Narratives

Corporation Law (Commercial)
Michael Vernon Guerrero Mendiola 2005 Shared under Creative Commons Attri ution! NonCommercial!ShareAli"e #$0 %hilippines license$

Some &i'hts &eserved$

(a le o) Contents
*eliciano vs$ Commission on Audit +G& ,-.-02/ ,- 0anuar1 200-2 3$$$$$$$$$ , Ma'sa1sa1!La rador/ et$ al$ vs$ Court o) Appeals +G& 54,54/ ,6 7ecem er ,6462 3$$$$$$$$$ , Sulo n' 8a1an vs$ Araneta +G& L!#,05,/ ,. Au'ust ,6.52 3$$$$$$$$$ 2 Lu9uria :omes vs$ Court o) Appeals +G& ,25645/ 24 0anuar1 ,6662 3$$$$$$$$$ # Concept 8uilders ;nc$ vs$ National La or &elations Commission (NL&C/ *irst 7ivision) +G& ,04.#-/ 26 Ma1 ,6652 3$$$$$$$$$ Villa &e1 (ransit vs$ *errer +G& L!2#46#/ 26 <cto er ,6542 3$$$$$$$$$ 5 *rancisco Motors Corporation vs$ Court o) Appeals +G& ,004,2/ 25 0une ,6662 3$$$$$$$$$ 4 %hilippine National 8an" vs$ Andrada =lectric > =n'ineerin' Co$ +G& ,-26#5/ ,. April 20022 3$$$$$$$$$ 6 Lipat vs$ %aci)ic 8an"in' Corporation +G& ,-2-#5/ #0 April 200#2 3$$$$$$$$$ ,0 :all vs$ %iccio +G& L!2564/ 26 0une ,6502 3$$$$$$$$$ ,2 Lim vs$ %hilippine *ishin' Gear ;ndustries ;nc$ +G& ,#5--4/ # Novem er ,6662 3$$$$$$$$$ ,# ;nternational =9press (ravel > (our Services/ ;nc$ vs$ Court o) Appelas +G& ,,6002/ ,6 <cto er 20002 3$$$$$$$$$ ,5 0ardine 7avies vs$ Court o) Appeals +G& ,24055/ ,6 0une 20002 3$$$$$$$$$ ,5 *ilipinas 8roadcastin' Networ" ;nc$ vs$ A'o Medical and =ducational Center! 8icol Christian Colle'e o) Medicine (AM=C!8CCM) +G& ,-,66-/ ,. 0anuar1 20052 3$$$$$$$$$ ,. L1ceum o) the %hilippines vs$ Court o) Appeals +G& ,0,46./ 5 March ,66#2 3$$$$$$$$$ ,6 An' m'a ?aani sa ;'lesia n' 7ios ?a1 ?risto :esus/ :S? sa 8ansan' %ilipinas ;nc$ vs$ ;'lesia n' 7ios "a1 Cristo 0esus/ :ali'i at Suha1 n' ?atotohanan +G& ,#.562/ ,2 7ecem er 200,2 3$$$$$$$$$ 20 ;ndustrial &e)ractories Corporation o) the %hilippines vs$ Court o) Appeals +G& ,22,.-/ # <cto er 20022 3$$$$$$$$$ 22 0G Summit :oldin's ;nc$ vs$ Court o) Appeals +G& ,2-26#/ 20 Novem er 20002 3$$$$$$$$$ 2# @oun' Auto Suppl1 vs$ Court o) Appeals +G& ,0-,.5/ 25 0une ,66#2 3$$$$$$$$$ 25 &epu lic %lanters 8an" vs$ A'ana +G& 5,.55/ # March ,66.2 3$$$$$$$$$ 25 Grace Christian :i'h School vs$ Court o) Appeals +G& ,04605/ 2# <cto er ,66.2 3$$$$$$$$$ 2. Go"on'wei vs$ Securities and =9chan'e Commission +G& L!-56,,/ ,, April ,6.62 3$$$$$$$$$ 24 Aestern ;nstitute o) (echnolo'1 ;nc$ vs$ Salas +G& ,,#0#2/ 2, Au'ust ,66.2 3$$$$$$$$$ ## Nacpil vs$ ;nternational 8roadcastin' Corporation +G& ,--.5./ 2, March 20022 3$$$$$$$$$ #%eopleBs Aircar'o and Aarehousin' Co$ ;nc$ vs$ Court o) Appeals +G& ,,.4-./ . <cto er ,6642 3$$$$$$$$$ #5 %rime Ahite Cement Corporation vs$ ;ntermediate Appellate Court +G& 54555/ ,6 March ,66#2 3$$$$$$$$$ #. Santos vs$ National La or &elations Commission +G& ,0,566/ ,# March ,6652 3$$$$$$$$$ #6 Mala1an' Samahan n' m'a Man''a'awa sa M$ Green)ield (MSMG!CA%) vs$ &amos +G& ,,#60./ 20 April 200,2 3$$$$$$$$$ -0 A* &ealt1 > 7evelopment ;nc$ vs$ 7ieselman *rei'ht Services Co$ +G& ,,,--4/ ,5 0anuar1 20022 3$$$$$$$$$ -# Atrium Mana'ement Corporation vs$ Court o) Appeals +G& ,06-6,/ 24 *e ruar1 200,2 3$$$$$$$$$ -8A Savin's 8an" vs$ Sia +G& ,#,2,-/ 2. 0ul1 20002 3$$$$$$$$$ -5 %owton Con'lomerate ;nc$ vs$ A'colicol +G& ,506.4/ # April 200#2 3$$$$$$$$$ -5 ;nter!Asia ;nvestments ;ndustries vs$ Court o) Appeals +G& ,25..4/ ,0 0une 200#2 3$$$$$$$$$ -. Lapu!Lapu *oundation vs$ Court o) Appeals +G& ,25005/ 26 0anuar1 200-2 3$$$$$$$$$ -6 Nielson > Co$ ;nc$ vs$ Lepanto Consolidated Minin' Co$ +G& L!2,50,/ 24 7ecem er ,6542 3$$$$$$$$$ 50 ;slamic 7irectorate o) the %hilippines vs$ Court o) Appeals +G& ,,.46./ ,- Ma1 ,66.2 3$$$$$$$$$ 52 LopeD 7ee vs$ Securit1 and =9chan'e Commission +G& 50502/ ,5 0ul1 ,66,2 3$$$$$$$$$ 5Spouses *irme vs$ 8u"al =nterprises and 7evelopment Corp$ +G& ,-5504/ 2# <cto er 200#2 3$$$$$$$$$ 55 Lo1ola Grand Villas :omeowners (South) Association ;nc$ vs$ Court o) Appeals +G& ,,.,44/ . Au'ust ,66.2 3$$$$$$$$$ 54 China 8an"in' Corporation vs$ Court o) Appeals +G& ,,.50-/ 25 March ,66.2 3$$$$$$$$$ 56 Lee vs$ Court o) Appeals +G& 6#565/ - *e ruar1 ,6622 3$$$$$$$$$ 5, &epu lic o) the %hilippines (%CGG) vs$ Sandi'an a1an +G& ,0..46/ #0 April 200#2 3$$$$$$$$$ 5# &epu lic o) the %hilippines vs$ Coco)ed +G&s ,-.052!5-/ ,- 7ecem er 200,2 3$$$$$$$$$ 55 =van'elista vs$ Santos +G& L!,.2,/ ,6 Ma1 ,6502 3$$$$$$$$$ 5. Lim vs$ Lim!@u +G& ,#4#-#/ ,6 *e ruar1 200,2 3$$$$$$$$$ 54 Gochan vs$ @oun' +G& ,#,446/ ,2 March 200,2 3$$$$$$$$$ 56 Chua vs$ Court o) Appeals +G& ,50.6#/ ,6 Novem er 200- 3$$$$$$$$$ .0 Nava vs$ %eers Mar"etin' Corp$ +G& L!24,20/ 25 Novem er ,6.52 3$$$$$$$$$ ., Lim (a1 vs$ Court o) Appeals +G& ,2546,/ 5 Au'ust ,6642 3$$$$$$$$$ .2 (he &ural 8an" o) Lipa Cit1 ;nc$/ etc$ vs$ Court o) Appeals +G& ,2-5#5/ 24 Septem er 200,2 3$$$$$$$$$ .#

%once vs$ Alsons Cement Corporation +G& ,#6402/ ,0 7ecem er 20022 3$$$$$$$$$ .5 <n' @on'/ et al$ vs$ (iu/ et al$ +G& ,---.5/ 4 April 200#2 3$$$$$$$$$ .5 GonDales vs$ %hilippine National 8an" +G& L!###20/ #0 Ma1 ,64#2 3$$$$$$$$$ .4 Associated 8an" vs$ Court o) Appeals +G& ,2#.6#/ 26 0une ,6642 3$$$$$$$$$ .6 8a st vs$ Court o) Appeals +G& 66#64/ 25 0anuar1 200,2 3$$$$$$$$$ 4, Lon' vs$ 8asa +G&s ,#-65#!5-/ 2. Septem er 200,2 3$$$$$$$$$ 42 Sta$ Clara :omeownersB Association vs$ Spouses Gaston +G& ,-,65,/ 2# 0anuar1 20022 3$$$$$$$$$ 4%adcom Condominium Corporation vs$ <rti'as Center Association +G& ,-540./ 6 Ma1 20022 3$$$$$$$$$ 45 Manuel &$ 7ula1 =nterprises vs$ Court o) Appeals +G& 6,446/ 2. Au'ust ,66#2 3$$$$$$$$$ 4. San 0uan Structural and Steel *a ricators +G& ,26-56/ 26 Septem er ,6642 3$$$$$$$$$ 46 Gelano vs$ Court o) Appeals +G& L!#6050/ 2- *e ruar1 ,64,2 3$$$$$$$$$ 60 Vesa'as vs$ Court o) Appeals +G& ,-262-/ 5 7ecem er 200,2 3$$$$$$$$$ 62 %hilippine Veterans 8an" =mplo1ees Cnion!NC8= vs$ Ve'a +G& ,05#5-/ 24 0une 200,2 3$$$$$$$$$ 6# (an (ion' 8io vs$ 8ureau o) ;nternal &evenue +G& L!4400/ 2# <cto er ,6552 3$$$$$$$$$ 6&e ollido vs$ Court o) Appeals +G& 6,,2#/ 24 *e ruar1 ,6462 3$$$$$$$$$ 65 *acilities Mana'ement Corporation vs$ de la <sa +G& L!#45-6/ 25 March ,6.62 3$$$$$$$$$ 64 :ome ;nsurance Compan1 vs$ =astern Shippin' Lines +G& L!#-#42/ 20 0ul1 ,64#2 3$$$$$$$$$ 66 (he Mentholatum Co$ ;nc$ vs$ Man'aliman +G& -..0,/ 2. 0une ,6-,2 3$$$$$$$$$ ,0, =ri"s %te$ Ltd$ vs$ Court o) Appeals +G& ,,44-#/ 5 *e ruar1 ,66.2 3$$$$$$$$$ ,02 M& :oldin's Ltd$ vs$ Sheri)) 8aEar +G& ,#4,0-/ ,, April 20022 3$$$$$$$$$ ,0# :utchison %orts %hilippines Limited vs$ Su ic 8a1 Metropolitan Authorit1 (S8MA) +G& ,#,#5./ #, Au'ust 20002 3$$$$$$$$$ ,05 Antam Consolidated vs$ Court o) Appeals +G& L!5,52#/ #, 0ul1 ,6452 3$$$$$$$$$ ,0. Merrill L1nch *utures vs$ Court o) Appeals +G& 6.4,5/ 2- 0ul1 ,6622 3$$$$$$$$$ ,06 A'ilent (echnolo'ies Sin'apore vs$ ;nte'rated Silicon (echnolo'1 %hilippines Corp$ +G& ,5-5,4/ ,- April 200-2 3$$$$$$$$$ ,,,

This collection contains seventy four (74) cases summarized in this format by Michael Vernon M. Guerrero (as a senior law student) during the econd emester! school year "##$%"##& in the 'ommercial (aw )eview class under *tty. +arah Villanueva%'astro at the *rellano ,niversity chool of (aw (*, (). 'om-iled as ./0! 1uly "#22. 3erne Guerrero entered *, ( in 1une "##" and eventually graduated from *, ( in "##&. 4e -assed the .hili--ine bar e5aminations immediately after (*-ril "##7).

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3ido3 and special administrati? of t%e estate of t%e late Senator /enaro (a sa'sa'. informin COA2s Re ional *irector t%at t%e 3ater district could not pa' t%e auditin fees" 0eliciano cited as +asis for %is action Sections 4 and 15 of 6* 1. onl' corporations created under a eneral la3 can ./10/ 11 2ecem+er 11/1# Third Division.uentl'. Adelaida Rodri ue>=(a sa'sa'. Su+ic &and Corporation (S@B$C). A--eals [GR . families or roups special pri-ile es denied to ot%er citi>ens" $n s%ort..&)*<) is a o-ernment=o3ned or controlled corporation" &eld$ T%e Constitution reco ni>es t3o classes of corporations" T%e first refers to pri-ate corporations created under a eneral la3" T%e second refers to o-ernment=o3ned or controlled corporations created +' special c%arters" T%e Constitution emp%aticall' pro%i+its t%e creation of pri-ate corporations e?cept +' a eneral la3 applica+le to all citi>ens" T%e purpose of t%is constitutional pro-ision is to +an pri-ate corporations created +' special c%arters...7" 2 'a(sa"sa")*a+rador et.. al. and to stop c%ar in auditin fees. 3%ic% constitutes t%eir special c%arter" Since under t%e Constitution onl' o-ernment=o3ned or controlled corporations ma' %a-e special c%arters.. 0elicaino filed t%e petition for certiorari" %ssue$ )%et%er a &ocal )ater *istrict (. t%at eneral la3 is t%e Corporation Code. Carpio (J): 13 concur Facts$ A Special Audit Team from Commission on Audit (COA) Re ional Office !o" #$$$ audited t%e accounts of t%e &e'te (etropolitan )ater *istrict (&()*)" Su+se. ( 1 ) . &)*s are not pri-ate corporations +ecause t%e' are not created under t%e Corporation Code" &)*s are not re istered 3it% t%e Securities and E?c%an e Commission" Section 1A of t%e Corporation Code states t%at . it follo3s t%at Con ress can create corporations 3it% special c%arters onl' if suc% corporations are o-ernment=o3ned or controlled" O+-iousl'. &()* recei-ed a letter from COA dated 1. as 3ell as Section 17 of RA 4897" T%e Re ional *irector referred 0eliciano2s repl' to t%e COA C%airman on 17 Octo+er 1.. Con ress cannot enact a la3 creatin a pri-ate corporation 3it% a special c%arter" Suc% le islation 3ould +e unconstitutional" 6ri-ate corporations ma' e?ist onl' under a eneral la3" $f t%e corporation is pri-ate. e?cept t%at t%e Cooperati-e Code o-erns t%e incorporation of cooperati-es" T%e Constitution aut%ori>es Con ress to create o-ernment=o3ned or controlled corporations t%rou % special c%arters" Since pri-ate corporations cannot %a-e special c%arters. Fernan (CJ): 3 concur... 0ilipinas (anufacturerDs Ban: (0$&(A!BA!E) and t%e Re ister of *eeds of Fam+ales.8. &)*s deri-e t%eir le al e?istence and po3er from 6* 1. 0e+ruar' 1. Court o. Commission on Audit [GR 147402 14 !anuar" 2004# En Banc. Jul' 1.uest for COA to cease all audit ser-ices. En r" Ranulfo C" 0eliciano sent a repl' dated 11 Octo+er 1. 3%ic% deri-e t%eir le al e?istence and po3er from t%e Corporation Code.uest for COA to refund all auditin fees pre-iousl' paid +' &()*" 0eliciano filed a motion for reconsideration on 31 (arc% 1555.7. vs. it must necessaril' e?ist under a eneral la3" Stated differentl'. re..Narratives (Berne Guerrero) 1 Feliciano vs. for t%e annulment of t%e *eed of Assi nment Commercial *a3 ) Cor-oration *a3 200. Octo+er 1. no incorporators and no stoc:%olders or mem+ers" T%ere are no stoc:%olders or mem+ers to elect t%e +oard directors of &)*s as in t%e case of all corporations re istered 3it% t%e Securities and E?c%an e Commission" T%e local ma'or or t%e pro-incial o-ernor appoints t%e directors of &)*s for a fi?ed term of office" &)*s e?ist +' -irtue of 6* 1.BACll corporations or ani>ed under t%is code s%all file 3it% t%e Securities and E?c%an e Commission articles of incorporation ? ? ?"< &)*s %a-e no articles of incorporation.uestin pa'ment of auditin fees" As /eneral (ana er of &()*.. 3%ic% %istoricall' a-e certain indi-iduals.7. to &()*" T%e COA also denied 0eliciano2s re.ualif' as pri-ate corporations" @nder e?istin la3s. 1 on leave Facts$ On . +rou %t +efore t%e t%en Court of 0irst $nstance of Olon apo an action a ainst Artemio 6an ani+an. 0eliciano recei-ed COA C%airman Celso *" /an an2s Resolution dated 3 Januar' 1555 den'in 0eliciano2s re." On 1. 3%ic% COA denied on 35 Januar' 1551" On 13 (arc% 1551. &)*s can -alidl' e?ist onl' if t%e' are o-ernment=o3ned or controlled" To claim t%at &)*s are pri-ate corporations 3it% a special c%arter is to admit t%at t%eir e?istence is constitutionall' infirm" @nli:e pri-ate corporations. 0eliciano 3rote COA t%rou % t%e Re ional *irector as:in for refund of all auditin fees &()* pre-iousl' paid to COA" On 14 (arc% 1555.

and for t%e latter to issue a ne3 title in %er fa-or" On 8 (arc% 1.8. a ainst /re orio Araneta $nc" (/A$). or in t%e success of eit%er of t%e parties or an interest a ainst +ot%. for t%e annulment of t%e *eed of (ort a e e?ecuted +' S@B$C in fa-or of 0$&(A!BA!E (dated 17 April 1. #alen>uela. after pa'ment of t%e corporate de+ts and o+li ations" )%ile a s%are of stoc: represents a proportionate or ali. more or less." ms". alle edl' stoc:%olders of S@B$C. Sulo n Ba'an filed a Commercial *a3 ) Cor-oration *a3 200. $nc" and Jacienda Caretas. 0elicidad (a sa'sa'. Rule 11 of t%e Re-ised Rules of Court. conIectural.855.195 s.44. t%e trial court issued an Order dismissin t%e (amended) complaint" On 1A 0e+ruar' 1. and t%e Re ister of *eeds of Bulacan to reco-er t%e o3ners%ip and possession of a lar e tract of land in San Jose del (onte.88 in t%e amount of 6 1. if it e?ists at all. t%e' %a-e a su+stantial and le al interest in t%e su+Iect matter of liti ation and t%at t%e' %a-e a le al interest in t%e success of t%e suit 3it% respect to S@B$C" On 14 Jul' 1.8. 6aradise 0arms $nc". ( 2 ) . and (ercedes (a sa'sa'=*ia>. t%e part' must %a-e a le al interest in t%e matter in liti ation.uot interest in t%e propert' of t%e corporation. /A$ filed a motion to dismiss t%e amended complaint on t%e rounds t%at (1) t%e complaint states no cause of actionL and (1) t%e cause of action.71. 3%ic% is o3ned +' t%e corporation as a distinct le al person" 4 5ulo n( Ba"an vs. if an'. &uisa (a sa'sa'=Corpu>.. t%e interest.48. Bulacan. are interested parties in a case 3%ere corporate properties are in dispute" &eld$ #ie3ed in t%e li %t of Section 1. or in s%eer e?pectanc' of a ri %t in t%e mana ement of t%e corporation and to s%are in t%e profits t%ereof and in t%e properties and assets t%ereof on dissolution. et" al"Ds predecessors=in=interest (3%o are mem+ers of t%e corporation)" On 1 Septem+er 1. and ruled t%at petitioners %a-e no le al interest 3%atsoe-er in t%e matter in liti ation and t%eir +ein alle ed assi nees or transferees of certain s%ares in S@B$C cannot le all' entitle t%em to inter-ene +ecause S@B$C %as a personalit' separate and distinct from its stoc:%olders" On appeal. t%eir interest is purel' inc%oate. Jacienda Caretas $nc". 0ift% Judicial *istrict. re istered under t%e Torrens S'stem in t%e name of /A$.87. Sulo n Ba'an. %is interest in t%e corporate propert' +ein e. it pleaded in its ans3er as special and affirmati-e defenses lac: of cause of action +' Sulo n Ba'an $nc" and t%e +arrin of suc% action +' prescription and lac%es" On 1A Januar' 1. $nc" filed motions to dismiss +ased on t%e same rounds" !A)ASA did not file an' motion to dismiss" Jo3e-er.Narratives (Berne Guerrero) e?ecuted +' t%e late Senator in fa-or of S@B$C (as a result of 3%ic% TCT 3197 3as cancelled and TCT 11A31 issued in t%e name of S@B$C). Araneta [GR *)41001 17 Au(ust 1170# Second Division.uential and collateral" At t%e -er' least. sisters of t%e late senator. Soledad (a sa'sa'=Ca+rera. t%eir +rot%er con-e'ed to t%em 1G1 of %is s%are%oldin s in S@B$C or a total of A14. $nc" filed an accion de re-indicacion 3it% t%e Court of 0irst $nstance of Bulacan. or %e must +e so situated as to +e ad-ersel' affected +' a distri+ution or ot%er disposition of t%e propert' in t%e custod' of t%e court or an officer t%ereof " Jere. of t%e (a sa'sa' sisters is indirect.944"4 s%ares and as assi nees of around A1 H of t%e total outstandin s%ares of suc% stoc:s of S@B$C.48.. t%e Court of Appeals found no factual or le al Iustification to distur+ t%e findin s of t%e lo3er court" T%e appellate court furt%er stated t%at 3%ate-er claims t%e (a sa'sa' sisters %a-e a ainst t%e late Senator or a ainst S@B$C for t%at matter can +e -entilated in a separate proceedin " T%e motion for reconsideration of t%e (a sa'sa' sisters 3as denied" Jence. filed a motion for inter-ention on t%e round t%at on 15 June 1. t%e trial court denied t%e motion for inter-ention. t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%e (a sa'sa' sister.44. !ational )ater3or:s K Se3era e Aut%orit' (!A)ASA). Antonio (J): 4 concur Facts$ On 14 April 1. is +arred +' prescription and lac%es" 6aradise 0arms. remote. it does not -est t%e o3ner t%ereof 3it% an' le al ri %t or title to an' of t%e propert'. conse. t%e (a sa'sa' sisters %a-e no le al interest in t%e su+Iect matter in liti ation so as to entitle t%em to inter-ene in t%e proceedin s" To +e permitted to inter-ene in a pendin action.uita+le or +eneficial in nature" S%are%olders are in no le al sense t%e o3ners of corporate propert'. and cancellation of TCT 11A31 +' t%e Re ister of *eeds.. Bulacan. Concepcion (a sa'sa'=&a+rador. contin ent. containin an area of 18.555"55).

Martinez (J):4 concur Facts$ Aida (" 6osadas and %er t3o (1) minor c%ildren co=o3ned a 1"4 %ectare propert' in Sucat.uestion of fact 3as in-ol-ed in t%e appeal +ut onl' .48" Sulo n Ba'an appealed to t%e Court of Appeals" On 3 Septem+er 1. is +ut a le al fiction introduced for t%e purpose of con-enience and to su+ser-e t%e ends of Iustice" T%is separate personalit' of t%e corporation ma' +e disre arded. stoc:%olders in a corporation en a ed in +u'in and dealin in real estate 3%ose certificates of stoc: entitled t%e %older t%ereof to an allotment in t%e distri+ution of t%e land of t%e corporation upon surrender of t%eir stoc: certificates 3ere considered not to %a-e suc% le al or e. Me-en in t%e case of a one=man corporation"M T%e mere fact t%at one is president of a corporation does not render t%e propert' 3%ic% %e o3ns or possesses t%e propert' of t%e corporation. and is not affected +' t%e personal ri %ts.uisites must +e present: (1) t%at t%e su+Iect matter of t%e contro-ers' is one of common or eneral interest to man' personsL and (1) t%at t%e parties are so numerous t%at it is impractica+le to +rin t%em all +efore t%e court" Jere.uestion to t%e corporation" A+sent an' s%o3in of interest.uestions of la3 and Iurisdiction. t%ere is onl' one part' plaintiff. %as no personalit' to +rin an action for and in +e%alf of its stoc:%olders or mem+ers for t%e purpose of reco-erin propert' 3%ic% +elon s to said stoc:%olders or mem+ers in t%eir personal capacities" %ssue [2#$ )%et%er t%e complaint filed +' t%e corporation in +e%alf of its mem+ers ma' +e treated as a class suit &eld [2#$ $n order t%at a class suit ma' prosper.4. %o3e-er.uita+le title or interest in t%e land. as indi-idual. in cases 3%ere it is used as a cloa: or co-er for fraud or ille alit'. especiall' a ainst parties ot%er t%an t%e corporation" $t must +e noted. A--eals [GR 12. and cannot. t%erefore.uit' t%at a corporation is a distinct le al entit' to +e considered as separate and apart from t%e indi-idual stoc:%olders or mem+ers 3%o compose it. as eac% one could alle ed and pro-e %is respecti-e ri %t in a different 3a' for eac% portion of t%e land. or 3%ere necessar' to ac%ie-e e. or to 3or: =an inIustice.Narratives (Berne Guerrero) motion to reconsider t%e Order of dismissal. ( 4 ) .. so t%at t%e' cannot all +e %eld to %a-e identical title t%rou % ac.uities in it" 6roperties re istered in t%e name of t%e corporation are o3ned +' it as an entit' separate and distinct from its mem+ers" Con-ersel'. a class suit does not lie in actions for t%e reco-er' of propert' 3%ere se-eral persons claim partners%ip of t%eir respecti-e portions of t%e propert'. since t%e president. or t%e -eil of corporate fiction pierced. t%e Court of Appeals. t%e follo3in re. as o3ners.uisitionGprescription" 4 *u6uria &omes vs. and t%e corporation does not e-en %a-e an interest in t%e su+Iect matter of t%e contro-ers'.1/0 2/ !anuar" 1111# First Division. o+li ations and transactions of its stoc:%olders or mem+ers" T%e propert' of t%e corporation is its propert' and not t%at of t%e stoc:%olders. alt%ou % t%e' %a-e e. Commercial *a3 ) Cor-oration *a3 200. Court o. a corporation. as 3ould support a suit for title. amon ot%ers" &eld [1#$ $t is a doctrine 3ell=esta+lis%ed and o+tains +ot% at la3 and in e. t%at t%e Iuridical personalit' of t%e corporation. represent its mem+ers or stoc:%olders 3%o claim to o3n in t%eir indi-idual capacities o3ners%ip of t%e said propert'" (oreo-er. t%erefore. and t%e corporation are separate similarities" Similarl'. as separate and distinct from t%e persons composin it. upon findin t%at no . a corporation ordinaril' %as no interest in t%e indi-idual propert' of its stoc:%olders unless transferred to t%e corporation. certified t%e case to t%e Supreme Court for resolution of t%e le al issues in-ol-ed in t%e contro-ers'" %ssue [1#$ )%et%er t%e corporation (non=stoc:) ma' institute an action in +e%alf of its indi-idual mem+ers for t%e reco-er' of certain parcels of land alle edl' o3ned +' said mem+ers.uit'" $t %as not +een claimed t%at t%e mem+ers %a-e assi ned or transferred 3%ate-er ri %ts t%e' ma' %a-e on t%e land in . ar uin amon ot%ers t%at t%e complaint states a sufficient cause of action +ecause t%e su+Iect matter of t%e contro-ers' in one of common interest to t%e mem+ers of t%e corporation 3%o are so numerous t%at t%e present complaint s%ould +e treated as a class suit" T%e motion 3as denied +' t%e trial court in its Order dated 11 0e+ruar' 1.

not e-en to t%e a reement to ne otiate 3it% and relocate t%e s.. $nc". some 8 mont%s later.7. $nc" To disre ard t%e separate Iuridical personalit' of a corporation. $nc". t%rou % a *eed of Assi nment.. James Builder Construction and Jaime T" Bra-o instituted a complaint for specific performance +efore t%e trial court a ainst 6osadas and &u?uria Jomes. as e-idenced +' t%e *eed of Assi nment dated 11 *ecem+er 1. Conce-t Builders %nc. na' Iointl' and in solidum. "er#osisi#a Jr$ (J): 4 concur Commercial *a3 ) Cor-oration *a3 200. preparation of t%e arc%itectural desi n and site de-elopment plan. 3as a part' to t%e transactions entered into +' 6osadas 3it% Bra-o and James Builder Construction and t%us could +e %eld Iointl' and se-erall' 3it% 6osadas" &eld$ $t cannot +e said t%en t%at t%e incorporation of &u?uria Jomes and t%e e-entual transfer of t%e su+Iect propert' to it 3ere in fraud of Bra-o and James Builder Construction as suc% 3ere done 3it% t%e full :no3led e of Bra-o %imself. ur ortedl! for or ani>ational and ta? a-oidance purposes" Bra-o si ned as one of t%e 3itnesses to t%e e?ecution of t%e *eed of Assi nment and t%e Articles of $ncorporation of &u?uria Jomes.A7. et" al" failed to s%o3 proof t%at 6osadas acted in +ad fait%.857. $nc" On 18 Septem+er 1. also in consideration of t%e -arious underta:in s t%at Bra-o rendered for %er" &u?uria Jomes and 6osadas appealed to t%e Court of Appeals" T%e appellate court affirmed 3it% modification t%e decision of t%e trial court" T%e appellate court deleted t%e a3ard of moral dama es on t%e round t%at James Builder Construction is a corporation and %ence could not e?perience p%'sical sufferin and mental an uis%" $t also reduced t%e a3ard of e?emplar' dama es" &u?uria JomesD and 6osadasD motion for reconsideration. 6osadas and %er c%ildren."55L actual dama es incurred for t%e construction of t%e 3are%ouseG+un:s. issued 14 Januar' 1. 3%ic% 3as occupied +' s. i"e". t%e latter 3as proposin " $n retaliation. $nc".uatters" 6osadas entered into ne otiations 3it% Jaime T" Bra-o re ardin t%e de-elopment of t%e said propert' into a residential su+di-ision" On 3 (a' 1.uentl' t%at &u?uria Jomes. relocation of s. t%e %armonious and con enial relations%ip of 6osadas and Bra-o turned sour 3%en t%e former supposedl' could not accept t%e mana ement contracts to de-elop t%e 1"4 %ectare propert' into a residential su+di-ision. vs. on 11 *ecem+er 1..955"555"55L moral and e?emplar' dama es of 6955"555"55L Attorne'Ds fee of 695.. $nc".. $nc" T%e Articles of $ncorporation of &u?uria Jomes.Narratives (Berne Guerrero) (untinlupa.7. $nc"."55 for -arious ser-ices rendered. and t%e Articles of $ncorporation of &u?uria Jomes. s%e aut%ori>ed Bra-o to ne otiate 3it% t%e s.1. et" al" Jence. $nc". t%e 3ron doin must +e clearl' and con-incin l' esta+lis%ed" $t cannot +e presumed" Bra-o. Iointl' and in solidum 3it% &u?uria Jomes. to pa' Bra-o.7. $ncorporated. to pa' Bra-o.. since it 3as 6osadas 3%o contracted Bra-o to render t%e su+Iect ser-ices. t%e trial court declared 6osadas in default and allo3ed James Builder Construction and Bra-o to present t%eir e-idence e?=parte" On 7 (arc% 1.A.555"55L and cost of t%is proceedin s" T%e court also directed 6osadas as t%e Representati-e of t%e Corporation &u?uria Jomes. clearl' s%o3 t%at 6osadas o3ns appro?imatel' 33H onl' of t%e capital stoc:" Jence.3. Bra-o +uc:led do3n to 3or: and started ne otiations 3it% t%e s. and conse.. 3as a part' to an' of t%e supposed transactions. et" al" t%e +alance of t%e pa'ment for t%e -arious ser-ices performed +' t%em in t%e total amount of 61.. in Septem+er 1. assi ned t%e said propert' to &u?uria Jomes. onl' s%e is lia+le to pa' t%e amounts adIud ed +' t%e Court" . 6osadas cannot +e considered as an alter e o of &u?uria Jomes. and for t%e material used in t%e total sum of 61.A7.uatters. promptin t%em to file t%e petition for re-ie3 +efore t%e Supreme Court" %ssue$ )%et%er &u?uria Jomes.1. National *a+or Relations Commission (N*RC First 2ivision) [GR 10/744 21 'a" 1110# First Division. $nc" T%en sometime in 1.uatters.uatters to lea-e t%e said propert'" )it% a 3ritten aut%ori>ation. Bra-o demanded t%e pa'ment of 61. ( 4 ) . it cannot +e %eld lia+le.1.uatters" (ean3%ile.5 3ere +ot% si ned +' Bra-o %imself as 3itness" 0urt%er. sur-e' and fencin " 6osadas refused to pa' t%e amount demanded" T%us. Bra-o demanded pa'ment for ser-ices rendered in connection 3it% t%e de-elopment of t%e land" $n %is statement of account dated 11 Au ust 1. 6osadas is not t%e maIorit' stoc:%older of &u?uria Jomes.857. to e?ecute t%e mana ement contract s%e committed to do. it ordered 6osadas.

t%e !&RC dismissed t%e motion for reconsideration filed +' CB$ on t%e round t%at t%e said decision %ad alread' +ecome final and e?ecutor'" On 14 Octo+er 1. #alen>uela. t%e &a+or Ar+iter issued a second alias 3rit of e?ecution" T%e said 3rit %ad not +een enforced +' t%e special s%eriff +ecause. et" al" 3ere 3illin to post an indemnit' +ond to ans3er for an' dama es 3%ic% CB$ and J66$ ma' suffer +ecause of t%e issuance of t%e +rea:=open order" On 1 (arc% 1. 6edro A+oi ar. (etro (anila" Commercial *a3 ) Cor-oration *a3 200. Romeo /al-e. Ro elio Salut. et" al". carpenters and ri ers" On !o-em+er 1. et" al" A rie-ed.7. (oreno Escares.uito Salut.1.71" $t 3as stated in t%e indi-idual notices t%at t%eir contracts of emplo'ment %ad e?pired and t%e proIect in 3%ic% t%e' 3ere %ired %ad +een completed" T%e !ational &a+or Relations Commission (!&RC) found it to +e.Narratives (Berne Guerrero) Facts$ Concept Builders." On 4 !o-em+er 1. of 3%ic% %e is t%e #ice=6resident" On 13 !o-em+er 1. 3it% principal office at 399 (a'san Road. 6alcronio /iducos. as stated in %is pro ress report dated 1 !o-em+er 1. t%e petition" %ssue$ )%et%er t%e !&RC 3as correct in issuin t%e +rea:=open order to le-' t%e .. t%at at t%e time of t%e termination of (ara+e... /a-ino Suali+io.7. an Alias )rit of E?ecution 3as issued +' t%e &a+or Ar+iter directin t%e s%eriff to collect from CB$ t%e sum of 6118. upon motion of (ara+e.7. t%e !&RC set aside t%e order of t%e &a+or Ar+iter. 6a. et" al" filed a M(otion for $ssuance of a Brea:=Open Order.J66$ properties< located at CB$ amdGor J66$2s premises at 399 (a'san Road.79. representin t%e +alance of t%e Iud ment a3ard.379"3A" Said amount 3as turned o-er to t%e cas%ier of t%e !&RC" On 1 0e+ruar' 1.74. unfair la+or practice and non=pa'ment of t%eir le al %olida' pa'.. (anuel /ille o.. et" al" t%en appealed to t%e !&RC" On 13 April 1. *omin o /uarino. Cristo+al Rie o. $nc" (J66$) and not +' CB$L t%at le-' 3as made upon personal properties %e found in t%e premisesL and t%at securit' uards 3it% %i %=po3ered uns pre-ented %im from remo-in t%e properties %e %ad le-ied upon" T%e said special s%eriff recommended t%at a M+rea:=open orderM +e issued to ena+le %im to enter CB$Ds premises so t%at %e could proceed 3it% t%e pu+lic auction sale of t%e aforesaid personal properties on 8 !o-em+er 1. 0erdinand Torres. *ecem+er 1.74. et" al" to t%eir former positions" On 13 Jul' 1.7. et" al"Ds +ac: 3a es amounted to 61.7A..M alle in t%at J66$ and CB$ 3ere o3ned +' t%e same incorporatorGstoc:%olders" T%e' also alle ed t%at petitioner temporaril' suspended its +usiness operations in order to e-ade its le al o+li ations to t%em and t%at (ara+e. *ecem+er 1.7. et"al"Ds emplo'ment. t%e !&RC Researc% and $nformation *epartment made t%e findin t%at (ara+e.755"55" On 1.ui-alent to 1 'ear or 355 3or:in da's" On 18 !o-em+er 1. et" al" to file a +ond" T%ereafter. in t%e amount of 671. (etro (anila.. Emilio /arcia. ( . issued a +rea:=open order and directed (ara+e. it directed t%e s%eriff to proceed 3it% t%e auction sale of t%e properties alread' le-ied upon" $t dismissed t%e t%ird=part' claim for lac: of merit" CB$ mo-ed for reconsideration +ut t%e motion 3as denied +' t%e !&RC in a Resolution. t%e &a+or Ar+iter issued an Order 3%ic% denied (ara+e. t%e &a+or Ar+iter rendered Iud ment orderin CB$ to reinstate (ara+e et" al" and to pa' t%em +ac: 3a es e. $nc". is en a ed in t%e construction +usiness 3%ile !or+erto (ara+eL Rodolfo Ra... t%e (etropolitan )ater3or:s and Se3era e Aut%orit'.1" Jence. and to reinstate (ara+e. t%e &a+or Ar+iter issued a 3rit of e?ecution directin t%e s%eriff to e?ecute t%e *ecision. dated 3 *ecem+er 1. (ara+e.7A" T%e 3rit 3as partiall' satisfied t%rou % arnis%ment of sums from CB$Ds de+tor. 0elipe Basilan.uel. Alfredo Al+era. a certain *ennis Cu'e :en filed a t%ird=part' claim 3it% t%e &a+or Ar+iter alle in t%at t%e properties sou %t to +e le-ied upon +' t%e s%eriff 3ere o3ned +' J66$. et" al"Ds motion for +rea:=open order" (ara+e. t%e fact. *ominador Sa+ina. (ariano Rio.5. #alen>uela. ) . Octo+er 1. t%e proIect in 3%ic% t%e' 3ere %ired %ad not 'et +een finis%ed and completed" CB$ %ad to en a e t%e ser-ices of su+=contractors 3%ose 3or:ers performed t%e functions of (ara+e. (ara+e. effecti-e on 35 !o-em+er 1.7. %o3e-er. dated 1. et" al" 3ere ser-ed indi-idual 3ritten notices of termination of emplo'ment +' CB$.A1A"84. 0elipe Radiana. and Ru+en Ro+alos 3ere emplo'ed +' said compan' as la+orers. et" al" filed a complaint for ille al dismissal. Jr".. t%at all t%e emplo'ees inside CB$Ds premises claimed t%at t%e' 3ere emplo'ees of J'dro 6ipes 6%ilippines.71. t%e s%eriff issued a report statin t%at %e tried to ser-e t%e alias 3rit of e?ecution on petitioner t%rou % t%e securit' uard on dut' +ut t%e ser-ice 3as refused on t%e round t%at CB$ no lon er occupied t%e premises" On 14 Septem+er 1. !or+erto Comendador. (CB$) a domestic corporation. 6aulina Basea.74. (ara+e. o-ertime pa' and t%irteent%=mont% pa' a ainst CB$" On 1.

and su+stantiall' t%e same su+scri+ers" 0rom t%e fore oin . to 3it: (1) Stoc: o3ners%ip +' one or common o3ners%ip of +ot% corporationsL (1) $dentit' of directors and officersL (3) T%e manner of :eepin corporate +oo:s and recordsL and (A) (et%ods of conductin t%e +usiness" T%e SEC en +anc e?plained t%e Minstrumentalit' ruleM 3%ic% t%e courts %a-e applied in disre ardin t%e separate Iuridical personalit' of corporations as M)%ere one corporation is so or ani>ed and controlled and its affairs are conducted so t%at it is. it cannot +e said t%at t%e propert' le-ied upon +' t%e s%eriff 3ere not of CB$Ds" Clearl'. t%e same corporate officers..Narratives (Berne Guerrero) &eld$ $t is a fundamental principle of corporation la3 t%at a corporation is an entit' separate and distinct from its stoc:%olders and from ot%er corporations to 3%ic% it ma' +e connected" But. no separate mind. and is +ut a conduit for its principal" $t must +e :ept in mind t%at t%e control must +e s%o3n to %a-e +een e?ercised at t%e time t%e acts complained of too: place" (oreo-er. #alen>uela. 1 on leave Facts$ + recedin' case. amon ot%er t%in s. under t%e +usiness name of #illa Re' Transit. ( 0 ) . Jose (" #illarama 3as an operator of a +us transportation. 3%en t%e notion of separate Iuridical personalit' is used to defeat pu+lic con-enience. a +usiness conduit or an alter e o of anot%er corporation" T%e conditions under 3%ic% t%e Iuridical entit' ma' +e disre arded -ar' accordin to t%e peculiar facts and circumstances of eac% case" !o %ard and fast rule can +e accuratel' laid do3n. (etro (anila" 0urt%er. statin t%at its office address is at 399 (a'san Road.74. 3%ile CB$ claimed t%at it ceased its +usiness operations on 1. t%e t%ird=part' claimant. not onl' of finances +ut of polic' and +usiness practice in respect to t%e transaction attac:ed so t%at t%e corporate entit' as to t%is transaction %ad at t%e time no separate mind. or is used as a de-ice to defeat t%e la+or la3s. t%ere are some pro+ati-e factors of identit' t%at 3ill Iustif' t%e application of t%e doctrine of piercin t%e corporate -eil. +ut complete domination. su+mitted on t%e same da'. so to spea:.9. 3ill or e?istence of its o3nL (1) Suc% control must %a-e +een used +' t%e defendant to commit fraud or 3ron . a mere s%eet or paper corporation. Iustif' 3ron . a mere instrumentalit' or adIunct of t%e ot%er. t%is separate personalit' of t%e corporation ma' +e disre arded or t%e -eil of corporate fiction pierced" T%is is true li:e3ise 3%en t%e corporation is merel' an adIunct. 6rior to 1. not mere maIorit' or complete stoc: control. J66$. t%e fiction of t%e corporate entit' of t%e Minstrumentalit'M ma' +e disre arded" T%e control necessar' to in-o:e t%e rule is not maIorit' or e-en complete stoc: control +ut suc% domination of instances. et" al" of +ac: 3a es and to +ar t%eir reinstatement to t%eir former positions" J66$ is o+-iousl' a +usiness conduit of CB$ and its emer ence 3as s:illfull' orc%estrated to a-oid t%e financial lia+ilit' t%at alread' attac%ed to CB$" 0 7illa Re" 8ransit vs. CB$ ceased its +usiness operations in order to e-ade t%e pa'ment to (ara+e. April 1. t%is separate and distinct personalit' of a corporation is merel' a fiction created +' la3 for con-enience and to promote Iustice" So. a s%am or a su+terfu e is purel' one of fact" Jere. 3%ic% aut%ori>ed %im to operate a total of 31 units Commercial *a3 ) Cor-oration *a3 200. t%e same +oard of directors. it filed an $nformation S%eet 3it% t%e Securities and E?c%an e Commission on 19 (a' 1. policies and practices t%at t%e controlled corporation %as. Ferrer [GR *)24/14 21 9cto+er 110/# %n &anc. t%e courts are concerned 3it% realit' and not form.78. to perpetuate t%e -iolation of a statutor' or ot%er positi-e le al dut' or dis%onest and unIust act in contra-ention of plaintiffDs le al ri %tsL and (3) T%e aforesaid control and +reac% of dut' must pro?imatel' cause t%e inIur' or unIust loss complained of" T%e a+sence of an' one of t%ese elements pre-ents Mpiercin t%e corporate -eil"M $n appl'in t%e Minstrumentalit'M or Malter e oM doctrine. in fact. (etro (anila" On t%e ot%er %and. 3it% %o3 t%e corporation operated and t%e indi-idual defendantDs relations%ip to t%at operation" T%us t%e . An'eles (J): ( concur. protect fraud or defend crime. t%e CB$ and t%e J66$ s%ared t%e same address andGor premises" @nder t%ese circumstances. +ot% information s%eets 3ere filed +' t%e same #ir ilio O" CasiNo as t%e corporate secretar' of +ot% corporations" Bot% corporations %ad t%e same president. it appears t%at. pursuant to certificates of pu+lic con-enience ranted %im +' t%e 6u+lic Ser-ice Commission (6SC) in Cases AA113 and 15A491. t%e control and +reac% of dut' must pro?imatel' cause t%e inIur' or unIust loss for 3%ic% t%e complaint is made"M T%e test in determinin t%e applica+ilit' of t%e doctrine of piercin t%e -eil of corporate fiction is as (1) Control. +ut certainl'.uestion of 3%et%er a corporation is a mere alter e o. ) too* no art. 3ill or e?istence of its o3n. a similar information s%eet statin t%at its office address is at 399 (a'san Road. #alen>uela.

