Ali, Mhezreha D.
Spouses Firme another draft deed of sale ("Second
Spouses Constante Firme and Azucena E. Firme,
petitioners, vs. Bukal Enterprises and
Development Corporation, respondent.
G.R. No. 146608 October 23, 2003
Issue
Whether there was a perfected contract of
sale of real property between the Spouses Firme
and Bukal Enterprises and Development
Corporation.
Arguments made and Evidence filed by the
defendant
On 28 March 1995, Bukal Enterprises filed a
complaint for specific performance and damages
with the regional trial court, alleging that the
Spouses Firme refused on their agreement to sell
the parcel of land. The complaint asked the trial
court to order the Spouses Firme to execute the
deed of sale and to deliver the title of the
Property to Bukal Enterprises upon payment of the
agreed purchase price. The Regional Trial Court
reversed the complaint, stating that there is no
perfected contract.
Bukal Enterprises filed to the Court of
Appeals which later granted the complaint and the
spouses Firme are directed to henceforth execute
the Deed of Absolute Sale transferring the
ownership of the subject property Bukal
Enterprises immediately upon receipt of the
purchase price of ₱3,224,000.00 and to perform
all such acts necessary and proper to effect the
transfer of the property.
Subsequently, the Spouses Firme raised a
petition for review to the Supreme Court, to
decide on the case.
During trial, Bukal Enterprises presented
five witnesses, namely, Teodoro Aviles, Renato De
Castro, Antonio Moreno, Jocelyn Napa and Antonio
Ancheta.
Aviles testified that De Castro, the vice
president of the corporation, authorized him to
negotiate on behalf of Bukal Enterprises for the
purchase of the property. According to Aviles, he
met with the Spouses Firme on 23 January 1995
and he presented them with a draft deed of sale
("First Draft") dated February 1995.
The Spouses Firme rejected this First Draft
because of several objectionable conditions,
including the payment of capital gains and other
government taxes by the seller and the relocation
of the squatters at the seller’s expense. During
their second meeting, Aviles presented to the
Draft") dated March 1995.
The Spouses Firme allegedly accepted the
Second Draft in view of the deletion of the
objectionable conditions contained in the First
Draft. According to Aviles, the Spouses Firme were
willing to sell the Property at ₱4,000 per square
meter. They then agreed that payment would be
made at the Far East Bank and Trust Company
(FEBTC), Padre Faura Branch, Manila. However,
the scheduled payment had to be postponed due
to problems in the transfer of funds.
Aviles informed De Castro that the Spouses
Firme agreed to sell the Property at ₱4,000 per
square meter, payable in cash for a lump sum of
₱3,224,000. Furthermore, Bukal Enterprises
agreed to pay the taxes due and to undertake the
relocation of the squatters on the Property. For
this purpose, Bukal Enterprises applied for a loan
of ₱4,500,000 which FEBTC granted. Bukal
Enterprises then relocated the four families
squatting on the Property at a cost of ₱60,000 per
family. After the squatters vacated the Property,
Bukal Enterprises fenced the area, covered it with
filling materials, and constructed posts and riprap.
Bukal Enterprises spent approximately ₱300,000
for these improvements. In a letter dated 7 March
1995, Bukal Enterprises offered to pay the
purchase price of ₱3,224,000 to the Spouses Firme
upon execution of the transfer documents and
delivery of the owner’s duplicate copy of TCT No.
264243. The Spouses Firme did not accept this
offer but instead sent Bukal Enterprises a letter
demanding that its workers vacate the Property.
Bukal Enterprises then filed a complaint for
specific performance and damages.
Arguments made and Evidence filed by the
petitioner
The records indubitably show that there
was no consent on the part of the Spouses Firme.
Aviles did not present any draft deed of sale
during his first meeting with the Spouses Firme on
30 January 1995. Dr. Firme was consistent in his
testimony that he and his wife rejected the
provisions of the Third Draft presented by Aviles
during their second meeting on 6 February 1995.
The Spouses Firme found the terms and conditions
unacceptable and told Aviles that they would not
sell the property. Aviles showed them only one
draft deed of sale (Third Draft) during their
second and last meeting on 6 February 1995.2
When shown a copy of the First Draft, Dr. Firme
testified that it was not the deed of sale shown to
them by Aviles during their second meeting and
that the Third Draft was completely different from
the First Draft.
Even after the two meetings with Aviles,
the Spouses Firme were firm in their decision not
to sell the Property. Aviles called the Spouses
Firme twice after their last meeting. The Spouses
Firme informed Aviles that they were not selling
the Property. Aviles himself admitted this during
his testimony. Significantly, De Castro also
admitted that he was aware of the Spouses
Firme’s refusal to sell the Property.
The confusing testimony of Aviles taken
together with De Castro’s admission that he was
aware of the Spouses Firme’s refusal to sell the
Property reinforces Dr. Firme’s testimony that he
and his wife never consented to sell the Property.
On 6 March 1995, the Spouses Firme visited
their Property and discovered that there was a
hollow block fence on one side, concrete posts on
another side and bunkers occupied by workers of a
certain Florante de Castro. On 11 March 1995,
Spouses Firme visited the Property again with a
surveyor. The Spouses Firme sent a letter dated 20
March 1995 to Bukal Enterprises demanding
removal of the bunkers and vacation by the
occupants of the Property. On 22 March 1995, the
Spouses Firme received a letter dated 7 March
1995 from Bukal Enterprises demanding that they
sell the Property.
Supreme Court Decision
There was no perfected contract of sale.
Bukal Enterprises failed to establish that the
Spouses Firme gave their consent to the sale of
the Property. The parties did not go beyond the
negotiation stage and there was no evidence of
meeting of the minds between the parties.
Another piece of evidence which supports
the contention of the Spouses Firme that they did
not consent to the contract of sale is the fact they
never signed any deed of sale. If the Spouses
Firme were already agreeable to the offer of
Bukal Enterprises as embodied in the Second
Draft, then the Spouses Firme could have simply
affixed their signatures on the deed of sale, but
they did not.
Furthermore, Aviles had no valid authority
to bind Bukal Enterprises in the sale transaction.
Under Sections 23 and 36 (No. 7) of the
Corporation Code, the corporate power to
purchase a specific property is exercised by the
Board of Directors of the corporation. Without an
authorization from the Board of Directors, Aviles
could not validly finalize the purchase of the
Property on behalf of Bukal Enterprises.
With this, there was no approval from the
Board of Directors of Bukal Enterprises as would
finalize any transaction with the Spouses Firme.
Aviles did not have the proper authority to
negotiate for Bukal Enterprises. Aviles testified
that his friend, De Castro, had asked him to
negotiate with the Spouses Firme to buy the
Property. De Castro, as Bukal Enterprises’ vice
president, testified that he authorized Aviles to
buy the Property. However, there is no Board
Resolution authorizing Aviles to negotiate and
purchase the Property on behalf of Bukal
Enterprises.
It is the board of directors or trustees
which exercises almost all the corporate powers in
a corporation. The power to purchase real
property is vested in the board of directors or
trustees. While a corporation may appoint agents
to negotiate for the purchase of real property
needed by the corporation, the final say will have
to be with the board, whose approval will finalize
the transaction. A corporation can only exercise
its powers and transact its business through its
board of directors and through its officers and
agents when authorized by a board resolution or
its by-laws.
Alim, Sittie Hashaira K.
Alhambra Cigar & Cigarette Manufacturing
Company, Inc., petitioner, vs. Securities &
Exchange Commission, respondent.
G.R. No L-23606 July 29, 1969
Issue
Whether or not a corporation under
liquidation may still amend its articles of
incorporation to extend its lifespan.
Arguments made and Evidence filed by the
defendant
On November 18, 1963, Securites Exchange
Commission, the defendant, returned said
amended articles of incorporation to Alhambra's
counsel with the ruling that Republic Act 3531
"which took effect only on June 20, 1963, cannot
be availed of by the said corporation, for the
reason that its term of existence had already
expired when the said law took effect in short,
said law has no retroactive effect."
On September 8, 1964, SEC, after a
conference hearing, issued an order denying the
reconsideration sought.
Arguments made and Evidence filed by the
petitioner
Petitioner Alhambra Cigar and Cigarette
Manufacturing Company, Inc. (hereinafter referred
to simply as Alhambra) was duly incorporated
under Philippine laws on January 15, 1912. By its
corporate articles it was to exist for fifty (50)
years from incorporation. Its term of existence
expired on January 15, 1962. On that date, it
ceased transacting business, entered into a state
of liquidation.
In 1963, while Alhambra was liquidating,
Republic Act 3531 was enacted.
On June 20, 1963 — within Alhambra's
three-year statutory period for liquidation -
Republic Act 3531 was enacted into law. It
amended Section 18 of the Corporation Law; it
empowered domestic private corporations to
extend their corporate life beyond the period
fixed by the articles of incorporation for a term
not to exceed fifty years in any one instance.
Previous to Republic Act 3531, the maximum non-
extendible term of such corporations was fifty
years.
On July 15, 1963, at a special meeting,
Alhambra's board of directors resolved to amend
paragraph “Fourth” of its articles of incorporation
to extend its corporate life for an additional fifty
years, or a total of 100 years from its
incorporation.
On August 26, 1963, Alhambra's
stockholders, representing more than two-thirds
of its subscribed capital stock, voted to approve
the foregoing resolution. The "Fourth" paragraph
of Alhambra's articles of incorporation was thus
altered to read:
FOURTH. That the term for which said
corporation is to exist is fifty (50) years from and
after the date of incorporation, and for an
additional period of fifty (50) years thereafter.
On October 28, 1963, Alhambra's articles of
incorporation as so amended certified correct by
its president and secretary and a majority of its
board of directors, were filed with respondent
Securities and Exchange Commission (SEC).
Supreme Court Decision
No. Alhambra cannot avail of the new law
because it has already expired at the time of its
passage.
For, implicit in Section 77 heretofore
quoted is that the privilege given
to prolong corporate life under the amendment
must be exercised before the expiry of the term
fixed in the articles of incorporation.
The common law rule, at the beginning,
was rigid and inflexible in that upon its
dissolution, a corporation became legally dead for
all purposes. Statutory authorizations had to be
provided for its continuance after dissolution “for
limited and specified purposes incident to
complete liquidation of its affairs”. Thus, the
moment a corporation’s right to exist as an
“artificial person” ceases, its corporate powers
are terminated “just as the powers of a natural
person to take part in mundane affairs cease to
exist upon his death”. There is nothing left but to
conduct, as it were, the settlement of the estate
of a deceased juridical person.
Andongan, Lica Krisha L
The Rural Bank of Lipa City Inc., etc., petitioners,
vs. Court of Appeals, respondent.
GR No. 124535 September 28, 2001
Issue
Whether there was valid transfer of the shares to
the Bank.
Arguments made and Evidence filed by the
defendant
Reynaldo Villanueva, Sr., a stockholder of
the Rural Bank of Lipa City, executed a Deed of
Assignment, wherein he assigned his shares, as
well as those of 8 other shareholders under his
control with a total of 10,467 shares, in favor of
the stockholders of the Bank represented by its
directors Bernardo Bautista, Jaime Custodio and
Octavio Katigbak. Sometime thereafter, Reynaldo
Villanueva, Sr. and his wife, Avelina, executed an
agreement wherein they acknowledged their
indebtedness to the Bank in the amount of
P4,000,000.00, and stipulated that said debt will
be paid out of the proceeds of the sale of their
real property described in the Agreement. The
Villanuevas' shares of stock were converted into
Treasury Stocks. Through their counsel, they
questioned the legality of the conversion of their
shares. In reply, the new set of officers of the
Bank informed Atty. Ignacio, their counsel, that
the Villanuevas were no longer entitled to notice
of the said meeting since they had relinquished
their rights as stockholders in favor of the Bank.
Consequently, the Villanueva spouses filed with
the Securities and Exchange Commission (SEC), a
petition for annulment of the stockholders'
meeting and election of directors and officers on
15 January 1994, with damages and prayer for
preliminary injunction.
Arguments made and Evidence filed by the
petitioner
At a meeting of the Board of Directors of
the Bank on November 15 1993, The Villanueva
spouses assured the Board that their debt would
be paid on or before December 31 of that same
year; otherwise, the Bank would be entitled to
liquidate their shareholdings, including those
under their control. In such event, should the
proceeds of the sale of said shares fail to satisfy in
fulfil the obligation, the unpaid balance shall be
secured by other collateral sufficient therefor.
The Villanueva spouses failed to settle their
obligation to the Bank on the due date, the Board
sent them a letter demanding: (1) the surrender
of all the stock certificates issued to them; and
(2) the delivery of sufficient collateral to secure
the balance of their debtamounting to
P3,346,898.54. The Villanuevas ignored the bank's
demands, whereupon their shares of stock were
converted into Treasury Stocks. A writ of
preliminary injunction was issued enjoining
Bautista, et. al. from acting as directors and
officers of the bank. Thereafter, Bautista, et al.
filed an urgent motion to quash the writ of
preliminary injunction, challenging the propriety
of the said writ considering that they had not yet
received a copy of the order granting the
application for the writ of preliminary injunction.
A petition for Certiorari and Annulment
with damages was filed by the Rural Bank, its
directors and officers before the SEC. On June 7
1995, the SEC denied the petition for certiorari. A
subsequent motion for reconsideration was
likewise denied by the. A petition for review was
filed before the Court of Appeals, assailing such
order. The appellate court upheld the ruling of
the SEC. Bautista, et al.'s motion for
reconsideration was likewise denied by the
Courtof Appeals in an order dated 29 March 1996.
The bank, Bautista, et al. filed the instant petition
for review.
Supreme Court Decision
On 6 April 1994, the Villanuevas'
application for the issuance of a writ of
preliminary injunction was denied by the SEC
Hearing Officer on the ground of lack of sufficient
basis for the issuance thereof. However, a motion
for reconsideration was granted on 16 December
1994, upon finding that since the Villanuevas' have
not disposed of their shares, whether voluntarily
or involuntarily, they were still stockholders
entitled to notice of the annual stockholders'
meeting was sustained by the SEC.
For a valid transfer of stocks, there must
be strict compliance with the mode of transfer
prescribed by law. The requirements are:
(a) There must be delivery of the stock
certificate:
(b) The certificate must be endorsed by
the owner or his attorney-in-fact or other persons
legally authorized to make the transfer; and
(c) To be valid against third parties, the
transfer must be recorded in the books of the
corporation.
As it is, compliance with any of these
requisites has not been clearly and sufficiently
shown. Still, while the assignment may be valid
and binding on the bank, et al. and the
Villanuevas, it does not necessarily make the
transfer effective. Consequently, the bank e tal.,
as mere assignees, cannot enjoy the status of a
stockholder, cannot vote nor be voted for, and
will not be entitled to dividends, insofar as the
assigned shares are concerned. Parenthetically,
the Villanuevas cannot, as yet, be deprived of
their rights as stockholders, until and unless the
issue of ownership and transfer of the shares in
question is resolved with finality.
Bulosan, Reggie Nicole C.
Concept Builders, Inc., petitioner, vs. NLRC,
defendant.
G.R. No. 108734 May 29, 1996
Issue
Whether the doctrine of piercing the veil of
corporate fiction is applicable.
Arguments made and Evidence filed by the
defendant
Private respondents filed a complaint for
illegal dismissal, unfair labor practice and non-
payment of their legal holiday pay, overtime pay
and thirteenth-month pay against petitioner. On
November, 1981 they received notices of
termination of employment stating that their
contracts had expired and the project was
completed. Respondents found it to be, that the
project has not yet been finished and completed.
The Labor Arbiter rendered judgment
ordering petitioner to reinstate private
respondents and to pay them back wages. On
October 29, 1986, the Labor Arbiter issued a writ
of execution directing the sheriff to execute the
Decision. The writ was partially satisfied. The
sheriff issued a report stating that he tried to
serve the alias writ of execution on petitioner
through the security guard on duty but the service
was refused on the ground that petitioner no
longer occupied the premises.
Upon motion of private respondents, the
Labor Arbiter issued a second alias writ of
execution. The said writ had not been enforced by
the special sheriff because;
(1) All the employees inside petitioner's
premises claimed that they were
employees of Hydro Pipes Philippines, Inc.
