at the
time the relationship between Posadas and Bravo was still very pleasant.
Furthermore, Posadas is not the majority stockholder of Luxuria. The AOI
shows that Posadas owns approximately 33% only of the capital stock.
Hence, Posadas cannot be considered as an alter ego of Luxuria Homes.

To disregard the separate juridical personality of a corporation, the


wrongdoing must be clearly and convincingly established. It cannot be
presumed. The separate personality of the corproation may be disregarded
only when the corporation is used as a cloak or cover for fraud or illegality, or
to work injustice, or where necessary for the protection of the creditors. In
the case at bar, Bravo failed to show proof that Posadas was acting in bad
faith.

Case Digest on ABS CBN Broadcasting Corporation vs. CA (301 SCRA 572)

July 27, 2010

ABS CBN Broadcasting Corporation vs. CA [301 SCRA 572 (Jan 21 1999)]

Power of the Board of Directors

Delegation to Executive Committee

Facts: In 1990, ABS CBN and Viva executed a Film Exhibition Agreement
whereby Viva gave ABS CBN an exclusive right to exhibit some Viva films.
Said agreement contained a stipulation that ABS shall have the right of first
refusal to the next 24 Viva films for TV telecast, provided that such right shall
be exercised by ABS from the actual offer in writing.

Hence, through this agreement, Viva offered ABS a list of 36 films from which
ABS may exercise its right of first refusal. ABS however, through VP Concio,
did not accept the list since she could only tick off 10 films. This rejection
was embodied in a letter.
In 1992, Viva again approached ABS with a list consisting of 52 original films
where Viva proposed to sell these airing rights for P60M.

Viva’s Vic del Rosario and ABS’ general manager Eugenio Lopez III met at the
Tamarind Grill to discuss this package proposal. What transcribed at that
meeting was subject to conflicting versions.

According to Lopez, he and del Rosario agreed that ABS was granted
exclusive film rights to 14 films for P36M, and that this was put in writing in a
napkin, signed by Lopez and given to del Rosario. On the other hand, del
Rosario denied the existence of the napkin in which Lopez wrote something,
and insisted that what he and Lopez discussed was Viva’s film package of the
52 original films for P60M stated above, and that Lopez refused said offer,
allegedly signifying his intent to send a counter proposal. When the counter
proposal arrived, Viva’s BoD rejected it, hence, he sold the rights to the 52
original films to RBS.

Thus, ABS filed before RTC a complaint for specific performance with prayer
for TRO against RBS and Viva. RTC issued the TRO enjoining the airing of the
films subject of controversy. After hearing, RTC rendered its decision in favor
of RBS and Viva contending that there was no meeting of minds on the price
and terms of the offer. The agreement between Lopez and del Rosario was
subject to Viva BoD approval, and since this was rejected by the board, then,
there was no basis for ABS’ demand that a contract was entered into
between them. That the 1990 Agreement with the right of first refusal was
already exercised by Ms. Concio when it rejected the offer, and such 1990
Agreement was an entirely new contract other than the 1992 alleged
agreement at the Tamarind Grill. CA affirmed. Hence, this petition for
certiorari with SC.

Lopez claims that it had not fully exercised its right of first refusal over 24
films since it only chose 10. He insists that SC give credence to his testimony
that he and del Rosario discussed the airing of the remaining 14 films under
the right of first refusal agreement in Tamarind Grill where there was a
contract written in the alleged napkin.

Issue: Whether or not there was a perfected contract between Lopez and del
Rosario.

Held: NO. A contract is a meeting of minds between 2 persons whereby one


binds himself to give something or to render some service to another for a
consideration. There is no contract unless the following requisites concur: (1)
consent of the contracting parties (2) object certain which is the subject of
the contract (3) cause of the obligation, which is established.

Contracts that are consensual in nature are perfected upon mere meeting of
the minds. Once there is concurrence between the offer and the acceptance
upon the subject matter, consideration, and terms of payment, a contract is
produced. The offer must be certain. To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms of the offer; it
must be plain, unequivocal, unconditional, and without variance of any sort
from the proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly what is
proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuls the
offer.

In the case at bar, when del Rosario met with Lopez at the Tamarind Grill, the
package of 52 films was Viva’s offer to enter into a new Exhibition
Agreement. But ABS, through its counter proposal sent to Viva, actually
made a counter offer. Clearly, there was no acceptance. The acceptance
should be unqualified. When Viva’s BoD rejected the counter proposal, then
no contract could have been executed. Assuming arguendo that del Rosario
did enter into a contract with Lopez at Tamarind Grill, this acceptance did not
bind Viva since there was no proof whatsoever that del Rosario had specific
authority to do so. Under the Corporation Code, unless otherwise provided
by said law, corporate powers, such as the power to enter into contracts, are
exercised by the BoD. However, the board may delegate such powers to
either an executive committee or officials or contracted managers. The
delegation, except for the executive committee, must be for specific
purposes. Delegation to officers makes the latter agents of the corporation,
and accordingly, the general rules of agency ad to the binding effects of their
acts would apply. For such officers to be deemed fully clothed by the
corporation to exercise a power of the Board, the latter must specially
authorize them to do so. That del Rosario did not have the authority to
accept ABS’ counter offer was best evidenced by his submission of the
counter proposal to Viva’s BoD for the latter’s approval. In any event, there
was no meeting of the minds between del Rosario and Lopez.

The contention of Lopez that their meeting in Tamarind Grill was a


continuation of their right of first refusal agreement over the remaining 14
films is untenable. ABS’ right of first refusal had already been exercised
when Ms. Concio wrote to Viva choosing only 10 out of the 36 films offered by
del Rosario. It already refused the 26 films.

Case Digest on Reburiano vs. CA (301 SCRA 342)

July 27, 2010


Reburiano vs. CA [301 SCRA 342 (Jan 21 1999)]

Continuation of juridical personality for 3 years after dissolution of


corporation for limited purpose

Facts: RTC rendered judgment in favor of Pepsi Cola Bottling Co. ordering
Reburiano to pay P55,000 with interest for the unpaid bottles of softdrinks it
received from the company. RTC issued a writ of execution. However, before
the promulgation of the decision of the RTC, Pepsi amended its articles of
incorporation to shorten its term of existence. The RTC was not notified of
this fact.

Reburiano then moved to quash the writ of execution on the ground that
Pepsi no longer had juridical personality, hence, it could no longer sue and be
sued.

RTC denied Reburiano’s petition to quash the writ of execution. An appeal


was made. CA dismissed the appeal. Hence, this petition for review on
certiorari.

Issue: Whether or not Pepsi still had juridical personality to pursue its case
against Reburiano after a shortening of its corporate existence.

Held: YES. Sec. 122 of the Corporation Code provides that every corporation
whose charter expires by its own limitation or is annulled by forfeiture or
otherwise, or whose corporate existence for other purposes is terminated in
any other manner, shall nevertheless be continued as a body corporate for 3
years after the time when it would have been so dissolved, for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and
close its affairs, to dispose of and convey its property and to distribute its
assets, but not for the purpose of continuing the business for which it was
established.

However, Reburiano further argues that when Pepsi undertook a voluntary


dissolution, there was no showing that a receiver or trustee was ever
appointed. He contends that Sec. 122 of the Corporation Code above cited
does not authorize a corporation, after the 3 year liquidation period, to
continue actions instituted by it within said period of 3 years. SC held that in
the case of Gelano vs. CA, a corporation that has a pending action and which
cannot be terminated within the 3 year period after dissolution is authorized
to convey all its property to trustees to enable it to prosecute and defend
suits by or against the corporation beyond the 3 year period. No reason
could be conceived why a suit already commenced by the corporation itself
during its existence, not by a mere trustee who, by fiction, merely continues
the legal personality of the dissolved corporation, should not be accorded
similar treatment allowed to proceed to final judgment and execution thereof.

Counsel of the dissolved corporation can be considered a trustee. Also, the


board of directors may be permitted to complete the corporate liquidation by
continuing as trustees by legal implication.

Moreover, the Corporation Code provides:

Sec. 145 – Amendment or Repeal – No right or remedy in favor of or against


any corporation, its stockholders, members, directors, trustees, or officers,
nor any liability incurred by any such corporation, stockholders, members,
directors, trustees, or officers, shall be removed or impaired either by the
subsequent dissolution of said corporation or by any subsequent amendment
or repeal of this Code or of any part thereof.

Case Digest on Reynoso IV vs. CA & General Credit Corporation (345 SCRA
335)

July 27, 2010

Reynoso IV v. CA & General Credit Corporation [345 SCRA 335 (Nov.22,


2000)]

Separate Juridical Entity

Sufficiency of Proof to Pierce the Veil of Corporate Fiction

Facts: Commercial Credit Corporation (CCC), a financing & investment firm,


decided to organize franchise companies in different parts of the country,
wherein it shall hold 30% equity. Employees of CCC were designated as
resident managers of the franchise companies – Bibiano Reynoso IV was
resident manager in CCC-QC.

