Corpo Case Digests I

CASE DIGESTS | CORPO
CORPO CASE DIGESTS | I. DEFINITION OF CORPORATION

1. ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.
Facts: Mangila contracted the freight forwarding services of Guina for shipment of petitioners products. Petitioner
agreed to pay private respondent cash on delivery. On the first shipment, petitioner requested for seven days within
which to pay private respondent. However, for the next three shipments petitioner failed to pay private respondent.
Despite several demands, petitioner never paid private respondent. Guina sued Mangila before the RTC of Pasay.
The sheriff filed his Sheriffs Return showing that summons was not served on petitioner. The writ of preliminary
attachment was issued in favor of Guina since the absence of Mangila in the country was construed as done with
fraud. Mangila filed motion to Discharge Attachment without submitting herself to the jurisdiction of the trial court.
She pointed out that up to then, she had not been served a copy of the Complaint and the summons. Hence,
petitioner claimed the court had not acquired jurisdiction over her person. The said motion was granted. Guina
applied for alias summons on December 26, 1988, which the trial court issued on January 19, 1989. It was only on
January 26, 1989 that summons was finally served on petitioner.
Issue: Whether the writ of attachment was improperly issued.
Held: As a preliminary note, a distinction should be made between issuance and implementation of the writ of
attachment. It is necessary to distinguish between the two to determine when jurisdiction over the person of the
defendant should be acquired to validly implement the writ. This Court has long settled the issue of when jurisdiction
over the person of the defendant should be acquired in cases where a party resorts to provisional remedies. A party
to a suit may, at any time after filing the complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy at the commencement of the
action or at any time thereafter.[21] This phrase refers to the date of filing of the complaint which is the moment that
marks the commencement of the action. The reference plainly is to a time before summons is served on the
defendant, or even before summons issues. The grant of the provisional remedy of attachment involves three stages:
first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over
the person of the defendant be first obtained. However, once the implementation of the writ commences, the court
must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority
to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. In the
instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented on October 28,
1988. However, the alias summons was served only on January 26, 1989 or almost three months after the
implementation of the writ of attachment. In conclusion, we hold that the alias summons belatedly served on
petitioner cannot be deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot
enforce such a coercive process on petitioner without first obtaining jurisdiction over her person. The preliminary writ
of attachment must be served after or simultaneous with the service of summons on the defendant whether by
personal service, substituted service or by publication as warranted by the circumstances of the case. The
subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her person because the
law does not allow for retroactivity of a belated service.
RE: Query of Mr. Roger C. Prioreschi Re Exemption from Legal and Filing Fees of the Good Shepherd
Foundation, Inc.
A. M. No. 09-6-9-SC, Aug. 19, 2009
Facts: Mr. Roger C. Prioreschi, administrator of the Good Shepherd Foundation, Inc., wrote to the Chief Justice
asking the court to grant to their Foundation, who works for indigent and underprivileged people, the same option
granted to indigent people which is the exemption from payment of docket fees.
Issue: Should an incorporated foundation (serving indigent litigants) be exempted from payment of docket fees?
Ruling: No. The basis for the exemption from legal and filing fees is the free access clause, embodied in Sec. 11,
Art. III of the 1987 Constitution. The clear intent and precise language of the provisions of the Rules of Court indicate
that only a natural party litigant may be regarded as an indigent litigant. The Good Shepherd Foundation, Inc., a
juridical cannot be accorded the exemption from legal and filing fees granted to indigent litigants.
CRYSTAL ET AL V BPI | GR 172428
Filipinas Broadcasting vs. Ago Medical Center

GRN 141994 January 17, 2005
FACTS:
Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and Hermogenes Jun Alegre
(Alegre). Expos is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc.
(FBNI). Expos is heard over Legazpi City, the Albay municipalities and other Bicol areas. In the morning of 14
and 15 December 1989, Rima and Alegre exposed various alleged complaints from students, teachers and parents
against Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC) and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita Ago (Ago), as Dean of AMECs College of
Medicine, filed a complaint for damages against FBNI, Rima and Alegre on 27 February 1990.
The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposs, FBNI, Rima
and Alegre transmitted malicious imputations, and as such, destroyed plaintiffs (AMEC and Ago) reputation.
AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the selection and
supervision of its employees, particularly Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer alleging that the broadcasts
against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly impelled by a sense of public
duty to report the goings-on in AMEC, [which is] an institution imbued with public interest. Thereafter, trial ensued.
During the presentation of the evidence for the defense, Atty. Edmundo Cea, collaborating counsel of Atty. Lozares,
filed a Motion to Dismiss on FBNIs behalf. The trial court denied the motion to dismiss.
Consequently, FBNI filed a separate Answer claiming that it exercised due diligence in the selection and supervision
of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster should (1) file an application; (2)
be interviewed; and (3) undergo an apprenticeship and training program after passing the interview.
FBNI likewise claimed that it always reminds its broadcasters to observe truth, fairness and objectivity in their
broadcasts and to refrain from using libelous and indecent language.
Moreover, FBNI requires all broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas (KBP)
accreditation test and to secure a KBP permit. On 14 December 1992, the trial court rendered a Decision finding
FBNI and Alegre liable for libel except Rima.
The trial court held that the broadcasts are libelous per se. The trial court rejected the broadcasters claim that their
utterances were the result of straight reporting because it had no factual basis. The broadcasters did not even verify
their reports before airing them to show good faith.
In holding FBNI liable for libel, the trial court found that FBNI failed to exercise diligence in the selection and
supervision of its employees. In absolving Rima from the charge, the trial court ruled that Rimas only participation
was when he agreed with Alegres expos.
The trial court found Rimas statement within the bounds of freedom of speech, expression, and of the press. Both
parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other, appealed the decision to
the Court of Appeals. The Court of Appeals affirmed the trial courts judgment with modification.
The appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court denied Agos claim for
damages and attorneys fees because the broadcasts were directed against AMEC, and not against her. FBNI, Rima
and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26 January 2000 Resolution.
Hence, FBNI filed the petition for review.
ISSUE:
Whether or not AMEC is entitled to moral damages.
RULING:
A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
Nevertheless, AMECs claim, or moral damages fall under item 7 of Art 2219 of the NCC.
This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of
defamation. Art 2219 (7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical
person such as a corporation can validly complain for libel or any other form of defamation and claim for moral
damages. Moreover, where the broadcast is libelous per se, the law implied damages. In such a case, evidence of an
honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages. In this
case, the broadcasts are libelous per se. thus, AMEC is entitled to moral damages. However, we find the award
P500,000 moral damages unreasonable. The record shows that even though the broadcasts were libelous, per se,
AMEC has not suffered any substantial or material damage to its reputation. Therefore, we reduce the award of
moral damages to P150k.
G.R. No. 128690 January 21, 1999

ABS-CBN
BROADCASTING
CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA PRODUCTION, INC., and
VICENTE DEL ROSARIO, respondents.
In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-Concio, requested Viva
Production, Inc. to allow ABS-CBN to air at least 14 films produced by Viva. Pursuant to this request, a meeting was
held between Vivas representative (Vicente Del Rosario) and ABS-CBNs Eugenio Lopez (GeneralManager) and
Santos-Concio was held on April 2, 1992. During the meeting Del Rosario proposed a film package which will allow
ABS-CBN to air 104 Viva films for P60 million. Later, Santos-Concio, in a letter to Del Rosario, proposed a
counterproposal of 53 films (including the 14 films initially requested) for P35 million. Del Rosario presented the
counter offer to Vivas Board of Directors but the Board rejected the counter offer. Several negotiations were
subsequently made but on April 29, 1992, Viva made an agreement with Republic Broadcasting Corporation (referred
to as RBS or GMA 7) which gave exclusive rights to RBS to air 104 Viva films including the 14 films initially
requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that there is already a perfected
contract between Viva and ABS-CBN in the April 2, 1992 meeting. Lopez testified that Del Rosario agreed to the
counterproposal and he (Lopez) even put the agreement in a napkin which was signed and given to Del Rosario.
ABS-CBN also filed an injunction against RBS to enjoin the latter from airing the films. The injunction was granted.
RBS now filed a countersuit with a prayer for moral damages as it claimed that its reputation was debased when they
failed to air the shows that they promised to their viewers. RBS relied on the ruling in People vs Manero and
Mambulao Lumber vs PNB which states that a corporation may recover moral damages if it has a good reputation
that is debased, resulting in social humiliation. The trial court ruled in favor of Viva and RBS. The Court of Appeals
affirmed the trial court.
ISSUE:
1.
Whether or not a contract was perfected in the April 2, 1992 meeting between the representatives of the two
corporations.
2.
Whether or not a corporation, like RBS, is entitled to an award of moral damages upon grounds of debased
reputation.