(HPPI) and not by respondent;
(2) Levy was made upon personal
properties he found in the premises;
(3) Security guards with high-powered guns
prevented him from removing the
properties he had levied upon.
In this case, the NLRC noted that, while
petitioner claimed that it ceased its business
operations on April 29, 1986, it filed an
Information Sheet with the Securities and
Exchange Commission on May 15, 1987, stating
that its office address is at 355 Maysan Road,
Valenzuela, Metro Manila. On the other hand,
HPPI, the third-party claimant, submitted on the
same day, a similar information sheet stating that
its office address is the same as Concept Builders,
Inc.
Also, both information sheets were filed by
the same Virgilio O. Casino as the corporate
secretary of both corporations. It would also not
be amiss to note that both corporations had the
same president, the same board of directors, the
same corporate officers, and substantially the
same subscribers.
Arguments made and Evidence filed by the
petitioner
Dennis Cuyegkeng filed a third-party claim
with the Labor Arbiter alleging that the properties
sought to be levied upon by the sheriff were
owned by Hydro (Phils.), Inc. (HPPI) of which he is
the Vice-President.
Petitioner alleges that the NLRC committed
grave abuse of discretion when it ordered the
execution of its decision despite a third-party
claim on the levied property. Petitioner further
contends, that the doctrine of piercing the
corporate veil should not have been applied, in
this case, in the absence of any showing that it
created HPPI in order to evade its liability to
private respondents. It also contends that HPPI is
engaged in the manufacture and sale of steel,
concrete and iron pipes, a business which is
distinct and separate from petitioner's
construction business. Hence, it is of no
consequence that petitioner and HPPI shared the
same premises, the same President and the same
set of officers and subscribers.
Supreme Court Decision
The petition is DISMISSED and the assailed
resolutions of the NLRC are AFFIRMED.
It is a fundamental principle of corporation
law that a corporation is an entity separate and
distinct from its stockholders and from other
corporations to which it may be connected. But,
this separate and distinct personality of a
corporation is merely a fiction created by law for
convenience and to promote justice. So, when the
notion of separate juridical personality is used to
defeat public convenience, justify wrong, protect
fraud or defend crime, or is used as a device to
defeat the labor laws, this separate personality of
the corporation may be disregarded or the veil of
corporate fiction pierced. This is true likewise
when the corporation is merely an adjunct, a
business conduit or an alter ego of another
corporation.
Clearly, petitioner ceased its business
operations in order to evade the payment to
private respondents of back wages and to bar their
reinstatement to their former positions. HPPI is
obviously a business conduit of petitioner
corporation and its emergence was skillfully
orchestrated to avoid the financial liability that
already attached to petitioner corporation.
Caralde, Louie F.
Woodchild Holdings, Inc., petitioner, vs. Roxas
Electric And Construction Company, Inc.,
defendant.
G.R. No. 140667 August 12, 2004
Issue
Whether or not the respondent is bound by
the provisions in the deed of absolute sale
granting to the petitioner beneficial use and a
right of way over a portion of Lot accessing to the
Sumulong Highway and granting the option to the
petitioner to buy a portion thereof, and, if so,
whether such agreement is enforceable against
the respondent?
Arguments made and Evidence filed by the
defendant
The respondent Roxas Electric and
Construction Company, Inc. (RECCI), formerly the
Roxas Electric and Construction Company, was the
owner of two parcels of land. A portion of Lot No.
491-A-3-B-1 which abutted Lot No. 491-A-3-B-2
was a dirt road accessing to the Sumulong
Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the
respondent's Board of Directors approved a
resolution authorizing the corporation, through its
president, Roberto B. Roxas, to sell the Lots, at a
price and under such terms and conditions which
he deemed most reasonable and advantageous to
the corporation.
Petitioner Woodchild Holdings, Inc. (WHI)
wanted to buy the Lot on which it planned to
construct its warehouse building, and a portion of
the adjoining lot, so that its 45-foot container van
would be able to readily enter or leave the
property.
On September 5, 1991, a Deed of Absolute
Sale in favor of WHI was issued, under which the
Lot was sold for P5,000,000, receipt of which was
acknowledged by Roxas under the following terms
and conditions:
 The Vendor agree (sic), as it hereby agrees
and binds itself to give Vendee the
beneficial use of and a right of way from
Sumulong Highway to the property herein
conveyed consists of 25 square meters wide
to be used as the latter's egress from and
ingress to and an additional 25 square
meters in the corner of Lot No. 491-A-3-B-
1, as turning and/or maneuvering area for
Vendee's vehicles.
 The Vendor agrees that in the event that
the right of way is insufficient for the
Vendee's use (ex entry of a 45-foot
container) the Vendor agrees to sell
additional square meters from its current
adjacent property to allow the Vendee full
access and full use of the property.
 The Vendor hereby undertakes and agrees,
at its account, to defend the title of the
Vendee to the parcel of land and
improvements herein conveyed, against all
claims of any and all persons or entities,
and that the Vendor hereby warrants the
right of the Vendee to possess and own the
said parcel of land and improvements
thereon and will defend the Vendee
against all present and future claims
and/or action in relation thereto, judicial
and/or administrative.
The RECCI alleged that it never authorized its
former president, Roberto Roxas, to grant the
beneficial use of any portion of Lot No. 491-A-3-B-
1, nor agreed to sell any portion thereof or create
a lien or burden thereon. It alleged that, under
the Resolution approved on May 17, 1991, it
merely authorized Roxas to sell Lot No. 491-A-3-B-
2 covered by TCT No. 78086. As such, the grant of
a right of way and the agreement to sell a portion
of Lot No. 491-A-3-B-1 covered by TCT No. 78085
in the said deed are ultra vires. The RECCI further
alleged that the provision therein that it would
sell a portion of Lot No. 491-A-3-B-1 to the WHI
lacked the essential elements of a binding
contract.
In its amended answer to the complaint, the
RECCI alleged that the delay in the construction of
its warehouse building was due to the failure of
the WHI's contractor to secure a building permit
thereon.
Arguments made and Evidence filed by the
petitioner
On March 31, 1992, WHI and WBI executed
a Letter-Contract for the construction of the
warehouse building for P11,804,160.13 The
contractor started construction in April 1992 even
before the building officials of Antipolo City issued
a building permit on May 28, 1992. After the
warehouse was finished, WHI issued on March 21,
1993 a certificate of occupancy by the building
official. Earlier, or on March 18, 1993, WHI, as
lessor, and Ponderosa, as lessee, executed a
contract of lease over a portion of the property
for a monthly rental of P300,000 for a period of
three years from March 1, 1993 up to February 28,
1996.
The WHI demanded that the RECCI sell a
portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085 for its beneficial use within 72 hours from
notice thereof, otherwise the appropriate action
would be filed against it. RECCI rejected the
demand of WHI. WHI reiterated its demand in a
Letter dated May 29, 1992. There was no response
from RECCI.
The petitioner now comes to this Court
asserting that:
 The Court of Appeals erred in holding that
the deed of absolute sale (EXH. “C”) is
ultra vires.
 The Court of Appeals gravely erred in
reversing the ruling of the court a quo
allowing the plaintiff-appellee the
beneficial use of the existing right of way
plus the stipulated 25 square meters and
55 square meters because these are valid
stipulations agreed by both parties to the
deed of absolute sale (EXH. “C”).
 There is no actual proof or evidence for
the Court of Appeals to rule that the
stipulations of the deed of absolute sale
(EXH. “C”) were disadvantageous to the
appellee, nor was appellee deprived of its
property without due process.
 In fact, it was Woodchild who was deprived
of property without due process by the
assailed decision.
 The delay in the construction was due to
the failure of the appellant to evict the
squatters on the land as agreed in the deed
of absolute sale (EXH. “C”).
 The Court of Appeals gravely erred in
reversing the ruling of the court a quo
directing the defendant to pay the plaintiff
the amount of P5,568,000.00 representing
actual damages and plaintiff’s unrealized
income as well attorney’s Fees.
Supreme Court Decision
In light of all the foregoing, judgment is
hereby rendered affirming the assailed Decision of
the Court of Appeals with modification. The
respondent is ordered to pay to the petitioner the
amount of P5,612,980 by way of actual damages
and P100,000 by way of attorney's fees. No costs.
SO ORDERED.
Maugin, Ma. Erika U.
Republic of the Philippines, plaintiff-appellee, vs.
Acoje Mining Company, Inc., defendant-appellant.
G.R. No. L-18062 February 28, 1963
Issue
Whether or not the board of directors’ acts
was ultra vires?
Arguments made and Evidence filed by the
defendant
A post office branch was opened on
October 13,1949 due to the request of Acoje
Mining Company to the Director of Post to service
its employees and their families that are living in
the camp. The request was granted with
accompanying conditions set by the Director of
Post. On May 11, 1954,an employee of Acoje filed
a three-day leave and did not return ever since.
With this unexpected turn of events and to receive
compensation, a lawsuit was filed with Acoje
Mining Company as respondent. The company in
its answer denied liability for the shortage found
worth P13,867.24 and insisted that the resolution
of the board of directors is ultra vires, and in any
event its liability under said resolution is only that
of a guarantor who answers only after the
exhaustion of the properties of the principal,
aside from the fact that the loss claimed by the
plaintiff is not supported by the office record.
Arguments made and Evidence filed by the
petitioner
Several demands were made upon the
company for the payment of the shortage, having
failed, the post office demanded payment and
filed a suit with the Court of First Instance (CFI) of
Manila for the shortage due to the agreement that
the company should assume direct responsibility
for whatever pecuniary loss may be suffered by
the Bureau of Posts by reason of any act of
dishonesty, carelessness or negligence on the part
of the employee of the company who is assigned
to take charge of the post office. It was proven
that the opening of the post office was not the
idea of the government and it was only agreed
upon thorough study of the necessity of the
establishment and the declaration of the company
about its willingness to comply with the
requirements imposed by the petitioner.
Supreme Court Decision
Resolution adopted by the company to
open a post office branch at the mining camp and
to assume sole and direct responsibility for any
dishonest, careless or negligent act of its
appointed postmaster is not ultra vires because
the act covers a subject which concerns
promote the convenience and benefit of its
employees and their families. There are certain
corporate acts that may be performed outside of
the scope of the powers expressly conferred if
they are necessary to promote the interest or
welfare of the corporation.
"A mere reading of the resolution of the
Board of Directors dated August 31, 1949, upon
which the plaintiff based its claim would show
that the responsibility of the defendant company
is not just that of a guarantor. Notice that the
phraseology and the terms employed are so clear
and sweeping and that the defendant
assumed 'full responsibility for all cash received
by the Postmaster.' Here the responsibility of the
defendant is not just that of a guarantor. It is
clearly that of a principal."
WHEREFORE, the decision appealed from is
affirmed. No costs.
Datumanguda, Fatima Erica I.
Cecilia Castillo, et. al., petitioner vs. Angeles
Balinghasay, et. al., defendant.
G.R. No. 150976 October 18, 2004
Issue
Whether or not the law referred to in the
amendment to Article VII refers to the New
Corporation Code and as such holders of class “B”
shares have the right to vote and be voted upon
Arguments made and Evidence filed by the
defendant
Petitioners and defendants are
stockholders of Medical Center Paranaque, Inc.
(MCPI, for brevity) with the former holding class
“B” shares while the latter owning class “A”
shares. MCPI was incorporated when the Old
Corporation Code was then in force. Under Article
VII of its Articles of Incorporation, only holders of
class “A” shares have the right to vote and be
voted for during their annual stockholders
election.
In their response, Angeles Balinghasay, et.
al. averred that the provisions of Article VII clearly
and categorically state that only holders of Class
"A" shares have the exclusive right to vote and be
elected as directors and officers of the
corporation. They denied that the exclusivity was
intended only as a privilege granted to founder's
shares, as no such proviso is found in the Articles
of Incorporation. The defendants further claimed
that the exclusivity of the right granted to Class
"A" holders cannot be defeated or impaired by any
subsequent legislative enactment, e.g. the New
Corporation Code, as the Articles of Incorporation
is an intra-corporate contract between the
corporation and its members; between the
corporation and its stockholders; and among the
stockholders. They submit that to allow Class "B"
shareholders to vote and be elected as directors
would constitute a violation of MCPI's franchise or
charter as granted by the State.
Arguments made and Evidence filed by the
petitioner
The said Articles of Incorporation was
amended three times, however, only holders of
class “B” shares are still deprived to vote and be
voted for. Cecilia Castillo, et. al. protested
claiming that Article VII was null and void for
depriving them, as holders of class “B” shares, of
their right to vote and be voted upon, in violation
of the New Corporation Code. They alleged that
the phrase, under Artice VII, “except when
otherwise provided by law” grants them the right
to vote under the New Corporation Code.
Before the trial court, the herein
petitioners alleged that they were deprived of
their right to vote and to be voted on as directors
at the annual stockholders' meeting held on
February 9, 2001, because respondents had
erroneously relied on Article VII of the Articles of
Incorporation of MCPI, despite Article VII being
contrary to the Corporation Code, thus null and
void. Additionally, respondents were in estoppel,
because in the past, petitioners were allowed to
vote and to be elected as members of the board.
They further claimed that the privilege granted to
the Class "A" shareholders was more in the nature
of a right granted to founder's shares.

Supreme Court Decision
The Supreme Court found and so held that
the law referred to in the amendment to Article
VII refers to the Corporation Code and no other
law. At the time of the incorporation of MCPI in
1977, the right of a corporation to classify its
shares of stock was sanctioned by Section 5 of Act
No. 1459. The law repealing Act No. 1459, B.P.
Blg. 68, retained the same grant of right of
classification of stock shares to corporations, but
with a significant change.
Under Section 6 of B.P. Blg. 68, the
requirements and restrictions on voting rights
were explicitly provided for, such that "no share
may be deprived of voting rights except those
classified and issued as "preferred" or
"redeemable" shares, unless otherwise provided in
this Code" and that "there shall always be a class
or series of shares which have complete voting
rights."
One of the rights of a stockholder is the
right to participate in the control and
management of the corporation that is exercised
through his vote. The right to vote is a right
inherent in and incidental to the ownership of
corporate stock, and as such is a property right.
The stockholder cannot be deprived of the right to
vote his stock nor may the right be essentially
impaired, either by the legislature or by the
corporation, without his consent, through
amending the charter, or the by-laws.
Gampong, Shaira M.
Zambrano, et. al., vs. Philippine Carpet
Manufacturing Corporation
GR No. 224099 June 21, 2017
Issue
 WON Pacific Carpet may be held liable for
Phil Carpet’s obligations?
 Is respondent liable for unfair labor
practice?
 Should the doctrine of piercing the
corporate veil be applied?
Arguments made and Evidence file by the
defendant
 On January 3, 2011, Philippine Carpet
Manufacturing Corporation, defendant
notified their employees Rommel M.
Zambrano, Romeo O. Calipay, Jesus L.
Chin, et al., of the termination of their
employment effective February 3, 2011 on
the ground of cessation of operation due to
serious business losses.
 They countered that it permanently closed
and totally ceased its operations because
there had been a steady decline in the
demand for its products due to Thbal
recession, stiffer competition, and the
effects of a changing market.
 They continuously incurred losses starting
2007, as shown by the Audited Financial
Statements affirmed in toto by the NLRC,
and subsequently by the CA., it incurred
losses of ₱4.1M in 2006; ₱12.8M in 2007;
₱53.28M in 2008; and ₱47.79M in 2009. As
of the end of October 2010, unaudited
losses already amounted to ₱26.59M.
 Thus, in order to stem the bleeding, the
company implemented several cost-cutting
measures, including voluntary redundancy
and early retirement programs.
Arguments made and evidence file by the
petitioner
 Rommel M. Zambrano, Romeo O. Calipay,
Jesus L. Chin, et al., petitioner believed
that their dismissal or the termination of
their employment was without just cause &
refuse to consider these losses as serious
enough to warrant Phil Carpet's total and
permanent closure ,
 They asserted that their dismissal
constituted unfair labor practice as it
involved the mass dismissal of all union
officers and members of the Philippine
Carpet Manufacturing Corp.