3%ic% decreed.555"55 3as pa'a+le upon t%e final appro-al of t%e sale +' t%e 6SCL 6A.955"55 one 'ear after t%e final appro-al of t%e saleL and t%e +alance of 695.9. t%ose issued under 6SC cases 9. t%e 6antranco s%all +e t%e one to operate pro-isionall' t%e ser-ice under t%e t3o certificates em+raced in t%e contract +et3een 0errer and 6antranco" T%e Corporation too: issue 3it% t%is particular rulin of t%e 6SC and ele-ated t%e matter to t%e Supreme Court. Case 11A598. Iointl' and se-erall'.555"55 Ms%all +e paid +' t%e B@OER to t%e different suppliers of t%e SE&&ER"M T%e -er' same da' t%at t%e contract of sale 3as e?ecuted. a complaint for t%e annulment of t%e s%eriffDs sale of t%e aforesaid t3o certificates of pu+lic con-enience (6SC Cases 9. for t%e sum of 61A. to pa' t%e Corporation. to 3it.uipment from one #alentin 0ernando. a ainst 0errer. after deli+eration. %e sold t%e t3o certificates of pu+lic con-enience to t%e 6an asinan Transportation Compan'.Narratives (Berne Guerrero) on -arious routes or lines from 6an asinan to (anila.uent sale t%ereof +' t%e latter to 6antranco. 6159. and a certificate of sale 3as issued in %is name" T%ereafter. (a' 1.555"55 3it% t%e condition. A.9. tools and e. t%e Corporation filed in t%e Court of 0irst $nstance of (anila.9. t%e Corporation s%ould +e t%e one to operate t%e lines pro-isionall'" + resent case. t%e 6SC issued an order disposin t%at durin t%e pendenc' of t%e cases and +efore a final resolution on t%e aforesaid applications. $nc" (6antranco).555"55 3as paid upon t%e si nin of t%e contractL 695...A. 6antranco and t%e 6SC" T%e Corporation pra'ed t%erein t%at all t%e orders of t%e 6SC relati-e to t%e partiesD dispute o-er t%e said certificates +e annulled" T%e C0$ of (anila declared t%e s%eriffDs sale of t3o certificates of pu+lic con-enience in fa-or of 0errer and t%e su+se. t%e sum of 69. and t%e su+se. of 3%ic% 6155. ( 7 ) .A.555"55 3as paid to t%e treasurer of t%e corporation..555"55 3as su+scri+ed +' t%e +rot%er and sister=in=la3 of Jose (" #illaramaL of t%e su+scri+ed capital stoc:.555"55 as and for attorne'Ds fees" T%e case a ainst t%e 6SC 3as dismissed" All parties appealed" %ssue$ )%et%er t%e stipulation. 0errer sold t%e t3o certificates of pu+lic con-enience to 6antranco. 3%o 3as !ati-idad R" #illarama" $n less t%an a mont% after its re istration 3it% t%e Securities and E?c%an e Commission (15 (arc% 1....).555"55 di-ided into 9. +inds t%e Corporation (t%e #illa Re' Transit. Case 114187. MSJA&& !OT 0OR A 6ER$O* O0 15 OEARS 0RO( TJE *ATE O0 TJ$S SA&E. and Iointl' su+mitted for appro-al t%eir correspondin contract of sale to t%e 6SC" 6antranco t%erein pra'ed t%at it +e aut%ori>ed pro-isionall' to operate t%e ser-ice in-ol-ed in t%e said t3o certificates" T%e applications for appro-al of sale. and t%at of 0errer and 6antranco.: a corporation called #illa Re' Transit.555"55.9.555"55L t%e +alance of 61. on 8 Jul' 1. namel'. a pu+lic sale 3as conducted +' t%e S%eriff of t%e said t3o certificates of pu+lic con-enience" 0errer 3as t%e %i %est +idder. amon ot%ers.9.. $nc" (t%e Corporation) 3as or ani>ed 3it% a capital stoc: of 6955. On A !o-em+er 1.. appl' for an' T6@ ser-ice identical or competin 3it% t%e +u'er"M Barel' 3 mont%s t%ereafter. or on 4 (arc% 1. %o3e-er. t%e parties t%ereto immediatel' applied 3it% t%e 6SC for its appro-al. upon t%e condition t%at Mit ma' +e modified or re-o:ed +' t%e Commission at an' time. filed +efore t%e 6SC.555 s%ares of t%e par -alue of 6155"55 eac%L 6155.9. +uses.9. $nc")" Commercial *a3 ) Cor-oration *a3 200. on 8 April 1.9.7. t%at t%e seller (#illarama) Ms%all not for a period of 15 'ears from t%e date of t%is sale. 3ere sc%eduled for a Ioint %earin " $n t%e meantime. in fa-or of Euse+io E" 0errer a ainst #alentin 0ernando" T%e S%eriff made and entered t%e le-' in t%e records of t%e 6SC" On 14 Jul' 1. t%e 6SC ranted t%e pro-isional permit pra'ed for. on 11 Jul' 1. pursuant to a 3rit of e?ecution issued +' t%e Court of 0irst $nstance of 6an asinan in Ci-il Case 138. s%all +e su+Iect to 3%ate-er action t%at ma' +e ta:en on t%e +asic application and s%all +e -alid onl' durin t%e pendenc' of said application"M Before t%e 6SC could ta:e final action on said application for appro-al of sale.555"55 3as t%e su+scri+ed stoc:L !ati-idad R" #illarama (3ife of Jose (" #illarama) 3as one of t%e incorporators. and -ice=-ersa" On 7 Januar' 1.A and 43875) in fa-or of 0errer. le-ied on 1 of t%e fi-e certificates of pu+lic con-enience in-ol-ed t%erein. +ou %t 9 certificates of pu+lic con-enience.. t%e S%eriff of (anila. and s%e su+scri+ed for 61.uent sale t%ereof +' t%e latter to 6antranco null and -oidL declared t%e Corporation to +e t%e la3ful o3ner of t%e said certificates of pu+lic con-enienceL and ordered 0errer and 6antranco.9. t%e Corporation..A and 43875. A66&O 0OR A!O T6@ SER#$CE $*E!T$CA& OR CO(6ET$!/ )$TJ TJE B@OERM in t%e contract +et3een #illarama and 6antranco.. for 6395. t%at until t%e issue on t%e o3ners%ip of t%e disputed certificates s%all %a-e +een finall' settled +' t%e proper court. 3it% a pra'er for t%e issuance of a pro-isional aut%orit' in fa-or of t%e -endee Corporation to operate t%e ser-ice t%erein in-ol-ed" On 1. +' 0ernando and t%e Corporation.

in' (J): 4 concur Facts$ On 13 Januar' 1. Commercial *a3 ) Cor-oration *a3 200. +ut also allo3ed t%e counter=claim of t%e (anuel spouses" Bot% parties appealed" On 19 April 1. or 3%ere t%e corporation is so or ani>ed and controlled and its affairs are so conducted as to ma:e it merel' an instrumentalit'. t%en its distinct personalit' ma' +e i nored" $n t%ese circumstances.555"55 and 6155..uipmentL t%ere 3as no actual pa'ment +' t%e ori inal su+scri+ers of t%e amounts of 6. t%e corporationDs separate Iuridical personalit' ma' +e disre arded. -uisu#. a enc'.1. are muc% too inconsistent 3it% t%e ends and purposes of t%e Corporation la3. 3%en t%e corporate identit' is used to defeat pu+lic con-enience. or defend crime" Also. t%e -eil 3it% 3%ic% t%e la3 co-ers and isolates t%e corporation from t%e mem+ers or stoc:%olders 3%o compose it 3ill +e lifted to allo3 for its consideration merel' as an a re ation of indi-iduals" Jence. 3%ic%. precisel'.Narratives (Berne Guerrero) &eld$ #illarama supplied t%e or ani>ation e?penses and t%e assets of t%e Corporation. protect fraud. t%e courts 3ill treat t%e corporation as a mere a rupation of persons and t%e lia+ilit' 3ill directl' attac% to t%em" T%e le al fiction of a separate corporate personalit' in t%ose cited instances.9.79. Court o. t%e Court of Appeals sustained t%e trial courtDs decision" Jence. 3%ere t%e corporation is a mere alter e o or +usiness conduit of a person. t%e (anuel spouses interposed a counterclaim for unpaid le al ser-ices +' /re orio (anuel in t%e amount of 695. in fa-or of 0rancisco (otors in re ard to its claim for mone'. directors and officers of 0rancisco (otors" T%e trial court decided t%e case on 14 June 1.555"55 for cost of suit and attorne'Ds fees" To t%e ori inal +alance on t%e price of Ieep +od' 3ere added t%e costs of repair" $n t%eir ans3er. see:s to separate personal responsi+ilities from corporate underta:in s" $t is t%e -er' essence of incorporation t%at t%e acts and conduct of t%e corporation +e carried out in its o3n corporate name +ecause it %as its o3n personalit'" T%e doctrine t%at a corporation is a le al entit' distinct and separate from t%e mem+ers and stoc:%olders 3%o compose it is reco ni>ed and respected in all cases 3%ic% are 3it%in reason and t%e la3" )%en t%e fiction is ur ed as a means of perpetratin a fraud or an ille al act or as a -e%icle for t%e e-asion of an e?istin o+li ation.555"55 as appearin in t%e +oo:sL #illarama made use of t%e mone' of t%e Corporation and deposited t%em to %is pri-ate accountsL and t%e Corporation paid %is personal accounts" #illarama %imself admitted t%at %e min led t%e corporate funds 3it% %is o3n mone'" T%ese circumstances are stron persuasi-e e-idence s%o3in t%at #illarama %as +een too muc% in-ol-ed in t%e affairs of t%e Corporation to alto et%er ne ati-e t%e claim t%at %e 3as onl' a part=time eneral mana er" T%e' s%o3 +e'ond dou+t t%at t%e Corporation is %is alter e o" T%e interference of #illarama in t%e comple? affairs of t%e corporation. $nc" is an alter e o of Jose (" #illarama. for reasons of pu+lic polic' and in t%e interest of Iustice. t%e circum-ention of statutes. 3ill +e Iustifia+l' set aside" Jerein.79. it can +e enIoined from competin 3it% t%e co-enantee" 7 Francisco 'otors Cor-oration vs. conduit or adIunct of anot%er corporation. 0rancisco (otors Corp" filed a complaint a ainst Spouses /re orio and &i+rada (anuel to reco-er 63.555 3%ic% 3as not paid +' t%e incorporators. suc% as truc:s and e. and particularl' its finances.A11"54. A--eals [GR 100/12 2. t%e #illa Re' Transit. t%e present petition for re-ie3 on certiorari" %ssue$ )%et%er t%e 0rancisco (otors Corporation s%ould +e lia+le for t%e le al ser-ices of /re orio (anuel rendered in t%e intestate proceedin s o-er Benita Trinidad2s estate (of t%e 0rancisco famil')" &eld$ Basic in corporation la3 is t%e principle t%at a corporation %as a separate personalit' distinct from its stoc:%olders and from ot%er corporations to 3%ic% it ma' +e connected" Jo3e-er. Iustif' 3ron . representin t%e +alance of t%e Ieep +od' purc%ased +' t%e (anuels from 0rancisco (otorsL an additional sum of 615.A9A"75 representin t%e unpaid +alance on t%e cost of repair of t%e -e%icleL and 64. !une 1111# Second Division. under t%e doctrine of piercin t%e -eil of corporate entit'. and t%at t%e restricti-e clause in t%e contract entered into +' t%e latter and 6antranco is also enforcea+le and +indin a ainst t%e said Corporation" 0or t%e rule is t%at a seller or promisor ma' not ma:e use of a corporate entit' as a means of e-adin t%e o+li ation of %is co-enant" )%ere t%e Corporation is su+stantiall' t%e alter e o of t%e co-enantor to t%e restricti-e a reement. t%e ac%ie-ement or perfection of a monopol' or enerall' t%e perpetration of :na-er' or crime. ( / ) . for e?ample.

inasmuc% as 6!B and !AS@*ECO no3 o3ned and possessed t%e assets of 6AS@($&. as of 18 June 1. AEEC and 6AS@($& entered into a contract for AEEC to perform t%e (a) Construction of a po3er %ouse +uildin L 3 reinforced concrete foundation for 3 units 395 E) diesel en ine eneratin sets. amountin to 6918. and pro-ide electrical e. alt%ou % unintended. 6AS@($& %ad paid onl' 6195.89.8A up to 13 (a' 1.143"75. to ta:e o3ners%ip and possession of t%e assets and ultimatel' to nationali>e and consolidate its interest in ot%er 6!B controlled su ar mills" 6rior to 1. its o3n creditors. i-en t%e facts and circumstances of t%is case. t%e situation %as +een re-ersed" $t is t%e 0rancisco (otors Corporation (0(C) as a corporation 3%ic% is +ein ordered to ans3er for t%e personal lia+ilit' of certain indi-idual directors. it 3as incurred in t%eir personal capacit'" )%en directors and officers of a corporation are una+le to compensate a part' for a personal o+li ation.an (J): 3 concur. and e-en ot%er stoc:%oldersL %ence. and +e t%ere+' %eld lia+le t%erefor +' piercin its corporate -eil" )%ile t%ere are no %ard and fast rules on disre ardin separate corporate identit'. 6AS@($& made a partial pa'ment to AEEC of 61A.uired AEEC to perform e?tra 3or:. [GR 142140 17 A-ril 2002# Third Division. co-erin t%e period from 9 Januar' 1.ili--ine National Ban< vs. officers and directors could not +e properl' directed a ainst t%e corporation 3it%out -iolatin +asic principles o-ernin corporations" (oreo-er.195 E) tur+o enerator sets. 1 on o00icial leave Facts$ On 14 Au ust 1. Octo+er 1. Andrada =lectric > =n(ineerin( Co. as 3ell as t%e en ineerin Commercial *a3 ) Cor-oration *a3 200. lea-in se-eral unpaid accounts 3it% AEEC" On 1. ( 1 ) . clearl' ine.89. t%e 6%ilippine national Ban: (6!B) ac.83. 3 reinforced concrete foundation for t%e 9. alle edl' failed and refused to pa' AEEC t%eir Iust.8A. and t%e electrical. lea-in an unpaid +alance.uitous to 0(C" 0urt%ermore. amon ot%ers" Aside from t%e 3or: contract. 6AS@($& en a ed t%e ser-ices of t%e Andrada Electric K En ineerin Compan' (AEEC) for electrical re3indin and repair. 6AS@($& re. 3%ate-er o+li ation said incorporators. Octo+er 1. and t%ese defendants all +enefited from t%e 3or:s. t%e doctrine of piercin t%e corporate -eil %as no rele-ant application" T%e rationale +e%ind piercin a corporationDs identit' in a i-en case is to remo-e t%e +arrier +et3een t%e corporation from t%e persons comprisin it to t%3art t%e fraudulent and ille al sc%emes of t%ose 3%o use t%e corporate personalit' as a s%ield for underta:in certain proscri+ed acti-ities" $n t%e present case. ma' result from its erroneous application" T%e personalit' of t%e corporation and t%ose of its incorporators.uipment and spare parts" Out of t%e total o+li ation of 6888. officers and incorporators concerned" Jence.81. and incorporators" Suc% result if permitted could easil' preIudice t%e corporation. directors and officers of t%e corporation %ad incurred. t%e doctrine %as +een turned upside do3n +ecause of its erroneous in-ocation" $n fact.81. t%e ser-ices of /re orio (anuel 3ere solicited as counsel for mem+ers of t%e 0rancisco famil' to represent t%em in t%e intestate proceedin s o-er Benita TrinidadDs estate" T%ese estate proceedin s did not in-ol-e an' +usiness of 0(C" (anuelDs mo-e to reco-er unpaid le al fees t%rou % a counterclaim a ainst 0(C. lea-in an unpaid +alance of 6913.uired t%e assets of t%e 6ampan a Su ar (ills (6AS@($&) t%at 3ere earlier foreclosed +' t%e *e-elopment Ban: of t%e 6%ilippines (*B6) under &O$ 311" T%e 6!B or ani>ed t%e ational Su ar *e-elopment Corporation (!AS@*ECO) in Septem+er 1. 3e must al3a's +e mindful of its function and purpose" A court s%ould +e careful in assessin t%e milieu 3%ere t%e doctrine of piercin t%e corporate -eil ma' +e applied" Ot%er3ise an inIustice. /an'ani. instead of %oldin certain indi-iduals or persons responsi+le for an alle ed corporate act. to offset t%e unpaid +alance of t%e purc%ase and repair of a Ieep +od' could onl' result from an o+-ious misappre%ension t%at 0(CDs corporate assets could +e used to ans3er for t%e lia+ilities of its indi-idual directors. and no3 !AS@*ECO. officers.143"75. in +ro:en amounts.143"75" Out of said unpaid +alance of 6918. it is far=fetc%ed to alle e t%at t%e corporation is perpetuatin fraud or promotin inIustice.555"55.555"55. -alid and demanda+le o+li ation (T%e 6resident of t%e !AS@*ECO is also t%e #ice=6resident of t%e 6!B" AEEC +esou %t said official to pa' t%e outstandin o+li ation of 6AS@($&.143"75" 6AS@($& and 6!B. directors and officers in t%eir personal capacities ou %t to +e :ept separate in t%is case" T%e claim for le al fees a ainst t%e concerned indi-idual incorporators.555 E) and 1. considerin t%e nature of t%e le al ser-ices in-ol-ed. e-er' action P includin a counterclaim P must +e prosecuted or defended in t%e name of t%e real part' in interest" $t is plainl' an error to la' t%e claim for le al fees of pri-ate respondent /re orio (anuel at t%e door of 0(C rat%er t%an indi-idual mem+ers of t%e 0rancisco famil'" / :. most of 3%ic% 3ere partiall' paid +' 6AS@($&.Narratives (Berne Guerrero) %o3e-er.

75 until full' paidL (1) t%e sum of 6151.413"75 plus interest t%ereon at t%e rate of 1AH per annum as claimed from 19 Septem+er 1. from 9 Januar' 1. or a dis%onest and an unIust act in contra-ention of plaintiffDs le al ri %tL and (3) t%e said control and +reac% of dut' must %a-e pro?imatel' caused t%e inIur' or unIust loss complained of" T%e a+sence of t%e fore oin elements in t%e present case precludes t%e piercin of t%e corporate -eil" 0irst. to 3%om AEEC a reed to pa' a sum e.ui-alent to 19H of t%e amount of t%e o+li ation due +' 3a' of attorne'Ds fees" 6!B and !AS@*ECO filed a Ioint motion to dismiss on t%e round t%at t%e complaint failed to state sufficient alle ations to esta+lis% a cause of action a ainst 6!B and !AS@*ECO.ic Ban<in( Cor-oration [GR 14244. Iustif' a 3ron .uisition of t%e foreclosed assets. prior to 6!BDs ac.uired t%e assets of 6AS@($&" Jence. 6AS@($& %ad paid 6195. 40 A-ril 2004# 1. 6AS@($&Ds corporate e?istence %ad not +een le all' e?tin uis%ed or terminated" 0urt%er. despite AEECDs insistence to t%e contrar'" 1 *i-at vs. and ordered 6!B nad !AS@*ECO to file t%eir ans3ers 3it%in 19 da's" After due proceedin s.8A to 13 (a' 1.143"75" As of 18 June 1. t%ere is no s%o3in t%at t%eir control o-er it 3arrants t%e disre ard of corporate personalities" Second.uired o3ners%ip or mana ement of some assets of t%e 6ampan a Su ar (ill (6AS@($&). insulate +ad fait% or perpetuate inIustice" T%us. 3ill or e?istence of its o3nL (1) suc% control must %a-e +een used +' t%e defendant to commit a fraud or a 3ron to perpetuate t%e -iolation of a statutor' or ot%er positi-e le al dut'. inasmuc% as t%ere is lac: or 3ant of pri-it' of contract +et3een t%e t%em and AEEC" Said motion 3as denied +' t%e trial court in its 18 !o-em+er order. alt%ou % t%e assets of !AS@*ECO can +e easil' traced to 6AS@($&. AEEC 3as compelled to en a e t%e professional ser-ices of counsel.83. performed +' AEEC)" Because of t%e failure and refusal of 6!B. :aci. t%e corporate separateness +et3een 6AS@($& and 6!B remains.in' (J): 3 concur Commercial *a3 ) Cor-oration *a3 200. AEEC alle edl' suffered actual dama es in t%e total amount of 6913. defeat pu+lic con-enience.555 to AEEC and. defend crime.555" !eit%er did 6!B e?pressl' or impliedl' a ree to assume t%e de+t of 6AS@($& to AEEC" &O$ 11 e?plicitl' pro-ides t%at 6!B s%all stud' and su+mit recommendations on t%e claims of 6AS@($&Ds creditors" Clearl'. (3) Costs" 6!B and !AS@*ECO appealed" T%e Court of Appeals affirmed t%e decision of t%e trial court in its decision of 18 April 1555 (CA=/R C# 98415" 6!B and !AS@*ECO filed t%e petition for re-ie3" %ssue$ )%et%er 6!B and !AS@*ECO ma' +e %eld lia+le for 6AS@($&2s lia+ilit' to AEEC" &eld$ Basic is t%e rule t%at a corporation %as a le al personalit' distinct and separate from t%e persons and entities o3nin it" T%e corporate -eil ma' +e lifted onl' if it %as +een used to s%ield fraud. +usiness conduit or instrumentalit' of anot%er entit' or person" T%ird.Narratives (Berne Guerrero) and repairs.143"75L and t%at in order to reco-er t%ese sums. 3ill not ma:e 6!B lia+le for t%e 6AS@($&Ds contractual de+ts to Andrada Electric K En ineerin Compan' (AEEC)" 6iercin t%e -eil of corporate fiction ma' +e allo3ed onl' if t%e follo3in elements concur: (1) control P not mere stoc: control.81A"84 as attorne'Ds feesL and. 3as not follo3ed" $n fact. 6AS@($& %ad pre-iousl' made partial pa'ments to AEEC for t%e formerDs o+li ation in t%e amount of 6888. must %a-e +een suc% t%at t%e corporate entit' as to t%is transaction %ad at t%e time no separate mind. ot%er t%an t%e fact t%at 6!B and !AS@*ECO ac. t%e Trial Court rendered Iud ment in fa-or of AEEC and a ainst 6!B. ( 10 ) .uired t%e assets of 6AS@($&. +ut complete domination P not onl' of finances. AEEC 3as not defrauded or inIured 3%en 6!B and !AS@*ECO ac. +ut of polic' and +usiness practice in respect to t%e transaction attac:ed. 3%ic% %ad earlier +een foreclosed and purc%ased at t%e resultin pu+lic auction +' t%e *e-elopment Ban: of t%e 6%ilippines (*B6). t%e mere fact t%at t%e 6%ilippine !ational Ban: (6!B) ac.8A. !AS@*ECO and 6AS@($&L t%e latter +ein ordered to pa' Iointl' and se-erall' t%e former (1) t%e sum of 6913. 6AS@($& andGor !AS@*ECO to pa' t%eir o+li ations. t%ere is no e-idence t%at t%eir Iuridical personalit' 3as used to commit a fraud or to do a 3ron L or t%at t%e separate corporate entit' 3as farcicall' used as a mere alter e o. anot%er 61A. -uisu#. t%e transfer of t%e latterDs assets to 6!B and !AS@*ECO 3as not fraudulentl' entered into in order to escape lia+ilit' for its de+t to AEEC" !eit%er 3as t%ere an' mer er or consolidation 3it% respect to 6AS@($& and 6!B" T%e procedure prescri+ed under Title $Q of t%e Corporation Code 9.

o3ned MBelaDs E?port Tradin M (BET). Teresita. t%at t%e promissor' notes. a special po3er of attorne' appointin Teresita &ipat as %er attorne'=in=fact to o+tain loans and ot%er credit accommodations from 6acific Ban:in Corporation (6acific Ban:)" S%e li:e3ise aut%ori>ed Teresita to e?ecute mort a e contracts on properties o3ned or co=o3ned +' %er as securit' for t%e o+li ations to +e e?tended +' 6acific Ban: includin an' e?tension or rene3al t%ereof" Sometime in April 1. 3as dismissed +' t%e appellate court for lac: of merit" T%e &ipats t%en mo-ed for reconsideration. Rue>on Cit'" Said propert' 3as li:e3ise made to secure ot%er additional or ne3 loans. e?ecuted a Real Estate (ort a e o-er t%eir propert' located at !o" 71A Aurora Bl-d". a loan from 6acific Ban: amountin to 6973.uirements of t%e la3 t%e mort a ed propert' 3as sold at pu+lic auction" On 31 Januar' 1. 3%ic% sells oods imported from t%e 6%ilippines t%rou % BET" (rs" &ipat desi nated %er dau %ter. Rue>on Cit'" BET 3as en a ed in t%e manufacture of arments for domestic and forei n consumption" T%e &ipats also o3ned t%e M('stical 0as%ionsM in t%e @nited States.7. t%e latter +ein a famil' corporation" Trinidad furt%er claimed t%at %e 3as a +u'er in ood fait% and for -alue and t%at t%e &ipat spouses are estopped from den'in BECDs e?istence after %oldin t%emsel-es out as a corporation" After trial on t%e merits. %o3e-er. (rs" &ipat and BET.uipment pre-iousl' used +' BET" $ts incorporators and directors included t%e &ipat spouses 3%o o3ned a com+ined 355 s%ares out of t%e A15 s%ares su+scri+ed. $nc". t%e RTC dismissed t%e complaint" T%e &ipats timel' appealed t%e RTC decision to t%e Court of Appeals in CA=/"R" C# A1934" Said appeal. t%e &ipat spouses. BEC defaulted in its pa'ments" After receipt of 6acific Ban:Ds demand letters. Cu+ao. trust receipt. a sin le proprietors%ip 3it% principal office at !o" 71A Aurora Boule-ard. Cu+ao.. e?port +ills.87. t%e spouses &ipat filed +efore t%e Rue>on Cit' RTC a complaint for annulment of t%e real estate mort a e. and trust receipt e-entuall' +ecame due and demanda+le" @nfortunatel'.8. 6acific Ban: and Trinidad alle ed in common t%at petitioners &ipat cannot e-ade pa'ments of t%e -alue of t%e promissor' notes. and e?port +ills 3it% t%eir propert' +ecause t%e' and t%e BEC are one and t%e same. amon ot%ers. to mana e BET in t%e 6%ilippines 3%ile s%e 3as mana in M('stical 0as%ionsM in t%e @nited States" $n order to facilitate t%e con-enient operation of BET. +' -irtue of t%e special po3er of attorne'. a certificate of sale 3as issued to respondent Eu enio *" Trinidad as t%e %i %est +idder" On 17 !o-em+er 1..uest +ut Estelita failed to fulfill %er promise" Conse. and e?port +ills 3ere all ultra -ires acts of Teresita as t%e' 3ere e?ecuted 3it%out t%e re..8. trust receipt. etc" On 9 Septem+er 1. t%e same 3ere t%e corporationDs sole o+li ation. Teresita B" &ipat.uentl'.Narratives (Berne Guerrero) Facts$ T%e spouses Alfredo &ipat and Estelita Bur os &ipat.. upon t%e re. t%e real estate mort a e 3as foreclosed and after compliance 3it% t%e re. Estelita &ipat e?ecuted on 1A *ecem+er 1. 3as a+le to secure for and in +e%alf of %er mot%er. ( 11 ) . it %a-in a personalit' distinct and separate from spouses &ipat" $t 3as li:e3ise pointed out t%at TeresitaDs aut%orit' to secure a loan from 6acific Ban: 3as specificall' limited to (rs" &ipatDs sole use and +enefit and t%at t%e real estate mort a e 3as e?ecuted to secure t%e &ipatsD and BETDs 6973. 3%ile Teresita +ecame t%e -ice=president and eneral mana er" E-entuall'. BET 3as incorporated into a famil' corporation named BelaDs E?port Corporation (BEC) in order to facilitate t%e mana ement of t%e +usiness" BEC 3as en a ed in t%e +usiness of manufacturin and e?portation of all :inds of arments of 3%ate-er :ind and description and utili>ed t%e same mac%ineries and e.79A"55 loan onl'" $n t%eir respecti-e ans3ers.uent loans 3ere o+tained +' BEC 3it% t%e correspondin promissor' notes dul' e?ecuted +' Teresita on +e%alf of t%e corporation" A letter of credit 3as also opened +' 6acific Ban: in fa-or of A" O" Enittin (anufacturin Co". Estelita &ipat 3ent to t%e office of t%e +an:Ds li.uidator and as:ed for additional time to ena+le %er to personall' settle BECDs o+li ations" T%e +an: acceded to %er re.79A"55 to +u' fa+rics to +e manufactured +' BET and e?ported to M('stical 0as%ionsM in t%e @nited States" As securit' t%erefor. as represented +' Teresita.uest of BEC after BEC e?ecuted t%e correspondin trust receipt t%erefor" E?port +ills 3ere also e?ecuted in fa-or of 6acific Ban: for additional finances" T%ese transactions 3ere all secured +' t%e real estate mort a e o-er t%e &ipatsD propert'" T%e promissor' notes. e?traIudicial foreclosure and t%e certificate of sale issued o-er t%e propert' a ainst 6acific Ban: and Eu enio *" Trinidad" T%e complaint alle ed. and ot%er close relati-es and friends of t%e &ipats" Estelita &ipat 3as named president of BEC.7. +ut t%is 3as denied +' t%e appellate court in its Resolution of 13 0e+ruar' 1555" T%e &ipat spouses filed t%e petition for re-ie3 on certiorari" Commercial *a3 ) Cor-oration *a3 200.uisite +oard resolution of t%e Board of *irectors of BEC" T%e &ipats also a-erred t%at assumin said acts 3ere -alid and +indin on BEC. t%e loan 3as later restructured in t%e name of BEC and su+se. Teresita &ipat 3%o o3ned 15 s%ares.

A17 s%ares of stoc: %ad +een su+scri+ed and full' paid 3it% certain properties transferred to t%e corporation descri+ed in a list appended t%ereto" $mmediatel' after t%e e?ecution of said articles of incorporation.uest of Bro3n. Jipolita *" C%apman and Ceferino S" A+ella filed +efore t%e Court of 0irst $nstance of &e'te t%e ci-il case. respecti-el'L (1) +ot% firms 3ere mana ed +' t%eir dau %ter. appointed 6edro A" Capucion as t%e recei-er of t%e properties t%ereof. and t%e &ipat spouses cannot e-ade t%eir o+li ations in t%e mort a e contract secured under t%e name of BEC on t%e prete?t t%at it 3as si ned for t%e +enefit and under t%e name of BET" 10 &all vs. Emma Bro3n. $nc". :iccio [GR *)2.M a @"S" firm esta+lis%ed +' Estelita &ipatL (A) +ot% firms %eld office in t%e same +uildin o3ned +' t%e &ipatsL (9) BEC is a famil' corporation 3it% t%e &ipats as its maIorit' stoc:%oldersL (4) t%e +usiness operations of t%e BEC 3ere so mer ed 3it% t%ose of (rs" &ipat suc% t%at t%e' 3ere practicall' indistin uis%a+leL (8) t%e corporate funds 3ere %eld +' Estelita &ipat and t%e corporation itself %ad no -isi+le assetsL (7) t%e +oard of directors of BEC 3as composed of t%e Bur os and &ipat famil' mem+ersL (. policies and practices t%at t%e controlled corporation %as. upon t%e Commercial *a3 ) Cor-oration *a3 200. suppl'in products to M('stical 0as%ion. +usiness purpose. t%e separate personalit' of t%e corporation ma' +e disre arded" T%is is commonl' referred to as t%e Minstrumentalit' ruleM or t%e alter e o doctrine.Narratives (Berne Guerrero) %ssue$ )%et%er BEC and BET are separate +usiness entities. operators and mana ers. t%e corporation proceeded to do +usiness 3it% t%e adoption of +'=la3s and t%e election of its officers" On 1 *ecem+er 1. 0red Bro3n. or ani>ed to en a e in a eneral lum+er +usiness to carr' on as eneral contractors. a mere instrumentalit' or adIunct of t%e ot%er.A7. t%e article of incorporation of t%e 0ar Eastern &um+er and Commercial Co". (3) +ot% firms 3ere en a ed in t%e arment +usiness. 3ill or e?istence of its o3n. filed a motion to dismiss. so to spea:. and is +ut a conduit for its principal" T%e e-idence on record s%o3s BET and BEC are not separate +usiness entities" (1) Estelita and Alfredo &ipat are t%e o3ners and maIorit' s%are%olders of BET and BEC. and 0red Bro3n.A8. t%e fiction of t%e corporate entit' of t%e Dinstrumentalit'D ma' +e disre arded" T%e control necessar' to in-o:e t%e rule is not maIorit' or e-en complete stoc: control +ut suc% domination of finances. &en'zon (J): 2 concur Facts$ On 17 (a' 1. TeresitaL 1. for t%e issuance of t%e correspondin certificate of incorporation" On 11 (arc% 1. t%e Jon" Edmund S" 6iccio ordered t%e dissolution of t%e compan'L and at t%e re. in fact. Jipolita *" C%apman and Ceferino S" A+ella. Emma Bro3n.1/ 21 !une 11. et" al". 3%ere one corporation is so or ani>ed and controlled and its affairs are conducted so t%at it is. contestin t%e courtDs Iurisdiction and t%e sufficientl' of t%e cause of action" After %earin t%e parties. 3%ic% t%e courts %a-e applied in disre ardin t%e separate Iuridical personalit' of corporations" As %eld in one case. si ned and ac:no3led ed in &e'te.0# %n &anc. etc" Attac%ed to t%e article 3as an affida-it of t%e treasurer statin t%at 13. no separate mind. ( 12 ) . C" Arnold Jall and Bradle' 6" Jall. mismana ement and fraud +' t%e mana ers and %ea-' financial losses" C" Arnold Jall and Bradle' 6" Jall. and mana ement" Apparentl'. and t%us t%e &ipt spouses can isolate t%emsel-es +e%ind t%e corporate personalit' of BEC" &eld$ )%en t%e corporation is t%e mere alter e o or +usiness conduit of a person. BET and BEC are one and t%e same and t%e latter is a conduit of and merel' succeeded t%e former" T%e spousesD attempt to isolate t%emsel-es from and %ide +e%ind t%e corporate personalit' of BEC so as to e-ade t%eir lia+ilities to 6acific Ban: is precisel' 3%at t%e classical doctrine of piercin t%e -eil of corporate entit' see:s to pre-ent and remed'" BEC is a mere continuation and successor of BET.A8. alle in amon ot%er t%in s t%at t%e 0ar Eastern &um+er and Commercial Co" 3as an unre istered partners%ipL t%at t%e' 3is%ed to %a-e it dissol-ed +ecause of +itter dissension amon t%e mem+ers.) Estelita %ad full control o-er t%e acti-ities of and decided +usiness matters of t%e corporationL and t%at (15) Estelita &ipat %ad +enefited from t%e loans secured from 6acific Ban: to finance %er +usiness a+road and from t%e e?port +ills secured +' BEC for t%e account of M('stical 0as%ion"M $t could not %a-e +een coincidental t%at BET and BEC are so intert3ined 3it% eac% ot%er in terms of o3ners%ip. pendin action on t%e articles of incorporation +' t%e aforesaid o-ernmental office. t%e said articles of incorporation 3ere filed in t%e office of t%e Securities and E?c%an e Commissioner.

rulin t%at 60/$ 3as entitled to t%e )rit of Attac%ment and t%at C%ua. for t%e purc%ase of fis%in nets of -arious si>es from t%e 6%ilippine 0is%in /ear $ndustries. and upon motion of 60/$. failed to pa' for t%e fis%in nets and t%e floatsL %ence. C%ua and Oao e?isted +ased (1) on t%e testimonies of t%e 3itnesses presented and (1) on a Compromise A reement e?ecuted +' t%e t%ree in Ci-il Case 1A.Narratives (Berne Guerrero) filin of a 615. t%e lo3er court issued a )rit of 6reliminar' Attac%ment. !a-otas. on t%e alle ation t%at MOcean Ruest 0is%in CorporationM 3as a none?istent corporation as s%o3n +' a Certification from t%e Securities and E?c%an e Commission" On 15 Septem+er 1. filed an Ans3er 3it% Counterclaim and Crossclaim and mo-ed for t%e liftin of t%e )rit of Attac%ment" T%e trial court maintained t%e )rit. Jall and Jall instituted t%e present special ci-il action 3it% t%e Supreme Court" %ssue$ )%et%er Bro3n.555 +ond" Jall and Jall offered to file a counter=+ond for t%e disc%ar e of t%e recei-er. /an'ani.55.M Antonio C%ua and 6eter Oao entered into a Contract dated 8 0e+ruar' 1. 3%o %o3e-er 3as not a si nator' to t%e a reement" T%e total price of t%e nets amounted to 6931. 60/$ filed a collection suit a ainst C%ua. as eneral partners.an (J): 3 concur Facts$ On +e%alf of MOcean Ruest 0is%in Corporation. %o3e-er. C%ua filed a (anifestation admittin %is lia+ilit' and re.5.1. +ut Jud e 6iccio refused to accept t%e offer and to disc%ar e t%e recei-er" )%ereupon. 3ere Iointl' lia+le to pa' 60/$" T%e trial court ruled t%at a partners%ip amon &im.555 3ere also sold to t%e Corporation" T%e +u'ers. t%e trial court rendered its *ecision. Branc% 81.555" On 17 !o-em+er 1..5.1=(! 3%ic% C%ua and Oao %ad +rou %t a ainst &im in t%e RTC of (ala+on. ( 14 ) .. affirmed t%e RTC" &im filed t%e 6etition for Re-ie3 on Certiorari" &im ar ues. [GR 14044/ 4 Novem+er 1111# Third Division.uestin a reasona+le time 3it%in 3%ic% to pa'" Je also turned o-er to 60/$ some of t%e nets 3%ic% 3ere in %is possession" 6eter Oao filed an Ans3er. Oao and &im. 3it%out t%e inter-ention of t%e state" 11 *im vs. et" al" ma' file an action to cause t%e dissolution of t%e 0ar Eastern &um+er and Commercial Co".ili--ine Fis. t%at under t%e doctrine of corporation +' estoppel.uent %earin s" &im Ton &im. for (a) a declaration of nullit' of commercial documentsL (+) a reformation of contractsL (c) a declaration of o3ners%ip of fis%in +oatsL (d) an inIunction and (e) dama es" &im appealed to t%e Court of Appeals (CA) 3%ic%. after 3%ic% %e 3as deemed to %a-e 3ai-ed %is ri %t to cross=e?amine 3itnesses and to present e-idence on %is +e%alf. $nc" (60/$)" T%e' claimed t%at t%e' 3ere en a ed in a +usiness -enture 3it% &im Ton &im. ordered t%e sale of t%e fis%in nets at a pu+lic auction" 60/$ 3on t%e +iddin and deposited 3it% t%e said court t%e sales proceeds of 6. amon ot%ers. :. 3%ic% t%e s%eriff enforced +' attac%in t%e fis%in nets on +oard 0GB &ourdes 3%ic% 3as t%en doc:ed at t%e 0is%eries 6ort. Oao and &im Ton &im 3it% a pra'er for a 3rit of preliminar' attac%ment" T%e suit 3as +rou %t a ainst t%e t%ree in t%eir capacities as eneral partners.in( Gear %ndustries %nc. on t%e ot%er %and.5A9" A55 pieces of floats 3ort% 647. lia+ilit' can +e Commercial *a3 ) Cor-oration *a3 200. (etro (anila" $nstead of ans3erin t%e Complaint. 3it%out State inter-ention" &eld$ T%e Securities and E?c%an e Commission %as not issued t%e correspondin certificate of incorporation" T%e personalit' of a corporation +e ins to e?ist onl' from t%e moment suc% certificate is issued P not +efore" !ot %a-in o+tained t%e certificate of incorporation.. +ecause of %is failure to appear in su+se. for t%e purpose of o+tainin its dissolution" E-en t%e e?istence of a de Iure corporation ma' +e terminated in a pri-ate suit for its dissolution +et3een stoc:%olders. t%e 0ar Eastern &um+er and Commercial Co" P e-en its stoc:%olders P ma' not pro+a+l' claim Min ood fait%M to +e a corporation" @nder t%e statue it is to +e noted t%at it is t%e issuance of a certificate of incorporation +' t%e *irector of t%e Bureau of Commerce and $ndustr' 3%ic% calls a corporation into +ein " T%e immunit' if collateral attac: is ranted to corporations Mclaimin in ood fait% to +e a corporation under t%is act"M Suc% a claim is compati+le 3it% t%e e?istence of errors and irre ularitiesL +ut not 3it% a total or su+stantial disre ard of t%e la3" @nless t%ere %as +een an e-ident attempt to compl' 3it% t%e la3 t%e claim to +e a corporation Munder t%is actM could not +e made Min ood fait%"M T%is is not a suit in 3%ic% t%e corporation is a part'" T%is is a liti ation +et3een stoc:%olders of t%e alle ed corporation.

all t%ose 3%o +enefited from t%e transaction made +' t%e ostensi+le corporation. ma' +e +arred from den'in its corporate e?istence in a suit +rou %t a ainst t%e alle ed corporation" $n suc% case.uired in furt%erance of t%eir +usiness" $t 3ould %a-e +een inconcei-a+le for &im to in-ol-e %imself so muc% in +u'in t%e +oat +ut not in t%e ac.Narratives (Berne Guerrero) imputed onl' to C%ua and Oao. 3ill +e estopped from den'in its corporate capacit' in a suit a ainst it +' a t%ird person 3%o relied in ood fait% on suc% representation" $t cannot alle e lac: of personalit' to +e sued to e-ade its responsi+ilit' for a contract it entered into and +' -irtue of 3%ic% it recei-ed ad-anta es and +enefits" On t%e ot%er %and. an unincorporated association.uipment. and not to %im" %ssue$ )%et%er &im s%ould +e %eld Iointl' lia+le 3it% C%ua and Oao" &eld$ C%ua. financed +' a loan secured from Jesus &im 3%o 3as &im Ton &im2s +rot%er" $n t%eir Compromise A reement. +ut also to t%at of t%e nets and t%e floats" T%e fis%in nets and t%e floats. %e is t%e +rot%er of t%e creditor. lia+ilities and dama es incurred or arisin as a result t%ereof: 6ro-ided %o3e-er. Oao and &im %ad decided to en a e in a fis%in +usiness. as 3ell as t%e di-ision amon t%e t%ree of t%e +alance remainin after t%e pa'ment of t%eir loans. it s%all not +e allo3ed to use as a defense its lac: of corporate personalit'" One 3%o assumes an o+li ation to an ostensi+le corporation as suc%. ma' +e %eld lia+le for contracts t%e' impliedl' assented to or too: ad-anta e of" T%ere is no dispute t%at 60/$ is entitled to +e paid for t%e nets it sold" T%e onl' . fell under t%e term Mcommon fundM under Article 1848" T%e contri+ution to suc% fund need not +e cas% or fi?ed assetsL it could +e an intan i+le li:e credit or industr'" T%at t%e parties a reed t%at an' loss or profit from t%e sale and operation of t%e +oats 3ould +e di-ided e.uired from a loan in t%e name of t%e person t%e lender trusts. despite :no3led e of its le al defects. if t%e relations%ip amon t%e t%ree of t%em 3as merel' t%at of lessor=lessee. e-en if t%e ostensi+le corporate entit' is pro-en to +e le all' none?istent.uisition of t%e aforesaid e. 3%ic% represented itself to +e a corporation. 3ere o+-iousl' ac. cannot resist performance t%ereof on t%e round t%at t%ere 3as in fact no corporation"M T%us. a t%ird part' 3%o. t%e purc%ase and t%e repair of 3%ic% 3ere financed 3it% +orro3ed mone'. 3as not %is o3n propert' +ut an asset of t%e partners%ip" $t is not uncommon to re ister t%e properties ac. t%ou % re istered in %is name. and to di-ide e. a person actin or purportin to act on +e%alf of a corporation 3%ic% %as no -alid e?istence assumes suc% pri-ile es and o+li ations and +ecomes personall' lia+le for contracts entered into or for ot%er acts performed as suc% a ent"M T%e doctrine of corporation +' estoppel ma' appl' to t%e alle ed corporation and to a t%ird part'" $n t%e first instance. instead of partners" As to &imDs ar ument t%at under t%e doctrine of corporation +' estoppel. pro-es +e'ond ca-il t%at 0GB &ourdes. Jesus &im" $t is unreasona+le P indeed. nonet%eless treated it as a corporation and recei-ed +enefits from it. T%at 3%en an' suc% ostensi+le corporation is sued on an' transaction entered +' it as a corporation or on an' tort committed +' it as suc%. a part' ma' +e estopped from den'in its corporate e?istence" MT%e reason +e%ind t%is doctrine is o+-ious P an unincorporated association %as no personalit' and 3ould +e incompetent to act and appropriate for itself t%e po3er and attri+utes of a corporation as pro-ided +' la3L it cannot create a ents or confer aut%orit' on anot%er to act in its +e%alfL t%us. ( 14 ) .uall' amon t%em t%e e?cess or loss" T%ese +oats. 3it%out 3%ic% t%e +usiness could not %a-e proceeded" T%e sale of t%e +oats. it is a+surd P for petitioner to sell %is propert' to pa' a de+t %e did not incur. 3%o in t%is case is &im Ton &im %imself" After all. insistin t%at onl' t%ose 3%o dealt in t%e name of t%e ostensi+le Commercial *a3 ) Cor-oration *a3 200. possessed of all t%e ri %t and su+Iect to all t%e lia+ilities of a principal. 3%ic% t%e' started +' +u'in +oats 3ort% 63"39 million. lia+ilit' can +e imputed onl' to C%ua and Oao.uestion %ere is 3%et%er &im s%ould +e %eld Iointl' lia+le 3it% C%ua and Oao" &im contests suc% lia+ilit'. +ot% essential to fis%in . t%ose 3%o act or purport to act as its representati-es or a ents do so 3it%out aut%orit' and at t%eir o3n ris:" And as it is an elementar' principle of la3 t%at a person 3%o acts as an a ent 3it%out aut%orit' or 3it%out a principal is %imself re arded as t%e principal.uentl' re-ealed t%eir intention to pa' t%e loan 3it% t%e proceeds of t%e sale of t%e +oats.uall' amon t%em also s%o3s t%at t%e' %ad indeed formed a partners%ip" T%e partners%ip e?tended not onl' to t%e purc%ase of t%e +oat. and not to %imL Section 11 of t%e Corporation Code of t%e 6%ilippines pro-ides t%at MAll persons 3%o assume to act as a corporation :no3in it to +e 3it%out aut%orit' to do so s%all +e lia+le as eneral partners for all de+ts. t%e' su+se. :no3in an association to +e unincorporated.

