Islamic Directorate vs.

CA
Case Title : J. F. RAMIREZ, plaintiff and appellee, vs. THE ORIENTALIST Co., and RAMON J.
FERNANDEZ, defendants and appellants.
Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Harvey, J.
Syllabi Class : PLEADING|CORPORATIONS|CONTRACTS|DUE EXECUTION OF CONTRACT|
CORPORATIONS|CONTRACTS|POWER OF BOARD|SURETY
Syllabi:
1. PLEADING; DUE EXECUTION OF CONTRACT; AUTHORITY OF OFFICER TO BIND
CORPORATION.Where the name of a corporation is signed to the document which is the basis of an action, the
failure
2. PLEADING; CORPORATIONS; WANT OF AUTHORITY IN AGENT AS SPECIAL DEFENSE.Where a corporation seeks to evade liability on a contract on the ground of lack of authority on the
part of the person who assumed to act for it, such defense should be specially pleaded.
3. PLEADING; AMENDMENTS.While immaterial variances between allegations in the pleadings and the proof adduced at the
hearing may be disregarded, it is, nevertheless, still true that relief can be granted only upon matter
which is put in issue by the pleadings; and if the proof varies materially from the allegations, the
pleadings may, upon the application of the party interested, be amended in order to bring them into
conformity with the facts proved.
4. PLEADING; SPECIAL DEFENSE.The rule above stated applies equally to a special defense stated in the answer as to the plaintiff's
cause of action.
5. CORPORATIONS; CONTRACTS; POWER OF BOARD; RATIFICATION.The power to make corporate contracts resides primarily in the company's board of directors; but
the board may ratify an unauthorized contract made by an officer of the corporation. Ratification in
this case is held to have occurred when the board, with knowledge that the contract had been
made, adopted a resolution recognizing the existence of the contract and directing that steps be
taken to enable the corporation to utilize its benefits.
6. CORPORATIONS; CONTRACTS; ACTION OF STOCKHOLDERS.Where a corporate contract has been effected with the approval of the board of directors, a
resolution adopted at a meeting of stockholders refusing to recognize the contract or repudiating it
is without effect.
7. CONTRACTS; SURETY; PAROL EVIDENCE TO SHOW CHARACTER IN WHIGH PARTY IS
BOUND.The written contract which was the subject of this action contained the corporate name signed at
the lower right-hand corner of the contract, in the manner usual with a party signing in the
character of principal obligor. The name of another individual was signed somewhat below and to
the left of the corporate signature, after the customary manner of those who sign in a subsidiary
capacity; but no words were written to indicate clearly whether this individual signed as a principal
obligor or as surety. Held: That parol evidence

Case Title : THE BOARD OF LIQUIDATORS representing THE GOVERNMENT OF THE

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF MAXIMO M. KALAW, JUAN
BOCAR, ESTATE OF THE DECEASED CASIMIRO GARCIA, and LEONOR MOLL, defendantsappellees.
Case Nature : APPEAL from a judgment of the Court of First Instance of Manila, Enriquez, J.
Syllabi Class : Courts|Corporations|Board of Liquidators|Settlement of decedent's estate|Contracts|
Damages|Judgment|Right of Board of Liquidators to proceed as partyplaintiff|Actions|Actions that
survive
Syllabi:
1. Courts; Judgment; Appeals.An appellate court may base its decision of affirmance of the judgment below on a point or points
ignored by the trial court on which said court was in error.
2. Corporations; Three methods of winding up corporate affairs.Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1)
under Section 3, Rule 104, of the Rules of Court (which superseded Section 66 of the Corporation
Law), whereby, upon voluntary dissolution of a corporation, the court may direct "such disposi- tion
of its assets as justice requires, and may appoint a receiver to collect such assets and pay the
debts of the corporation"; (2) under Section 77 of the Corporation Law, whereby a corporation
whose corporate existence is terminated, "shall nevertheless be continued as a body corporate for
three years after the time when it would have been so dissolved, for the purpose of prosecuting
and defending suits by or against it and of enabling it gradually to settle and close its affairs, to
dispose of and convey its property and to divide its capital stock, but not for the purpose of
continuing the business for which it was established"; and (3) under Section 78 of the Corporation
Law, by virtue of which the corporation, within the three-year period just mentioned, "is authorized
and empowered to convey all of its property to trustees for the benefit of members, stockholders,
creditors, and others interested,"
3. Board of Liquidators; Trustee for government.By Executive Order No. 372, the government, the sole stockholder, abolished the National Coconut
Corporation (NACOCO) and placed its assets in the hands of the Board of Liquidators. The Board
thus became the trustee on behalf of the government. It was an express trust. The legal interest
became vested in the trustee, the Board of Liquidators. The beneficial interest remained with the
sole stockholder, the government. The Board took the place of the dissolved government
corporations after the expiration of the statutory three-year period for the liquidation of their affairs.
4. Board of Liquidators; No term for life of Board.No time limit has been tacked to the existence of the Board of Liquidators and its function of
closing the affairs of various government corporations. Its term of life is not fixed.
5. Board of Liquidators; Right of Board of Liquidators to proceed as partyplaintiff; Case at bar.At no time had the government withdrawn the property. or the authority to continue the present suit,
from the Board of Liquidators. Hence, the Board can prosecute this case to its final conclusion. The
provisions of Section 78 of the Corporation Law, the third method of winding up corporate affairs,
find application. The Board has personality to proceed as party-plaintiff in this case.
6. Settlement of decedent's estate; Actions; Actions that survive; Executors and administrators.The actions that survive against a decedent's executors or administrators are: (1) actions to
recover real and personal property from the estate; (2) actions to enforce a lien thereon; and (3)

actions to recover damages for an injury to person or property. A suit to recover damages, based
on the alleged tortious acts of the manager of a government corporation, survives. It is not a mere
money claim that is extinguished upon the death of a party.
7. Corporations; Implied authority of corporate officer to enter into contracts.A corporate officer, entrusted with the general management and control of its business, has implied
authority to make any contract or do any other act which is necessary or appropriate to the conduct
of the ordinary business of the corporation. As such officer, he may, without any special authority
from the Board of Directors, perform all acts of an ordinary nature, which by usage or necessity are
incident to his office, and may bind the corporation by contracts in matters arising in the usual
course of business.
8. Corporations; Where similar acts of manager were approved by directors.Where similar acts have been approved by the directors as a matter of general practice, custom,
and policy, the general manager may bind the company without formal authorization of the board of
directors. In varying language, existence of such authority is established by proof of the course of
business, the usages and practices of the company and by the knowledge which the board of
directors has, or must be presumed to have, of acts and doings of its subordinates in and about the
affairs of the corporation. Where the practice of the corporation has been to allow its general
manager to negotiate and execute contracts in its copra trading activities for and in Nacoco's behalf
without prior board approval, and the board itself, by its acts and through acquiescence, practically
laid aside the by-law requirement of prior approval, the contracts of the general manager, under the
given circumstances, are valid corporate acts.
9. Corporations; Ratification by corporation of unauthorized contract of its officers.Ratification by a corporation of an unauthorized act or contract by its officers or others relates back
to the time of the act or contract ratified and is equivalent to original authority. The corporation and
the other party to the transaction are in precisely the same position as if the act or contract had
been authorized at the time. The adoption or ratif ication of a contract by a corporation is nothing
more nor less than the making of an original contract. The theory of corporate ratification is
predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to
a grant of prior authority.
10. Contracts; Bad faith.Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or
some moral obliquity and conscious doing of wrong; it means breach of a known duty through
some motive or interest or ill-will; it partakes of the nature of fraud.
11. Damages; Damnum absque injuria.The present case is one of damnum absque injuria. Conjunction of damage and wrong is here
absent. There cannot be an actionable wrong if either one or the other is wanting.