Due to the DOSRI Rule prohibiting lending of funds by a corporation to its


directors, officers, Share Holders & other persons with related interests
therein, CCC decided to form CCC Equity Corporation, a wholly-owned
subsidiary to which CCC transferred its 30% equity in CCC-QC together with 2
seats on the BoD. In the new set-up, several employees of CCC became
employees of CCC-Equity.

A complaint for a sum of money was later field by CCC-QC against Reynoso,
who in the meantime was dismissed from CCC-Equity, & wife for
embezzlement of funds which were used to buy a house in Valle Verde.
Reynoso claims the money he used represented his money placements in
CCC-QC shown by 23 checks he issued to CCC-QC.

RTC dismissed the case against Reynoso and found his counterclaim for
damages to be meritorious hence granted it. For failing to pay the docket
fees, CCC-QC’s appeal to the IAC was dismissed hence the RTC decision
became final & executory. However, the judgment became remained
unsatisfied prompting Reynoso to file a Motion for Alias Writ of Execution.
CCC-QC opposed saying that its premises & records had been taken over by
CCC.

CCC meanwhile became known as General Credit Corporation. So, when the
RTC ordered GCC to file its comment on the petition of Reynoso, it claimed
that it was not a party to the case & Reynoso should direct his claim against
CCC-QC. Reynoso replied saying that CCC-QC is in adjunct instrumentality,
conduit & agency of CCC & invoked the ruling in Ramoso v. GCC where the
SC declared that GCC, CCC-Equity & other franchised companies including
CCC-QC were declared as 1 corp. Reynoso claimed that GCC is just the new
name of CCC hence both should be treated as 1 entity. Cases were filed in
the RTC of Pasig & QC to levy on the properties of GCC. CA on the other hand
enjoins the auction sale of the properties.

Issue: (1) WON the piercing the veil of corporate fiction was proper.

Held: CA decision reversed and set aside. Injunction against levying on


properties of GCC & their auction sale lifted. The use by CCC-QC of the same
name of Commercial Credit Corporation was intended to publicly identify it as
a component of the CCC group of companies engaged in one & the same
business: investment & financing. When the mother corporation & its
subsidiary corporations cease to act in good faith and honest business
judgment, when the corporate fiction is used to perpetuate fraud or promote
injustice, the law steps in to remedy the injustice. The corporate character is
not necessarily abrogated. It continues for legitimate objectives; however
pierced, to remedy injustices.

A court judgment becomes useless & ineffective if the employer, in this case
CCC as a mother corporation, is placed beyond the legal reach of the
judgment creditor who after protracted litigation, has been found entitled to
positive relief. Courts have been organized to put an end to controversy.
This should not be negated by an inapplicable and wrong use of the fiction of
the corporate veil.

The defense of separateness will be disregarded where the business affairs of


a subsidiary corporation are so controlled by the mother corporation to the
extent that it becomes an instrument or agent of its parent. But even when
there us dominance over the affairs of the subsidiary, the doctrine of piercing
the veil of corporate fiction applies only when used to defeat public
convenience, justify wrong, protect fraud, or defend crime.

Factually & legally, CCC had dominant control of the business operations of
CCC-QC:

a. the exclusive management contract insured that CCC-QC would be


managed & controlled by CCC & not deviate from the commands of the
mother corp

b. CCC appointed its own employee as the resident manager of CCC-QC

c. Salaries, pensions, benefits, etc were from CCC, which later became GCC

d. Unity of interest, management, control, intensive auditing function of


CCC over CCC-QC, sharing of office space

e. Lawyers of the CCC-QC case were all in-house counsels of CCC

Case Digest on Heirs of Ramon Durano, Sr. vs. Uy (344 SCRA 238)

July 27, 2010

Heirs of Ramon Durano, Sr. v. Uy [344 SCRA 238 (Oct.24, 2000)]

Separate Juridical Personality

Alter Ego: Piercing the Veil of Corporate Fiction

Facts: Ramon Durano III & wife instituted an action for damages against Uy,
etc. accusing them of officiating a hate campaign against them by lodging
complaints in the police for ‘invasion of property’; sending complaints to the
Office of the President depicting them as oppressors, landgrabbers &
usurpers; spreading false rumors & damaging tales w/c put them into public
contempt & ridicule.

In their answer, Uy, etc. lodged affirmative defenses, demanded the return of
their property & made counterclaims for actual, moral & exemplary damages.
They claim that in the first week of August 1970, they received
mimeographed notices signed by Durano, Sr. informing them that the land
they were tilling, formerly owned by Cepco was purchased by Durano & Co,
directing them to immediately turn over the property. Even before they
could vacate, Durano & Co. proceeded to bulldoze & destroy their property &
fire at air even. September 15, 1970 Durano & Co. sold the property to
Durano III who proceeded to register the lands in his name. They claim that
they were deprived of their independent source of income, were made
victims of serious violence & demanded damages for cost of improvements
on the land that were destroyed.

The Duranos moved for the dismissal of their complaint w/c the trial court
granted w/o prejudice to the right of Uy, etc. to maintain their counterclaim.
The counterclaim was later upheld. This decision was affirmed by the CA.
Hence this petition.

Issue: WON Durano can invoke the doctrine of separate corporate


personality to evade liability for damages

Held: Denied & CA decision modified. The Duranos hinge their claim on the
TCTs issued in the name of Durano III. Their validity was put into serious
doubt by the ff: a) the certificates reveal the lack of registered title of Cepoc
to the Properties; b) alleged reconstituted titles of Cepoc were not produced
in evidence; c) deed of sale between Cepoc & Durano & Co. was unnotarized
& thus unregisterable

Fraud in the issuance of a certificate of title may be raised only in an action


expressly instituted for that purpose; and not collaterally as in an action for
reconveyance & damages. The rule on indefeasibility of title – Torrens titles
can only be attacked for fraud w/in 1 year from the date of issuance of the
decree of registration; an action for reconveyance may prosper if a property
wrongfully registered has not passed to an innocent purchaser for value. The
purchase of Durano & Co. could not be said to have been in good faith since
it is not disputed that Durano III acquired the property w/ full knowledge of
Uy’s occupancy thereon. Uy’s action for reconveyance will prosper, it being
clear that the property, wrongfully registered in the name of Durano III, has
not passed to an innocent purchaser for value.

Notarization of the deed of sale is essential to its registrability, & the action of
the RD in allowing the registration of the unacknowledged deed of sale was
unauthorized & did not render validity to the registration of the document.

A buyer who could not have failed to know or discover that the land sold to
him was in the adverse possession of another is a buyer in bad faith. A
purchaser cannot just close his eyes to facts w/c should put a reasonable man
upon his guard, such as when the subject of the sale is in the possession of
persons other than the seller. Uy & company were in open possession &
occupancy of the properties when Durano & Co. supposedly purchased the
same from Cepoc.

In applying the instrumentality or alter ego doctrine, the courts are


concerned w/ reality & not form, w/ how the corp operated & the individual
defendant’s relationship to that operation.
Whether a corporation is a mere alter ego is purely one of fact. Shortly after
the sale by Cepco to Durano & Co., the latter sold the property to Durano III,
who immediately procured the registration of the property in his name.
Obviously, Durano & Co. was used by Durano III,etc. as an instrumentality to
appropriate the disputed property for themselves.

Test to enable piercing of the veil, except in express agency, estoppel or


direct tort: a)Control, not mere majority or complete domination; b)Such
control must have e=been used by the defendant to commit fraud or wrong,
etc.; c)The aforesaid control & breach of duty must approximately cause the
injury or unjust loss complained of.

• Sec.8 Rule 51 indicates that the CA is not limited to reviewing only those
errors assigned by appellant but also those closely related to or dependent
on an assigned error. CA is imbued w/ sufficient discretion to review matters.

• Ordinary acquisitive prescription, in the case of immovable property,


requires possession of the thing in good faith & w/ just title for a period of 10
years.

• Remedies of an owner on whose land somebody has built in bad faith: a)


appropriate what has been built w/o any obligation to pay indemnity; b)
demand that the builder remove what he had built; c) compel the builder to
pay the value of the land. In any case, landowner is entitled to damages
(Art.451)

Case on International Express Travel & Tour Services vs. CA, Kahn Philippine
Football Federation (343 SCRA 674)

July 27, 2010

International Express Travel & Tour Services, Inc. v. CA, Kahn & Philippine
Football Federation [343 SCRA 674 (Oct.19, 2000)]

Creation of Separate Corporate Personality

Liability of Person Acting for Unincorporated Entity

Doctrine of Estoppel

Facts: IETTSI wrote a letter to the Federation through its president, Kahn,
offering its services as a travel agency. This was accepted by the Federation.
IETTSI secured airline tickets for the trips of the athletes & officials of the
Federation to the South East Asian Games in Kula Lumpur as well as other
trips to China & Brisbane. A demand letter was sent to the Federation re:
payment of the tickets. After 3 partial payments, Kahn issued a personal
check as partial payment for the Federation’s balance. No further payments
were made, causing IETTSI to file a civil case before the RTC against Kahn in
his personal capacity on the ground that he allegedly guaranteed the said
obligation & as President of the Federation, impleading the Federation as an
alternative defendant.