 Petitioners question the validity of the
quitclaims they signed on the ground that
Phil. Carpet's closure was a mere pretense
as they transfer not only its operations but
also job orders of some regular clients and
several machines to its wholly owned and
controlled corporation, Pacific Carpet
Manufacturing Corporation (Pacific
Carpet).
 Petitioners claimed that Pacific Carpet
Corp. should be liable for the obligations of
the Philippine Carpet Corp. & asked the
court to disregard its "separate corporate
personality" as they insist that there is an
application of " alter ego principle".
Supreme Court Decision
The petition is bereft of merit.
Petitioners failed to present substantial evidence
to prove their allegation that Pacific Carpet is a
mere alter ego of Philippine Carpet Corp. & did
not identify the acts of Phil Carpet which, they
claimed, constituted unfair labor practice.
 There was no alter ego or control even
though there is control in the subsidiary, it
does not amount to alter ego. There is
absence of harm and fraud, such move of
Philippine Carpet Corp. to cease its
operation is lawful and there is no unfair
labor practice committed.
 In order for there to be piercing of the veil
based on alter ego the three elements
must occur together.
 There was complete control,
 there was an intention to defraud using
that control, and
 you caused harm to another person
because of that control.
The fact that you own all the stocks in a certain
corporation and another corporation owns the
stocks in another corporation does not mean
automatically that you will apply the alter ego
rule. All three elements must occur.
In this case, it is true that there was control by
Phil Carpet of Pacific Carpet. It owned 100% of the
shares. However, it was also found that there was
no fraud and there was no harm.
Phil carpet’s reason for closure was legitimate. It
was shown by the audited FS of the corporation
that it was really losing money and based on the
Labor Code, that is a sufficient ground to
terminate your employees.
Glang, Jameel Mujahid O.
Ricardo A. Nava, petitioner-appellant, vs. Peers
Marketing Corporation, Renato R. Cusi and Amparo
Cusi, respondents-appellees
G.R. No. L-28120 November 25, 1967
Issue
Whether the officers of Peers Marketing
Corporation can be compelled by mandamus to
enter in its stock and transfer book the sale made
by Teofilo Po to Ricardo A. Nava of the 20 shares
forming part of Po's subscription of 80 shares, with
a total par value of P8,000 and for which Po had
paid only P2,000, it being admitted that the
corporation has an unpaid claim of P6,000 as the
balance due on Po's subscription and that the 20
shares are not covered by any stock certificate.
Arguments made and Evidence filed by the
defendant
The request of Nava was denied because Po
has not paid fully the amount of his subscription.
Nava was informed that Po was delinquent in the
payment of the balance due on his subscription
and that the corporation had a claim on his entire
subscription of 80 shares which included the 20
shares that had been sold to Nava.
The corporation and the Cusis pleaded the
defence that no shares of stock against which the
corporation holds an unpaid claim are transferable
in the books of the corporation.
Arguments made and Evidence filed by the
petitioner
Teofilo Po as an incorporator subscribed to 80
shares of Peers Marketing Corporation at P100 a
share or a total par value of P8, 000. Po paid P2,
000 or 25% of the amount of his subscription. No
certificate of stock was issued to him or, for that
matter, to any incorporator, subscriber or
stockholder. On 2 April 1966 Po sold to Ricardo A.
Nava for P2, 000 20 of his 80 shares. In the deed
of sale Po represented that he was "the absolute
and registered owner of twenty shares" of Peers
Marketing Corp. Nava requested the officers of the
corporation to register the sale in the books of the
corporation.
Nava appealed on the ground that the
decision "is contrary to law". His sole assignment
of error is that the trial court erred in applying
the ruling in Fua Cun vs. Summers and China
Banking Corporation, 44 Phil. 705 to justify
respondents' refusal in registering the twenty
shares in Nava's name in the books of the corpo-
ration.
Appellant Nava contends that the Fua
Cun case was decided under section 36 of the
Corporation Law which provides that "no
certificate of stock shall be issued to a subscriber
as fully paid up until the full par value thereof has
been paid by him to the corporation". Section 36
was amended by Act No. 3518. It is now section
37. Section 37 provides that "no certificate of
stock shall be issued to a subscriber as fully paid
up until the full par value thereof, or the full
subscription in case of no par stock, has been paid
by him to the corporation".
Nava argues that under section 37 a
certificate of stock may be issued for shares the
par value of which have already been paid for
although the entire subscription has not been fully
paid. He contends that Peers Marketing
Corporation should issue a certificate of stock for
the twenty shares, notwithstanding that Po had
not paid fully his subscription for the eighty
shares, because section 37 requires full payment
for the subscription, as a condition precedent for
the issuance of the certificate of stock, only in the
case of no par stock.
Nava relies on Baltazar vs. Lingayen Gulf
Electric Power Co., Inc., L-16236-38, June 30,
1965, 14 SCRA 522, where it was held that section
37 "requires as a condition before a shareholder
can vote his shares, that his full subscription be
paid in the case of no par value stock; and in case
of stock corporation with par value, the
stockholder can vote the shares fully paid by him
only, irrespective of the unpaid delinquent
shares".
Supreme Court Decision
The transfer made by Po to Nava is not the
"alienation, sale, or transfer of stock" that is
supposed to be recorded in the stock and transfer
book, as contemplated in section 52 of the
Corporation Law. As a rule, the shares which may
be alienated are those which are covered by
certificates of stock. The twenty shares in
question, however, are not covered by any
certificate of stock in Po's name. Moreover, the
corporation has a claim on the said shares for the
unpaid balance of Po's subscription. A stock
subscription is a subsisting liability from the time
the subscription is made. The subscriber is as
much bound to pay his subscription as he would be
to pay any other debt. The right of the
corporation to demand payment is no less
incontestable. A corporation cannot release an
original subscriber from paying for his shares
without a valuable consideration or without the
unanimous consent of the stockholders. Thus,
herein, there is no clear legal duty on the part of
the officers of the corporation to register the 20
shares in Nava's name. As no stock certificate was
issued to Po; and without the stock certificate,
which is the evidence of ownership of corporate
stock, the assignment of corporate shares is
effective only between the parties to the
transaction. The delivery of the stock certificate,
which represents the shares to be alienated, is
essential for the protection of both the
corporation and its stockholders.
Escolano, Mary Levie A.
Land Bank of the Philippines, petitioner, vs.
Eduardo M. Cacayuran, respondent.
G.R No. 191667 April 17, 2013
Issue:
a. Whether Cacayuran has standing to sue
b. Whether the Subject Resolutions were
validly passed
c. Whether the Subject Loans are ultra vires
Arguments made and Evidence filed by the
defendant
 The defendant argues that the conversion
of the Agoo Plaza into a commercial
center, as funded by the proceeds from the
First and Second Loans (Subject Loans),
were "highly irregular, violative of the law,
and detrimental to public interests, and
will result to wanton desecration of the
said historical and public park."
 Unable to get any response, Cacayuran,
invoking his right as a taxpayer, filed a
complaint against the Implicated Officers
and Land Bank, assailing, among others,
the validity of the Subject Loans on the
ground that the Plaza Lot used as collateral
thereof is property of public dominion and
therefore, beyond the commerce of man.
Arguments made and Evidence filed by the
petitioner:
 Land Bank claimed that it is not privy to
the Implicated Officers' acts of destroying
the Agoo Plaza. It further asserted that
Cacayuran did not have a cause of action
against it since he was not privy to any of
the Subject Loans.
Supreme Court Decision
1. A taxpayer is allowed to sue where there is
a claim that public funds are illegally
disbursed, or that public money is being
deflected to any improper purpose, or that
there is wastage of public funds through
the enforcement of an invalid or
unconstitutional law, for a taxpayer's suit
to prosper, two requisites must be met
namely, (1) public funds derived from
taxation are disbursed by a political
subdivision or instrumentality and in doing
so, a law is violated or some irregularity is
committed; and (2) the petitioner is
directly affected by the alleged act. It is
observed that the proceeds from the
 Subject Loans had already been converted
into public funds by the Municipality's
receipt thereof. Funds coming from private
sources become impressed with the
characteristics of public funds when they
are under official custody. Accordingly, the
first requisite has been clearly met. As a
resident-taxpayer of the Municipality,
Cacayuran is directly affected by the
conversion of the Agoo Plaza which was
funded by the proceeds of the Subject
Loans. It is well-settled that public plazas
are properties for public use and therefore,
belongs to the public dominion.
2. While ordinances are laws and possess a
general and permanent character,
resolutions are merely declarations of the
sentiment or opinion of a law-making body
on a specific matter and are temporary in
nature. As opposed to ordinances, "no
rights can be conferred by and be inferred
from a resolution." In this accord, it cannot
be denied that the SB violated Section
444(b)(1)(vi) of the LGC altogether.
Noticeably, the passage of the Subject
Resolutions was also tainted with other
irregularities, such as (1) the SB's failure to
submit the Subject Resolutions to the
Sangguniang Panlalawigan of La Union for
its review contrary to Section 56 of the
LGC; and (2) the lack of publication and
posting in contravention of Section 59 of
the LGC.
3. Generally, an ultra vires act is one
committed outside the object for which a
corporation is created as defined by the
law of its organization and therefore
beyond the powers conferred upon it by
law. There are two (2) types of ultra vires
acts. An act which is outside of the
municipality's jurisdiction is considered as
a void ultra vires act, while an act
attended only by an irregularity but
remains within the municipality's power is
considered as an ultra vires act subject to
ratification and/or validation. In this
relation, Article 1409(1) of the Civil Code
provides that a contract whose purpose is
contrary to law, morals, good customs,
public order or public policy is considered
void and as such, creates no rights or
obligations or any juridical relations.
Consequently, given the unlawful purpose
behind the Subject Loans which is to fund
the commercialization of the Agoo Plaza
pursuant to the Redevelopment Plan, they
are considered as ultra vires in the primary
sense thus, rendering them void and in
effect, non-binding on the Municipality.
Linso, Hazraphine S.
Advance Paper Corporation and George Haw, in his
capacity as President of Advance Paper
Corporation, petitioners, vs. Arma Traders
Corporation, Manuel Ting, Cheng Gui and
Benjamin Ng, Respondents. Antonio Tan and Uy
Seng Kee Willy, respondents.
G.R. No.176897 December 11, 2013
Issue
The main procedural and substantive issues are:
 Whether the petition for review should be
dismissed for failure to comply with A.M.
No. 02-8-13-SC.
 Whether the petition for review should be
dismissed on the ground of failure to file
the motion for reconsideration with the CA
on time.
 Whether Arma Traders is liable to pay the
loans applying the doctrine of apparent
authority.
 Whether the petitioners proved Arma
Traders’ liability on the purchases on
credit by preponderance of evidence.
Arguments made and Evidence filed by the
defendant
 The respondents argue that the Petition for
Review should be dismissed summarily
because of the following procedural
grounds: first, for failure to comply with
A.M. No. 02-8-13-SC; and second, the CA
decision is already final and executory
since the petitioners filed their Motion for
Reconsideration out of time. They explain
that under the rules of the CA, if the last
day for filing of any pleading falls on a
Saturday not a holiday, the same must be
filed on said Saturday, as the Docket and
Receiving Section of the CA is open on a
Saturday.
 The respondents argue that while as a
general rule, a corporation is estopped
from denying the authority of its agents
which it allowed to deal with the general
public; this is only true if the person
dealing with the agent dealt in good
faith. In the present case, the respondents
claim that the petitioners are in bad faith
because the petitioners connived with Tan
and Uy to make Arma Traders liable for the
non-existent deliveries of notebooks and
 other paper products. They also insist that
the sales invoices are manufactured
evidence.
 As to the loans, the respondents aver that
these were Tan and Uy’s personal
obligations with Advance Paper. Moreover,
while the three cashier’s checks were
deposited in the account of Arma Traders,
it is likewise true that Tan and Uy issued
Arma Traders’ checks in favor of Advance
Paper. All these checks are evidence of
Tan, Uy and Haw’s systematic conspiracy
to siphon Arma Traders corporate funds.
 The respondents also seek to discredit
Haw’s testimony on the basis of the
following. First, his testimony as regards
the sales invoices is hearsay because he did
not personally prepare these documentary
evidence. Second, Haw suspiciously never
had any written authority from his own
Board of Directors to lend
money. Third, the respondents also
questioned why Advance Paper granted the
₱7,000,000.00 loan without requiring Arma
Traders to present any collateral or
guarantees.
Arguments made and Evidence filed by the
petitioner
The petitioners raise the following arguments.
 First, Arma Traders led the petitioners to
believe that Tan and Uy had the authority
to obtain loans since the respondents left
the active and sole management of the
company to Tan and Uy since 1984. In fact,
Ng testified that Arma Traders’
stockholders and board of directors never
conducted a meeting from 1984 to 1995.
Therefore, if the respondents’ position will
be sustained, they will have the absurd
power to question all the business
transactions of Arma Traders. Citing Lipat
v. Pacific Banking Corporation, the
petitioners said that if a corporation
knowingly permits one of its officers or any
other agent to act within the scope of an
apparent authority, it holds him out to the
public as possessing the power to do those
acts; thus, the corporation will, as against
anyone who has in good faith dealt with it
through such agent, be estopped from
denying the agent’s authority.
 Second, the petitioners argue that Haw’s
testimony is not hearsay. They emphasize
that Haw has personal knowledge of the
assailed purchases and loan transactions
because he dealt with the customers, and
supervised and directed the preparation of
the sales invoices and the deliveries of the
goods. Moreover, the petitioners stress
that the respondents never objected to the
admissibility of the sales invoices on the
ground that they were hearsay.
 Third, the petitioners dispute the CA’s
findings on the existence of the badges of
fraud. The petitioners countered:
(1) The discrepancies between the figures
in the 15 out of the 96 photocopies and
duplicate originals of the sales invoices
amounting to ₱4,624.80 – an insignificant
amount compared to the total purchases of
₱7,533,001.49 – may have been caused by
the failure to put the carbon
paper. Besides, the remaining 81 sales
invoices are uncontroverted. The
petitioners also raise the point that this
discrepancy is a nonissue because the
duplicate originals were surrendered in the
RTC.
(2) The respondents misled Haw during the
cross-examination and took his answer out
of context. The petitioners argue that this
maneuver is insufficient to discredit Haw’s
entire testimony.
(3) Arma Traders should be faulted for
indicating Top Line as the payee in Exhibit
E-26 or PBC check no. 091014. Moreover,
Exhibit E-26 does not refer to PBC check
no. 091014 but to PBC check no. 091032
payable to the order of cash.
(4) The discrepancy in the total amount of
the checks which is ₱15,130,363.87 as
against the total obligation
of ₱15,321,798.25 does not necessarily
prove that the transactions are spurious.
(5) The difference in Advance Paper’s
accounts receivables in the SEC report and
in Arma Traders’ obligation with Advance
Paper was based on non-existent evidence
because Exhibit 294-NG does not pertain to
any balance sheet. Moreover, the term
"accounts receivable" is not synonymous
with "cause of action." The respondents
cannot escape their liability by simply
pointing the SEC report because the
petitioners have established their cause of
action – that the purchases on credit and
loan transactions took place, the
respondents issued the dishonored checks
to cover their debts, and they refused to
settle their obligation with Advance Paper.

Supreme Court Decision
We grant the petition.
The procedural issues.
First, the respondents correctly cited A.M.
No. 02-8-13-SC dated February 19, 2008 which
refer to the amendment of the 2004 Rules on
Notarial Practice. It deleted the Community Tax
Certificate among the accepted proof of identity
of the affiant because of its inherent unreliability.
The petitioners violated this when they used
Community Tax Certificate No. 05730869 in their
Petition for Review. Nevertheless, the
defective jurat in the Verification/Certification of
Non-Forum Shopping is not a fatal defect because
it is only a formal, not a jurisdictional,
requirement that the Court may waive.
Furthermore, we cannot simply ignore the millions
of pesos at stake in this case. To do so might
cause grave injustice to a party, a situation that
this Court intends to avoid.
Second, no less than the CA itself waived
the rules on the period to file the motion for
reconsideration. A review of the CA
Resolution dated March 7, 2007, reveals that the
petitioners’ Motion for Reconsideration was
denied because the allegations were a mere
rehash of what the petitioners earlier argued – not
because the motion for reconsideration was filed
out of time.