Morano vs. Vivo,

Case Title : FRED M. HARDEN, J. D. HIGHSMITH, and JOHN C. HART, in their own behalf and in
that of all other stockholders of the Balatoc Mining Company, etc., plaintiffs and appellants, vs.

BENGUET CONSOLIDATED MINING COMPANY, BALATOC MINING COMPANY, H. E. RENZ,

JOHN W. HAUSSERMANN, and A. W. BEAM, defendants and appellees.
Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Goddard, J.
Syllabi Class : CORPORATIONS|MlNING CORPORATION
Syllabi:
1. CORPORATIONS; MlNING CORPORATION; PROHIBITION AGAINST OWNING INTEREST IN
OTHER MINING CORPORATION; RIGHT OF ACTION.Inasmuch as the Corporation Law contains, in section 190 (A), provisions fully penalizing the
violation of subsection 5 of sec- tion 13 of Act No. 1459,which prohibits the acquisition by one
mining corporation of any interest in another,and inasmuch as these provisions have been
enacted in the exercise of the general police powers of the Government, it results that, where one
mining corporation acquires a prohibited interest in another such corporation, the shareholders of
the latter cannot maintain an action to annul the contract by which such interest was acquired. The
remedy must be sought in a criminal proceeding or quo warranto action, under section 190 (A),
instituted by the Government. Until thus assailed in a direct proceeding the contract by which the
interest was acquired will be treated as valid, as between the parties.

Case Title : W. S. PRICE and THE SULU DEVELOPMENT COMPANY, plaintiffs and appellants,
vs. H. MARTIN, defendant and appellant, THE AGUSAN COCONUT COMPANY, defendant and
appellee.
Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Diaz, J.
Syllabi Class : SHARES OF STOCK |MORTGAGE|PARTICIPATION IN STOCKHOLDERS'
MEETING
Syllabi:
1. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; TRANSFER OF
SHARES.Plaintiffs contend that the transference on the books of the S. D. Co. of 97 shares of stock in the
name of Mrs, W. was fraudulent and illegal. The evidence of record, however, under all the
circumstances of the case, fails to demonstrate the allegation of fraud, and the court believes that
she acted in good faith and in the honest belief that she had not only a legal right but a duty to
participate in the stockholders' meeting.
2. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; ID.Until challenged in a proper proceeding, a stockholder according to the books of the company has
a right to participate in any meeting, and in the absence of fraud the action of thestockholders'
meeting cannot be collaterally attacked on account of such participation.
3. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; ID."A person who has purchased stock, and who desires to be recognized as a stockholder, for the
purpose of voting, must secure such a standing by having the transfer recorded upon the books. If
the transfer is not duly made upon request, he has, as his remedy, to compel it to be made."
(Morrill vs. Little Falls, Mfg. Co., 53 Minn., 371.)
4. MORTGAGE; CONSIDERATION.-

A morgtage given to cover past advancement of funds executed upon the advice of competent
attorneys and to avoid litigation is not made without consideration.

Case Title : RAMON DE LA RAMA, FRANCISCO RODRIGUEZ, HORTENCIA SALAS, PAZ

SALAS and PATRIA SALAS, heirs of Magdalena Salas, as stockholders on their own behalf and on
the benefit of the Ma-ao Sugar Central Co., Inc., and other stockholders thereof who may wish to
join in this action, plaintiffs-appellants, vs. MA-AO SUGAR CENTRAL Co., INC., J. AMADO
ARANETA, MRS. RAMON S. ARANETA, ROMUALDO M. ARANETA, and RAMON A. YULO,
defendants-appellants.
Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Gatmaitan, J.
Syllabi Class : Corporation Law|Counterclaims|Dismissal
Syllabi:
1. Corporation Law; Investment of corporate funds in another corporation; When not violative of
Section of the Corporation Law.Plaintiffs-appellants contend that the investment of corporate funds by defendants-appellants in
another corporation constitutes a violation of section of the Corporation Law. The Supreme
Court held that such an act, if done pursuance of the corporate purpose, does not need the
approval of the stock- holders; but when the purchase of shares of another corporation is done
solely for investment and not to accomplish the purpose of its incorporation, the vote of approval of
the stockholders is necessary, and further states that when purpose or purposes as stated in its
articles of incorporation, the approval of the stockholders is not necessary. (Guevara, Philippine
Corp. Law, 1967 ed., p. 89).
2. Counterclaims; Dismissal; When justified.The defendants counterclaim on the allegation that the complaint of plaintiff was premature,
improper, malicious and that the language is unnecessarily vituperative, abusive and insulting
cannot be sustained in the case at bar. On the contrary, the lower court found otherwise, as could
be gleaned from the decision. With respect to the allegation that the complaint was abusive and
insulting, there is no finding that plaintiff had been actuated by bad faith, nor is there anything in the
complaint essentially libelous especially as the rule is that allegations in pleadings where relevant,
are privileged even though they may not be clearly proved afterwards.
3. Corporation Law; Investment of corporation for other corporations not similar with its business;
Deemed proper by Section 17 of the Corporation Law.The lower courts order refraining the appellant corporation from making investment in other
companies whose purpose is not connected with the sugar central business should be reversed.
This is because section 17 of the Corporation Law allows a corporation to invest its funds in any
other corporation or business, or for any purpose other than the main purpose for which it was
organized, provided that its board of directors has been so authorized by the affirmative vote of
stockholders holding shares entitling them to exercise at least two-thirds of the voting power.
Case Title : JOHN GOKONGWEI, JR., petitioner, vs. SECURITIES AND EXCHANGE
COMMISSION, ANDRES M. SORIANO, JOSE M. SORIANO, ENRIQUE ZOBEL, ANTONIO
ROXAS, EMETERIO BUAO, WALTHRODE B. CONDE, MIGUEL ORTIGAS, ANTONIO PRIETO,