HELD:
1. No. There is no proof that a contract was perfected in the said meeting. Lopez testimony about the contract being
written in a napkin is not corroborated because the napkin was never produced in court. Further, there is no meeting
of the minds because Del Rosarios offer was of 104 films for P60 million was not accepted. And that the alleged
counter-offer made by Lopez on the same day was not also accepted because theres no proof of such. The counter
offer can only be deemed to have been made days after the April 2 meeting when Santos-Concio sent a letter to Del
Rosario containing the counter-offer. Regardless, there was no showing that Del Rosario accepted. But even if he did
accept, such acceptance will not bloom into a perfected contract because Del Rosario has no authority to do so.
As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the Board of Directors. But
this power may be delegated to a corporate committee, a corporate officer or corporate manager. Such a delegation
must be clear and specific. In the case at bar, there was no such delegation to Del Rosario. The fact that he has to
present the counteroffer to the Board of Directors of Viva is proof that the contract must be accepted first by the
Vivas Board. Hence, even if Del Rosario accepted the counter-offer, it did not result to a contract because it will not
bind Viva sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because, being an artificial person
and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore,
experience physical suffering and mental anguish, which call be experienced only by one having a nervous
system. No moral damages can be awarded to a juridical person. The statement in the case of People vs Manero
and Mambulao Lumber vs PNB is a mere obiter dictum hence it is not binding as a jurisprudence.
Moral Damages; Besmirched Reputation

Jardine Davies v. Court of Appeals [GR No. 128066, June 19, 2000]
Facts:
During the height of the power crisis in 1992 which the country experiencing, PURE FOODS CORPORATION
(hereafter PUREFOODS) decided to install two (2) 1500 KW generators in its food processing plant in San Roque,
Marikina City to remedy and curtail further losses due to the series of power failures.
Sometime in November 1992, bidding for the supply and installation of the generators was held. Several suppliers
and dealers were invited to attend a pre-bidding conference to discuss the conditions, propose scheme and
specifications that would best suit the needs of PUREFOODS.
Out of the eight (8) prospective bidders, FAR EAST MILLS SUPPLY CORPORATION (hereafter FEMSCO) won the
bid.
Thereafter, in a letter dated 12 December 1992 addressed to FEMSCO President Alfonso Po, PUREFOODS
confirmed the award of the contract to FEMSCO.
Later, however, in a letter dated 22 December 1992, PUREFOODS unilaterally canceled the award due to alleged
"significant factors and re-bid of the project." Consequently, FEMSCO protested the cancellation of the award.
However, on 26 March 1993, before the matter could be resolved, PUREFOODS already awarded the project and
entered into a contract with JARDINE NELL, a division of Jardine Davies, Inc. (hereafter JARDINE).
Trial ensued and on 27 June 1994 the Regional Trial Court of Pasig, Br. 68, granted among others the award for
moral damages in the amount of P2,000,000.00 each for JARDINE and PUREFOODS, respectively.
Issue: Whether or not the award for moral damages is proper.
Ruling: The award for moral damages to a corporation whose reputation has been besmirched is proper.
The controversy in this case lies in the consent - whether there was an acceptance of the offer, and if so, if it was
communicated, thereby there is a perfected contract.
Article 1326 of the Civil Code, provides that "advertisements for bidders are simply invitations to make proposals,"
accordingly, the Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS constitutes the
"advertisement" to bid on the project. The bid proposals or quotations submitted by the prospective suppliers
including respondent FEMSCO, are the offer and, the reply of petitioner PUREFOODS, the acceptance or rejection of
the respective offers. The 12 December 1992 letter of petitioner PUREFOODS to FEMSCO constituted acceptance
of respondent FEMSCOs offer as contemplated by law.
Hence, by the unilateral cancellation of the contract, the defendant (petitioner PURE FOODS) has acted with bad
faith and this was further aggravated by the subsequent inking of a contract between defendant Purefoods and
erstwhile co-defendant Jardine. It is very evident that Purefoods thought that by the expedient means of merely
writing a letter would automatically cancel or nullify the existing contract entered into by both parties after a process
of bidding. This, to the Courts mind, is a flagrant violation of the express provisions of the law and is contrary to fair
and just dealings to which every man is due.
In the instant 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 sustain respondent appellate court's award of moral damages. However the award is reduced from
P2,000,000.00 to P1,000,000.00, as moral damages are never intended to enrich the recipient.
Further, the Court finds no sufficient evidence on record to support the allegation that JARDINE induced
PUREFOODS to violate the contract with FEMSCO and therefore the award for moral damages is not granted.
MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK and ANACLETO
HERALDO Deputy Provincial Sheriff of Camarines Norte, defendants-appellees. G.R. No. L-22973, January 30,
1968
FACTS: On May 5, 1956 the plaintiff applied for an industrial loan of P155,000 (approved for a loan of P100,000
only) with the Naga Branch of defendant PNB. To secure payment, the plaintiff mortgaged a parcel of land, together
with the buildings and improvements existing thereon, situated in the poblacion of Jose Panganiban (formerly
Mambulao), province of Camarines Norte. The PNB released from the approved loan the sum of P27,500, and
another release of P15,500.
The plaintiff failed to pay the amortization on the amounts released to and received by it. It was found that the plaintiff
had already stopped operation about the end of 1957 or early part of 1958.
The unpaid obligation of the plaintiff as of September 22, 1961, amounted to P57,646.59, excluding attorney's fees. A
foreclosure sale of the parcel of land, together with the buildings and improvements thereon was, held on November
21, 1961, and the said property was sold to the PNB for the sum of P56,908.00, subject to the right of the plaintiff to
redeem the same within a period of one year.
The plaintiff sent a letter reiterating its request that the foreclosure sale of the mortgaged chattels be discontinued on
the grounds that the mortgaged indebtedness had been fully paid and that it could not be legally effected at a place
other than the City of Manila.
The trial court sentenced the Mambulao Lumber Company to pay to the defendant PNB the sum of P3,582.52 with
interest thereon at the rate of 6% per annum. The plaintiff on appeal advanced that its total indebtedness to the PNB
as of November 21, 1961, was only P56,485.87 and not P58,213.51 as concluded by the court a quo; hence, the
proceeds of the foreclosure sale of its real property alone in the amount of P56,908.00 on that date, added to the
sum of P738.59 it remitted to the PNB thereafter was more than sufficient to liquidate its obligation, thereby rendering
the subsequent foreclosure sale of its chattels unlawful;
That for the acts of the PNB in proceeding with the sale of the chattels, in utter disregard of plaintiff's vigorous
opposition thereto, and in taking possession thereof after the sale thru force, intimidation, coercion, and by detaining
its "man-in-charge" of said properties, the PNB is liable to plaintiff for damages and attorney's fees.
ISSUE: Whether or not PNB may be held liable to plaintiff Corporation for damages and attorneys fees.
HELD: Herein appellant's claim for moral damages, seems to have no legal or factual basis. Obviously, an artificial
person like herein appellant corporation cannot experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which are basis of moral damages. A
corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages.
The same cannot be considered under the facts of this case, however, not only because it is admitted that herein
appellant had already ceased in its business operation at the time of the foreclosure sale of the chattels, but also for
the reason that whatever adverse effects of the foreclosure sale of the chattels could have upon its reputation or
business standing would undoubtedly be the same whether the sale was conducted at Jose Panganiban, Camarines
Norte, or in Manila which is the place agreed upon by the parties in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines Norte in proceeding with the
sale in utter disregard of the agreement to have the chattels sold in Manila as provided for in the mortgage contract,
to which their attentions were timely called by herein appellant, and in disposing of the chattels in gross for the
miserable amount of P4,200.00, herein appellant should be awarded exemplary damages in the sum of P10,000.00.
The circumstances of the case also warrant the award of P3,000.00 as attorney's fees for herein appellant.
G.R. Nos. 86883-85 January 29, 1993
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
NORBERTO MANERO, JR., EDILBERTO MANERO, ELPIDIO MANERO, SEVERINO LINES, RUDY LINES,
EFREN PLEAGO, ROGER BEDAO, RODRIGO ESPIA, ARSENIO VILLAMOR, JR., JOHN DOE and PETER
DOE, accused.
SEVERINO LINES, RUDY LINES, EFREN PLEAGO and ROGER BENDAO, accused-appellants.
The Solicitor General for plaintiff-appellee.
Romeo P. Jorge for accused-appellants.
BELLOSILLO, J.:
This was gruesome murder in a main thoroughfare an hour before sundown. A hapless foreign religious minister was
riddled with bullets, his head shattered into bits and pieces amidst the revelling of his executioners as they danced
and laughed around their quarry, chanting the tune "Mutya Ka Baleleng", a popular regional folk song, kicking and
scoffing at his prostrate, miserable, spiritless figure that was gasping its last. Seemingly unsatiated with the ignominy
of their manslaughter, their leader picked up pieces of the splattered brain and mockingly displayed them before
horrified spectators. Some accounts swear that acts of cannibalism ensued, although they were not sufficiently
demonstrated. However, for their outrageous feat, the gangleader already earned the monicker "cannibal priest-killer"
But, what is indubitable is that Fr. Tulio Favali 1 was senselessly killed for no apparent reason than that he was one of
the Italian Catholic missionaries laboring in heir vineyard in the hinterlands of Mindanao. 2
In the aftermath of the murder, police authorities launched a massive manhunt which resulted in the capture of the
perpetrators except Arsenio Villamor, Jr., and two unidentified persons who eluded arrest and still remain at large.