The substantive issues.
Arma Traders is liable to pay the loans on the
basis of the doctrine of apparent authority.
The doctrine of apparent authority
provides that a corporation will be estopped from
denying the agent’s authority if it knowingly
permits one of its officers or any other agent to
act within the scope of an apparent authority, and
it holds him out to the public as possessing the
power to do those acts. The doctrine of apparent
authority does not apply if the principal did not
commit any acts or conduct which a third party
knew and relied upon in good faith as a result of
the exercise of reasonable prudence. Moreover,
the agent’s acts or conduct must have produced a
change of position to the third party’s detriment.
As against the case and the evidence
Advance Paper presented, the respondents relied
on the core theory of an alleged conspiracy
between Tan, Uy and Haw to defraud Arma
Traders. However, the records are bereft of
supporting evidence to prove the alleged
conspiracy. Instead, the respondents simply
dwelled on the minor inconsistencies from the
petitioners' evidence that the respondents appear
to have magnified. From these perspectives, the
preponderance of evidence thus lies heavily in the
petitioners' favor as the RTC found. For this
reason, we find the petition meritorious.
WHEREFORE, premises considered, we
GRANT the petition. The decision dated March 31,
2006 and the resolution dated March 7, 2007 of
the Court of Appeals in CA-G.R. CV No. 71499 are
REVERSED and SET ASIDE. The Regional Trial Court
decision in Civil Case No. 94-72526 dated June 18,
2001 is REINSTATED. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
Macalawan, Jonnel Aleah M.
Land Bank of the Philippines, petitioner, vs. Lina
B. Navarro, represented by her attorney-in-fact,
Felipe B. Capili, respondent.
G.R. No. 196264 June 6, 2019
Issue
Whether the just compensation fixed by the SAC
and affirmed by the CA is correct.
Arguments made and Evidence filed by the
defendant
Lina, daughter of Antonio Buenaventura and
stepdaughter of Jovita Buenaventura owned Lot
No. 6561, Cad-174 of the Guianga Cadastre
located at Catalunan Grande, Davao City. The
property, covered by Original Certificate of Title
(OCT) No. P-2182, is an agricultural land with an
area of 29.0772 hectares or 290,772 square meters
(sq. m.). When Antonio died, Jovita was appointed
as the administratix of his estate in Special
Proceeding Case No. 1920. Lot No. 6561 was also
partitioned between Jovita and Lina, Jovita got a
75% pro-indiviso share while Lina received the
remaining 25% pro-indiviso share.
1988, the government, pursuant to its land
transfer program under Presidential Decree No.
(PD) 27, expropriated 21.890 hectares of Lot No.
6561 (property). The DAR valued it at P49,025.15
based on the Landowner-Tenant Production
Agreement and Farmer's Undertaking (LTPA-FU)
executed between Jovita and the farmer/tenant-
beneficiaries over the property.
August 9, 1995, Lina filed a petition with the
SAC for the fixing of just compensation against the
DAR and the LBP. She alleged that the property
was expropriated by the government, by virtue of
which Emancipation Patents (EPs) were issued to
tenant-farmers, namely: EP 221 to EP-234.She
stated that the DAR valued the property at P0.17
per sq. m. only, which is ridiculously low. Thus,
she did not accept the payment for her 25% pro-
indiviso share amounting to P12,256.29 for being
confiscatory, unrealistic, and violative of her
rights to just compensation and due process. She
asked the SAC to consider the comparable sales of
lots similarly situated within or near the location
of the property.
1995- Lina filed a reply alleging that the
doctrine of exhaustion of administrative remedies
is not applicable to her action.
May 30, 2002 pre-trial followed - Out of the
total land area of 29.0772 has. belonging to the
estate of Antonio Buenaventura and covered by
OCT No. P-2182[,] 21.890 was covered by the DAR
under P.D. 27 as shown by TCT Nos. EP-221 up to
EP-234 to be marked in exhibit as Exhibits "O" up
to "BB"; --Of the 21.890 that was covered by the
DAR, 6.5006 was paid directly by the tenants to
Jovita Buenaventura representing a portion of her
75% share in the 21.890 has. and these are
covered by EP 229 (Exh. "V") for 2.4268 has., EP
228 (Exh. ("U") for 3.8889 has., EP 221 (Exh. "O")
for 900 sq.m. and EP-222 (Exh. "P") for 948 sq.m.;
June 2002- Lina, faulted the SAC for fixing
just compensation at a low price and for ruling
that she did not claim for attorney's fees in her
petition. Lina asserts the SAC failed to consider
that the value of the property as of 1988 was
P20.00 per sq. m., as established by the
testimonies of the duly licensed real estate
appraisers she presented as witnesses.
November 27, 2003, while the appeal was still
at the completion-of-records stage, Lina filed
before the CA a motion for execution pending
appeal of the SAC Decision. She cited her old age
and sickness and the fact that 14 years had
already elapsed since the taking of her property
by the government. The CA granted the motion
and ordered the Division Clerk of Court to issue a
writ of execution.
Arguments made and Evidence filed by the
petitioner
1988- Petitioner Land Bank of the Philippines
(LBP) concurred with the valuation of the DAR.
Out of the P49,025.15, Jovita was paid
P36,768.86. Lina on the other hand rejected a
tender of P12,256.29 for her share.
1995- In its answer, the LBP denied that the
valuation was confiscatory. The property was
valued in accordance with the provisions of PD 27
as amended by Executive Order No. (EO) 228.[16]
It further argued that the property is not
physically subdivided between Jovita and Lina.
Thus, the portion belonging to Lina for purposes of
determining just compensation still cannot be
identified. The LBP prayed for the dismissal of the
case for lack of merit. Similarly, the DAR claimed
that its valuation is fair and just, as it was fixed in
accordance with the criteria prescribed under
Section 17 of RA 6657. The DAR contended that
since Lina failed to exhaust administrative
remedies, her case should be dismissed for lack of
jurisdiction
May 30, 2002 pre-trial followed - The
remaining 15.2999 has. was paid for by the
government through the Land Bank as evidenced
by the Deed of Assignment, Warranties, and
Undertaking (or DAWU) to be marked in exhibit as
Exhibit "1" - LBP;
Hence, the share of petitioner for which just
compensation should be fixed is 5.4725 has. (i.e.,
25% of 21.890 has.) RESPECTFULLY SUBMITTED.
June 2002- The LBP took issue with the date
of taking as found by the SAC, as well as the
factors and formula by the court in arriving at the
valuation of P10.00 per sq. m. It alleged that the
property was covered and acquired by the
government pursuant to PD 27; thus, the SAC
should have followed the valuation formula under
that law.The LBP also questioned the imposition
of legal interest on the just compensation
awarded
November 27, 2003- The LBP sought
reconsideration but this was denied by the CA.
Supreme Court Decision
After the submission of the stipulation of facts
(May 30,2002) the SAC issued an Order submitting
the case for decision.
In its Decision dated June 17, 2002 the SAC
ruled in favor of Lina. It explained that out of Lot
No. 6561's total area of 290,772 sq. m., 234,702
sq. m. were taken by the DAR and distributed
among the tenant-farmers through EPs 221-234.
The estate of Antonio retained 56,070 sq. m. The
SAC computed Lina's 25% share out of the 234,702
sq. m. to be equivalent to 58,675.50 sq. m. It
also declared that the actual taking of the
property happened on June 13, 1988 when OCT
No. P-2182 was cancelled and EPs were issued.
Despite this, the LBP offered to pay Lina the value
of the property as of March 11, 1993 as shown by
LBP's letter of the same date.[25] Subsequently, in
arriving at the valuation of P10.00 per sq. m., the
SAC considered the market value approach as the
"fairer gauge."
 After the case was submitted for decision
(June 2002) the LBP filed a be recovered by Lina from Jovita, but not from
manifestation/compliance relative to the
execution of the SAC Decision pending appeal,
stating that:
While we are ready and willing to
comply with the Alias Writ of
Execution Pending Appeal of 10
pesos per square meter, we are
faced, however, with a compelling
reality that only 3.8249 hectares
rightfully belonged to Lina Navarro.
It is for this reason that LBP can
only effect payment on the 3.8249
hectares, (25% of 15.2999 hectares)
despite the SAC's pronouncement of
5.8070 hectares (25% of 23.4702).
Accordingly, a Manager's Check (No.
29586) dated January 12, 2007 in
the amount of P1,235,578.93 x x x
payable to LINA B. NAVARRO was
delivered by LBP, through its AOC in
Davao, to the handling Sheriff on
January 19, 2007 as LBP's
compliance for the writ of
execution.
The CA then required the parties to
simultaneously submit a memorandum on the
matter of the hectarage of the property.
Lina claimed in her memorandum that a
typographical error attended the recording of the
total area placed under agrarian reform. Instead
of recording the total area as covering only
21.8005 hectares, what was recorded was an area
of 21.890 hectares. Nevertheless, she contended
that the controversy as to the actual area of the
property, to which she was entitled had long been
settled in the parties' Stipulation of Facts. In its
Item No. 4, the parties agreed that Lina's 25%
share shall be based on [21.890] 21.8005 hectares.
Thus, her compensable share should be 5.4501
hectares.
The LBP for its part asserted that the total
area acquired by the government, based on the
LTPA-FU and the Land Valuation Summary and
Farmer's Undertaking, was 15.2999 hectares only.
Under the May 30, 2002 Stipulation of Facts it
clearly states that, of the 21.890 hectares placed
under agrarian reform, 6.5006 hectares was paid
directly by the tenants to Jo vita represented a
portion of her 75% share in the 21.980 hectares.
The remaining 15.2999 hectares was paid for by
the government. The LBP insisted that Lina's 25%
share should only be based on the 15.2999
hectares because the payment for 6.5006 hectares
was directly paid by the tenants to Jovita. Thus,
the difference in area of about 1.7 hectares may
LBP.
In its Decision dated June 25, 2009, the CA
denied the appeal and affirmed the ruling of the
SAC with modification, to wit:
WHEREFORE, the appeal is DENIED.
The assailed Decision is hereby
AFFIRMED with MODIFICATION that
the total area to which petitioner is
entitled should be [5.4501 hectares]
only and not 5.8070 hectares. The
Court directs the LBP to pay
petitioner the value of the
remaining portion of 1.7 hectares at
P10.00 per square meter plus
twelve percent (12%) per annum
interest to be computed from June
13, 1988 until fully paid.
SO ORDERED.
Magsayo, Karen Joy T.
Ong Yong, Juanita Tan Ong, Wilson T. Ong, Anna
L. Ong, William T. Ong, Willie T. Ong, and Julie
Ong Alonzo, petitioners, vs. David S. Tiu, Cely Y.
Tiu, Moly Yu Gaw, Belen See Yu, D. Terence Y.
Tiu, John Yu, Lourdes C. Tiu, Intraland Resources
Development Corp., Masagana Telamart, Inc.,
Register of Deeds of Pasay City, and the Securities
and Exchange Commission, respondents.
G.R. No. 144476 April 8, 2003
Issue
1. Whether the pre-Subscription Agreement
executed by the Ongs is actually a
subscription contract.
2. Whether the rescission of Pre-Subscription
Agreement would result in unauthorized
liquidation.
Arguments made and Evidence filed by the
defendant
In 1994, the construction of the Masagana
Citimall in Pasay City was threatened with
stoppage and incompletion when its owner, the
First Landlink Asia Development Corporation
(FLADC), which was owned by David S. Tiu, Cely Y.
Tiu, Moly Yu Gow, Belen See Yu, D. Terence Y.
Tiu, John Yu and Lourdes C. Tiu (the Tius),
encountered dire financial difficulties. It was
heavily indebted to the Philippine National Bank
(PNB) for P190 million. To stave off foreclosure of
the mortgage on the two lots where the mall was
being built, the Tius invited Ong Yong, Juanita Tan
Ong, Wilson T. Ong, Anna L. Ong, William T. Ong
and Julia Ong Alonzo (the Ongs), to invest in
FLADC. Under the Pre-Subscription Agreement
they entered into, the Ongs and the Tius agreed to
maintain equal shareholdings in FLADC: the Ongs
were to subscribe to 1,000,000 shares at a par
value of P100.00 each while the Tius were to
subscribe to an additional 549,800 shares at
P100.00 each in addition to their already existing
subscription of 450,200 shares. Furthermore, they
agreed that the Tius were entitled to nominate
the Vice-President and the Treasurer plus 5
directors while the Ongs were entitled to
nominate the President, the Secretary and 6
directors (including the chairman) to the board of
directors of FLADC. Moreover, the Ongs were given
the right to manage and operate the mall.
Accordingly, the Ongs paid P100 million in
cash for their subscription to 1,000,000 shares of
stock while the Tius committed to contribute to
FLADC a four-storey building and two parcels of
land respectively valued at P20 million (for
200,000 shares), P30 million (for 300,000 shares)
and P49.8 million (for 49,800 shares) to cover
their additional 549,800 stock subscription
therein. The Ongs paid in another P70 million 3 to
FLADC and P20 million to the Tius over and above
their P100 million investment, the total sum of
which (P190 million) was used to settle the P190
million mortgage indebtedness of FLADC to PNB.
The business harmony between the Ongs and the
Tius in FLADC, however, was shortlived because
the Tius, on 23 February 1996, rescinded the Pre-
Subscription Agreement. The Tius accused the
Ongs of:
(1) refusing to credit to them the FLADC
shares covering their real property
contributions;
(2) preventing David S. Tiu and Cely Y. Tiu
from assuming the positions of and
performing their duties as Vice-President
and Treasurer, respectively, and
(3) refusing to give them the office spaces
agreed upon. The controversy finally came
to a head when the case was commenced
by the Tius on 27 February 1996 at the
Securities and Exchange Commission (SEC),
seeking confirmation of their rescission of
the Pre-Subscription Agreement.
Arguments made and Evidence filed by the
petitioner
After hearing, the SEC, through then
Hearing Officer Rolando G. Andaya, Jr., issued a
decision on 19 May 1997 confirming the rescission
sought by the Tius. On motion of both parties, the
above decision was partially reconsidered but only
insofar as the Ongs' P70 million was declared not
as a premium on capital stock but an advance
(loan) by the Ongs to FLADC and that the
imposition of interest on it was correct. Both
parties appealed to the SEC en banc which
rendered a decision on 11 September 1998,
affirming the 19 May 1997 decision of the Hearing
Officer. The SEC en banc confirmed the rescission
of the Pre-Subscription Agreement but reverted to
classifying the P70 million paid by the Ongs as
premium on capital and not as a loan or advance
to FLADC, hence, not entitled to earn interest. On
appeal, the Court of Appeals (CA) rendered a
decision on 5 October 1999, modifying the SEC
order of 11 September 1998.
Their motions for reconsideration having
been denied, both parties filed separate petitions
for review before the Supreme Court. On 1
February 2002, the Supreme Court promulgated its
Decision, affirming the assailed decision of the
Court of Appeals but with the modifications that
the P20 million loan extended by the Ongs to the
Tius shall earn interest at 12% per annum to be
computed from the time of judicial demand which
is from 23 April 1996; that the P70 million
advanced by the Ongs to the FLADC shall earn
interest at 10% per annum to be computed from
the date of the FLADC Board Resolution which is
19 June 1996; and that the Tius shall be credited
with 49,800 shares in FLADC for their property
contribution, specifically, the 151 sq. m. parcel of
land. The Court affirmed the fact that both the
Ongs and the Tius violated their respective
obligations under the Pre-Subscription
Agreement.
On 15 March 2002, the Tius filed before the
Court a Motion for Issuance of a Writ of Execution.
Aside from their opposition to the Tius' Motion for
Issuance of Writ of Execution, the Ongs filed their
own "Motion for Reconsideration; Alternatively,
Motion for Modification (of the February 1, 2002
Decision)" on 15 March 2002. Willie Ong filed a
separate "Motion for Partial Reconsideration"
dated 8 March 2002, pointing out that there was
no violation of the Pre-Subscription Agreement on
the part of the Ongs, among others. On 29 January
2003, the Special Second Division of this Court
held oral arguments on the respective positions of
the parties. On 27 February 2003, Dr. Willie Ong
and the rest of the movants Ong filed their
respective memoranda. On 28 February 2003, the
Tius submitted their memorandum.