SAN MIGUEL CORPORATION, EMIGDIO TANJUATCO, SR., and EDUARDO R. VISAYA,

respondents.
Case Nature : ORIGINAL ACTION in the Supreme Court. Certiorari, mandamus and injunction.
Syllabi Class : Supreme Court|Corporation Law|Judgments|Securities and Exchange Commission|
Corporation Law|Constitutional Law|Due Process
Syllabi:
1. Supreme Court; Judgments; Securities and Exchange Commission; Corporation Law; Supreme
Court always strives to settle a legal controversy in a single proceeding.xxx In the case at bar, there are facts which cannot be denied, viz.: that the amended by-laws were
adopted by the Board of Directors of the San Miguel Corporation in the exercise of the power
delegated by the stockholders ostensibly pursuant to section 22 of the Corporation Law; that in a
special meeting on February 10, 1977 held specially for that purpose, the amended by-laws were
ratified by more than 80% of the stockholders of record; that the foreign investment in the
Hongkong Brewery and Distillery, a beer manufacturing company in Hongkong, was made by the
San Miguel Corporation in 1948; and that in the stockholders annual meeting held in 1972 and
1977, all foreign investments and operations of San Miguel Corporation were ratified by the
stockholders.
2. Corporation Law; While reasonableness of a by-law is a legal question, where reasonableness
of a by-law provision is one in which reasonable minds may differ a court will not be justified in
subsisting its judgment for those authorized to make the by-laws.The validity or reasonableness of a by-law of a corporation is purely a question of law. Whether the
by-law is in conflict with the law of the land, or with the charter of the corporation, or is in a legal
sense unreasonable and therefore unlawful is a question of law. This rule is subject, however, to
the limitation that where the reasonableness of a by-law is a mere matter of judgment, and one
upon which reasonable minds must necessarily differ, a court would not be warranted in
substituting its judgment instead of the judgment of those who are authorized to make by-laws and
who have exercised their authority.
3. Corporation Law; Under the Corporation Law a corporation is authorized to prescribe the
qualification of its directors.In this jurisdiction, under Section 21 of the Corporation Law, a corporation may prescribed in its bylaws the qualifications, duties and compensation of directors, officers and employees ***. This
must necessarily refer to a qualification in addition to that specified by section 30 of the Corporation
Law, which provides that every director must own in his right at least one share of the capital stock
of the stock corporation of which he is a director * * *.
4. Corporation Law; Stockholder has no vested right to be elected as stockholder.Any person who buys stock in a corporation does so with the knowledge that its affairs are
dominated by a majority of the stockholders and that he implied contracts that the will of the
majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted
by-laws and not forbidden by law. To this extent, therefore, the stockholder may be considered to
have parted with his personal right or privilege to regulate the disposition of his property which he
has invested in the capital stock of the corporation and surrendered it to the will of the majority or
his fellow incorporators. **** It can not therefore be justly said that the contract, express or implied,
between the corporation and the stockholders is infringed *** by any act of the former which is
authorized by a majority, ***.

5. Corporation Law; A director stands in a fiduciary relation to the competition and its stockholders.
The disqualification of a competition from being elected to the board of directors is a reasonable
exercise of corporate authority.Although in the strict and technical sense, directors of a private corporation are not regarded as
trustees, there cannot be any doubt that their character is that of a fiduciary insofar as the
corporation for the collective benefit of the stockholders, they occupy a fiduciary relation, and in
these sense the relation is one of trust.
6. Corporation Law; Same.It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel
Corporation, who is also the officer or owner of competing corporation, from taking advantage of
the information which he acquires as director to promote his individual or corporate interests to the
prejudice of San Miguel Corporation and its stockholders, that the questioned amendment of the
by-laws was made. Certainly, where two corporations are competitive in a substantial sense, it
would seem improbable, if not impossible, for the director, if he were to discharge effectively his
duty, to satisfy his loyalty to both corporations and place the performance of his corporate duties
above his personal concerns.
7. Corporation Law; Same.Sound principles of corporate management counsel against sharing sensitive information with a
director whose fiduciary duty to loyalty may well require that he disclose this information to a
competitive rival. These dangers are enhanced considerably where the common director such as
the petitioner is a controlling stockholder of two of the competing corporations. It would seem
manifest that in such situations, the director has an economic incentive to appropriate for the
benefit of his own corporation the corporate plans and policies of the corporation where he sits as
director.
8. Corporation Law; Another reason for upholding a by-law provision that forbids a competitor to be
elected as corporate director are the laws prohibiting cartels.There is another important consideration in determining whether or not the amended by-laws are
reasonable. The Constitution and the law prohibit combinations in restraint of trade or unfair
competition. Thus, Section 2 of Article XIV of the Constitution provides: That State shall regulate
or prohibit private monopolies when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed.
9. Corporation Law; Same.Basically, these anti-trust laws or laws against monopolies or combinations in restraint of trade are
aimed at raising levels of competition by improving the consumers effectiveness as the final arbiter
in free markets. These laws are designed to preserve free and unfettered competition as the rule of
trade. It rests on the premise that the unrestrained interaction of competitive forces will yield the
best allocation of our economic resources, the lowest prices and the highest quality ***. They
operate to forestall concentration of economic power. The law against monopolies and
combinations in restraint of trade is aimed at contracts and combinations that, by reason of the
inherent nature of the contemplated acts, prejudice the public interest by unduly restraining
competition or unduly obstructing the course of trade.
10. Corporation Law; Election of petitioner as San Miguel Corporation Director may run counter to
the prohibition contained in Section 13(5) of Corporation Law on investments in corporations
engaged in agriculture.-

Finally, considering that both Robina and SMC are, to a certain extent, engaged in agriculture, then
the election of petitioner to the Board of SMC may constitute a violation of the prohibition contained
in Section 13(5) of the Corporation Law. Said section provides in part that any stockholder of more
than one corporation organized for the purpose of engaging in agriculture may hold his stock in
such corporations solely for investment and not for the purpose of bringing about or attempting to
bring about a combination to exercise control of such corporations. ***.
11. Corporation Law; The by-law amendment of SMC applies equally to all and does not
discriminate against petitioner only.However, the by-law, by its terms, applies to all stockholders. The equal protection clause of the
Constitution requires only that the by-laws operate equally upon all persons of a class. Besides,
before petitioner can be declared ineligible to run for director, there must be hearing and evidence
must be submitted to bring his case within the ambit of the disqualification. Sound principles of
public policy and management, therefore, support the view that a by-law which disqualifies a
competitor from election to the Board of Directors of another corporation is valid and reasonable.
12. Corporation Law; Petitioner is not ipso facto disqualified to run on SMC director. He must be
given full opportunity by the SEC to show that he is not covered by the disqualification.While We here sustain the validity of the amended by-laws, it does not follow as a necessary
consequence that petitioner is ipso facto disqualified. Consonant with the requirement of due
process, there must be due hearing at which the petitioner must be given the fullest opportunity to
show that he is not covered by the disqualification. As trustees of the corporation and of the
stockholders, it is the responsibility of directors to act with fairness to the stockholders. Pursuant to
this obligation and to remove any suspicion that this power may be utilized by the incumbent
members of the Board to perpetuate themselves in power, any decision of the Board to disqualify a
candidate for the Board of Directors should be reviewed by the Securities and Exchange
Commission en banc and its decision shall be final unless reversed by this Court on certiorari.
13. Corporation Law; Every stockholder has the right to inspect corporate books and records.The stockholders right of inspection of the corporations books and records is based upon their
ownership of the assets and property of the corporation. It is, therefore, an incident of ownership of
the corporate property, whether this ownership or interest be termed an equitable ownership, a
beneficial ownership, or a quasi-ownership. This right is predicated upon the necessity of
selfprotection. It is generally held by majority of the courts that where the right is granted by statute
to the stockholder, it is given to him as such and must be exercised by him with respect to his
interest as a stockholder and for some purpose germane thereto or in the interest of the
corporation. In other words, the inspection has to germane to the petitioners interest as a
stockholder, and has to be proper and lawful in character and not inimical to the interest of the
corporation.
14. Corporation Law; The right of stockholder to inspect corporate books extends to a whollyowned subsidiary.In the case at bar, considering that the foreign subsidiary is wholly owned by respondent San
Miguel Corporation and, therefore, under its control, it would be more in accord with equity, good
faith and fair dealing to construe the statutory right of petitioner as stockholder to inspect the books
and records of the corporation as extending to books and records of such wholly owned subsidiary
which are in respondent corporations possession and control.