Informations for Murder, 3 Attempted Murder 4 and Arson 5 were accordingly filed against those responsible for the
frenzied orgy of violence that fateful day of 11 April 1985. As these cases arose from the same occasion, they were
all consolidated in Branch 17 of the Regional Trial Court of Kidapawan, Cotabato. 6
After trial, the court a quo held
WHEREFORE . . . the Court finds the accused Norberto Manero, Jr. alias Commander Bucay,
Edilberto Manero alias Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias
Rudy, Efren Pleago and Roger Bedao GUILTY beyond reasonable doubt of the offense of
Murder, and with the aggravating circumstances of superior strength and treachery, hereby
sentences each of them to a penalty of imprisonment of reclusion perpetua; to pay the Pontifical
Institute of Foreign Mission (PIME) Brothers, the congregation to which Father Tulio Favali
belonged, a civil indemnity of P12,000.00; attorney's fees in the sum of P50,000.00 for each of
the eight (8) accused or a total sum of P400,000.00; court appearance fee of P10,000.00 for
every day the case was set for trial; moral damages in the sum of P100,000.00; and to pay
proportionately the costs.
Further, the Court finds the accused Norberto Manero, Jr. alias Commander Bucay GUILTY
beyond reasonable doubt of the offense of Arson and with the application of the Indeterminate
Sentence Law, hereby sentences him to an indeterminate penalty of imprisonment of not less
than four (4) years, nine (9) months, one (1) day of prision correccional, as minimum, to six (6)
years of prision correccional, as maximum, and to indemnify the Pontifical Institute of Foreign
Mission (PIME) Brothers, the congregation to which Father Tulio Favali belonged, the sum of
P19,000.00 representing the value of the motorcycle and to pay the costs.
Finally, the Court finds the accused Norberto Manero, Jr., alias Commander Bucay, Edilberto
Manero alias Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias Rudy, Efren
Pleago and Roger Bedao GUILTY beyond reasonable doubt of the offense of Attempted
Murder and with the application of the Indeterminate Sentence Law, hereby sentences each of
them to an indeterminate penalty of imprisonment of not less than two (2) years, four (4) months
and one (1) day of prision correccional, and minimum, to eight (8) years and twenty (20) days
of prision mayor, as maximum, and to pay the complainant Rufino Robles the sum of P20,000.00
as attorney's fees and P2,000.00 as court appearance fee for every day of trial and to pay
proportionately the costs.
The foregoing penalties shall be served by the said accused successively in the order of their
respective severity in accordance with the provisions of Article 70 of the Revised Penal Code, as
amended. 7
From this judgment of conviction only accused Severino Lines, Rudy Lines, Efren Pleago and Roger Bedao
appealed with respect to the cases for Murder and Attempted Murder. The Manero brothers as well as Rodrigo Espia
did not appeal; neither did Norberto Manero, Jr., in the Arson case. Consequently, the decision as against them
already became final.
Culled from the records, the facts are: On 11 April 1985, around 10:00 o'clock in the morning, the Manero brothers
Norberto Jr., Edilberto and Elpidio, along with Rodrigo Espia, Severino Lines, Rudy Lines, Efren Pleago and Roger
Bedao, were inside the eatery of one Reynaldo Diocades at Km. 125, La Esperanza, Tulunan, Cotabato. They were
conferring with Arsenio Villamor, Jr., private secretary to the Municipal Mayor of Tulunan, Cotabato, and his two (2)
unidentified bodyguards. Plans to liquidate a number of suspected communist sympathizers were discussed. Arsenio
Villamor, Jr. scribbled on a cigarette wrapper the following "NPA v. NPA, starring Fr. Peter, Domingo Gomez, Bantil,
Fred Gapate, Rene alias Tabagac and Villaning." "Fr. Peter" is Fr. Peter Geremias, an Italian priest suspected of
having links with the communist movement; "Bantil" is Rufino Robles, a Catholic lay leader who is the complaining
witness in the Attempted Murder; Domingo Gomez is another lay leader, while the others are simply "messengers".
On the same occasion, the conspirators agreed to Edilberto Manero's proposal that should they fail to kill Fr. Peter
Geremias, another Italian priest would be killed in his stead. 8
At about 1:00 o'clock that afternoon, Elpidio Manero with two (2) unidentified companions nailed a placard on a
street-post beside the eatery of Deocades. The placard bore the same inscriptions as those found on the cigarette
wrapper except for the additional phrase "versus Bucay, Edil and Palo." Some two (2) hours later, Elpidio also posted
a wooden placard bearing the same message on a street cross-sign close to the eatery. 9
Later, at 4:00 o'clock, the Manero brothers, together with Espia and the four (4) appellants, all with assorted firearms,
proceeded to the house of "Bantil", their first intended victim, which was also in the vicinity of Deocades'carinderia.
They were met by "Bantil" who confronted them why his name was included in the placards. Edilberto brushed aside
the query; instead, he asked "Bantil" if he had any qualms about it, and without any provocation, Edilberto drew his
revolver and fired at the forehead of "Bantil". "Bantil" was able to parry the gun, albeit his right finger and the lower
portion of his right ear were hit. Then they grappled for its possession until "Bantil" was extricated by his wife from the
fray. But, as he was running away, he was again fired upon by Edilberto. Only his trousers were hit. "Bantil" however
managed to seek refuge in the house of a certain Domingo Gomez. 10 Norberto, Jr., ordered his men to surround the
house and not to allow any one to get out so that "Bantil" would die of hemorrhage. Then Edilberto went back to the
restaurant of Deocades and pistol-whipped him on the face and accused him of being a communist coddler, while
appellants and their cohorts relished the unfolding drama. 11
Moments later, while Deocades was feeding his swine, Edilberto strewed him with a burst of gunfire from his M-14
Armalite. Deocades cowered in fear as he knelt with both hands clenched at the back of his head. This again drew
boisterous laughter and ridicule from the dreaded desperados.
At 5:00 o'clock, Fr. Tulio Favali arrived at Km. 125 on board his motorcycle. He entered the house of Gomez. While
inside, Norberto, Jr., and his co-accused Pleago towed the motorcycle outside to the center of the highway.
Norberto, Jr., opened the gasoline tank, spilled some fuel, lit a fire and burned the motorcycle. As the vehicle was
ablaze, the felons raved and rejoiced. 12
Upon seeing his motorcycle on fire, Fr. Favali accosted Norberto, Jr. But the latter simply stepped backwards and
executed a thumbs-down signal. At this point, Edilberto asked the priest: "Ano ang gusto mo, padre (What is it you
want, Father)? Gusto mo, Father, bukon ko ang ulo mo (Do you want me, Father, to break your head)?" Thereafter,
in a flash, Edilberto fired at the head of the priest. As Fr. Favali dropped to the ground, his hands clasped against his
chest, Norberto, Jr., taunted Edilberto if that was the only way he knew to kill a priest. Slighted over the remark,
Edilberto jumped over the prostrate body three (3) times, kicked it twice, and fired anew. The burst of gunfire virtually
shattered the head of Fr. Favali, causing his brain to scatter on the road. As Norberto, Jr., flaunted the brain to the
terrified onlookers, his brothers danced and sang "Mutya Ka Baleleng" to the delight of their comrades-in-arms who
now took guarded positions to isolate the victim from possible assistance. 13
In seeking exculpation from criminal liability, appellants Severino Lines, Rudy Lines, Efren Pleago and Roger
Bedao contend that the trial court erred in disregarding their respective defenses of alibi which, if properly
appreciated, would tend to establish that there was no prior agreement to kill; that the intended victim was Fr. Peter
Geremias, not Fr. Tulio Favali; that there was only one (1) gunman, Edilberto; and, that there was absolutely no
showing that appellants cooperated in the shooting of the victim despite their proximity at the time to Edilberto.
But the evidence on record does not agree with the arguments of accused-appellants.
On their defense of alibi, accused brothers Severino and Rudy Lines claim that they were harvesting palay the whole
day of 11 April 1985 some one kilometer away from the crime scene. Accused Roger Bedao alleges that he was on
an errand for the church to buy lumber and nipa in M'lang, Cotabato, that morning of 11 April 1985, taking along his
wife and sick child for medical treatment and arrived in La Esperanza, Tulunan, past noontime.
Interestingly, all appellants similarly contend that it was only after they heard gunshots that they rushed to the house
of Norberto Manero, Sr., Barangay Captain of La Esperanza, where they were joined by their fellow CHDF members
and co-accused, and that it was only then that they proceeded together to where the crime took place at Km. 125.