A. A--elas [GR 111002 11 9cto+er 2000# First Division.9" $ETTS$ filed t%e petition 3it% t%e Supreme Court" %ssue [1#$ )%et%er t%e 6%ilippine 0oot+all 0ederation %as a corporate e?istence of its o3n" &eld [1#$ Bot% RA 3139 (t%e Re-ised C%arter of t%e 6%ilippine Amateur At%letic 0ederation) and 6* 45A reco ni>ed t%e Iuridical e?istence of national sports associations" T%is ma' +e leaned from t%e po3ers and functions ranted to t%ese associations (See Section 1A of RA 3139 and Section 7 of 6* 45A)" T%e po3ers and functions ranted to national sports associations indicate t%at t%ese entities ma' ac.453"55" On 18 *ecem+er 1. t%rou % t%e 6roIect /inton Ala'. 3it% costs a ainst Ea%n" Onl' Jenri Ea%n ele-ated t%e decision to t%e Court of Appeals" On 11 *ecem+er 1. vs. 3it% Iuridical capacit'" Jo3e-er. t%e $nternational E?press Tra-el and Tour Ser-ices. %o3e-er. Jenri Ea%n. %a-in reaped t%e +enefits of t%e contract entered into +' persons 3it% 3%om %e pre-iousl' %ad an e?istin relations%ip. suc% entit' must +e reco ni>ed +' t%e accreditin or ani>ation. Amateur At%letic 0ederation under RA 3139. t%rou % Ea%n a demand letter re.uire Iuridical personalit'.7. suc% does not automaticall' ta:e place +' t%e mere passa e of t%ese la3s" $t is a +asic postulate t%at +efore a corporation ma' ac. t%e appellate court rendered a decision re-ersin t%e trial court" $ETTS$ filed a motion for reconsideration and as an alternati-e pra'er pleaded t%at t%e 0ederation +e %eld lia+le for t%e unpaid o+li ation" T%e same 3as denied +' t%e appellate court in its resolution of 7 0e+ruar' 1.. $ETTS$ 3rote t%e 0ederation.. t%rou % its mana in director.uire Iuridical personalit'" Section 11 of RA 3139 and Section 7 of 6* 45A re. sell.. 3%et%er natural or artificial. 3%ile national sports associations ma' +e accorded corporate status.A"33" On 35 Octo+er 1. t%e 0ederation. Jenri Ea%n failed to su+stantiate" A cop' of t%e constitution and +'=la3s of t%e Commercial *a3 ) Cor-oration *a3 200.7. no furt%er pa'ments 3ere made despite repeated demands" T%is prompted $ETTS$ to file a ci-il case +efore t%e Re ional Trial Court of (anila" $ETTS$ sued Jenri Ea%n in %is personal capacit' and as 6resident of t%e 0ederation and impleaded t%e 0ederation as an alternati-e defendant" $ETTS$ sou %t to %old Jenri Ea%n lia+le for t%e unpaid +alance for t%e tic:ets purc%ased +' t%e 0ederation on t%e round t%at Jenri Ea%n alle edl' uaranteed t%e said o+li ation" Ea%n filed %is ans3er 3it% counterclaim.49A"73" 0or t%e tic:ets recei-ed. t%e 0ederation made t3o partial pa'ments. 3a unan (J): 4 concur Facts$ On 35 June 1. t%e State must i-e its consent eit%er in t%e form of a special la3 or a eneral ena+lin act" T%e 6%ilippine 0oot+all 0ederation did not come into e?istence upon t%e passa e of t%ese la3s" !o3%ere can it +e found in RA 3139 or 6* 45A an' pro-ision creatin t%e 6%ilippine 0oot+all 0ederation" T%ese la3s merel' reco ni>ed t%e e?istence of national sports associations and pro-ided t%e manner +' 3%ic% t%ese entities ma' ac. Jenri Ea%n issued a personal c%ec: in t%e amount of 695..7.uire t%at +efore an entit' ma' +e considered as a national sports association.. Court o.Narratives (Berne Guerrero) corporation s%ould +e %eld lia+le" Alt%ou % tec%nicall' it is true t%at &im did not directl' act on +e%alf of t%e corporationL %o3e-er. %e is deemed to +e part of said association and is co-ered +' t%e scope of t%e doctrine of corporation +' estoppel" 12 %nternational =6-ress 8ravel > 8our 5ervices %nc.7. +ot% in Septem+er of 1. and t%e *epartment of Oout% and Sports *e-elopment under 6* 45A" T%is fact of reco nition.555 as partial pa'ment for t%e outstandin +alance of t%e 0ederation" T%ereafter. t%e trial court rendered Iud ment and ruled in fa-or of $ETTS$ and declared Jenri Ea%n personall' lia+le for t%e unpaid o+li ation of t%e 0ederation" T%e complaint of $ETTS$ a ainst t%e 6%ilippine 0oot+all 0ederation and t%e counterclaims of Jenri Ea%n 3ere dismissed.uestin for t%e amount of 6149. 3%erein t%e former offered its ser-ices as a tra-el a enc' to t%e latter" T%e offer 3as accepted" $ETTS$ secured t%e airline tic:ets for t%e trips of t%e at%letes and officials of t%e 0ederation to t%e Sout% East Asian /ames in Euala &umpur as 3ell as -arious ot%er trips to t%e 6eopleDs Repu+lic of C%ina and Bris+ane" T%e total cost of t%e tic:ets amounted to 6AA. lease and encum+er propert' are acts 3%ic% ma' onl' +e done +' persons. in t%e total amount of 6184. 3%ile t%e 0ederation failed to file its ans3er and 3as declared in default +' t%e trial court" $n due course. ( 1.. t%e 6%ilippine. ) . t%rou % its president.A48"95" On A Octo+er 1. paid t%e amount of 631.uire a Iuridical personalit'" T%e po3er to purc%ase. 3rote a letter to t%e 6%ilippine 0oot+all 0ederation (0ederation)..7. $nc" ($ETTS$).7..

7A1.5 and contractorDs all=ris: insurance polic' in t%e amount of 64..138. as re. in a letter dated 11 *ecem+er 1. ( 10 ) .1.1 addressed to 0E(SCO 6resident Alfonso 6o.ue.. &ellosillo (J): 4 concur Facts$ $n 1.1" 0E(SCO also made arran ements 3it% its principal and started t%e 6@RE0OO*S proIect +' purc%asin t%e necessar' materials" 6@RE0OO*S on t%e ot%er %and returned 0E(SCODs BidderDs Bond in t%e amount of 61. and to remed' and curtail furt%er losses due to t%e series of po3er failures. 6ure 0oods Corporation decided to install t3o (1) 1955 E) enerators in its food processin plant in San Ro.uentl'. Jenri Ea%n is presumed to %a-e :no3n a+out t%e corporate e?istence or non=e?istence of t%e 0ederation" %ssue [4#$ )%et%er t%e appellate court properl' applied t%e doctrine of corporation +' estoppel" &eld [4#$ T%e Court cannot su+scri+e to t%e position ta:en +' t%e appellate court t%at e-en assumin t%at t%e 0ederation 3as defecti-el' incorporated. 0E(SCO protested t%e cancellation of t%e a3ard and sou %t a meetin 3it% 6@RE0OO*S" Jo3e-er. 0E(SCO sued +ot% Commercial *a3 ) Cor-oration *a3 200.Narratives (Berne Guerrero) 6%ilippine 0oot+all 0ederation does not pro-e t%at said 0ederation %as indeed +een reco ni>ed and accredited +' eit%er t%e 6%ilippine Amateur At%letic 0ederation or t%e *epartment of Oout% and Sports *e-elopment" Accordin l'. on 14 (arc% 1.3"55 3%ic% 6@RE0OO*S t%rou % its #ice 6resident Benedicto /" Tope ac:no3led ed in a letter dated 17 *ecem+er 1.1. 0ar East (ills Suppl' Corporation (0E(SCO).. 6@RE0OO*S alread' a3arded t%e proIect and entered into a contract 3it% JAR*$!E !E&&. $ETTS$ cannot den' t%e corporate e?istence of t%e 0ederation +ecause it %ad contracted and dealt 3it% t%e 0ederation in suc% a manner as to reco ni>e and in effect admit its e?istence" T%e doctrine of corporation +' estoppel is mista:enl' applied +' t%e appellate court to $ETTS$" T%e application of t%e doctrine applies to a t%ird part' onl' 3%en %e tries to escape lia+ilities on a contract from 3%ic% %e %as +enefited on t%e irrele-ant round of defecti-e incorporation" Jerein.1. propose sc%eme and specifications t%at 3ould +est suit t%e needs of 6@RE0OO*S" Out of t%e 7 prospecti-e +idders 3%o attended t%e pre=+iddin conference. 0E(SCO su+mitted t%e re. (onar: and Ad-ance 6o3er su+mitted +id proposals and a-e +id +onds e. 3%ic% incidentall' 3as not one of t%e +idders" 0E(SCO t%us 3rote 6@RE0OO*S to %onor its contract 3it% t%e former. at t%e %ei %t of t%e po3er crisis 3%ic% t%e countr' 3as t%en e?periencin .C Second Division. as re. 6@RE0OO*S confirmed t%e a3ard of t%e contract to 0E(SCO" $mmediatel'.555.ui-alent to 9H of t%eir respecti-e +ids.uired performance +ond in t%e amount of 61. namel'.uested" &ater.555"55. in a letter dated 11 *ecem+er 1. (ari:ina Cit'" Sometime in !o-em+er 1. 6@RE0OO*S t%rou % its Senior #ice 6resident Teodoro &" *ima'u a unilaterall' cancelled t%e a3ard as Msi nificant factors 3ere unco-ered and +rou %t to (t%eir) attention 3%ic% dictate (t%e) cancellation and 3arrant a total re-ie3 and re=+id of (t%e) proIect"M Conse.uired" T%ereafter. Court o. A--eals [GR 12/000 11 !une 2000# also 6urefoods Corporation -s" Court of Appeals B/R 11754. $nc" (JAR*$!E)...178". a di-ision of Jardine *a-ies.3. onl' 3 +idders. t%e 6%ilippine 0oot+all 0ederation is not a national sports association 3it%in t%e pur-ie3 of t%e aforementioned la3s and does not %a-e corporate e?istence of its o3n" %ssue [2#$ )%et%er Ea%n s%ould +e made personall' lia+le for t%e unpaid o+li ations of t%e 6%ilippine 0oot+all 0ederation" &eld [2#$ Jenr' Ea%n s%ould +e %eld lia+le for t%e unpaid o+li ations of t%e unincorporated 6%ilippine 0oot+all 0ederation" $t is a settled principal in corporation la3 t%at an' person actin or purportin to act on +e%alf of a corporation 3%ic% %as no -alid e?istence assumes suc% pri-ile es and +ecomes personall' lia+le for contract entered into or for ot%er acts performed as suc% a ent" As president of t%e 0ederation.. +efore t%e matter could +e resol-ed. %o3e-er. and to JAR*$!E to cease and desist from deli-erin and installin t%e 1 enerators at 6@RE0OO*S" $ts demand letters un%eeded.1 a +iddin for t%e suppl' and installation of t%e enerators 3as %eld" Se-eral suppliers and dealers 3ere in-ited to attend a pre=+iddin conference to discuss t%e conditions. $ETTS$ is not tr'in to escape lia+ilit' from t%e contract +ut rat%er is t%e one claimin from t%e contract" 14 !ardine 2avies vs.

Ale re<)" E?posT is aired e-er' mornin o-er *FRC=A( 3%ic% is o3ned +' 0ilipinas Broadcastin !et3or:. 0E(SCO %as sufficientl' s%o3n t%at its reputation 3as tarnis%ed after it immediatel' ordered e.8 t%e Court of Appeals denied for lac: of merit t%e separate motions for reconsideration filed +' 6@RE0OO*S and JAR*$!E" Jence.555"55 to 61.555. A(o 'edical and =ducational Center)Bicol C. t%ere is no s%o3in 3%atsoe-er t%at JAR*$!E induced 6@RE0OO*S" T%e similarit' in t%e desi n su+mitted to 6@RE0OO*S +' +ot% JAR*$!E and 0E(SCO. t%e Al+a' municipalities and Commercial *a3 ) Cor-oration *a3 200.555"55" On t%e ot%er %and.355. t%e a3ard of e?emplar' dama es +' 3a' of e?ample for t%e pu+lic ood is e?cessi-e and s%ould +e reduced to 6155. 1 petitions for re-ie3 filed 3ere +' 6@RE0OO*S and JAR*$!E 3%ic% 3ere su+se.. JAR*$!E 3as ordered to pa' 0E(SCO 61. 3%ile 6@RE0OO*S appealed t%e 17 Jul' 1..ui-alent to 15H of t%e total amount dueL and.A *ecision of t%e trial court" $t also re-ersed t%e 18 June 1.uentl' consolidated" %ssue$ )%et%er 0E(SCO is entitled to an a3ard for moral dama es" &eld$ B' t%e unilateral cancellation of t%e contract.Narratives (Berne Guerrero) 6@RE0OO*S and JAR*$!E: 6@RE0OO*S for rene in on its contract.A Resolution of t%e lo3er court and ordered JAR*$!E to pa' 0E(SCO dama es for inducin 6@RE0OO*S to -iolate t%e latterDs contract 3it% 0E(SCO" As suc%. JAR*$!E filed a *emurrer to E-idence" On 18 June 1.ui-alent.555"55 representin t%e -alue of en ineerin ser-ices it renderedL (+) to pa' 0E(SCO t%e sum of @SS1A.555"55 as e?emplar' dama es as 3ell as 15H of t%e total amount due as attorne'Ds fees" On 31 Januar' 1.A *ecision of t%e same court 3%ic% ordered it to pa' 0E(SCO" On 1A Au ust 1. considerin t%at it 3ould +e impossi+le to compel 6@RE0OO*S to %onor. 'edicine (A'=C)BCC') [GR 141114 17 !anuar" 200.E?posT< is a radio documentar' pro ram %osted +' Carmelo U(el2 Rima (.55. perform and fulfill its contractual o+li ations in -ie3 of 6@RE0OO*Ds contract 3it% JAR*$!E and notin t%at construction %ad alread' started t%ereonL (c) to pa' attorne'Ds fees in an amount e. 6@RE0OO*S 3as also directed to pa' 0E(SCO 61.555"55 for moral dama es" $n addition. Branc% 47.555. t%ere is no specific e-idence on record to support suc% perception" &i:e3ise. vs.555.555"55 or its peso e.A t%e Re ional Trial Court of 6asi .... onl' to +e canceled later" T%e Court t%us sustain t%e appellate courtDs a3ard of moral dama es" T%e Court %o3e-er reduced t%e a3ard from 61.555"55 representin contractorDs mar:=up on installation 3or:.uipment from its suppliers on account of t%e ur enc' of t%e proIect..Rima<) and Jermo enes UJun2 Ale re (.0B!$<)" .A t%e trial court rendered a decision orderin 6@RE0OO*S: (a) to indemnif' 0E(SCO t%e sum of 61.uotation +' JAR*$!E are insufficient to s%o3 t%at JAR*$!E indeed induced 6@RE0OO*S to -iolate its contract 3it% 0E(SCO" 14 Fili-inas Broadcastin( Net3or< %nc. 6@RE 0OO*S %as acted 3it% +ad fait% and t%is 3as furt%er a ra-ated +' t%e su+se.555. and JAR*$!E for its un3arranted interference and inducement" Trial ensued" After 0E(SCO presented its e-idence.555"55 as moral dama es and 61..E?posT< is %eard o-er &e a>pi Cit'.555.A Resolution of t%e trial court 3%ic% ranted t%e *emurrer to E-idence filed +' JAR*$!E resultin in t%e dismissal of t%e complaint a ainst it. ( 17 ) . ranted JAR*$!EDs *emurrer to E-idence" On 17 Jul' 1.# Car io (J): 4 concur Facts$ .ristian Colle(e o.4 t%e Court of Appeals affirmed in toto t%e 17 Jul' 1. $nc" (..555"55. and 6. (d) to pa' t%e costs" T%e trial court dismissed t%e counterclaim filed +' 6@RE0OO*S for lac: of factual and le al +asis" Bot% 0E(SCO and 6@RE0OO*S appealed to t%e Court of Appeals" 0E(SCO appealed t%e 18 June 1. and t%e tender of a lo3er . as moral dama es are ne-er intended to enric% t%e recipient" &i:e3ise. t%e appellate court erred in orderin JAR*$!E to pa' moral dama es to 0E(SCO as it supposedl' induced 6@RE0OO*S to -iolate t%e contract 3it% 0E(SCO" )%ile it ma' seem t%at 6@RE0OO*S and JAR*$!E conni-ed to decei-e 0E(SCO.uent in:in of a contract +et3een 6urefoods and Jardine" $t is -er' e-ident t%at 6urefoods t%ou %t t%at +' t%e e?pedient means of merel' 3ritin a letter 3ould automaticall' cancel or nullif' t%e e?istin contract entered into +' +ot% parties after a process of +iddin " T%is is a fla rant -iolation of t%e e?press pro-isions of t%e la3 and is contrar' to fair and Iust dealin s to 3%ic% e-er' man is due" T%e Court %as a3arded in t%e past moral dama es to a corporation 3%ose reputation %as +een +esmirc%ed" Jerein.

Att'" Edmundo Cea. ( 1/ ) . t%e trial court rendered a *ecision findin 0B!$ and Ale re lia+le for li+el e?cept Rima" T%e trial court %eld t%at t%e +roadcasts are li+elous per se" T%e trial court reIected t%e +roadcasters2 claim t%at t%eir utterances 3ere t%e result of strai %t reportin +ecause it %ad no factual +asis" T%e +roadcasters did not e-en -erif' t%eir reports +efore airin t%em to s%o3 ood fait%" $n %oldin 0B!$ lia+le for li+el. A(EC is entitled to moral dama es" Jo3e-er. B3%ic% isC an institution im+ued 3it% pu+lic interest"< T%ereafter. and of t%e press"< Bot% parties. t%e trial court ruled t%at Rima2s onl' participation 3as 3%en %e a reed 3it% Ale re2s e?posT" T%e trial court found Rima2s statement 3it%in t%e . namel'.uentl'.1. 0B!$ re. ma' also +e a round for t%e a3ard of moral dama es< is an o+iter dictum" !e-ert%eless. t%e Court2s statement in (am+ulao t%at .uires all +roadcasters to pass t%e Eapisanan n m a Brod:aster sa 6ilipinas (.. t%e trial court found t%at 0B!$ failed to e?ercise dili ence in t%e selection and super-ision of its emplo'ees" $n a+sol-in Rima from t%e c%ar e. as *ean of A(EC2s Colle e of (edicine. if +esmirc%ed. 0B!$. filed a complaint for dama es a ainst 0B!$. mental an uis% or moral s%oc:" T%e Court of Appeals cites (am+ulao &um+er Co" -" 6!B. fairness and o+Iecti-it' in t%eir +roadcasts and to refrain from usin li+elous and indecent lan ua e"< (oreo-er.A o<). 3%ere t%e +roadcast is li+elous per se. on one %and. unli:e a natural person. trial ensued" *urin t%e presentation of t%e e-idence for t%e defense.5" T%e complaint furt%er alle ed t%at A(EC is a reputa+le learnin institution" )it% t%e supposed e?posTs. particularl' Rima and Ale re" On 17 June 1. a Iuridical person suc% as a corporation can -alidl' complain for li+el or an' ot%er form of defamation and claim for moral dama es" (oreo-er. Rima and Ale re claimed t%at t%e' 3ere plainl' impelled +' a sense of pu+lic dut' to report t%e . 0B!$. t%e Court found t%e a3ard of 6355. colla+oratin counsel of Att'" &o>ares. t%rou % Att'" Ro>il &o>ares. t%e +roadcasts are li+elous per se" T%us.o+ser-e trut%. t%e la3 implies dama es" $n suc% a case. Rima and Ale re. 0B!$. oin s=on in A(EC. A(EC %as not suffered Commercial *a3 ) Cor-oration *a3 200. and A(EC and A o.Narratives (Berne Guerrero) ot%er Bicol areas" $n t%e mornin of 1A and 19 *ecem+er 1. appealed t%e decision to t%e Court of Appeals" T%e Court of Appeals affirmed t%e trial court2s Iud ment 3it% modification" T%e appellate court made Rima solidaril' lia+le 3it% 0B!$ and Ale re" T%e appellate court denied A o2s claim for dama es and attorne'2s fees +ecause t%e +roadcasts 3ere directed a ainst A(EC. e?pression.. of t%e Ci-il Code" T%is pro-ision e?pressl' aut%ori>es t%e reco-er' of moral dama es in cases of li+el..A(EC<) and its administrators" Claimin t%at t%e +roadcasts 3ere defamator'. and not a ainst %er" 0B!$. Rima and Ale re on 18 0e+ruar' 1. 0B!$ filed a separate Ans3er claimin t%at it e?ercised due dili ence in t%e selection and super-ision of Rima and Ale re" 0B!$ claimed t%at +efore %irin a +roadcaster. Rima and Ale re . Rima and Ale re filed a motion for reconsideration 3%ic% t%e Court of Appeals denied in its 14 Januar' 1555 Resolution" Jence. teac%ers and parents a ainst A o (edical and Educational Center=Bicol C%ristian Colle e of (edicine (. t%e +roadcaster s%ould (1) file an applicationL (1) +e inter-ie3edL and (3) under o an apprentices%ip and trainin pro ram after passin t%e inter-ie3" 0B!$ li:e3ise claimed t%at it al3a's reminds its +roadcasters to .ualif' 3%et%er t%e plaintiff is a natural or Iuridical person" T%erefore. 0B!$ filed t%e petition for re-ie3" %ssue$ )%et%er A(EC is entitled to moral dama es" &eld$ A Iuridical person is enerall' not entitled to moral dama es +ecause. A(EC and An elita A o (. slander or an' ot%er form of defamation" Article 111. serious an?iet'. it cannot e?perience p%'sical sufferin or suc% sentiments as 3ounded feelin s. Rima and Ale re e?posed -arious alle ed complaints from students.uired to introduce e-idence of actual dama es as a condition precedent to t%e reco-er' of some dama es" $n t%is case.a corporation ma' %a-e a ood reputation 3%ic%.5. and as suc%..EB6<) accreditation test and to secure a EB6 permit" On 1A *ecem+er 1. filed an Ans3er alle in t%at t%e +roadcasts a ainst A(EC 3ere fair and true" 0B!$. et al" to Iustif' t%e a3ard of moral dama es" Jo3e-er. Rima and Ale re.+ounds of freedom of speec%. A(EC2s claim for moral dama es falls under item 8 of Article 111.7.(8) does not .555 moral dama es unreasona+le" T%e record s%o3s t%at e-en t%ou % t%e +roadcasts 3ere li+elous per se. on t%e ot%er. filed a (otion to *ismiss on 0B!$2s +e%alf" T%e trial court denied t%e motion to dismiss" Conse. e-idence of an %onest mista:e or t%e 3ant of c%aracter or reputation of t%e part' li+eled oes onl' in miti ation of dama es" !eit%er in suc% a case is t%e plaintiff re. destro'ed plaintiffs2 (A(EC and A o) reputation"< A(EC and A o included 0B!$ as defendant for alle edl' failin to e?ercise due dili ence in t%e selection and super-ision of its emplo'ees.transmitted malicious imputations.

Narratives (Berne Guerrero)

an' su+stantial or material dama e to its reputation" T%erefore, t%e Court reduced t%e a3ard of moral dama es from 6355,555 to 6195,555" 1. *"ceum o, t;e :;ili--ines vs. Court o, A--eals [GR 101/17 . 'arc; 1114# Third Division, Feliciano (J): 4 concur, 1 on ter#inal leave Facts$ &'ceum of t%e 6%ilippines $nc" %ad sometime +efore commenced in t%e SEC a proceedin (SEC=Case !o" 11A1) a ainst t%e &'ceum of Ba uio, $nc" to re,uire it to c%an e its corporate name and to adopt anot%er name not Msimilar BtoC or identicalM 3it% t%at of petitioner" $n an Order dated 15 April 1.88, Associate Commissioner Julio Sulit %eld t%at t%e corporate name of petitioner and t%at of t%e &'ceum of Ba uio, $nc" 3ere su+stantiall' identical +ecause of t%e presence of a MdominantM 3ord, i"e", M&'ceum,M t%e name of t%e eo rap%ical location of t%e campus +ein t%e onl' 3ord 3%ic% distin uis%ed one from t%e ot%er corporate name" T%e SEC also noted t%at &'ceum of t%e 6%ilippines $nc" %ad re istered as a corporation a%ead of t%e &'ceum of Ba uio, $nc" in point of time, and ordered t%e latter to c%an e its name to anot%er name Mnot similar or identical B3it%CM t%e names of pre-iousl' re istered entities" T%e &'ceum of Ba uio, $nc" assailed t%e Order of t%e SEC +efore t%e Supreme Court (/R &=A49.9)" $n a (inute Resolution dated 1A Septem+er 1.88, t%e Court denied t%e 6etition for Re-ie3 for lac: of merit" Entr' of Iud ment in t%at case 3as made on 11 Octo+er 1.88" Armed 3it% t%e Resolution of t%e Supreme Court, t%e &'ceum of t%e 6%ilippines t%en 3rote all t%e educational institutions it could find usin t%e 3ord M&'ceumM as part of t%eir corporate name, and ad-ised t%em to discontinue suc% use of M&'ceum"M )%en, 3it% t%e passa e of time, it +ecame clear t%at t%is recourse %ad failed, and on 1A 0e+ruar' 1.7A, &'ceum of t%e 6%ilippines instituted +efore t%e SEC SEC=Case 198. to enforce 3%at &'ceum of t%e 6%ilippines claims as its proprietar' ri %t to t%e 3ord M&'ceum"M T%e SEC %earin officer rendered a decision sustainin petitionerDs claim to an e?clusi-e ri %t to use t%e 3ord M&'ceum"M T%e %earin officer relied upon t%e SEC rulin in t%e &'ceum of Ba uio, $nc" case (SEC=Case 11A1) and %eld t%at t%e 3ord M&'ceumM 3as capa+le of appropriation and t%at petitioner %ad ac,uired an enforcea+le e?clusi-e ri %t to t%e use of t%at 3ord" On appeal, %o3e-er, +' &'ceum Of Aparri, &'ceum Of Ca+a an, &'ceum Of Camalaniu an, $nc", &'ceum Of &allo, $nc", &'ceum Of Tuao, $nc", Bu%i &'ceum, Central &'ceum Of Catanduanes, &'ceum Of Sout%ern 6%ilippines, &'ceum Of Eastern (indanao, $nc" and )estern 6an asinan &'ceum, $nc",, 3%ic% are also educational institutions, to t%e SEC En Banc, t%e decision of t%e %earin officer 3as re-ersed and set aside" T%e SEC En Banc did not consider t%e 3ord M&'ceumM to %a-e +ecome so identified 3it% &'ceum of t%e 6%ilippines as to render use t%ereof +' ot%er institutions as producti-e of confusion a+out t%e identit' of t%e sc%ools concerned in t%e mind of t%e eneral pu+lic" @nli:e its %earin officer, t%e SEC En Banc %eld t%at t%e attac%in of eo rap%ical names to t%e 3ord M&'ceumM ser-ed sufficientl' to distin uis% t%e sc%ools from one anot%er, especiall' in -ie3 of t%e fact t%at t%e campuses of &'ceum of t%e 6%ilippines and t%ose of t%e ot%er &'ceums 3ere p%'sicall' ,uite remote from eac% ot%er" &'ceum of t%e 6%ilippines t%en 3ent on appeal to t%e Court of Appeals" $n its *ecision dated 17 June 1..1, %o3e-er, t%e Court of Appeals affirmed t%e ,uestioned Orders of t%e SEC En Banc" &'ceum of t%e 6%ilippines filed a motion for reconsideration, 3it%out success" &'ceum of t%e 6%ilippines filed t%e petition for re-ie3" %ssue [1#$ )%et%er t%e names of t%e contendin &'ceum sc%ools are confusin l' similar" &eld [1#$ T%e Articles of $ncorporation of a corporation must, amon ot%er t%in s, set out t%e name of t%e corporation" Section 17 of t%e Corporation Code esta+lis%es a restricti-e rule insofar as corporate names are concerned" $t pro-ides t%at M!o corporate name ma' +e allo3ed +' t%e Securities an E?c%an e Commission if t%e proposed name is identical or decepti-el' or confusin l' similar to t%at of an' e?istin corporation or to an' ot%er name alread' protected +' la3 or is patentl' decepti-e, confusin or contrar' to e?istin la3s" )%en a c%an e in t%e corporate name is appro-ed, t%e Commission s%all issue an amended certificate of incorporation under t%e amended name"M T%e polic' underl'in t%e pro%i+ition in Section 17 a ainst t%e
Commercial *a3 ) Cor-oration *a3 200. ( 11 )

Narratives (Berne Guerrero)

re istration of a corporate name 3%ic% is Midentical or decepti-el' or confusin l' similarM to t%at of an' e?istin corporation or 3%ic% is Mpatentl' decepti-eM or Mpatentl' confusin M or Mcontrar' to e?istin la3s,M is t%e a-oidance of fraud upon t%e pu+lic 3%ic% 3ould %a-e occasion to deal 3it% t%e entit' concerned, t%e e-asion of le al o+li ations and duties, and t%e reduction of difficulties of administration and super-ision o-er corporations" Jerein, t%e Court does not consider t%at t%e corporate names of t%e academic institutions are Midentical 3it%, or decepti-el' or confusin l' similarM to t%at of &'ceum of t%e 6%ilippines $nc"" True enou %, t%e corporate names of t%e ot%er sc%ools (defendant institutions) entities all carr' t%e 3ord M&'ceumM +ut confusion and deception are effecti-el' precluded +' t%e appendin of eo rap%ic names to t%e 3ord M&'ceum"M T%us, t%e M&'ceum of AparriM cannot +e mista:en +' t%e eneral pu+lic for t%e &'ceum of t%e 6%ilippines, or t%at t%e M&'ceum of Camalaniu anM 3ould +e confused 3it% t%e &'ceum of t%e 6%ilippines" 0urt%er, et'molo icall', t%e 3ord M&'ceumM is t%e &atin 3ord for t%e /ree: l':eion 3%ic% in turn referred to a localit' on t%e ri-er $lissius in ancient At%ens Mcomprisin an enclosure dedicated to Apollo and adorned 3it% fountains and +uildin s erected +' 6isistratus, 6ericles and &'cur us fre,uented +' t%e 'out% for e?ercise and +' t%e p%ilosop%er Aristotle and %is follo3ers for teac%in "M $n time, t%e 3ord M&'ceumM +ecame associated 3it% sc%ools and ot%er institutions pro-idin pu+lic lectures and concerts and pu+lic discussions" T%us toda', t%e 3ord M&'ceumM enerall' refers to a sc%ool or an institution of learnin " Since M&'ceumM or M&iceoM denotes a sc%ool or institution of learnin , it is not unnatural to use t%is 3ord to desi nate an entit' 3%ic% is or ani>ed and operatin as an educational institution" To determine 3%et%er a i-en corporate name is MidenticalM or Mconfusin l' or decepti-el' similarM 3it% anot%er entit'Ds corporate name, it is not enou % to ascertain t%e presence of M&'ceumM or M&iceoM in +ot% names" One must e-aluate corporate names in t%eir entiret' and 3%en t%e name of &'ceum of t%e 6%ilippines is Iu?taposed 3it% t%e names of pri-ate respondents, t%e' are not reasona+l' re arded as MidenticalM or Mconfusin l' or decepti-el' similarM 3it% eac% ot%er" %ssue [2#$ )%et%er t%e use +' t%e &'ceum of t%e 6%ilippines of M&'ceumM in its corporate name %as +een for suc% len t% of time and 3it% suc% e?clusi-it' as to %a-e +ecome associated or identified 3it% t%e petitioner institution in t%e mind of t%e eneral pu+lic (or at least t%at portion of t%e eneral pu+lic 3%ic% %as to do 3it% sc%ools)" &eld [2#$ T%e num+er alone of t%e pri-ate respondents in t%e present case su ests stron l' t%at t%e &'ceum of t%e 6%ilippinesD use of t%e 3ord M&'ceumM %as not +een attended 3it% t%e e?clusi-it' essential for applica+ilit' of t%e doctrine of secondar' meanin " $t ma' +e noted also t%at at least one of t%e pri-ate respondents, i"e", t%e )estern 6an asinan &'ceum, $nc", used t%e term M&'ceumM 18 'ears +efore &'ceum of t%e 6%ilippines re istered its o3n corporate name 3it% t%e SEC and +e an usin t%e 3ord M&'ceum"M $t follo3s t%at if an' institution %ad ac,uired an e?clusi-e ri %t to t%e 3ord M&'ceum,M t%at institution 3ould %a-e +een t%e )estern 6an asinan &'ceum, $nc" rat%er t%an &'ceum of t%e 6%ilippines" Jence, &'ceum of t%e 6%ilippines is not entitled to a le all' enforcea+le e?clusi-e ri %t to use t%e 3ord M&'ceumM in its corporate name and t%at ot%er institutions ma' use M&'ceumM as part of t%eir corporate names" 10 An( m(a ?aani+ sa %(lesia n( 2ios ?a" ?risto &esus &5? sa Bansan( :ili-inas %nc. vs. %(lesia n( 2ios <a" Cristo !esus &ali(i at 5u;a" n( ?atoto;anan [GR 147.12 12 2ecem+er 2001# First Division, 4nares5Santia'o (J): 3 concur, 1 on o00icial leave Facts$ T%e $ lesia n *ios Ea' Cristo Jesus, Jali i at Su%a' n Eatoto%anan ($*CJ=JSEL C%urc% of /od in C%rist Jesus, t%e 6illar and /round of Trut%), is a non=stoc: reli ious societ' or corporation re istered in 1.34" Sometime in 1.84, one Eliseo Soriano and se-eral ot%er mem+ers of said corporation disassociated t%emsel-es from t%e latter and succeeded in re isterin on 35 (arc% 1.88 a ne3 non=stoc: reli ious societ' or corporation, named $ lesia n *ios Ea' Eristo Jesus, Jali i at Sali an n Eatoto%anan ($*EJ=JSE)" On 14 Jul' 1.8., $*CJ=JSE filed 3it% t%e SEC a petition to compel $*EJ=JSE to c%an e its corporate name (SEC Case 188A)" On A (a' 1.77, t%e SEC rendered Iud ment in fa-or of $*CJ=JSE, orderin $*EJ=JSE to c%an e its corporate name to anot%er name t%at is not similar or identical to an' name alread' used +' a corporation, partners%ip or association re istered 3it% t%e Commission" !o appeal 3as ta:en from said
Commercial *a3 ) Cor-oration *a3 200. ( 20 )

Narratives (Berne Guerrero)

decision" *urin t%e pendenc' of SEC Case 188A, Soriano, et al", caused t%e re istration on 19 April 1.75 of An ( a Eaani+ sa $ lesia n *ios Ea' Eristo Jesus, J"S"E, sa Bansan 6ilipinas (AEB$*EJ=JSECB6)" T%e acron'm MJ"S"E"M stands for Jali i at Sali an n Eatoto%anan" On 1 (arc% 1..A, $*CJ=JSE filed +efore t%e SEC a petition (SEC Case 53=.A=A85A), pra'in t%at AEB$*EJ=JSECB6 +e compelled to c%an e its corporate name and +e +arred from usin t%e same or similar name on t%e round t%at t%e same causes confusion amon t%eir mem+ers as 3ell as t%e pu+lic" E$*EJ=JSE=B6 filed a motion to dismiss on t%e round of lac: of cause of action" T%e motion to dismiss 3as denied" T%ereafter, for failure to file an ans3er, AEB$*EJ=JSECB6 3as declared in default and $*CJ=JSE 3as allo3ed to present its e-idence e? parte" On 15 !o-em+er 1..9, t%e SEC rendered a decision orderin AEB$*EJ=JSECB6 to c%an e its corporate name" AEB$*EJ=JSECB6 appealed to t%e SEC En Banc (SEC=AC 93.)" $n a decision dated A (arc% 1..4, t%e SEC En Banc affirmed t%e a+o-e decision, upon a findin t%at AEB$*EJ=JSECB6Ds corporate name 3as identical or confusin l' or decepti-el' similar to t%at of $*CJ=JSEDs corporate name" AEB$*EJ=JSECB6 filed a petition for re-ie3 3it% t%e Court of Appeals" On 8 Octo+er 1..8, t%e Court of Appeals rendered t%e decision affirmin t%e decision of t%e SEC En Banc" AEB$*EJ=JSECB6Ds motion for reconsideration 3as denied +' t%e Court of Appeals on 14 0e+ruar' 1..1" AEB$*EJ=JSECB6 filed t%e petition for re-ie3" %ssue [1#$ )%et%er t%e corporate names of AEB$*EJ=JSECB6 and $*CJ=JSE are confusin l' similar" &eld [1#$ T%e SEC %as t%e aut%orit' to de=re ister at all times and under all circumstances corporate names 3%ic% in its estimation are li:el' to spa3n confusion" $t is t%e dut' of t%e SEC to pre-ent confusion in t%e use of corporate names not onl' for t%e protection of t%e corporations in-ol-ed +ut more so for t%e protection of t%e pu+lic" Section 17 of t%e Corporation Code pro-ides t%at M!o corporate name ma' +e allo3ed +' t%e Securities and E?c%an e Commission if t%e proposed name is identical or decepti-el' or confusin l' similar to t%at of an' e?istin corporation or to an' ot%er name alread' protected +' la3 or is patentl' decepti-e, confusin or is contrar' to e?istin la3s" )%en a c%an e in t%e corporate name is appro-ed, t%e Commission s%all issue an amended certificate of incorporation under t%e amended name"M Corollar' t%ereto, t%e pertinent portion of t%e SEC /uidelines on Corporate !ames states t%at M(d) $f t%e proposed name contains a 3ord similar to a 3ord alread' used as part of t%e firm name or st'le of a re istered compan', t%e proposed name must contain t3o ot%er 3ords different from t%e name of t%e compan' alread' re isteredL 6arties or ani>in a corporation must c%oose a name at t%eir perilL and t%e use of a name similar to one adopted +' anot%er corporation, 3%et%er a +usiness or a nonprofit or ani>ation, if misleadin or li:el' to inIure in t%e e?ercise of its corporate functions, re ardless of intent, ma' +e pre-ented +' t%e corporation %a-in a prior ri %t, +' a suit for inIunction a ainst t%e ne3 corporation to pre-ent t%e use of t%e name" Jerein, t%e additional 3ords MAn ( a Eaani+ M and MSa Bansan 6ilipinas, $nc"M in AEB$*EJ=JSECB6Ds name are merel' descripti-e of and also referrin to t%e mem+ers, or :aani+, of $*CJ=JSE 3%o are li:e3ise residin in t%e 6%ilippines" T%ese 3ords can %ardl' ser-e as an effecti-e differentiatin medium necessar' to a-oid confusion or difficult' in distin uis%in AEB$*EJ=JSECB6 from $*CJ=JSE" T%is is especiall' so, since +ot% AEB$*EJ= JSECB6 and $*CJ=JSE are usin t%e same acron'm P J"S"E"L not to mention t%e fact t%at +ot% are espousin reli ious +eliefs and operatin in t%e same place" 6arent%eticall', it is 3ell to mention t%at t%e acron'm J"S"E" used +' AEB$*EJ=JSECB6 stands for MJali i at Sali an n Eatoto%anan"M T%en, too, t%e records re-eal t%at in %oldin out t%eir corporate name to t%e pu+lic, AEB$*EJ=JSECB6 %i %li %ts t%e dominant 3ords M$/&ES$A !/ *$OS EAO ER$STO JES@S, JA&$/$ AT SA&$/A! !/ EATOTOJA!A!,M 3%ic% is stri:in l' similar to $*CJ=JSEDs corporate name, t%us ma:in it e-en more e-ident t%at t%e additional 3ords MAn ( a Eaani+M and MSa Bansan 6ilipinas, $nc"M, are merel' descripti-e of and pertainin to t%e mem+ers of $*CJ=JSE" Si nificantl', t%e onl' difference +et3een t%e corporate names of AEB$*EJ=JSECB6 and $*CJ=JSE are t%e 3ords SA&$/A! and S@JAO" T%ese 3ords are s'non'mous P +ot% mean round, foundation or support" Jence, t%is case is on all fours 3it% @ni-ersal (ills Corporation -" @ni-ersal Te?tile (ills, $nc", 11 3%ere t%e Court ruled t%at t%e corporate names @ni-ersal (ills Corporation and @ni-ersal Te?tile (ills, $nc", are undisputa+l' so similar t%at e-en under t%e
Commercial *a3 ) Cor-oration *a3 200. ( 21 )

confusin or contrar' to e?istin la3sM" T%e polic' +e%ind t%e fore oin pro%i+ition is to a-oid fraud upon t%e pu+lic t%at 3ill %a-e occasion to deal 3it% t%e entit' concerned.e :.. and rulin t%at t%e corporate names of $RC6 and RC6 are confusin l' or decepti-el' similar. t. sellin . e?cept paints and >incs" Bot% companies are t%e onl' local suppliers of monolit%ic unnin mi?" *isco-erin t%at $RC6 3as usin suc% corporate name. is of no conse. and it %as aut%orit' to de=re ister at all times and under all circumstances corporate names 3%ic% in its estimation are li:el' to enerate confusion" Section 17 of t%e Corporation Code e?pressl' pro%i+its t%e use of a corporate name 3%ic% is Midentical or decepti-el' or confusin l' similar to t%at of an' e?istin corporation or to an' ot%er name alread' protected +' la3 or is patentl' decepti-e. and t%e reduction of difficulties of administration and super-ision o-er corporation" 6ursuant t%ereto. RC6 filed on 1A April 1. as amended" $t is t%e SECDs dut' to pre-ent confusion in t%e use of corporate names not onl' for t%e protection of t%e corporations in-ol-ed +ut more so for t%e protection of t%e pu+lic. Austria5Martinez (J): 3 concur.79 to c%an e its corporate name to M$ndustrial Refractories Corp" of t%e 6%ilippinesM" $t is en a ed in t%e +usiness of manufacturin all :inds of ceramics and ot%er products. C%urc% of /od Jesus C%rist t%e Son of /od t%e Jead.3" $RC6 appealed to t%e SEC En Banc. ori inall' under t%e name MS'nclaire (anufacturin CorporationM" $t amended its Articles of $ncorporation on 13 Au ust 1. t%e e-asion of le al o+li ations and duties. Court o.. e?portin and ot%er3ise dealin in an' and all refractor' +ric:s. ar uin t%at it does not %a-e an' Iurisdiction o-er t%e case.ili--ines vs.ractories Cor-oration o.88. it re istered its corporate and +usiness name 3it% t%e Bureau of *omestic Trade" $ndustrial Refractories Corp" of t%e 6%ilippines ($RC6) on t%e ot%er %and. t%e Re-ised /uidelines in t%e Appro-al of Corporate and Commercial *a3 ) Cor-oration *a3 200. and t%at RC6 %as no ri %t to t%e e?clusi-e use of its corporate name as it is composed of eneric or common 3ords" $n its *ecision dated 13 Jul' 1. t%e SEC En Banc modified t%e appealed decision in t%at $RC6 3as ordered to delete or drop from its corporate name onl' t%e 3ord MRefractoriesM" $RC6 ele-ated t%e decision of t%e SEC En Banc t%rou % a petition for re-ie3 on certiorari to t%e Court of Appeals 3%ic% t%en rendered t%e decision.51=A. 3as incorporated on 13 Au ust 1. and t%at RC6 %as esta+lis%ed its prior ri %t to use t%e 3ord MRefractoriesM as its corporate name" T%e appellate court also found t%at t%e petition 3as filed +e'ond t%e re lementar' period" $RC6 filed t%e petition for re-ie3 on certiorari" %ssue [1#$ )%et%er t%e corporate names of $RC6 and RC6 are confusin l' similar" &eld [1#$ T%e Iurisdiction of t%e SEC is not merel' confined to t%e adIudicati-e functions pro-ided in Section 9 of 6* .8. and ot%er similar names.77 3it% t%e Securities and E?c%an e Commission (SEC) a petition to compel $RC6 to c%an e its corporate name on t%e round t%at its corporate name is confusin l' similar 3it% t%at of RC6Ds suc% t%at t%e pu+lic ma' +e confused or decei-ed into +elie-in t%at t%e' are one and t%e same corporation" T%e SEC decided in fa-or of RC6 in its Iud ment of 13 Jul' 1. 1 on o00icial leave Facts$ Refractories Corporation of t%e 6%ilippines (RC6) is a corporation dul' or ani>ed on 13 Octo+er 1. producin .84 for t%e purpose of en a in in t%e +usiness of manufacturin .uence" $t does not aut%ori>e t%e use +' AEB$*EJ=JSECB6 of t%e essential and distin uis%in feature of $*CJ=JSEDs re istered and protected corporate name" 17 %ndustrial Re. den'in to i-e due course t%e petition filed +' $RC6 +' up%oldin t%e Iurisdiction of t%e SEC o-er t%e case. $nc".Narratives (Berne Guerrero) test of Mreasona+le care and o+ser-ationM confusion ma' arise" %ssue [2#$ )%et%er t%e eneric 3ord rule 3ould appl' to support AEB$*EJ=JSECB62s cause" &eld [2#$ T%e 3%olesale appropriation +' AEB$*EJ=JSECB6 of $*CJ=JSEDs corporate name cannot find Iustification under t%e eneric 3ord rule" A contrar' rulin 3ould encoura e ot%er corporations to adopt -er+atim and re ister an e?istin and protected corporate name.3. to t%e detriment of t%e pu+lic" T%e fact t%at t%ere are ot%er non=stoc: reli ious societies or corporations usin t%e names C%urc% of t%e &i-in /od. A--eals [GR 122174 4 9cto+er 2002# Second Division. C%urc% of /od in C%rist K B' t%e Jol' Spirit. ( 22 ) . its +'=products and deri-ati-es" On 11 June 1.

plastic fire+ric:. rammin mi?tures. or (+) decepti-el' or confusin l' similar to t%at of an' e?istin corporation or to an' ot%er name alread' protected +' la3L or (c) patentl' decepti-e. t3o re. c%rome or round anister and special cla'" )%ile t%e 3ord MrefractoriesM is a eneric term. as a result of a . t%e CO6 and t%e A6T deemed it in t%e +est interest of t%e national Commercial *a3 ) Cor-oration *a3 200.uired t%e ri %t to use t%e 3ord MRefractoriesM as part of its corporate name" Anent t%e second re. !$*C transferred all its ri %ts. its usa e is not 3idespread and is limited merel' to t%e industr'Gtrade in 3%ic% it is used. t%e proposed name must contain at least one distincti-e 3ord different from t%e name of t%e compan' alread' re istered" To fall 3it%in t%e pro%i+ition of t%e la3. t%e !ational $n-estment and *e-elopment Corporation (!$*C). assi n or transfer its interest in t%e Ioint -enture" On 19 !o-em+er 1. operation. +ein t%e prior re istrant.uisites must +e pro-en: (1) t%at t%e complainant corporation ac. in determinin t%e e?istence of confusin similarit' in corporate names.78.74. +ondin mortars. A--eals [GR 124214 20 Novem+er 2000# 4nares5Santia'o (J): 4 concur Facts$ On 18 Januar' 1.uisite.uasi=reor ani>ation of 6J$&SECO to settle its %u e o+li ations to 6!B. i"e". it %as +een %eld t%at t%e ri %t to t%e e?clusi-e use of a corporate name 3it% freedom from infrin ement +' similarit' is determined +' priorit' of adoption" Jerein. t%e onl' 3ord t%at distin uis%es $RC6 from RC6 is t%e 3ord M$ndustrialM 3%ic% merel' identifies a corporationDs eneral field of acti-ities or operations" T%e t3o corporate names are patentl' similar t%at e-en 3it% reasona+le care and o+ser-ation. $nc" (S!S).7. on 7 *ecem+er 1.Narratives (Berne Guerrero) 6artners%ip !ames 19 specificall' re. respecti-el'" One of t%e pro-isions of t%e J#A accorded t%e parties t%e ri %t of first refusal s%ould eit%er part' sell. RC6 %as ac. casta+les. misleadin or confusin l' similar to one alread' re istered +' anot%er corporation 3it% t%e CommissionL and (1) if t%e proposed name is similar to t%e name of a re istered firm.uisite. 3%ic% su+se. &td" of Eo+e. t%e !ational /o-ernmentDs s%are%oldin s in 6J$&SECO increased to . $RC6Ds appropriation of RC6Ds corporate name cannot find Iustification under t%e eneric 3ord rule" A contrar' rulin 3ould encoura e ot%er corporations to adopt -er+atim and re ister an e?istin and protected corporate name. confusin or contrar' to e?istin la3" As re ards t%e first re. t%e SEC found t%at t%ere 3ere instances 3%en different steel companies 3ere actuall' confused +et3een t%e t3o. especiall' since t%e' also %a-e similar product pac:a in " %ssue [2#$ )%et%er t%e eneric 3ord rule 3ould appl' to support $RC62s cause" &eld [2#$ Refractories are structural materials used at %i % temperatures to BsicC industrial furnaces" T%e' are supplied mainl' in t%e form of +ric: of standard si>es and of special s%apes" Refractories also include refractor' cements.uires t%at: (1) a corporate name s%all not +e identical. a o-ernment corporation. confusion mi %t arise" $t must +e noted t%at +ot% cater to t%e same clientele. to t%e detriment of t%e pu+lic" 1/ !G 5ummit &oldin(s %nc.78. Japan (Ea3asa:i) for t%e construction.uino issued 6roclamation 95 esta+lis%in t%e Committee on 6ri-ati>ation (CO6) and t%e Asset 6ri-ati>ation Trust (A6T) to ta:e title to and possession of. 6resident Cora>on C" A. entered into a Joint #enture A reement (J#A) 3it% Ea3asa:i Jea-' $ndustries. ( 24 ) . and ot%er +ul: materials suc% as dead=+uried rain ma neside.74. conser-e. title and interest in 6J$&SECO to t%e 6%ilippine !ational Ban: (6!B)" (ore t%an t3o mont%s later or on 3 0e+ruar' 1. t%e steel industr'" $n fact.H" E?ercisin t%eir discretion. and mana ement of t%e Su+ic !ational S%ip'ard. vs.uired a prior ri %t o-er t%e use of suc% corporate nameL and (1) t%e proposed name is eit%er: (a) identical.uentl' +ecame t%e 6%ilippine S%ip'ard and En ineerin Corporation (6J$&SECO)" @nder t%e J#A. t%e test is 3%et%er t%e similarit' is suc% as to mislead a person usin ordinar' care and discrimination and t%e Court must loo: to t%e record as 3ell as t%e names t%emsel-es" Jerein.8"A1H t%ere+' reducin Ea3asa:iDs s%are%oldin s to 1"9. +' -irtue of Administrati-e Order 1A. mana e and dispose of non=performin assets of t%e !ational /o-ernment" On 18 0e+ruar' 1.. 6!BDs interest in 6J$&SECO 3as transferred to t%e !ational /o-ernment" (ean3%ile. !$*C and Ea3asa:i 3ould maintain a s%are%oldin proportion of 45H = A5H. Court o.88. a trust a reement 3as entered into +et3een t%e !ational /o-ernment and t%e A6T +' -irtue of 3%ic% t%e latter 3as named t%e trustee of t%e !ational /o-ernmentDs s%are in 6J$&SECO" $n 1. and its continuous use +' RC6 for a considera+le period %as made t%e term so closel' identified 3it% it" (oreo-er.

