said shares. They further agreed that KAWASAKI would be entitled to name acompany in which it was a stockholder, which could exercise the right to top.On September 7, 1990, KAWASAKI informed APT that Philyards Holdings, Inc.(PHI) 1 would exercise its right to top. The Asset Specific Bidding Rulesprovide among others that the subject of the sale is the NG's 87.67% equityin PHILSECO, that the highest bid shall be subject to the final approval of theAPT Board of Trustees and COP, and that the indicative price is P1.3B.At the public bidding, JG Summit submitted a bid of P2.03B with anacknowledgement of Kawasaki's right to top. JG Summit then informed APTthat it was protesting the offer of PHI to top its bid on the grounds that: (a)the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui,Keppel, SM Group, ICTSI and Insular Life violated the ASBR because the lastfour (4) companies were the losing bidders thereby circumventing the lawand prejudicing the weak winning bidder; (b) only KAWASAKI could exercisethe right to top; (c) giving the same option to top to PHI constitutedunwarranted benefit to a third party; (d) no right of first refusal can beexercised in a public bidding or auction sale; and (e) the JG Summitconsortium was not estopped from questioning the proceedings.H: The SC upheld the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is aproperty right of PHILSECO shareholders, KAWASAKI and NIDC, under theterms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to mutually grant this right to each other, by itself, does notconstitute a violation of the provisions of the Constitution limiting landownership to Filipinos and Filipino corporations. As PHILYARDS correctly putsit, if PHILSECO still owns land, the right of first refusal can be validlyassigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-DummyLaws, absent proof of any fraudulent intent. The transfer could be madeeither to a nominee or such other party which the holder of the right of firstrefusal feels it can comfortably do business with. Alternatively, PHILSECOmay divest of its landholdings, in which case KAWASAKI, in exercising itsright of first refusal, can exceed 40% of PHILSECO's equity. In fact, it caneven be said that if the foreign shareholdings of a landholding corporationexceeds 40%, it is not the foreign stockholders' ownership of the shareswhich is adversely affected but the capacity of the corporation to own land— that is, the corporation becomes disqualified to own land. This findssupport under the basic corporate law principle that the corporation and itsstockholders are separate juridical entities. In this vein, the right of firstrefusal over shares pertains to the shareholders whereas the capacity toown land pertains to the corporation. Hence, the fact that PHILSECO ownsland cannot deprive stockholders of their right of first refusal. No lawdisqualifies a person from purchasing shares in a landholding corporationeven if the latter will exceed the allowed foreign equity, what the lawdisqualifies is the corporation from owning land. This is the clear import of the Constitution.
Tramat Mercantile Inc v CA
. On 09 April 1984, Melchor de la Cuesta,doing business under the name and style of "Farmers Machineries," sold to Tramat Mercantile, Inc. (Tramat), one (1) unit HINOMOTO TRACTOR Model MB1100D powered by a 13 H.P. diesel engine. In payment, David Ong, Tramat'spresident and manager, issued a check for P33,500.00 (apparently replacingan earlier postdated check for P33,080.00). Tramat, in turn, sold the tractor,together with an attached lawn mower fabricated by it, to the MetropolitanWaterworks and Sewerage System ("NAWASA") for P67,000.00. David Ongcaused a stop payment of the check when NAWASA refused to pay thetractor and lawn mower after discovering that, aside from some stateddefects of the attached lawn mower, the engine (sold by de la Cuesta) was areconditioned unit. On 28 May 1985, de la Cuesta filed an action for therecovery of P33,500.00, as well as attorney's fees of P10,000.00, and thecosts of suit. Ong, in his answer, averred, among other things, that de laCuesta had no cause of action; that the questioned transaction was betweenplaintiff and Tramat Mercantile, Inc., and not with Ong in his personalcapacity; and that the payment of the check was stopped because thesubject tractor had been priced as a brand new, not as a reconditioned unit. TC ordered Ong to pay the plaintiff the sum of P33,500.00 with legal interestthereon at the rate of 12% per annum from July 7, 1984 until fully paid.H: It was an error to hold David Ong jointly and severally liable with TRAMATto de la Cuesta under the questioned transaction. Ong had there so acted,not in his personal capacity, but as an officer of a corporation, TRAMAT, witha distinct and separate personality. As such, it should only be thecorporation, not the person acting for and on its behalf, that properly couldbe made liable thereon. Personal liability of a corporate director, trustee orofficer along (although not necessarily) with the corporation may so validlyattach, as a rule, only when —1. He assents (a) to a patently unlawful act of the corporation, or (b) for badfaith, or (c) for conflict of interest, resulting in damages to the corporation,its stockholders or other persons;2. He consents to the issuance of watered stocks or who, having knowledgethereof, does not forthwith file with the corporate secretary his writtenobjection thereto;3. He agrees to hold himself personally and solidarily liable with thecorporation; 6 or4. He is made, by a specific provision of law, to personally answer for hiscorporate action.In the case at bench, there is no indication that petitioner David Ong couldbe held personally accountable under any of the abovementioned cases.