It is axiomatic that the accused interposing the defense of alibi must not only be at some other place but that it must
also be physically impossible for him to be at the scene of the crime at the time of its commission. 14
Considering the failure of appellants to prove the required physical impossibility of being present at the crime scene,
as can be readily deduced from the proximity between the places where accused-appellants were allegedly situated
at the time of the commission of the offenses and the locus criminis, 15 the defense of alibi is definitely feeble. 16 After
all, it has been the consistent ruling of this Court that no physical impossibility exists in instances where it would take
the accused only fifteen to twenty minutes by jeep or tricycle, or some one-and-a-half hours by foot, to traverse the
distance between the place where he allegedly was at the time of commission of the offense and the scene of the
crime. 17 Recently, we ruled that there can be no physical impossibility even if the distance between two places is
merely two (2) hours by bus.18 More important, it is well-settled that the defense of alibi cannot prevail over
the positive identification of the authors of the crime by the prosecution witnesses. 19
In the case before Us, two (2) eyewitnesses, Reynaldo Deocades and Manuel Bantolo, testified that they were both
inside the eatery at about 10:00 o'clock in the morning of 11 April 1985 when the Manero brothers, together with
appellants, first discussed their plan to kill some communist sympathizers. The witnesses also testified that they still
saw the appellants in the company of the Manero brothers at 4:00 o'clock in the afternoon when Rufino Robles was
shot. Further, at 5:00 o'clock that same afternoon, appellants were very much at the scene of the crime, along with
the Manero brothers, when Fr. Favali was brutally murdered. 20 Indeed, in the face of such positive declarations that
appellants were at the locus criminis from 10:00 o'clock in the morning up to about 5:00 o'clock in the afternoon, the
alibi of appellants that they were somewhere else, which is negative in nature, cannot prevail. 21 The presence of
appellants in the eatery at Km. 125 having been positively established, all doubts that they were not privy to the plot
to liquidate alleged communist sympathizers are therefore removed. There was direct proof to link them to the
conspiracy.
There is conspiracy when two or more persons come to an agreement to commit a crime and decide to commit it. 22It
is not essential that all the accused commit together each and every act constitutive of the offense. 23 It is enough
that an accused participates in an act or deed where there is singularity of purpose, and unity in its execution is
present. 24
The findings of the court a quo unmistakably show that there was indeed a community of design as evidenced by the
concerted acts of all the accused. Thus
The other six accused, 25 all armed with high powered firearms, were positively identified with
Norberto Manero, Jr. and Edilberto Manero in the carinderia of Reynaldo Deocades in La
Esperanza, Tulunan, Cotabato at 10:00 o'clock in the morning of 11 April 1985 morning . . . they
were outside of the carinderia by the window near the table where Edilberto Manero, Norberto
Manero, Jr., Jun Villamor, Elpidio Manero and unidentified members of the airborne from
Cotabato were grouped together. Later that morning, they all went to the cockhouse nearby to
finish their plan and drink tuba. They were seen again with Edilberto Manero and Norberto
Manero, Jr., at 4:00 o'clock in the afternoon of that day near the house of Rufino Robles (Bantil)
when Edilberto Manero shot Robles. They surrounded the house of Domingo Gomez where
Robles fled and hid, but later left when Edilberto Manero told them to leave as Robles would die
of hemorrhage. They followed Fr. Favali to Domingo Gomez' house, witnessed and enjoyed the
burning of the motorcycle of Fr. Favali and later stood guard with their firearms ready on the road
when Edilberto Manero shot to death Fr. Favali. Finally, they joined Norberto Manero, Jr. and
Edilberto Manero in their enjoyment and merriment on the death of the priest. 26
From the foregoing narration of the trial court, it is clear that appellants were not merely innocent bystanders but were
in fact vital cogs in perpetrating the savage murder of Fr. Favali and the attempted murder of Rufino Robles by the
Manero brothers and their militiamen. For sure, appellants all assumed a fighting stance to discourage if not prevent
any attempt to provide assistance to the fallen priest. They surrounded the house of Domingo Gomez to stop Robles
and the other occupants from leaving so that the wounded Robles may die of hemorrhage. 27Undoubtedly, these
were overt acts to ensure success of the commission of the crimes and in furtherance of the aims of the conspiracy.
The appellants acted in concert in the murder of Fr. Favali and in the attempted murder of Rufino Robles. While
accused-appellants may not have delivered the fatal shots themselves, their collective action showed a common
intent to commit the criminal acts.
While it may be true that Fr. Favali was not originally the intended victim, as it was Fr. Peter Geremias whom the
group targetted for the kill, nevertheless, Fr. Favali was deemed a good substitute in the murder as he was an Italian
priest. On this, the conspirators expressly agreed. As witness Manuel Bantolo explained 28
Q Aside from those persons listed in that paper to be killed, were there other
persons who were to be liquidated?
A There were some others.
Q Who were they?
A They said that if they could not kill those persons listed in that paper then
they will (sic) kill anyone so long as he is (sic) an Italian and if they could not
kill the persons they like to kill they will (sic) make Reynaldo Deocades as
their sample.
That appellants and their co-accused reached a common understanding to kill another Italian priest in the event that
Fr. Peter Geremias could not be spotted was elucidated by Bantolo thus 29
Q Who suggested that Fr. Peter be the first to be killed?
A All of them in the group.
Q What was the reaction of Norberto Manero with respect to the plan to kill
Fr. Peter?
A He laughed and even said, "amo ina" meaning "yes, we will kill him
ahead."
xxx xxx xxx
Q What about Severino Lines? What was his reaction?
A He also laughed and so conformed and agreed to it.
Q Rudy Lines.
A He also said "yes".
Q What do you mean "yes"?
A He also agreed and he was happy and said "yes" we will kill him.
xxx xxx xxx
Q What about Efren Pleago?
A He also agreed and even commented laughing "go ahead".
Q Roger Bedao, what was his reaction to that suggestion that should they
fail to kill Fr. Peter, they will (sic) kill anybody provided he is an Italian and if
not, they will (sic) make Reynaldo Deocades an example?
A He also agreed laughing.
Conspiracy or action in concert to achieve a criminal design being sufficiently shown, the act of one is the act of all
the other conspirators, and
the precise extent or modality of participation of each of them becomes secondary. 30
The award of moral damages in the amount of P100,000.00 to the congregation, the Pontifical Institute of Foreign
Mission (PIME) Brothers, is not proper. There is nothing on record which indicates that the deceased effectively
severed his civil relations with his family, or that he disinherited any member thereof, when he joined his religious
congregation. As a matter of fact, Fr. Peter Geremias of the same congregation, who was then a parish priest of
Kidapawan, testified that "the religious family belongs to the natural family of origin." 31 Besides, as We already
held,32 a juridical person is not entitled to moral damages because, not being a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. It is only
when a juridical person has a good reputation that is debased, resulting in social humiliation, that moral damages
may be awarded.
Neither can We award moral damages to the heirs of the deceased who may otherwise be lawfully entitled thereto
pursuant to par. (3), Art. 2206, of the Civil Code, 33 for the reason that the heirs never presented any evidence
showing that they suffered mental anguish; much less did they take the witness stand. It has been held 34 that moral
damages and their causal relation to the defendant's acts should be satisfactorily proved by the claimant. It is
elementary that in order that moral damages may be awarded there must be proof of moral suffering. 35 However,
considering that the brutal slaying of Fr. Tulio Favali was attended with abuse of superior strength, cruelty and
ignominy by deliberately and inhumanly augmenting the pain and anguish of the victim, outraging or scoffing at his
person or corpse, exemplary damages may be awarded to the lawful heirs, 36 even though not proved nor expressly
pleaded in the complaint, 37 and the amount of P100,000.00 is considered reasonable.
With respect to the civil indemnity of P12,000.00 for the death of Fr. Tulio Favali, the amount is increased to
P50,000.00 in accordance with existing jurisprudence, which should be paid to the lawful heirs, not the PIME as the
trial court ruled.
WHEREFORE, the judgment appealed from being in accord with law and the evidence is AFFIRMED with the
modification that the civil indemnity which is increased from P12,000.00 to P50,000.00 is awarded to the lawful heirs
of the deceased plus exemplary damages of P100,000.00; however, the award of moral damages is deleted.
Costs against accused-appellants.
SO ORDERED.
II. JURISDICTION
RENATO REAL, Petitioner, vs. SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents.
G.R. No. 168757
January 19, 2011
DEL CASTILLO, J.:
FACTS:
Renato Real was the Manager of respondent corporation Sangu Philippines, Inc. which is engaged in the business of
providing manpower for general services. He filed a complaint for illegal dismissal against the respondents stating
that he was neither notified of the Board meeting during which his removal was discussed nor was he formally
charged with any infraction.
Respondents, on the other hand, said that Real committed gross acts of misconduct detrimental to the company
since 2000. The LA declared petitioner as having been illegally dismissed. Sangu appealed to NLRC and established
petitioners status as a stockholder and as a corporate officer and hence, his action against respondent corporation is
an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. NLRC modified the LAs decision. On
appeal, the CA affirmed the decision of NLRC.
Hence, this petition.
ISSUE: WON petitioners complaint for illegal dismissal constitutes an intra-corporate controversy.
RULING: To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by
the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must
concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their
controversy.