15. Corporation Law; Purely ultra vires corporate acts of corporate officers to invest corporate funds
in another business or corporation, i.e., acts not contrary to law, morals, public order as public
policy, may be ratified by the stockholders holding 2/3 of the voting power.Assuming arguendo that the Board of Directors of San Miguel Corporation had no authority to
make the assailed investment, there is no question that a corporation, like an individual, may ratify
and thereby render binding upon it the originally unauthorized acts of its officers or other agents.
This is true because the questioned investment is neither contrary to law, morals, public order or
public policy. It is a corporate transaction or contract which is within the corporate powers, but
which is defective from a purported failure to observe in its execution the requirement of the law
that the investment must be authorized by the affirmative vote of the stockholders holding twothirds
of the voting power. This requirement is for the benefit of the stockholders. The stockholders for
whose benefit the requirement was enacted may, therefore, ratify the investment and its ratification
by said stockholders obliterates any defect which it may have had at the outset. Mere ultra vires
acts, said this Court in Pirovano, or those which are not illegal and void ab initio, but are not
merely within the scope of the articles of incorporation, are merely voidable and may become
binding and enforceable when ratified by the stockholders.
16. Corporation Law; Judgment; The doctrine of the law of the case.We hold on our part that the doctrine of the law of the case invoked by Mr. Justice Barredo has no
applicability for the following reasons: a) Our jurisprudence is quite clear that this doctrine may be
invoked only where there has been a final and conclusive determination of an issue in the first case
later invoked as the law of the case.
17. Corporation Law; Judgment; When doctrine of the law of the case not applicable.The doctrine of the law of the case, therefore, has no applicability whatsoever herein insofar as the
question of the validity or invalidity of the amended by-laws is concerned. The Courts judgment of
April 11, 1979 clearly shows that the voting on this question inconclusive with six against four
Justices and two other Justices (the Chief Justice and Mr. Justice Fernando) expressly reserving
their votes thereon, and Mr. Justice Aquino while taking no part in effect likewise expressly
reserved his vote thereon. No final aad conclusive determination could be reached on the issue
and pursuant to the provisions of Rule 56, section 11, since this special civil action originally
commenced in this Court, the action was simply dismissed with the result that no law of the case
was laid down insofar as the issue of the validity or invalidity of the questioned by-laws is concerned, and the relief sought herein by petitioner that this Court bypass the SEC which has yet to
hear and determine the same issue pending before it below and that this Court itself directly
resolve the said issue stands denied.
18. Corporation Law; Judgment; Constitutional Law; Due Process; When procedural due process
was not observed.The entire Court, therefore, recognized that petitioner had not been given procedural due process
by the SMC board on the matter of his disqualification and that he was entitled to a new and
proper hearing. It stands to reason that in such hearing, petitioner could raise not only questions of
fact but questions of law, particularly questions of law affecting the investing public and their right to
representation on the board as provided by lawnot to mention that as borne out by the fact that
no restriction whatsoever appears in the Courts decision, it was never contemplated that petitioner
was to be limited questions of fact and could not raise the fundamental question of law bearing on
the invalidity of the questioned amended by-laws at such hearing before the SMC board.

Furthermore, it was expressly provided unanimously in the Courts decision that the SMC boards
decision on the disqualification of petitioner (assuming the board of directors of San Miguel
Corporation should, after the proper hearing, disqualify him as qualified in Mr. Justice Barredos
own separate opinion, at page 2) shall be appealable to respondent Securities and Exchange
Commission deliberating and acting en banc and ultimately to this Court.
19. Corporation Law; Judgment; Reservation of the vote of the Chief Justice.As expressly stated in the Chief Justices reservation of his vote, the matter of the question of the
applicability of the said section 13(5) to petitioner would be heard by this Court at the appropriate
time after the proceedings below (and necessarily the question of the validity of the amended bylaws would be taken up anew and the Court would at that time be able to reach a final and
conclusive vote).
20. Corporation Law; Judgment; Validity of the amended by-laws.The six votes cast by Justices Makasiar, Antonio, Santos, Abad Santos, De Castro and this writer
in favor of validity of the amended by-laws in question, with only four members of this Court,
namely, Justices Teehankee, Concepcion Jr., Fernandez and Guerrero opining otherwise, and with
Chief Justice Castro and Justice Fernando reserving their votes thereon and Justice Aquino and
Melencio Herrera not voting, thereby resulting in the dismissal of the petition insofar as it assails
the validity of the amended by-laws . . . . for lack of necessary votes, has no other legal
consequence than that it is the law of the case far as the parties herein are concerned, albeit the
majority opinion of six against four Justices is not doctrinal in the sense that it cannot be cited as
necessarily a precedent for subsequent cases. This means that petitioner Gokongwei and the
respondents, including the Securities and Exchange Commission, are bound by the foregoing
result, namely, that the Court en banc has not found merit in the claim that the amended by-laws in
question are invalid. Indeed, it is one thing to say that dismissal of the case is not doctrinal and
entirely another thing to maintain that such dismissal leaves the issue unsettled.
21. Corporation Law; Judgment; Where petitioner can no longer revive the issue validity of the
amended by-laws.I reiterate, therefore, that as between the parties herein, the issue of validity of the challenged
bylaws is already settled. From which it follows that the same are already enforceable insofar as
they are concerned. Petitioner Gokongwei may not hereafter act on the assumption that he can
revive the issue of validity whether in the Securities Exchange Commission, in this Court or in any
other forum, unless he proceeds on the basis of a factual milieu different from the setting of this
case. Not even the Securities and Exchange Commission may pass on such question anymore at
the instance of herein petitioner or anyone acting in his stead or on his behalf. The vote of four
justices to remand the case thereto cannot alter the situation.
22. Corporation Law; Judgment; Where Court has not found merit in the claim that the amended
by-laws in question are valid.I concur in Justice Barredos statement that the dismissal (for lack of necessary votes) of the
petition to the extent that it assails the validity of the amended by-laws, is the law of the case at
bar, which means in effect that as far and only in so far as the parties and the Securities and
Exchange Commission are concerned, the Court has not found merit in the claim that the amended
by-laws in question are valid.
23. Corporation Law; Judgment; Term and meaning of farming.-