Kahn filed a counterclaim against IETTSI averring that it had no cause of


action against him either in his personal nor official capacity as he did not
guarantee the payment but merely acted as an agent of the Federation w/c
has a separate & distinct juridical personality. The Federation, in failing to
file its answer, was declared in default.

The RTC found Kahn personally liable since a voluntary unincorporated


association, like the Federation, doesn’t have the power to enter nor ratify a
contract. The contract thus entered into by its officers or agents on its behalf
is not binding on the association nor enforceable against it – but against the
officers or agents in their personal capacity. On appeal to the CA, decision
was reversed saying that IETTSI failed to prove that Kahn guaranteed the
obligation, hence this petition.

Issues: (1) WON the Federation has a separate juridical personality.

(2) WON Kahn can be held personally liable for the unpaid obligations of the
Federation

Held: CA decision reversed & set aside. RTC decision reinstated.

RA 3135 & PD 604 recognized the juridical existence of national sports


associations. The power to purchase, sell, lease & encumber property are
acts w/c may only be done by persons, whether natural or artificial, with
juridical capacity and these have been granted to national sports
associations, clearly indicating their juridical personality. However, such does
not automatically take place by mere passage of the laws.

Before a corp may acquire juridical personality, the State must give its
consent either in the form of a special law or a general enabling act.
Nowhere can it be found in RA 3135 & PD 604 any provision creating the
Philippine Football Federation. These laws merely recognized the existence
of national sports associations & provided the manner by which they may
acquire juridical personality.

The statutory provisions require that before an entity may be considered as a


national sports association, such must be recognized by the accrediting
organization, the Philippine Amateur Athletic Federation under RA 3135 & the
Department of Youth & Sports Development under PD 604. In attempting to
prove juridical existence of the Federation, Kahn attached a copy of the
constitution & by-laws of the Federation this doesn’t prove the said
Federation has been recognized & accredited.

Any person acting or purporting to act on behalf of a corp w/c has no valid
existence assumes such privileges & obligations & becomes personally liable
for contracts entered into or for such other acts performed as such agent.
Hence, Kahn should be liable for the unpaid obligations of the unincorporated
Federation. He is presumed to have known of the corp existence or non-
existence of the Federation.

Doctrine of Corporation by Estoppel – applies to third persons only when he


tries to escape liability on a contract from w/c he has benefited on the
irrelevant ground of defective corporation. Here, IETTSI is not trying to
escape liability from the contract but rather is the 1 claiming from it.

Case Digest on Manila Hotel Corp. vs. National Labor Relations Commission
(334 SCRA 1)

July 27, 2010

Manila Hotel Corp. v. National Labor Relations Commission [343 SCRA 1


(Oct.13, 2000)]

Requisites to Piercing the Veil of Corporate Fiction

Facts: Marcelo Santos was an overseas worker, a printer at the Mazoon


Printing Press, Sultanate of Oman when he was directly hired by the Palace
Hotel, Beijing by its GM Gerhard Shmidt as he was recommended by Nestor
Buenio, his friend. Santos resigned from Mazoon and thereafter signed an
employment contract mailed to him. The contract stated it would be for a
period of 2 years.

After a short vacation in the Phil & barely a year into the contract, Santos was
terminated from his job due to retrenchment, and repatriated to the Phil.
Santos, through his lawyer, demanded full compensation pursuant to the
employment agreement which Shmidt denied. Santos then filed a complaint
with the NLRC against MHC, MHICL, the Palace Hotel & Shmidt for illegal
dismissal.
The Labor Arbiter grants payment of damages to Santos which was vacated
on appeal by the NLRC. On an MR, the NLRC found Santos illegally dismissed
& recommended that he be paid actual damages equivalent to his salaries for
the unexpired portion of his contract. MRs were denied, hence this petition.

Issue: WON MHC is liable to Santos.

Held: Granted. Piercing the veil of corporate fiction – fact that MHC is an
incorporator & owns 50% of the capital stock of MHICL is not enough to
pierce the veil. Even if we assume: NLRC had jurisdiction over the case &
MHICL was liable for Santos’ retrenchment, still MHC, as a separate & distinct
juridical entity, cannot be held liable. Piercing the veil is an equitable
remedy. When the notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will regard
the corp as an association of persons. It is done only when the corp is a mere
alter ego or business conduit of a person or another corp.

? Clear & convincing evidence is needed to pierce the veil of corporate


fiction. There is no such evidence to show that MHICL & MHC are 1 & the
same entity.

? Test to enable piercing of the veil, except in express agency, estoppel or


direct tort: a)Control, not mere majority or complete domination; b)Such
control must have e=been used by the defendant to commit fraud or wrong,
etc.; c)The aforesaid control & breach of duty must approximately cause the
injury or unjust loss complained of.

? Fact that the Palace Hotel is a member of the Manila Hotel Group is not
enough to pierce the corporate veil – there is no evidence to show that they
are 1 & the same entity.

? Contrary to what Santos claims that MHICL signed his employment


contract, MHICL Vice-President signed as a mere witness under the word
‘noted’. Furthermore, there is no EER between Santos & MHICL.

Case Digest on Transfarm & Co., Inc. vs. Daewoo Corporation (343 SCRA 410)

July 27, 2010

Transfarm & Co., Inc. v. Daewoo Corporation [343 SCRA 410 (Oct.17, 2000)]

Jurisdiction of SEC

Facts: Daewoo Corp (Daewoo) entered into a joint venture agreement with
Transfarm & Co. (Transfarm) for the delivery, assembly, production &
distribution of Daewoo cars in the country. Transdaewoo Automotive
Manufacturing Company was to be incorporated with Transfarm owning 70%
& Daewoo 30%. Transfarm & TAMC were then to enter into a separate
agreement that would name Transfarm as the exclusive distributor in the
country of Daewoo cars.

Parties stipulated that controversies or claims arising out of the joint venture
itself should be settled by arbitration conducted in Hong Kong but the joint
venture agreement itself was to be governed & construed in accordance with
Philippine laws.

When the agreement went awry, Transfarm & TAMC filed a complaint with
the RTC against Daewoo & Daewoo Motor Co., Ltd. (DMCL), a corp organized
under Korean laws & not doing business in the Phils, praying that Daewoo &
DMCL be ordered to refrain from doing business here. An MTD was filed on
the ground that what was field was an intracorp controversy hence
cognizable by the SEC. RTC denied such MTD. CA dismisses the case & says
that jurisdiction is with the SEC. With a subsequent MR rebuffed, Transfarm
now files a petition with the SC.

During the pendency of the petition with the SC, RA8799 was enacted.

Issue: WON SEC has jurisdiction over the dispute.

Held: CA decision set aside & case remanded back to RTC.

? The Securities Regulation Code (RA 8799) transferred to the courts of


general jurisdiction the SEC’s jurisdiction over all cases enumerated under
Sec.5 of PD 902-A. The SEC shall retain jurisdiction over pending cases
involving intra-corp disputes submitted for final resolution which shall be
resolved within 1 year from the enactment of RA 8799. The SEC shall retain
jurisdiction over pending suspension of payments/ rehabilitation cases filed
as of 30 June 2000 until finally disposed.

? The instant case, neither filed nor pending with the SEC, let alone ready
for final resolution by it, is clearly cognizable by the RTC.

EXTRA:

• Statutes regulating court jurisdiction & procedure are generally construed


to be applicable to actions pending & undetermined at the time of the
passage of said enactments.

Case Digest Pascual vs. Court of Appeals (339 SCRA 117)

July 27, 2010


Pascual vs. Court of Appeals [339 SCRA 117 (Aug. 25, 2000)]

Jurisdiction of the SEC

Facts: Private respondents filed an action for reconveyance of a piece of land


and for accounting and damages against petitioners. Petitioners filed a
motion to dismiss on the ground of lack of jurisdiction. They claim that the
case involves an intra-corporate dispute and thus, the SEC has jurisdiction
and not the regular courts. The trial court denied the motion to dismiss and
ruled that the case does not involve an intra-corporate dispute. The CA
affirmed. Hence, this petition.

Issue: Whether or not this case involves an intra-corporate dispute and


whether or not the SEC has jurisdiction over it?

Held: Pursuant to R.A. 8799, §5.2, which took effect on August 8, 2000, the
jurisdiction of the Sec to decide cases involving intra-corporate dispute was
transferred to courts of general jurisdiction. Thus, the question as to whether
this case involves an intra-corporate dispute is now only of academic interest.
Even if the case involves an intra-corporate dispute, it would be remanded to
the RTC just the same.