The first element requires that the controversy must arise out of intra-corporate or partnership relations between any
or all of the parties and the corporation x x . The second element requires that the dispute among the parties be
intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are
purely civil in character, necessarily, the case does not involve an intra-corporate controversy.
Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that
petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intracorporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as
intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as
to consider them as intra-corporate controversies.
G.R. No. 187872
November 17, 2010
STRATEGIC
ALLIANCE
DEVELOPMENT
CORPORATION, Petitioner,
vs.
STAR INFRASTRUCTURE DEVELOPMENT CORPORATION ET AL., Respondents.
DECISION
PEREZ, J.:
The classification of causes of action as intra-corporate disputes is at the heart of this petition for review on certiorari
filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, assailing the 22 December 2008 Decision rendered by
the Ninth Division of the Court of Appeals (CA) in CA-G.R. No. 969451 as well as the 30 April 2009 resolution which
denied the motion for reconsideration of the same decision.2
The Facts
Petitioner Strategic Alliance Development Corporation (STRADEC) is a domestic corporation primarily engaged in
the business of a development company in all the elements and details thereof, with principal place of business at
Poblacion Sur, Bayambang, Pangasinan.3 Along with five individuals4 and three other corporations,5 STRADEC
incorporated respondent Star Infrastructure Development Corporation (SIDC) on 28 October 1997, for the purpose of
engaging in the general construction business. As such incorporator, STRADEC fully paid and owned 2,449,998
shares or 49% of the 5,000,000 shares of stock into which SIDCs authorized capital stock of P5,000,000.00 were
divided.6 Pursuant to an amendment of its Articles of Incorporation on 5 June 1998, SIDC transferred its principal
place of business from Pasig City to Poblacion Sur, Bayambang, Pangasinan7 and, later, to Lipa, Batangas.8
On 8 October 2004, respondents Aderito Z. Yujuico and Bonifacio C. Sumbilla, in their respective capacities as then
President and Treasurer of STRADEC, executed a Promissory Note for and in consideration of a loan in the sum
ofP10,000,000.00 ostensibly extended in favor of said corporation by respondent Robert L. Wong, one of the
incorporators of SIDC.9 As security for the payment of the principal as well as the stipulated interests thereon, a
pledge constituted over STRADECs entire shareholdings in SIDC was executed by respondent Yujuico on 1 April
2005.10 In view of STRADECs repeated default on its obligations, 11 however, the shares thus pledged were sold by
way of the 26 April 2005 notarial sale conducted in Makati City by respondent Raymond M. Caraos. Having tendered
the sole bid of P11,800,000.00,12 respondent Wong was issued the corresponding certificates of stocks by
respondent Bede S. Tabalingcos, SIDCs Corporate Secretary for the years 2004 and 2005, after the transfer was
recorded in the corporations stock and transfer book.13
On 17 July 2006, Cezar T. Quiambao, in his capacity as President and Chairman of the Board of Directors of
STRADEC, commenced the instant suit with the filing of the petition which was docketed as Civil Case No. 7956
before Branch 2 of the Regional Trial Court (RTC) of Batangas City, sitting as a Special Commercial Court (SCC). 14In
its 31 July 2006 amended petition, STRADEC alleged, among other matters, that respondents Yujuico and Sumbilla
were not authorized to enter into any loan agreement with respondent Wong, much less pledge its SIDC
shareholdings as security therefor; that it did not receive the proceeds of the supposed loan and immediately
apprised SIDC of the irregularity of the transaction upon discovering the same; that it was only able to ascertain the
details of the transaction and transfer of the subject shares from a narration thereof in a Certification dated 3
September 2005 issued by respondent Tabalingcos; and, that respondent Wong subsequently sold the shares to
respondent Cypress Tree Capital Investment, Inc. (CTCII), a corporation he formed with members of his own family
on 5 July 2005.15
STRADEC further averred that it already caused the National Bureau of Investigation (NBI) to conduct an
investigation of the unlawful transfer of its shares; that it was altogether eased out during the 30 July 2005 SIDC
annual stockholders meeting where respondent Wong was acknowledged as the holder of the subject shares and
the further transfer of the corporations principal place of business to Lipa, Batangas was approved; and, that despite
being left out in the notice sent by respondent Cynthia Laureta, SIDCs new Corporate Secretary, it fielded a proxy to
the 20 July 2006 SIDC stockholders special meeting where the increase of the corporations authorized capital stock
to P850,000,000.00 was discussed together with the decrease of the number of its directors from nine to five. In
addition to a temporary restraining order and/or writ of preliminary injunction to enjoin, among other matters, CTCIIs
exercise of proprietary rights over the subject shares, SIDCs implementation of the resolutions passed during the 20
July 2006 stockholders meeting and any action thereon by respondent Securities and Exchange Commission (SEC),
STRADEC prayed for the grant of the following reliefs: (a) the nullification of the loan and pledge respondents Yujuico
and Sumbilla contracted with respondent Wong; (b) the avoidance of the notarial sale conducted by respondent
Caraos; (c) the cancellation of the transfer of its shares in SIDCs books; (d) the invalidation of the 30 July 2005 and
20 July 2006 SIDC stockholders meetings; and, (e) the grant of its claims for attorneys fees and the costs. 16
On 30 August 2006, the RTC issued a resolution denying STRADECs application for writ of preliminary injunction on
the ground that the grant thereof would effectively dispose of the main action without trial; and, that the right to the
relief sought was, as yet, uncertain in view of the pendency of cases before the courts of Pasig and Urdaneta City
involving, among other issues, the ownership of STRADECs shares and the legitimacy of its two opposing sets of
directors.17 Anent STRADECs amended petition as aforesaid, the RTC issued the following order on the same date:
The Amended Petition dated July 31, 2006 presents four (4) main causes of action.
The Court holds that as for the first and second causes of action, to wit: First declaration of nullity of the supposed
loan extended by respondent Wong to STRADEC and the Deed of Pledge covering STRADECs entire shareholding
in SIDC; Second declaration of nullity of the 26 April 2005 auction sale of STRADECs entire shareholdings in SIDC
in Makati City, this Court is the wrong venue; The Rules of Court provides that all other actions (other than real) may
be commenced and tried where the plaintiff or any of the principal plaintiffs resides; or where the defendant or any of
the principal defendants resides, at the election of the plaintiff. By the foregoing, STRADEC should file the case,
under the first cause of action, either in Bayambang, Pangasinan, its principal place of business as stated in the
Articles of Incorporation or in any of the residences of Yujuico, Sumbilla or Wong. The same holds true with respect
to the second cause of action. The matter is between STRADEC and its alleged erring officers over the alleged
irregular auction sale of STRADECs shareholdings in SIDC, hence, venue should be at the residences of the parties,
as plaintiff may elect, as discussed above.
10
Although this Court is not the correct venue, the Court will not dismiss the case but however will not act thereon.
As for the third and fourth causes of action which are the cancellation of registration of fraudulent transfers involving
STRADECs shareholding in SIDC and the declaration of invalidity of the 30 July 2005 annual stockholders meeting
and 20 July 2006 special stockholders meeting of SIDC, the Court resolves to hold in abeyance any action thereon
until after the Supreme Court shall have rendered a ruling as to who between the conflicting two (2) sets of Board of
Directors of STRADEC should be recognized as legitimate, because it is only then that this Court could make a
determination on the issue raised by the respondents on the authority of Mr. Quiambao to represent STRADEC in
this suit.
SO ORDERED.18
Dissatisfied with the foregoing order, STRADEC, through its counsel of record, interposed an oral motion for
reconsideration on the ground that the solidary liability the individual respondents and SIDC incurred for the tortious
transfer of the subject shares justified the laying of venue at the latters principal place of business in Batangas; that
the pledge executed by respondent Yujuico violated the 18 October 2004 temporary restraining order issued by
Branch 48 of the RTC of Urdaneta City in Civil Case No. U-14 (SCC-2874), the intra-corporate dispute earlier filed to
determine STRADECs legitimate Directors and Officers; and, that pursuant to the 25 November 2004 order issued in
the same case, a writ of preliminary injunction had been issued enjoining respondent Yujuico and his cohorts from
acting as STRADECs Officers and committing acts inimical to its interests.19 The motion was, however, denied for
lack of merit in the second 30 August 2006 order issued by the RTC upon the finding that the theory of solidary
liability foisted by STRADEC had no basis in its pleadings and that the injunctive writ issued in Civil Case No. U-14
(SCC-2874) was not determinative of the issue of ownership of its shares. 20
Aggrieved, STRADEC filed the petition for certiorari docketed before the CA as CA-G.R. SP No. 96945, on the
ground that the RTC acted without or in excess of jurisdiction or with grave abuse of discretion in finding that venue
was improperly laid, in holding in abeyance further proceedings in the case and in denying its application for a writ of
preliminary injunction.21 In receipt of respondents separate comments22 to the petition and the memoranda
subsequently filed by the parties,23 the Ninth Division of the CA rendered the herein assailed 22 December 2008
decision,24 discounting the grave abuse of discretion STRADEC imputed against the RTC upon the following findings
and conclusions, to wit:
1. STRADECs first and second causes of action for nullification of the pledge constituted over its shares
and the subsequent notarial sale thereof are purely civil in nature and were, therefore, erroneously joined
with its third and fourth causes of action for invalidation of the registration of the transfer in SIDCs books
as well as its annual and special stockholders meetings;
2. Aside from correctly applying the rule on venue in personal actions for STRADECs first and second
causes of action, the RTC cannot be faulted for not ordering the dismissal of the same since misjoinder of
causes of action does not involve a question of jurisdiction and the discretionary authority to order
separation of the misjoined causes of action necessarily includes the authority to stay proceedings with
respect thereto;
3. Further proceedings with respect to the third and fourth causes of action were also correctly held in
abeyance by the RTC in view of the pendency of cases in other courts involving, among other issues, the
ownership of STRADECs shares, its legitimate Directors and Corporate Officers and the authority of Cezar
T. Quiambao to act for and its behalf; and
4. The pendency of said cases discounts the existence of a clear and unmistakable right on the part of
STRADEC as would justify the grant of its application to an injunctive writ which would, at any rate,
effectively dispose of the main case without trial.25
STRADECs motion for reconsideration26 of the foregoing decision was denied in the 30 April 2009 resolution issued
in the case,27 hence, this petition.