This is my view, even as I am for a restrictive interpretation of Section 13(5) of the Philippine
Corporation Law, under which I would limit the scope of the provision to corporations engaged in
agriculture, but only as the word agriculture refers to its more limited meaning as distinguish- ed
from its general and broad connotation. The term would then mean farming or raising the natural
products of the soil, such as by cultivation, in the acquisition of agricultural land such as by
homestead, before the patent may be issued.
24. Corporation Law; Judgment; Poultry raising or piggery is included in the term agriculture.It is my opinion that under the public land statute, the development of a certain portion of the land
applied for a specified in the law as a condition precedent before the applicant may obtain a patent,
is cultivation, not let us say, poultry raising or piggery, which may be included in the term
Agriculture in its broad sense. For under Section 13(5) of the Philippine Corporation Law,
construed not in the strict way as I believe it should because the provision is in derogation of
property rights, the petitioner in this case would be disqualified from becoming an officer of either
the San Miguel Corporation or his own supposedly agricultural corporations.
Lanuza v Court of Appeals
Case Title : RAMON C. LEE and ANTONIO DM. LACDAO, petitioners, vs. THE HON. COURT OF
APPEALS, SACOBA MANUFACTURING CORP., PABLO GONZALES, JR. and THOMAS
GONZALES, respondents.
Case Nature : PETITION for certiorari to review the decision and resolution of the Court of
Appeals.
Syllabi Class : Mercantile Law|Remedial Law|Corporation Code|Voting Trusts|Civil Procedure|
Service of summons
Syllabi:
1. Mercantile Law; Corporation Code; Every director must own at least one (1) share of the capital
stock of the corporation of which he is a director which share shall stand in his name on the books
of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital
stock of the corporation of which he is a director shall thereby cease to be a director.Under the old Corporation Code, the eligibility of a director, strictly speaking, cannot be adversely
affected by the simple act of such director being a party to a voting trust agreement inasmuch as
he remains owner (although beneficial or equitable only) of the shares subject of the voting trust
agreement pursuant to which a transfer of the stockholder's shares in favor of the trustee is
required (section 36 of the old Corporation Code). No disqualification arises by virtue of the phrase
"in his own right" provided under the old Corporation Code. With the omission of the phrase "in his
own right" the election of trustees and other persons who in fact are not the beneficial owners of
the shares registered in their names on the books of the corporation becomes formally legalized
(see Campos and Lopez-Campos, supra, p. 296) Hence, this is a clear indication that in order to
be eligible as a director, what is material is the legal title to, not beneficial ownership of, the stock
as appearing on the books of the corporation (2 Fletcher, Cyclopedia of the Law of Private
Corporations, section 300, p. 92 [1969] citing People v. Lihme, 269111. 351, 109 N.E. 1051).
2. Mercantile Law; Corporation Code; Voting Trusts; A voting trust agreement results in the
separation of the voting rights of a stockholder from his other rights such as the right to receive

dividends and other rights to which a stockholder may be entitled until the liquidation of the
corporation.There can be no reliance on the inference that the five-year period of the voting trust agreement in
question had lapsed in 1986 so that the legal title to the stocks covered by the said voting trust
agreement ipso facto reverted to the petitioners as beneficial owners pursuant to the 6th paragraph
of section 59 of the new Corporation Code which reads: "Unless expressly renewed, all rights
granted in a voting trust agreement shall automatically expire at the end of the agreed period, and
the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees
shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of
the transferors." On the contrary, it is manifestly clear from the terms of the voting trust agreement
between ALFA and the DBP that the duration of the agreement is contingent upon the fulfillment of
certain obligations of ALFA with the DBP.
3. Remedial Law; Civil Procedure; Service of summons; If the defendant is a corporation organized
under the laws of the Philippines, service may be made on the president, manager, secretary,
cashier, agent or any of its directors.It is a basic principle in Corporation Law that a corporation has a personality separate and distinct
from the officers or members who compose it. (See Sulo ng Bayan Inc. v. Araneta, Inc., 72 SCRA
347 [1976]; Osias Academy v. Department of Labor and Employment, et al., G.R. Nos. 83257-58,
December 21, 1990). Thus, the above rule on service of processes on a corporation enumerates
the representatives of a corporation who can validly receive court processes on its behalf. Not
every stockholder or officer can bind the corporation considering the existence of a corporate entity
separate from those who compose it. The rationale of the aforecited rule is that service must be
made on a representative so integrated with the corporation sued as to make it a priori supposable
that he will realize his responsibilities and know what he should do with any legal papers served on
him. (Far Corporation v. Francisco, 146 SCRA 197 [1986] citing Villa Rey Transit, Inc. v. Far East
Motor Corp., 81 SCRA 303 [1978]).

Case Title : NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO

VILLATUYA, MARIO Y. CONSING and ROBERTO S. BENEDICTO, petitioners, vs. HON.
BENJAMIN AQUINO, in his official capacity as Presiding Judge of Branch VIII of the Court of First
Instance of Rizal, BATJAK, INC., GRACIANO A. GARCIA and MARCELINO CALINAWAN, JR.,
respondents., PHILIPPINE NATIONAL BANK, petitioner, vs. HON. BENJAMIN H. AQUINO, in his
capacity as Presiding Judge of the Court of First Instance of Rizal, Branch VIII and BATJAK,
INCORPOEATED, respondents.
Case Nature : PETITIONS for certiorari and prohibition with preliminary injunction to review the
orders of the Court of First Instance of Rizal, Br. VIII. Aquino, J.
Syllabi Class : Remedial Law|Corporations|Certiorari|Mjotion to Quash|General Rule|Jurisdiction|
Venue|Actions|Mandamus|nature of|Receivership|Voting Trust Agreement
Syllabi:
1. Remedial Law; Certiorari; Mjotion to Quash; General Rule; An order denying a motion to quash
or to dismiss is interlocutory and cannot be subject ofa petition for certiorari; Remedies ofthe
aggrieved party; Exceptions to the general ruJe.+