Case Digest BA Savings Bank vs. SIA (336 SCRA 484)

July 27, 2010

BA Savings Bank vs. Sia [336 SCRA 484 ((July 27,2000)]

Powers of the Board of Directors

Facts: The Court of Appeals issued a Resolution denying due course to a


Petition for Certiorari filed by BA Savings Bank, on the ground that ‘the
Certification on anti-forum shopping incorporated in the petition was signed
not by the duly authorized representative of the petitioner, as required under
Supreme Court Circular 28-91 but by its counsel.xxx” A Motion for
Reconsideration was filed by petitioner, attached to it was a BA Savings Bank
Corporate Secretary’s Certificate. The Certificate showed that the
petitioner’s Board of directors approved a resolution authorizing the
petitioners lawyers to represent it in any action or proceeding before any
court, tribunal or agency; and to sign the Certificate of Non-forum Shopping,
among others. The MR was denied.

Issue: Whether or not the Supreme Court Revised Circular No. 28-91 allows a
corporation to authorize its counsel to execute a certificate of non-forum
shopping in its behalf

Held: Yes. The resolution of the Board of Directors was sufficient to vest
petitioner’s lawyers with authority to bind the corporation and was specific
enough as to the acts they were empowered to do. In the case of natural
persons, Circular 28-91 requires the patties themselves to sign the certificate
of non-forum shopping. However, such requirement cannot be imposed on
artificial persons, like corporations, for the reason that they cannot do the
task themselves. Corporations act only through their officers and duly
authorized agents. The Circular does not require corporate officers to sign
the certificate. Further, there is no prohibition against authorizing agents to
do so.

Case Digest BA Savings Bank vs. SIA (336 SCRA 484)

July 27, 2010

Case Digest on Jardine Davies Inc. vs. CA and Far East Mills Supply
Corporation

July 27, 2010

Jardine Davies Inc. vs. CA and Far East Mills Supply Corporation; Pure Foods
Corporation vs CA (June 19, 2000)

Corporation entitled to Moral Damages (reputation besmirched)

Facts: In 1992 Purefoods decided to install 2 generators in its food processing


plant in San Roque, Marikina. A bidding for the supply and installation was
held among the bidders was Far East Mills Supply Corporation (FEMSCO).
Thereafter, in a letter addressed to FEMSCO president, Purefoods confirmed
the award of the contract. Immediately FEMSCO submitted the requirements
such as a performance bond and all risk insurance policy as well as
purchasing the necessary materials. However, in another letter, Purefoods
unilaterally cancelled the award citing “significant factors” which were
uncovered and brought to their attention “which dictate the cancellation and
warrant a total review and re-bid of the project.” FEMSCO protested the
cancellation but before the matter could be resolve, Purefoods awarded the
project with Jardine Nell, a division of Jardine Davies.

FEMSCO sued both Purefoods and Jardine. The RTC granted Jardine’s
demurrer to evidence but found in favor of FEMSCO against Purefoods and
order indemnification. FEMSCO appealed the granting of the demurrer filed
by Jardine and Purefoods appealed the decision of the court. The CA affirmed
the decision of the RTC but ordered Jardine to pay FEMSCO damages for
inducing Purefoods to violate the contract as such, Jardine must pay moral
damages. In addition, Purefoods was also directed to pay FEMSCO moral
damages and exemplary damages Both Purefoods and Jardine filed motions
for reconsideration which were denied.

Issue: Whether or not moral damages may be granted to a corporation?

Held: The Court has awarded in the past moral damages to a corporation
whose reputation has been besmirched. (Asset Privatization Trust v. CA, 300
SCRA 379) In this case, respondent FEMSCO has sufficiently shown that its
reputation was tarnished after it immediately ordered equipment from its
suppliers on account of the urgency of the project, only to be canceled later.
The Court thus, sustained respondent appellate court’s award of moral
damages. However, as there is no showing whatsoever that Jardine induced
Purefoods, the decision of the CA is modified. The order to Jardine Davies to
pay FEMSCO moral damages is reversed and set aside.

Case Digest on ARB Constructions Co. vs. CA

July 27, 2010

ARB Construction Co., Inc v CA (May 31, 2000)

Corporate Officers not personally liable for Authorized Corporate Acts

Facts: In 1993 TBS Security and Investigation Agency (TBSS) entered into 2
service contracts with ARBC wherein TBSS agreed to provide and post
securioty guards in the 5 establishments being maintained by ARBC. In 1994,
ARBC informed TBSS of its desire to terminate the service contracts. ARBC
also informed TBSS through its Vice President for Operations, Mark Molina,
that it was replacing its security guards with those of Global Security for
Investigation Agency (GSIA). TBSS informed ARBS that it could not
preterminate the service contracts nor post security guards from GSIA as
these would run counter to their contracts. Later, Molina wrote TBSS
conceding that ARBS could not preterminate the contract but nevertheless
decreased the security guards to only 1, allegedly pursuant to Clause 2 of the
service contract. TBSS subsequently filed a complaint for preliminary
injunction against ARBC and GSIA. In answer, ARBC claimed that it decreased
the number of security guards because they were found to be grossly
negligent and inefficient. TBSS, in addition to the allegations in its original
complaint, alleged in an amended and supplemental complaint that ARBC
illegally deducted from the payroll amounts representing the value of 1 unit
of concrete vibrator and cassette recorder and furthermore, ARBC withheld
additional amounts from its payroll as payment for the parts of the grader
that were stolen. ARBC filed its opposition to the filing of such.
Subsequently, MArk Molina also filed a motion to dismiss the amended and
supplemental complaint on the ground that it did not state a cause of action.
The RTC denied the motion. On appeal, the CA denied both petitions of ARBC
and Molina. Hence this petition.

Aside from arguing that the CA erred in holding that TBSS had a right to
change its cause of action in view of a change in the situation of the parties
after the filing of the original complaint, both ARBC and Molina argue that the
CA erred in holding that the allegations in the amended and supplemental
complaint were sufficient to hold Molina liable to TBSS in his personal
capacity.

Issue: Whether or not Molina is personally liable for his act of applying
amounts payable to TBSS to losses suffered by ARBC due to TBSS security
guards. (Whether or not Molina was acting in his capacity as an officer of
ARBC)

Held: The Court agrees with ARBC and Molina. The CA, affirming the order of
the RTC, ruled that Molina by his actions imputed pretended and fabricated
violations, blaming TBSS for alleged losses and deducting the values from
TBSS’ billings. It likewise held that since all these accusations and
imputations were made by Molica such are sufficient cause of action against
Molina in his personal capacity.

However, it is basic 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. As a general rule, a
corporation may not be made to answer for acts or liabilities of its
stockholders or those of the legal entities it may be connected an vice versa.
However, the veil of corporate fiction may be pierced when it is used as a
shield to further an end subversive of justice; or for purposes that could not
have been intended by the law that created it; or to defeat public
convenience, justify a wrong, protect fraud or defend crime; or to perpetuate
deception; or as an alter ego, adjunct or business conduit for the sole benefit
o the stockholders.
The general rule is that officers of a corporation are not personally liable for
their official acts unless it is shown that they have exceeded their authority.
(Art. 31 of the Corporate Code.) Absent any proof of bad faith or malice,
Molina cannot be held jointly and severally liable for any obligation which
ARBC may be held accountable for.

Case Digest Leyson vs. Ombudsman, Et. Als.

July 27, 2010

Leyson vs. Office of the Ombudsman, Tirso Antiporda, Chairman, UCPB and
CIIF Oil Mills, and Oscar A. Torralba, President, CIIF Oil Mills (April 27, 2000)

Control and Function Test to determine Nature of Corporation (public/private)

Facts: In 1996 International Towage and Transport Corp. (ITTC), a domestic


corporation engaged in shipping business, entered into a 1 yr. contract with
Legaspi Oil Company, Inc. (LEGASPI OIL), Granexport Manufacturing Corp.
(GRANEXPORT) and United Coconut Chemicals, Inc. (UNITED COCONUT),
comprising the Coconut Industry Investment Fund (CIIF) companies for the
transport of coconut oil in bulk through MT Transasia. The majority of
shareholdings of these companies are owned by the United Coconut Planters
Bank (UCPB) as administrator of CIIF. Under the contract, 3 month advance
notice would be given to terminate the contract. However, the CIIF with their
new president Torralba terminated the contract without such advance notice
and engaged another vessel, MT Marilag.

Leyson, Ex. Vice Pres. Of ITTC filed with the Office of the Ombudsman against
Torralba. In another complaint, petitioner charged Antiporda as Chairman of
UCPB and CIIF Oil Mills and Torralba with violation of the Anti- Graft and
Corrupt Practices Act. The Ombudsman dismissed the complaint finding that
the case is a simple breach of contract and that the entities involved are
private corporations over which it has no jurisdiction. Motion for
reconsideration was denied. Petitioner raises the issue to the Court. He
submits that based on Philippine Coconut Producers Federation Inc.
(COCOFED) vs PCGG and Republic vs. Sandiganbayan, the Court has declared
that the coconut levy funds are public funds, then corporations formed and
organized from those funds or whose controlling stocks are from those funds
should be regarded as government owned and/or controlled corporations. As
in the present case, since the funding or controlling interest of the companies
being headed by private respondents was given or owned by the CIIF as
shown in the certification of their Corporate Secretary, it follows that they are
government owned and/or controlled corporations. Corollarily, petitioner
asserts that respondents Antiporda and Torralba are public officers subject to
the jurisdiction of the Ombudsman.