. S( /roup..3.A.! such citizens.lic$ The artici ation o0 0orei'n investors in the 'overnin' . nor shall such 0ranchise.! the 'eneral u.! the Con'ress 8hen the co##on 'ood so re:uires$ The State shall encoura'e e:uit! artici ation in u.e 'ranted e7ce t to citizens o0 the /hili ines or to cor orations or associations or'anized under the la8s o0 the /hili ines at least si7t! er centu# o0 8hose ca ital is o8ned .. could +e operated onl' +' a corporation at least 45H of 3%ose capital is o3ned +' 0ilipino citi>ens.88 manifests t%e intention of t%e parties to a+ide +' t%e constitutional mandate on capitali>ation of pu+lic utilities" T%e Ioint -enture created +et3een !$*C and Ea3asa:i falls 3it%in t%e pur-ie3 of an MassociationM pursuant to Section 9 of Article Q$# of t%e 1. *ecem+er 1..83 Constitution.. re. alteration.. t%e Court of Appeals MdeniedM for lac: of merit t%e petition for mandamus" J/S($ filed a motion for t%e reconsideration of said *ecision 3%ic% 3as denied on 19 (arc% 1. or an! other 0or# o0 authorization 0or the o eration o0 a u. Section 15 of t%e Constitution" &eld$ A s%ip'ard suc% as 6J$&SECO +ein a pu+lic utilit' as pro-ided +' la3.uestionin t%e proceedin s" On 1 0e+ruar' 1. or re eal . $nc" (6J$) 3ould e?ercise its ri %t to top +' 9H" At t%e pre=+iddin conference %eld on 17 Septem+er 1.83 Constitution and Section 11 of Article Q$$ of t%e 1.9.Narratives (Berne Guerrero) econom' and t%e o-ernment to pri-ati>e 6J$&SECO +' sellin 78"48H of its total outstandin capital stoc: to pri-ate entities" After a series of ne otiations +et3een t%e A6T and Easa3a:i.A. $nc"G6%il'ards Joldin s. t%e consortium composed of J/ Summit Joldin s.uired t%e same proportion of 45H = A5H capitali>ation" T%e J#A +et3een !$*C and Ea3asa:i entered into on 18 Januar' 1. is a pu+lic utilit' and. must o+ser-e Commercial *a3 ) Cor-oration *a3 200. $CTS$ and $nsular &ife -iolated t%e ASBR +ecause t%e last four (A) companies 3ere t%e losin +idders (for 61"917 +illion) t%ere+' circum-entin t%e la3 and preIudicin t%e 3ea: 3innin +idderL (+) onl' Ea3asa:i could e?ercise t%e ri %t to topL (c) i-in t%e same option to top to 6J$ constituted un3arranted +enefit to a t%ird part'L (d) no ri %t of first refusal can +e e?ercised in a pu+lic +iddin or auction sale. as a s%ip'ard. Article Q$#.A" On 1A 0e+ruar' 1. suc% as a s%ip'ard.A.uentl'..lic utilit! shall .lic utilit! enter rise shall .od! o0 an! u. t%e' a reed t%at t%e latterDs ri %t of first refusal under t%e J#A +e Me?c%an edM for t%e ri %t to top +' 9H t%e %i %est +id for said s%ares" T%e' furt%er a reed t%at Ea3asa:i 3ould +e entitled to name a compan' in 3%ic% it 3as a stoc:%older.78 Constitution" Conse. Section 11 of t%e Article Q$$ of t%e Constitution applies" T%e pro-ision states t%at M6o 0ranchise. 3as declared t%e %i %est +idder at 61"53 +illion" T%e follo3in da'.3.. in accordance 3it% Article Q$$. $nc" (J/S($).A.. $nc" to top J/S($Ds +id +' 9H as specified in t%e +iddin rules"M On 1.e citizens o0 the /hili ines$. J/S($ 3as notified t%at 6J$ %ad full' paid t%e +alance of t%e purc%ase price of t%e su+Iect +iddin " On 8 0e+ruar' 1.5.e li#ited to their ro ortionate share in its ca ital. said petition 3as referred to t%e Court of Appeals" On 17 Jul' 1. Eeppel.e su. 6%il'ards.e 'ranted e7ce t under the condition that it shall . interested +idders 3ere i-en copies of t%e J#A +et3een !$*C and Ea3asa:i. (itsui.uentl'. and all the e7ecutive and #ana'in' o00icers o0 such cor oration or association shall . and of t%e Asset Specific Biddin Rules (ASBR) drafted for t%e 78"48H e. certi0icate. 3%ic% could e?ercise t%e ri %t to top" On 8 Septem+er 1. Section 9 of t%e 1. T%e pro enitor of t%is constitutional pro-ision. a Ioint -enture t%at 3ould en a e in t%e +usiness of operatin a pu+lic utilit'. t%e A6T notified J/S($ t%at 6J$ %ad e?ercised its option to top t%e %i %est +id and t%at t%e CO6 %ad appro-ed t%e same on 4 Januar' 1. Sem+a3an S%ip'ard &td" of Sin apore (Sem+a3an ). certi0icate. and (e) t%e J/ Summit Consortium 3as not estopped from ..4" J/S($ filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er 6J$&SECO. ( 24 ) .. t%e A6T and 6J$ e?ecuted a Stoc: 6urc%ase A reement" Conse. J/S($ informed t%e A6T t%at it 3as protestin t%e offer of 6J$ to top its +id on t%e rounds t%at: (a) t%e Ea3asa:iG6J$ consortium composed of Ea3asa:i.3" At t%e pu+lic +iddin on said date. t%e CO6 appro-ed t%e sale of 78"48H !ational /o-ernment s%ares of stoc: in 6J$&SECO to said consortium" $t notified J/S($ of said appro-al Msu+Iect to t%e ri %t of Ea3asa:i Jea-' $ndustries. and Juron S%ip'ard &imited of (ala'sia (Juron ). or authorization .lic utilities .uit' (sic) in 6J$&SECO of t%e !ational /o-ernment" T%e pro-isions of t%e ASBR 3ere e?plained to t%e interested +idders 3%o 3ere notified t%at +iddin 3ould +e %eld on 1 *ecem+er 1. %ence.9ect to a#end#ent. Ea3asa:i informed A6T t%at 6%il'ards Joldin s.e e7clusive in character or 0or a lon'er eriod than 0i0t! !ears$ 6either shall an! such 0ranchise or ri'ht . J/S($ filed 3it% t%e Supreme Court a petition for mandamus under /R 11A598" On 11 (a' 1.

555"55 pa'a+le as follo3s: a do3n pa'ment of 6A.1.77.77.78.555"55 3ere dis%onored" $n t%e meantime. pra'in t%at Ro?as +e ordered to pa' t%em t%e sum of 63. sold all of t%eir s%ares of stoc: in Consolidated (ar:etin K *e-elopment Corporation (C(*C) to /eor e C" Ro?as" T%e purc%ase price 3as 67. t%e A6T and Ea3asa:i respected t%e 45H=A5H capitali>ation proportion in 6J$&SECO" Jo3e-er. ( 2. t%e' can onl' do so to t%e e?tent allo3ed t%em +' para rap%s 1"1 and 1"3 of t%e J#A or under t%e proportion of 45H=A5H of t%e s%ares of stoc:" T%us.555.555"55 and t%e pa'ment of attorne'Ds fees and costs" 0ailin to su+mit %is ans3er.A55. %e filed a petition for certiorari 3it% t%e Court of Appeals" T%e Court of Appeals dismissal of t%e complaint on t%e round of improper -enue" A su+se. Ro?as too: full control of t%e four mar:ets of C(*C" Jo3e-er.uired affida-it of merit" But 3it%out 3aitin for t%e resolution of t%e motion. on t%e ot%er %and. -uiason (J): 3 concur Facts$ On 17 Octo+er 1. !elson /arcia and #icente S' assi ned all t%eir ri %ts and title to t%e proceeds of t%e sale of t%e C(*C s%ares to !emesio /arcia" On 15 June 1. it appears t%at at t%e outset. its president. t%e -endors %eld on to t%e stoc: certificates of C(*C as securit' pendin full pa'ment of t%e +alance of t%e purc%ase price" T%e first c%ec: of 6A. !une 1114# First Division. t%e trial court in an Order dated 7 0e+ruar' 1. Ro?as filed an un-erified (otion to &ift t%e Order of *efault 3%ic% 3as not accompanied 3it% t%e re. Au ust 1. lifted upon motion of Ro?as" On 11 Au ust 1. and on 1. 2.555"55.455. Ro?as filed a motion to dismiss" After a %earin .555"55 eac%" $mmediatel' after t%e e?ecution of t%e a reement. Branc% 11.555"55. t%e trial court declared Ro?as in default" T%e order of default 3as. para rap% 1"A of t%e J#A accorded t%e parties t%e ri %t of first refusal Munder t%e same terms"M T%is p%rase implies t%at 3%en eit%er part' e?ercises t%e ri %t of first refusal under para rap% 1"A. t%e A6T 3ent +e'ond t%e am+it of its aut%orit'" 11 @oun( Auto 5u--l" vs.555. Ro?as sold one of t%e mar:ets to a t%ird part'" Out of t%e proceeds of t%e sale. %o3e-er.uent motion for reconsideration +' OASCO 3as to no a-ail" OASCO and /arcia filed t%e petition" %ssue$ )%et%er t%e -enue for t%e case a ainst OASCO and /arcia in Ce+u Cit' 3as improperl' laid" &eld$ A corporation %as no residence in t%e same sense in 3%ic% t%is term is applied to a natural person" But Commercial *a3 ) Cor-oration *a3 200.77. !elson /arcia and #icente S'.555"55 or t%at full control of t%e t%ree mar:ets +e turned o-er to OASCO and /arcia" T%e complaint also pra'ed for t%e forfeiture of t%e partial pa'ment of 6A.555.1 for +ein pro=forma" Ro?as 3as a ain declared in default. 3%ic% t%e trial court denied in its Order dated 15 April 1.555. 3%erein testimonial and documentar' e-idence 3ere presented +' +ot% parties.555.uentl'. OASCO recei-ed 6455. representin t%e do3n pa'ment. OASCO and /arcia filed a complaint a ainst Ro?as in t%e Re ional Trial Court.. lea-in a +alance of 63. ) . Ea3asa:i cannot purc%ase +e'ond A5H of t%e capitali>ation of t%e Ioint -enture on account of +ot% constitutional and contractual proscriptions" 0rom t%e facts on record. A--eals [GR 10417.555"55 in four postdated c%ec:s of 61. Court o.. Ooun Auto Suppl' Co" $nc" (OASCO) represented +' !emesio /arcia.A55. Ea3asa:i could onl' e?ercise its ri %t of first refusal to t%e e?tent t%at its total s%ares of stoc: 3ould not e?ceed A5H of t%e entire s%ares of stoc: of S!S or 6J$&SECO" T%e !$*C. Ce+u Cit'.Narratives (Berne Guerrero) t%e proportion of 45H=A5H 0ilipino=forei n capitali>ation" 0urt%er.555"55 and t%e +alance of 6A. ma' purc%ase e-en +e'ond 45H of t%e total s%ares" As a o-ernment corporation and necessaril' a 155H 0ilipino=o3ned corporation.uentl' encoura ed Ea3asa:i to participate in t%e pu+lic +iddin of t%e !ational /o-ernmentDs s%are%oldin s of 78"48H of t%e total 6J$&SECO s%ares. 3as %onored +' t%e dra3ee +an: +ut t%e four ot%er c%ec:s representin t%e +alance of 6A..555. definitel' o-er and a+o-e t%e A5H limit of its s%are%oldin s" $n so doin . A6T su+se. t%ere is not%in to pre-ent its purc%ase of stoc:s e-en +e'ond 45H of t%e capitali>ation as t%e Constitution clearl' limits onl' forei n capitali>ation" Ea3asa:i 3as +ound +' its contractual o+li ation under t%e J#A t%at limits its ri %t of first refusal to A5H of t%e total capitali>ation of 6J$&SECO" T%us. s%ould t%e !$*C opt to sell its s%ares of stoc: to a t%ird part'. on t%e round t%at %is motion for reconsideration did not toll t%e runnin of t%e period to file %is ans3er" On 3 (a' 1. Ro?as filed anot%er motion for e?tension of time to su+mit %is ans3er" Je also filed a motion for reconsideration.1 denied Ro?asD motion to dismiss" After recei-in said order.555"55" Su+se.

. to su+mit t%eir respecti-e memoranda after t%e su+mission of 3%ic% t%e case 3ould +e deemed su+mitted for resolution" On 8 Septem+er 1. +' t%e s'stem of dra3in lots. 3%ere its principal place of +usiness is located. eac% for A55 s%ares 3it% a par -alue of 615"55 per s%are. essentiall' on pure . or for 6A. Adalia 0" Ro+es and one Carlos 0" Ro+es" $n ot%er 3ords. instead of allo3in it to +e am+ulator'" Actions cannot +e filed a ainst a corporation in an' place 3%ere t%e corporation maintains its +ranc% offices" T%e Court ruled t%at to allo3 an action to +e instituted in an' place 3%ere t%e corporation %as +ranc% offices. instead of i-in t%e le al tender totalin to t%e full amount of t%e loan.555"55" Said stoc: certificates 3ere in t%e name of Adalia 0" Ro+es and Carlos 0" Ro+es.555"55" As part of t%e proceeds of t%e loan. 3%o su+se. 3ould create confusion and 3or: untold incon-enience to said entit'" B' t%e same to:en. %o3e-er. t%e trial court a-e t%e parties 15 da's from 35 Jul' 1. R0R*C and Ro+es proceeded a ainst t%e Ban: and filed a complaint anc%ored on t%eir alle ed ri %ts to collect di-idends under t%e preferred s%ares in . ." T%e +an: t%en filed its Ans3er on 1 (a' 1. endorsed %is s%ares in fa-or of Adalia 0" Ro+es" Said certificates of stoc: +ear t%e follo3in terms and conditions: MT%e 6referred Stoc: s%all %a-e t%e follo3in ri %ts. for a total of 67. 1117# First Division. at an' time after 1 'ears from t%e date of issue at t%e option of t%e Corporation"M On 31 Januar' 1.8.uarterl' di-idend of 1H.uentl'.8. t%e terms and conditions set fort% t%erein use t%e 3ord Mma'M" $t is a settled doctrine in statutor' construction t%at t%e 3ord Mma'M denotes discretion. and t%at suc% Commercial *a3 ) Cor-oration *a3 200. 3%ic% is 6115.8. t%e trial court rendered t%e decision in fa-or of R0R*C and Ro+esL orderin t%e +an: to pa' R0R*C and Ro+es t%e face -alue of t%e stoc: certificates as redemption price.8.Narratives (Berne Guerrero) for practical purposes.170.ualifications and limitations.uestion and to %a-e t%e +an: redeem t%e same under t%e terms and conditions of t%e stoc: certificates" T%e +an: filed a (otion to *ismiss 3 pri-ate respondentsD Complaint on t%e follo3in rounds: (1) t%at t%e trial court %ad no Iurisdiction o-er t%e su+Iect=matter of t%e actionL (1) t%at t%e action 3as unenforcea+le under su+stanti-e la3L and (3) t%at t%e action 3as +arred +' t%e statute of limitations andGor lac%es" T%e +an:Ds (otion to *ismiss 3as denied +' t%e trial court in an order dated 14 (arc% 1. t%e option to do so 3as clearl' -ested in t%e +an:" T%e redemption t%erefore is clearl' t%e t'pe :no3n as MoptionalM" T%us. t%e Ban: lent suc% amount partiall' in t%e form of mone' and partiall' in t%e form of stoc: certificates num+ered 315A and 3159. plus 1H . e?cept as ot%er3ise pro-ided in t%e stoc: certificate.uirement is to fi? t%e residence of a corporation in a definite place.8. t%e Ro+es=0rancisco Realt' K *e-elopment Corporation (R0R*C) secured a loan from t%e Repu+lic 6lanters Ban: in t%e amount of 6115. a corporation cannot +e allo3ed to file personal actions in a place ot%er t%an its principal place of +usiness unless suc% a place is also t%e residence of a co= plaintiff or a defendant" )it% t%e findin t%at t%e residence of OASCO for purposes of -enue is in Ce+u Cit'.555"55.uestions of la3" %ssue [1#$ )%et%er t%e +an: can +e compelled to redeem t%e preferred s%ares issued to R0R*C and Ro+es" &eld [1#$ )%ile t%e stoc: certificate does allo3 redemption. ( 20 ) . 4 'arc. it +ecomes unnecessar' to decide 3%et%er /arcia is also a resident of Ce+u Cit' and 3%et%er Ro?as 3as in estoppel from . preferences..41. A(ana [GR . 1 concurs in result Facts$ On 17 Septem+er 1. and cannot +e construed as %a-in a mandator' effect" T%e redemption of said s%ares cannot +e allo3ed" T%e Central Ban: made a findin t%at t%e Ban: %as +een sufferin from c%ronic reser-e deficienc'. t%e redemption rests entirel' 3it% t%e corporation and t%e stoc:%older is 3it%out ri %t to eit%er compel or refuse t%e redemption of its stoc:" 0urt%ermore. a corporation is in a metap%'sical sense a resident of t%e place 3%ere its principal office is located as stated in t%e articles of incorporation" T%e Corporation Code precisel' re. "er#osisi#a Jr$ (J): 3 concur.uarterl' interest t%ereon until full pa'ment" T%e +an: filed t%e petition for certiorari 3it% t%e Supreme Court. to 3it: 1" Of t%e ri %t to recei-e a ." T%ereafter.uires eac% corporation to specif' in its articles of incorporation t%e Mplace 3%ere t%e principal office of t%e corporation is to +e located 3%ic% must +e 3it%in t%e 6%ilippines"M T%e purpose of t%is re.uestionin t%e c%oice of Ce+u Cit' as t%e -enue" T%e decision of t%e Court of Appelas 3as set aside" 20 Re-u+lic :lanters Ban< vs. preferred s%ares of stoc:s 3ere issued to R0R*C t%rou % its officers t%en. cumulati-e and participatin " ??? 1" T%at suc% preferred s%ares ma' +e redeemed.555"55 eac%.

representin not less t%an t3o=t%irds (1G3) of t%e outstandin capital stoc: at a re ular or special meetin dul' called for t%e purpose" T%ese pro-isions underscore t%e fact t%at pa'ment of di-idends to a stoc:%older is not a matter of ri %t +ut a matter of consensus" 0urt%ermore.uired t%ru %is mont%l' mem+ers%ip fees onl' computed on a ratio of TE! (615"55) 6ESOS for one -ote" T%e C%arter and Associate (em+ers s%all elect t%e *irectors of t%e Association" T%e candidates recei-in t%e first 1A %i %est num+er of -otes s%all +e declared and proclaimed elected until t%eir successors are elected and . on t%e ot%er %and.uirin pa'ment of interest as di-idends from net earnin s or surplus onl'" $n compellin t%e +an: to redeem t%e s%ares and to pa' t%e correspondin di-idends. /race C%ristian Ji % Sc%ool 3as i-en a permanent seat in t%e +oard of directors of t%e association" On 13 0e+ruar' 1. a committee of t%e +oard of directors prepared a draft of an amendment to t%e +'=la3s. ma' t%us +e considered as an e?ercise of police po3er" %ssue [2#$ )%et%er R0R*C and Ro+es are entitled to t%e pa'ment of certain rate of interest on t%e stoc:s as a matter of ri %t 3it%out necessit' of a prior declaration of di-idend" &eld [2#$ Bot% Section 14 of t%e Corporation &a3 and Section A3 of t%e present Corporation Code pro%i+it t%e issuance of an' stoc: di-idend 3it%out t%e appro-al of stoc:%olders. issued on 31 Januar' 1. t%e Trial committed ra-e a+use of discretion amountin to lac: or e?cess of Iurisdiction in i norin +ot% t%e terms and conditions specified in t%e stoc: certificate. Minterest +earin stoc:sM. t%at on 15 *ecem+er 1.Narratives (Berne Guerrero) findin resulted in a directi-e. $nc". t%at Mt%e annual meetin of t%e mem+ers of t%e Association s%all +e %eld on t%e first Sunda' of Januar' in eac% calendar 'ear at t%e principal office of t%e Association at 1:55 6"(" 3%ere t%e' s%all elect +' pluralit' -ote and +' secret +allotin . +ut also to t%e +an:in industr' as a 3%ole" T%e directi-e. to t%e 6resident and Actin C%airman of t%e Board of t%e +an: pro%i+itin t%e latter from redeemin an' preferred s%are. in 1. t%e +'=la3s of t%e association pro-ided in Article $#. pro-idin t%at MT%e Annual (eetin of t%e mem+ers of t%e Association s%all +e %eld on t%e second T%ursda' of Januar' of eac% 'ear" Eac% C%arter or Associate (em+er of t%e Association is entitled to -ote" Je s%all +e entitled to as man' -otes as %e %as ac. respecti-el'.89. notices 3ere sent to t%e mem+ers of t%e Commercial *a3 ) Cor-oration *a3 200. 24 9cto+er 1117# Second Division.. not onl' to its depositors and creditors. and to pre-ent t%e financial ruin of a +an:in institution t%at 3ould %a-e resulted in ad-erse repercussions.89. :inder arten and secondar' courses at t%e /race #illa e in Rue>on Cit'" /race #illa e Association.ristian &i(.5. Court o.. t%e Board of *irectors.M and Mit is undemocratic for a person or entit' to %old office in perpetuit'"M 0or t%is reason. t%e associationDs committee on election in a letter informed James Tan.ualified"M $t appears. 1 on leave Facts$ /race C%ristian Ji % Sc%ool is an educational institution offerin preparator'.83 +' t%en /o-" /" S" &icaros of t%e Central Ban:. Mendoza (J): ) concur. ( 27 ) .uo. Tan 3as told t%at Mt%e proposal to ma:e t%e /race C%ristian Ji % Sc%ool representati-e as a permanent director of t%e association. is an or ani>ation of lot andGor +uildin o3ners. lessees and residents at /race #illa e.ool vs. 3%ile AleIandro /" Beltran and Ernesto &" /o 3ere its president and c%airman of t%e committee on election. after it 3as presuma+l' su+mitted to t%e +oard. is le al onl' 3%en construed as re. as 3ell as t%e clear mandate of t%e la3" 21 Grace C. up to 1. composed of 11 mem+ers to ser-e for one 'ear until t%eir successors are dul' elected and %a-e .ualified" /RACE CJR$ST$A! J$/J SCJOO& representati-e is a permanent *irector of t%e ASSOC$AT$O!"M T%is draft 3as ne-er presented to t%e eneral mem+ers%ip for appro-al" !e-ert%eless. alt%ou % pre-iousl' tolerated in t%e past elections s%ould +e ree?amined"M 0ollo3in t%is ad-ice. 3%en t%is suit 3as +rou %t" As adopted in 1. from 1. principal of t%e sc%ool. on 3%ic% t%e corporation a rees a+solutel' to pa' interest +efore di-idends are paid to common stoc:%olders. in limitin t%e e?ercise of a ri %t ranted +' la3 to a corporate entit'.5. t%at Mit 3as t%e sentiment t%at all directors s%ould +e elected +' mem+ers of t%e associationM +ecause Mto ma:e a person or entit' a permanent *irector 3ould depri-e t%e ri %t of -oters to -ote for 19 mem+ers of t%e Board..5. 5c.47. A--eals [GR 10/10. on t%e round t%at said redemption 3ould reduce t%e assets of t%e Ban: to t%e preIudice of its depositors and creditors" Redemption of preferred s%ares 3as pro%i+ited for a Iust and -alid reason" T%e directi-e issued +' t%e Central Ban: /o-ernor 3as o+-iousl' meant to preser-e t%e status .

5" 6etitioner appealed to t%e Court of Appeals +ut t%e sc%ool a ain lost as t%e appellate court on . $nc" as a mem+er t%ereof" &eld$ $t is actuall' VV17 and 1. i"e". +ut t%e parties failed to reac% an a reement" $nstead. in allo3in t%e sc%oolDs representati-e to sit on t%e +oard.uire mem+ers of t%e +oards of directors of corporations to +e elected" T%e +oard of directors of corporations must +e elected from amon t%e stoc:%olders or mem+ers" T%ere ma' +e corporations in 3%ic% t%ere are unelected mem+ers in t%e +oard +ut it is clear t%at in t%e e?amples cited +' t%e sc%ool.an(e Commission [GR *)4.1 of t%e present la3 or V1.111 11 A-ril 1171# %n &anc. 4 0ile a 9oint se arate Commercial *a3 ) Cor-oration *a3 200.Narratives (Berne Guerrero) association t%at t%e pro-ision on election of directors of t%e 1.uiescence +ecause. t%e SEC rendered an opinion to t%e effect t%at t%e practice of allo3in unelected mem+ers in t%e +oard 3as contrar' to t%e e?istin +'=la3s of t%e association and to V. affirmed t%e decision of t%e J$/C" T%e sc%ool filed t%e petition for re-ie3" %ssue$ )%et%er t%e sc%oolDs representati-e s%ould +e elected to %a-e t%e ri %t to sit in t%e +oard of directors of /race #illa e Association. +' -irtue of and for as lon as t%e' %old a particular office" But in t%e case of t%e sc%ool itself..uestion is contrar' to la3.1 of t%e Corporation Code" T%e association cited t%e SEC opinion. 1 concurs in result and reserves his ri'ht to 0ile se arate o inion. t%e +oard adopted a resolution declarin t%e 1. cannot i-e rise to an' -ested ri %t if it is contrar' to la3" E-en less tena+le is t%e sc%oolDs claim t%at its ri %t is Mcoterminus 3it% t%e e?istence of t%e association"M 22 Go<on(3ei vs.uest. +ut certainl' not t%e allo3ance of t%e sc%oolDs representati-e as an unelected mem+er of t%e +oard of directors" $t is more accurate to sa' t%at t%e mem+ers merel' tolerated t%e sc%oolDs representati-e and tolerance cannot +e considered ratification" !or can t%e sc%ool claim a -ested ri %t to sit in t%e +oard on t%e +asis of Mpractice"M 6ractice. t%e fact t%at for 19 'ears it %as not +een . t%e sc%ool +rou %t suit for mandamus in t%e Jome $nsurance and /uarant' Corporation to compel t%e +oard of directors of t%e association to reco ni>e its ri %t to a permanent seat in t%e +oard" T%e sc%ool +ased its claim on t%e follo3in portion of t%e proposed amendment 3%ic%. 0e+ruar' 1. t%ere is no reason at all for its representati-e to +e i-en a seat in t%e +oard" !or does t%e sc%ool claim a ri %t to suc% seat +' -irtue of an office %eld" $n fact it 3as not i-en suc% seat in t%e +e innin " $t 3as onl' in 1. amon ot%ers. t%e mem+ers of t%e association 3ere not a3are t%at t%is 3as contrar' to la3" $t s%ould +e noted t%at t%e' did not actuall' implement t%e pro-ision in . of t%e Corporation &a3 P V 13 of t%e present la3L not V. on t%e contrar'. t%e %earin officer of t%e J$/C rendered a decision dismissin t%e sc%oolDs action" T%e appeals +oard of t%e J$/C affirmed t%e decision of t%e %earin officer in its resolution dated 13 Septem+er 1.uer'. if it is contrar' to la3. no matter %o3 lon continued..uestion..5.89 pro-ision null and -oid for lac: of appro-al +' mem+ers of t%e association and t%e 1. of t%e former one P 3%ic% re. in its ans3er" A preliminar' conference 3as %eld on 1. it is +e'ond t%e po3er of t%e mem+ers of t%e association to 3ai-e its in-alidit'" 0or t%at matter t%e mem+ers of t%e association ma' %a-e formall' adopted t%e pro-ision in .89)M and Munla3full' depri-eBdC /race C%ristian Ji % Sc%ool of its -ested ri %t BtoC a permanent seat in t%e +oard"M As t%e association denied its re.5 +ut not%in su+stantial 3as a reed upon" A su+se..uestioned or c%allen ed +ut. 5ecurities and =6c..uested t%e c%airman of t%e election committee to c%an e t%e notice of election +' follo3in t%e procedure in pre-ious elections. appears to %a-e +een implemented +' t%e mem+ers of t%e association cannot forestall a later c%allen e to its -alidit'" !eit%er can it attain -alidit' t%rou % ac.47 +'=la3s to +e effecti-e" On 15 June 1. claimin t%at t%e notice issued for t%e 1. it contended.3. (arc% 1..uent meetin 3as %eld on 18 April 1. %ad +ecome part of t%e +'=la3s of t%e association as Article #$. 1 reserves ri'ht to 0ile se arate o inion.5 elections ran Mcounter to t%e practice in pre-ious 'earsM and 3as Min -iolation of t%e +'=la3s (of 1. 1 concur and reserves his ri'ht to 0ile se aration o inion.uestion e?cept per%aps insofar as it increased t%e num+er of directors from 11 to 19. para rap% 1" $t appears t%at t%e opinion of t%e Securities and E?c%an e Commission on t%e -alidit' of t%is pro-ision 3as sou %t +' t%e association and t%at in repl' to t%e .5.47 +'=la3s of t%e association 3ould +e o+ser-ed" T%e sc%ool re. +ut t%eir action 3ould +e of no a-ail +ecause no pro-ision of t%e +'=la3s can +e adopted if it is contrar' to la3" $t is pro+a+le t%at.89 t%at a proposed amendment to t%e +'=la3s sou %t to i-e it one" Since t%e pro-ision in . ( 2/ ) . Antonio (J): 4 concur. t%e unelected mem+ers sit as e? officio mem+ers.

uires t%at Mall nominations for election of directors s%all +e su+mitted in 3ritin to t%e Board of *irectors at least fi-e (9) 3or:in da's +efore t%e date of t%e Annual (eetin M is li:e3ise unreasona+le and oppressi-e" $t 3as. /o:on 3ei %ad ac. et" al" purposel' pro-ided for /o:on 3eiDs dis. Enri. in specified amounts.ualif' a stoc:%older from +ein elected as a director and. 1 concurs and dissents in a se arate o inion.ualification and depri-ed %im of %is -ested ri %t as afore=mentioned.41.uestioned amendment a-e t%e Board itself t%e prero ati-e of determinin 3%et%er t%e' or ot%er persons are en a ed in competiti-e or anta onistic +usinessL t%at t%e portion of t%e amended +'=la3s 3%ic% states t%at in determinin 3%et%er or not a person is en a ed in competiti-e +usiness.uest made +' /o:on 3ei for production of certain documents enumerated in t%e re.41. On 11 Octo+er 1. t%erefore.185. t%e corporation issued a notice of special stoc:%oldersD meetin for t%e purpose of Mratification and confirmation of t%e amendment to t%e B'=la3sM. filed 3it% t%e Securities and E?c%an e Commission (SEC) a petition for Mdeclaration of nullit' of amended +'=la3s.uired ri %ts in%erent in stoc: o3ners%ip."8A5"55.84" T%e motion for Commercial *a3 ) Cor-oration *a3 200. on 15 *ecem+er 1. )alt%rode B" Conde. Emeterio BuNao.. et" al" +e made to pa' dama es. Jose (" Soriano. ( 21 ) . cancellation of certificate of filin of amended +'=la3s. et" al" T%e Corporation. t%e Board ma' consider suc% factors as +usiness and famil' relations%ip.uestioned act is ultra -ires and -oidL t%at Andres (" Soriano. 1 too* no art$ Facts$ +S%C Case 13<2. t%erefore. suc% as t%e ri %ts to -ote and to +e -oted upon in t%e election of directorsL and t%at in amendin t%e +'=la3s. pra'ed t%at t%e amended +'=la3s +e declared null and -oid and t%e certificate of filin t%ereof +e cancelled. respecti-el'" (ean3%ile. modif'. entered into contracts (specificall' a mana ement contract) 3it% t%e corporation. and t%at Soriano.84.43. for t%e alle ed reason t%at +' callin a special stoc:%oldersD meetin for t%e aforesaid purpose. as stoc:%older of San (i uel Corporation.Narratives (Berne Guerrero) o inion to 8hich 1 9oined.913. 3%ic% 3as a-o3ed +ecause t%e . /o:on 3ei a-erred t%at t%e mem+ers%ip of t%e Board of *irectors %ad c%an ed since t%e aut%orit' 3as i-en in 1. it 3as alle ed t%at corporations %a-e no in%erent po3er to dis. /o:on 3ei filed 3it% t%e Securities and E?c%an e Commission an M@r ent (otion for 6roduction and $nspection of *ocumentsM. %ence t%e amended +'=la3s are null and -oid" As additional causes of action.41 aut%ori>ation. 3%ile t%e petition 3as 'et to +e %eard. it 3as alle ed t%at t%e aut%orit' ranted in 1. 3%ile representin ot%er corporations.555 preferred s%ares at 6155"55 per s%are" At t%e time of t%e amendment. repeal or adopt ne3 +'=la3s ma' +e dele ated to t%e Board of *irectors onl' +' t%e affirmati-e -ote of stoc:%olders representin not less t%an 1G3 of t%e su+scri+ed and paid up capital stoc: of t%e corporation.uest. t%e po3er to amend. Soriano.88" T%is prompted /o:on 3ei to as: t%e SEC for a summar' Iud ment insofar as t%e first cause of action is concerned.41 and 1. alle in t%at t%e Secretar' of t%e corporation refused to allo3 %im to inspect its records despite re. /o:o 3ei %ad all t%e . 3%en t%e outstandin capital stoc: of t%e corporation 3as onl' 685.41 %ad alread' +een e?ercised in 1. Soriano. Jr". settin suc% meetin for 15 0e+ruar' 1. et" al" admitted t%e in-alidit' of t%e amendments of 17 Septem+er 1. /o:on 3ei contended t%at t%e Board acted 3it%out aut%orit' and in usurpation of t%e po3er of t%e stoc:%olders" As a second cause of action.84.ue Fo+el. inIunction and dama es 3it% pra'er for a preliminar' inIunctionM a ainst t%e maIorit' of t%e mem+ers of t%e Board of *irectors and San (i uel Corporation as an un3illin petitioner" As a first cause of action.A35"55" $t 3as contended t%at accordin to section 11 of t%e Corporation &a3 and Article #$$$ of t%e +'=la3s of t%e corporation. +ein a su+stantial stoc:%older t%ereofL t%at as a stoc:%older. +asin t%eir aut%orit' to do so on a resolution of t%e stoc:%olders adopted on 13 (arc% 1.5A3. -oidL and t%at t%e portion of t%e amended +'=la3s 3%ic% re.uestioned amendment. (i uel Orti as. 3it% a total par -alue of 6351.ualifications to +e a director of t%e corporation. it 3as claimed t%at prior to t%e . t%e . /o:on 3ei alle ed t%at on 17 Septem+er 1. 3%ic% 1G3 s%ould %a-e +een computed on t%e +asis of t%e capitali>ation at t%e time of t%e amendment" Since t%e amendment 3as +ased on t%e 1. di-ided into 9. and Antonio 6rieto amended +' +'la3s of t%e corporation.118. after 3%ic% t%e aut%orit' of t%e Board ceased to e?ist" As a t%ird cause of action.8A common s%ares at 615"55 per s%are and 195. Andres Soriano. Jr" andGor Jose (" Soriano. and t%at t%e corporation %ad +een attemptin to suppress information from its stoc:%olders despite a ne ati-e repl' +' t%e SEC to its . t%e outstandin and paid up s%ares totalled 35.13. et" al" filed t%eir ans3er.uer' re ardin t%eir aut%orit' to do so" T%e motion 3as opposed +' Soriano. Antonio Ro?as. Soriano. Jo%n /o:on 3ei Jr". and t%eir opposition to t%e petition. t%ere +ein 4 ne3 directors" As a fourt% cause of action. t%erefore. is unreasona+le and oppressi-e and. in connection 3it% t%e same case.84. to /o:on 3ei" On 17 Octo+er 1.84.

88. et" al" from ta:in up $tem 4 of t%e A enda at t%e annual stoc:%oldersD meetin . includin in t%e A enda t%ereof. pra'in t%at pendin t%e determination of /o:on 3eiDs application for t%e issuance of a preliminar' inIunction and or /o:on 3eiDs motion for summar' Iud ment. Cremation issued an order den'in t%e motion for issuance of temporar' restrainin order" After receipt of t%e order of denial. t%e Commission acted t%ereon onl' on 19 April 1. et" al". 3it% pra'er for issuance of 3rit of preliminar' inIunction. ( 40 ) .88" Soriano. on 15 Januar' 1. /o:on 3ei filed a consolidated motion for contempt and for nullification of t%e special stoc:%oldersD meetin " A motion for reconsideration of t%e order den'in /o:on 3eiDs motion for summar' Iud ment 3as filed +' /o:on 3ei +efore t%e SEC on 15 (arc% 1. and surrendered it Commercial *a3 ) Cor-oration *a3 200.88. officers and emplo'ees"M T%is must necessaril' refer to a . 3%en it denied Soriano. and ordered to account for suc% in-estments and to ans3er for dama es" On A 0e+ruar' 1. as 3ell as t%e corporation declared uilt' of suc% -iolation. /o:on 3ei filed an M@r ent (otion for t%e $ssuance of a Temporar' Restrainin OrderM. /o:on 3ei alle ed t%at.88. a temporar' restrainin order +e issued.81 to in-est corporate funds in ot%er companies or +usinesses or for purposes ot%er t%an t%e main purpose for 3%ic% t%e Corporation %as +een or ani>ed.88" +S%C Case 14)3. %e filed 3it% SEC. Soriano. et" al" 6endin action on t%e motion.88. Jr" and Jose (" Soriano. and ratification of t%e in-estments t%ereafter made pursuant t%ereto"M B' reason of t%e fore oin . duties and compensation of directors.88. +ut t%is not3it%standin . 1. t%e date set for t%e second %earin of t%e case on t%e merits" T%e SEC.88.uestin t%at t%e same +e set for %earin on 3 (a' 1. t%e Mreaffirmation of t%e aut%ori>ation to t%e Board of *irectors +' t%e stoc:%olders at t%e meetin on 15 (arc% 1.88. a petition see:in to %a-e Andres (" Soriano. to 3%ic% a consolidated motion to stri:e and to declare Soriano. alle in t%at t%ere appears a deli+erate and concerted ina+ilit' on t%e part of t%e SEC to act" %ssue [1#$ )%et%er t%e corporation %as t%e po3er to pro-ide for t%e (additional) . t%erefore. et" al" On 15 0e+ruar' 1. and to re ulate t%e conduct and prescri+e t%e ri %ts and duties of its mem+ers to3ards itself and amon t%emsel-es in reference to t%e mana ement of its affairs"DM $n t%is Iurisdiction under section 11 of t%e Corporation &a3. et" al"Ds motions to dismiss and a-e t%em t3o (1) da's 3it%in 3%ic% to file t%eir ans3er.88. et" al" conducted t%e special stoc:%oldersD meetin 3%erein t%e amendments to t%e +'=la3s 3ere ratified" On 1A 0e+ruar' 1. %a-in disco-ered t%at t%e corporation %as +een in-estin corporate funds in ot%er corporations and +usinesses outside of t%e primar' purpose clause of t%e corporation. or after t%e sc%eduled annual stoc:%oldersD meetin " 0or t%e purpose of ur in t%e Commission to act. 1. a corporation ma' prescri+e in its +'=la3s Mt%e . re. et" al" from %oldin t%e special stoc:%oldersD meetin as sc%eduled" T%is motion 3as dul' opposed +' Soriano. 3it% t%e Supreme Court. %o3e-er. restrainin Soriano. motions to dismiss 3ere filed +' Soriano.ualification in addition to t%at specified +' section 35 of t%e Corporation &a3. 3%ic% pro-ides t%at Me-er' director must o3n in %is ri %t at least one s%are of t%e capital stoc: of t%e stoc: corporation of 3%ic% %e is a director"M An' person M3%o +u's stoc: in a corporation does so 3it% t%e :no3led e t%at its affairs are dominated +' a maIorit' of t%e stoc:%olders and t%at %e impliedl' contracts t%at t%e 3ill of t%e maIorit' s%all o-ern in all matters 3it%in t%e limits of t%e act of incorporation and la3full' enacted +'=la3s and not for+idden +' la3"M To t%is e?tent.Narratives (Berne Guerrero) summar' Iud ment 3as opposed +' Soriano. mandamus and inIunction. /o:on 3ei filed 3it% t%e SEC an ur ent motion for t%e issuance of a 3rit of preliminar' inIunction to restrain Soriano. on 17 April 1. /o:on 3ei filed an ur ent manifestation on 3 (a' 1.ualifications. no action %as +een ta:en up to t%e date of t%e filin of t%e instant petition" /o:on 3ei filed a petition for petition for certiorari. and (a' 3. cancelled t%e dates of %earin ori inall' sc%eduled and reset t%e same to (a' 14 and 18. t%e stoc:%older ma' +e considered to %a-e Mparted 3it% %is personal ri %t or pri-ile e to re ulate t%e disposition of %is propert' 3%ic% %e %as in-ested in t%e capital stoc: of t%e corporation.88. in -iolation of section 18=1G1 of t%e Corporation &a3. and set t%e case for %earin on April 1. et" al" in default and an opposition ad a+undantiorem cautelam 3ere filed +' /o:on 3ei" *espite t%e fact t%at said motions 3ere filed as earl' as A 0e+ruar' 1.ualifications of its directors" &eld [1#$ $t is reco ni>ed +' all aut%orities t%at Me-er' corporation %as t%e in%erent po3er to adopt +'=la3s Dfor its internal o-ernment. et" al" issued notices of t%e annual stoc:%oldersD meetin .88.

or ad-anta e of t%e fiduciar' to t%e e?clusion or detriment of t%e cestuis" T%e doctrine of Mcorporate opportunit'M is precisel' a reco nition +' t%e courts t%at t%e fiduciar' standards could not +e up%eld 3%ere t%e fiduciar' 3as actin for t3o entities 3it% competin interests" T%is doctrine rests fundamentall' on t%e unfairness.uired contained t%e prescription t%at t%e corporate c%arter and t%e +'=la3 s%all +e su+Iect to amendment. it 3ould seem impro+a+le. a-aila+ilit' of personnel. -i>": Mto o+Iect t%ereto in 3ritin and demand pa'ment for %is s%are"M @nder section 11 of t%e same la3. an' corporation ma' amend its articles of incorporation +' a -ote or 3ritten assent of t%e stoc:%olders representin at least t3o=t%irds of t%e su+scri+ed capital stoc: of t%e corporation" $f t%e amendment c%an es. preference. t%e o3ners of t%e maIorit' of t%e su+scri+ed capital stoc: ma' amend or repeal an' +'=la3 or adopt ne3 +'=la3s" $t cannot +e said. Mt%e' occup' a fiduciar' relation. suc% as: (a) mar:etin strate ies and pricin structureL (+) +ud et for e?pansion and di-ersificationL (c) researc% and de-elopmentL and (d) sources of fundin . t%at /o:on 3ei %as a -ested ri %t to +e elected director.Narratives (Berne Guerrero) to t%e 3ill of t%e maIorit' of %is fello3 incorporators" $t can not t%erefore +e Iustl' said t%at t%e contract. to satisf' %is lo'alt' to +ot% corporations and place t%e performance of %is corporation duties a+o-e %is personal concerns" T%e offer and assurance of /o:on 3ei t%at to a-oid an' possi+ilit' of %is ta:in unfair ad-anta e of %is position as director of San (i uel Corporation. directors of a pri-ate corporation are not re arded as trustees.uires as director to promote %is indi-idual or corporate interests to t%e preIudice of San (i uel Corporation and its stoc:%olders. t%at t%e . if not impossi+le. t%erefore. 3%o is also t%e officer or o3ner of a competin corporation. ( 41 ) . in particular circumstances. t%en t%e dissentin minorit' %as onl' one ri %t. of an officer or director ta:in ad-anta e of an opportunit' for %is o3n personal profit 3%en t%e interest of t%e corporation Iustl' calls for protection" $t is not denied t%at a mem+er of t%e Board of *irectors of t%e San (i uel Corporation %as access to sensiti-e and %i %l' confidential information.uita+le limitation t%at it ma' not +e e?ercised for t%e a randi>ement. proposals of mer ers or tie=ups 3it% ot%er firms" $t is o+-iousl' to pre-ent t%e creation of an opportunit' for an officer or director of San (i uel Corporation. for t%e director. and in t%is sense t%e relation is one of trust"M MT%e ordinar' trust relations%ip of directors of a corporation and stoc:%olders is not a matter of statutor' or tec%nical la3" $t sprin s from t%e fact t%at directors %a-e t%e control and uidance of corporate affairs and propert' and %ence of t%e propert' interests of t%e stoc:%olders" E. %e 3ould a+sent %imself from meetin s at 3%ic% confidential matters 3ould +e discussed. e?press or implied. in t%e face of t%e fact t%at t%e la3 at t%e time suc% ri %t as stoc:%older 3as ac. 3ould not detract from t%e -alidit' and reasona+leness of t%e +'=la3s in-ol-ed" Apart from t%e impractical results Commercial *a3 ) Cor-oration *a3 200. if %e 3ere to disc%ar e effecti-el' %is dut'. +et3een t%e corporation and t%e stoc:%olders is infrin ed +' an' act of t%e former 3%ic% is aut%ori>ed +' a maIorit'"M 6ursuant to section 17 of t%e Corporation &a3.uestioned amendment of t%e +'=la3s 3as made" Certainl'. 3%ere t3o corporations are competiti-e in a su+stantial sense.uit' reco ni>es t%at stoc:%olders are t%e proprietors of t%e corporate interests and are ultimatel' t%e onl' +eneficiaries t%ereof"M A director is a fiduciar'" T%eir po3ers are po3ers in trust" Je 3%o is in suc% fiduciar' position cannot ser-e %imself first and %is cestuis second" Je cannot manipulate t%e affairs of %is corporation to t%eir detriment and in disre ard of t%e standards of common decenc'" Je cannot +' t%e inter-ention of a corporate entit' -iolate t%e ancient precept a ainst ser-in t3o masters" Je cannot utili>e %is inside information and strate ic position for %is o3n preferment" Je cannot -iolate rules of fair pla' +' doin indirectl' t%rou % t%e corporation 3%at %e could not do so directl'" Je cannot -iolate rules of fair pla' +' doin indirectl' t%rou % t%e corporation 3%at %e could not do so directl'" Je cannot use %is po3er for %is personal ad-anta e and to t%e detriment of t%e stoc:%olders and creditors no matter %o3 a+solute in terms t%at po3er ma' +e and no matter %o3 meticulous %e is to satisf' tec%nical re.ualification of a competitor from +ein elected to t%e Board of *irectors is a reasona+le e?ercise of corporate aut%orit'" &eld[2#$ Alt%ou % in t%e strict and tec%nical sense.uirements" 0or t%at po3er is at all times su+Iect to t%e e. t%ere cannot +e an' dou+t t%at t%eir c%aracter is t%at of a fiduciar' insofar as t%e corporation and t%e stoc:%olders as a +od' are concerned" As a ents entrusted 3it% t%e mana ement of t%e corporation for t%e collecti-e +enefit of t%e stoc:%olders. from ta:in ad-anta e of t%e information 3%ic% %e ac. diminis%es or restricts t%e ri %ts of t%e e?istin s%are%olders. alteration and modification" %ssue [2#$ )%et%er t%e dis.

and to inspection to o+tain suc% information. purc%ased a +eer +re3er' in Jon :on (Jon :on Bre3er' K *istiller'. 3%en S(C.81 t%ru t%e or ani>ation of S($ in Bermuda as a ta? free reor ani>ation" Assumin ar uendo t%at t%e Board of *irectors of S(C %ad no aut%orit' to ma:e t%e assailed in-estment.uestion t%at a corporation. 3%et%er t%is o3ners%ip or interest +e termed an e.uest for an e?amination of t%e records of San (i uel $nternational. it does not need t%e appro-al of t%e stoc:%olders" $t is onl' 3%en t%e purc%ase of s%ares is done solel' for in-estment and not to accomplis% t%e purpose of its incorporation t%at t%e -ote of appro-al of t%e stoc:%olders %oldin s%ares entitlin t%em to e?ercise at least t3o=t%irds of t%e -otin po3er is necessar'" As stated +' t%e corporation. &td") for t%e manufacture and mar:etin of San (i uel +eer t%ereat" Restructurin of t%e in-estment 3as made in 1. t%erefore. ood fait% and fair dealin to construe t%e statutor' ri %t of petitioner as stoc:%older to inspect t%e +oo:s and records of t%e corporation as e?tendin to +oo:s and records of suc% 3%oll' o3ned su+sidiar' 3%ic% are in t%e corporationDs possession and control" %ssue [4#$ )%et%er t%e SEC ra-el' a+used its discretion in allo3in t%e stoc:%olders of San (i uel Corporation to ratif' t%e in-estment of corporate funds in a forei n corporation" &eld [4#$ Section 18=1G1 of t%e Corporation &a3 allo3s a corporation to Min-est its funds in an' ot%er corporation or +usiness or for an' purpose ot%er t%an t%e main purpose for 3%ic% it 3as or ani>edM pro-ided t%at its Board of *irectors %as +een so aut%ori>ed +' t%e affirmati-e -ote of stoc:%olders %oldin s%ares entitlin t%em to e?ercise at least t3o=t%irds of t%e -otin po3er" $f t%e in-estment is made in pursuance of t%e corporate purpose. $nc". and %as to +e proper and la3ful in c%aracter and not inimical to t%e interest of t%e corporation" T%e M eneral rule t%at stoc:%olders are entitled to full information as to t%e mana ement of t%e corporation and t%e manner of e?penditure of its funds. a full' o3ned su+sidiar' of San (i uel Corporation" &eld [4#$ 6ursuant to t%e second para rap% of section 91 of t%e Corporation &a3. a +eneficial o3ners%ip. or a . t%e ri %t of suc% stoc:%older to e?amine t%e +oo:s and records of a 3%oll'= o3ned su+sidiar' of t%e corporation in 3%ic% %e is a stoc:%older is a different t%in " Stoc:%olders are entitled to inspect t%e +oo:s and records of a corporation in order to in-esti ate t%e conduct of t%e mana ement. under $ts control. it 3ould +e more in accord 3it% e.A8=1. mem+er or stoc:%older of t%e corporation at reasona+le %ours"M T%e stoc:%olderDs ri %t of inspection of t%e corporationDs +oo:s and records is +ased upon t%eir o3ners%ip of t%e assets and propert' of t%e corporation" $t is. $nc".uasi=o3ners%ip" T%is ri %t is predicated upon t%e necessit' of self=protection" $t is enerall' %eld +' maIorit' of t%e courts t%at 3%ere t%e ri %t is ranted +' statute to t%e stoc:%older. ( 42 ) . li:e an Commercial *a3 ) Cor-oration *a3 200. M(t)%e record of all +usiness transactions of t%e corporation and minutes of an' meetin s%all +e open to t%e inspection of an' director.Narratives (Berne Guerrero) t%at 3ould ensue from suc% arran ement.uit'. and enerall' ta:e an account of t%e ste3ards%ip of t%e officers and directors" %erein. an incident of o3ners%ip of t%e corporate propert'. t%e inspection %as to +e ermane to t%e petitionerDs interest as a stoc:%older.85=1. for t%e polic' of t%e la3 is to encoura e and enforce responsi+le corporate mana ement" %ssue [4#$ )%et%er t%e SEC ra-el' a+used its discretion in den'in /o:on 3eiDs re. it is i-en to %im as suc% and must +e e?ercised +' %im 3it% respect to %is interest as a stoc:%older and for some purpose ermane t%ereto or in t%e interest of t%e corporation" $n ot%er 3ords. especiall' 3%ere it appears t%at t%e compan' is +ein mismana ed or t%at it is +ein mana ed for t%e personal +enefit of officers or directors or certain of t%e stoc:%olders to t%e e?clusion of ot%ers"M )%ile t%e ri %t of a stoc:%older to e?amine t%e +oo:s and records of a corporation for a la3ful purpose is a matter of la3. t%ere is no . t%erefore. suc% a proposed norm of conduct 3ould +e a ainst all accepted principles underl'in a directorDs dut' of fidelit' to t%e corporation.A7. considerin t%at t%e forei n su+sidiar' is 3%oll' o3ned +' San (i uel Corporation and. it 3ould +e inconsistent 3it% /o:on 3eiDs primar' moti-e in runnin for +oard mem+ers%ip P 3%ic% is to protect %is in-estments in San (i uel Corporation" (ore important. t%en San (i uel Bre3er'. 3%ic% is to manufacture and mar:et +eer" $t appears t%at t%e ori inal in-estment 3as made in 1.uita+le o3ners%ip. t%e purc%ase of +eer manufacturin facilities +' S(C 3as an in-estment in t%e same +usiness stated as its main purpose in its Articles of $ncorporation. determine t%e financial condition of t%e corporation.