The Issues
STRADEC urges the reversal and setting aside of the assailed CA decision and resolution on the following grounds:
THE COURT OF APPEALS HAS NOT ONLY DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT, BUT HAS ALSO SO
FAR SANCTIONED THE LOWER COURTS DEPARTURE FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THIS HONORABLE COURTS POWER OF
SUPERVISION, IN THAT
A. THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT CHARACTERIZING THE FIRST
AND SECOND CAUSES OF ACTION IN CIVIL CASE NO. 7956 AS INTRA-CORPORATE AND
PLACE ITS VENUE AND JURISDICTION IN RTC BATANGAS CITY.
11
B. THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT ASCRIBING GRAVE ABUSE OF

DISCRETION TO RTC BATANGAS CITYS REFUSAL TO APPLY THE RULES OF COURT
AFTER RULING THAT IT WAS NOT THE PROPER VENUE FOR THE FIRST AND SECOND
CAUSES OF ACTION IN CIVIL CASE NO. 7956.
C. THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT ASCRIBING GRAVE ABUSE OF
DISCRETION TO RTC BATANGAS CITYS RULING TO HOLD IN ABEYANCE FURTHER
PROCEEDINGS WITH RESPECT TO THE THIRD AND FOURTH CAUSES OF ACTION IN
CIVIL CASE NO. 7956 BY REASON OF AN UNRELATED PENDING ACTION.
D. THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT ASCRIBING GRAVE ABUSE TO
RTC BATANGAS CITYS DENIAL OF PETITIONERS APPLICATION FOR A WRIT OF
PRELIMINARY INJUNCTION DESPITE A SHOWING OF A CLEAR AND POSITIVE RIGHT
AND A CONTINUING VIOLATION BY THE RESPONDENTS THEREOF.28
The Courts Ruling
We find merit in the petition.
An intra-corporate dispute is understood as a suit arising from intra-corporate relations29 or between or among
stockholders or between any or all of them and the corporation.30 Applying what has come to be known as the
relationship test, it has been held that the types of actions embraced by the foregoing definition include the following
suits: (a) between the corporation, partnership or association and the public; (b) between the corporation, partnership
or association and its stockholders, partners, members, or officers; (c) between the corporation, partnership or
association and the State insofar as its franchise, permit or license to operate is concerned; and, (d) among the
stockholders, partners or associates themselves.31 As the definition is broad enough to cover all kinds of
controversies between stockholders and corporations, the traditional interpretation was to the effect that the
relationship test brooked no distinction, qualification or any exemption whatsoever.32
However, the unqualified application of the relationship test has been modified on the ground that the same
effectively divests regular courts of jurisdiction over cases for the sole reason that the suit is between the corporation
and/or its corporators. It was held that the better policy in determining which body has jurisdiction over a case would
be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of
their controversy.33 Under the nature of the controversy test, the dispute must not only be rooted in the existence of
an intra-corporate relationship, but must also refer to the enforcement of the parties' correlative rights and obligations
under the Corporation Code as well as the internal and intra-corporate regulatory rules of the corporation.34 The
combined application of the relationship test and the nature of the controversy test has, consequently, become the
norm in determining whether a case is an intra-corporate controversy or is purely civil in character.
In the case at bench, STRADECs first and second causes of action seek the nullification of the loan and pledge over
its SIDC shareholding contracted by respondents Yujuico, Sumbilla and Wong as well the avoidance of the notarial
sale of said shares conducted by respondent Caraos. STRADECs 31 July 2006 amended petition significantly set
forth the following allegations common to its main causes of action, to wit:
xxx
"4. Sometime in June 2005, STRADECs President and Chairman of the Board of Directors, Cezar T. Quiambao,
received information that STRADEC had been divested of its shareholdings in SIDC.
Apparently, all of STRADECs 49% shareholdings in SIDC were transferred and placed in the name of respondent
Wong, another incorporator of SIDC, upon the instance of respondents Yujuico and Sumbilla, former officers of
STRADEC.
5. However, respondents Yujuico and Sumbilla, despite being former officers of STRADEC, never possessed
authority to transact any business in behalf of STRADEC involving any of its corporate assets and investments,
including STRADECs shareholdings in SIDC.
6. Upon learning of this highly irregular development, STRADEC immediately called the attention of SIDCs Board of
Directors and officers and requested official confirmation of the recording of any such sale in the books of SIDC
cautioning that STRADEC had not authorized the sale or transfer of its shares in SIDC.
xxxx
7. To date, however, STRADEC has not received any response from SIDCs Board of Directors and officers.
8. Instead, STRADEC was able to secure from a secondary source a copy of the Certification dated 23 September
2005 issued by respondent Tabalingcos, SIDCs Corporate Secretary, narrating how all of STRADECs
12
shareholdings in SIDC, among others, were acquired by respondent Wong by reason of respondents Yujuico and
Sumbillas unauthorized acts.
The same Certification states that the shareholdings were in turn transferred by respondent Wong to respondent
CTCII, which as STRADEC would later learn was a newly-formed corporation of respondent Wongs family;
xxxx
11. STRADEC was able to get hold of a document entitled Deed of Pledge dated 08 October 2004 purportedly
signed by respondents Yujuico and Sumbilla in behalf of STRADEC as pledgor, and by respondent Wong as
pledgee.
xxxx
12. The Deed of Pledge made it appear, among others, that for and in partial consideration of a loan from respondent
Wong in the principal amount of only TEN MILLION PESOS (P10,000,000.00), STRADEC pledged its 2,449,998
shares of stocks in SIDC worth TWO HUNDRED FORTY-FOUR MILLION, NINE HUNDRED NINETY-NINE
THOUSAND EIGHT HUNDRED PESOS (P244,999,800.00).
13. STRADEC, however, had never authorized respondents Yuhuico and Sumbilla to enter into any loan agreement
with respondent Wong, much less pledge its shareholdings in SIDC.
14. Neither has STRADEC at any time received any amount of loan personally from Mr. Wong.
xxxx
15. Moreover, a subsequent examination of the Notarial Records of respondent Caraos for the year 2004 with the
Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Makati City revealed that the Deed of
Pledge is not one of the documents notarized by Atty. Caraos during the period of September 2003 to December
2004.
16. STRADEC was also able to get hold of a Certificate of Sale issued by respondent Caraos on 26 April 2005
stating that an auction sale was held on 26 April 2005 wherein all of STRADECs 2,449,998 shares of stock in SIDC,
among others, were sold to respondent Wong to satisfy STRADECs alleged outstanding obligation in the amount of
ELEVEN MILLION EIGHT HUNDRED THOUSAND PESOS (P11,800,000.00);
From the Certificate of Sale, it appears that respondent Caraos proceeded with the auction sale without any notice to
STRADEC as the supposed pledgor, and despite the fact that that respondent Wong, the supposed pledgee, was the
only bidder.
xxxx
17. Incidentally, respondent CARAOS and SIDCs Corporate Secretary, Atty. Tabalingcos, are partners of the same
law firm;
18. STRADEC has good reasons to believe that while it immediately informed the officers of SIDC of the irregularities
attending the divestment of its shareholdings in said respondent corporation, its Corporate Secretary, respondent
Tabalingcos, apparently went on to register the transfers in the corporations stock and transfer book, as evidenced
by SIDCs General Information Sheet for 2005, wherein it was annotated that the shares of STRADEC or Strategic
Alliance Development Corp. has been acquired by Mr. Wong in view of the Notarial Sale conducted on April 26,
2005.
xxxx
19. Worse, it would appear now that respondent Wong had likewise unlawfully transferred STRADECs 49%
shareholdings in SIDC to his newly formed Corporation, respondent CTCII.
x x x x"35
Applying the relationship test, we find that STRADECs first and second causes of action qualify as intra-corporate
disputes since said corporation and respondent Wong are incorporators and/or stockholders of SIDC. Having
acquired STRADECs shares thru the impugned notarial sale conducted by respondent Caraos, respondent Wong
appears to have further transferred said shares in favor of CTCII, a corporation he allegedly formed with members of
his own family. By reason of said transfer, CTCII became a stockholder of SIDC and was, in fact, alleged to have
been recognized as such by the latter and its corporate officers. To our mind, these relationships were erroneously
disregarded by the RTC when it ruled that venue was improperly laid for STRADECs first and second causes of
13
action which, applying Section 2, Rule 4 of the 1997 Rules of Civil Procedure, 36 should have been filed either at the
place where it maintained its principal place of business or where respondents Yujuico, Sumbilla and Wong resided.