Private respondents counter that the CIIF companies were duly organized
under the Corporation Code and that their stockholders are private
individuals and entities.

Issue: Whether or not the CIIF companies are public corporation.

Held: The Court found in favor of the respondents. The jurisprudential rules
invoked by petitioner are incomplete without resorting to the definition of
“government owned or controlled corporation” contained in par. 13, Sec. 2
Introductory Provisions of the Administrative Code of 1987. It mentions 3
requisites 1) any agency organized as a stock or non-stock corp. 2) it is
vested with functions relating to public needs whether governmental or
proprietary in nature 3) owned by the Government directly or through its
instrumentalities either wholly or in case of stock corp. at least 51% of its
capital stock.

In the present case, UCPB owns 44.1% of Legaspi Oil, which is below 51% and
removes it from the definition of government owned or controlled corp. UCPB
owns 91.24% of GRANEXPORT and 92.85% of United Coconut. However,
there is no showing that both were vested with functions relating to public
needs whether governmental or proprietary in nature. The CIIF companies
are private corporations and not within the scope of the jurisdiction of the
Office of the Ombudsman.

Case Digest DLSU vs. Dela Salle University Employees Association (DLSUEA)

July 27, 2010

DLSU vs Dela Salle University Employees Association (DLSUEA)

Dela Salle University Employees Association-National Federation of Teachers


and Employees Union (DLSUEA-NAFTEU) vs DLSU (April 12, 2000)

Piercing the Veil of Corporate Fiction to determine members of Collective


Bargaining Unit

Facts: Dela Salle University and DLSUEA-NAFTEU entered into a collective


bargaining agreement with a life span of 3 years. During the freedom period,
negotiations with the University for a new CBA were unsuccessful. Identifying
the unresolved issues, the matter was submitted for arbitration. One of the
issues was the scope of the bargaining unit. Magsalin, as arbitrator decided
that the Computer Operators assigned at the Computer Services Center just
like any other Computer Operators in other units, should be included as
members of the bargaining unit, the discipline officers belong to the rank-
and-file on the basis of the nature of their job and that the employees of the
College of St. Benilde, the College having a personality separate and distinct
from the University, such employees are outside the bargaining unit of said
University.

Both parties filed for reconsideration with the Magsalin but were not
entertained by him. The University then filed for certiorari with the Court.

Issue: Whether or not to pierce the veil of corporate fiction of the College of
St. Benilde-DLSU (whether or not the employees thereat are within or outside
the bargaining unit.)

Held: The Solicitor General supports the employees of the College of St.
Benilde and the Union that the veil of corporate fiction should be pierced and
thus, according to the Union, the University and the College of St. Benilde
should be considered as only one entity because the latter is but a mere
intergral part of the University.

However, the Court affirms the findings of the voluntary arbitrator that the
employees of the College of St. Benilde should be excluded from the
bargaining unit of the rank and file employees of Dela Salle University,
because the two educational institutions have their own separate juridical
personality and not sufficient evidence was shown to justify the piercing of
the veil of corporate ficiton.

Case Digest on Presidential Commission on Good Government vs.


Sandiganbayan

July 27, 2010

Presidential Commission on Good Government v. The Hon. Sandiganbayan

February 23, 2000

Piercing Veil of Corporate Fiction to recover Ill-Gotten Wealth

Facts: World Universal Trading & Investment Co., S.A. *WUTIC( was a
sociedad anonima registered in Panama but not licensed to do business in
the Philippines. Construction Development Corporation of the Philippines,
now known as Philippine National Construction Corporation (CDCP/PNCC) is
duly organized and existing under the laws of the Philippines. PCGG ordered
the sequestration and provisional takeovers against assets and records of
Rodolfo Cuenca, Universal Holdings, Cuenca Investment, PNCC and San
Mariano Milling Corporation. In 1987 PCGG filed with the Sandiganbayan a
complaint against Cuenca for illegally acquiring assets in the Cuenca owned
corporations of CDCP/PNCC, Asia International Hardwood Limited (AHL), a
Hongkong based company and Construction Development Corporation
International Limited, Hongkong, a wholly owned subsidiary or alter ego of
CDCP/PNCC. In 1991, claiming to be an assignee of AHL, WUTIC filed with the
RTC against CDCP/PNCC to enforce a foreign judgement which WUTIC had
obtained in Hongkong against CDCPI, which is wholly owned by CDCP/PNCC.
After trial, the RTC found in favor of WUTIC, it considered CDCP/PNCC and
CDCPI as “one corporate entity” and liable to pay WUTIC. CDCP/PNCC
appealed, the CA affirmed the decision of the RTC and the Supreme Court
denied it on petition for review. Upon motion of WUTIC, the RTC issued a writ
of execution and Sheriff Harina issued notices of garnishment against the
accounts, shares of stocks and income of CDCP/PNCC with various banks and
corporations.

In October 197, PCGG Commissioner Mendoza attended the PNCC board


meeting and discovered the writ and notices of garnishment. After realizing
that WUTIC/AHL’s claim could be Cuenca’s in disguise, PCGG enjoined ONCC
and/or any person acting in its behalf from taking any action which would
dissipate or affect the assets of CDCP/PNCC. PCGG filed for certiorari with the
Sandiganbayan to annul the RTC decision, writ and garnishment. The
Sandiganbayan dismissed the petition ruling that it had not jurisdiction to
annul the judgement of the RTC. It claimed to have only appellate
jurisdiction over decisions of the RTC in criminal cases involving offenses
relating to public office.

Issue: Whether or not the Sandiganbayan committed grave abuse of


discretion in summarily dismissing the petition for certiorari despite the
possibility that WUTIC is a dummy corporation or an alter ego of Rodolfo
Cuenca.

Held: The 3 corporations involved in this petition, PNCC/CDCP, AHL and


CDCPI, Hongkong are under sequestration are defendants in the
sequestration case pending before the Sandiganbayan. AHL had claims
against CDCPI and assigned the same to WUTIC. Eventually WUTIC obtained
a favorable judgement in a Hongkong court. Due to the closure of CDCPI in
Hongkong, WUTIC filed a case with RTC against PNCC/CDCP to enforce a
foreign judgement obtained against CDCPI. Both corporations are Cuenca-
owned and under sequestration. Hence there is valid ground for PCGG to
evaluate the validity of WUTIC’s claim as a legitimate assignee or merely a
dummy corporation set up to circumvent the sequestration case. As per the
Court, it should be noted that despite the initial sequestration orders and the
case filed with the Sandiganbayan against stockholdings of Rodolfo Cuenca
and th so-called Cuenca-owned corporations, AHL, ONCC/CDCP and CDCPI,
the PCGG was not made a party in the civil case in Hongkong and the case to
enforce the foreign judgement filled with the trial court. Considering the
interconnections between the participating corporations in the said
transactions and the existence of the sequestration case, the PCGG should
have been informed of the above cases to question and verify the veracity of
the claim.

The Court stated that it is aware of various schemes employed to circumvent


sequestration orders, dissipate sequestered assets and thwart PCGG’s efforts
to recover ill-gotten wealth. That there is a possibility that WUTIC is a
dummy corporation formed by Rodolfo Cuenca, or his alter ego, the reach the
sequestered assets, there is a need to vigorously guard these assets and
preserve them pending resolution of the sequestration case before the
Sandiganbayan.

Case Digest on Andres Lao vs. CA, Associated Anglo-American Tabacco Corp.
and Esteban Co.

July 27, 2010

Andres Lao vs. CA, the Associated Anglo-Amedican Tabacco Corp. and
Esteban Co.

February 17, 2000

Corporate Officers not personally liable for Authorized Corporate Acts

Facts: In 1965 a Contract of Sales Agent was entered by the Association of


Anglo-American Tobacco Corporation with Andres Lao. Lao was to sell
cigarettes manufactured and shipped by the Corporation to his address in
Tacloban, and he would remit the sales proceeds. Lao would receive
commission for those sold, with a monthly salary and operational allowance.
In 1968 Lao’s attention was called to his enormous accounts and the difficulty
in obtaining a tally despite his avowal of regular remittance of collections. In
1969 it was established that his liability amounted to P525,053. Also, the
Corp. discovered that Lao was engaged in a construction business and
suspecting that he diverted the sale proceeds to such business, it gave a
demand letter for payment of his obligations. It also found that contrary to
his allegations, he did not have a huge collectible from customers and
nothing was due to the Corporation. From then on, the Corp. no longer sent
him shipments. In 1970, Andres, Jose and Tomas Lao brought a complaint for
accounting and damages against the Corp.. The court ordered both to
undergo a court supervised accounting but also ordered the Corporation to
pay the Lao’s actual loss of earnings, moral damages, exemplary damages,
atty. fees and cost of suit. Later the court gave a supplemental decision
dismissing Lao’s claim of overpayment. The Corp. and the Lao’s appealed.
The CA found the Corp. liable for actual damages of loss of earnings, moral
damages and exemplary damages. It also ordered the Corp. to pay the claim
of overpayment by Lao. The Corp. file a motion for reconsideration and
during its pendency, Esteban Co, the new VP of the Corp. filed a complaint
with the fiscal alleging Lao failed to remit an amount which he allegedly
misappropriated and converted to his own personal use. Pending the
criminal case, Lao filed against the Corp. and Esteban Co a complaint for
malicious prosecution. The fiscal found that Lao did not commit estafa and
that his liability was civil. The trial court found the Corp and Esteban Co
guilty of malicious prosecution. They appealed. Co asserts that he cannot be
held jointly and severally liable with the Corp. as he was acting as executive
vice president and his action was within the scope of his authority as such
corporate officer.