Supreme Court Decision
1. FLADC was originally incorporated with an
authorized capital stock of 500,000 shares
with the Tius owning 450,200 shares
representing the paid-up capital. When the
Tius invited the Ongs to invest in FLADC as
stockholders, an increase of the authorized
capital stock became necessary to give
each group equal (50-50) shareholdings as
agreed upon in the Pre-Subscription
Agreement. The authorized capital stock
was thus increased from 500,000 shares to
2,000,000 shares with a par value of P100
each, with the Ongs subscribing to
1,000,000 shares and the Tius to 549,800
more shares in addition to their 450,200
shares to complete 1,000,000 shares. Thus,
the subject matter of the contract was the
1,000,000 unissued shares of FLADC stock
allocated to the Ongs. Since these were
unissued shares, the parties' Pre-
Subscription Agreement was in fact a
subscription contract as defined under
Section 60, Title VII of the Corporation
Code. A subscription contract necessarily
involves the corporation as one of the
contracting parties since the subject
matter of the transaction is property
owned by the corporation — its shares of
stock. Thus, the subscription contract
(denominated by the parties as a Pre-
Subscription Agreement) whereby the Ongs
invested P100 million for 1,000,000 shares
of stock was, from the viewpoint of the
law, one between the Ongs and FLADC, not
between the Ongs and the Tius. Otherwise
stated, the Tius did not contract in their
personal capacities with the Ongs since
they were not selling any of their own
shares to them. It was FLADC that did.
Considering therefore that the real
contracting parties to the subscription
agreement were FLADC and the Ongs
alone, a civil case for rescission on the
ground of breach of contract filed by the
Tius in their personal capacities will not
prosper. Assuming it had valid reasons to
do so, only FLADC (and certainly not the
Tius) had the legal personality to file suit
rescinding the subscription agreement with
the Ongs inasmuch as it was the real party
in interest therein. Article 1311 of the Civil
Code provides that "contracts take effect
only between the parties, their assigns and
heirs. . ." Therefore, a party who has not
taken part in the transaction cannot sue or
be sued for performance or for
cancellation thereof, unless he shows that
he has a real interest affected thereby.
2. The rescission of the Pre-Subscription
Agreement will effectively result in the
unauthorized distribution of the capital
assets and property of the corporation,
thereby violating the Trust Fund Doctrine
and the Corporation Code, since rescission
of a subscription agreement is not one of
the instances when distribution of capital
assets and property of the corporation is
allowed. Rescission will, in the final
analysis, result in the premature
liquidation of the corporation without the
benefit of prior dissolution in accordance
with Sections 117, 118, 119 and 120 of the
Corporation Code.
Martin, Freya Rica N.
Ramon C. Lee and Antonio M. Lacdao, petitioners,
vs. Court of Appeals, et. al, respondent.
GR No. 93695, February 4, 1992
Issue
Whether or not the execution of the voting
trust agreement by a stockholder whereby all his
shares to the corporation have been transferred to
the trustee deprives the stockholder of his
position as director of the corporation;
Arguments made and Evidence filed by the
defendant
 November 15, 1985: a complaint for a sum
of money was filed by the International
Corporate Bank, Inc. (ICB) against the
private respondents
 March 17, 1986: private respondents, in
turn, filed a 3rd-party complaint against
ALFA and ICB
 July 22, 1988: DBP claimed that it was not
authorized to receive summons on behalf
of ALFA
 August 4, 1988: trial court issued an order
advising the private respondents to take
the appropriate steps to serve the
summons to ALFA
 April 25, 1989: trial court reversed itself by
setting aside its previous Order dated
January 2, 1989 and declared that service
upon the petitioners who were no longer
corporate officers of ALFA cannot be
considered as proper service of summons
on ALFA
  October 17, 1989: trial court (NOT notified
of the petition for certiorari) declared final
its decision on April 25, 1989
Arguments made and Evidence filed by the
petitioner
 On September 17, 1987, the petitioners
filed a motion to dismiss the third party
complaint which the Regional Trial Court of
Makati, Branch 58 denied in an Order dated
June 27, 1988.
 On July 18, 1988, the petitioners filed their
answer to the third party complaint.
 September 12, 1988: petitioners filed a
motion for reconsideration submitting that
Rule 14, section 13 of the Revised Rules of
Court is not applicable since they were no
longer officers of ALFA and that the private
respondents should have availed of another
mode of service under Rule 14, Section 16
of the said Rules, i.e., through publication
to effect proper service upon ALFA which is
denied.
 January 19, 1989: 2nd motion for
reconsideration was filed by the petitioners
reiterating their stand that by virtue of the
voting trust agreement they ceased to be
officers and directors of ALFA
 That the execution of the voting trust
agreement by a stockholder whereby all his
shares to the corporation have been
transferred to the trustee deprives the
stockholder of his position as director of
the corporation; to rule otherwise, as the
respondent Court of Appeals did, would be
violative of Section 23 of the Corporation
Code.
 The petitioners were no longer acting or
holding any of the positions provided under
Rule 14, Section 13 of the Rules of Court
authorized to receive service of summons
for and in behalf of the private domestic
corporation so that the service of summons
on ALFA effected through the petitioners is
not valid and ineffective; to maintain the
respondent Court of Appeals’ position that
ALFA was properly served its summons
through the petitioners would be contrary
to the general principle that a corporation
can only be bound by such acts which are
within the scope of its officers’ or agents’
authority.
Supreme Court Decision
VOTING TRUST AGREEMENT; DEFINED. — By
its very nature, 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, the right to inspect the books of the
corporation, the right to sell certain interests in
the assets of the corporation and other rights to
which a stockholder may be entitled until the
liquidation of the corporation.
However, in order to distinguish a voting
trust agreement from proxies and other voting
pools and agreements, it must pass three criteria
or tests, namely: (1) that the voting rights of the
stock are separated from the other attributes of
ownership; (2) that the voting rights granted are
intended to be irrevocable for a definite period of
time; and (3) that the principal purpose of the
grant of voting rights is to acquire voting control
of the corporation. (5 Fletcher, Cylopedia of the
Law on Private Corporations, section 2075 [1976]
p. 331 citing Tankersly v. Albright, 374 F. Supp.
538)
In the instant case, The 6th paragraph of
section 59 of the new Corporation Code reads that
"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." However, 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. Had the
five-year period of the voting trust agreement
expired in 1986, the DBP would not have
transferred an its rights, titles and interests in
ALFA "effective June 30, 1986" to the national
government through the Asset Privatization Trust
(APT) as attested to in a Certification dated 24
January 1989 of the Vice President of the DBP's
Special Accounts Department II. In the same
certification, it is stated that the DBP, from 1987
until 1989, had handled s account which included
ALFA's assets pursuant to a management
agreement by and between the DBP and APT.
Hence, there is evidence on record that at the
time of the service of summons on ALFA through
Lee and Lacdao on 21 August 1987, the voting
trust agreement in question was not yet
terminated so that the legal title to the stocks of
ALFA, then, still belonged to the DBP.
Mastura, Mikhail Ayman B.
Jesus V. Lanuza, Magadya Reyes, Bayani Reyes,
and Arial Reyes, petitioners vs. Court of Appeals,
Securities and Exchange Commission, Dolores
Onrubia, Elenita Nolasco, Juan O. Nolasco III,
Estate of Faustina M. Onrubia, Philippine Merchant
Marine School, Inc., respondents
G.R. No. 131394 March 28, 2005
Issue
Whether or not the quorum should be
based on the outstanding capital stock as
indicated in the Articles of Incorporation.
Arguments made and Evidence filed by the
defendant
The Philippine Merchant Marine School,
Inc. (PMMSI) was incorporated in 1952 with seven
hundred (700) founders' shares and seventy-six
(76) common shares as the initial capital stock
subscription in its Articles of Incorporation.
The defendants and their predecessors only
registered the company's stock and transfer book
for the first time in 1978, the time of which they
recorded thirty-three (33) common shares as the
only issued and outstanding shares of the
corporation.
A special stockholders' meeting was then
called in 1979 with the basis of the quorum being
twenty-seven (27) common shares, representing
more than two-thirds (2/3) of the common shares
issued and outstanding.
Juan Acayan, one of the heirs of one of the
original incorporators, filed a petition with the
Securities and Exchange Commission (SEC) in 1982
for the registration of their property rights over
one hundred twenty (120) founders' shares and
twelve (12) common shares owned by their father.
The SEC hearing officer held that the heirs
of Acayan were entitled to the claimed shares and
called for a special stockholders' meeting to elect
a new set of officers.
The SEC en banc affirmed the decision and
as a result, the shares of Acayan were recorded in
the stock and transfer book.
On May 6, 1992, a special stockholders'
meeting was held to elect a new set of directors.
Private respondents filed a petition with
the SEC questioning the validity of the meeting,
alleging that the quorum should not be based on
the one hundred and sixty five (165) issued and
outstanding shares based on the stock and transfer
book, but on the initial subscribed capital stock of
seven hundred seventy-six (776) shares in the 1952
Articles of Incorporation.
After the petition was dismissed, an appeal
was made to the SEC en banc who granted the said
appeal, holding that the shares of the deceased
incorporators should be represented by their
respective heirs or administrators.
The SEC then directed the parties to call
for a special stockholders' meeting based on the
stockholdings reflected in the Articles of
Incorporation for the purpose of electing a new
set of officers for the corporation.
Arguments made and filed by the petitioner
Petitioners, who were PMMSI stockholders,
filed a petition for review with the Court of
Appeals. Rebecca Acayan, Jayne O. Abuid, Willie
O. Abuid, and Renato Cervantes, stockholders and
directors of PMMSI, earlier filed another petition
for review of the same SEC en banc's orders.
The petitions, which were consolidated,
raised the following issues:
1. Whether the basis of the outstanding
capital stock and the quorum of the stockholders'
meeting should be the 1978 stock and transfer
book or the 1952 Articles of Incorporation.
2. Whether the Court of Appeals erred in
applying the Espejo Decision, otherwise known as
SEC Case No. 2289, which ordered the recording of
the shares of Jose Acayan in the stock and transfer
book.
For the first issue, the Court of Appeals
held that the quorum should be based on the
outstanding capital stock as found in the Articles
of Incorporation.
As for the second issue, the Court of
Appeals held that the ruling the Acayan case
would ipso facto benefit the private respondents,
since to require a separate judicial declaration to
recognize the shares of the original incorporators
would entail unnecessary delay and expense.
In the instant petition, petitioners claim
that the 1992 stockholders' meeting was valid and
legal.
They submit that reliance on the 1952
Articles of Incorporation for determining the
quorum negates the validity and existence of the
stock and transfer book which the private
respondents themselves prepared for the
corporation.
Supreme Court Decision
The Supreme Court agrees with the Court
of Appeals. The quorum should be based on the
totality of shares which have been subscribed and
issued, whether it be founders' shares or common
shares.
To base the computation of quorum solely
on the obviously deficient, if not inaccurate stock
and transfer book, and completely disregarding
the issued and outstanding shares as indicated in
the Articles of Incorporation would mean injustice
to the owners and/or successors in interest of the
said shares. This case is one instance where resort
to documents other than the stock and transfer
book is necessary. The stock and transfer book of
PMMSI cannot be used as the sole basis for
determining the quorum as it does not reflect the
totality of shares which have been subscribed,
more so when the Articles of Incorporation show a
significantly larger amount of shares issued and
outstanding as compared to that listed in the
stock and transfer book.
Matabalao, Fherdawzia N.
FVR Skills and Services Exponents, Inc. (SKILLEX),
Fulgencio V. Rana and Monina R. Burgos,
petitioners, VS. Jovert Seva, Josuel V.
Valencerina, Janet Alcazar, Angelito Amparo,
Benjamin Anaen, Jr., John Hilbert Barba,
Bonifacio Batang, Jr., Valeriano Bingco, Jr.,
Ronald Castro, Marlon Consorte, Rolando Cornelio,
Edito Culdora, Ruel Duncil, Mervin Flores, Lord
Galisim, Sotero Garcia, Jr., Rey Gonzales, Dante
Isip, Ryan Ismen, Joel Junio, Carlito Latoja, Zaldy
Marra, Michael Pantano, Glenn Piloton, Noreldo
Quirante, Roel Rance, Renante Rosario and
Leonarda Tanael, defendants
G.R. No. 200857 October 22, 2014
Issue
Whether or not the petitioners and owner
and managers are solidarily liable with the
corporation respondents’ monetary awards.
Arguments made and Evidence filed by the
defendant
On April 21, 2008, the petitioner, FVR
Skills and Services Exponents, Inc., entered into
a Contract of Janitorial Service (service
contract) with Robinsons Land Corporation
(Robinsons for a period of one year -from January
1, 2008 to December 31, 2008. Pursuant to this,
the respondents were deployed to Robinsons.
Halfway through the service contract, the
petitioner asked the respondents to execute
individual contracts which stipulated that their
respective employments shall end on December
31, 2008, unless earlier terminated. The
petitioner dismissed the respondents when
Robinsons no longer extended their contract of
janitorial services, as they were project
employees whose duration of employment was
dependent on the petitioner's service contract
with Robinsons
The respondents responded to the
termination of their employment by filing a
complaint for illegal dismissal with the National
Labor Relations Commission. They argued that
they were not project employees; they were
regular employees who may only be dismissed for
just or authorized causes. The respondents also
asked for payment of their unpaid wage
differential, 13th month pay differential, service
incentive leave pay, holiday pay and separation
pay.
The respondents reiterate that even before
the execution of the petitioner's service contract
with Robinsons, they had already been working for
the petitioner between the years 1998 to 2007.
Since their hiring, they had been performing
janitorial and other manpower activities that were
necessary or desirable to the petitioner's business.
They further argue that the employment
contracts they executed were void since these
were signed under duress; the petitioner
threatened not to release their salaries if they
would refuse to sign.
Lastly, the respondents assert that the
Court of Appeals (CA) did not err in holding Rana
and Burgos solidarily liable with the corporation.
These officers acted in bad faith when they
obliged the respondents to execute the
employment contracts under threat.
Arguments made and Evidence filed by the
petitioner
The petitioner now submits that the CA
erred in ruling that the respondents were regular
employees and that they had been illegally
dismissed. The respondents' contracts of
employments did not only provide for a fixed
term, but were also dependent on the continued
existence of the Robinsons' service contract. Since
this main contract had not been renewed, the
respondents' respective employment contracts
were properly terminated. Based on this
reasoning, no illegal dismissal took place, only the
expiration of the respondents' fixed term
contracts.
In the absence of any illegal dismissal, the
CA also erred in affirming the NLRC's award of
separation pay to the respondents.
Lastly, the petitioner asserts that Rana and
Burgos should not be held solidarily liable with the
corporation for respondents' monetary claims;
they have personalities separate and distinct from
the corporation.
Supreme Court Decision
No, the officers should not be held solidary
liable according to SC. SC modify the CA's ruling
that Rana and Burgos, as the petitioner's president
and general manager, should be held solidarity
liable with the corporation for its monetary
liabilities with the respondents.
A corporation is a juridical entity with legal
personality separate and distinct from those
acting for and in its behalf and, in general, from
the people comprising it. The general rule is that,
obligations incurred by the corporation, acting
through its directors, officers and employees, are
its sole liabilities.
A director or officer shall only be
personally liable for the obligations of the
corporation, if the following conditions concur: (1)
the complainant alleged in the complaint that the
director or officer assented to patently unlawful
acts of the corporation, or that the officer was
guilty of gross negligence or bad faith; and (2) the
complainant clearly and convincingly proved such
unlawful acts, negligence or bad faith.
The respondents failed to show the
existence of the first requisite. They did not
specifically allege in their complaint that Rana
and Burgos willfully and knowingly assented to the
petitioner's patently unlawful act of forcing the
respondents to sign the dubious employment
contracts in exchange for their salaries. The
respondents also failed to prove that Rana and
Burgos had been guilty of gross negligence or bad
faith in directing the affairs of the corporation.