2. Remedial Law; Certiorari; Mjotion to Quash; Jurisdiction; Jurisdiction of CFI to issue a writ of
preliminary or permanent injunction is confmed within the province where the land in question is
situated.+
3. Remedial Law; Certiorari; Mjotion to Quash; Venue; Respondent Batjak's complaint should have
been filed in the provinces where the oil mills are located pursuajit to Sec. 2, Rule 4, par. A ofRules
ofCourt.+
4. Remedial Law; Certiorari; Mjotion to Quash; Actions; Every action must beprosecuted and
defended in the name ofthe real party in interest.+
5. Remedial Law; Certiorari; Mjotion to Quash; Mandamus, nature of; Legal Right, defined in Sec.
3, Rule 65 ofRules of Court.+
6. Remedial Law; Certiorari; Mjotion to Quash; Mandamus, nature of; Writ of mandamus will not
issue to give the applicant anything to which he is not entitled by law; Case at bar.+
7. Remedial Law; Certiorari; Mjotion to Quash; Receivership; A receiver ofproperty subject of the
action may be appointed by the court when the party applying for the appointment of a receiver has
an interest in said property.+
8. Remedial Law; Certiorari; Mjotion to Quash; Receivership; Prevention of imminent danger to
property, the guiding principle that governs courts in appointing receivers.+
9. Corporations; Voting Trust Agreement; A voting trust transfers only voting or other rights
pertaining to the shares subject of the agreement or control over the stock.ln any event, a voting trust transfers only voting or other rights pertaining to the shares subject of
the agreement, or control over the stock. The law on the matter is Section 59, paragraph 1 of the
Corporation Code (BP 68) which provides: "Sec. 59. Voting TrustsOne or more stockholders of a
stock corporation may create a voting trust for the purpose of confer- ing upon a trustee or trusties
the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at
any one time: x x x

Case Title : W. G. PHILPOTTS, petitioner, vs. PHILIPPINE MANUFACTURING COMPANY and F.

N. BERRY, respondents.
Case Nature : ORIGINAL ACTION in the Supreme Court. Mandamus.
Syllabi Class : CORPORATIONS|EXAMINATION OF COMPANY'S AFFAIRS BY STOCKHOLDER
Syllabi:
1. CORPORATIONS; EXAMINATION OF COMPANY'S AFFAIRS BY STOCKHOLDER; RIGHT OF
STOCKHOLDER TO ACT THROUGH REPRESENTATIVE.The right of examination into corporate affairs which is conceded to the stockholder by section 51
of the Corporation Law may be exercised either by the stockholder in person or by any duly
authorized representative.

Pardo v Hercules
Veraguth v Isabela Sugar,

Case Title : RAMON A. GONZALES, petitioner, vs. THE PHILIPPINE NATIONAL BANK,
respondent.
Case Nature : SPECIAL CIVIL ACTION for mandamus to review the decision of the Court of First
Instance of Manila.
Syllabi Class : Corporation Law|Banks
Syllabi:
1. Corporation Law; Under the new Corporation Code (B.P. No. 68) the right of a stockholder to
examine the books of a corporation is subject to certain limitations.As may be noted from the abovequoted provisions, among the changes introduced in the new
Code with respect to the right of inspection granted to a stockholder are the following: the records
must be kept at the principal office of the corporation; the inspection must be made on business
days; the stockholder may demand a copy of the excerpts of the records or minutes; and the
refusal to allow such inspection shall subject the erring officer or agent of the corporation to civil
and criminal liabilities. However, while seemingly enlarging the right of inspection, the new Code
has prescribed limitations to the same. It is now expressly required as a condition for such
examination that the one requesting it must not have been guilty of using improperly any
information secured through a prior examination, and that the person asking for such examination
must be acting in good faith and for a legitimate purpose in making his demand.
2. Corporation Law; The unqualified provision on the right of a stockholder to examine corporate
books under the old law (Act 1459) no longer holds true under B.P. No. 68.The unqualified provision on the right of inspection previously contained in Section 51, Act No.
1459, as amended, no longer holds true under the provisions of the present law. The argument of
the petitioner that the right granted to him under Section 51 of the former Corporation Law should
not be dependent on the propriety of his motive or purpose in asking for the inspection of the books
of the respondent bank loses whatever validity it might have had before the amendment of the law.
If there is any doubt in the correctness of the ruling of the trial court that the right of inspection
granted under Section 51 of the old Corporation Law must be dependent on a showing of proper
motive on the part of the stockholder demanding the same, it is now dissipated by the clear
language of the pertinent provision contained in Section 74 of Batas Pambansa Blg. 68.
3. Corporation Law; Stockholder has the duty of showing good motive or purpose for demanding
an examination of corporate books. One who acquired one share of stock of a bank to be able to
examine its books can hardly be said to have been motivated with good faith or proper purpose in
demanding inspection of the banks transactions before he became a stockholder.Although the petitioner has claimed that he has justifiable motives in seeking the inspection of the
books of the respondent bank, he has not set forth the reasons and the purposes for which he
desires such inspection, except to satisfy himself as to the truth of published reports regarding
certain transactions entered into by the respondent bank and to inquire into their validity. The
circumstances under which he acquired one share of stock in the respondent bank purposely to
exercise the right of inspection do not argue in favor of his good faith and proper motivation.
Admittedly he sought to be a stockholder in order to pry into transactions entered into by the
respondent bank even before he became a stockholder. His obvious purpose was to arm himself
with materials which he can use against the respondent bank for acts done by the latter when the
petitioner was a total stranger to the same. He could have been impelled by a laudable sense of

civic consciousness, but it could not be said that his purpose is germane to his interest as a
stockholder.
4. Corporation Law; Banks; The Philippine National Bank is not governed, as a rule, by the
Corporation Code, but by its Charter.The Philippine National Bank is not an ordinary corporation. Having a charter of its own, it is not
governed, as a rule, by the Corporation Code of the Philippines. Section 4 of the said Code
provides: SEC. 4. Corporations created by special laws or charters.Corporations created by
special laws or charters shall be governed primarily by the provisions of the special law or charter
creating them or applicable to them, supplemented by the provisions of this Code, insofar as they
are applicable.
5. Corporation Law; Banks; The right of a stockholder to examine corporate books under the new
Corporation Code does not apply to the Philippine National Bank.The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code with respect
to the right of a stockholder to demand an inspection or examination of the books of the corporation
may not be reconciled with the above-quoted provisions of the charter of the respondent bank. It is
not correct to claim, therefore, that the right of inspection under Section 74 of the new Corporation
Code may apply in a supplemental capacity to the charter of the respondent bank.