Narratives (Berne Guerrero)

indi-idual, ma' ratif' and t%ere+' render +indin upon it t%e ori inall' unaut%ori>ed acts of its officers or ot%er a ents" T%is is true +ecause t%e ,uestioned in-estment is neit%er contrar' to la3, morals, pu+lic order or pu+lic polic'" $t is a corporate transaction or contract 3%ic% is 3it%in t%e corporate po3ers, +ut 3%ic% is defecti-e from a purported failure to o+ser-e in its e?ecution t%e re,uirement of t%e la3 t%at t%e in-estment must +e aut%ori>ed +' t%e affirmati-e -ote of t%e stoc:%olders %oldin t3o=t%irds of t%e -otin po3er" T%is re,uirement is for t%e +enefit of t%e stoc:%olders" T%e stoc:%olders for 3%ose +enefit t%e re,uirement 3as enacted ma', t%erefore, ratif' t%e in-estment and its ratification +' said stoc:%olders o+literates an' defect 3%ic% it ma' %a-e %ad at t%e outset" Besides, t%e in-estment 3as for t%e purc%ase of +eer manufacturin and mar:etin facilities 3%ic% is apparentl' rele-ant to t%e corporate purpose" T%e mere fact t%at t%e corporation su+mitted t%e assailed in-estment to t%e stoc:%olders for ratification at t%e annual meetin of 15 (a' 1.88 cannot +e construed as an admission t%at t%e corporation %ad committed an ultra -ires act, considerin t%e common practice of corporations of periodicall' su+mittin for t%e ratification of t%eir stoc:%olders t%e acts of t%eir directors, officers and mana ers" 24 Aestern %nstitute o, 8ec;nolo(" %nc. vs. 5alas [GR 114042 21 Au(ust 1117# First Division, "er#osisi#a Jr$ (J): 4 concur Facts$ Ricardo T" Salas, Sal-ador T" Salas, Soledad Salas=Tu+illeIa, Antonio S" Salas, and Ric%ard S" Salas, +elon in to t%e same famil', are t%e maIorit' and controllin mem+ers of t%e Board of Trustees of )estern $nstitute of Tec%nolo ', $nc" ()$T), a stoc: corporation en a ed in t%e operation, amon ot%ers, of an educational institution" Accordin to Jomero &" #illasis, *imas Enri,ue>, peston 0" #illasis, and Re inald 0" #illasis, t%e minorit' stoc:%olders of )$T, sometime on 1 June 1.74 in t%e principal office of )$T at &a 6a>, $loilo Cit', a Special Board (eetin 3as %eld" $n attendance 3ere ot%er mem+ers of t%e Board includin Re inald #illasis" 6rior to said Special Board (eetin , copies of notice t%ereof, dated 1A (a' 1.74, 3ere distri+uted to all Board (em+ers" T%e notice alle edl' indicated t%at t%e meetin to +e %eld on 1 June 1.74 included $tem 4 3%ic% states t%at M6ossi+le implementation of Art" $$$, Sec" 4 of t%e Amended B'=&a3s of )estern $nstitute of Tec%nolo ', $nc" on compensation of all officers of t%e corporation"M $n said meetin , t%e Board of Trustees passed Resolution A7, series 1.74, rantin mont%l' compensation to Salas, et" al" as corporate officers retroacti-e 1 June 1.79, in t%e follo3in amounts: ;C%airman .,555"55Gmont%, #ice C%airman 63,955"55Gmont%, Corporate Treasurer 63,955"55Gmont% and Corporate Secretar' 63,955"55Gmont%, retroacti-e June 1, 1.79 and t%e ten percentum of t%e net profits s%all +e distri+uted e,uall' amon t%e ten mem+ers of t%e Board of Trustees" T%is s%all amend and supercede an' pre-ious resolution"< A fe3 'ears later, or on 13 (arc% 1..1, Jomero #illasis, 6reston #illasis, Re inald #illasis and *imas Enri,ue> filed an affida-it=complaint a ainst Salas, et" al" +efore t%e Office of t%e Cit' 6rosecutor of $loilo, as a result of 3%ic% 1 separate criminal informations, one for falsification of a pu+lic document under Article 181 of t%e Re-ised 6enal Code and t%e ot%er for estafa under Article 319, par" 1(+) of t%e R6C, 3ere filed +efore Branc% 33 of t%e Re ional Trial Court of $loilo Cit'" T%e c%ar e for falsification of pu+lic document 3as anc%ored on Salas, et" al"Ds su+mission of )$TDs income statement for t%e fiscal 'ear 1.79=1.74 3it% t%e Securities and E?c%an e Commission (SEC) reflectin t%erein t%e dis+ursement of corporate funds for t%e compensation of Salas, et" al" +ased on Resolution A, series of 1.74, ma:in it appear t%at t%e same 3as passed +' t%e +oard on 35 (arc% 1.74, 3%en in trut%, t%e same 3as actuall' passed on 1 June 1.74, a date not co-ered +' t%e corporationDs fiscal 'ear 1.79=1.74 (+e innin (a' 1, 1..9 and endin April 35, 1.74)" T%ereafter, trial for t%e t3o criminal cases (Criminal Cases 385.8 and 385.7), 3as consolidated" After a full=+lo3n %earin , Jud e 6orfirio 6arian %anded do3n a -erdict of ac,uittal on +ot% counts dated 4 Septem+er 1..3 3it%out imposin an' ci-il lia+ilit' a ainst t%e accused t%erein" #illasis, et" al" filed a (otion for Reconsideration of t%e ci-il aspect of t%e RTC *ecision 3%ic% 3as, %o3e-er, denied in an Order dated 13 !o-em+er 1..3" #illasis, et" al" filed t%e petition for re-ie3 on certiorari" Si nificantl' on 7 *ecem+er 1..A, a (otion for $nter-ention, dated 1 *ecem+er 1..A, 3as filed +efore t%is Court +' )estern $nstitute of Tec%nolo ', $nc", diso3nin its inclusion in t%e petition and su+mittin t%at Att'" Tran,uilino R" /ale, counsel for #illasis, et" al", %ad no aut%orit' 3%atsoe-er to represent t%e corporation in filin t%e petition" $nter-enor li:e3ise pra'ed for t%e dismissal of t%e petition for +ein utterl' 3it%out merit" T%e (otion for $nter-ention 3as ranted on
Commercial *a3 ) Cor-oration *a3 200. ( 44 )

Narratives (Berne Guerrero)

14 Januar' 1..9" %ssue$ )%et%er t%e rant of compensation to Salas, et" al" is proscri+ed under Section 35 of t%e Corporation Code" &eld$ *irectors or trustees, as t%e case ma' +e, are not entitled to salar' or ot%er compensation 3%en t%e' perform not%in more t%an t%e usual and ordinar' duties of t%eir office" T%is rule is founded upon a presumption t%at directorsGtrustees render ser-ice ratuitousl', and t%at t%e return upon t%eir s%ares ade,uatel' furnis%es t%e moti-es for ser-ice, 3it%out compensation" @nder Section 35 of t%e Corporation Code, t%ere are onl' t3o (1) 3a's +' 3%ic% mem+ers of t%e +oard can +e ranted compensation apart from reasona+le per diems: (1) 3%en t%ere is a pro-ision in t%e +'=la3s fi?in t%eir compensationL and (1) 3%en t%e stoc:%olders representin a maIorit' of t%e outstandin capital stoc: at a re ular or special stoc:%oldersD meetin a ree to i-e it to t%em" Also, t%e proscription, %o3e-er, a ainst rantin compensation to directorGtrustees of a corporation is not a s3eepin rule" )ort%' of note is t%e clear p%raseolo ' of Section 35 3%ic% state: MBTC%e directors s%all not recei-e an' compensation, as suc% directors"M T%e p%rase as suc% directors is not 3it%out si nificance for it delimits t%e scope of t%e pro%i+ition to compensation i-en to t%em for ser-ices performed purel' in t%eir capacit' as directors or trustees" T%e unam+i uous implication is t%at mem+ers of t%e +oard ma' recei-e compensation, in addition to reasona+le per diems, 3%en t%e' render ser-ices to t%e corporation in a capacit' ot%er t%an as directorsGtrustees" Jerein, resolution A7, s" 1.74 ranted mont%l' compensation to Salas, et" al" not in t%eir capacit' as mem+ers of t%e +oard, +ut rat%er as officers of t%e corporation, more particularl' as C%airman, #ice=C%airman, Treasurer and Secretar' of )estern $nstitute of Tec%nolo '" Clearl', t%erefore, t%e pro%i+ition 3it% respect to rantin compensation to corporate directorsGtrustees as suc% under Section 35 is not -iolated in t%is particular case" Conse,uentl', t%e last sentence of Section 35 3%ic% pro-ides t%at M$n no case s%all t%e total 'earl' compensation of directors, as suc% directors, e?ceed ten (15H) percent of t%e net income +efore income ta? of t%e corporation durin t%e precedin 'earM does not li:e3ise find application in t%is case since t%e compensation is +ein i-en to Salas, et" al" in t%eir capacit' as officers of )$T and not as +oard mem+ers" 24 Nac-il vs. %nternational Broadcastin( Cor-oration [GR 144707 21 'arc; 2002# First Division, 3a unan (J): ) concur, 1 on o00icial leave Facts$ *il' *an' !acpil states t%at %e 3as Assistant /eneral (ana er for 0inanceGAdministration and Comptroller of $ntercontinental Broadcastin Corporation ($BC) from 1..4 until April 1..8" Accordin to !acpil, 3%en Emiliano Templo 3as appointed to replace $BC 6resident Tomas /ome> $$$ sometime in (arc% 1..8, t%e former told t%e Board of *irectors t%at as soon as %e assumes t%e $BC presidenc', %e 3ould terminate t%e ser-ices of !acpil" Apparentl', Templo +lamed !acpil, alon 3it% a certain (r" Basilio and (r" /ome>, for t%e prior mismana ement of $BC" @pon %is assumption of t%e $BC presidenc', Templo alle edl' %arassed, insulted, %umiliated and pressured !acpil into resi nin until t%e latter 3as forced to retire" Jo3e-er, Templo refused to pa' %im %is retirement +enefits, alle edl' +ecause %e %ad not 'et secured t%e clearances from t%e 6residential Commission on /ood /o-ernment (6C//) and t%e Commission on Audit (COA)" 0urt%ermore, Templo alle edl' refused to reco ni>e !acpilDs emplo'ment, claimin t%at !acpil 3as not t%e Assistant /eneral (ana erGComptroller of $BC +ut merel' usurped t%e po3ers of t%e Comptroller" Jence, in 1..8, !acpil filed 3it% t%e &a+or Ar+iter a complaint for ille al dismissal and non=pa'ment of +enefits" $nstead of filin its position paper, $BC filed a motion to dismiss alle in t%at t%e &a+or Ar+iter %ad no Iurisdiction o-er t%e case" $BC contended t%at !acpil 3as a corporate officer 3%o 3as dul' elected +' t%e Board of *irectors of $BCL %ence, t%e case ,ualities as an intra=corporate dispute fallin 3it%in t%e Iurisdiction of t%e Securities and E?c%an e Commission (SEC)" Jo3e-er, t%e motion 3as denied +' t%e &a+or Ar+iter in an Order dated 11 April 1..7" On 11 Au ust 1..7, t%e &a+or Ar+iter rendered a *ecision statin t%at !acpil %ad +een ille all' dismissed" $BC 3as ordered (1) to reinstate !acpil to %is former position 3it%out diminution of salar' or loss of seniorit' ri %ts, and 3it% full +ac:3a es computed from t%e time of %is ille al dismissal on (a' 14, 1..8 up to t%e time of %is actual reinstatement 3%ic% is tentati-el'
Commercial *a3 ) Cor-oration *a3 200. ( 44 )

Narratives (Berne Guerrero)

computed as of t%e date of t%is decision on Au ust 11, 1..7 in t%e amount of 61,131,895"55L and t%at s%ould !acpil +e not reinstated 3it%in 15 da's from receipt of t%is decision, %e s%all +e entitled to additional +ac:3a es until actuall' reinstatedL and (1) to pa' !acpil 61 (illion as and for moral dama es, 6955,555"55 as and for e?emplar' dama es, and 15H t%ereof as and for attorne'Ds fees" $BC appealed to t%e !&RC, +ut t%e same 3as dismissed in a Resolution dated 1 (arc% 1..., for its failure to file t%e re,uired appeal +ond in accordance 3it% Article 113 of t%e &a+or Code" $BC t%en filed a motion for reconsideration t%at 3as li:e3ise denied in a Resolution dated 14 April 1..." $BC t%en filed 3it% t%e Court of Appeals a petition for certiorari under Rule 49, 3%ic% petition 3as ranted +' t%e appellate court in its *ecision dated 13 !o-em+er 1..." !acpil t%en filed a motion for reconsideration, 3%ic% 3as denied +' t%e appellate court in a Resolution dated 31 Au ust 1555" !acpil filed t%e petition for re-ie3 on certiorari" %ssue [1#$ )%et%er t%e SEC or t%e !&RC %as Iurisdiction o-er t%e !acpil2s alle ed ille al dismissal" &eld [1#$ As !acpilDs appointment as comptroller re,uired t%e appro-al and formal action of t%e $BCDs Board of *irectors to +ecome -alid, 18 it is clear t%erefore %olds t%at !acpil is a corporate officer 3%ose dismissal ma' +e t%e su+Iect of a contro-ers' co ni>a+le +' t%e SEC under Section 9(c) of 6* .51=A 3%ic% includes contro-ersies in-ol-in +ot% election and appointment of corporate directors, trustees, officers, and mana ers Jad !acpil +een an ordinar' emplo'ee, suc% +oard action 3ould not %a-e +een re,uired" T%us, since !acpil is considered a corporate officer and %is claim of ille al dismissal is a contro-ers' t%at falls under t%e Iurisdiction of t%e SEC as contemplated +' Section 9 of 6* .51=A" T%e rule is t%at dismissal or non= appointment of a corporate officer is clearl' an intra=corporate matter and Iurisdiction o-er t%e case properl' +elon s to t%e SEC, not to t%e !&RC" As to t%e ar ument t%at t%e nature of %is functions is recommendator' t%ere+' ma:in %im a mere mana erial officer, t%e Court %as pre-iousl' %eld t%at t%e relations%ip of a person to a corporation, 3%et%er as officer or a ent or emplo'ee is not determined +' t%e nature of t%e ser-ices performed, +ut instead +' t%e incidents of t%e relations%ip as t%e' actuall' e?ist" %ssue [2#$ )%et%er t%e inclusion of mone' claims in !acpil2s complaint for ille al dismissal remo-es t%e case from t%e am+it of t%e Corporation Code" &eld [2#$ $t is of no conse,uence t%at !acpilDs complaint for ille al dismissal includes mone' claims, for suc% claims are actuall' part of t%e per,uisites of %is position in, and t%erefore lin:ed 3it% %is relations 3it%, t%e corporation" T%e inclusion of suc% mone' claims does not con-ert t%e issue into a simple la+or pro+lem" Clearl', t%e issues raised +' !acpil a ainst t%e $BC are matters t%at come 3it%in t%e area of corporate affairs and mana ement, and constitute a corporate contro-ers' in contemplation of t%e Corporation Code" (Note: =nder Section 2$) o0 the Securities >e'ulation Code (>e u.lic Act ?<@@) 8hich 8as si'ned into la8 .! then /resident Jose h %9ercito %strada on 1? Jul! )AAA, the S%CBs 9urisdiction over all cases enu#erated in Section 2 o0 /D @A)5A has .een trans0erred to the >e'ional Trial Courts$) 2. :eo-leBs Aircar(o and Aare;ousin( Co. %nc. vs. Court o, A--eals [GR 117/47 7 9cto+er 111/# First Division, /an'ani.an (J): 4 concur Facts$ 6eopleDs Aircar o and )are%ousin Co" $nc" (6A)C$) is a domestic corporation, 3%ic% 3as or ani>ed in t%e middle of 1.74 to operate a customs +onded 3are%ouse at t%e old (anila $nternational Airport in 6asa' Cit'" To o+tain a license for t%e corporation from t%e Bureau of Customs, Antonio 6unsalan Jr", t%e corporation president, solicited a proposal from Stefani SaNo for t%e preparation of a feasi+ilit' stud'" SaNo su+mitted a letter=proposal dated 18 Octo+er 1.74 (M0irst ContractM) to 6unsalan, for t%e proIect feasi+ilit' stud' (mar:et, tec%nical, and financial feasi+ilit') and preparation of pertinent documentation re,uirements for t%e application, 3ort% 6395,555" $nitiall', C%en Oon , t%e maIorit' stoc:%older of 6A)C$, o+Iected to SaNoDs offer, as anot%er compan' priced a similar proposal at onl' 619,555" Jo3e-er, 6unsalan preferred SaNoDs ser-ices +ecause of t%e latterDs mem+ers%ip in t%e tas: force, 3%ic% 3as super-isin t%e transition of
Commercial *a3 ) Cor-oration *a3 200. ( 4. )

Narratives (Berne Guerrero) t%e Bureau of Customs from t%e (arcos o-ernment to t%e A. reconsideration of t%e decision 3as denied in t%e Resolution promul ated on 17 Octo+er 1. 3%et%er 3it%in or +e'ond t%e scope of %is ordinar' po3ers" $t re. a t%ree=da' trainin seminar for t%e latterDs emplo'ees" On 19 (arc% 1. t%rou % its president Antonio 6unsalan Jr". t%e appellate court modified t%e decision of t%e trial court. SaNo sent 6A)C$ anot%er letter=proposal (MSecond ContractM) formali>in its proposal for consultanc' ser-ices in t%e amount of 6A55.. on t%e round t%at no one s%ould +e unIustl' enric%ed at t%e e?pense of anot%er (Article 11A1. sent SaNo a letter confirmin t%eir a reement" Accordin l'.555.A. and declared t%e Second Contract -alid and +indin on 6A)C$. And' #illaceren. +ut t%e -estin of a corporate officer 3it% t%e po3er to +ind t%e corporation" Jerein. in (a' 1. t%e Bureau issued to it a license to operate. 3it% 3%ic% it clot%es %imL or (1) t%e ac. to act 3it%in t%e scope of an apparent aut%orit'.78 in t%e 3are%ouse of 6A)C$.78. and despite %is :no3led e t%at a roup of emplo'ees of t%e compan' %ad +een commissioned +' t%e +oard of directors to prepare an operations manual" T%e Re ional Trial Court (RTC) of 6asa' Cit'. denied t%at SaNo %ad prepared an operations manual and a computer pro ram or conducted a seminar=3or:s%op for its emplo'ees" $t furt%er alle ed t%at t%e letter=a reement 3as si ned +' 6unsalan 3it%out aut%orit'.A" 6A)C$ filed t%e 6etition for Re-ie3" %ssue$ )%et%er a sin le instance 3%ere t%e corporation %ad pre-iousl' allo3ed its president to enter into a contract 3it% anot%er 3it%out a +oard resolution e?pressl' aut%ori>in %im. 6A)C$. 6A)C$ refused to pa' %im for %is ser-ices" 6A)C$.555 to t%e former. 3%ic% 3as %eld lia+le to SaNo in t%e full amount of 6A55.74. in t%e t%ird 3ee: of Januar' 1. Ci-il Code)" T%e trial Court determined t%e amount Min li %t of t%e e-idence presented +' defendant on t%e usual c%ar es made +' a leadin consultanc' firm on similar ser-ices"M @pon appeal. since SaNo %ad actuall' prepared t%e operations manual and conducted a trainin seminar for 6A)C$ and its emplo'ees. in ot%er 3ords. a position %e %eld until %e +ecame tec%nical assistant to t%en Commissioner (iriam *efensor=Santia o on 8 (arc% 1. or an' ot%er a ent. 6unsalan sold %is s%ares in 6A)C$ and resi ned as its president in 1.uino Administration" On 18 Octo+er 1.78. implemented and paid 3it%out a %itc%" Jence. %as clot%ed its president 3it% apparent aut%orit' to e?ecute t%e su+Iect contract" &eld$ Apparent aut%orit' is deri-ed not merel' from practice" $ts e?istence ma' +e ascertained t%rou % (1) t%e eneral manner in 3%ic% t%e corporation %olds out an officer or a ent as %a-in t%e po3er to act or. treasurer and maIor stoc:%older of 6A)C$" T%e 0irst Contract 3as consummated.78.77. 6A)C$ did not o+Iect to or repudiate said contract. conducted a seminar=3or:s%op for its emplo'ees and deli-ered to it a computer pro ramL +ut t%at. recei-ed t%e operations manual prepared +' SaNo" 6A)C$ su+mitted said operations manual to t%e Bureau of Customs in connection 3it% t%e formerDs application to operate a +onded 3are%ouseL t%ereafter. 0e+ruar' 1.74. SaNo prepared a feasi+ilit' stud' for 6A)C$ 3%ic% e-entuall' paid %im t%e +alance of t%e contract price. t%e corporation 3ill. Sano s%ould not +e faulted for +elie-in t%at 6unsalanDs conformit' to t%e contract in dispute 3as also +indin on petitioner" $t is familiar doctrine t%at if a corporation :no3in l' permits one of its officers. 3it% actual or constructi-e :no3led e t%ereof. ( 40 ) . and on 17 0e+ruar' 1. despite demand. t%rou % 6unsalan.uantit' of similar acts 3%ic% esta+lis%es apparent aut%orit'.uest..5 declared t%e Second Contract unenforcea+le or simulated" Jo3e-er. representin pa'ment of SaNo ser-ices in preparin t%e manual of operations and in t%e conduct of a seminar for 6A)C$" As no ne3 round 3as raised +' 6A)C$. rendered a *ecision dated 14 Octo+er 1.77" (ean3%ile.78" On . in collusion 3it% SaNo in order to unla3full' et some mone' from 6A)C$. it %olds %im out to t%e pu+lic as possessin t%e po3er to do t%ose actsL and t%us. t%us Mclot%in M its president 3it% t%e po3er to +ind t%e corporation" T%e rant of apparent aut%orit' to 6unsalan is e-ident in t%e testimon' of Oon P senior -ice president. Branc% 115.555" On 15 Januar' 1. alt%ou % not accordin to t%e sc%edule a reed upon" On A *ecem+er 1. t%e apparent aut%orit' to act in eneral. ena+lin it to +ecome one of t%e t%ree pu+lic customs +onded 3are%ouses at t%e international airport" SaNo also conducted. 6A)C$.uires presentation of e-idence of similar act(s) e?ecuted eit%er in its fa-or or in fa-or of ot%er parties" $t is not t%e .. upon 6unsalanDs re. SaNo filed a collection suit a ainst 6A)C$" Je alle ed t%at %e %ad prepared an operations manual for 6A)C$. entered into t%e 0irst Contract 3it%out first securin +oard appro-al" *espite suc% lac: of +oard appro-al.uiescence in %is acts of a particular nature. t%e trial court a3arded 645. in its ans3er. -ice president of 6A)C$. SaNo Ioined t%e Bureau of Customs as special assistant to t%en Commissioner Ale? 6adilla. as a ainst Commercial *a3 ) Cor-oration *a3 200.

replied t%at t%e +oard of directors of 6)CC decided to impose t%e follo3in conditions: (a) *eli-er' of 3%ite cement s%all commence at t%e end of !o-em+er. circulatin ne3spaper t%e fact of %is +ein t%e e?clusi-e dealer of 6))CDs 3%ite cement products in (indanao area. sell to and suppl' Te. and *ecem+er. 6%ilippine Currenc'. 11 'arc. entered into a dealers%ip a reement 3%ere+' Te 3as o+li ated to act as t%e e?clusi-e dealer andGor distri+utor of 6)CC of its cement products in t%e entire (indanao area for a term of 9 'ears and pro-idin amon ot%ers t%at (a) t%e corporation s%all.. entered into a 3ritten a reement 3it% se-eral %ard3are stores dealin in +u'in and sellin 3%ite cement in t%e Cities of *a-ao and Ca a'an de Oro 3%ic% 3ould t%us ena+le %im to sell %is allocation of 15. %ntermediate A--ellate Court [GR 0/. +' Septem+er.4.4.555 +a s (. (r" Fosimo 0alcon and Justo C" Tra>o.. per +a of 3%ite cement. unconditional.85 t%at %e is ma:in t%e necessar' preparation for t%e openin of t%e re.A l+sG+a ) of 3%ite cement per mont%L (+) Te s%all pa' 6)CC 6. and irre-oca+le letter of credit in fa-or of 6)CC and t%at upon certification +' t%e +oat captain on t%e +ill of ladin t%at t%e oods %a-e +een loaded on +oard t%e -essel +ound for *a-ao t%e said +an: or +an:in institution s%all release t%e correspondin amount as pa'ment of t%e oods so s%ipped"M Ri %t after Te entered into t%e dealers%ip a reement. %e placed an ad-ertisement in a national. 1. 1114# Second Division. Ca# os Jr$ (J): 4 concur Facts$ On or a+out 14 Jul' 1. Te sometime in t%e mont%s of Septem+er."85. SaNo prepared an operations manual and conducted a seminar for t%e emplo'ees of 6A)C$ in accordance 3it% t%eir contract" 6A)C$ accepted t%e operations manual.85. more particularl'. 3%ic% 3ere concluded in anticipation of.85L (+) Onl' 7. %e 3as as:ed +' some of %is +usinessmen friends and close associates if t%e' can +e %is su+=dealer in t%e (indanao area" Rel'in %ea-il' on t%e dealers%ip a reement. and 3as e-en con ratulated +' %is +usiness associates. in t%e (anila C%ronicle dated 14 Au ust 1. entered into an e?clusi-e dealers%ip a reement 3it% a certain !apoleon Co for t%e mar:etin of 3%ite cement in (indanao" Te filed suit" After trial.555 +a s re ular suppl' of t%e said commodit'. and 3it% e-ident intention not to +e +ound +' t%e terms and conditions t%ereof.. and Te +' force of circumstances 3as constrained to cancel %is a reement for t%e suppl' of 3%ite cement 3it% t%ird parties.Narratives (Berne Guerrero) an'one 3%o %as in ood fait% dealt 3it% it t%rou % suc% a ent. %o3e-er.555 +a s of 3%ite cement can +e disposed of. (a:ati Branc%L ( ) 6a'ment of 3%ite cement s%all +e made in ad-ance and 3%ic% pa'ment s%all +e used +' t%e defendant as uarant' in t%e openin of a forei n letter of credit to co-er costs and e?penses in t%e procurement of materials in t%e manufacture of 3%ite cement" Se-eral demands to compl' 3it% t%e dealers%ip a reement 3ere made +' Te to 6)CC. +e estopped from den'in t%e a entDs aut%orit'" 0urt%ermore. 6)CC t%ru its corporate secretar'. as dealer 3it% 15. Octo+er. as C%airman of t%e Board. 6A)C$ 3as i-en +' t%e Bureau of Customs a license to operate a +onded 3are%ouse" /rantin ar uendo t%en t%at t%e Second Contract 3as outside t%e usual po3ers of t%e president. in -iolation of. 6A)C$Ds ratification of said contract and acceptance of +enefits %a-e made it +indin . ( 47 ) .uisite letter of credit to co-er t%e price of t%e due initial deli-er' for t%e mont% of Septem+er 1.555 +a s of 3%ite cement per mont% for onl' a period of t%ree (3) mont%s 3ill +e deli-eredL (c) T%e price of 3%ite cement 3as priced at 613"35 per +a L (d) T%e price of 3%ite cement is su+Iect to readIustment unilaterall' on t%e part of t%e defendantL (e) T%e place of deli-er' of 3%ite cement s%all +e Austurias (sic)L (f) T%e letter of credit ma' +e opened onl' 3it% t%e 6rudential Ban:. AleIandro Te and 6rime )%ite Cement Corporation (6)CC) t%ru its 6resident. t%e trial court adIud ed 6)CC lia+le to AleIandro Te in t%e Commercial *a3 ) Cor-oration *a3 200.ite Cement Cor-oration vs.85" After Te 3as assured +' %is supposed +u'er t%at %is allocation of 15.85. 1.4.. 6)CC. and pursuant to t%e said dealers%ip a reement" !ot3it%standin t%at t%e dealers%ip a reement +et3een Te and 6)CC 3as in force and su+sistin . 1. 6)CC refused to compl' 3it% t%e same. 0OB *a-ao and Ca a'an de Oro portsL (c) Te s%all e-er' time 6)CC is read' to deli-er t%e ood. 1. commencin Septem+er. %e informed t%e defendant corporation in %is letter dated 17 Au ust 1. su+mitted it to t%e Bureau of Customs and allo3ed t%e seminar for its emplo'ees" As a result of its aforementioned actions. open 3it% an' +an: or +an:in institution a confirmed. nonet%eless" T%e enforcea+ilit' of contracts under Article 1A53(1) is ratified M+' t%e acceptance of +enefits under t%emM under Article 1A59" 20 :rime A. loo:in for3ard to 6)CCDs dut' to compl' 3it% t%e dealers%ip a reement" $n repl' to t%e aforesaid letter of Te. so muc% so.

e-en in t%e a+sence of e?press or implied aut%orit' +' ratification. alt%ou % it ma' %a-e +een in t%e ordinar' course of +usiness" T%e fi?ed price of 6. t%e 6resident as suc% ma'. and 615."85 per +a for t%e 3%ole 9 'ears of t%e contract" 0airness on %is part as a director of t%e corporation from 3%om %e 3as to +u' t%e cement. at t%e fi?ed price of 6. a contract entered into +' its 6resident. prices of commodities in eneral. t%e contract 3as neit%er fair nor reasona+le" T%e Mdealers%ip a reementM entered into in Jul' 1.uite clear t%at %e 3as uilt' of dislo'alt' to t%e corporationL %e 3as attemptin in effect. is dealin 3it% a t%ird person. Te 3as not an ordinar' stoc:%olderL %e 3as a mem+er of t%e Board of *irectors and Auditor of t%e corporation as 3ell" Je 3as 3%at is often referred to as a Mself=dealin M director" A director of a corporation %olds a position of trust and as suc%. as 3ell as under t%e present Corporation Code. it ma' +e ratified +' t%e stoc:%olders pro-ided a full disclosure of %is ad-erse interest is made" /rantin ar uendo t%at t%e Mdealers%ip a reementM 3ould +e -alid and enforcea+le if entered into 3it% a person ot%er t%an a director or officer of t%e corporation. all corporate po3ers s%all +e e?ercised +' t%e Board of *irectors.uite fle?i+le" T%e' appl' 3%ere t%e 6resident or ot%er officer. TeDs o3n (emorandum s%o3s t%at in Septem+er 1."85 per +a " Te is a +usinessman %imself and must %a-e :no3n. +ut are all eneral and t%us . 6155. to enric% %imself at t%e e?pense of t%e corporation" T%ere is no s%o3in t%at t%e stoc:%olders ratified t%e Mdealers%ip a reementM or t%at t%e' 3ere full' a3are of its pro-isions" T%e contract 3as t%erefore not -alid and t%e Court cannot allo3 %im to reap t%e Commercial *a3 ) Cor-oration *a3 200. i"e". t%e fact t%at t%e ot%er part' to t%e contract 3as a *irector and Auditor of 6)CC c%an es t%e 3%ole situation" 0irst of all. directors are committed to see: t%e ma?imum amount of profits for t%e corporation" A directorDs contract 3it% %is corporation is not in all instances -oid or -oida+le" $f t%e contract is fair and reasona+le under t%e circumstances."85 per +a for a period of 9 'ears 3as not fair and reasona+le" As director.89. %e cannot sacrifice t%e latter to %is o3n ad-anta e and +enefit" As corporate mana ers. t%e price 3as pe ed at 6. t%at at t%at time.Narratives (Berne Guerrero) amount of 63. 3%ic% 3as t%en in force at t%e time t%e case arose. ( 4/ ) . pro-ided t%e same is reasona+le under t%e circumstances" T%ese rules are +asic. t%e reason 3%' deli-er' 3as not to +e in until 1A mont%s later" Je must %a-e :no3n t%at 3it%in t%at period of 4 'ears. purportedl' actin for t%e corporations. 6)CC %ad not e-en commenced t%e manufacture of 3%ite cement. no pro-ision 3as made in t%e Mdealers%ip a reementM to allo3 for an increase in price mutuall' accepta+le to t%e parties" $nstead. +ind t%e corporation +' a contract in t%e ordinar' course of +usiness.uiescenceL +' acts s%o3in appro-al or adoption of t%e contractL or +' acceptance and retention of +enefits flo3in t%erefrom" 0urt%ermore. 3ere not sta+le and 3ere e?pected to rise" At t%e time of t%e contract. for 9 'ears startin Septem+er 1. t%ere 3ould +e a considera+le rise in t%e price of 3%ite cement" $n fact. TeDs +ounden dut' 3as to act in suc% manner as not to undul' preIudice t%e corporation" $n t%e li %t of t%e circumstances of t%is case.555 55 as and for attorne'Ds fees and costs" T%e appellate court affirmed t%e said decision" Jence.uite different 3%ere a director or officer is dealin 3it% %is o3n corporation" Jerein.85. as a eneral rule. or at least must +e presumed to :no3. %e o3es a dut' of lo'alt' to %is corporation" $n case %is interests conflict 3it% t%ose of t%e corporation. ma' still +ind t%e corporation if t%e +oard s%ould ratif' t%e same e?pressl' or impliedl'" $mplied ratification ma' ta:e -arious forms P li:e silence or ac. 6)CC filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%e Mdealers%ip a reementM referred +' t%e 6resident and C%airman of t%e Board of 6)CC is a -alid and enforcea+le contract" &eld$ T%e . t%e price per +a 3as 61A"95. speciall' since %e 3as t%e ot%er part' in interest. t%e Board ma' e?pressl' dele ate specific po3ers to its 6resident or an' of its officers" $n t%e a+sence of suc% e?press dele ation.555 +a s of 3%ite cement per mont%. it 3as alread' 638"95 per +a " *espite t%is.4.85. and 3%ite cement in particular. 3as to sell and suppl' to Te 15. on +e%alf of t%e corporation. 3it%out aut%orit' from t%e Board of *irectors. 3ould re.A55"55 as actual dama es.351.. e?cept as ot%er3ise pro-ided +' la3" Alt%ou % it cannot completel' a+dicate its po3er and responsi+ilit' to act for t%e Iuridical entit'. it is to @s .dealers%ip a reement< is not -alid and unenforcea+le" @nder t%e Corporation &a3. t%is unfairness in t%e contract is also a +asis 3%ic% renders a contract entered into +' t%e 6resident. and +' t%e middle of 1.555"55 as moral dama es. a person outside t%e corporation" T%e situation is .uire suc% a pro-ision" $n fact. -oid or -oida+le.

unpaid salaries. in eneral. ( 41 ) .74. +ein a mere fiction of la3. Branc% !o" #.74.74. actin t%rou % its directors. summons or e-en a cop' of t%e complaintL %ence. %e said. Santos filed a motion for reconsideration of t%e !&RCDs resolution alon 3it% a pra'er for t%e . a memorandum callin t%e latterDs attention to t%e failure of t%e compan' to compl' 3it% t%e 3it%%oldin ta? re.ue>" (illena re.7.131"19 correspondin to t%e latterDs unpaid salaries and ad-ances: 69. t%e disre ard of its independent +ein and t%e liftin of t%e corporate -eil" As a rule. peculiar situations or -alid rounds can e?ist to 3arrant.. Sorso on" On 11 Au ust 1. Citu' (J): 4 concur Facts$ (el-in *" (illena. 3%ere %e 3as alread' a senior staff auditor. officers and emplo'ees. National *a+or Relations Commission [GR 101011 14 'arc. (illena filed 3it% t%e !&RC Re ional Ar+itration.3A5". t%e compan' and its co=respondents filed a Mmotion for reconsideration and Gor appeal"M 7 T%e motionGappeal 3as fort%3it% indorsed to t%e E?ecuti-e *irector of t%e !&RC in (anila" $n a resolution. 13t% mont% pa'. A55"55 as separation pa'" Santos. 3as %ired to +e t%e proIect accountant for (ana (inin and *e-elopment CorporationDs (((*C) minin operations in /at+o. %ad it not +een for t%e assurance of a Mcontinuous Io+M +' ((*CDs En " Rodillano E" #elas.A55"55 for petitionerDs 13t% mont% pa'L 63. &a+or Ar+iter 0ructouso T" Aurellano.9 as ser-ice incenti-e lea-e pa'L and 69. /ores K #ela'o accountin firm.uas%al of t%e 3rit of e?ecution and order of arnis%ment" Je a-erred t%at %e %ad ne-er recei-ed an' notice. o-ertime pa'. separation pa' and incenti-e lea-e pa' a ainst ((*C and its t3o top officials.79. to Commercial *a3 ) Cor-oration *a3 200. et" al" 3ere furt%er ordered to pa' (illena 15H of t%e monetar' a3ards as attorne'Ds fees" Alle in a+use of discretion +' t%e &a+or Ar+iter. and to ma:e t%e correspondin mont%l' remittances to. in &e a>pi Cit'. are its sole lia+ilities" !e-ert%eless. from t%e people comprisin it" T%e rule is t%at o+li ations incurred +' t%e corporation. BenIamin A Santos (t%e 6resident) and Rodillano A" #elas.ue> (t%e e?ecuti-e -ice=president)" $n %is complaint=affida-it (position paper). findin no -alid cause for terminatin complaintDs emplo'ment. t%is situation mi %t arise a corporation is used to e-ade a Iust and due o+li ation or to Iustif' a 3ron . Bacon. t%e ((*C corporate treasurer.Narratives (Berne Guerrero) fruits of %is dislo'alt'" 27 5antos vs. ruledt%at a partial closure of an esta+lis%ment due to losses 3as a retrenc%ment measure t%at rendered t%e emplo'er lia+le for unpaid salaries and ot%er monetar' claims" T%e &a+or Ar+iter ordered Santos. to s%ield or perpetrate fraud. it 3as returned unsatisfied for t%e failure of t%e s%eriff to locate t%e offices of t%e corporation in t%e addressed indicated" Anot%er 3rit of e?ecution and an order of arnis%ment 3as t%ereupon ser-ed on Santos at %is residence" Contendin t%at %e %ad +een denied due process. t%e !&RC dismissed t%e motion for reconsideration" Santos filed t%e petition for certiorari" %ssue$ )%et%er Santos s%ould +e made solidaril' lia+le 3it% ((*C" &eld$ A corporation is a Iudicial entit' 3it% le al personalit' separated and distinct from t%ose actin for and in its +e%alf and. (illena sent to (r" /il A+aNo. a complaint for ille al dismissal..1. su+mitted on 18 Octo+er 1. et" al" to pa' (illena t%e amount of 638. (illena alle ed. 1110# 1. t%at %is dismissal 3as merel' an offs%oot of %is letter of 11 Au ust 1. on 1 Octo+er 1. dated 5A Septem+er 1.74 to A+aNo a+out t%e compan'Ds ina+ilit' to pa' its 3or:ers and to remit 3it%%oldin ta?es to t%e B$R" On 18 Jul' 1. t%e &a+or Ar+iter at no time %ad ac.uested t%at %e +e reim+ursed t%e Mad-ancesM %e %ad made for t%e compan' and +e paid %is Maccrued salariesGclaims"M T%e claim 3as not %eeded" On Octo+er 1.uirements of. namel'.uired Iurisdiction o-er %im" On 14 Au ust 1. A+aNo ad-ised (illena t%at it 3as t%e +oardDs decision t%at it stop porduction (operation) in Sorso on due to t%e upcomin rain' seasons and t%e deterioration of t%e peace and order in t%e said areaL t%at t%e corporation 3ill underta:e onl' necessar' maintenance and repair 3or: and 3ill :eep o-er%ead do3n to t%e minimum mana ea+le le-elL and t%at t%e corporation 3ill not need a proIect accountant until t%e corporaton resumes full=scale operations" (illena e?pressed Ms%oc:M o-er t%e termination of %is emplo'ment" Je complained t%at %e 3ould not %a-e resi ned from t%e S'cip.74. t%e Bureau of $nternal Re-enue (B$R) on account of dela'ed pa'ments of accrued salaries to t%e compan'Ds la+orers and emplo'ees" $n a letter.77. amon ot%er t%in s. t%e !&RC affirmed t%e decision of t%e &a+or Ar+iter" A 3rit of e?ecution correspondin l' issuedL %o3e-er. al+eit done sparin l'. dated 7 Septem+er 1.

to t%e need for a furt%er miti ation of losses. t%e federation conducted an audit of t%e local union=funds" T%e in-esti ation" did not 'ield an' unfa-ora+le result and t%e local union" officers 3ere cleared of t%e c%ar es of anomal' in t%e custod'. t%e local union 3rote @&/)6 a letter re. /odofredo 6aceNo.74" On 11 (arc% 1. Beda (a dalena #illanue-a. a local union election 3as %eld under t%e auspices of t%e @&/)6 3%erein (S(/=@)6. a 6etition for $mpeac%ment 3as filed 3it% t%e national federation @&/)6 +' t%e defeated candidates in t%e aforementioned election" On 14 June 1. $nc".an n( m(a 'an((a(a3a sa '. does not fort%3it% file 3it% t%e corporate secretar' %is 3ritten o+Iection t%eretoL (3) Je a rees to %old %imself personall' and solidaril' lia+le 3it% t%e corporationL or (A) Je is made. %andlin and disposition of t%e union funds" T%e 1A defeated candidates filed a 6etition for $mpeac%mentGE?pulsion of t%e local union officers 3it% t%e *O&E !CR on 9 !o-em+er 1. Ramos [GR 114107 20 A-ril 2001# Third Division.Narratives (Berne Guerrero) carr' out similar ot%er unIustifia+le aims or intentions. ( 40 ) . or (+) for +ad fait% or ross ne li ence in directin its affairs. t%e same 3as dismissed on 1 (arc% 1. +een due. trustee or officerL to 3it: )%en (1) Je assents (a) to a patentl' unla3ful act of t%e corporation. or (+) for conflict of interest. and t%e ot%er union officers 3ere proclaimed as 3inners" (inutes of said election 3ere dul' filed 3it% t%e Bureau of &a+or Relations on 1. or as a su+terfu e to commit inIustice and so circum-ent t%e la3" )it%out necessaril' piercin t%e -eil of corporate fiction. D> 11<A4A. t%e Secretar' /eneral of t%e national federation. (B) ((S(/. Donza'a5>e!es (J): ) concur. t%e local union %eld a eneral mem+ers%ip meetin at t%e Carunc%o Comple? in 6asi " Se-eral union mem+ers failed to attend t%e meetin .77. instead. pursuant to Sections A and 9. ) reiterate their se arate o inion in Serrano v 6E>C.74.ruar! )AAA decisionF /urisi#a.77.ield ('5'G)CA:) vs. Septem+er 1.uestin it to deduct t%e union fines from t%e 3a esGsalaries of t%ose union mem+ers 3%o failed to attend t%e eneral mem+ers%ip meetin " $n a (emorandum dated 3 Jul' 1. statin t%at it cannot deduct fines from t%e emplo'eesD salar' 3it%out oin a ainst certain la3s" T%e compan' su ested t%at t%e union refer t%e matter to t%e proper o-ernment office for resolution in order to a-oid placin t%e compan' in t%e middle of t%e issue" T%e imposition of 695"55 fine Commercial *a3 ) Cor-oration *a3 200.77. its stoc:%olders or ot%er personsL (1) Je consents to t%e issuance of 3atered stoc:s or 3%o. t%e Mlocal unionM). Januar! )AAA$ +)? Fe. +' (ed=Ar+iter Renato 6arun o for failure to su+stantiate t%e c%ar es and to present e-idence in support of t%e alle ations" On 18 April 1. Santos s%ould not %a-e +een made personall' ans3era+le for t%e pa'ment of (illenaDs +ac: salaries" 2/ 'ala"an( 5ama. %a-in :no3led e t%ereof. t%e federation 3rote (" /reenfield (B) a letter ad-isin t%e latter not to deduct t%e fift'=peso fine from t%e salaries of t%e union mem+ers" T%e follo3in da'. Green. t%e onset of t%e rain' season. personal ci-il lia+ilit' can also +e said to la3full' attac% to a corporate director. t%e MfederationM)" On 11 Septem+er 1. resultin in dama es to t%e corporation.78.77. is an affiliate of @nited &um+er and /eneral )or:ers of t%e 6%ilippines (@&/)6. in Sorso on and t%e lac: of funds to furt%er support t%e minin operation in /at+o" $t is +asic t%at a corporation is in-ested +' la3 3it% a personall' separate and distinct from t%ose of t%e persons composin it as 3ell as from t%at of an'.77.uest in a letter.78 (!CR=O*=(=11=875=78)" Jo3e-er. Article # of t%e Constitution and B'=&a3s of t%e union" On 18 June 1. of t%e &a+or Code +e applied since t%is specificall' refers onl' to t%e imposition of penalties under t%e Code" $t is undisputed t%at t%e termination of (illenaDs emplo'ment %as. promptin t%e E?ecuti-e Board to create a committee tas:ed to in-esti ate t%e non=attendance of se-eral union mem+ers in t%e said assem+l'. Jr" disappro-ed t%e resolution of t%e local union imposin t%e 695"55 fine" T%e union officers protested suc% action +' t%e 0ederation in a Repl' dated A Jul' 1. +' a specific pro-ision of la3. ot%er le al entit' to 3%ic% it ma' +e related" (ere o3ners%ip +' a sin le stoc:%older or +' anot%er corporation of all nearl' all of t%e capital stoc: of a corporation is not of itself sufficient round for disre ardin t%e separate corporate personall'" Similar to t%e case of Sunio -s" !ational &a+or Relations Commission. to personall' ans3er for %is corporate action" T%e case of Santos is 3a' of t%ese e?ceptional instances" $t is not e-en s%o3n t%at Santos %as %ad a direct %and in t%e dismissal of (illena enou % to attri+ute to Santos a patentl' unla3ful act 3%ile actin for t%e corporation" !eit%er can Article 17. collecti-el'.78. (ala'an Sama%an n m a (an a a3a sa (" /reenfield. t%e compan' sent a repl' to (S(/Ds re.77" On 11 Jul' 1. t%e insur enc' pro+lem.