To hold an officer personally liable for the
debts of the corporation, and thus pierce the veil
of corporate fiction, it is necessary to clearly and
convincingly establish the bad faith or wrongdoing
of such officer, since bad faith is never
presumed.41 Because the respondents were not
able to clearly show the definite participation of
Burgos and Rana in their illegal dismissal, we
uphold the general rule that corporate officers are
not personally liable for the money claims of the
discharged employees, unless they acted with
evident malice and bad faith in terminating their
employment.
Mato, Norjanah I.
G.R. No. L-31061 August 17, 1976
Sulo ng Bayan Inc., plaintiff-appellant, vs.
Gregorio Araneta, Inc., Paradise Farms, Inc.,
National Waterworks & Sewerage Authority,
Hacienda Caretas, Inc, and Register Of Deeds Of
Bulacan, defendants-appellees.
Issue
Whether the corporation (non-stock) may
institute an action in behalf of its individual
members for the recovery of certain parcels of
land allegedly owned by said members, among
others.
Arguments made and Evidence filed by the
defendant
On September 2, 1966, defendant-appellee
Gregorio Araneta, Inc. filed a motion to dismiss
the amended complaint on the grounds that (1)
the complaint states no cause of action; and (2)
the cause of action, if any, is barred by
prescription and laches. Paradise Farms, Inc. and
Hacienda Caretas, Inc. filed motions to dismiss
based on the same grounds. Appellee National
Waterworks & Sewerage Authority did not file any
motion to dismiss. However, it pleaded in its
answer as special and affirmative defenses lack of
cause of action by the plaintiff-appellant and the
barring of such action by prescription and laches.
According to defendants-appellees, they
were not furnished a copy of said motion, hence,
on October 14, 1966, and consequently, prayed
that the said motion be denied for lack of notice
and for failure of the plaintiff-appellant to comply
with the order requiring plaintiff-appellant to
furnish the appellees copy of said motion.
Similarly, defendant-appellee paradise
Farms, Inc. filed, on December 2, 1966,
manifestation information the court that it also
did not receive a copy of the afore-mentioned of
appellant. On January 24, 1967, the trial court
issued an Order dismissing the amended
complaint.
Arguments made and evidence filed by the
petitioner
On April 26, 1966, plaintiff-appellant Sulo
ng Bayan, Inc. filed an accion de revindicacion
with the Court of First Instance of Bulacan, Fifth
Judicial District, Valenzuela, Bulacan, against
defendants-appellees to recover the ownership
and possession of a large tract of land in San Jose
del Monte, Bulacan, containing an area of
27,982,250 square meters, more or less,
registered under the Torrens System in the name
of defendants-appellees' predecessors-in-interest.
The complaint, as amended on June 13,
1966 specifically alleged that plaintiff is a
corporation organized and existing under the laws
of the Philippines, with its principal office and
place of business at San Jose del Monte, Bulacan;
that the members of the plaintiff corporation,
through themselves and their predecessors-in-
interest, had pioneered in the clearing of the fore-
mentioned tract of land, cultivated the same since
the Spanish regime and continuously possessed the
said property openly and public under concept of
ownership adverse against the whole world; that
defendant-appellee Gregorio Araneta, Inc.,
sometime in the year 1958, through force and
intimidation, ejected the members of the plaintiff
corporation from their possession of the
aforementioned vast tract of land. During the
pendency of the motion to dismiss, plaintiff-
appellant filed a motion, dated October 7, 1966,
praying that the case be transferred to another
branch of the Court of First Instance sitting at
Malolos, Bulacan.
On February 14, 1967, appellant filed a
motion to reconsider the Order of dismissal on the
grounds that the court had no jurisdiction to issue
the Order of dismissal, because its request for the
transfer of the case from the Valenzuela Branch of
the Court of First Instance to the Malolos Branch
of the said court has been approved by the
Department of Justice; that the complaint states a
sufficient cause of action because the subject
matter of the controversy in one of common
interest to the members of the corporation who
are so numerous that the present complaint
should be treated as a class suit; and that the
action is not barred by the statute of limitations
because (a) an action for the reconveyance of
property registered through fraud does not
prescribe, and (b) an action to impugn a void
judgment may be brought any time.
Supreme Court Decision
It is a doctrine well-established and obtains
both at law and in equity that a corporation is a
distinct legal entity to be considered as separate
and apart from the stockholders or members who
compose it, and is not affected by the personal
rights, obligations and transactions of its
stockholders or members. The property of the
corporation is its property and not that of the
stockholders, as owners, although they have
equities in it. Properties registered in the name of
the corporation are owned by it as an entity
separate and distinct from its members.
Conversely, a corporation, “even in the
case of a one-man corporation.” The mere fact
that one is president of a corporation does not
render the property which he owns or possesses
the property of the corporation, since the
president, as individual, and the corporation are
separate. Similarly, stockholders in a corporation
engaged in buying and dealing in real estate
whose certificates of stock entitled the holder
thereof to an allotment in the distribution of the
land of the corporation upon surrender of the
stock certificated were considered not to have
such legal or equitable title or interest in the
land, as would support a suit for title, especially
against parties other than the corporation. It must
be noted, however, that the juridical personality
of the corporation, as separate and distinct from
the persons composing it, is but a legal fiction
introduced for the purpose of convenience. This
separate personality of the corporation may be
disregarded, or the veil of corporate fiction
pierced, in cases where it is used as a cloak or
cover for fraud or illegality, or to work an
injustice, or where necessary to achieve equity. It
has not been claimed that the members have
assigned or transferred whatever rights they may
have on the land in question to the corporation.
Absent any showing of interest, therefore, a
corporation, has no personality to bring the action
for and in behalf of its stockholders or members
for the purpose of recovering property which
belongs to said stockholders or members in their
personal capacities.
Having shown that no cause of action in
favor of the plaintiff exists and that the action in
the lower court cannot be considered as a class
suit, it would be unnecessary and an Idle exercise
for this Court to resolve the remaining issue of
whether or not the plaintiffs action for
reconveyance of real property based upon
constructive or implied trust had already
prescribed.
Accordingly, the instant appeal is hereby
dismissed with costs against the plaintiff-
appellant.
Matura, Mary Edylainne O.
Sumifru (Philippines) Corporation (surviving entity
in a merger with Davao Fruits Corporation and
other Companies), petitioners, vs. Bernabe Baya,
respondents
G.R. NO. 188269 April 17, 2017
Issue
Did the Court of Appeals correctly ruled
that the National Labor Relations Commission
(NLRC) gravely abused its discretion, and
consequently, held that AMS Farming Corporation
(AMSFC) and Davao Fruit Corporation (DFC)
constructively dismissed Bernabe Baya? Are the
said corporations liable to Baya for separation
pay, moral damages and attorney’s fees? Should
SUMIFRU (Philippines) Corporation be held
solidarily liable with AMSFC’s for Baya’s monetary
awards?
Arguments made and Evidence filed by the
defendant
Constructive dismissal was clearly established
by the undisputed acts based on the following
considerations:
(a) The top management still proceeded to
order the return of Baya to AMSF to force
him to accept rank-and file positions in
spite of knowing that there was no
available supervisory position in AMSFC;
(b) After Baya refused when he was harassed
by company managers into switching
loyalties to the SAFFP AI, an association of
pro-company beneficiaries, it was the time
when such "return to AMSFC" was done;
(c) Such acts of the top management of AMSFC
and DFC were in furtherance of their
cooperative busting tactics as stated in the
Joint Affidavits executed by AMSKARBEMCO
members, which were not refuted by
AMSFC and DFC; and
(d) Even before the ARBs were allowed to take
over the lands awarded to them, such acts
constituting constructive dismissal were
done.
Arguments made and Evidence filed by the
petitioner
AMSFC and DFC argued that they did not
constructively dismissed Baya by reasoning out
that his termination from employment was caused
by the takeover of Agrarian Reform Beneficiaries
(ARB) of AMSFC’s banana plantation through the
agrarian reform program of the government. They
even argued that it was the consequence for the
actions of Baya because he was the one who
formed AMS Kapalong Agrarian Reform
Beneficiaries Multipurpose Cooperative
(AMSKARBEMCO) and caused the ARB’s takeover.
In contrast to the Labor Arbiter (LA) Ruling, the
NLRC ruled in favor of the petitioner stating that
the real and just cause of Baya’s termination was
by the cessation of the business operation of
AMSFC or undertaking in its banana plantation’s
large portions due to the implementation of the
agrarian reform program, and not because of
illegal or constructive dismissal. With this, NRLC
ruled that Baya is not entitled to separation pay
because such cessation was involuntary on the
part of AMSFC. It was the agrarian reform
program, an act of the state, which caused the
cessation of the said business operation.
Supreme Court Decision
The Court ruled that the CA correctly
ascribed grave abuse of discretion on the part of
the NRLC in reversing LA ruling. The findings and
conclusions of NRLC were not supported by
substantial or relevant evidence which a
reasonable mind might accept as adequate to
justify a conclusion.
True enough, it is worthy to stress that
both AMSFC and DFC are guilty of acts constitutive
of constructive dismissal performed against Baya.
The cessation of work was caused for the reason
that continued employment is rendered
impossible, unreasonable or unlikely, as an offer
involving a demotion in rank or a diminution in
pay' and other benefits. Constructive dismissal was
considered dismissal in disguise or a dismissal
which is made to appear as not one and may exist
when on the part of the employee, discrimination,
insensibility, or disdain by the employer becomes
unbearable that it would leave him no other
choice but to forego his continued employment.
Lastly, Sumifru was held solidarily liable
with AMSFC’s for Baya’s monetary awards. Its
argument that it can only be held liable for the
period when Baya stayed with DFC as it only
merged with the latter and not with AMSFC is
without merit. One of the effects of merger is that
the surviving company, Sumifru, shall inherit not
only the assets but the liabilities of the
corporation it merged with.
WHEREFORE, the petition is DENIED. The
Decision dated May 14, 2008 and the Resolution
dated May 20, 2009 of the Court of Appeals in CA-
G.R. SP No. 85950 are hereby AFFIRMED.
Accordingly, Sumifru (Philippines) Corporation, as
the surviving entity in its merger with Davao Fruits
Corporation, shall be held answerable for the
latter's obligations as indicated in this Decision.
Salipada, Junaizah U.
Olongapo City, petitioner, vs. Subic Water And
Sewerage Co., Inc., respondent
G.R. No. 171626 August 6, 2014
Issue
Whether or not Subic Water is liable for the
unpaid liabilities of Olongapo City Water District
(OCWD) to the petitioner, Olongapo City.
Arguments made and Evidence filed by the
defendant
 June 4, 1997. In this agreement, petitioner
and OCWD offset their respective claims
and counterclaims. OCWD also undertook
to pay to petitioner its net obligation
amounting to ₱135,909,467.09, to be
amortized for a period of not exceeding
twenty-five (25) years at twenty-four
percent (24%) per annum.
 Subic Water also filed a manifestation
informing the trial court that as borne out
by the articles of incorporation and general
information sheet of Subic Water
defendant OCWD is not Subic Water. The
manifestation also indicated that OCWD
was only a ten percent (10%) shareholder
of Subic Water; and that its 10% share was
already in the process of being transferred
to petitioner pursuant to the Deed of
Assignment dated November 24, 1997.
 Strangers to a case are not bound by the
judgment rendered in it. Thus, a writ of
execution can only be issued against a
party and not against one who did not have
his day in court. Subic Water never
participated in the proceedings in Civil
Case No. 580-0-90, where OCWD and
petitioner were the contending parties.
Subic Water only came into the picture
when one Atty. Segundo Mangohig,
claiming to be OCWD’s former counsel,
manifested before the trial court that
OCWD had already been judicially dissolved
and that Subic Water assumed OCWD’s
personality. The compromise agreement,
although signed by Mr. Noli Aldip, did not
carry the express conformity of Subic
Water. Mr. Aldip was never given any
authorization to conform to or bind Subic
Water in the compromise agreement. Also,
the agreement merely labeled Subic Water
as a co-maker. It did not contain any
provision where Subic Water acknowledged
its solidary liability with OCWD.
 Subic Water did not voluntarily submit to
the court’s jurisdiction. In fact, the motion
it filed was only made as a special
appearance, precisely to avoid the court’s
acquisition of jurisdiction over its person.
Without any participation in the
proceedings below, it cannot be made
liable on the writ of execution issued by
the court a quo.
Arguments made and Evidence filed by the
petitioner
 Subic Water was granted the franchise to
operate and to carry on the business of
providing water and sewerage services in
the Subic BayFree Port Zone, as well as in
Olongapo City.18 Hence, Subic Water took
over OCWD’s water operations in Olongapo
City.
 May 30, 2003, the petitioner, through its
new counsel, filed a notice of appearance
with urgent motion/manifestation28 and
prayed again for the issuance of a writ of
execution against OCWD. A certain Atty.
Segundo Mangohig, claiming to be OCWD’s
former counsel, filed a manifestation
alleging that OCWD had already been
dissolved and that Subic Water is now the
former OCWD.
 The petitioner acknowledged the rule that
the execution of a judgment could no
longer be made by mere motion after the
prescribed five-year period had already
lapsed. However, it argued that the delay
for the issuance of the writ of execution
was caused by OCWD and Subic Water. The
petitioner submitted that this Court had
allowed execution by mere motion even
after the lapse of the five-year period,
when the delay was caused or occasioned
by the actions of the judgment debtor.
Also, the petitioner asserted that although
Subic Water was not a party in the case, it
could still be subjected to a writ of
execution, since it was identified as
OCWD’s co-maker and successor-in-interest
in the compromise agreement. Lastly, the
petitioner contended that the compromise
agreement was signed by Mr. Noli R. Aldip,
 then Subic Water’s chairman, signifying
Subic Water’s consent to the agreement.
Supreme Court Decision
The Court enumerated the possible
probative factors of identity which could justify
the application of the doctrine of piercing the
corporate veil. These are: stock ownership by one
or common ownership of both corporations;
identity of directors and officers; the manner of
keeping corporate books and records; and
methods of conducting the business.
The burden of proving the presence of any
of these probative factors lies with the one
alleging it. Unfortunately, petitioner simply
claimed that Subic Water took over OCWD's water
operations in Olongapo City. Apart from this
allegation, petitioner failed to demonstrate any
link to justify the construction that Subic Water
and OCWD are one and the same. Under this
evidentiary situation, the duty is to respect the
separate and distinct personalities of these two
juridical entities.1âwphi1
We thus deny the present petition. The
writ of execution issued by RTC Olongapo, Br. 75,
in favor of Olongapo City, is hereby confirmed to
be null and void. Accordingly, respondent Subic
Water cannot be made liable under this writ. To
conclude, premises considered hereby dismiss the
petition. The Court of Appeals' decision dated July
6, 2005 and resolution dated January 3, 2006,
annulling and setting aside the orders of the
Regional Trial Court of Olongapo, Branch 75 dated
July 29, 2003 and October 7, 2003, and the writ of
execution dated July 31, 2003, are hereby
AFFIRMED. Costs against the City of Olongapo.
Pantia, Patrik Oliver E.
Roberto C. Sicam and Agencia De R.C. Sicam, Inc.,
petitioners, vs. Lulu V. Jorge and Cesar
Jorge, respondents.
G.R. No. 159617, August 8, 2007
Issue
Are the petitioners liable for the loss of the
pawned articles in their possession? (Petitioners
insist that they are not liable since robbery is a
fortuitous event and they are not negligent at all.)
Arguments made and Evidence filed by the
defendant
To begin with, although it is true that
indeed the CA findings were exact reproductions
of the arguments raised in respondents’
(appellants’) brief filed with the CA, we find the
same to be not fatally infirmed. Upon examination
of the Decision, we find that it expressed clearly
and distinctly the facts and the law on which it is
based as required by Section 8, Article VIII of the
Constitution. The discretion to decide a case one
way or another is broad enough to justify the
adoption of the arguments put forth by one of the
parties, as long as these are legally tenable and
supported by law and the facts on records.
However, after a careful examination of
the records, we find no justification to absolve
petitioner Sicam from liability.