Issue: Whether or not Co should be held solidarily liable with the Corp.

Held: A perusal of his affidavit reveals that at the time he filed the
complaint on June 1974, Co was vice president of the Corp. As a corporate
officer, his power to bind the Corp as its agent must be sought from statute,
charter, by-laws, a delegation of authority to a corporate officer, or from the
acts of the board of directions, expressed or implied from custom of doing
business. In this case, no such sources of Co’s authority from which to
deduce whether or not he was acting beyond the scope of his responsibilities
are mentioned, or proven. It is logical to conclude that the board or by-laws
of the Corp. vested Co with certain executive duties, one of which is the case
for the Corp. That Co was authorized to institute the estafa case is
buttressed by the fact the Corp failed to make an issue out of his authority to
file the case. The defense should have been specially pleaded by the Corp.
Its failure to interpose such defense could only mean that the filing of Co was
with consent and authority of the Corp. Thus, Co may not be held personally
liable for acts performed by him in pursuance of an authority.

Case Digest on Pilipinas Bank vs. CA and Ricardo Silverio

July 27, 2010


Pilipinas Bank vs CA and Ricardo Silverio (February 22, 2000)

SEC Jurisdiction, Requirement of Proof of Relationship of Parties and Subject


Matter

Facts: In 1991, Pilipinas bank filed a complaint against Silverio to secure


payment of two loans he obtained from petitioner when he was still its
majority stockholder. Silverio contends that it is the SEC and not the regular
courts that has jurisdiction over the suit which is an intra-corporate
controversy between the Bank and its stockholder and that there is a pending
case in the SEC wherein the petitioner may plead his claim.

The Bank in answer to a request for admission, admits that Silverio was a
stockholder, that it instituted a case for Specific Performance and Breach of
Contract before the SEC. It also admits that Silverio had a capital infusin of
25 million credited to paid in surplus in its books but the same was written off
against losses of the Bank, in the same may equities of other stockholders
were proportionately written off. The court granted the motion to dismiss
and denied the Banks motion for reconsideration. The Bank filed for
certiorari with the CA, which found the case to be intra-corporate and
dismissed the case. It cited Sec. 5 of P.D. 902-a. Motion for reconsideration
denied.

Issue: Whether or not the establishment of a relationship between a


stockholder and corporation in a dispute necessarily vest jurisdiction in the
SEC.

Held: The Bank invoke the ruling of the cases of Viray vs. CA wherein the
Court ruled that the establishment of the relationship does not always confer
jurisdiction on the SEC. The better policy is determining which body has
jurisdiction would be to consider not only the status or the relationship of the
parties but also the nature of the question. And in Macapalan Vs. Katalbas-
Moscardon, the Court held that simple money claims, without any averment
of fraud or misrepresentation committed by the corporations involved, are
cognizable by the ordinary courts.

However, there is no question that the present case instituted by the Bank to
collect loans obtained by Silverio who in turn seeks to recover his 25 million
deposit in paid-in surplus which was written off by the Bank , is an intra-
corporate controversy. Considering the relationship of the parties and the
subject matter of the controversy, jurisdiction is with the SEC. Question
which arise, such as: whether the loans obtained by Silverio were in his
personal capacity or as accommodation, he having been the majority
stockholder and whether the write-off was applied for his loan accounts or for
a proportionate reduction of his equity, call for an investigation of specific
matters within the exclusive competence and authority of the SEC to pass
upon.

Case Digest on Rufina Lim vs. CA, Auto Truck, TBA Corp, et. al.

July 27, 2010

Rufina Lim vs CA, Auto Truck, TBA Corporation, Sspeed Distributing Inc.,
Active Distributors, Alliance Marketing Corporation, Action Company, Inc.
(January 24, 2000)

Tests to Pierce the Veil of Corporate Fiction

Facts: Rufina Lim is the surviving spouse of Pastor Lim whose estate is the
subject of probate proceedings. The private respondents are corporations
formed, organized and existing under Philippine Laws and which own real
properties. Pastor Lim died June 1994, Rufina Lim filed for the administration
of the estate. The properties which were owned by the corporations were
included in the inventory of the estate. They filed for the exclusion of the
properties from said estate and the cancellation of the annotation of lis
pendens in the TCTs of said properties.

The RTC granted the motions. However Rufina Lim filed an amended petition
which averred that such corporations were owned by Pastor Lim, that such
were dummies of Pastor Lim, that those listed as incorporators are there only
for the purpose of registration with the SEC, and that the real properties,
although registered in the name of the corporations, were actually acquired
by Pastor Lim during his marriage with Rufina Lim. The RTC acting on such
motion set aside its order and ordered the Register of Deeds to reinstate the
lis pendens. The respondent filed for certiorari with the CA which granted its
prayer. Rufina Lim disputes such decision and urges that not only are the
properties of the corporations part of the estate but also the corporations
themselves. She cites that Pastor Lim during his lifetime organized and
wholly owned the 5 corporations.

Issue: Whether or not a corporation in its universality be the proper subject of


and be included in the inventory of the estate of a deceased person?

Held: The real properties included in the inventory of the estate of the late
Pastor Lim are in the possession of and are registered in the name of private
respondent corporations, which under the law possess a personality separate
and distinct from their stockholders and in the absence of any cogency to
shred the veil of corporate fiction, the presumption of conclusiveness of said
titles in favor of private respondents should stand. It is settled that a
corporation is clothed with personality separate and distinct from that of
persons composing it. It may not generally be held liable for that of the
persons composing it. It may not be held liable for the personal indebtedness
of its stockholders or those of the entities connected with it. A corporation by
legal fiction and convenience is an entity shielded by a protective mantle and
imbued by law with a character alien to the persons comprising it. But “when
the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of
statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and
isolates the corporation from…will be lifted to allow for its consideration
merely as an aggregation of individuals.” First Philippine International Bank
vs CA (252 SCRA 259)

The test in determining the applicability of piercing the veil of corporation


fiction is as follows: 1) Control, not mere majority or complete stock control
but complete domination not only of finances but of policy and business
practice in respect to the transaction attacked so that the corporate entity as
of 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
fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiff’s legal
right. 3) The control and breach of duty must proximately cause the injury.
The absence of these elements prevent the piercing. Petitioner failed to
adduce evidence that would justify such piercing. Mere ownership by a single
stockholder or by a corporation of all or nearly all of the capital stock is not
sufficient reason for disregarding the fiction of separate corporate
personalities.

Case Digest on Cyanamid Philippines, Inc. vs. CA, CTA

July 27, 2010

Cyanamid Philippines, Inc. vs CA, CTA and Commissioner of Internal Revenue

January 20, 2000

Accumulation of Profits

Facts: Petitioner is a corporation organized under Philippine laws and is a


wholly owned subsidiary of American Cyanamid Co. based in Maine, USA. It
is engaged in the manufacture of pharmaceutical products and chemicals, a
wholesaler of imported finished goods and an imported/indentor. In 1985 the
CIR assessed on petitioner a deficiency income tax of P119,817) for the year
1981. Cyanamid protested the assessments particularly the 25% surtax for
undue accumulation of earnings. It claimed that said profits were retained to
increase petitioner’s working capital and it would be used for reasonable
business needs of the company. The CIR refused to allow the cancellation of
the assessments, petitioner appealed to the CTA. It claimed that there was
not legal basis for the assessment because 1) it accumulated its earnings and
profits for reasonable business requirements to meet working capital needs
and retirement of indebtedness 2) it is a wholly owned subsidiary of American
Cyanamid Company, a foreign corporation, and its shares are listed and
traded in the NY Stock Exchange. The CTA denied the petition stating that
the law permits corporations to set aside a portion of its retained earnings for
specified purposes under Sec. 43 of the Corporation Code but that
petitioner’s purpose did not fall within such purposes. It found that there was
no need to set aside such retained earnings as working capital as it had
considerable liquid funds. Those corporations exempted from the
accumulated earnings tax are found under Sec. 25 of the NIRC, and that the
petitioner is not among those exempted.