7.77" On 13 !o-em+er 1.7. t%e compan' terminated t%e 35 union officers from emplo'ment.77. to t%e compan'" T%ereafter. T%e e?pelled union officers assi ned in t%e first s%ift 3ere p%'sicall' or +odil' +rou %t out of t%e compan' premises +' t%e compan'Ds securit' uards" &i:e3ise.7. and #ander Jons c%apters) filed a 6etition for Audit and E?amination of t%e federation and education funds of @&/)6 3%ic% 3as ranted +' (ed=Ar+iter Rasidali A+dulla% on 19 *ecem+er 1. %a-in ac%ie-ed its o+Iecti-e. t%e 0ederation.7.).77" Jo3e-er. +' (ed=Ar+iter Anastacio Bactin in an Order. to t%e e?tent t%at t%e compan' s%ould remit t%e amount of 69. orderin (1) T%at t%e @nited &um+er and /eneral )or:ers of t%e 6%ilippines (@&/)6) t%rou % its local union officers s%all administer t%e collecti-e +ar ainin a reement (CBA)L (1) T%at t%e compan' s%all remit t%e 615.77" $n retaliation. t%e officers 3ere e?pelled from t%e @&/)6" On t%e same da'. A usan del !orte 3%ere a Resolution 3as passed placin t%e (S(/ under trustees%ip and appointin Cesar Clarete as administrator" On 18 Octo+er 1.555"55 to (S(/... as earl' as 11 !o-em+er 1.77. 3it% t%e Office of t%e Secretar' of t%e *epartment of &a+or and Emplo'ment pra'in for t%e suspension of t%e effects of t%eir termination from emplo'ment" Jo3e-er.555"55 mont%l' la+or education pro ram fund to t%e @&/)6 su+Iect to t%e condition t%at it s%all use t%e said amount for its intended purpose" and (3) t%at t%e Treasurer of t%e (S(/ s%all +e aut%ori>ed to collect from t%e 394 union mem+ers t%e amount of 695"55 as penalt' for t%eir failure to attend t%e eneral mem+ers%ip assem+l' on 18 April 1. t%e officials of @&/)6 called a Special !ational E?ecuti-e Board (eetin at !asipit." On (arc% 13 and 1A. a total Commercial *a3 ) Cor-oration *a3 200.uirin t%em to e?plain 3it%in 81 %ours 3%' t%e' s%ould not +e remo-ed from t%eir office and e?pelled from union mem+ers%ip" On 14 !o-em+er 1. (anila (!C(B=!CR=!S53=114=7. (" /reenfield.77. if t%e (S(/ Officers could present t%e indi-idual 3ritten aut%ori>ations of t%e 394 union mem+ers.77" T%is 3as o+Iected to +' t%e local union 3%ic% demanded t%at t%e education fund +e remitted to it in full" T%e compan' 3as t%us constrained to file a Complaint for $nterpleader 3it% a 6etition for *eclarator' Relief 3it% t%e (ed=Ar+itration Branc% of t%e *epartment of &a+or and Emplo'ment (Case O*=(=7=A39=77)" T%is 3as resol-ed on 17 Octo+er 1. (S(/ replied.574 mem+ers -oted to declare a stri:e" On 15 (arc% 1. t%e said administrator 3rote t%e compan' informin t%e latter of its desi nation of a certain Alfredo Ealin :in as local union president and Mdisaut%ori>in M t%e incum+ent union officers from representin t%e emplo'ees" T%is action +' t%e national federation 3as protested +' t%e (S(/ in a letter to t%e compan' dated 11 !o-em+er 1. t%e petition 3as dismissed +' t%en Secretar' 0ran:lin *rilon on 11 April 1. *O&E. t%e 35 dismissed union officers filed an ur ent petition (!C(B=!CR=!S=53=114=7.77.555"55 of t%e 615..555"55 mont%l' la+or education pro ram fund to @&/)6 and t%e ot%er 69. on 1 Septem+er 1. Triump% $nternational. 1. t%e federation ad-ised respondent compan' of t%e e?pulsion of t%e 35 union officers and demanded t%eir separation from emplo'ment pursuant to t%e @nion Securit' Clause in t%eir collecti-e +ar ainin a reement" T%is demand 3as reiterated t3ice..)" T%e follo3in da'.77.7. t%rou % letters dated 0e+ruar' 11 and (arc% A.7. *irector 6ura=0errer CalleIa issued a Resolution dated 8 0e+ruar' 1.77. a stri:e -ote referendum 3as conducted and out of 1.. /eneral (illin . (S(/ union officers recei-ed identical letters from t%e administrator re. (S(/ filed a !otice of Stri:e 3it% t%e !C(B. respecti-el'. 3%ic% modified in part t%e earlier disposition.77. /ros+'. 1. +ot% unions to use t%e same for its intended purpose"M (ean3%ile. under t%e pressure of a t%reatened stri:e.7. t%en t%e compan' is o+li ed to deduct from t%e salaries of t%e 394 union mem+ers t%e 695"55 fine"M On appeal. ( 41 ) . t%ose assi ned to t%e second s%ift 3ere not allo3ed to report for 3or:" t%is pro-o:ed some of t%e mem+ers of t%e local union to demonstrate t%eir protest for t%e dismissal of t%e said union officers" Some union mem+ers left t%eir 3or: posts and 3al:ed out of t%e compan' premises" On t%e ot%er %and.. t%e 0ederation filed a !otice of Stri:e 3it% t%e !ational Conciliation and (ediation Board to compel t%e compan' to effect t%e immediate termination of t%e e?pelled union officers" On 8 (arc% 1. 1. ser-in t%em identical copies of t%e termination letter. Jo3e-er.153 union mem+ers 3%o cast t%eir -otes. t%e national federation as:ed t%e compan' to stop t%e remittance of t%e local unionDs s%are in t%e education funds effecti-e Au ust 1.77 in an Order 3%ic% directed t%e audit and e?amination of t%e +oo:s of account of @&/)6" On 35 Septem+er 1.Narratives (Berne Guerrero) +ecame t%e su+Iect of +itter disa reement +et3een t%e 0ederation and t%e local union culminatin in t%e latterDs declaration of eneral autonom' from t%e former t%rou % Resolution 15 passed +' t%e local e?ecuti-e +oard and ratified +' t%e eneral mem+ers%ip on 14 Jul' 1. 3it%dre3 t%e !otice of Stri:e filed 3it% t%e !C(B" On 7 (arc% 1. se-eral local unions (Top 0orm.

t%e compan' accordin l' notified its emplo'ees of a temporar' s%utdo3n" in operations" Emplo'ees 3%o 3ere interested in relocatin to Taclo+an 3ere ad-ised to enlist on or +efore 13 April 1.1.7. (S(/ filed a -erified complaint 3it% t%e Ar+itration Branc%.. onl' 141 emplo'ees 3ere e-entuall' accepted +ac: to 3or:" T%ose 3%o did not respond to t%e return=to=3or: notice 3ere sent termination letters dated 18 (a' 1. solidar' lia+ilities ma' at times +e incurred +ut onl' 3%en e?ceptional circumstances 3arrant suc% as.7. in eneral from t%e people comprisin it" T%e rule is t%at o+li ations incurred +' t%e corporation. and dama e to compan' properties" T%e emplo'ees 3%o participated in t%e stri:e and alle edl' fi ured in t%e -iolent incident 3ere placed under pre-enti-e suspension +' t%e compan'" T%e compan' also sent return to=3or: notices to t%e %ome addresses of t%e stri:in emplo'ees t%rice successi-el'. discrimination. &a+or Ar+iter Cresencio Ramos dismissed t%e complaint" (S(/ t%en appealed to t%e !&RC" T%e 0irst *i-ision affirmed t%e &a+or Ar+iterDs disposition" )it% t%e denial of t%eir motion for reconsideration on 17 Januar' 1.A. t%e compan' 3as ordered to pa' full +ac:3a es to t%e affected emplo'ees 3%ile t%e 0ederation 3as ordered to pa' full +ac:3a es to t%e affected union officers 3%o 3ere dismissed upon its insti ationL t%at since t%e dismissal of t%e affected emplo'ees and officers 3as 3it%out cause. (S(/ ele-ated t%e case to t%e Supreme Court" T%e Supreme Court on 17 0e+ruar' 1555." T%e stri:e 3as attended 3it% -iolence.. ordered (" /reenfield to immediatel' reinstate t%e affected emplo'ees and officers to t%eir respecti-e positionsL t%at s%ould reinstatement +e not feasi+le. and t%at s%ould reinstatement +e not feasi+le. &e'te" Jence.=7.). t%reats." On 8 Au ust 1. findin t%e termination to +e -alid in compliance 3it% t%e union securit' clause of t%e collecti-e +ar ainin a reement. t%e compan' 3as compelled to -acate its office and factor'" T%ereafter. *O&E. c%ar in t%e corporation. etc" of unfair la+or practice 3%ic% consists of union +ustin . on 14 April 1. t%eir +ac:3a es s%all +e computed from t%e time t%e affected emplo'ees and officers 3ere terminated until t%e finalit' of t%e CourtDs decisionL 3it% costs a ainst t%e compan'" $n t%e decision..5. (!CR =55=5. coercion.7.5" On 19 *ecem+er 1. are its sole lia+ilities" True. t%e compan' transferred its administration and accountGclient ser-icin department at A06=RSBS $ndustrial 6ar: in Ta ui .. April 7 and April 31. 1. t%e lease contracts on t%e compan'Ds office and factor' at (er-ille Su+di-ision... 6araNa.=5A1. t%e officers of a corporation P (a) #ote for or assent to patentl' unla3ful acts of t%e corporationL (+) act in +ad fait% or 3it% ross ne li ence in Commercial *a3 ) Cor-oration *a3 200. in t%e follo3in cases: (1) )%en directors and trustees or. !ational Capital Re ion. respecti-el'" Jo3e-er. said compan' s%all pa' separation pa' of one mont% salar' for e-er' 'ear of ser-iceL t%at since t%e affected emplo'ees and officers 3ere terminated 3it%out t%e re. intimidation. officers and emplo'ees.ue e?pired and 3ere not rene3ed" @pon demand of t%e o3ners of t%e premises. ille al dismissal. enerall'.7. t%e compan' 3as constrained to mo-e t%e said departments to Taclo+an. actin t%rou % its directors. on (arc% 18. force and intimidation on +ot% sides resultin to p%'sical inIuries to se-eral emplo'ees.Narratives (Berne Guerrero) of 87 union s%op ste3ards 3ere placed under pre-enti-e suspension +' t%e compan'" T%is prompted t%e union mem+ers to a ain sta e a 3al:=out and resulted in t%e official declaration of stri:e at around 3:35 p"m" of 1A (arc% 1. +ot% stri:in and non=stri:in . +ac:3a es are to +e computed from t%e time t%e affected emplo'ees and union officers 3ere dismissed until t%eir actual reinstatement. ( 42 ) . t%e court %eld t%at t%e compan' officials cannot +e %eld personall' lia+le for dama es on account of t%e emplo'eesD dismissal +ecause t%e emplo'er corporation %as a personalit' separate and distinct from its officers 3%o merel' acted as its a ents" (S(/=@)/ filed a motion for partial reconsideration" %ssue$ )%et%er t%e compan' officials cannot +e %eld personall' lia+le for dama es on account of emplo'eesD dismissal +ecause t%e emplo'er corporation %as a personalit' separate and distinct from its officers 3%o merel' acted as its a ents" &eld$ A corporation is a Iuridical entit' 3it% le al personalit' separate and distinct from t%ose actin for and in its +e%alf and. in appropriate cases. ille al suspension interference in union acti-ities. and oppression" After t%e filin of t%e complaint.uisite 3ritten notice at least 35 da's prior to t%eir termination. (anila.. -iolence. (etro (anila" 0or failure to find a suita+le place in (etro (anila for relocation of its factor' and manufacturin operations.

did not fort%3it% file 3it% t%e corporate secretar' %is 3ritten o+Iection t%ereto" (3) )%en a director. (anuel 0" Cru>. [GR 11144/ 10 !anuar" 2002# Third Division.555"55 per s. aut%ori>ed 0elicisima (M(imiM) !o+le to sell t%e same lot" 0elicisima !o+le t%en offered for sale t%e propert' to A0 Realt' K *e-elopment.uestion of fact and is e-identiar'" $t %as +een %eld t%at +ad fait% does not connote +ad Iud ment or ne li enceL it imports a dis%onest purpose or some moral o+li. and ot%er persons" (1) )%en a director or officer %as consented to t%e issuance of 3atered stoc:s or 3%o. ( 44 ) . (r" Cru>. +' specific pro-ision of la3. t%e Commercial *a3 ) Cor-oration *a3 200. a real estate +ro:er of t%e C!6 Real Estate Bro:era e" Cru>.77. (anuel C" Cru>. t%ere is not%in su+stantial on record to s%o3 t%at t%e corporate officers acted in patent +ad fait% or 3ere uilt' of ross ne li ence in terminatin t%e ser-ices of t%e affected emplo'ees and officers so as to 3arrant personal lia+ilit'" 21 AF Realt" > 2evelo-ment %nc. its stoc:%olders or mem+ers.755"55 per s.uare meter" A0 Realt' replied t%at it %as paid an initial do3n pa'ment of 6355. 2ieselman Frei(. particularl'.555"55 per s. Sr". Sandoval5Dutierrez (J): 4 concur Facts$ On 15 (a' 1.77.171. t%e ta? declaration and ta? receipt for t%e lot.555"55" Cru>. Branc% 145.77. A0 Realt' confirmed its intention to +u' t%e lot" Jence. 6olintan could onl' i-e Ranullo t%e ori inal cop' of TCT 3.355. $nc" (A0 Realt') at 61.955"55 per s. issued a letter denominated as MAut%orit' To Sell Real EstateM to Cristeta !" 6olintan. (a' 1.uired A0 Realt' to finali>e t%e sale at 6A.7A.uare meter" (idas deli-ered to *ieselman 6955.555"55 as compensator' dama esL 6A55. %ence *ieselman cannot +e compelled to sell and con-e' it to A0 Realt'" T%e trial court ranted (idasD motion" After trial. A0 Realt' as:ed for pa'ment of 61.uare meter" Fenaida Ranullo. Jr" +ound *ieselman in t%e sale of t%e lot to A0 Realt'" Conse. on 35 Jul' 1. Jr" aut%ori>ed 6olintan Mto loo: for a +u'erG+u'ers and ne otiate t%e saleM of t%e lot at 63.t 5ervices Co. t%rou % a letter dated 1. Jr"" T%e complaint pra'ed t%at *ieselman +e ordered to e?ecute and deli-er a final deed of sale in fa-or of A0 Realt'"M $n its amended complaint. ac:no3led ed receipt of t%e said 6355.7.555"55 in escro3 account 3it% t%e 6C$Ban:" Constrained to protect its interest in t%e propert'. +oard mem+er and -ice=president of A0 Realt'. Ranullo as:ed 6olintan for t%e +oard resolution of *ieselman aut%ori>in t%e sale of t%e propert'" Jo3e-er. accepted t%e offer and issued a c%ec: in t%e amount of 6355. trustee or officer %as contractuall' a reed or stipulated to %old %imself personall' and solidaril' lia+le 3it% t%e Corporation" (A) )%en a director.uare meter. %a-in :no3led e t%ereof. (idas filed on 3 April 1.Narratives (Berne Guerrero) directin t%e corporate affairsL (c) are uilt' of conflict of interest to t%e preIudice of t%e corporation. Jr" %as no 3ritten aut%orit' from *ieselman to sell t%e lot" $n turn.uentl'. June 1. a (otion for &ea-e to $nter-ene in Ci-il Case 94187" (idas alle ed t%at it %as purc%ased t%e propert' and too: possession t%ereof.955.uit' and conscious doin of 3ron L it means +reac% of a :no3n dut' t%ru some moti-e or interest or ill 3illL it parta:es of t%e nature of fraud" Jerein. on 13 Au ust 1.555"55 as attorne'Ds feesL and 6955. t%e lo3er court rendered t%e *ecision %oldin t%at t%e acts of Cru>. or a total of 64.555"55 as e?emplar' dama es" $n its ans3er. personall' lia+le for %is corporate action" $n la+or cases.555"55 pa'a+le to t%e order of *ieselman" 6olintan recei-ed t%e c%ec: and si ned an MAc:no3led ment ReceiptM indicatin t%at t%e amount of 6355.555"55 and is 3illin to pa' t%e +alance" Jo3e-er. a mem+er of t%e +oard of directors of *ieselman 0rei %t Ser-ices Co". *ieselman and (idas *e-elopment Corporation ((idas) e?ecuted a *eed of A+solute Sale of t%e same propert'" T%e a reed price 3as 61..77.77. Cristeta 6olintan.555"55 as do3n pa'ment and deposited t%e +alance of 69.555"55 as Mearnest mone'M +ut re.555"55 represents t%e partial pa'ment of t%e propert' +ut refunda+le 3it%in t3o 3ee:s s%ould A0 Realt' disappro-e RanulloDs action on t%e matter" On 1. *ieselman alle ed t%at t%ere 3as no meetin of t%e minds +et3een t%e parties in t%e sale of t%e propert' and t%at it did not aut%ori>e an' person to enter into suc% transaction on its +e%alf" (ean3%ile. t%e Court %as %eld corporate directors and officers solidaril' lia+le 3it% t%e corporation for t%e termination of emplo'ment of corporate emplo'ees done 3it% malice or in +ad fait%" Bad fait% or ne li ence is a .77. trustee or officer is made. 6asi Cit' a complaint for specific performance (Ci-il Case 94187) a ainst *ieselman and Cru>. A0 Realt' filed 3it% t%e Re ional Trial Court. and a p%otocop' of t%e Articles of $ncorporation of *ieselman" On 1 Au ust 1. vs. Sr" terminated t%e offer and demanded from A0 Realt' t%e return of t%e title of t%e lot earlier deli-ered +' 6olintan" Claimin t%at t%ere 3as a perfected contract of sale +et3een t%em. president of *ieselman. Jr".

. $nc" and Ji=Cement Corporation to pa' Atrium Iointl' and se-erall'. t%ere +ein no +ad fait% on t%e part of t%e latter" T%e Court of Appeals t%en declared *ieselman and Cru>. endorsed t%e four c%ec:s to Atrium (ana ement Corporation for -alua+le consideration" @pon presentment for pa'ment. in t%e case of t%e said 6355. t%e rule is t%at t%e declarations of an indi-idual director relatin to t%e affairs of t%e corporation. (anila an action for collection of t%e proceeds of four postdated c%ec:s in t%e total amount of 61 million. t%e notarial report of t%e sale 3as not su+mitted to t%e Cler: of Court of t%e Rue>on Cit' RTC and t%e +alance of 69. t%e performance of aut%ori>ed duties of suc% director. plus interest and attorne'Ds fees" On appeal to t%e Court of Appeals. contracts or acts of a corporation must +e made eit%er +' t%e +oard of directors or +' a corporate a ent dul' aut%ori>ed +' t%e +oard" A+sent suc% -alid dele ationGaut%ori>ation. or connected 3it%. 6olintan and !o+le cannot +ind *ieselman in t%e purported contract of sale" 40 Atrium 'ana(ement Cor-oration vs. t%e sale 3as not perfectedL and t%at t%e *eed of A+solute Sale +et3een *ieselman and (idas is -alid. t%e Court of Appeals promul ated its decision modif'in t%e decision of t%e trial court. t%e collecti-e acts of Cru>. in t%e sense t%at onl' Cru>. issued c%ec:s in fa-or of E"T" Jenr' and Co" $nc". in turn. muc% less to appoint ot%er persons for t%e same purpose" Cru>Ds lac: of suc% aut%orit' precludes %im from conferrin an' aut%orit' to 6olintan in-ol-in t%e su+Iect realt'" !ecessaril'..555"55.555"55 purportedl' deposited in escro3 +' (idas 3it% a +an: 3as not esta+lis%ed" *ieselman 3as ordered to e?ecute and deli-er to A0 Realt' t%e final deed of sale of t%e propert' co-ered +' TCT 3.73. and t%e late Antonio de las Alas.355. +ut not in t%e course of. Jr" Iointl' and se-erall' lia+le to A0 Realt' for 6155. on 18 (arc% 1. t%e Court of Appeals re-ersed t%e Iud ment of t%e trial court %oldin t%at since Cru>. t%e same is still deposited 3it% t%e Court 3%ic% s%ould +e restituted to A0 Realt'" A0 Realt' filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%ere 3as a perfected contract of sale in-ol-in t%e *ieselman real propert' in fa-or of A0 Realt'" &eld$ Section 13 of t%e Corporation Code e?pressl' pro-ides t%at t%e corporate po3ers of all corporations s%all +e e?ercised +' t%e +oard of directors" Just as a natural person ma' aut%ori>e anot%er to do certain acts in %is +e%alf. Atrium (ana ement Corporation filed 3it% t%e Re ional Trial Court. E"T" Jenr' and Co". promul ated an Amendin *ecision. plus t%e amount of 6355. upon motions for reconsideration filed +' t%e parties.7A. includin t%e impro-ements t%ereon. neit%er could 6olintan aut%ori>e 0elicisima !o+le" Clearl'. ( 44 ) .555"55 and to pa' t%e costs" *issatisfied. /ardo (J): 4 concur Facts$ Ji=Cement Corporation t%rou % its corporate si natories. t%e Court of Appeals. A--eals [GR 101411 2/ Fe+ruar" 2001# also *e &eon -s" Court of Appeals B/R 1117. Court o.3.7.3. $nc".. Cru> %as no 3ritten aut%orit' from t%e +oard of directors of *ieselman to sell or to ne otiate t%e sale of t%e lot. after its demand for pa'ment of t%e -alue of t%e c%ec:s 3as denied" After due proceedin s. and orderin *ieselman to pa' A0 Realt' attorne'Ds fees in t%e amount of 695. C%airman. on 15 Jul' 1.AC First Division. of t%e Re istr' of *eed of Ri>al. treasurer. t%e trial court rendered a decision orderin &ourdes (" de &eon. &ourdes (" de &eon.1. a+sol-in Ji= Cement Corporation from lia+ilit' and dismissin t%e complaint as a ainst it" T%e appellate court ruled t%at: Commercial *a3 ) Cor-oration *a3 200. all t%e parties appealed to t%e Court of Appeals" $n its *ecision dated 15 *ecem+er 1.555"55 e-en 3it%out seein t%e latterDs title to t%e propert'" (oreo-er. t%e dra3ee +an: dis%onored all four c%ec:s for t%e common reason Mpa'ment stoppedM" On 3 Januar' 1. Jr" 3as not aut%ori>ed in 3ritin +' *ieselman to sell t%e su+Iect propert' to A0 Realt'..555"55 as moral dama esL 6155. %er %us+and Rafael de &eon.555"55 unless.Narratives (Berne Guerrero) perfected contract of sale +et3een *ieselman and A0 Realt' +ars (idasD inter-ention" T%e trial court also %eld t%at (idas acted in +ad fait% 3%en it initiall' paid *ieselman 6955.555"55 as attorne'Ds fees" On 9 Au ust 1. so ma' t%e +oard of directors of a corporation -alidl' dele ate some of its functions to indi-idual officers or a ents appointed +' it" T%us. t%e amount of 61 million correspondin to t%e -alue of t%e four c%ec:s. s%ould +e made lia+le to pa' A0 Realt' t%e dama es and attorne'Ds fees a3arded t%erein. are %eld not +indin on t%e corporation" Jerein. as pa'ee" E"T" Jenr' and Co". (etro (anila *istrict $$.555"55 as e?emplar' dama esL and 6155.

on t%e round t%at Mt%e Certification on anti=forum s%oppin incorporated in t%e petition 3as si ned not +' t%e dul' aut%ori>ed representati-e of t%e petitioner. onl' 3%en: (1) Je assents (a) to a patentl' unla3ful act of t%e corporation. &ourdes (" de &eon and Antonio de las Alas as treasurer and C%airman of Ji=Cement 3ere aut%ori>ed to issue t%e c%ec:s" Jo3e-er. 3%o admittedl' 3as in need of financial assistance" T%ere 3as no sufficient e-idence to s%o3 t%at suc% is t%e case" &ourdes (" de &eon is t%e treasurer of t%e corporation and is aut%ori>ed to si n c%ec:s for t%e corporation" At t%e time of t%e issuance of t%e c%ec:s. ) . as a rule. Atrium filed t%e petition" %ssue [1#$ )%et%er t%e issuance of t%e c%ec:s 3as an ultra -ires act" &eld [1#$ T%e record re-eals t%at Ji=Cement Corporation issued t%e four (A) c%ec:s to e?tend financial assistance to E"T" Jenr'. ( 4. maintains t%at t%e c%ec:s 3ere not issued for consideration and t%at &ourdes and E"T" Jenr' en a ed in a M:itin operationM to raise funds for E"T" Jenr'. or estoppel. does not fort%3it% file 3it% t%e corporate secretar' %is 3ritten o+Iection t%eretoL (3) Je a rees to %old %imself personall' and solidaril' lia+le 3it% t%e corporationL or (A) Je is made. %a-in :no3led e t%ereof.1. +ut +' its counsel.uired under Supreme Court Circular !o" 17=..8.. 5ia [GR 141214 27 !ul" 2000# Third Division.an (J): 4 concur Facts$ On 4 Au ust 1. aut%ori>in t%e +an:Ds la3'ers to represent it in an' action Commercial *a3 ) Cor-oration *a3 200. attac%ed to 3%ic% 3as a BA Sa-in s Ban: Corporate Secretar'Ds Certificate. t%at is. Mt%at t%e c%ec:s issued to E"T" Jenr' 3ere in pa'ment of J'dro oil +ou %t +' Ji=Cement from E"T" Jenr'M" Jer ne li ence resulted in dama e to t%e corporation" Jence. $nc"L (1) T%e issuance of t%e su+Iect c%ec:s +' &ourdes (" de &eon and t%e late Antonio de las Alas constituted ultra -ires actsL and (3) T%e su+Iect c%ec:s 3ere not issued for -alua+le consideration" Jence. trustee or officer alon (alt%ou % not necessaril') 3it% t%e corporation ma' so -alidl' attac%. (s" de &eon 3as ne li ent 3%en s%e si ned t%e confirmation letter re.. %ence. (s" de &eon ma' +e %eld personall' lia+le t%erefor" 41 BA 5avin(s Ban< vs. for it 3as for securin a loan to finance t%e acti-ities of t%e corporation. to personall' ans3er for %is corporate action"M Jerein. t%e Court of Appeals issued a Resolution den'in due course to a 6etition for Certiorari filed +' BA Sa-in s Ban:. resultin in dama es to t%e corporation. as re.8" T%e Certificate t%at BA Sa-in s Ban:Ds Board of *irectors appro-ed a Resolution on 11 (a' 1. ratification. its stoc:%olders or ot%er personsL (1) Je consents to t%e issuance of 3atered do3n stoc:s or 3%o.Narratives (Berne Guerrero) (1) &ourdes (" de &eon 3as not aut%ori>ed to issue t%e su+Iect c%ec:s in fa-or of E"T" Jenr'. /an'ani. 3%ile t%e latter is -oid and cannot +e -alidated" %ssue [2#$ )%et%er &ourdes (" de &eon and Antonio de las Alas 3ere personall' lia+le for t%e c%ec:s issued as corporate officers and aut%ori>ed si natories of t%e c%ec:" &eld [2#$ 6ersonal lia+ilit' of a corporate director.uentl' filed +' BA Sa-in s Ban:. t%e confirmation letter contained a clause t%at 3as not true. in contra-ention of said circular"M A (otion for Reconsideration 3as su+se. or (c) for conflict of interest. dated 1A Au ust 1. or (+) for +ad fait% or ross ne li ence in directin its affairs. %o3e-er. t%ere 3ere sufficient funds in t%e +an: to co-er pa'ment of t%e amount of 61 million pesos" T%us. t%e act of issuin t%e c%ec:s 3as 3ell 3it%in t%e am+it of a -alid corporate act.4. +' a specific pro-ision of la3.uested +' (r" Oap of Atrium and (r" Jenr' of E"T" Jenr' for t%e rediscountin of t%e crossed c%ec:s issued in fa-or of E"T" Jenr'" S%e 3as a3are t%at t%e c%ec:s 3ere strictl' endorsed for deposit onl' to t%e pa'eeDs account and not to +e furt%er ne otiated" )%at is more. not as pa'ment of t%e +alance of t%e 635 million pesos cost of %'dro oil deli-ered +' E"T" Jenr' to Ji=Cement" )%' else 3ould petitioner de &eon as: for counterpart c%ec:s from E"T" Jenr' if t%e c%ec:s 3ere in pa'ment for %'dro oil deli-ered +' E"T" Jenr' to Ji=CementW Ji=Cement. not an ultra -ires act" An ultra -ires act is one committed outside t%e o+Iect for 3%ic% a corporation is created as defined +' t%e la3 of its or ani>ation and t%erefore +e'ond t%e po3er conferred upon it +' la3M T%e term Multra -iresM is Mdistin uis%ed from an ille al act for t%e former is merel' -oida+le 3%ic% ma' +e enforced +' performance.

+'=la3. Circular 17=. p%'sical actions.uires t%e parties t%emsel-es to si n t%e certificate of non=forum s%oppin " Jo3e-er. not necessaril' +' t%e corporate officers alone" &eld$ A corporation %as no po3ers e?cept t%ose e?pressl' conferred on it +' t%e Corporation Code and t%ose t%at are implied +' or are incidental to its e?istence" $n turn. for t%e simple reason t%at t%e' cannot personall' do t%e tas: t%emsel-es" As alread' stated.8. ma' +e performed. amon ot%ers" On 1A Octo+er 1.. not t%e counsel. A colicol undertoo: to pro-ide electrical 3or:s as 3ell as t%e necessar' la+or and materials for t%e installation of electrical facilities at t%e Ciano 6la>a Buildin o3ned +' 6o3ton. 3%o must certif' under oat% to all of t%e facts and underta:in s re.uirement cannot +e imposed on artificial persons. A colicol filed 3it% t%e Re ional Trial Court of 6asa' Cit'. it issued t%e correspondin certificate of electrical inspection" On 14 *ecem+er 1.. t%ru its 6resident and C%airman of t%e Board. can +e performed onl' +' natural persons dul' aut%ori>ed for t%e purpose +' corporate +'la3s or +' a specific act of t%e +oard of directors" MAll acts 3it%in t%e po3ers of a corporation ma' +e performed +' a ents of its selectionL and. lia+ilities and incapacities as are a ents of indi-iduals and pri-ate persons"M Jerein.1 Mre. e?ecute and deli-er in connection t%ere3it% t%e necessar' pleadin s. ma' not e-en :no3 t%e details re. motions.1. 3%o %ad personal :no3led e of t%e matters re. Jo%nn' A colicol. $nc" (6o3ton).uired in t%e Circular" 42 :o3ton Con(lomerate %nc.1 3as prescri+ed +' t%e Supreme Court to pro%i+it and penali>e t%e e-ils of forum s%oppin " )e see no circum-ention of t%is rationale if t%e certificate 3as si ned +' t%e corporationDs specificall' aut%ori>ed counsel.1 re. tri+unal or a enc'L and to si n.. or mem+ers actin in t%eir stead.Narratives (Berne Guerrero) or proceedin +efore an' court. li:e t%e si nin of documents. certificate of non=forum s%oppin and ot%er instruments necessar' for suc% action and proceedin "M T%e Resolution 3as sufficient to -est suc% persons 3it% t%e aut%orit' to +ind t%e corporation and 3as specific enou % as to t%e acts t%e' 3ere empo3ered to do" $n t%e case of natural persons. li:e its +oard c%airman and president. corner /" (ascardo Street.uired in t%e Certificate +ut its o3n retained counsel" $ts re ular officers. li:e t%e si nin and t%e deli-er' of documents. Ban :al. t%e Cit' En ineerDs Office of (a:ati inspected t%e electrical installations at t%e Ciano 6la>a Buildin and certified t%at t%e same 3ere in ood condition" Jence. t%e same eneral principles of la3 3%ic% o-ern t%e relation of a enc' for a natural person o-ern t%e officer or a ent of a corporation. entered into an MElectrical $nstallation ContractM 3it% 6o3ton Con lomerate. not onl' 3as BA Sa-in s Ban: aut%ori>ed to name an a ent to si n t%e certificateL it also e?ercised its appointin aut%orit' reasona+l' 3ell" 0or 3%o else :no3s of t%e circumstances re.555"55.uire corporate officers to si n t%e certificate" (ore important. e?ecute and deli-er t%e Certificate of !on= forum S%oppin . a corporation e?ercises said po3ers t%rou % its +oard of directors andGor its dul' aut%ori>ed officers and a ents" 6%'sical acts.017/ 4 A-ril 2004# First Division. t%e (otion for Reconsideration 3as denied +' t%e Court of Appeals on t%e round t%at Supreme Court Re-ised Circular 17=. or statutor' pro-isions. t%ere is no pro%i+ition on a ainst aut%ori>in a ents to do so" $n fact.A. suc% re. -erification. on +e%alf of t%e corporate entit'. of 3%ate-er status or ran:. t%e Court of Appeals. A(colicol [GR 1. are su+Iect to t%e same rules. e?cept so far as limitations or restrictions 3%ic% ma' +e imposed +' special c%arter. proprietor of Japerson En ineerin .5. corporations act onl' t%rou % t%eir officers and dul' aut%ori>ed a ents" $n fact. t%e complaint for sum of mone' a ainst 6o3ton and C%ien" Je alle ed Commercial *a3 ) Cor-oration *a3 200. in respect to %is po3er to act for t%e corporationL and a ents once appointed.uires t%at it is t%e petitioner.uired t%erein" Circular 17=. onl' +' specificall' aut%ori>ed indi-iduals" $t is note3ort%' t%at t%e Circular does not re.355. (etro (anila" $n Au ust 1.uired t%erein"M T%e +an: appealed" %ssue$ )%et%er t%e certificate of non=forum s%oppin can +e si ned +' t%e corporate counsel. Branc% 119. 4nares5Santia'o (J): 4 concur Facts$ Sometime in !o-em+er 1. t%e corporationDs +oard of directors issued a Resolution specificall' aut%ori>in its la3'ers Mto act as t%eir a ents in an' action or proceedin +efore t%e Supreme Court. li:e corporations. (a:ati. 6%ilip C" C%ien" 0or a contract price of 69. ( 40 ) . located alon (" Re'es Street. vs.. affida-it of merit. or an' ot%er tri+unal or a enc'BLC and to si n.

$nter=Asia as seller made 3arranties and representations" T%e A reement 3as later amended 3it% respect to t%e MClosin *ate. sold to Asia $ndustries.835"37" On 14 Au ust 1. Asia $ndustries ma' retain t%e sum of 68. $!C" (0AR(ACOR)" T%e A reement 3as si ned +' &eonides 6" /on>ales and Jesus J" #er ara.119"55" Since Commercial *a3 ) Cor-oration *a3 200. $nter=Asia $ndustries.555.13.M ori inall' set up at 15:55 a"m" of 35 Septem+er 1. 6o3ton and C%ien appealed to t%e Court of Appeals 3%ic%. its stoc:%olders or ot%er personsL (1) %e consents to t%e issuance of 3atered do3n stoc:s or 3%o.5. does not fort%3it% file 3it% t%e corporate secretar' %is 3ritten o+Iection t%eretoL (3) %e a rees to %old %imself personall' and solidaril' lia+le 3it% t%e corporationL or (A) %e is made +' a specific pro-ision of la3 personall' ans3era+le for %is corporate action" Considerin t%at none of t%e fore oin e?ceptions 3as esta+lis%ed in t%e present case.555.748"37 representin t%e unpaid +alance and t%e costs of additional 3or:s" A rie-ed.Narratives (Berne Guerrero) t%at despite t%e completion of t%e electrical 3or:s at Ciano 6la>a Buildin . respecti-el'" @nder para rap% 8 of t%e A reement.555"55 upon t%e si nin of t%e A reement. petitioners contended t%at t%e' cannot +e o+li ed to pa' t%e +alance of t%e contract price +ecause t%e electrical installations 3ere defecti-e and 3ere completed +e'ond t%e a reed period" *urin t%e trial. C%ien testified t%at t%e' s%ould not +e %eld lia+le for t%e additional electrical 3or:s alle edl' performed +' 6o3ton +ecause t%e' ne-er aut%ori>ed t%e same" At t%e pre=trial conference. t%at t%e unpaid +alance claimed +' t%e respondent is 6147. as president..835"37 as additional electrical 3or:s 3%ic% 3ere necessitated +' t%e alle ed re-isions in t%e structural desi n of t%e +uildin " $n t%eir ans3er. 3%ic% is e.87" 0rom t%e STATE(E!T O0 $!CO(E A!* *E0$C$T attac%ed to t%e financial report dated 17 !o-em+er 1.555"55: 69.555"55 all its ri %t.955. affirmed t%e decision of t%e trial court" T%e motion for reconsideration 3as li:e3ise denied on 9 *ecem+er 1551" 6o3ton and C%ien filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er C%ien. Asia $ndustries ma' deduct an' s%ortfall on t%e (inimum /uaranteed !et )ort% of 611. a decision 3as rendered a3ardin A colicol t%e total a3ard of 6. C%ien.955. for t%e 15 mont%s ended 31 Octo+er 1.9H of t%e total contract price. t%e parties stipulated. sa-e for certain e?ceptions. $nter=Asia s%all pa' t%e difference 3it%in 9 da's from date of receipt of t%e audited financial statements" Asia $ndustries paid $nter=Asia a total amount of 611.955. A--eals [GR 12.. onl' 3%en P (1) %e assents to a patentl' unla3ful act of t%e corporation..87. presidents of $nter=Asia and Asia $ndustries.87 su+mitted +' S/#. a deficit of 611. it appears t%at 0AR(ACOR %ad. t%e latter onl' paid t%e amount of 69.."75" A colicol li:e3ise claimed t%e amount of 6811.ui-alent to more t%an . corporate officers 3%o entered into contracts in +e%alf of t%e corporation cannot +e %eld personall' lia+le for t%e lia+ilities of t%e latter" 6ersonal lia+ilit' of a corporate director. $nc" (Asia $ndustries) for and in consideration of t%e sum of 61.555.87. Court o. and 68. inter alia. $nc" ($nter=Asia). 3%o entered into a contract 3it% A colicol in %is capacit' as 6resident and C%airman of t%e Board of 6o3ton. as a rule.77/ 10 !une 2004# Third Division. +' a Stoc: 6urc%ase A reement (t%e A reement).. pro-ided t%at pendin su+mission +' S/# of 0AR(ACORDs audited financial statements as of 31 Octo+er 1.87. suc% t%at. t%ere+' lea-in a +alance of 6147. and to t%e mode of pa'ment of t%e purc%ase price" T%e A reement. cannot +e %eld solidaril' lia+le 3it% t%e latter" 44 %nter)Asia %nvestments %ndustries vs. can +e made solidaril' lia+le 3it% 6o3ton" &eld$ T%e settled rule is t%at."45 and t%e cost of additional 3or: is 6811.531.13. Car io Morales (J): 4 concur Facts$ On 1 Septem+er 1..555"55L and t%at if t%e amount retained is not sufficient to ma:e up for t%e deficienc' in t%e (inimum /uaranteed !et )ort%.555"55L t%at from t%is retained amount of 68.555"55. title and interest in and to all t%e outstandin s%ares of stoc: of 0AR(ACOR. or 3%en t%ere is a conflict of interest resultin in dama es to t%e corporation.955. as amended.1AA. or 3%en %e is uilt' of +ad fait% or ross ne li ence in directin its affairs.555"55 on 1 !o-em+er 1.87. trustee or officer alon (alt%ou % not necessaril') 3it% t%e corporation ma' so -alidl' attac%.555.87. 3%ic% 3as mo-ed to 31 Octo+er 1.745"A5. ( 47 ) . %a-in :no3led e t%ereof. on 3 Septem+er 1551 %o3e-er.555"55 out of t%e stipulated purc%ase price of 61. a corporation is in-ested +' la3 3it% a personalit' separate and distinct from t%ose of t%e persons composin it.