Considering that they fundamentally relate to STRADECs status as a stockholder and the alleged fraudulent
divestment of its stockholding in SIDC, the same causes of action also qualify as intra-corporate disputes under the
nature of the controversy test. As part of the fraud which attended the transfer of its shares, STRADEC distinctly
averred, among other matters, that respondents Yujuico and Sumbilla had no authority to contract a loan with
respondent Wong; that the pledge executed by respondent Yujuico was simulated since it did not receive the
proceeds of the loan for which its shares in SIDC were set up as security; that irregularities attended the notarial sale
conducted by respondent Caraos who sold said shares to respondent Wong; that the latter unlawfully transferred the
same shares in favor of CTCII; and, that SIDC and its officers recognized and validated said transfers despite being
alerted about their defects. Ultimately, the foregoing circumstances were alleged to have combined to rid STRADEC
of its shares in SIDC and its right as a stockholder to participate in the latters corporate affairs.
In addition to being conferred by law,37 it bears emphasizing that the jurisdiction of a court or tribunal over the case is
determined by the allegations in the complaint38 and the character of the relief sought,39 irrespective of whether or not
the plaintiff is entitled to recover all or some of the claims asserted therein. 40 Moreover, pursuant to Section 5.2 of
Republic Act No. 8799,41 otherwise known as the Securities Regulation Code, the jurisdiction of the SEC over all
cases enumerated under Section 5 of Presidential Decree No. 902-A has been transferred to RTCs designated by
this Court as SCCs42 pursuant to A.M. No. 00-11-03-SC promulgated on 21 November 2000. Thus, Section 1(a),
Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate Controversies (Interim Rules) provides as
follows:
"SECTION 1. (a) Cases covered. These Rules shall govern the procedure to be observed in civil cases involving
the following:
(1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, or members of any corporation, partnership, or association;
(2) Controversies arising out of intra-corporate, partnership, or association relations, between and among
stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively;
(3) Controversies in the election or appointment of directors, trustees, officers, or managers of
corporations, partnerships, or associations;
(4) Derivative suits; and
(5) Inspection of corporate books." (Italics supplied)
In upholding the RTCs pronouncement that venue was improperly laid, the CA ruled that STRADECs first and
second causes of action were not intra-corporate disputes because the issues pertaining thereto were civil in nature.
In support of the foregoing conclusion, the CA cited Speed Distributing Corporation vs. Court of Appeals 43 where this
Court essentially ruled out the existence of an intra-corporate dispute from an action instituted by the wife for the
nullification of the transfer of a property between corporations of which her deceased husband was a stockholder.
The CA also relied on this Courts pronouncement in Nautica Canning Corporation vs. Yumul 44 to the effect, among
others, that an action to determine the validity of the transfer of shares from one stockholder to another is civil in
nature and is, therefore, cognizable by regular courts and not the SEC. 45 In addition to the fact that the first case
involved a civil action instituted against corporations by one who was not a stockholder thereof, however, STRADEC
correctly points out that, unlike the second case, the limited jurisdiction of the SEC is not in issue in the case at
bench.
Even prescinding from the different factual and legal milieus of said cases, the CA also failed to take into
consideration the fact that, unlike the SEC which is a tribunal of limited jurisdiction, 46 SCCs like the RTC are still
competent to tackle civil law issues incidental to intra-corporate disputes filed before them. In G.D. Express
Worldwide N.V. vs. Court of Appeals,47 this Court ruled as follows:
It should be noted that the SCCs are still considered courts of general jurisdiction. Section 5.2 of R.A. No. 8799
directs merely the Supreme Court's designation of RTC branches that shall exercise jurisdiction over intra-corporate
disputes. Nothing in the language of the law suggests the diminution of jurisdiction of those RTCs to be designated
as SCCs. The assignment of intra-corporate disputes to SCCs is only for the purpose of streamlining the workload of
the RTCs so that certain branches thereof like the SCCs can focus only on a particular subject matter.
The designation of certain RTC branches to handle specific cases is nothing new. For instance, pursuant to the
provisions of R.A. No. 6657 or the Comprehensive Agrarian Reform Law, the Supreme Court has assigned certain
RTC branches to hear and decide cases under Sections 56 and 57 of R.A. No. 6657.
14
The RTC exercising jurisdiction over an intra-corporate dispute can be likened to an RTC exercising its probate
jurisdiction or sitting as a special agrarian court. The designation of the SCCs as such has not in any way limited their
jurisdiction to hear and decide cases of all nature, whether civil, criminal or special proceedings.
Viewed in the foregoing light and the intra-corporate nature of STRADECs first and second causes of action, the CA
clearly erred in upholding the RTCs finding that venue therefor was improperly laid. Given that the question of venue
is decidedly not jurisdictional and may, in fact, be waived, 48 said error was further compounded when the RTC
handed down its first 30 August 2006 order even before respondents were able to file pleadings squarely raising
objections to the venue for said causes of action.49 Pursuant to Section 5, Rule 1 of the Interim Rules,50 at any rate, it
cannot be gainsaid that STRADEC correctly commenced its petition before the RTC exercising jurisdiction over
SIDCs principal place of business which was alleged to have been transferred from Bayambang, Pangasinan to
Lipa, Batangas.51 It matters little that STRADEC, as pointed out by respondents, also questions the validity of the 30
July 2005 SIDC stockholders annual meeting where the aforesaid change in the address of its principal place of
business was allegedly approved. Said matter should be properly threshed out in the proceedings before the RTC
alongside such issues as the validity of the transfers of STRADECs shares to respondents Wong and CTCII, the
propriety of the recording of said transfers in SIDCs books, STRADECs status as a stockholder of SIDC, the legality
of the 20 July 2006 SIDC stockholders special meeting or, for that matter, Cezar T. Quiambaos authority to
represent STRADEC in the case at bench.1avvphi1
The rule is settled that rules of procedure ought not to be applied in a very rigid, technical sense,52 for they have been
adopted to help secure not override substantial justice.53 Considering that litigation is not a game of
technicalities54 courts have been exhorted, time and again, to afford every litigant the amplest opportunity for the
proper and just determination of his case free from the constraints of technicalities. Since rules of procedure are
mere tools designed to facilitate the attainment of justice, it is well recognized that courts are empowered to suspend
its rules, when the rigid application thereof tends to frustrate rather than promote the ends of justice. 55 No less than
Section 3, Rule 1 of the Interim Rules provides that the provisions thereof are to "be liberally construed in order to
promote their objective of securing a just, summary, speedy and inexpensive determination of every action or
proceeding."
The CA also erred in upholding the RTCs suspension of proceedings for STRADECs third and fourth causes of
action assailing the registration of the transfers of its shares as well as the 30 July 2005 annual meeting and 20 July
2006 special meeting of SIDCs stockholders, in view of the pendency of actions in other courts involving ownership
of the shares into which STRADECs own capital stock has been divided and its legitimate directors and officers. On
the principle that a corporation is a legal entity with a personality separate and distinct from its individual stockholders
or members and from that of its officers who manage and run its affairs, 56 we find that said other actions have little or
no bearing to the issues set forth in STRADECs amended petition which, at bottom, involve the transfer of its own
shareholding in SIDC and its status and rights as such stockholder. The record also shows that the impugned loan
transaction was contracted by respondents Yujuico and Sumbilla on 8 October 2004 or before the 10 December
2004 election of STRADECs Board of Directors conducted pursuant to the 25 November 2004 order issued in Civil
Case No. U-14 (SCC-2874). Thus, even the restoration of status quo ante in said case pursuant to this Courts 29
January 2007 decision in G.R. No. 168639, entitled Alderito Yujuico, et al. vs. Cezar T. Quiambao, et al. 57 is no
hindrance to the determination of the issues of want of authority and consideration for the transfer of STRADECs
shares.1avvphi1
Considering that the determination of the factual and legal issues presented in the case can proceed independent of
those being litigated in the other cases filed against each other by the members of STRADEC's Board of Directors,
we find that the CA finally erred in denying STRADEC's application of a writ of preliminary injunction to restrain (a)
CTCII from further exercising proprietary rights over the subject shares; (b) SIDC and its officers from recognizing the
transfer or further transfers of the same; (c) the implementation of the resolutions passed during the 20 July 2006
SIDC stockholders special meeting; and (d) the SEC from acting on any report submitted in respect thereto. A
provisional remedy which has, for its object, the preservation of the status quo,58 preliminary injunction may be
resorted to by a party in order to preserve and protect certain rights and interests during the pendency of an
action.59 By both law and jurisprudence, said provisional writ may be issued upon the concurrence of the following
essential requisites, to wit: (1) that the invasion of the right is material and substantial; (2) that the right of
complainant is clear and unmistakable; and, (3) that there is an urgent and paramount necessity for the writ to
prevent serious damage.60
As the owner, STRADEC is undoubtedly possessed of clear and unmistakable rights over the subject SIDC shares
which respondent Yujuico pledged in favor of respondent Wong. Unless collectively restrained, the aforesaid acts will
completely divest STRADEC of its shares and unfairly deprive it of participation in SIDC's corporate affairs pending
the determination of the validity of the impugned transfers. Given that the parties have already submitted their
arguments for and against the writ of preliminary injunction sought, STRADEC is, however, required to put up an
injunction bond pursuant to Section 1, Rule 10 of the Interim Rules.61 Conditioned to answer for damages
respondents may sustain as a consequence of the issuance of the writ, 62 the amount of the bond is fixed
atP10,000,000.00 which is equivalent to the supposed loan for which STRADEC's shares were pledged by
respondent Yujuico.