Richardson vs. Arizona Fuels Corp

Bitong vs. CA

Case Title : SAN MIGUEL CORPORATION, represented by EDUARDO DE LOS ANGELES,

petitioners, vs. ERNEST KAHN, ANDRES SORIANO III, BENIGNO TODA, JR., ANTONIO ROXAS,
ANTONIO PRIETO, FRANCISCO EIZMENDI, JR., EDUARDO SORIANO, RALPH KARR and
RAMON DEL ROSARIO, JR., respondents.
Case Nature : PETITION to review the decision of the Court of Appeals.
Syllabi Class : Actions|Corporation Law|Jurisdiction|Derivative Suit
Syllabi:
1. Actions; Jurisdiction; De los Angeles complaint does not involve any property illegally acquired
or misappropriated by Marcos, et al., or any incidents arising from, incidental to or related to any
case involving such property but assets indisputably belonging to San Miguel Corporation.The subject matter of his complaint in the SEC does not therefore fall within the ambit of this
Courts Resolution of August 10, 1988 on the cases just mentioned, to the effect that, citing PCGG
v. Pea, et al, all cases of the Commission regarding the funds, moneys, assets, and properties
illegally acquired or misappropriated by former President Ferdinand Marcos, Mrs. Imelda
Romualdez Marcos, their close relatives, Subordinates, Business Associates, Dummies, Agents, or
Nominees, whether civil or criminal, are lodged within the exclusive and original jurisdiction of the
Sandiganbayan, and all incidents arising from, incidental to, or related to, such cases necessarily
fall likewise under the Sandiganbayans exclusive and original jurisdiction, subject to review on
certiorari exclusively by the Supreme Court. His complaint does not involve any property illegally

acquired or misappropriated by Marcos, et al., or any incidents arising from, incidental to, or
related to any case involving such property, but assets indisputably belonging to San Miguel
Corporation which were, in his (de los Angeles) view, being illicitly committed by a majority of its
board of directors to answer for loans assumed by a sister corporation, Neptunia Co., Ltd.
2. Actions; Jurisdiction; The contention therefore that in view of this Courts ruling as regards the
sequestered SMC stock, the SEC has no jurisdiction over the de los Angeles complaint cannot be
sustained and must be rejected.De los Angeles complaint, in fine, is confined to the issue of the validity of the assumption by the
corporation of the indebtedness of Neptunia Co., Ltd., allegedly for the benefit of certain of its
officers and stockholders, an issue evidently distinct from, and not even remotely requiring inquiry
into the matter of whether or not the 33,133,266 SMC shares sequestered by the PCGG belong to
Marcos and his cronies or dummies (on which issue, as already pointed out, de los Angeles, in
common with the PCGG, had in fact espoused the affirmative). De los Angeles dispute, as
stockholder and director of SMC, with other SMC directors, an intra-corporate one, to be sure, is of
no concern to the Sandiganbayan, having no relevance whatever to the ownership of the
sequestered stock. The contention, therefore, that in view of this Courts ruling as regards the
sequestered SMC stock above adverted to, the SEC has no jurisdiction over the de los Angeles
complaint, cannot be sustained and must be rejected. The dispute concerns acts of the board of
directors claimed to amount to fraud and misrepresentation which may be detrimental to the
interest of the stockholders, or is one arising out of intra-corporate relations between and among
stockholders, or between any or all of them and the corporation of which they are stockholders.
3. Corporation Law; Derivative Suit; Theory that de los Angeles has no personality to bring suit in
behalf of the corporation cannot be sustained.The theory that de los Angeles has no personality to bring suit in behalf of the corporation
because his stockholding is minuscule, and there is a conflict of interest between him and the
PCGGcannot be sustained, either.
4. Corporation Law; Derivative Suit; The implicit argument that a stockholder to be considered as
qualified to bring a derivative suit must hold a substantial or significant block of stock finds no
support whatever in the law; Requisites for a derivative suit.It is claimed that since de los Angeles 20 shares (owned by him since 1977) represent only .
00001644% of the total number of outstanding shares (121,645,860), he cannot be deemed to
fairly and adequately represent the interests of the minority stockholders. The implicit argument
that a stockholder, to be considered as qualified to bring a derivative suit, must hold a substantial or
significant block of stockfinds no support whatever in the law. The requisites for a derivative suit
are as follows: a) the party bringing suit should be a shareholder as of the time of the act or
transaction complained of, the number of his shares not being material; b) he has tried to exhaust
intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate
relief but the latter has failed or refused to heed his plea; and c) the cause of action actually
devolves on the corporation, the wrongdoing or harm having been, or being caused to the
corporation and not to the particular stockholder bringing the suit.
5. Corporation Law; Derivative Suit; Bona fide ownership by a stockholder of stock in his own right
suffices to invest him with standing to bring a derivative action for the benefit of the corporation;
Number of shares is immaterial.-

The bona fide ownership by a stockholder of stock in his own right suffices to invest him with
standing to bring a derivative action for the benefit of the corporation. The number of his shares is
immaterial since he is not suing in his own behalf, or for the protection or vindication of his own
particular right, or the redress of a wrong committed against him, individually, but in behalf and for
the benefit of the corporation.
6. Corporation Law; Derivative Suit; Theory of conflict-of-interest cannot be upheld.Neither can the conflict-of-interest theory be upheld. From the conceded premise that de los
Angeles now sits in the SMC Board of Directors by the grace of the PCGG, it does not follow that
he is legally obliged to vote as the PCGG would have him do, that he cannot legitimately take a
position inconsistent with that of the PCGG, or that, not having been elected by the minority
stockholders, his vote would necessarily never consider the latters interests. The proposition is not
only logically indefensible, non sequitur, but also constitutes an erroneous conception of a
directors role and function, it being plainly a directors duty to vote according to his own
independent judgment and his own conscience as to what is in the best interests of the company.
Moreover, it is undisputed that apart from the qualifying shares given to him by the PCGG, he owns
20 shares in his own right, as regards which he cannot from any aspect be deemed to be
beholden to the PCGG, his ownership of these shares being precisely what he invokes as the
source of his authority to bring the derivative suit.
7. Corporation Law; Derivative Suit; Argument that the PCGG has no power to vote sequestered
shares of stock as an act of dominion but only in pursuance of its power of administration is
strained and of no merit.It is also theorized, on the authority of the BASECO decision, that the PCGG has no power to vote
sequestered shares of stock as an act of dominion but only in pursuance to its power of
administration. The inference is that the PCGGs act of voting the stock to elect de los Angeles to
the SMC Board of Directors was unauthorized and void; hence, the latter could not bring suit in the
corporations behalf. The argument is strained and obviously of no merit. As already more than
plainly indicated, it was not necessary for de los Angeles to be a director in order to bring a
derivative action; all he had to be was a stockholder, and that he wasowning in his own right 20
shares of stock, a fact not disputed by the respondents.
8. Corporation Law; Derivative Suit; Nothing in the Baseco decision which can be interpreted as
ruling that sequestered stock may not under any circumstances be voted by the PCGG to elect a
director in the company in which such stock is held.Nor is there anything in the Baseco decision which can be interpreted as ruling that sequestered
stock may not under any circumstances be voted by the PCGG to elect a director in the company in
which such stock is held. On the contrary, that it held such act permissible is evident from the
context of its reference to the Presidential Memorandum of June 26, 1986 authorizing the PCGG,
pending the outcome of proceedings to determine the ownership of x x sequestered shares of
stock, to vote such shares x x at all stockholders meetings called for the election of directors x x
the only caveat being that the stock is not to be voted simply because the power to do so exists,
whether it be to oust and replace directors or to effect substantial changes in corporate policy,
programs or practice, but only for demonstrably weighty and defensible grounds or when
essential to prevent disappearance or wastage of corporate property.