The CA affirmed the CTA’s decision.

Issue: Whether or not the accumulation of income was justified.

Held: In order to determine whether profits are accumulated for the


reasonable needs of the business to avoid the surtax upon the shareholders,
it must be shown that the controlling intention of the taxpayer is manifested
at the time of the accumulation, not intentions subsequently, which are mere
afterthoughts. The accumulated profits must be used within reasonable time
after the close of the taxable year. In the instant case, petitioner did not
establish by clear and convincing evidence that such accumulated was for
the immediate needs of the business.

To determine the reasonable needs of the business, the United States Courts
have invented the “Immediacy Test” which construed the words “reasonable
needs of the business” to mean the immediate needs of the business, and it
is held that if the corporation did not prove an immediate need for the
accumulation of earnings and profits such was not for reasonable needs of
the business and the penalty tax would apply. (Law of Federal Income
Taxation Vol 7) The working capital needs of a business depend on the
nature of the business, its credit policies, the amount of inventories, the rate
of turnover, the amount of accounts receivable, the collection rate, the
availability of credit and other similar factors. The Tax Court opted to
determine the working capital sufficiency by using the ration between the
current assets to current liabilities. Unless, rebutted, the presumption is that
the assessment is correct. With the petitioner’s failure to prove the CIR
incorrect, clearly and conclusively, the Tax Court’s ruling is upheld.

Case Digest on Union Bank of the Philippines vs. SEC

July 27, 2010

Union Bank of the Philippines v. SEC [June 6, 2001]

Revised Securities Act

Facts: On April 4, 1997, petitioner Union Bank sought the opinion of


Chairman Perfecto Yasay, Jr. of respondent Commission as to the applicability
and coverage of the Full Material Disclosure Rule on banks, contending that
said rules, in effect, amend Section 5 (a) (3) of the Revised Securities Act
which exempts securities issued or guaranteed by banking institutions from
the registration requirement provided by Section 4 of the same Act.

Chairman Yasay replied and informed the petitioner that while the
requirements of registration do not apply to securities of banks which are
exempt under Section 5(a) (3) of the Revised Securities Act, however, banks
with a class of securities listed for trading on the Philippine Stock Exchange,
Inc. are covered by certain Revised Securities Act Rules governing the filing
of various reports with respondent Commission.

On July 17, 1997, respondent Commission wrote petitioner, enjoining the


latter to show cause why it should not be penalized for its failure to submit a
Proxy/Information Statement in connection with its annual meeting held on
May 23, 1997, in violation of respondent Commission’s ‘Full Material
Disclosure Rule.’

“Failing to respond to the aforesaid communication, petitioner was given a


‘2nd Show Cause with Assessment’ by respondent Commission on July 21,
1997. Petitioner was then assessed a fine of P50,000.00 plus P500.00 for
every day that the report [was] not filed, or a total of P91, 000.00 as of July
21, 1997. Petitioner was likewise advised by respondent Commission to
submit the required reports and settle the assessment, or submit the case to
a formal hearing.

The SEC issued an order:

“In view of the foregoing, the appeal filed by the Union Bank of the
Philippines is hereby denied. The penalty imposed in the amount of
P91,000.00 as of July 21, 1997, for failure to file SEC Form 11-A excludes the
fine accruing after the cut-off date until the final submission of the report.
Further, the amount of P50,000.00 shall be collected for the violation of RSA
Rule 34(a)-1 or Rule 34 (c)(1).”

Issue: WON is required to comply with the respondent SEC’s full disclosure
rules.

Held: The petition is not meritorious. Section 5 of the Revised Securities Act
states that:

Sec 5. Exempt Securities. (a) Except as expressly provided, the requirement


of registration under subsection (a) of Section four of this Act shall not apply
to any of the following classes of securities:

xxxx

(3) Any security issued or guaranteed by any banking institution authorized


to do business in the Philippines, the business of which is substantially
confined to banking, or a financial institution licensed to engage in quasi-
banking, and is supervised by the Central Bank.

This provision exempts from registration the securities issued by banking or


financial institutions mentioned in the law. Nowhere does it state or even
imply that petitioner, as a listed corporation, is exempt from complying with
the reports required by the assailed RSA Implementing Rules.

It must be emphasized that petitioner is a commercial banking corporation


listed in the stock exchange. Thus, it must adhere not only to banking and
other allied special laws, but also to the rules promulgated by Respondent
SEC, the government entity tasked not only with the enforcement of the
Revised Securities Act, but also with the supervision of all corporations,
partnerships or associations which are grantees of government-issued
primary franchises and/or licenses or permits to operate in the Philippines.

That petitioner is under the supervision of the Bangko Sentral ng Pilipinas


(BSP) and the Philippine Stock Exchange (PSE) does not exempt it from
complying with the continuing disclosure requirements embodied in the
assailed Rules. Petitioner, as a bank, is primarily subject to the control of the
BSP; and as a corporation trading its securities in the stock market, it is under
the supervision of the SEC. It must be pointed out that even the PSE is under
the control and supervision of respondent. There is no over-supervision here.
Each regulating authority operates within the sphere of its powers. That
stringent requirements are imposed is understandable, considering the
paramount importance given to the interests of the investing public.

Otherwise stated, the mere fact that in regard to its banking functions,
petitioner is already subject to the supervision of the BSP does not exempt
the former from reasonable disclosure regulations issued by the SEC. These
regulations are meant to assure full, fair and accurate disclosure of
information for the protection of investors in the stock market. Imposing
such regulations is a function within the jurisdiction of the SEC. Since
petitioner opted to trade its shares in the exchange, then it must abide by the
reasonable rules imposed by the SEC.

Case Digest on TCL Sales vs. CA (349 SCRA 35)

July 27, 2010

TCL Sales Corporation v. CA & Ting Ping Lay [349 SCRA 35 (Jan.5, 2001)]

Jurisdiction of the SEC

Rights of a Shareholder

Duty of Corporate Secretary to enter transfer of Shares in Corporate Books

Facts: Ting Ping Lay, not one of the original subscribers of the shares of stock
of TCL Sales Corporation, acquired his shares by purchasing those of some of
the original subscribers. In order to protect his shareholdings with TCL, Lay
requested Anna Teng, TCL Corporate Secretary to enter the transfer of shares
of stock for proper recording of his acquisitions in the Stock & Transfer Book
of TCL. He too demanded issuance of new certificates of stock in his favor.

TCL, however, even after repeated demands, refused. Lay filed a case with
the SEC for mandamus against TCL and Teng. This was in turn granted by
the SEC denying a later MR as well. The CA dismissed TCL’s petition as well
for being filed out of time.

Issues: (1) WON SEC has jurisdiction over the petition for mandamus
filed by Lay.

(2) WON the alleged transfer of shares in favor of Lay are valid and can be
ordered recorded.

Held: Denied and CA decision affirmed. Even if Lay were not a Share Holder,
he is still a member of the public whose investment in the corporate the law
seeks to protect and encourage, as his purchase of shares of stock has been
established. Principal function of SEC is supervision and control of corps,
partnerships, assoc with the view of protecting and encouraging investments
for the protection of economic development. SEC has power of control &
supervision over all corps to encourage active public participation in the
affairs of private corps through investments.

Jurisdiction over an action for mandamus lies with the SEC even if the
proponent is not yet a SH of record, as in the case of Abejo v. de la Cruz. SEC
by express mandate has absolute jurisdiction to enforce the provisions of the
Corp Code among which is the stock purchaser’s right to secure the
corresponding certificate of stock in his name.

Determination of whether or not a Share Holder is entitled to exercise the


rights of a Share Holder is within jurisdiction of the SEC. The SEC en banc
found that TCL did not refute the validity of the transfers of the shares of
stock – they conceded that they could not assail the documents evincing the
transfer of the shares to Lay. Lay was able to establish prima facie ownership
through the deeds of transfer of shares of stock of TCL. A listing of TCL’s
Share Holders & their respective shares before & after the execution of a
certain deed of assignment shows that Lay is indeed listed as a Share Holder
of TCL. The dispute is an intra-corp controversy involving Share Holders of
TCL.

As held in Lim Tay v. CA, the duty of the corporate secretary to record
transfers of stocks is ministerial. It however, cannot be compelled when the
transferee’s title has no prima facie validity or is uncertain. Mandamus will
not issue to establish a right but only to enforce one already established.

Although during the trial before the SEC, TCL admitted that they ignored
Lay’s request was based simply on the fact that they did not want to grant it.
Having been capricious, whimsical & unwarranted, it constitutes bad faith.
However, the SEC en banc modified & deleted the said award for damages
imposed on the corp. The matter of damages now concerns only Teng, the
corporate secretary. It was Teng’s refusal as corp secretary to record the
transfer of the shares, without evidence that such refusal was authorized by
TCL’s BOD, that caused damage. No error was committed by the respondent
court in refusing to disturb the SEC’s findings.