The CA correctly pierced the veil of the
corporate fiction and adjudged petitioner Sicam
liable together with petitioner corporation. The
rule is that the veil of corporate fiction may be
pierced when made as a shield to perpetrate fraud
and/or confuse legitimate issues. The theory of
corporate entity was not meant to promote unfair
objectives or otherwise to shield them.
Notably, the evidence on record shows that
at the time respondent Lulu pawned her jewelry,
the pawnshop was owned by petitioner Sicam
himself. As correctly observed by the CA, in all
the pawnshop receipts issued to respondent Lulu
in September 1987, all bear the words "Agencia de
R. C. Sicam," notwithstanding that the pawnshop
was allegedly incorporated in April 1987. The
receipts issued after such alleged incorporation
were still in the name of "Agencia de R. C. Sicam,"
thus inevitably misleading, or at the very least,
creating the wrong impression to respondents and
the public as well, that the pawnshop was owned
solely by petitioner Sicam and not by a
corporation.
Petitioner Sicam had testified that there
was a security guard in their pawnshop at the time
of the robbery. He likewise testified that when he
started the pawnshop business in 1983, he thought
of opening a vault with the nearby bank for the
purpose of safekeeping the valuables but was
discouraged by the Central Bank since pawned
articles should only be stored in a vault inside the
pawnshop. The very measures which petitioners
had allegedly adopted show that to them the
possibility of robbery was not only foreseeable,
but actually foreseen and anticipated. Petitioner
Sicam’s testimony, in effect, contradicts
petitioners’ defense of fortuitous event.
Arguments made and Evidence filed by the
petitioner
Petitioners argue that the reproduced
arguments of respondents in their Appellants’
Brief suffer from infirmities, as follows:
(1) Respondents conclusively asserted in
paragraph 2 of their Amended Complaint
that Agencia de R.C. Sicam, Inc. is the
present owner of Agencia de R.C. Sicam
Pawnshop, and therefore, the CA cannot
rule against said conclusive assertion of
respondents;
(2) The issue resolved against petitioner
Sicam was not among those raised and
litigated in the trial court; and
(3) By reason of the above infirmities, it
was error for the CA to have pierced the
corporate veil since a corporation has a
personality distinct and separate from its
individual stockholders or members.
Anent the second error, petitioners point
out that the CA finding on their negligence is
likewise an unedited reproduction of respondents’
brief which had the following defects:
(1) There were unrebutted evidence on
record that petitioners had observed the
diligence required of them.
(2) Petitioners were adjudged negligent as
they did not take insurance against the loss
of the pledged jelweries, but it is judicial
notice that due to high incidence of
crimes, insurance companies refused to
cover pawnshops and banks because of high
probability of losses due to robberies;
(3) In Hernandez v. Chairman, Commission
on Audit (179 SCRA 39, 45-46), the victim
of robbery was exonerated from liability
for the sum of money belonging to others
and lost by him to robbers.
Supreme Court Decision
HELD: The Decision of the CA is AFFIRMED. YES
Article 1174 of the Civil Code provides:
Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or
when the nature of the obligation requires the
assumption of risk, no person shall be responsible
for those events which could not be foreseen or
which, though foreseen, were inevitable.
Fortuitous events by definition are
extraordinary events not foreseeable or avoidable.
It is therefore, not enough that the event should
not have been foreseen or anticipated, as is
commonly believed but it must be one impossible
to foresee or to avoid. The mere difficulty to
foresee the happening is not impossibility to
foresee the same.
Moreover, petitioners failed to show that
they were free from any negligence by which the
loss of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a
fortuitous event. It does not foreclose the
possibility of negligence on the part of herein
petitioners.
Furthermore, petitioner Sicam’s admission
that the vault was open at the time of robbery is
clearly a proof of petitioners’ failure to observe
the care, precaution and vigilance that the
circumstances justly demanded.
The robbery in this case happened in
petitioners’ pawnshop and they were negligent in
not exercising the precautions justly demanded of
a pawnshop.
Pasaol, Devvie Mae A.
Magsaysay Maritime Corporation, Princess Cruise
Lines, Ltd., and/or Gary M. Castillo, petitioners
vs. Allan F. Buico, defendant
G.R. No. 230901 December 05, 2019
Issue
Whether Buico is entitled to the award of total
and permanent disability.
Arguments made and Evidence filed by the
defendant
 Buico filed a complaint that he is entitled
for permanent and total disability benefits.
 Buico consulted his own physician who
diagnosed Buico unfit to perform sea duty
in whatever capacity with a permanent
disability status.
 That company-designated physician's
assessment was not accurate and precise,
pointing out that the that the company-
designated physician even admitted in the
Final Medical Report that Buico was not
restored to his previous condition, hence,
his disability should therefore be
considered as total and permanent.
Arguments made and Evidence filed by the
petitioner
 On October 11, 2014 and November 15,
2014, the company-designated physician
issued an Interim Disability Grading,
assessing Buico's disability at Grade 10
pursuant to the POEA-SEC.
 Subsequently, on December 1, 2014, the
company-designated physician gave a Final
Medical Report and a Disability Grading of
Grade 10 disability in accordance with the
POEA-SEC.
 Buico was not entitled to permanent and
total disability benefits because the
company-designated physician had already
assessed his disability at Grade 10 pursuant
to the POEA-SEC.
 Buico failed to follow the third doctor rule.
 The company-designated physician had
knowledge of Buico's actual medical
condition, hence, he was more qualified to
assess his disability and his assessment
should be upheld.
Supreme Court Decision
In light of the foregoing, the Court finds
that the LA had correctly awarded Grade 10
disability benefits to Buico based on the disability
grading given by the company-designated
physician. Further, in accordance with prevailing
jurisprudence, the total monetary award in his
favor should be subject to an interest of 6% per
annum from the finality of this Decision until full
payment.
Saglayan, Jannefah Irish H.
Loyola Grand Villas Homeowners (South)
Association, Inc., petitioner, vs.
Hon. Court Of Appeals, Home Insurance And
Guaranty Corporation, Emden Encarnacion and
Horatio Aycardo, respondents.
G.R. No. 117188 August 7, 1997
Issue
Whether the Loyola Grand Villas
Homeowners Association Incorporation’s failure to
file its by-laws within the period prescribed by
Section 46 of the Corporation Code had the effect
of automatically dissolving the said corporation.
Arguments made and Evidence filed by the
defendant
 In July, 1989, when Soliven inquired about
the status of LGVHAI, Atty. Joaquin A.
Bautista, the head of the legal department
of the HIGC, informed him that LGVHAI had
been automatically dissolved for two
reasons. First, it did not submit its by-laws
within the period required by the
Corporation Code and, second, there was
non-user of corporate charter because
HIGC had not received any report on the
association's activities. Apparently, this
information resulted in the registration of
the South Association with the HIGC on
July 27, 1989 covering Phases West I, East I
and East II. It filed its by-laws on July 26,
1989.
 The Appeals Board of the HIGC and the
Court of Appeals both rejected the
contention of the Petitioner affirmed the
decision of Hearing Officer Javier.
Arguments made and Evidence filed by the
petitioner
 Loyola Grand Villas Homeowners
Association, Inc. (LGVHAI) was organized
on 8 February 1983 as the homeowners'
association for Loyola Grand Villas. It was
also registered as the sole homeowners'
association in the said village with the
Home Financing Corporation which
eventually became Home Insurance
Guarantee Corporation (HIGC). However,
the association was not able file its
corporate by-laws.
 The LGVHAI officers then tried to
registered its By-Laws in 1988, but they
failed to do so. They then discovered that
there were two other homeowners'
organizations within the subdivision - the
Loyola Grand Villas Homeowners (North)
Association, Inc., the North Association and
herein Petitioner Loyola Grand Villas
Homeowners (South) Association, Inc., the
South Association.
 LGVHAI lodged a complaint with HIGC
Hearing Officer Danilo Javier, and
questioned the revocation of its
registration. Hearing Officer Javier ruled
in favor of LGVHAI, revoking the
 registration of the North and South
Associations.
 Petitioner South Association appealed the
ruling contending that LGVHAI failure to
file automatically dissolved the
corporation.
Supreme Court Decision
No. The Supreme Court ruled that the
non-filing of the by-laws within the period of 1
month from the issuance by SEC of the
Certificate of Incorporation will not result to
the automatic dissolution of the corporation.
The pertinent provision of the Corporation Code
that is the focal point of controversy in this case
states:
Sec. 46. Adoption of by-laws — “Every
corporation formed under this Code, must
within one (1) month after receipt of
official notice of the issuance of its
certificate
of incorporation by the Securities and
Exchange Commission, adopt a code of
by-laws for its government not inconsistent
with this Code.”
Ordinarily, the word "must" connotes an
imposition of duty which must be enforced.
However, the word "must" in a statute, like "shall,"
is not always imperative. It may be consistent
with an exercise of discretion. If the language of a
statute, considered as a whole with due regard to
its nature and object, reveals that the legislature
intended to use the words "shall" and "must" to be
directory, they should be given that meaning. The
legislative deliberations of the Corporation Code
reveals that it was not the intention of Congress
to automatically dissolve a corporation for failure
to file the By-Laws on time. Moreover, By-Laws
may be necessary to govern the corporation, but
By-Laws are still subordinate to the Articles of
Incorporation and the Corporation Code. In fact,
there are cases where By-Laws are unnecessary to
the corporate existence and to the valid exercise
of corporate powers. The Corporation Code does
not expressly provide for the effects of non-filing
of By-Laws. However, these have been rectified by
Section 6 of PD 902-A which provides that SEC
shall possess the power to suspend or revoke,
after proper notice and hearing, the franchise or
certificate of registration of corporations upon
failure to file By-Laws within the required period.
This shows that there must be notice and hearing
before a corporation is dissolved for failure to file
its By-Laws. Even assuming that the existence of a
ground, the penalty is not necessarily revocation,
but may only be suspension. By-Laws are
indispensable to corporations, since they are
required by law for an orderly management of
corporations. However, failure to file them within
the period prescribed does not equate to the
automatic dissolution of a corporation.
Saglayan, Jannefah Irish H.
Loyola Grand Villas Homeowners (South)
Association, Inc., petitioner, vs.
Hon. Court Of Appeals, Home Insurance And
Guaranty Corporation, Emden Encarnacion and
Horatio Aycardo, respondents.
G.R. No. 117188 August 7, 1997
Issue
Whether the Loyola Grand Villas
Homeowners Association Incorporation’s failure to
file its by-laws within the period prescribed by
Section 46 of the Corporation Code had the effect
of automatically dissolving the said corporation.
Arguments made and Evidence filed by the
defendant
 In July, 1989, when Soliven inquired about
the status of LGVHAI, Atty. Joaquin A.
Bautista, the head of the legal department
of the HIGC, informed him that LGVHAI had
been automatically dissolved for two
reasons. First, it did not submit its by-laws
within the period required by the
Corporation Code and, second, there was
non-user of corporate charter because
HIGC had not received any report on the
association's activities. Apparently, this
information resulted in the registration of
the South Association with the HIGC on
July 27, 1989 covering Phases West I, East I
and East II. It filed its by-laws on July 26,
1989.
 The Appeals Board of the HIGC and the
Court of Appeals both rejected the
 contention of the Petitioner affirmed the
decision of Hearing Officer Javier.
Arguments made and Evidence filed by the
petitioner
 Loyola Grand Villas Homeowners
Association, Inc. (LGVHAI) was organized
on 8 February 1983 as the homeowners'
association for Loyola Grand Villas. It was
also registered as the sole homeowners'
association in the said village with the
Home Financing Corporation which
eventually became Home Insurance
Guarantee Corporation (HIGC). However,
the association was not able file its
corporate by-laws.
 The LGVHAI officers then tried to
registered its By-Laws in 1988, but they
failed to do so. They then discovered that
there were two other homeowners'
organizations within the subdivision - the
Loyola Grand Villas Homeowners (North)
Association, Inc., the North Association and
herein Petitioner Loyola Grand Villas
Homeowners (South) Association, Inc., the
South Association.
 LGVHAI lodged a complaint with HIGC
Hearing Officer Danilo Javier, and
questioned the revocation of its
registration. Hearing Officer Javier ruled
in favor of LGVHAI, revoking the
registration of the North and South
Associations.
 Petitioner South Association appealed the
ruling contending that LGVHAI failure to
file automatically dissolved the
corporation.
Supreme Court Decision
No. The Supreme Court ruled that the
non-filing of the by-laws within the period of 1
month from the issuance by SEC of the
Certificate of Incorporation will not result to
the automatic dissolution of the corporation.
The pertinent provision of the Corporation Code
that is the focal point of controversy in this case
states:
Sec. 46. Adoption of by-laws — “Every
corporation formed under this Code, must
within one (1) month after receipt of
official notice of the issuance of its
certificate
of incorporation by the Securities and
Exchange Commission, adopt a code of
by-laws for its government not inconsistent
with this Code.”
Ordinarily, the word "must" connotes an
imposition of duty which must be enforced.
However, the word "must" in a statute, like "shall,"
is not always imperative. It may be consistent
with an exercise of discretion. If the language of a
statute, considered as a whole with due regard to
its nature and object, reveals that the legislature
intended to use the words "shall" and "must" to be
directory, they should be given that meaning. The
legislative deliberations of the Corporation Code
reveals that it was not the intention of Congress
to automatically dissolve a corporation for failure
to file the By-Laws on time. Moreover, By-Laws
may be necessary to govern the corporation, but
By-Laws are still subordinate to the Articles of
Incorporation and the Corporation Code. In fact,
there are cases where By-Laws are unnecessary to
the corporate existence and to the valid exercise
of corporate powers. The Corporation Code does
not expressly provide for the effects of non-filing
of By-Laws. However, these have been rectified by
Section 6 of PD 902-A which provides that SEC
shall possess the power to suspend or revoke,
after proper notice and hearing, the franchise or
certificate of registration of corporations upon
failure to file By-Laws within the required period.
This shows that there must be notice and hearing
before a corporation is dissolved for failure to file
its By-Laws. Even assuming that the existence of a
ground, the penalty is not necessarily revocation,
but may only be suspension. By-Laws are
indispensable to corporations, since they are
required by law for an orderly management of
corporations. However, failure to file them within
the period prescribed does not equate to the
automatic dissolution of a corporation.
Abo, Rufaidah U.
Wilson P. Gamboa, petitioner, vs. Finance
Secretary Margarito B. Teves, Finance
Undersecretary John P. Sevilla, And Commissioner
Ricardo Abcede of the Presidential Commission On
Good Government (PCGG) in their capacities as
chair and members, respectively, of the
privatization council, Chairman Anthoni Salim of
First Pacific Co., LTD. in his capacity as director of
Metro Pacific Asset Holdings Inc., Chairman
Manuel V. Pangilinan of Philippine Long Distance
Telephone Company (PLDT) in his capacity as
managing director of First Pacific Co., LTD.,
President Napoleon L. Nazareno of Philippine Long
Distance Telephone Company, Chair Fe Barin of
the Securities Exchange Commission, and
President Francis Lim of the Philippine Stock
Exchange, respondents.
Pablito V. Sanidad and Arno V. Sanidad,
Petitioners-in-Intervention.
G.R. No. 176579 June 28, 2011
Issue
Whether the term "capital" in Section 11,
Article XII of the Constitution refers to the total
common shares only or to the total outstanding
capital stock (combined total of common and non-
voting preferred shares) of PLDT, a public utility.
Arguments made and Evidence filed by the
defendant
On 9 November 1967, PTIC was
incorporated and had since engaged in the
business of investment holdings. PTIC held
26,034,263 PLDT common shares, or 13.847
percent of the total PLDT outstanding common
shares. PHI, on the other hand, was incorporated
in 1977, and became the owner of 111,415 PTIC
shares or 46.125 percent of the outstanding
capital stock of PTIC by virtue of three Deeds of
Assignment executed by Ramon Cojuangco and
Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares
held by PHI were sequestered by the PCGG, and
subsequently declared by this Court as part of the
ill-gotten wealth of former President Ferdinand
Marcos. The sequestered PTIC shares were
reconveyed to the Republic of the Philippines in
accordance with this Court’s decision which
became final and executory on 8 August 2006.