8AA. t%e Court of Appeals affirmed t%e trial courtDs decision" $nter=AsiaDs motion for reconsideration of t%e decision %a-in +een denied +' t%e Court of Appeals +' Resolution of 11 Jul' 1.119"55 to t%e (inimum /uaranteed !et )ort% of 611.119.3.5... t%e eneral rule is t%at.1 a *ecision.. 3elc%ed on its promise" $nter=AsiaDs total lia+ilit' t%us stood at 6A.. su+Iect to t%e articles of incorporation. no person. an officer of a corporation 3%o is aut%ori>ed to purc%ase t%e stoc: of anot%er corporation %as t%e implied po3er to perform all ot%er o+li ations arisin t%erefrom. can -alidl' +ind a corporation" A corporation is a Iuridical person. it 3as entitled to a refund of 69.555"55" T%e adIusted contract price. not e-en its officers. t%e sum of 635. and t%is includes po3ers as. or rele-ant pro-isions of la3" Jo3e-er. custom or ac. it promisin to pa' t%e cost of t%e !ort%ern Cota+ato $ndustries. eit%er e?pressl' or impliedl' +' %a+it. committees or a ents" T%e aut%orit' of suc% indi-iduals to +ind t%e corporation is enerall' deri-ed from la3. one of t3o causes of action of 3%ic% 3as for t%e reco-er' of a+o-e=said amount of 6A.uires presentation of e-idence of similar acts e?ecuted eit%er in its fa-or or in fa-or of ot%er parties" $t is not t%e . corporate +'la3s or aut%ori>ation from t%e +oard.4. Asia $ndustries filed a complaint a ainst $nter=Asia 3it% t%e Re ional Trial Court of (a:ati. a corporation ma' act t%rou % its +oard of directors.4. $nc" -" Court of Appeals.555"55 as attorne'Ds fees and t%e costs of suitL and (+) dismissin t%e counterclaim" On appeal to t%e Court of Appeals. +ut t%e -estin of a corporate officer 3it% t%e po3er to +ind t%e corporation"M Jence.75 letter si ned +' $nter=AsiaDs president is -alid and +indin " As %eld in t%e case of 6eopleDs Aircar o and )are%ousin Co". in t%e a+sence of aut%orit' from t%e +oard of directors. amounted to 64. +'la3s. t%e po3ers intentionall' conferred. or ma' +e implied from. Iust as a natural person ma' aut%ori>e anot%er to do certain acts for and on %is +e%alf. in t%e usual course of t%e particular +usiness.5.. are incidental to. M%a-in " " " po3ers.1AA.953"55 (6A.73. separate and distinct from its stoc:%olders and mem+ers.75 letter si ned +' $nter=Asia2s president is -alid and +indin " &eld$ T%e 1A Januar' 1..555. t%e po3er and responsi+ilit' to decide 3%et%er t%e corporation s%ould enter into a contract t%at 3ill +ind t%e corporation is lod ed in t%e +oard. as usuall' pertainin to t%e particular officer or a ent. t%at Asia $ndustriesDs claim for refund +e reduced to 6A.555"55 and t%e s%ortfall in t%e uaranteed net 3ort% of 613.793.985"55) e?clusi-e of interest" On 9 April 1. -i>: MA corporate officer or a ent ma' represent and +ind t%e corporation in transactions 3it% t%ird persons to t%e e?tent t%at Bt%eC aut%orit' to do so %as +een conferred upon %im. 3it% actual or constructi-e :no3led e t%ereof. 0AR(ACOR %ad a net 3ort% deficienc' of 61. attri+utes and properties e?pressl' aut%ori>ed +' la3 or incident to its e?istence"M Bein a Iuridical entit'.1AA. orderin $nter=Asia to pa' Asia $ndustries t%e sum of 6A.3"55 plus 689.1AA.955.3"55.953"55 plus interest t%ereon at t%e le al rate from t%e filin of t%e complaint until full' paid.119"55" T%e uaranteed net 3ort% s%ortfall t%us amounted to 613. la's do3n all corporate +usiness policies and is responsi+le for t%e efficienc' of mana ement.. and suc% apparent po3ers as t%e corporation %as caused person dealin 3it% t%e officer or a ent to +elie-e t%at it %as conferred"""" BACpparent aut%orit' is deri-ed not merel' from practice" $ts e?istence ma' +e ascertained t%rou % (1) t%e eneral manner in 3%ic% t%e corporation %olds out an officer or a ent as %a-in t%e po3er to act or. 3%ic% e?ercises almost all corporate po3ers.119"55 after addin t%e net 3ort% deficienc' of 61.555"55.Narratives (Berne Guerrero) t%e stoc:%olderDs e. as pro-ided in Section 13 of t%e Corporation Code of t%e 6%ilippines" @nder t%is pro-ision. in ot%er 3ords t%e apparent aut%orit' to act in eneral. $nter=Asia countered t%at Asia $ndustries failed to pa' t%e +alance of t%e purc%ase price and accordin l' set up a counterclaim" 0indin for Asia $ndustries.555"55. ( 4/ ) ..985"55" To t%e proposal respondent a reed" $nter=Asia.11A. suc% as pa'ment of t%e s%ares of stoc:" B' allo3in its president to si n t%e A reement on its Commercial *a3 ) Cor-oration *a3 200. t%e trial court rendered on 18 !o-em+er 1. si ned +' its president.953"55 18 plus interest" *en'in Asia $ndustriesDs claim. $nter=Asia filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%e 1A Januar' 1. 3it%in or +e'ond t%e scope of %is ordinar' po3ers" $t re.555. %o3e-er.119"55" Asia $ndustries %a-in alread' paid $nter=Asia 611.793.119"55" $nter=Asia t%ereafter proposed. po3ers added +' custom and usa e. $nc" (!OCOS$$) superstructures in t%e amount of 689.uit' amounted to 615. +' letter of 1A Januar' 1.889"55 3%ic% is t%e difference +et3een t%e contract price of 61.793.. t%erefore.75.uantit' of similar acts 3%ic% esta+lis%es apparent aut%orit'.uiescence in t%e eneral course of +usiness.555. 3it% 3%ic% it clot%es %imL or (1) t%e ac.uiescence in %is acts of a particular nature.3.. t%e +oard of directors ma' -alidl' dele ate some of its functions and po3ers to officers. and +' *ecision of 19 Januar' 1.

t%e Ban: made no demand on %im" After due trial. t%erefrom" T%e 0oundation t%en interposed a cross= claim a ainst Tan alle in t%at %e.uirin Tan and t%e 0oundation to pa' Iointl' and solidaril' to t%e Ban: t%e amount of 6A. o+tained four loans from Allied Ban:in Corporation co-ered +' four promissor' notes in t%e amounts of 6155. s%ould +e solel' lia+le for said loans. of t%e sum of 6A. a real estate firm" T%e loans 3ere co-ered +' promissor' notes 3%ic% 3ere automaticall' rene3a+le (. Tan admitted t%at %e contracted t%e loans from t%e Ban: in %is personal capacit'" T%e parties. t%en 6resident of &apulapu 0oundation. Tan and t%e foundation failed to pa' t%e same" T%e Ban: 3as constrained to file 3it% t%e Re ional Trial Court of Ce+u Cit'.555"55 plus costs of t%e suit" On appeal. computed from 1A Januar' 1. plus 1H ser-ice c%ar es and 1H mont%l' penalt' c%ar esL (1) re.944"41 and despite demands made on t%em +' t%e Ban:. and a counterclaim a ainst t%e Ban: for dama es and attorne'2s fees" 0or %is part. a complaint see:in pa'ment +' Tan and t%e foundation. %o3e-er. inter alia. t%ese 3ere filled out in a manner not in accord 3it% t%eir a reement. impliedl' and in%erentl' stated t%erein" 44 *a-u)*a-u Foundation vs. t%e foundation is lia+le for Commercial *a3 ) Cor-oration *a3 200. drafts or ot%er orders 3it% respect to t%e +an:L to transact +usiness 3it% t%e Ban:. until t%e same are full' paid.8.555 eac%" As of 13 Januar' 1.88. t%e Ban:2s emplo'ee re.uirin Tan and t%e 0oundation to pa' Iointl' and solidaril' liti ation e?penses of 61. for %is o3n use and +enefit and on t%e stren t% of t%e personal information %e furnis%ed t%e Ban:" T%e 0oundation maintained t%at it ne-er aut%ori>ed Tan to co=si n in %is capacit' as its 6resident an' promissor' note and t%at t%e Ban: full' :ne3 t%at t%e loans contracted 3ere made in Tan2s personal capacit' and for %is o3n use and t%at t%e 0oundation ne-er +enefited.uirin Tan and t%e 0oundation to pa' Iointl' and solidaril'. %a-in e?ceeded %is aut%orit'.944"41 representin t%eir loan o+li ation. a reed t%at t%e loans 3ere to +e paid from t%e proceeds of Tan2s s%ares of common stoc:s in t%e &apulapu $ndustries Corporation.944"41 as principal o+li ation for t%e four promissor' notes. attorne'2s fees in t%e e. e?clusi-e of interests.uo +' deletin t%e a3ard of attorne'2s fees in fa-or of t%e Ban: for +ein 3it%out +asis" Tan and t%e foundation filed t%e petition for re-ie3 on certiorari" %ssue [1#$ )%et%er Tan and t%e foundation s%ould +e %eld Iointl' and solidaril' lia+le" &eld [1#$ T%e appellate court did not err in %oldin Tan and t%e foundation Iointl' and solidaril' lia+le as it applied t%e doctrine of piercin t%e -eil of corporate entit'" Tan and t%e foundation cannot %ide +e%ind t%e corporate -eil under t%e follo3in circumstances: MT%e e-idence s%o3s t%at Tan %as +een representin %imself as t%e 6resident of &apulapu 0oundation. suc% t%at t%e 0oundation 3as included as part' t%ereto" 0urt%er. directl' or indirectl'. ( 41 ) .. until suc% time as Tan 3as a+le to pa' t%e same from t%e proceeds of %is aforesaid s%ares" Accordin to Tan. promissor' notes and ot%er commercial documentsL and to initiall' o+tain a loan for 6155. for %imself and for t%e foundation" Je su+mitted a notari>ed Secretar'2s Certificate from t%e corporation.3.rolled=o-er<) e-er' 'ear at an amount includin unpaid interests.8. includin all c%ar esL and (3) re. penalt' c%ar es. $nc". t%e court rendered Iud ment (1) re.ui-alent amount of 19H of t%e total amount due from t%em on t%e promissor' notes. A--eals [GR 120000 21 !anuar" 2004# Second Division. attestin t%at %e %as +een aut%ori>ed. a reements.555"55 from an' +an:" @nder t%ese circumstances. assurin %im t%at t%e loan documents 3ould +e filled out in accordance 3it% t%eir a reement" Jo3e-er. t%e CA affirmed 3it% modification t%e Iud ment of t%e court a .uired %im to affi? t3o si natures on e-er' promissor' note. prior to its filin of t%e complaint. includin all ot%er c%ar es included in t%e same.3.Narratives (Berne Guerrero) +e%alf.3.. after %e si ned and deli-ered t%e loan documents to t%e Ban:. Elias R" Tan. 3it% interest at 1AH per annum. o+li ations. Iointl' and solidaril'. Calle9o Sr$ (J): 4 concur Facts$ Sometime in 1. to si n for and in +e%alf of t%e &apulapu 0oundation an' and all c%ec:s. $nter=Asia clot%ed %im 3it% apparent capacit' to perform all acts 3%ic% are e?pressl'. Court o. t%e 0oundation denied incurrin inde+tedness from t%e Ban: alle in t%at t%e loans 3ere o+tained +' Tan in %is personal capacit'. $nc" Je opened a sa-in s account and a current account in t%e names of t%e corporation. attorne'2s fees and costs" $n its ans3er to t%e complaint. ne otiate loans. Branc% 19. t%e entire o+li ation amounted to 6A. and si ned t%e application form as 3ell as t%e necessar' specimen si nature cards t3ice.

t%e parties a reed to rene3 t%e contract for anot%er period of 9 'ears.A7" On 14 June 1.97. *e-anto Consolidated 'inin( Co. to pre-ent t%eir utili>ation +' t%e in-adin Japanese Arm'" T%e Japanese forces t%ereafter occupied t%e minin properties. for a period of 9 'ears" $n 1. or an' ot%er a ent. vs. aut%ori>ed its 6resident to enter into an a reement 3it% !ielson modif'in t%e pertinent pro-ision of t%e contract effecti-e 1 Januar' 1. to act 3it%in t%e scope of an apparent aut%orit'. and 3%o 3ere ousted from t%e minin properties onl' in Au ust 1. !$E&SO! +rou %t an action a ainst &E6A!TO +efore t%e Court of 0irst $nstance of (anila to reco-er certain sums of mone' representin dama es alle edl' suffered +' t%e former in -ie3 of t%e refusal of t%e latter to compl' 3it% t%e terms of a mana ement contract entered into +et3een t%em on 35 Januar' 1.A9" After t%e minin properties 3ere li+erated from t%e Japanese forces.uipment and storin t%e same 3it%in t%e +ode asL doin police 3or: necessar' to ta:e care of t%e materials and e. Tan.A8" @nder t%e terms t%ereof. +ut in t%e meantime. +e estopped from den'in t%e a ent2s aut%orit'" 4.uipment. &E6A!TO too: possession t%ereof and em+ar:ed in re+uildin and reconstructin t%e mines and millL settin up ne3 or ani>ationL clearin t%e mill siteL repairin t%e minesL erectin staff . ( .uo rendered a decision dismissin t%e complaint 3it% costs" T%e court stated t%at it did not find sufficient e-idence to esta+lis% &E6A!TODs counterclaim and so it li:e3ise dismissed t%e same" !$E&SO! appealed" T%e Supreme Court re-ersed t%e decision of t%e trial court and enter in lieu t%ereof anot%er. t%e 0oundation %ad i-en its 6resident. suc% as 3ar or ci-il commotion. 1< Dece#. it %olds %im out to t%e pu+lic as possessin t%e po3er to do t%ose actsL and t%us.er 1@((F Galdivar (J): ( concur. as a ainst an'one 3%o %as in ood fait% dealt 3it% it t%rou % suc% a ent. e. amon t%em. t%e court a . concentrates on %and and mines.0 ) .38. a dispute arose re ardin t%e computation of t%e 15H s%are of !ielson in t%e profits" T%e Board of *irectors of &epanto. a disa reement arose +et3een !$E&SO! and &E6A!TO o-er t%e status of t%e operatin contract 3%ic% as rene3ed e?pired in 1.A9. 3%en and as paid. ) too* no art. Commercial *a3 ) Cor-oration *a3 200.955"55 a mont% and a 15H participation in t%e net profits resultin from t%e operation of t%e minin properties. t%e 6acific )ar +ro:e out in *ecem+er 1. (1) 15H of an' depletion reser-e t%at ma' +e set up. t%e 0oundation is estopped from .38) +et3een !ielson K Co" $nc" and t%e &epanto Consolidated (inin Co" 3%ere+' t%e former operated and mana ed t%e minin properties o3ned +' t%e latter for a mana ement fee of 61.A1 operation of t%e minin properties 3as disrupted on account of t%e 3ar" $n 0e+ruar' 1.Narratives (Berne Guerrero) t%e transactions entered into +' Tan on its +e%alf" %ssue [2#$ )%et%er t%e foundation a-e Tan an apparent aut%orit' to deal 3it% t%e Ban:" &eld [2#$ 6er its Secretar'2s Certificate. ostensi+le and apparent aut%orit' to inter alia deal 3it% t%e Ban:" Accordin l'. as +ars a ainst t%e institution of t%e action" After trial. %nc. 4 too* no art Facts$ +D> E5)1(A1. includin attorne'Ds fees and costs" &E6A!TO in its ans3er denied t%e material alle ations of t%e complaint and set up certain special defenses.A7 t%e mines resumed operation under t%e e?clusi-e mana ement of &E6A!TO" S%ortl' after t%e mines 3ere li+erated from t%e Japanese in-aders in 1. durin t%e period of t%e contract and at t%e end of eac% 'ear. t%e mill. operated t%e mines durin t%e continuance of t%e 3ar.A1. [GR *)21001 2/ 2ecem+er 110/# %n &anc. prescription and lac%es. and (3) 15H of an' amount e?pended durin t%e 'ear out of surplus earnin s for capital account" $n t%e latter part of 1. Nielson > Co. t%e mana ement contract s%all remain in suspense in case fortuitous e-ent or force maIeure. reali>in t%at t%e mec%anics of t%e contract 3as unfair to !ielson. Galdivar (J): ( concur. ad-ersel' affects t%e 3or: of minin and millin " On 4 0e+ruar' 1. t%e corporation 3ill.A1.uipment reco-eredL repairin and rene3in t%e 3ater s'stemL and retim+erin " T%e re%a+ilitation and reconstruction of t%e mine and mill 3as not completed until 1. An operatin a reement 3as e?ecuted +efore )orld )ar $$ (on 35 Januar' 1. 3ere destro'ed upon orders of t%e @nited States Arm'.uestionin Tan2s aut%orit' to o+tain t%e su+Iect loans from t%e respondent Ban:" $t is a familiar doctrine t%at if a corporation :no3in l' permits one of its officers.A5 in suc% a 3a' t%at !ielson s%all recei-e (1) 15H of t%e di-idends declared and paid.uarters and +ode as and repairin e?istin structuresL installin ne3 mac%iner' and e. supplies on %and.A1" $n Januar' 1. po3er plant.uipmentL repairin roads and maintainin t%e sameL sal-a in e.A5.

. 3it% le al interest t%ereon from t%e date of t%e filin of t%e complaintL (1) mana ement fee for Januar'. 1.uent to !o-em+er 17.555"55 as attorne'Ds feesL and (. t%at is. 1. t%at e-en in t%ese cases !ielson could not e?ecute Iuridical acts 3%ic% 3ould +ind &epanto 3it%out first securin t%e appro-al of &epanto" !ielson. as ma' %a-e +een declared and issued su+se.955"55. 3%ile t%e a ent represents %is principal" 0urt%er. 3it% le al interest from t%e date of t%e filin of t%e complaintL (A) 15H s%are in t%e cas% di-idends durin t%e period of e?tension of t%e mana ement contract.955"55. 1. pro-ides t%at MB' t%e contract of a enc'. 3%ile in t%e lease of 3or: or ser-ices t%e +asis is emplo'ment" T%e lessor of ser-ices does not represent %is emplo'er. definin contract of lease of ser-ice. ( . 1. a enc' is a preparator' contract. 1. t%erefore. as fruits t%at accrued to said s%aresL pro-ided t%at if sufficient s%ares of stoc: of &epantoDs are not a-aila+le to satisf' t%is Iud ment. t%e principal and paramount underta:in of !ielson under t%e mana ement contract 3as t%e operation and de-elopment of t%e mine and t%e operation of t%e mill" All t%e ot%er underta:in s mentioned in t%e contract are necessar' or incidental to t%e principal underta:in P t%ese ot%er underta:in s +ein dependent upon t%e 3or: on t%e de-elopment of t%e mine and t%e operation of t%e mill" $n t%e performance of t%is principal underta:in !ielson 3as not in an' 3a' e?ecutin Iuridical acts for &epanto. is distin uis%ed from lease of 3or: or ser-ices in t%at t%e +asis of a enc' is representation. 3it% le al interest t%ereon from t%e date of t%e filin of t%e complaintL (3) mana ement fees for t%e si?t'=mont% period of e?tension of t%e mana ement contract.44" %ssue$ )%et%er t%e mana ement contract is a contract of a enc' or a contract of lease of ser-ices" &eld$ Article 185. if an'. pro-ides t%at M$n a lease of 3or: or ser-ices. as a enc' Mdoes not stop 3it% t%e a enc' +ecause t%e purpose is to enter into ot%er contracts"M T%e most c%aracteristic feature of an a enc' relations%ip is t%e a entDs po3er to +rin a+out +usiness relations +et3een %is principal and t%ird persons" MT%e a ent is destined to e?ecute Iuridical acts (creation.uest of anot%er"M Article 19AA. definin contract of a enc'. in t%e sense t%at t%e term a ent is interpreted under t%e la3 of a enc'. and Au ust 11.34A"84.A55. for it is onl' t%en t%at &epanto placed itself in condition of not +ein a+le to perform its o+li ationL (7) t%e sum of 695. %o3e-er. &epanto s%all pa' !ielson an amount in cas% e.A. 1. and Au ust 11. 3it% le al interest t%ereon from t%e date of t%e filin of t%e complaintL (4) 15H of t%e e?penses for capital account durin t%e period of e?tension. modif' or e?tin uis% +usiness relations +et3een &epanto and t%ird persons" $n ot%er 3ords. one person +inds %imself to render some ser-ice or do somet%in for t%e account or at t%e re. not as an a ent" Commercial *a3 ) Cor-oration *a3 200. of t%e Old Ci-il Code. to et%er 3it% all cas% and stoc: di-idends. +ut as one 3%o 3as performin material acts for an emplo'er. in performin its principal underta:in !ielson 3as not actin as an a ent of &epanto. 3as to act onl' as an intermediar'.Narratives (Berne Guerrero) orderin &epanto to pa' !ielson (1) 15H s%are of cas% di-idends of *ecem+er.ui-alent to t%e mar:et -alue of said s%ares at t%e time of default.17"77.ui-alent to t%e total of !ielsonDs 15H s%are in t%e stoc: di-idends declared on !o-em+er 17. amountin to 6195.95.95. modification or e?tinction of relations 3it% t%ird parties)" &ease of ser-ices contemplate onl' material (non=Iuridical) acts"M Jerein.A. +ut t%e contract also pro-ides t%at !ielson could not ma:e an' purc%ase. or sell t%e minerals. t%en. if an'. destined to create.A1 in t%e amount of 61.A.) t%e costs" &epanto see:s t%e reconsideration of t%e decision rendered on 18 *ecem+er 1.555"55. one of t%e parties +inds %imself to ma:e or construct somet%in or to render a ser-ice to t%e ot%er for a price certain"M $n +ot% a enc' and lease of ser-ices one of t%e parties +inds %imself to render some ser-ice to t%e ot%er part'" A enc'. 3it%out t%e prior appro-al of &epanto" $t is clear. amountin to 693. t%at s%ould %a-e +een deli-ered after t%e filin of t%e complaint at t%e mar:et -alue of t%e s%ares at t%e time &epanto disposed of all its a-aila+le s%ares.555"55. 3it% le al interest t%ereon from t%e date of t%e filin of t%e complaintL (9) 15H of t%e depletion reser-e set up durin t%e period of e?tension. 3it% le al interest t%ereon from t%e date of t%e filin of t%e complaintL (8) to issue and deli-er to !ielson and Co" $nc" s%ares of stoc: of &epanto Consolidated (inin Co" at par -alue e. amountin to 64. all s%ares of stoc: t%at s%ould %a-e +een deli-ered to !ielson +efore t%e filin of t%e complaint must +e paid at t%eir mar:et -alue as of t%e date of t%e filin of t%e complaintL and all s%ares.1 ) . amountin to 61.A1 in t%e amount of 618. for a compensation" $t is true t%at t%e mana ement contract pro-ides t%at !ielson 3ould also act as purc%asin a ent of supplies and enter into contracts re ardin t%e sale of mineral.

ili--ines vs. t%at is. Salipada 6endatun. 3it% an area of A.81.2 ) . 3%ic% sale 3as e-idenced +' a *eed of A+solute Sale 11 dated 15 April 1. and Con ressman Al=Ras%id &ucman fle3 to t%e (iddle East to escape political persecution" T%ereafter. A%mad Alonto. on 3 Octo+er 1. too: t%e necessar' steps prescri+ed +' t%e SEC in its 3 Octo+er 1. Re ional Trial Court of Rue>on Cit'. in a suit +et3een t%ese t3o contendin roups.81 $*6 Board of Trustees %eaded +' former Senator (amintal Tamano. *ele ate A%mad Alonto.7. after t%e purc%ase of t%e land +' t%e &i+'an o-ernment in t%e name of $*6. and t%e A++as /roup.. t%e Carpi>o /roup caused to +e si ned an alle ed Board Resolution of t%e $*6. t%e &i+'an o-ernment donated mone' to t%e $*6 to purc%ase land at Culiat.3A3. and from t%e pro-ision of para rap% Q$ of t%e (ana ement contract. t%e SEC found t%at.e :.uare meters. (adrasa% (Ara+ic Sc%ool). A--eals [GR 117/17 14 'a" 1117# First Division.Narratives (Berne Guerrero) 0urt%er. $!C filed a motion in t%e same case to compel one (rs" &eticia 6" &i on to produce and surrender to t%e Re ister of *eeds of Rue>on Cit' t%e o3nerDs duplicate cop' of TCTs RT=14911 and RT=14915 co-erin t%e t3o parcels of land.5=4.491 s. %o3e-er. t%at t%e emplo'ment +' &epanto of !ielson to operate and mana e its mines 3as principall' in consideration of t%e :no3=%o3 and tec%nical ser-ices t%at !ielson offered &epanto" T%e contract t%us entered into pursuant to t%e offer made +' !ielson and accepted +' &epanto 3as a Mdetailed operatin contractM" $t 3as not a contract of a enc'" !o3%ere in t%e record is it s%o3n t%at &epanto considered !ielson as its a ent and t%at &epanto terminated t%e mana ement contract +ecause it %ad lost its trust and confidence in !ielson" 40 %slamic 2irectorate o. Court o. aut%ori>in t%e sale of t%e su+Iect t3o parcels of land to t%e $ lesia ni Cristo ($!C) for a consideration of 611.38) to compel said roup to clear t%e propert' of s. Tandan Sora. t%e construction of a M(os. 3it%out %a-in +een properl' elected as ne3 mem+ers of t%e Board of Trustees of $*6. t%e 1. led +' (rs" Fora'da Tamano and Att'" 0irdaussi A++as" Bot% roups claimed to +e t%e le itimate $*6" Si nificantl'..uatters and deli-er complete and full p%'sical possession t%ereof to $!C" &i:e3ise. to +e used as a Center for t%e $slamic populace" T%e land. from t%e statements in t%e annual report for 1. 1 concurs." On 35 (a' 1. t3o (uslim roups sprun .81. came out 3it% a *ecision in SEC Case 1478 declarin t%e election of +ot% t%e Carpi>o /roup and t%e A++as /roup as $*6 +oard mem+ers to +e null and -oid" !eit%er roup.A55"55. (artial &a3 3as declared +' t%e late 6resident 0erdinand (arcos" (ost of t%e mem+ers of t%e 1. $!C.74 *ecision. Commissioner *atu (ama Sinsuat and (a'or Amin:adra A+u+a:ar" $n 1. t%e Carpi>o /roup.ue (pra'er place. denied $*6Ds motion to inter-ene on t%e round of lac: of Iuridical personalit' of t%e $*6= Commercial *a3 ) Cor-oration *a3 200. Sultan Jarun Al=Ras%id &ucman. filed an action for Specific 6erformance 3it% *ama es a ainst t%e -endor. so t%at t%e sale in $!CDs fa-or ma' +e re istered and ne3 titles issued in t%e name of $!C" (rs" &i on 3as alle ed to +e t%e mort a ee of t%e t3o parcels of land e?ecuted in %er fa-or +' certain A+dulra%man R"T" &in>a and Ro3aida Busran=Sampaco claimed to +e in +e%alf of t%e Carpi>o /roup" Jud e Celia &ipana=Re'es of Branc% 71.34. t%ose 3%o prepared and adopted t%e +'=la3s 3ere not +ona fide mem+ers of t%e $*6. t%e primar' purpose of 3%ic% is to esta+lis% an $slamic Center in Rue>on Cit' for. 3e co-ered +' t3o titles: TCTs RT=14915 (184414) and RT=14911 (185948). and ot%er reli ious infrastructuresM so as to facilitate t%e effecti-e practice of $slamic fait% in t%e area" To3ards t%is end. ( . or t%e Tamano /roup.81 Board of Trustees li:e Senators (amintal Tamano. t%e SEC. and no -alid election of t%e mem+ers of t%e Board of Trustees of $*6 3as e-er called" Alt%ou % t%e Carpi>o /roup attempted to su+mit a set of +'=la3s. %eaded +' En ineer 0arou: Carpi>o. t%e Board of Trustees of t%e $*6 3as composed of Senator (amintal Tamano. t.7. filed a petition +efore t%e SEC (SEC Case A511) see:in to declare null and -oid t%e *eed of A+solute Sale si ned +' t%e Carpi>o /roup and t%e $!C since t%e roup of En ineer Carpi>o 3as not t%e le itimate Board of Trustees of t%e $*6" (ean3%ile. +ot% re istered in t%e name of $*6" $n 1. pursuant to t%e *eed of A+solute Sale e?ecuted in its fa-or.1. $slamic leaders of all (uslim maIor tri+al roups in t%e 6%ilippines %eaded +' *ean Cesar Adi+ (aIul or ani>ed and incorporated t%e $S&A($C *$RECTORATE O0 TJE 6J$&$66$!ES ($*6). Con ressman Salipada 6endatun. Carpi>o /roup. 1 on leave Facts$ Sometime in 1.74. *ean Cesar Adi+ (aIul. Con ressman Ali *imaporo. in t%e same 'ear. 1 too* no art. Rue>on Cit'. aside from t%at En ineer 0arou: Carpi>o and Att'" (usi+ Buat. t%us renderin t%e adoption of t%e +'=la3s li:e3ise null and -oid" On 15 April 1. +efore Branc% 71 of t%e Re ional Trial Court of Rue>on Cit' (Ci-il Case R=.. "er#osisi#a Jr$ (J): 1 concurs.81.

t%e contract is -oid" Specificall'.1. t%e Supreme Court rendered Iud ment in /R 158891 on t%e petition filed +' (rs" &eticia 6" &i on" T%e *ecision. on 11 Septem+er 1.83). %a-e to +e struc: do3n for %a-in +een done 3it%out t%e consent of t%e $*6 t%ru a le itimate Board of Trustees" Article 1317 of t%e !e3 Ci-il Code la's do3n t%e essential re. t%e $*6=Tamano /roup +rou %t t%e petition for re-ie3. t%erefore.1 as null and -oidL and *eclarin t%e acceptance of t%e respondents. dated 8 Septem+er 1. Iurisdiction t%ereto properl' pertainin to t%e SEC" Apprised of t%e pendenc' of SEC Case A511 in-ol-in t%e contro-erted status of t%e $*6=Carpi>o /roup +ut 3it%out 3aitin for t%e outcome of said case. alle edl' in t%e name of t%e $*6..A. finall' came out 3it% a *ecision in SEC Case A511. t%e Order 3as amended +' Jud e Re'es directin &i on Mto deli-er t%e o3nerDs duplicate copies of TCT !os" RT=14911 (185948) and RT=14915 (184414) to t%e Re ister of *eeds of Rue>on Cit' for t%e purposes stated in t%e Order of (arc% 1. 3%ere e-en one is a+sent. &i on filed a petition for re-ie3 +efore t%e Supreme Court (/R 158891)" $n t%e meantime.74 to 1. in a suit +et3een t%e Carpi>o /roup and t%e A++as /roup.uatters and of deli-erin t%e actual possession t%ereof to $!C" T%ereupon Jud e Re'es in anot%er Order.3. a case not onl' of -itiated consent. constitutes t%e onl' propert' of t%e $*6" Jence. as mem+ers of t%e $*6 null and -oid" T%e $!C filed a (otion for $nter-ention.3. all acts carried out +' t%e Carpi>o Board. pertainin also to Ci-il Case R=. e?cept 0arou: Carpi>o and (usni+ Buat.83 3%ic% sustained t%e Order of Jud e Re'es compellin mort a ee &i on to surrender t%e o3nerDs duplicate copies of TCTs RT=14911 (185948) and RT=14915 (184414) to t%e Re ister of *eeds of Rue>on Cit' so t%at t%e *eed of A+solute Sale in $!CDs fa-or ma' +e properl' re istered" %ssue$ )%et%er t%e Tandan Sora propert' 3as le itimatel' sold to t%e $!C" &eld$ As far +ac: as 3 Octo+er 1. rendered 6artial Jud ment in Ci-il Case R=. Jud e Re'es.uisites of contracts. *eclarin t%e +'=la3s su+mitted +' t%e $*6=Capri>o roup as unaut%ori>ed.. it appears from t%e records.1.A...Narratives (Berne Guerrero) Tamano /roup and t%at t%e issues +ein raised +' 3a' of inter-ention are intra=corporate in nature. t%e contract is non=e?istent" Jerein.5=4. dated 1 June 1. 1. t%e SEC.. denied t%e &i on petition and affirmed t%e 17 Octo+er 1.38 orderin t%e $*6=Carpi>o /roup to compl' 3it% its o+li ation under t%e *eed of Sale of clearin t%e su+Iect lots of s.. dated 1 (arc% 1. t%ru a le itimate Board of Trustees.1 *ecision of t%e Court of Appeals in CA=/R S6=18.1" @ndaunted. %o3e-er. ( . and 3%ere all t%ese elements must +e present to constitute a -alid contract" 0or... alread' declared t%e election of t%e Carpi>o /roup (as 3ell as t%e A++as /roup) to t%e $*6 Board as null and -oid for +ein -iolati-e of t%e Articles of $ncorporation" !ot%in t%us +ecomes more settled t%an t%at t%e $*6=Carpi>o /roup 3it% 3%om $!C contracted is a fa:e Board" 6remises considered. its sale to a t%ird=part' is a sale or disposition of all t%e corporate propert' and assets of $*6 fallin Commercial *a3 ) Cor-oration *a3 200.38. $nc" null and -oidL declarin t%e election of t%e Board of *irectors 13 of t%e corporation from 1.9)" On 17 Octo+er 1. assailin t%e Orders of Jud e Re'es" T%e appellate court dismissed %er petition on 17 Octo+er 1. dated 11 *ecem+er 1.1"M (ort a ee &i on 3ent to t%e Court of Appeals. t%e $*6. to t%e Supreme Court" )%ile t%e petition 3as pendin .1. in Case 1478. no appeal %a-in +een ta:en t%erefrom" $!C ele-ated SEC Case A511 to t%e Court of Appeals +' 3a' of a special ci-il action for certiorari (CA=/R S6 331. consent is essential for t%e e?istence of a contract. on 9 Jul' 1.. ne-er a-e its consent.. particularl' t%e sale of t%e Tandan Sora propert'. t%e appeallate court promul ated a *ecision rantin $!CDs petition" T%e portion of t%e SEC *ecision in SEC Case A511 3%ic% declared t%e sale of t%e t3o (1) lots in .9. in SEC Case A511.. o3ner of t%e su+Iect parcels of land.. +ut t%e same 3as denied on account of t%e fact t%at t%e decision of t%e case %ad +ecome final and e?ecutor'. t%e SEC. treated $!C as t%e ri %tful o3ner of t%e real properties and disposed" On 4 April 1. +ut one 3%ere consent on t%e part of one of t%e supposed contractin parties is totall' 3antin " $nelucta+l'. t%e su+Iect sale is -oid and produces no effect 3%atsoe-er" T%e Carpi>o /roup= $!C sale is furt%er deemed null and -oid a+ initio +ecause of t%e Carpi>o /roupDs failure to compl' 3it% Section A5 of t%e Corporation Code pertainin to t%e disposition of all or su+stantiall' all assets of t%e corporation" T%e Tandan Sora propert'. to t%e disputed *eed of A+solute Sale e?ecuted in fa-or of $!C" T%is is. and 3%ere it is 3antin . null and -oidL declarin t%e sale of t%e t3o (1) parcels of land in Rue>on Cit' co-ered +' t%e *eed of A+solute Sale entered into +' $ lesia ni Eristo and t%e $slamic *irectorate of t%e 6%ilippines. t%ru a petition for certiorari (CA=/R S6=18. and %ence.74.5=4.4 ) .uestion to $!C as -oid 3as ordered set aside +' t%e Court of Appeals" T%us.

87=1. et" al" replaced t%e %old=o-er officers" *urin t%e tenure of t%e (a a' Board. Dafter 3%ic% no furt%er issues 3ill +e made 3it%out pre-ious aut%orit' from t%is Board"M 6ursuant to t%e appro-al i-en +' t%e t%en Board of Communications.555"55 of 3%ic% 61A9. and t%ose 3%ose names and si natures 3ere affi?ed +' t%e Carpi>o /roup to et%er 3it% t%e s%am Board Resolution aut%ori>in t%e ne otiation for t%e sale 3ere. upon t%e main round t%at t%ere 3as no -alid list of stoc:%olders t%rou % 3%ic% t%e ri %t to -ote could +e determined" As pra'ed for in t%e petition.88. suppl'. from all indications. ( . for t%e 'ear 1.555"55" $n 1.02 10 !ul" 1111# also *e Jesus -s" $ntermediate Appellate Court B/R 43..an(e Commission [GR 00. t%ere are onl' 19 official mem+ers of t%e $*6 includin t%e 7 mem+ers of t%e Board of Trustees" All told. !atelco filed its Amended Articles of $ncorporation 3it% t%e Securities and E?c%an e Commission (SEC)" )%en t%e amended articles 3ere filed 3it% t%e SEC. t%erefore.4 ) .uirements 3ere no met as t%e Carpi>o /roup 3%ic% -oted to sell t%e Tandan Sora propert' 3as a fa:e Board of Trustees.8.555 s%ares of common stoc:s to CS$ on t%e same date as part of t%e do3npa'ment" On 9 (a' 1.11C %n &anc. appro-in t%e said application su+Iect to certain conditions.8. $nc" (!atelco) 3as or ani>ed in 1. !atelco entered into a contract 3it% Communication Ser-ices. filed a petition in t%e SEC (SEC Case 18A7). /aras (J): 14 concur Facts$ !a a Telep%one Compan'.71..75.8A !atelco decided to increase its aut%ori>ed capital to 63.uarel' 3it%in t%e contemplation of t%e fore oin section" 0or t%e sale to +e -alid. +ot% at a par -alue of 615"55 per s%ares" On 11 April 1.75" $n t%is election 6edro &ope> *ee 3as unseated as C%airman of t%e Board and 6resident of t%e Corporation. +ut 3as elected as one of t%e directors. $nc" (CS$) for t%e Mmanufacture.Narratives (Berne Guerrero) s.555"55 t%e su+scri+ers su+scri+ed to 6975.555 common s%ares and 78.8. to et%er 3it% %is 3ife. Att'" &uciano (a a' 3on a seat in t%e Board 3it% t%e %elp of CS$" $n t%e reor ani>ation Att'" (a a' +ecame president" *ee %a-in +een unseated in t%e election.555 preferred s%ares. to 15 (arc% 1. !atelco filed an application for t%e appro-al of t%e increased aut%ori>ed capital 3it% t%e t%en Board of Communications under BOC Case 8A=7A" On 7 Januar' 1. t%e disputed *eed of A+solute Sale e?ecuted +' t%e fa:e Carpi>o Board and $!C 3as intrinsicall' -oid a+ initio" 47 *o-eD 2ee vs. amon 3%ic% 3as MT%at t%e issuance of t%e s%ares of stoc:s 3ill +e for a period of one 'ear from t%e date %ereof.55.=1.8.8.755 s%ares of common stoc:" Su+se. t%e maIorit' -ote of t%e le itimate Board of Trustees. (a' 1. and entered into anot%er contract 3it% CS$ for t%e suppl' and installation of additional e. no3 t%e !ational Telecommunications Commission.89. t%e aut%ori>ed capital 3as 6155. !atelco Board in %old=o-er capacit'" T%e SEC restrainin order 3as ele-ated to t%e Supreme Court in /R 95779 3%ere t%e enforcement of t%e SEC restrainin order 3as restrained" (a a'.797 s%ares of !atelco appear to %a-e +een issued in e?cess to CS$ Commercial *a3 ) Cor-oration *a3 200. entitled to -oteL (1) t%at une?plained 14.555"55" As re.555 3as full' paid" T%e capital stoc: of !atelco 3as di-ided into 113. t%e Supreme Court dismissed t%e petition in /R 95779 upon t%e round t%at t%e same 3as premature and t%e Commission s%ould +e allo3ed to conduct its %earin on t%e contro-ers'" T%e dismissal of t%e petition resulted in t%e unseatin of t%e (a a' roup from t%e +oard of directors of !atelco in a M%old=o-erM capacit'" $n t%e course of t%e proceedin s in SEC Case 18A7.555 s%ares of common stoc:s 3ere issued to CS$" $n +ot% instances.9A.uentl'.uipment +ut also issued to CS$ 113.555. anot%er 11.. from 11 June 1.8. 5ecurit" and =6c. Amelia &ope> *ee" $n t%e election CS$ 3as a+le to ain control of !atelco 3%en t%e latterDs le al counsel. SEC Jearin officer Emmanuel Sison issued an order on 13 June 1. t%e stoc:%olders of t%e !atelco %eld t%eir annual stoc:%oldersD meetin to elect t%eir se-en directors to t%eir Board of *irectors.uired +' t%e 6u+lic Ser-ice Act.uestionin t%e -alidit' of t%e elections of 1. a restrainin order 3as issued +' t%e SEC placin *ee and t%e ot%er officers of t%e 1.88. t%e ori inal aut%ori>ed capital of 6155. 3as secured pursuant to t%e conditions imposed +' t%e decision in BOC Case 8A=7A" On 1. . declarin : (1) t%at CS$ is a stoc:%older of !atelco and. no prior aut%ori>ation from t%e Board of Communications. not +ona fide mem+ers of t%e $*6 as t%e' 3ere made to appear to +e" Apparentl'.555"55 3as alread' paid" Of t%e increased capital of 61.uipment" $n accordance 3it% t%is contract. (a' 1. it did not reform t%e contract of 11 April 1. deli-er' and installationM of telep%one e. !atelco issued 1A. a decision 3as rendered in said case. concurred in +' t%e -ote of at least 1G3 of t%e +ona fide mem+ers of t%e corporation s%ould %a-e +een o+tained" T%ese t3in re.

*aniel J" $lano.71. Justino de Jesus.Narratives (Berne Guerrero) 3%ic% s%ould not +e allo3ed to -oteL (3) t%at 71 s%are%olders 3it% t%eir correspondin num+er of s%ares s%all +e allo3ed to -oteL and (A) conse. &uciano (a a'. Commercial *a3 ) Cor-oration *a3 200. *esirerio Saa-edra. !a a Cit'.. 6edro &ope> *ee and Julio &ope> *ee. t%e &ope> *ee roup %eaded +' (essrs" Justino *e Jesus and Julio &ope> *ee :ept insistin no elections 3ere %eld and refused to -acate t%eir position" On 17 (a' 1. *ee and !atelco filed t%eir respecti-e motions for reconsideration" 6endin resolution of t%e motions for reconsideration.uentl'.71. t%e lo3er court rendered Iud ment on t%e contempt c%ar e.71=1.71 election of directors and officers of !atelco +e enIoined" A restrainin order dated 11 (a' 1. !elin J" $lano. and t%ose no3 occup'in t%e positions of directors and officers of !ATE&CO to -acate t%eir respecti-e positions t%erein. *esiderio Saa-edra (Secretar'). and ot%er la3 enforcement a encies of t%e Cit' or of t%e 6ro-ince of Camarines Sur. Justino de Jesus St". 0elipa Ja-alera (Treasurer). Antonio #illasenor filed Ci-il Case 1958 3it% t%e Court of 0irst $nstance of Camarines Sur. Au usto 0ederis. as sc%eduled. ( .71. Jr" as Secretar'. to enforce t%e aforesaid order" On 1. !ilda $" Ramos. and conse.71 (/R 43.71. a ainst &uciano (a a'. orderin said respondents to turn o-er all records. Au usto 0ederis and Ernesto (i uel. on 11 (a' 1.uentl'. Julio &ope> *ee as Treasurer and #icente Tordilla. !ilda Ramos. &uciano (a a'. et" al" %a-e +een claimin in press conferences and o-er t%e radio airlanes t%at t%e' actuall' %eld and conducted elections on 11 (a' 1. Au usto 0ederis.73: 0elipa T" Ja-alera.71 directin t%e respondents in t%e contempt c%ar e to Mcompl' strictl'. presided o-er +' Jud e *elfin #ir" Sun a" #illasenor claimed t%at %e 3as an assi nee of an option to repurc%ase 34. (a' 1. and Ernesto A" (i uel" T%e follo3in are t%e reco ni>ed officers to 3it: &uciano (a a' (6resident). 3it% t%e assistance of 6C and $!6 of !a a Cit'. Au usto 0ederis and Ernesto (i uel. t%e Commission en +anc rendered a decision on 9 April 1.11). a c%ar e for contempt 3as filed +' #illasenor alle in t%at (a a'. and *aniel $lano (Auditor)" *espite ser-ice of t%e order of 19 (a' 1.71.555 s%ares of common stoc:s of !atelco under a *eed of Assi nment e?ecuted in %is fa-or" T%e (a a' roup alle edl' refused to allo3 t%e repurc%ase of said stoc:s 3%en #illasenor offered to CS$ t%e repurc%ase of said stoc:s +' tenderin pa'ment of its price" T%e complaint t%erefore. !ildo $" Ramos.71 in t%e Cit' of !a a and t%at t%e' %a-e a ne3 set of officers.71" On 15 (a' 1. Sr". orderin t%e %oldin of special stoc:%olderD meetin to elect t%e ne3 mem+ers of t%e Board of *irectors for !atelco +ased on t%e findin s made in t%e order as to 3%o are entitled to -ote" 0rom t%e fore oin order dated 13 June 1. and t%at suc% acts of (a a'. uilt' of contempt of court. &uciano (a a'. and t%e %old=o-er officers peacefull' -acated t%eir respecti-e offices and turned=o-er t%eir functions to t%e ne3 officers" On 1 June 1. et" al" constitute contempt of court" On 8 Septem+er 1.71. !ilda $" Ramos (#ice=6resident). t%e SEC reco ni>ed t%e fact t%at elections 3ere dul' %eld. and orderin t%em to reinstate t%e %old= o-er directors and officers of !ATE&CO. *esiderio Saa-edra. t%e S%eriff of !a a Cit'. amon ot%ers" On 11 April 1.71. propert' and assets of !ATE&CO to said %old=o-er directors and officers" T%e trial Iud e issued an order dated 15 Septem+er 1.71 of SEC Jearin Officer Emmanuel Sison. declarin CS$. and accordin l' punis%ed 3it% imprisonment of 4 mont%s and to pa' fine of 61.71. 3%ic% 3as raffled to Branc% $.71. t%e SEC en +anc denied t%e motions for reconsideration" (ean3%ile on 15 (a' 1. assisted +' la3 enforcement a encies. under t%e super-ision of t%e SEC representati-es" On 19 (a' 1. sustainin t%e order of t%e Jearin OfficerL dismissin t%e petitionGappeal for lac: of meritL and orderin ne3 elections as t%e Jearin Officer s%all set after consultations 3it% !atelco officers. and proclaimed t%at t%e follo3in are t%e Mdul' elected directorsM of t%e !atelco for t%e term 1. t%e controllin maIorit' of t%e stoc:%olders of t%e !atelco defied t%e restrainin order. and proceeded 3it% t%e elections. to +ecome final and e?ecutor' rendered an order statin t%at t%e election for directors 3ould +e %eld on 11 (a' 1. t%e %earin officer 3it%out 3aitin for t%e decision of t%e commission en +anc.555"55 eac%: and orderin r!ilda Ramos. installed t%e ne3l' elected directors and officers of t%e !atelco.71. in SEC Case 18A7. #icente Tordilla. t%e SEC issued anot%er order directin t%e %old=o-er directors and officers to turn o-er t%eir respecti-e posts to t%e ne3l' elected directors and officers and directin t%e S%eriff of !a a Cit'. *ee filed a petition for certiorariGappeal 3it% t%e SEC en +anc (SEC=AC 534)" T%ereafter. as #ice 6resident. Sr". Ernesto (i uel.71. ) . suc% as 6edro &ope> *ee as 6resident.71. and ot%ers referred to as %old= o-er directors and officers of !ATE&CO in t%e order dated 17 (a' 1. +' 3a' of REST$T@T$O!. *esiderio Saa-edra. on A (a' 1.71 3as issued +' t%e lo3er court commandin desistance from t%e sc%eduled election until furt%er orders" !e-ert%eless. pra'ed for t%e allo3ance to repurc%ase t%e aforesaid stoc:s and t%at t%e %oldin of t%e 11 (a' 1.