Case Digest on PEFIANCO V. MORAL 19 Jan. 2000

January 4, 2011

Case Digest on PEFIANCO V. MORAL

19 Jan. 2000
Denial of a Motion to Dismiss

Facts: D filed a mandamus and injunction case seeking to enjoin the


enforcement of a decision which had already become final. P filed a Motion to
Dismiss. The judge denied the motion without stating the basis why P’s
motion should be denied.

Issue: Whether the judge’s denial of the motion was proper

Held: No. Rule 16 mandatorily requires that the resolution of a motion to


dismiss should clearly and distinctly state the reasons therefor. The rule
proscribes the common practice of perfunctorily denying motions to dismiss
“for lack of merit.” The challenged order of the trial court falls short of the
requirements stated in Rule 16.

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Case Digest on ENOJAS V. JUDGE GACOTT 19 Jan. 2000

January 4, 2011

Case Digest on ENOJAS V. JUDGE GACOTT

19 Jan. 2000

Desistance

Facts: P filed an administrative case against Judge D. Later on, however, P


withdrew his complaint.

Issue: Whether the case should be dismissed in view of plaintiff’s desistance

Held: No. Withdrawal of a complaint or subsequent desistance by the


complainant in an administrative case does not necessarily warrant its
dismissal. Desistance cannot divest the court of its jurisdiction to investigate
and decide the complaint against D for public interest is at stake.

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Case Digest on ENOJAS V. JUDGE GACOTT 19 Jan. 2000


January 4, 2011

Case Digest on CONDO SUITE V. NLRC 28 Jan. 2000

January 4, 2011

Case Digest on CONDO SUITE V. NLRC

28 Jan. 2000

Forum Shopping

Facts: Labor Arbiter dismissed P’s complaint for illegal dismissal. NLRC
reversed and ordered reinstatement. Employer D filed a petition for certiorari.
The external legal counsel of D executed the certification against forum
shopping in the petition.

Issue: Whether there was proper compliance with the rule on certification
against forum shopping

Held: No. B did not comply with the rule since the certification was
improperly executed by the external legal counsel. A certification of non-
forum shopping must be executed by the petitioner or any of the principal
parties and not by counsel unless clothed with a special power of attorney to
do so.

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Case Digest on DIESEL CONSTRUCTION V. JOLLIBEE FOODS 28 Jan. 2000

January 4, 2011

Case Digest on DIESEL CONSTRUCTION V. JOLLIBEE FOODS

28 Jan. 2000

Interlocutory Order And Execution Pending Appeal


Facts: The trial court ruled that P was entitled to a certain amount to be paid
by D. Both parties appealed. The CA directed the RTC to issue a writ of
execution upon P’s posting of a P10 million bond and to stay execution D’s
filing of a supersedeas bond of P15 million.

Issue: Whether a petition for review under Rule 45 is the proper remedy to
question the CA’s resolution

Held: No. Rule 45 is the proper remedy to question final judgments and not
interlocutory orders of the CA. The assailed resolution is an interlocutory
order. Interlocutory orders are those that determine incidental matters which
do not touch on the merits of the case or put an end to the proceedings. A
petition for certiorari under Rule 65 is the proper remedy to question the
improvident order granting execution [ending appeal or a stay of such
execution.

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Case Digest on BERNARDO CONSTRUCTION V. CA 31 Jan. 2000

January 4, 2011

Case Digest on BERNARDO CONSTRUCTION V. CA

31 Jan. 2000

Interlocutory Order And Execution Pending Appeal

Facts: P filed a complaint for breach of contract, specific performance, and


collection of a sum of money against D. The trial court issued the writ of
preliminary attachment. D filed a petition for certiorari so CA reversed. P now
assails the CA’s decision.

Issue: Whether CA was correct in allowing due course to D’s petition for
certiorari

Held: No. As a general rule, an interlocutory order is not appealable until


after the rendition of the judgment on the merits. However, certiorari is an
appropriate remedy to assail an interlocutory order (1) when the tribunal
issued such order without or in excess of jurisdiction or with grave abuse of
discretion; and (2) when the assailed interlocutory order is patently
erroneous and the remedy of appeal would not afford adequate and
expeditious relief. The present case does not fall under the exceptions
because D still had recourse to a plain, speedy and adequate remedy, which
is the filing of a motion to fix the counter-bond.

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Case Digest on MACEDA V. DBP 26 Aug. 1999

January 4, 2011

Case Digest on MACEDA V. DBP

26 Aug. 1999

Interlocutory Order And Execution Pending Appeal

Facts: P won a case against D. D appealed and the trial court granted
execution pending appeal. However, the CA reversed and denied execution
pending the appeal of the case.

Issue: Whether there are good reasons to justify execution pending appeal

Held: No. Sec. 2, Rule 39 applies and his rule is strictly applied against the
movant. Execution pending appeal is usually not favored because it affects
the rights of the parties which are yet to be ascertained on appeal. The 3
requisites are: (1) there must be a motion by the prevailing party with notice
to the adverse party; (2) there must be a good reason for execution pending
appeal; and (3) the good reason must be stated in a special order. In this
case, there are no special, important, or pressing reasons that would justify
execution pending appeal.

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Case Digest on FIRESTONE CERAMICS V. CA 2 Sept. 1999

January 4, 2011
Case Digest on FIRESTONE CERAMICS V. CA

2 Sept. 1999

Intervention

Facts: The government filed a case to annul the certificate of title of D


covering forestland. X wanted to intervene believing that if D’s title would be
annulled and after declassification of the forestland to alienable land, then his
title over a portion of the property would become valid. Y also wanted to
intervene because the cancellation of D’s title would allegedly pave the way
for his free patent application.

Issue: Whether X and Y should be allowed to intervene.

Held: No. Intervention is not a matter of right but may be permitted by the
courts when the applicant shows that he is qualified to intervene as provided
under Sec. 1 of Rule 19. The legal interest of the intervenor must be of direct
and immediate character and not merely contingent or expectant so that he
will either gain or lose by the direct operation of the judgment. X and Y
merely have a collateral interest in the subject matter of the litigation, thus,
allowing intervention would not be justified.

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Case Digest on BALUYOT VS. GUIAO September 28, 1999

January 4, 2011

Case Digest on BALUYOT VS. GUIAO

September 28, 1999

Judgment

Facts: P filed a case to declare null and void a donation of a piece of land
against D. P claimed ownership of the same. After trial, the court declared
the donation void and P the owner of the land and issued a writ of possession
in favor of P. D now appeals the judgment. One of the errors assigned was
that the court committed grave abuse of discretion in issuing the writ of
possession.

Issue: Whether the writ of possession was issued in excess of jurisdiction.


Held: Yes.

Judgment is not confined to what appears on the face of the decision, but
also those necessarily included therein or necessary thereto; and, where the
ownership of a parcel of land was decreed in the judgment, the delivery of
the possession of the land should be considered included in the decision, it
appearing that the defeated party’s claim to the possession thereof is based
on his claim of ownership. Also, adjudication of ownership would include the
delivery of possession if the defeated party has not shown any right to
possess the land independently of his claim or ownership which was rejected.
In such case, writ of execution would be required if the defeated party does
not surrender the possession of the property. Here, there is no allegation,
much less proof, that petitioners have any right to possess the land
independent of their claim of ownership.

Case Digest on BALAGTAS MULTI-PURPOSE COOPERATIVE, INC. V. CA 16 Sept.


1999

January 4, 2011

Case Digest on BALAGTAS MULTI-PURPOSE COOPERATIVE, INC. V. CA

16 Sept. 1999

Liberal Construction Of Rules Of Procedure

Facts: The CA denied the motion for reconsideration filed by P because “only
the Motion for Reconsideration before the NLRC and Financial Statement of P
were attached but still without the other material documents mentioned in
the petition, such as, (a) complaint, (b) position papers, and (c) resignation
letter of private respondent.”

Issue: Whether the CA erred in not finding sufficient compliance on the part
of P with the requirements of the Rules of Civil Procedure

Held: Yes. The submission of said financial statement together with the
motion for reconsideration constitutes substantial compliance with the
requirements of Section 3, Rule 46. The rules of procedure are not to be
applied in a very rigid, technical sense; rules of procedure are used only to
help secure substantial justice. If a technical and rigid enforcement of the
rules is made, their aim would be defeated.

Case Digest on TOURIST DUTY FREE SHOPS V. SANDIGANBAYAN


January 4, 2011

Case Digest on TOURIST DUTY FREE SHOPS V. SANDIGANBAYAN

26 Jan. 2000

Litis Pendentia

Facts: P filed a case against D for reconveyance, reversion, and restitution of


illegally obtained assets. C filed another case against P et al., with the
Sandiganbayan for specific performance and the nullification of the writ of
sequestration.

Issue: Whether the second case should be dismissed on the ground of litis
pendentia or consolidation with the first case

Held: No. The requisites of litis pendentia are absent in this case (no identity
of parties; no identity of rights asserted and reliefs prayed for). The cases
should be resolved independently because merger or consolidation of the two
via mere motion is clearly unwarranted.

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