Pascual vs. Orosco

Case Title : JUAN D. EVANGELISTA ET AL., plaintiffs and appellants, vs. RAFAEL SANTOS,
defendant and appellee.
Case Nature : APPEAL from an order of the Court of First Instance of Rizal. Tan, J.
Syllabi Class : PLEADING AND PRACTICE|PARTIES|VENUE|CORPORATION
Syllabi:
1. PLEADING AND PRACTICE; VENUE; MERE SOJOURNING IN A PLACE DOES NOT MAKE
THE LATTER A RESIDENT FOR PURPOSES OF VENUEThe facts in this case show that the objection to the venue is well-founded. The fact that defendant
was sojourning in Pasay at the time he was served with summons does not make him a resident of
that place for purposes of venue.
2. PARTIES; CORPORATION; MISMANAGEMENT BY ITS OFFICER; RIGHT OF
STOCKHOLDERS TO BRING SUIT.The plaintiff stockholders have brought the action not for the benefit of the corporation but f or their
own benefit, since they ask that the def endant make good the losses occasioned by his
mismanagement and pay to them the value of their respective participation in the corporate assets
on the basis of their respective holdings.Clearly, this cannot be, done until all corporate debts, if
there be any, are paid and the existence of the corporation terminated by the limitation of its charter
or by lawful dissolution in view of the provisions of section 16 of the Corporation Law.

Case Title : REPUBLIC BANK, represented in this action by DAMASO P. PEREZ, etc., plaintiffappellant, vs. MIGUEL CUADERNO, BlENVENIDO DlZON, PABLO ROMAN, THE BOARD OF
DlRECTORS OF THE REPUBLIC BANK AND THE MONETARY BOARD OF THE CENTRAL
BANK OF THE PHILIPPINES, defendants-appellees.
Case Nature : APPEAL from an order of dismissal rendered by the Court of First Instance of
Manila. Lantin, 7.
Syllabi Class : Corporation|Pleadings|Banks|Motion to dismiss|Actions
Syllabi:
1. Corporation; Banks; Derivative suit by stockholder.An individual stockholder may institute a derivative or representative suit on behalf of the
corporation, wherein he holds stock, in order to protect or vindicate corporate rights, whenever the
of f icials of the corporation refuse to sue, or are the ones to be sued or hold control of the
corporation. In such actions, the suing stockholder is regarded as a nominal party, with the
corporation as the real party in interest.
2. Corporation; When authority of corporation to bring suit is not required.Such a suit need not be authorized by the corporation where its objective is to nullify the action
taken by its manager and the board of directors, in which case any demand for intra-corporate
remedy would be futile.
3. Corporation; Nonjoinder of other stockholders.The fact that no other stockholder has made common cause with the plaintiff is irrelevant since the
smallness of plaintiffs holding is no ground for denying him relief.

4. Corporation; Joinder of corporation.Whether in a derivative suit filed by a stockholder, the corporation should be joined as a plaintiff or
a defendant is not important. What is important is that the corporation should be made a party in
order to make the courts judgment binding upon it and thus bar future relitigations of the issues.
Misjoinder of parties is not a ground for dismissing an action.
5. Corporation; Derivative suit is not a quo warranto proceeding.A derivative suit by a stockholder for the purpose of annulling the appointment of a defendant as
Chairman of the Board of Directors is not a quo warranto proceeding. The plaintiff is not claiming
title to the position of Chairman of the Board of Directors. His action is designed to prevent
diversion of the corporate funds for the payment of the salary of said Chairman.
6. Corporation; Stockholders suit to annul actions of banks Board of Directors.A stockholder has a cause of action to annul certain actions of the Board of Directors of a bank,
which actions were considered anomalous and a breach of trust prejudicial to the bank.
7. Pleadings; Motion to dismiss; Hypothetical admission of facts alleged in the complaint.The facts pleaded in the com- plaint are deemed hypothetically admitted by the defendants who file
a motion to dismiss the complaint for failure to state a cause of action.
8. Pleadings; Actions; Sufficiency of cause of action.The test of sufficiency of the facts alleged in the complaint is whether or not the court could render
a valid judgment as prayed for, accepting as true the exclusive facts set forth in the complaint. If the
court should doubt the truth of the facts averred, it must not dismiss the complaint but should
require an answer and proceed to trial on the merits.
9. Pleadings; Pendency of other cases.A case should not be dismissed due to the pendency of other litigations between the same parties
if said ground was not invoked in the motion to dismiss, The .fact that said case may be
incorporated, by amendment, in any one of the other pending actions does not justify its dismissal
since the amendment of the complaint in the other cases rests on the discretion of the court. It is
possible that the amendment would not be allowed.

Case Title : CATALINA R. REYES, petitioner, vs. HON.BIENVENIDO A. TAN, as Judge of the
Court of First Instance of Manila, Branch XIII and FRANCISCA R. JUSTINIANI,respondents.
Case Nature : PETITION for review by certiorari of an order of the Court of First Instance of Manila.
Tan, J.
Syllabi Class : Corporations|Appointment of a receiver
Syllabi:
1. Corporations; Appointment of a receiver; When derivative suit may be brought.Where corporate directors are guilty of a breach of trustnot of mere error of judgment or abuse of
discretionand intra-corporate remedy is futile or useless, a stockholder may institute a suit in
behalf of himself and other stockholders and for the benefit of the corporation, to bring about a
redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholders
(Angeles vs. Santos, 64 Phil. 697).
2. Corporations; Failure of stockholder to take remedial steps against the corporation within two
years from commission of fraud not fatal to suit.-

Although the stockholder did not take steps to remedy the illegal importation by the corporation for
a period of two years, that act does not bar him from bringing an action for the appointment of a
receiver, because during that period of time he had the right to assume and expect that the
directors would remedy the anomalous situation of the corporation brought about by their own
wrong doing. Only after such period had elapsed could he conclude that the directors were remiss
in their duty to protect the corporation property and business.
3. Corporations; When expedient is necessary.Where the directors of the corporation permitted the fraudulent transaction to go unpunished by
allowing the importation of finished textile instead of raw cotton for the textile mill, and nothing
appears to have been done to remove the erring purchasing managers, the appointment of a
receiver may have been thought of by the court so that the dollar allocation for raw material may be
reviewed and the textile mill placed on an operating basis, because it is possible that if a receiver in
which the Central Bank may have confidence is appointed, the dollar allocation for raw material
may be restored.
Rural Bank Of Milaor vs. Ocfemia