WHEREFORE, premises considered, the petition is GRANTED and the assailed decision and resolution are,
accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ORDERING the resumption of
proceedings in Civil Case No. 7956 without further delay. Subject to the posting of the requisite bond in the sum
ofP10,000,000.00, STRADEC's application for a writ of preliminary injunction is likewise GRANTED.
15
G.R. No. L-12719
May 31, 1962
THE
COLLECTOR
OF
vs.
THE CLUB FILIPINO, INC. DE CEBU, respondent.
Office
of
the
V. Jaime and L. E. Petilla for respondent.
INTERNAL
Solicitor
General
REVENUE, petitioner,
for
petitioner.
PAREDES, J.:
This is a petition to review the decision of the Court of Tax Appeals, reversing the decision of the Collector of Internal
Revenue, assessing against and demanding from the "Club Filipino, Inc. de Cebu", the sum of P12,068.84 as fixed
and percentage taxes, surcharge and compromise penalty, allegedly due from it as a keeper of bar and restaurant.
As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu," (Club, for short), is a civic corporation
organized under the laws of the Philippines with an original authorized capital stock of P22,000.00, which was
subsequently increased to P200,000.00, among others, to it "proporcionar, operar, y mantener un campo de golf,
tenis, gimnesio (gymnasiums), juego de bolos (bowling alleys), mesas de billar y pool, y toda clase de juegos no
prohibidos por leyes generales y ordenanzas generales; y desarollar y cultivar deportes de toda clase y
denominacion cualquiera para el recreo y entrenamiento saludable de sus miembros y accionistas" (sec. 2, Escritura
de Incorporacion del Club Filipino, Inc. Exh. A). Neither in the articles or by-laws is there a provision relative to
dividends and their distribution, although it is covenanted that upon its dissolution, the Club's remaining assets, after
paying debts, shall be donated to a charitable Philippine Institution in Cebu (Art. 27, Estatutos del Club, Exh. A-a.).
The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from the government), and
a bar-restaurant where it sells wines and liquors, soft drinks, meals and short orders to its members and their guests.
The bar-restaurant was a necessary incident to the operation of the club and its golf-course. The club is operated
mainly with funds derived from membership fees and dues. Whatever profits it had, were used to defray its overhead
expenses and to improve its golf-course. In 1951. as a result of a capital surplus, arising from the re-valuation of its
real properties, the value or price of which increased, the Club declared stock dividends; but no actual cash dividends
were distributed to the stockholders. In 1952, a BIR agent discovered that the Club has never paid percentage tax on
the gross receipts of its bar and restaurant, although it secured B-4, B-9(a) and B-7 licenses. In a letter dated
December 22, 1852, the Collector of Internal Revenue assessed against and demanded from the Club, the following
sums:
As percentage tax on its gross receipts

during the tax years 1946 to 1951
P9,599.07
Surcharge therein
2,399.77
As fixed tax for the years 1946 to 1952
70.00
Compromise penalty
500.00
The Club wrote the Collector, requesting for the cancellation of the assessment. The request having been denied, the
Club filed the instant petition for review.
The dominant issues involved in this case are twofold:
1. Whether the respondent Club is liable for the payment of the sum of 12,068.84, as fixed and percentage taxes and
surcharges prescribed in sections 182, 183 and 191 of the Tax Code, under which the assessment was made, in
connection with the operation of its bar and restaurant, during the periods mentioned above; and
2. Whether it is liable for the payment of the sum of P500.00 as compromise penalty.
Section 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a business on which the
percentage tax is imposed shall pay in full a fixed annual tax of ten pesos for each calendar year or fraction thereof in
which such person shall engage in said business." Section 183 provides in general that "the percentage taxes on
business shall be payable at the end of each calendar quarter in the amount lawfully due on the business transacted
during each quarter; etc." And section 191, same Tax Code, provides "Percentage tax . . . Keepers of restaurants,
refreshment parlors and other eating places shall pay a tax three per centum, and keepers of bar and cafes where
wines or liquors are served five per centum of their gross receipts . . .". It has been held that the liability for fixed and
percentage taxes, as provided by these sections, does not ipso facto attach by mere reason of the operation of a bar
and restaurant. For the liability to attach, the operator thereof must be engaged in the business as a barkeeper and
restaurateur. The plain and ordinary meaning of business is restricted to activities or affairs where profit is the
purpose or livelihood is the motive, and the term business when used without qualification, should be construed in its
16
plain and ordinary meaning, restricted to activities for profit or livelihood (The Coll. of Int. Rev. v. Manila Lodge No.
761 of the BPOE [Manila Elks Club] & Court of Tax Appeals, G.R. No. L-11176, June 29, 1959, giving full definitions
of the word "business"; Coll. of Int. Rev. v. Sweeney, et al. [International Club of Iloilo, Inc.], G.R. No. L-12178, Aug.
21, 1959, the facts of which are similar to the ones at bar; Manila Polo Club v. B. L. Meer, etc., No. L-10854, Jan. 27,
1960).
Having found as a fact that the Club was organized to develop and cultivate sports of all class and denomination, for
the healthful recreation and entertainment of its stockholders and members; that upon its dissolution, its remaining
assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu; that it is operated mainly
with funds derived from membership fees and dues; that the Club's bar and restaurant catered only to its members
and their guests; that there was in fact no cash dividend distribution to its stockholders and that whatever was
derived on retail from its bar and restaurant was used to defray its overall overhead expenses and to improve its golfcourse (cost-plus-expenses-basis), it stands to reason that the Club is not engaged in the business of an operator of
bar and restaurant (same authorities, cited above).
It is conceded that the Club derived profit from the operation of its bar and restaurant, but such fact does not
necessarily convert it into a profit-making enterprise. The bar and restaurant are necessary adjuncts of the Club to
foster its purposes and the profits derived therefrom are necessarily incidental to the primary object of developing
and cultivating sports for the healthful recreation and entertainment of the stockholders and members. That a Club
makes some profit, does not make it a profit-making Club. As has been remarked a club should always strive,
whenever possible, to have surplus (Jesus Sacred Heart College v. Collector of Int. Rev., G.R. No. L-6807, May 24,
1954; Collector of Int. Rev. v. Sinco Educational Corp., G.R. No. L-9276, Oct. 23, 1956).1wph1.t
It is claimed that unlike the two cases just cited (supra), which are non-stock, the appellee Club is a stock
corporation. This is unmeritorious. The facts that the capital stock of the respondent Club is divided into shares, does
not detract from the finding of the trial court that it is not engaged in the business of operator of bar and restaurant.
What is determinative of whether or not the Club is engaged in such business is its object or purpose, as stated in its
articles and by-laws. It is a familiar rule that the actual purpose is not controlled by the corporate form or by the
commercial aspect of the business prosecuted, but may be shown by extrinsic evidence, including the by-laws and
the method of operation. From the extrinsic evidence adduced, the Tax Court concluded that the Club is not engaged
in the business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites must be complied with, to wit: (1) a capital stock divided into
shares and (2) an authority to distribute to the holders of such shares, dividends or allotments of the surplus profits
on the basis of the shares held (sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of incorporation or
by-laws could be found an authority for the distribution of its dividends or surplus profits. Strictly speaking, it cannot,
therefore, be considered a stock corporation, within the contemplation of the corporation law.
A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit, nonstock
organizations, unless the intent to the contrary is manifest and patent" (Collector v. BPOE Elks Club, et al., supra),
which is not the case in the present appeal.
Having arrived at the conclusion that respondent Club is not engaged in the business as an operator of a bar and
restaurant, and therefore, not liable for fixed and percentage taxes, it follows that it is not liable for any penalty, much
less of a compromise penalty.
WHEREFORE, the decision appealed from is affirmed without costs.
17

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