The Philippine Government decided to sell
the 111,415 PTIC shares, which represent 6.4
percent of the outstanding common shares of
stock of PLDT, and designated the Inter-Agency
Privatization Council (IPC), composed of the
Department of Finance and the PCGG, as the
disposing entity. An invitation to bid was
published in seven different newspapers from 13
to 24 November 2006. On 20 November 2006, a
pre-bid conference was held, and the original
deadline for bidding scheduled on 4 December
2006 was reset to 8 December 2006. The extension
was published in nine different newspapers.
During the 8 December 2006 bidding,
Parallax Capital Management LP emerged as the
highest bidder with a bid of ₱25,217,556,000. The
government notified First Pacific, the majority
owner of PTIC shares, of the bidding results and
gave First Pacific until 1 February 2007 to exercise
its right of first refusal in accordance with PTIC’s
Articles of Incorporation. First Pacific announced
its intention to match Parallax’s bid.
On 31 January 2007, the House of
Representatives (HR) Committee on Good
Government conducted a public hearing on the
particulars of the then impending sale of the
111,415 PTIC shares. Respondents Teves and
Sevilla were among those who attended the public
hearing. The HR Committee Report No. 2270
concluded that: (a) the auction of the
government’s 111,415 PTIC shares bore due
diligence, transparency and conformity with
existing legal procedures; and (b) First Pacific’s
intended acquisition of the government’s 111,415
PTIC shares resulting in First Pacific’s 100%
ownership of PTIC will not violate the 40 percent
constitutional limit on foreign ownership of a
public utility since PTIC holds only 13.847 percent
of the total outstanding common shares of PLDT.
On 28 February 2007, First Pacific completed the
acquisition of the 111,415 shares of stock of PTIC.
Nazareno stressed mainly that the petition
"seeks to divest foreign common shareholders
purportedly exceeding 40% of the total common
shareholdings in PLDT of their ownership over
their shares."
Similarly, respondent Manuel V. Pangilinan
does not define the term "capital" in Section 11,
Article XII of the Constitution. Neither does he
refute petitioner’s claim of foreigners holding
more than 40 percent of PLDT’s common shares.
Instead, respondent Pangilinan focuses on the
procedural flaws of the petition and the alleged
violation of the due process rights of foreigners.
Respondent Pangilinan emphasizes in his
Memorandum (1) the absence of this Court’s
jurisdiction over the petition; (2) petitioner’s lack
of standing; (3) mootness of the petition; (4) non-
availability of declaratory relief; and (5) the
denial of due process rights. Moreover, respondent
Pangilinan alleges that the issue should be
whether "owners of shares in PLDT as well as
owners of shares in companies holding shares in
PLDT may be required to relinquish their shares in
PLDT and in those companies without any law
requiring them to surrender their shares and also
without notice and trial."
Respondent Pangilinan further asserts that
"Section 11, [Article XII of the Constitution]
imposes no nationality requirement on the
shareholders of the utility company as a condition
for keeping their shares in the utility company."
According to him, "Section 11 does not authorize
taking one person’s property (the shareholder’s
stock in the utility company) on the basis of
another party’s alleged failure to satisfy a
requirement that is a condition only for that other
party’s retention of another piece of property (the
utility company being at least 60% Filipino-owned
to keep its franchise)."
In the earlier case of Fernandez v.
Cojuangco, petitioner Fernandez who claimed to
be a stockholder of record of PLDT, contended
that the term "capital" in the 1987 Constitution
refers to shares entitled to vote or the common
shares. Fernandez explained thus:
The forty percent (40%) foreign equity
limitation in public utilities prescribed by the
Constitution refers to ownership of shares of stock
entitled to vote, i.e., common shares, considering
that it is through voting that control is being
exercised.
Arguments made and Evidence filed by the
petitioner
On 28 November 1928, the Philippine
Legislature enacted Act No. 3436 which granted
PLDT a franchise and the right to engage in
telecommunications business. In 1969, General
Telephone and Electronics Corporation (GTE), an
American company and a major PLDT stockholder,
sold 26 percent of the outstanding common shares
of PLDT to PTIC. In 1977, Prime Holdings, Inc.
(PHI) was incorporated by several persons,
including Roland Gapud and Jose Campos, Jr.
Subsequently, PHI became the owner of 111,415
shares of stock of PTIC by virtue of three Deeds of
Assignment executed by PTIC stockholders Ramon
Cojuangco and Luis Tirso Rivilla. In 1986, the
111,415 shares of stock of PTIC held by PHI were
sequestered by the Presidential Commission on
Good Government (PCGG). The 111,415 PTIC
shares, which represent about 46.125 percent of
the outstanding capital stock of PTIC, were later
declared by this Court to be owned by the
Republic of the Philippines.
In 1999, First Pacific, a Bermuda-
registered, Hong Kong-based investment firm,
acquired the remaining 54 percent of the
outstanding capital stock of PTIC. On 20 November
2006, the Inter-Agency Privatization Council (IPC)
of the Philippine Government announced that it
would sell the 111,415 PTIC shares, or 46.125
percent of the outstanding capital stock of PTIC,
through a public bidding to be conducted on 4
December 2006. Subsequently, the public bidding
was reset to 8 December 2006, and only two
bidders, Parallax Venture Fund XXVII (Parallax)
and Pan-Asia Presidio Capital, submitted their
bids. Parallax won with a bid of ₱25.6 billion or
US$510 million.
Thereafter, First Pacific announced that it
would exercise its right of first refusal as a PTIC
stockholder and buy the 111,415 PTIC shares by
matching the bid price of Parallax. However, First
Pacific failed to do so by the 1 February 2007
deadline set by IPC and instead, yielded its right
to PTIC itself which was then given by IPC until 2
March 2007 to buy the PTIC shares. On 14 February
2007, First Pacific, through its subsidiary, MPAH,
entered into a Conditional Sale and Purchase
Agreement of the 111,415 PTIC shares, or 46.125
percent of the outstanding capital stock of PTIC,
with the Philippine Government for the price of
₱25,217,556,000 or US$510,580,189. The sale was
completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the
sale by the Philippine Government of 46.125
percent of PTIC shares is actually an indirect sale
of 12 million shares or about 6.3 percent of the
outstanding common shares of PLDT. With the
sale, First Pacific’s common shareholdings in PLDT
increased from 30.7 percent to 37 percent,
thereby increasing the common shareholdings of
foreigners in PLDT to about 81.47 percent. This
violates Section 11, Article XII of the 1987
Philippine Constitution which limits foreign
ownership of the capital of a public utility to not
more than 40 percent.
Section 11. No franchise, certificate, or
any other form of authorization for the operation
of a public utility shall be granted except to
citizens of the Philippines or to corporations or
associations organized under the laws of the
Philippines, at least sixty per centum of whose
capital is owned by such citizens; nor shall such
franchise, certificate, or authorization be
exclusive in character or for a longer period than
fifty years.
Supreme Court Decision
The court partly granted the petitioner and
held that the term “capital” in Section 11, Article
XII of theConstitution refers only to shares of stock
entitled to vote in the election of directors of a
public utility, i.e., to the total common shares in
PLDT.
Considering that common shares have
voting rights which translate to control, as
opposed to preferred shares which usually have no
voting rights, the term “capital” inSection 11,
Article XII of the Constitution refers only to
common shares. However, if the preferred shares
also have the right to vote in the election of
directors, then the term“capital” shall include
such preferred shares because the right to
participate in the control or management of the
corporation is exercised through the right to vote
in the election of directors. In short, the term
“capital” in Section11, Article XII of the
Constitution refers only to shares of stock that can
vote in the election of directors. To construe
broadly the term “capital” as the total
outstanding capital stock, including both common
and non-voting preferred shares, grossly
contravenes the intent and letter of the
Constitution that the “State shall develop a self-
reliant and independent national economy
effectively controlled by Filipinos.” A broad
definition unjustifiably disregards who owns the
all-important voting stock, which necessarily
equates to control of the public utility
Ugokan, Sittie Farisha B.
Luxuria Homes Inc. and/or Aida M.
Posadas, petitioners, vs. Honorable Court Of
Appeals, James Builder Construction and/or Jaime
T. Bravo, respondents.
GR No. 125986 January 28, 1999
Issue
 Were the respondents able to present
sufficient evidence to support the
allegations in their complaint and entitle
them to their prayers?
 Whether Luxuria Homes Inc. was a party to
the transactions entered into by Aida M.
Posadas with Jaime T. Bravo and James
Builder Construction, and thus could be
held jointly and severally with Posadas.
 Whether petitioners entered into a
management contract with respondents.
Arguments made and Evidence filed by the
defendant
James T. Bravo and James Builder
Construction filed a complaint for specific
performance before the trial court against Aida M.
Posadas and Luxuria Homes Inc. They argued that
petitioner Posadas authorized them to negotiate
with the squatters to leave the 1.6 hectare
property co-owned by Posadas and her two
children for a payment of P1,100,000.00.. They
were also asked to prepare a site development
plan and an architectural design for a contract
price of P450,000.00, in which P25,000.00 is
already paid. Moreover, in anticipation of land
development contract, Bravo and James Builder
Construction constructed a bunkhouse and
warehouse on the property and a hollow blocks
factory.
Defendants also claimed that petitioner
Posadas agreed that they will develop the land
into a first class subdivision through a
management contract and that the petitioner is
unjustly refusing to comply with her obligation to
finalize the said contract. An authorization letter
dated May 3, 1989 written by Posadas was
presented by respondents to urge the court to
compel the petitioners to execute a management
contract with them.
Bravo presented vouchers evidencing
payment made by Posadas to him for squatter
relocation, architectural design, survey and
fencing. The prepared architectural design, site
development plan and survey prepared and
conducted by Bravo were used by Posadas in his
application for the issuance of Development
Permit, Preliminary Approval and Locational
Clearance. Petitioner benefited from said services
of Bravo as Housing and Land Use Regulatory
Board issued and approved the petitioner’s
application. The contract price for the land is
P140,000.00, in which P130,000.00 is already paid
by the petitioner.
Regarding with the issue about the
squatters and fencing, Bravo failed to provide
proof that they fulfilled their commitments.
Nevertheless, he testified that he successfully
asked the squatters to leave the property.
Defendant also claimed that he finished 60% of the
fencing project but he failed to present evidence
supporting his testimony.
Respondents argued that petitioner
Posadas irrationally formed Luxuria Homes Inc.
and transferred the subject parcel of land to the
said corporation to evade payment and defraud
her creditors. However, they failed to show proof
that the petitioner acted in bad faith.
Arguments made and Evidence filed by the
petitioner
Posadas and Luxuria Homes Inc. asserted
that the respondents failed to support the
allegations in their complaint and as such cannot
be entitled to the reliefs prayed for. Posadas also
questioned the consistency of the argument of
Bravo. Initially, the defendant presented in his
written complaint that the agreed price for the
preparation of site development plan and
architectural design costs P450,000.00 in total.
But in his testimony, it is P950,000.00 where
P450,000.00 is only for architectural design and
P500,000.00 is for site development plan.
Mostly, the argument of Posadas is about
lacking of evidence supporting the claim of the
defendants. Indeed, a mere allegation is not an
evidence.
Regarding with the liability of Luxuria
Homes Inc., it is argued that the incorporation and
eventual transfer of property were not fraudulent
acts because such actions were done with the full
knowledge and presence of Bravo, the defendant.
The transfer was made at the time the
relationship between Posadas and Bravo was
supposedly very pleasant. Moreover, Posadas is
not the major stockholder of the corporation
because he owns approximately only 33% of the
capital stock. Luxuria Homes Inc. was not a party
to any of the transactions, not even to the
agreement to negotiate with the squatters.
As to the handwritten authorization letter,
it is argued that the said letter is in draft form
and is not put into its final form. Both parties
agreed that it was not in the final form because
they have not agreed on the stipulations of the
said contract. Thus, it is only to be considered as
mere unaccepted offer.
Supreme Court Decision
In civil cases, the burden of proof rests
upon the party who asserts the affirmative of an
issue. The respondents lack evidences to support
their claims. There is no proof that the defendants
actually fulfilled their commitments. Bravo has no
evidence that he finished 60% of the fencing
project which he claimed in his testimony. Bravo
also failed to provide proofs that they have
suffered moral damages. This Court has held that
he who alleges a fact has a burden of proving it.
There is no sufficient evidence to support
the defendants’ claim for actual damages of
warehouse construction and hollow-block factory
amounting to P500,000.00. The amount of loss
must be proven with reasonable degree of
certainty.
Luxuria Homes Inc. cannot be held liable
with Posadas because the transfer of the property
was done with full knowledge of the defendant.
There is no enough evidence to prove that Posadas
acted in bad faith when she incorporated Luxuria
Homes Inc. Thus, only Pasadas, who contracted
Bravo to render the services, is liable to pay.
Since the contract is not in its final form
because of disagreement of party in the
stipulation, it is considered that there is no
contract perfected. It lacks the element consent.
Therefore, the petition is partially granted.
Aida M. Posadas alone is liable to pay the
respondents amounting to P435,000.00. It is for
the balance for the payment of site development
plan, P425,000.00, and contract price for the
land, P10,000.00. Luxuria Homes Inc. is released
from any liability to the respondents.
Usman, Norolhaya T.
Donnina C. Halley, petitioner vs. Printwell Inc.,
respondent.
G.R. No. 157549 May 30, 2011
Issue
The propriety of disregarding the separate
personalities of BMPI and its stockholders by
piercing the thin veil that separated them.
Arguments made and Evidence filed by the (c) BMPI income tax return for the year
defendant 1988 (stamped "received" by the BIR);
Printwell engaged in commercial and (d) journal vouchers;
industrial printing. BMPI commissioned Printwell (e) cash deposit slips; and (f)Bank of the
for the printing of the magazine Philippines, Inc. Philippine Islands (BPI) savings account
(together with wrappers and subscription cards) pass book in the name of BMPI.
that BMPI published and sold. For that purpose, Supreme Court Decision
Printwell extended 30-day credit accommodations Although a corporation has a personality
to BMPI. separate and distinct from those of its
Printwell sued BMPI on January 26, 1990 stockholders, directors, or officers, such separate
for the collection of the unpaid balance of and distinct personality is merely a fiction created
₱291,342.76 in the RTC. by law for the sake of convenience and to promote
On February 8, 1990, Printwell amended the ends of justice.
the complaint in order to implead as defendants The corporate personality may be
all the original stockholders and incorporators to disregarded, and the individuals composing the
recover on their unpaid subscriptions. corporation will be treated as individuals, if the
The defendants filed a consolidated corporate entity is being used as a cloak or cover
answer, averring that they all had paid their for fraud or illegality; as a justification for a
subscriptions in full; that BMPI had a separate wrong; as an alter ego, an adjunct, or a business
personality from those of its stockholders; that conduit for the sole benefit of the stockholders.
Rizalino C. Viñeza had assigned his fully-paid up As a general rule, a corporation is looked
shares to a certain Gerardo R. Jacinto in 1989; and upon as a legal entity, unless and until sufficient
that the directors and stockholders of BMPI had reason to the contrary appears.
resolved to dissolve BMPI during the annual The prevailing rule is that a stockholder is
meeting held on February 5, 1990. personally liable for the financial obligations of
the corporation to the extent of his unpaid
Arguments made and Evidence filed by the subscription.
petitioner In view of the petitioner's unpaid
The petitioner was an incorporator and subscription being worth P262,500.00, she was
original director of Business Media Philippines, Inc. liable up to that amount.
(BMPI), which, at its incorporation on November
12, 1987,had an authorized capital stock of
₱3,000,000.00 divided into 300,000 shares each
with a par value of ₱10.00,of which 75,000 were
initially subscribed.
In the period from October 11, 1988 until
July 12, 1989, BMPI placed with Printwell several
orders on credit, evidenced by invoices and
delivery receipts totaling ₱316,342.76. BMPI paid
only ₱25,000.00.
Claiming that they had all paid their
subscriptions in full and to prove payment of their
subscriptions, the defendant stockholders
submitted in evidence BMPI official receipt.
In addition, the stockholders submitted
other documents in evidence, namely:
(a) an audit report dated March 30, 1989
prepared by Ilagan, Cepillo & Associates
(submitted to the SEC and the BIR);
(b) BMPI balance sheet and income
statement as of December 31, 1988;