not on t%e initiati-e to t%e ne3 Board.755 s%ares to CS$" 4/ 5-ouses Firme vs.uired to consider it +ecause additional issuance of s%ares of stoc:s does not need appro-al of t%e stoc:%olders" Conse. rendered a decision. [GR 14000/ 24 9cto+er 2004# First Division. 3%ic% petitioners are . et"a al".73.755 s%ares 3as pursuant to a Board Resolution and stoc:%oldersD appro-al prior to 1. 1 on leave Facts$ Spouses Constante and A>ucena 0irme are t%e re istered o3ners of a parcel of land located on *a%lia Commercial *a3 ) Cor-oration *a3 200.755 s%ares of stoc: durin t%e incum+enc' of t%e (a a' Board 3%ic% 3as alle edl' CS$ controlled. no pre=empti-e ri %t of !atelco stoc:%olders 3as -iolated +' t%e issuance of t%e 113.755 s%ares of !atelco stoc: to CS$ made durin t%e pendenc' of SEC Case 18A7 in t%e Securities and E?c%an e Commission 3as -alid" T%e findin s of t%e SEC En Banc as to t%e issuance of t%e 113.755 s%ares of !atelco to CS$. et" al" to comment on t%e petition." T%e actual issuance.8. and 3%ile t%e case 3as su+ Iudice.8.755 stoc:s is not in-alid e-en assumin t%at it 3as made 3it%out notice to t%e stoc:%olders as claimed +' *ee. (a' 1. and. and actual issuance of t%e s%ares after 1.11 3as consolidated 3it% /R 45951" %ssue [1#$ )%et%er t%e issuance of 113.71 to t%eir respecti-e offices in t%e !ATE&COL and pro%i+itin 3%oe-er ma' +e t%e successor of t%e Jud e from interferin 3it% t%e proceedin s of t%e Securities and E?c%an e Commission in SEC=AC 534" T%e order of re=implementation 3as issued. elected 1. t%erefore.. and at t%e same time temporaril' refrained from implementin and or enforcin t%e .73. annulin t%e Iud ment dated 8 Septem+er 1.71 rendered +' t%e trial Iud e on t%e contempt c%ar e.755 s%ares in .uestionin " T%e Commission en +anc finds it difficult to see %o3 t%e one 3%o a-e t%e orders can turn around and impu n t%e implementation of t%e orders %e %ad pre-iousl' i-en" T%e reformation of t%e contract is understanda+le for !atelco lac:ed t%e corporate funds to purc%ase t%e CS$ e.8. et" al" 3%o 3ere eIected on 11 (a' 1. amounted to unfair and undue ad-anta e" T%is does not merit consideration in t%e a+sence of additional e-idence to support t%e proposition"M $n effect. t%e t%en $ntermediate Appellate Court. !a a Cit' and de Jesus. (a' 1. 3it% t%e t%en $ntermediate Appellate Court 3%ic% issued a resolution orderin de Jesus. ( . t%e stoc:%olders of !atelco appro-ed t%e issuance of stoc: to CS$" %ssue [2#$ )%et%er !atelco stoc:%olders %a-e a ri %t of preemption to t%e 113. 3%en CS$ 3as not 'et in control of t%e Board or of t%e -otin s%ares" T%ere is distinction +et3een an order to issue s%ares on or +efore 1. implementin said Iud mentL orderin t%e D%old=o-erD directors and officers of !ATE&CO to -acate t%eir respecti-e officesL directin respondents to restore or re=esta+lis% (a a'. et" al"" T%e po3er to issue s%ares of stoc:s in a corporation is lod ed in t%e +oard of directors and no stoc:%olders meetin is re.8.71. Car io (J): 3 concur.71.Narratives (Berne Guerrero) under pain of +ein su+Iected to imprisonment until t%e' do so"M (a a'. in issuin said s%ares 3it%out notif'in !atelco stoc:%olders. a petition for certiorari and pro%i+ition 3it% preliminar' inIunction or restrainin order a ainst t%e C0$ Jud e of Camarines Sur. made durin t%e pendenc' of SEC Case 18A7 in t%e Securities and E?c%an e Commission 3as -alid" &eld [1#$ T%e issuance of 113. and %is order dated 15 Septem+er 1. -iolated t%eir ri %t of pre=emption to t%e unissued s%ares &eld [2#$ T%e issuance of t%e 113.755 s%ares of stoc: 3as stated as follo3s: MBut t%e issuance of 113. finall'.0 ) . came durin t%e period 3%en CS$ 3as in control of -otin s%ares and t%e Board (if t%e' 3ere in fact in control) = +ut onl' pursuant to t%e ori inal Board and stoc:%oldersD orders.uipment"""" Appellant %ad raise t%e issue 3%et%er t%e issuance of 113. /R 43. (a' 1. Sr". Bu<al =nter-rises and 2evelo-ment Cor-. 3%et%er t%e (a a' Board. 3%ic% 3as complied 3it%.uentl'. Sr".uestioned Iud ment and order of t%e lo3er court" On 1A April 1. it is true. (a' 1. t%e (a a' roup %as +een restored as t%e officers of t%e !atelco" &ope> *ee. et" al" filed t%e petitions for certiorari 3it% preliminar' inIunction andGor restrainin order" $n t%e resolution of t%e Court En Banc dated 13 Au ust 1.uestionL else. et" al" filed on 18 Septem+er 1.

t%e latter alle edl' +ein represented +' A-iles" &eld$ T%ere 3as no consent on t%e part of t%e Spouses 0irme" Consent is an essential element for t%e e?istence of a contract. t%e Court notes t%at in t%e Complaint filed +' Bu:al Enterprises 3it% t%e trial court.Narratives (Berne Guerrero) A-enue. and 3%ere it is 3antin .5 as and +' 3a' of actual and compensator' dama esL (1) t%e sum of 6955. Rue>on Cit'" Renato de Castro. to ne otiate 3it% t%e Spouses 0irme for t%e purc%ase of t%e 6ropert'" On 17 (arc% 1. 3%o ne otiated t%e purc%ase of t%e 6ropert'. 3%ic% re-ersed and set aside t%e decision of t%e trial court" T%e appellate court ordered t%e Spouses 0irme to e?ecute t%e *eed of A+solute Sale transferrin t%e o3ners%ip of t%e su+Iect propert' to Bu:al Enterprises immediatel' upon receipt of t%e purc%ase price of 63. t%e po3er to purc%ase real propert' is -ested in t%e +oard of directors or trustees" )%ile a corporation ma' appoint a ents to ne otiate for t%e purc%ase of real propert' needed +' t%e corporation. t%ere 3as no appro-al from t%e Board of *irectors of Bu:al Enterprises as 3ould finali>e an' transaction 3it% t%e Spouses 0irme" A-iles did not %a-e t%e proper aut%orit' to ne otiate for Bu:al Enterprises" A-iles testified t%at %is friend. t%e contract is non=e?istent" T%e essence of consent is t%e conformit' of t%e parties on t%e terms of t%e contract. is neit%er an officer of Bu:al Enterprises nor a mem+er of t%e Board of *irectors of Bu:al Enterprises" T%ere is no Board Resolution aut%ori>in A-iles to ne otiate and purc%ase t%e 6ropert' for Bu:al Enterprises" T%ere is also no e-idence to pro-e t%at Bu:al Enterprises appro-ed 3%ate-er transaction A-iles made 3it% t%e Spouses 0irme" $n fact.9. t%e president of Bu:al Enterprises did not si n an' of t%e deeds of sale presented to t%e Spouses 0irme" E-en *e Castro admitted t%at %e %ad ne-er met t%e Spouses 0irme" Considerin all t%ese circumstances.. as Bu:al Enterprises2 -ice president. it is %i %l' impro+a+le for A-iles to finali>e an' contract of sale 3it% t%e Spouses 0irme" 0urt%ermore. dismissin t%e case and orderin Bu:al Enterprises to pa' t%e Spouses Constante and A>ucena 0irme (1) t%e sum of 6339. alle in t%at t%e Spouses 0irme rene ed on t%eir a reement to sell t%e 6ropert'" T%e complaint as:ed t%e trial court to order t%e Spouses 0irme to e?ecute t%e deed of sale and to deli-er t%e title to t%e 6ropert' to Bu:al Enterprises upon pa'ment of t%e a reed purc%ase price" On 8 Au ust 1. t%ere is no Board Resolution aut%ori>in A-iles to ne otiate and purc%ase t%e 6ropert' on +e%alf of Bu:al Enterprises" $t is t%e +oard of directors or trustees 3%ic% e?ercises almost all t%e corporate po3ers in a corporation" @nder Sections 13 and 34 of t%e Corporation Code. ( . t%e -ice president of Bu:al Enterprises and *e-elopment Corporation aut%ori>ed %is friend. %ad as:ed %im to ne otiate 3it% t%e Spouses 0irme to +u' t%e 6ropert'" *e Castro. t%e acceptance +' one of t%e offer made +' t%e ot%er" T%e Spouses 0irme flatl' reIected t%e offer of A-iles to +u' t%e 6ropert' on +e%alf of Bu:al Enterprises" T%ere 3as t%erefore no concurrence of t%e offer and t%e acceptance on t%e su+Iect matter.7. t%e trial court rendered Iud ment a ainst Bu:al Enterprises.555"55 as and +' 3a' of attorne'2s feesL and (A) t%e costs of t%e suit" T%e trial court %eld t%ere 3as no perfected contract of sale as Bu:al Enterprises failed to esta+lis% t%at t%e Spouses 0irme a-e t%eir consent to t%e sale of t%e 6ropert'L and t%at A-iles %ad no -alid aut%orit' to +ind Bu:al Enterprises in t%e sale transaction" Bu:al Enterprises appealed to t%e Court of Appeals.555"55 as and +' 3a' of moral dama esL (3) t%e sum of 6155. consideration and terms of pa'ment as 3ould result in a perfected contract of sale" 0urt%er.4A". 0air-ie3 6ar:.. a +ro:er. Bu:al Enterprises filed a complaint for specific performance and dama es 3it% t%e trial court. A-iles si ned t%e -erification and certification of non=forum s%oppin " T%e -erification and Commercial *a3 ) Cor-oration *a3 200.555"55 and to perform all suc% acts necessar' and proper to effect t%e transfer of t%e propert' co-ered +' TCT 14A1A3 to Bula: EnterprisesL and directed Bu:al Enterprises to deli-er t%e pa'ment of t%e purc%ase price of t%e propert' 3it%in 45 da's from t%e finalit' of t%e Iud ment" T%e Court of Appeals %eld t%at t%e lac: of a +oard resolution aut%ori>in A-iles to act on +e%alf of Bu:al Enterprises in t%e purc%ase of t%e 6ropert' 3as cured +' ratificationL inasmuc% as Bu:al Enterprises ratified t%e purc%ase 3%en it filed t%e complaint for t%e enforcement of t%e sale" T%e spouses 0irme filed t%e petition for re-ie3 on certiorari +efore t%e Supreme Court" %ssue$ )%et%er t%ere 3as a perfected contract +et3een t%e Spouses 0irme and Bu:al Enterprises. t%e final sa' 3ill %a-e to +e 3it% t%e +oard.7 ) . *e Castro. 3%ose appro-al 3ill finali>e t%e transaction" A corporation can onl' e?ercise its po3ers and transact its +usiness t%rou % its +oard of directors and t%rou % its officers and a ents 3%en aut%ori>ed +' a +oard resolution or its +'=la3s" A-iles. Teodoro A-iles..11A. testified t%at %e aut%ori>ed A-iles to +u' t%e 6ropert'" Jo3e-er.

uired a+out t%e status of &/#JA$. in t%e *ecision of 13 Au ust 1.uestioned t%e re-ocation of &/#JA$Ds certificate of re istration 3it%out due notice and %earin and concomitantl' pra'ed for t%e cancellation of t%e certificates of re istration of t%e !ort% and Sout% Associations +' reason of t%e earlier issuance of a certificate of re istration in fa-or of &/#JA$" On 14 Januar' 1.7.77" $n Jul' 1. t%is re. t%e' disco-ered t%at t%ere 3ere t3o ot%er or ani>ations 3it%in t%e su+di-ision P t%e &o'ola /rand #illas Jomeo3ners (!ort%) Association $ncorporated (!ort% Association) and t%e &o'ola /rand #illas Jomeo3ners (Sout%) Association $ncorporated (Sout% Association)" Accordin to Emden Encarnaction and Joratio A'cardo.7. East $$$. A--eals [GR 1171// 7 Au(ust 1117# Second Division. amon ot%ers" T%e Sout% Association appealed to t%e Appeals Board of t%e J$/C" $n its Resolution of 7 Septem+er 1.. and declarin t%e Certificates of Re istration of !ort% and Sout% Associations as re-o:ed or cancelled. as t%e sole %omeo3nersD or ani>ation in t%e said su+di-ision under Certificate of Re istration 5A=1. &/#JA$ did not file its corporate +'=la3s" Sometime in 1. li:e t%e si nin of documents. ( . )est $$$ and East $#" $t su+mitted its +'=la3s on 15 *ecem+er 1.8 as t%e dul' re istered and e?istin %omeo3ners association for &o'ola /rand #illas %omeo3ners.uin A" Bautista. t%e Sout% Association in turn appealed to t%e Court of Appeals" Jo3e-er.. %imself t%e o3ner of t%e de-eloper" 0or un:no3n reasons. informed %im t%at &/#JA$ %ad +een automaticall' dissol-ed for t3o reasons" 0irst. t%e predecessor of Jome $nsurance and /uarant' Corporation (J$/C). after due notice and %earin . 3%en Soli-en in. Encarnacion and A'ca'do o+tained a fa-ora+le rulin from J$/C Jearin Officer *anilo C" Ja-ier (J$/C Case RR(=9=7. Att'" Joa..uired +' t%e Corporation Code and.7.3.77. t%ere 3as non=user of corporate c%arter +ecause J$/C %ad not recei-ed an' report on t%e associationDs acti-ities" Apparentl'. a non=resident and Soli-en %imself.T%e p%'sical acts of t%e corporation.Narratives (Berne Guerrero) certification of non=forum s%oppin 3as not accompanied +' proof t%at Bu:al Enterprises aut%ori>ed A-iles to file t%e complaint on +e%alf of Bu:al Enterprises" T%e po3er of a corporation to sue and +e sued is e?ercised +' t%e +oard of directors" . %o3e-er. t%e Board dismissed t%e appeal for lac: of merit" Re+uffed. can +e performed onl' +' natural persons dul' aut%ori>ed for t%e purpose +' corporate +'=la3s or +' a specific act of t%e +oard of directors"< T%e purpose of -erification is to secure an assurance t%at t%e alle ations in t%e pleadin are true and correct and t%at it is filed in ood fait%" True. 1 on leave Facts$ &o'ola /rand #illas Jomeo3ners Association (&/#JA$) 3as or ani>ed on 7 0e+ruar' 1." T%ese de-elopments prompted t%e officers of t%e &/#JA$ to lod e a complaint 3it% t%e J$/C" T%e' . t%e trial court s%ould %a-e ordered t%e correction of t%e complaint since A-iles 3as neit%er an officer of Bu:al Enterprises nor aut%ori>ed +' its Board of *irectors to act on +e%alf of Bu:al Enterprises" 41 *o"ola Grand 7illas &omeo3ners (5out.uirement is procedural and not Iurisdictional" Jo3e-er. directors and officers t%ereof" !one of t%e mem+ers of t%e &/#JA$ 3as listed as mem+er of t%e !ort% Association 3%ile 3 mem+ers of &/#JA$ 3ere listed as mem+ers of t%e Sout% Association" T%e !ort% Association 3as re istered 3it% t%e J$/C on 13 0e+ruar' 1. respecti-el' %eaded t%ese associations" T%e' also disco-ered t%at t%ese associations %ad 9 re istered %omeo3ners eac% 3%o 3ere also t%e incorporators.3.A. t%is information resulted in t%e re istration of t%e Sout% Association 3it% t%e J$/C on 18 Jul' 1. t%e officers of t%e &/#JA$ tried to re ister its +'=la3s" T%e' failed to do so" To t%e officersD consternation.73 as t%e association of %omeo3ners and residents of t%e &o'ola /rand #illas" $t 3as re istered 3it% t%e Jome 0inancin Corporation. it did not su+mit its +'= la3s 3it%in t%e period re. vs. >o#ero (J): 3 concur.7. Court o.8" $t 3as or ani>ed +' t%e de-eloper of t%e su+di-ision and its first president 3as #ictorio #" Soli-en. co-erin 6%ases )est $. under Certificate of Re istration 5A=1145 co-erin 6%ases )est $$. t%e %ead of t%e le al department of t%e J$/C./ ) .) Association %nc. East $ and East $$" $t filed its +'=la3s on 14 Jul' 1.. t%e Court of Appeals affirmed t%e Resolution of t%e J$/C Appeals Board" T%e Sout% Association filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%e &/#JA$Ds failure to file its +'=la3s 3it%in t%e period prescri+ed +' Section A4 of t%e Corporation Code %ad t%e effect of automaticall' dissol-in t%e said corporation" Commercial *a3 ) Cor-oration *a3 200.) reco ni>in t%e &/#JA$ under Certificate of Re istration 5A=1. second.

CBC 3rote #/CC$ re. failure to file t%em 3it%in t%e period re.51=A.uestin t%e latter to conduct a pu+lic auction sale of t%e pled ed stoc:" On 1A (a' 1. 1117# First Division. pled ed %is Stoc: Certificate 111. meanin for t%e 3ord DDmustM in t%e first sentence t%ereof" T%e second para rap% of t%e la3 3%ic% allo3s t%e filin of t%e +'=la3s e-en prior to incorporation" T%is pro-ision in t%e same section of t%e Code rules out mandator' compliance 3it% t%e re. t%us: M$n t%e a+sence of c%arter or statutor' pro-isions to t%e contrar'. to C%ina Ban:in Corporation (CBC)" On 14 Septem+er 1. t%e failure to e?ercise t%e po3er 3ill +e ascri+ed to mere nonaction 3%ic% 3ill not render -oid an' acts of t%e corporation 3%ic% 3ould ot%er3ise +e -alid"M Alt%ou % t%e Corporation Code re. re.1 ) .79. on 11 April 1.73.8A. /alicano Calapatia. filed a petition for e?traIudicial foreclosure +efore !otar' 6u+lic Antonio T" de #era of (anila. t%ese are re. #/CC$ replied t%at t%e deed of pled e e?ecuted +' Calapatia in CBCDs fa-or 3as dul' noted in its corporate +oo:s" On 3 Au ust 1.555"55 from CBC.uest in -ie3 of CalapatiaDs Commercial *a3 ) Cor-oration *a3 200. on 19 Jul' 1. Section A4 re-eals t%e le islati-e intent to attac% a director'. t%e la3 itself pro-ides t%e ans3er to t%e issue" Ta:en as a 3%ole and under t%e principle t%at t%e +est interpreter of a statute is t%e statute itself (optima statuli interpretati? est ipsum statutum). #/CC$ 3rote CBC e?pressin its ina+ilit' to accede to CBCDs re. Jr". o-ern and control its o3n actions. ( .uires t%e filin of +'=la3s. and not mandator'. is -er' muc% apposite to t%e Code" T%e Corporation Code and 6* .84. it does not e?pressl' pro-ide for t%e conse. a enc' or societ'" $n ot%er 3ords. A--eals [GR 117004 20 'arc. affairs and concerns and its stoc:%olders or mem+ers and directors and officers 3it% relation t%ereto and amon t%emsel-es in t%eir relation to it.uirement of filin t%e +'=la3s M3it%in 1 mont% after receipt of official notice of t%e issuance of its certificate of incorporation +' t%e Securities and E?c%an e Commission"M $t necessaril' follo3s t%at failure to file t%e +'=la3s 3it%in t%at period does not impl' t%e MdemiseM of t%e corporation" B'=la3s ma' +e necessar' for t%e M o-ernmentM of t%e corporation +ut t%ese are su+ordinate to t%e articles of incorporation as 3ell as to t%e Corporation Code and related statutes" T%ere are in fact cases 3%ere +'=la3s are unnecessar' to corporate e?istence or to t%e -alid e?ercise of corporate po3ers.uested t%at t%e pled ed stoc: +e transferred to its name and t%e same +e recorded in t%e corporate +oo:s" Jo3e-er.Narratives (Berne Guerrero) &eld$ Automatic corporate dissolution for failure to file t%e +'=la3s on time 3as ne-er t%e intention of t%e le islature" (oreo-er. 3a unan (J): 4 concur Facts$ On 11 Au ust 1.ina Ban<in( Cor-oration vs.51=A are statutes in pari materia" E-er' statute must +e so construed and %armoni>ed 3it% ot%er statutes as to form a uniform s'stem of Iurisprudence" As t%e Mrules and re ulations or pri-ate la3s enacted +' t%e corporation to re ulate.79. CBC informed #/CC$ of t%e foreclosure proceedin s and re. t%ere can +e no automatic corporate dissolution simpl' +ecause t%e incorporators failed to a+ide +' t%e re. Court o.uired filin of +'=la3s em+odied in Section A4 of t%e Corporation Code" T%ere is no outri %t MdemiseM of corporate e?istence" 6roper notice and %earin are cardinal components of due process in an' democratic institution.uences of t%e non=filin of t%e same 3it%in t%e period pro-ided for in Section A4" And e-en if suc% omission %as +een rectified +' 6residential *ecree . 3%ic% too: effect immediatel' after its promul ation on 11 (arc% 1.8A. Calapatia o+tained a loan of 615. and under t%e e?press rant of po3er and aut%orit' to t%e SEC.M +'=la3s are indispensa+le to corporations in t%is Iurisdiction" T%ese ma' not +e essential to corporate +irt% +ut certainl'. e-en 3it%out resortin to t%e records of deli+erations of t%e Batasan 6am+ansa. +'=la3s are not necessar' eit%er to t%e e?istence of a corporation or to t%e -alid e?ercise of t%e po3ers conferred upon it.uired +' la3 +' no means tolls t%e automatic dissolution of a corporation" 40 C. $nc" (#/CC$). a stoc:%older of #alle' /olf K Countr' Clu+.79. certainl' in all cases 3%ere t%e c%arter sufficientl' pro-ides for t%e o-ernment of t%e +od'L and e-en 3%ere t%e o-ernin statute in e?press terms confers upon t%e corporation t%e po3er to adopt +'=la3s. t%e incorporators must +e i-en t%e c%ance to e?plain t%eir ne lect or omission and remed' t%e same" T%at t%e failure to file +'=la3s is not pro-ided for +' t%e Corporation Code +ut in anot%er la3 is of no moment" 6* .51=A.uired +' la3 for an orderl' o-ernance and mana ement of corporations" !onet%eless. CBC.uestin t%at t%e pled e a reement +e recorded in its +oo:s" $n a letter dated 18 Septem+er 1. pa'ment of 3%ic% 3as secured +' t%e pled e a reement still e?istin +et3een Calapatia and CBC" *ue to CalapatiaDs failure to pa' %is o+li ation.8A.

5.79 and CBC emer ed as t%e %i %est +idder at 615.74 is declared !@&& and #O$*L and orderin #/CC$ to issue anot%er mem+ers%ip certificate in t%e name of CBC" #/CC$ sou %t reconsideration of t%e order" Jo3e-er. in 3%ole or in part. SEC Jearin Officer (anuel 6" 6erea rendered a decision in fa-or of #/CC$. +' -irtue of +ein t%e %i %est +idder in t%e 18 Septem+er 1.79 auction and re.873"1A" Said notice 3as follo3ed +' a demand letter dated 11 *ecem+er 1. CBC 3as issued t%e correspondin certificate of sale" On 11 !o-em+er 1..74.uenc'" Conse.74 auction and for t%e issuance of a ne3 stoc: certificate in its name" On 17 June 1.74 auction" On 9 (a' 1.74 for 619. #/CC$ informed Calapatia of t%e termination of %is mem+ers%ip due to t%e sale of %is s%are of stoc: in t%e 15 *ecem+er 1.A" CBC filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er CBC is +ound +' #/CC$Ds +'=la3s" &eld$ $n order to +e +ound. +'=la3s are t%e relati-el' permanent and continuin rules of action adopted +' t%e corporation for its o3n o-ernment and t%at of t%e indi-iduals composin it and %a-in t%e direction. #/CC$ %ad -alid reason not to transfer t%e s%are in t%e name of CBC in t%e +oo:s of #/CC$ until li. in t%e mana ement and control of its affairs and acti-ities" T%e purpose of a +'=la3 is to re ulate t%e conduct and define t%e duties of t%e mem+ers to3ards t%e Commercial *a3 ) Cor-oration *a3 200.555"55 for t%e pled ed stoc:" Conse.74 at 15:55 a"m" $ncluded t%erein 3as CalapatiaDs o3n s%are of stoc: (Stoc: Certificate 111. t%e t%ird part' must %a-e ac.uested t%at a ne3 certificate of stoc: +e issued in its name" On 1 (arc% 1. (arc% 1.)" T%rou % a letter dated 19 *ecem+er 1.uent.. attorne'Ds fees and costs of liti ation" On 3 Januar' 1.uidation of delin.. conse. o-ern and control its o3n actions.5. mana ement and control of its affairs...uentl'..74. at t%e time t%e pled e a reement 3as e?ecuted" #/CC$ could %a-e easil' informed CBC of its +'=la3s 3%en it sent notice formall' reco ni>in CBC as pled ee of one of its s%ares re istered in CalapatiaDs name" CBCDs +elated notice of said +'=la3s at t%e time of foreclosure 3ill not suffice" B'=la3s si nifies t%e rules and re ulations or pri-ate la3s enacted +' t%e corporation to re ulate.. CBC ad-ised #/CC$ t%at it is t%e ne3 o3ner of CalapatiaDs Stoc: Certificate 111. dismissed CBCDs ori inal complaint" T%e Court of Appeals declared t%at t%e contro-ers' +et3een CBC and #/CC$ is not intra=corporateL nullif'in t%e SEC orders and dismissin CBC2s complaint" CBC mo-ed for reconsideration +ut t%e same 3as denied +' t%e Court of Appeals in its resolution dated 9 Octo+er 1.Narratives (Berne Guerrero) unsettled accounts 3it% t%e clu+" *espite t%e fore oin .7.79.1.A.555"55" On . #/CC$ caused to +e pu+lis%ed in t%e ne3spaper *ail' E?press a notice of auction sale of a num+er of its stoc: certificates.3. to +e %eld on 15 *ecem+er 1. CBC filed a complaint 3it% t%e Securities and E?c%an e Commission (SEC) for t%e nullification of t%e sale of CalapatiaDs stoc: +' #/CC$L t%e cancellation of an' ne3 stoc: certificate issued pursuant t%eretoL for t%e issuance of a ne3 certificate in petitionerDs nameL and for dama es.3" T%e sudden turn of e-ents sent #/CC$ to see: redress from t%e Court of Appeals" On 19 Au ust 1. !otar' 6u+lic de #era %eld a pu+lic auction on 18 Septem+er 1. statin in t%e main t%at considerin t%at t%e said s%are is delin. t%e case 3as dismissed" On 1A April 1. CBC protested t%e sale +' #/CC$ of t%e su+Iect s%are of stoc: and t%ereafter filed a case 3it% t%e Re ional Trial Court of (a:ati for t%e nullification of t%e 15 *ecem+er 1.. t%e SEC denied t%e same in its resolution dated 8 *ecem+er 1.A73"1A" On A *ecem+er 1.74 for 613.uentl'.5.uenc'M CalapatiaDs stoc: 3as sold at t%e pu+lic auction %eld on 15 *ecem+er 1..uired :no3led e of t%e pertinent +'=la3s at t%e time t%e transaction or a reement +et3een said t%ird part' and t%e s%are%older 3as entered into" Jerein. t%e Court of Appeals rendered its decision nullif'in and settin aside t%e orders of t%e SEC and its %earin officer on round of lac: of Iurisdiction o-er t%e su+Iect matter and.5. affairs and concerns and its stoc:%olders or mem+ers and directors and officers 3it% relation t%ereto and amon t%emsel-es in t%eir relation to it" $n ot%er 3ords. Jearin Officer 6erea denied CBCDs motion for reconsideration" CBC appealed to t%e SEC en +anc and on A June 1. #/CC$ sent Calapatia a notice demandin full pa'ment of %is o-erdue account in t%e amount of 617..uentl'.. #/CC$ replied t%at Mfor reason of delin. ( 00 ) .1. t%e Re ional Trial Court of (a:ati dismissed t%e complaint for lac: of Iurisdiction o-er t%e su+Iect matter on t%e t%eor' t%at it in-ol-es an intra=corporate dispute and on 18 Au ust 1.79 for t%e same amount and anot%er notice dated 11 !o-em+er 1. t%e Commission issued an order re-ersin t%e decision of its %earin officerL %oldin t%at CBC %as a prior ri %t o-er t%e pled ed s%are and +ecause of pled orDs failure to pa' t%e principal de+t upon maturit'. CBC can proceed 3it% t%e foreclosure of t%e pled ed s%areL declarin t%at t%e auction sale conducted +' #/CC$ on 15 *ecem+er 1.5 denied CBCDs motion for reconsideration" On 15 Septem+er 1..

3%ere+' t%e mana ement and control of A&0A +ecame -ested upon t%e *B6" On 19 April 1.77. &ee and &acdao filed a motion for reconsideration su+mittin t%at t%e Rule 1A. t%e trial court up%eld t%e -alidit' of t%e ser-ice of summons on A&0A t%rou % &ee and &acdao.7.uirin t%e issuance of an alias summons upon A&0A t%rou % t%e *B6 as a conse. section 13 of t%e Re-ised Rules of Court is not applica+le since t%e' 3ere no lon er officers of A&0A and Saco+a (anufacturin .uence of &ee and &acdaoDs letter informin t%e court t%at t%e summons for A&0A 3as erroneousl' ser-ed upon t%em considerin t%at t%e mana ement of A&0A %ad +een transferred to t%e *B6" $n a manifestation dated 11 Jul' 1. #/CC$Ds contention t%at CBC is dut'=+ound to :no3 its +'=la3s +ecause of Article 15. Januar' 1. &ee and &acdao filed t%eir ans3er to t%e t%ird part' complaint" (ean3%ile. t%e *B6 claimed t%at it 3as not aut%ori>ed to recei-e summons on +e%alf of A&0A since t%e *B6 %ad not ta:en o-er t%e compan' 3%ic% %as a separate and distinct corporate personalit' and e?istence" On A Au ust 1.uestion %as +een full' paid as e-idenced +' t%e issuance of (em+ers%ip Certificate 111. on 11 Jul' 1. 6a+lo /on>ales Jr". of t%e Ci-il Code 3%ic% stipulates t%at t%e creditor must ta:e care of t%e t%in pled ed 3it% t%e dili ence of a ood fat%er of a famil'. Section 43 does not appl'" 41 *ee vs..77. t%us. t%e trial court issued an order ad-isin Saco+a (anufacturin . a complainant for sum of mone' 3as filed +' t%e $nternational Corporate Ban:. ( 01 ) . den'in t%e latterDs motion for reconsideration and re.77" On 11 Septem+er 1. filed a t%ird part' complaint a ainst Alfa $nte rated Te?tile (ills (A&0A). Ramon C" &ee (A&0ADs president) and Antonio *(" &acdao (A&0ADs -ice president) on 18 (arc% 1. %ence.77" On 17 Jul' 1. eit%er actual or constructi-e. alt%ou % adopted pursuant to statutor' aut%orit'. e?cept 3%en t%e' %a-e :no3led e of t%e pro-isions eit%er actuall' or constructi-el'" 0or t%e e?ception to t%e eneral accepted rule t%at t%ird persons are not +ound +' +'=la3s to +e applica+le and +indin upon t%e pled ee. et" al" s%ould %a-e a-ailed of anot%er mode of ser-ice under Rule 1A. on t%e ot%er %and.7.7." )%at Calapatia o3ed t%e corporation 3ere merel' t%e mont%l' dues" Jence. A--eals [GR 1401. a second motion for reconsideration 3as filed +' &ee and &acdao reiteratin t%eir stand t%at +' -irtue of t%e -otin trust a reement t%e' ceased to +e officers and directors of A&0A. Section 43 of t%e Corporation Code 3%ic% pro-ides t%at Mno s%ares of stoc: a ainst 3%ic% t%e corporation %olds an' unpaid claim s%all +e transfera+le in t%e +oo:s of t%e corporationM cannot +e utili>ed +' #/CC$" T%e term Munpaid claimM refers to Man' unpaid claim arisin from unpaid su+scription. t%e t%in s in 3%ic% t%e pled e or mort a e consists ma'+e alienated for t%e pa'ment to t%e creditor" 0urt%er. &ee and &acdao attac%ed t%ereto a cop' of t%e -otin trust a reement +et3een all t%e stoc:%olders of A&0A (&ee and &acdao included).74" On 18 Septem+er 1. &ee and &acdao filed a motion to dismiss t%e t%ird part' complaint 3%ic% t%e Re ional Trial Court of (a:ati.77.77.uired at t%e time t%e pled e a reement 3as contracted" Eno3led e of said pro-isions.. in turn.Narratives (Berne Guerrero) corporation and amon t%emsel-es" T%e' are self=imposed and. Branc% 97 denied in an Order dated 18 June 1. Dutierrez Jr$ (J): 4 concur Facts$ On 19 !o-em+er 1. t%rou % pu+lication to effect proper ser-ice upon A&0A" On 1 Januar' 1. et" al" filed a (anifestation and (otion for t%e *eclaration of 6roper Ser-ice of Summons 3%ic% t%e trial court ranted on 18 Au ust 1. :no3led e of t%e pro-isions of t%e #/CC$ B'=la3s must +e ac.79. at t%e time of foreclosure 3ill not affect pled eeDs ri %t o-er t%e pled ed s%are" Article 1578 of t%e Ci-il Code pro-ides t%at it is also of t%e essence of t%ese contracts t%at 3%en t%e principal o+li ation +ecomes due. and t%e *B6. %a-e no status as pu+lic la3" T%erefore. 4 Fe+ruar" 1112# Third Division. and Tomas /on>ales 3%o. t%e trial court re-ersed itself +' settin aside its pre-ious Order dated 1 Januar' 1. it is t%e enerall' accepted rule t%at t%ird persons are not +ound +' +'=la3s.uirin A&0A to file its ans3er t%rou % &ee and &acdao as its corporate officers" On 1. et" al" to ta:e t%e appropriate steps to ser-e t%e summons to A&0A" On 14 Au ust 1. on t%e one %and. t%e' could no lon er recei-e summons or an' court processes for or on +e%alf of A&0A" $n support of t%eir second motion for reconsideration. Section 14 of t%e said Rules.. fails to con-ince" CBC 3as ne-er informed of CalapatiaDs unpaid accounts and t%e restricti-e pro-isions in #/CC$Ds +'=la3s" 0urt%ermore.77..77. Court o. t%e trial issued an order re. t%e su+scription for t%e s%are in . i"e". and declared t%at ser-ice upon &ee and &acdao 3%o 3ere no lon er corporate Commercial *a3 ) Cor-oration *a3 200. Saco+a (anufacturin .78.7. $nc" a ainst Saco+a (anufacturin Corp". and not to an' inde+tedness 3%ic% a su+scri+er or stoc:%older ma' o3e t%e corporation arisin from an' ot%er transaction"M Jerein.

t%e appellate court inad-ertentl' made an entr' of Iud ment on 14 Jul' 1. et" al" +efore t%e Court of Appeals 3%ic%.74 so t%at t%e le al title to t%e stoc:s co-ered +' t%e said -otin trust a reement ipso facto re-erted to &ee and &acdao as +eneficial o3ners pursuant to t%e 4t% para rap% of section 9. 184 SCRA 93. not to appeals from its decision to t%e Supreme Court pursuant to t%e Supreme CourtDs rulin in t%e case of Refractories Corporation of t%e 6%ilippines -" $ntermediate Appellate Court. et" al"Ds motion for reconsideration" On 17 Septem+er 1.74.5 erroneousl' appl'in t%e rule t%at t%e period durin 3%ic% a motion for reconsideration %as +een pendin must +e deducted from t%e 19=da' period to appeal" Jo3e-er.7. not %a-in +een notified of t%e pendin petition for certiorari 3it% t%e appellate court issued an Order declarin as final t%e Order dated 19 April 1. B1. t%e appellate court set aside t%e aforestated entr' of Iud ment after furt%er considerin t%at t%e rule it relied on applies to appeals from decisions of t%e Re ional Trial Courts to t%e Court of Appeals. et" al" mo-ed for a reconsideration of t%e Order 3%ic% 3as affirmed +' t%e court in is Order dated 1A Au ust 1. on 19 Octo+er 1. it is manifestl' clear from t%e terms of t%e -otin trust a reement +et3een A&0A and t%e *B6 t%at t%e duration of t%e a reement is contin ent upon t%e fulfillment of certain o+li ations of A&0A 3it% t%e *B6" Jad t%e fi-e='ear period of t%e -otin trust a reement e?pired in 1. settin aside t%e orders of trial court Iud e dated 19 April 1. and t%e -otin trust certificates as 3ell as t%e certificates of stoc: in t%e name of t%e trustee or trustees s%all t%ere+' +e deemed cancelled and ne3 certificates of stoc: s%all +e reissued in t%e name of t%e transferors"M Jo3e-er..7. et" al" filed a motion for reconsideration on 3%ic% t%e trial court too: no furt%er action" On 1..uentl'..C" %ssue [1#$ )%et%er t%e e?ecution of t%e -otin trust a reement +' &ee and &acdao 3%ere+' all t%eir s%ares to t%e corporation %a-e +een transferred to t%e trustee depri-es t%e stoc:%older of t%eir positions as directors of t%e corporation" &eld [1#$ &ee and &acdao. a petition for certiorari 3as +elatedl' su+mitted +' Saco+a (anufacturin .1..5" &ee and &acdao filed t%e petition for certiorari" $n t%e meantime.uired to ta:e positi-e steps in prosecutin t%e t%ird part' complaint in order t%at t%e court 3ould not +e constrained to dismiss t%e same for failure to prosecute" Su+se.uestion %ad lapsed in 1. t%e trial court.5. &ee and &acdao ceased to o3n at least one s%are standin in t%eir names on t%e +oo:s of A&0A as re.7." On 18 Octo+er 1. t%e transfer of t%eir s%ares to t%e *B6 created -acancies in t%eir respecti-e positions as directors of A&0A" T%e transfer of s%ares from t%e stoc:%olders of A&0A to t%e *B6 is t%e essence of t%e su+Iect -otin trust a reement" Considerin t%at t%e -otin trust a reement +et3een A&0A and t%e *B6 transferred le al o3ners%ip of t%e stoc:s co-ered +' t%e a reement to t%e *B6 as trustee.uentl'. &ee and &acdao can no lon er +e deemed to %a-e retained t%eir status as officers of A&0A 3%ic% 3as t%e case +efore t%e e?ecution of t%e su+Iect -otin trust a reement" T%ere is no dispute from t%e records t%at *B6 %as ta:en o-er full control and mana ement of t%e firm" %ssue [2#$ )%et%er t%e fi-e='ear period of t%e -otin trust a reement in . +' -irtue of t%e -otin trust a reement e?ecuted in 1." Saco+a (anufacturin .5. nonet%eless. t%e appellate court rendered its decision.." On 11 April 1. t%e latter +ecause t%e stoc:%older of record 3it% respect to t%e said s%ares of stoc:s" $n t%e a+sence of a s%o3in t%at t%e *B6 %ad caused to +e transferred in t%eir names one s%are of stoc: for t%e purpose of . &ee and &acdao mo-ed for a reconsideration of t%e decision of t%e appellate court 3%ic% resol-ed to den' t%e same on 15 (a' 1. ( 02 ) . after &ee and &acdao filed t%eir ans3er to Saco+a (anufacturin . all ri %ts ranted in a -otin trust a reement s%all automaticall' e?pire at t%e end of t%e a reed period. t%e *B6 3ould not %a-e transferred Commercial *a3 ) Cor-oration *a3 200. and 1A Au ust 1. of t%e ne3 Corporation Code reads t%at M@nless e?pressl' rene3ed. (arc% 1..uired under Section 13 of t%e ne3 Corporation Code" T%e' also ceased to %a-e an't%in to do 3it% t%e mana ement of t%e enterprise" &ee and &acdao ceased to +e directors" Jence.. in its Resolution dated 3 Januar' 1. as trustee" Conse.71 disposed of all t%eir s%ares t%rou % assi nment and deli-er' in fa-or of t%e *B6.7.7.7. of t%e ne3 Corporation Code" &eld [2#$ T%e 4t% para rap% of section 9. den'in Saco+a (anufacturin .ualif'in as directors of A&0A. et" al" in t%e said Order 3ere re. resol-ed to i-e due course t%ereto on 11 Septem+er 1.7. Saco+a (anufacturin .7.Narratives (Berne Guerrero) officers of A&0A cannot +e considered as proper ser-ice of summons on A&0A" On 19 (a' 1.7. et" al"Ds petition for certiorari. Saco+a (anufacturin .7..

1 a. and (c) directin t%e amendment of t%e Articles of $ncorporation and B'=la3s of ET6$ pro-idin for t%e minimum safe uards for t%e conser-ation of assets prior to t%e callin of a stoc:%olders meetin " B' t%e assailed Resolution of 13 !o-em+er 1.road on o00icial .77 +een Mille all' De?ercisin D t%e ri %ts of stoc:%olders of ET6$.. An ela &o+re at.) for Certiorari. 6%ilippines. t%rou % &ee and &acdao. t%e -otin trust a reement in . Carlos !ieto.1" On 8 *ecem+er 1. t%erefore. $nc" (ET6$) stoc:%olders meetin durin 3%ic% a 6C// controlled +oard of directors 3as elected" A special stoc:%olders meetin 3as later con-ened +' t%e re istered ET6$ stoc:%olders 3%erein anot%er set of +oard of directors 3as elected. orderin t%e conduct of an annual stoc:%olders meetin of ET6$. t%ere is e-idence on record t%at at t%e time of t%e ser-ice of summons on A&0A t%rou % &ee and &acdao on 11 Au ust 1..1 under t%e BcCourtDs control and super-ision and prescri+ed uidelines"M T%e 6C// did not o+Iect to AfricaDs motion pro-ided t%at M(1) An Order +e issued up%oldin t%e ri %t of 6C// to -ote all t%e Class MAM s%ares of ET6$L (1) $n t%e alternati-e. t%en. t%e role on ser-ice of processes on a corporation enumerates t%e representati-es of a corporation 3%o can -alidl' recei-e court processes on its +e%alf" !ot e-er' stoc:%older or officer can +ind t%e corporation considerin t%e e?istence of a corporate entit' separate from t%ose 3%o compose it" T%e rationale of t%e rule is t%at ser-ice must +e made on a representati-e so inte rated 3it% t%e corporation sued as to ma:e it a priori supposa+le t%at %e 3ill reali>e %is responsi+ilities and :no3 3%at %e s%ould do 3it% an' le al papers ser-ed on %im" Jerein. t%e Sandi an+a'an resol-ed AfricaDs motion. &ee and &acdao do not fall under an' of t%e enumerated officers" T%e ser-ice of summons upon A&0A. 6%ilippines. t.74M to t%e national o-ernment t%rou % t%e Asset 6ri-ati>ation Trust (A6T) as attested to in a Certification dated 1A Januar' 1. from 1.7. a stoc:%older of ET6$..1. pra'ed t%at said court order t%e Mcallin and %oldin of t%e Eastern Telecommunications. Rosario Arellano. 1.Narratives (Berne Guerrero) an its ri %ts. (a" Rita de los Re'es. ) too* no art. Car io5Morales (J): @ concur. t%e Supreme Court enIoined t%e Sandi an+a'an from (a) implementin its Resolution of 13 !o-em+er 1.1. t%e 6C// filed +efore t%e Supreme Court a petition (/R 15887. #ictoria &e arda. of t%e #ice 6resident of t%e *B6Ds Special Accounts *epartment $$" $n t%e same certification..1.ili--ines (:residential Commission on Good Government) vs. ( 04 ) .usiness Facts$ On 8 Au ust 1. to +ind A&0A" &eld [4#$ $t is a +asic principle in Corporation &a3 t%at a corporation %as a personalit' separate and distinct from t%e officers or mem+ers 3%o compose it" T%us. as a result of 3%ic% t3o sets of suc% +oard and officers 3ere elected" #ictor Africa.. an Order +e issued (a) disre ardin t%e Stoc: and Transfer Boo: and Boo:let of Stoc: Certificates of ET6$ in determinin 3%o can -ote t%e s%ares in an Annual Stoc:%olders (eetin of ET6$.uestion 3as not 'et terminated so t%at t%e le al title to t%e stoc:s of A&0A. Januar' 1. alle in t%at t%e 6C// %ad since 1. t%e 6residential Commission on /ood /o-ernment (6C//) conducted an Eastern Telecommunications.. is not -alid" To rule ot%er3ise 3ill contra-ene t%e eneral principle t%at a corporation can onl' +e +ound +' suc% acts 3%ic% are 3it%in t%e scope of t%e officerDs or a entDs aut%orit'" 42 Re-u+lic o.H of t%e total su+scription in ET6$. Carmen Tua>on and Rafael #alde>. for 1.7. $nc" (ET6$) annual stoc:%olders meetin for 1. filed a motion to Commercial *a3 ) Cor-oration *a3 200.78..e :. (anuel !ieto $$$. 1 concurs in result. in t%e remote e-ent t%at 6C//Ds ri %t to -ote t%e se. filed a motion +efore t%e Sandi an+a'an.uestered s%ares +e not up%eld. still +elon ed to t%e *B6" %ssue [4#$ )%et%er t%ere 3as proper ser-ice of summons on A&0A t%rou % &ee and &acdao. (+) allo3in 6C// to -ote 13".78 until 1. Ramon !ieto. $nc" (AEROCO().1. and (+) %oldin t%e stoc:%oldersD meetin of ET6$ sc%eduled on 18 !o-em+er 1.1. titles and interests in A&0A Meffecti-e June 35.M especiall' in t%e election of t%e mem+ers of t%e +oard of directors.. all stoc:%olders of record of ET6$.1" Assailin t%e fore oin resolution. (andamus and 6ro%i+ition" B' Resolution of 14 !o-em+er 1. Aerocom $n-estors and (ana ers. %ad %andled s account 3%ic% included A&0ADs assets pursuant to a mana ement a reement +' and +et3een t%e *B6 and A6T" Jence. Benito !ieto. 5andi(an+a"an [GR 1077/1 40 A-ril 2004#L also Africa -s" Sandi an+a'an B/R 1A811AC >esolution %n &anc. it is stated t%at t%e *B6..

4 Resolution)" T%e petitions 3ere consolidated" %ssue [1#$ )%et%er t%e 6C// can -ote t%e se.89" B' Resolution of 8 (a' 1.M %e contendin t%at onl' t%is Court.uirements laid do3n +' E?ecuti-e Order 15. Africa alle ed t%at %e 3as not i-en notice of t%e meetin .4.)" #ide also 9 0letc%er C'c Corp (6erm Ed) V158AL 17A Am Jur 1d ) pro-ides a solution to t%e Sandi an+a'anDs dilemma of callin a meetin 3%en ET6$ %ad t3o sets of officers" T%ere. to %a-e +een (1) ori inall' o-ernment s%ares.4 aut%ori>in t%e 6C// to %old t%e stoc:%olders meetin %ad not 'et +ecome final +ecause t%e motions for reconsideration of said resolution 3ere still pendin " 0urt%er. $nc" -" Tan.uestered ET6$ Class MAM s%ares in t%e stoc:%olders meetin for t%e election of t%e +oard of directors" &eld [1#$ )%en se. prima facie. et al" (159 6%il" A14 (1.uestered s%ares" Africa 3ent on to contend t%at. t%en t%e t3o=tiered test is applied" Jo3e-er.4 (aut%ori>in t%e %oldin of a stoc:%olders meetin to increase ET6$Ds aut%ori>ed capital stoc: and to -ote t%erein t%e se.uisite :no3led e and e?pertise to disc%ar e t%e functions of a corporate secretar'" T%e case of Board of *irectors and Election Committee of S(B )or:ers Sa-in s and &oan Asso".. and Repu+lic Act 8. t%e o-ernment s%all -ote t%e s%ares" %ssue [2#$ )%et%er t%e Sandi an+a'an can order t%e *i-ision Cler: of Court to call t%e stoc:%olders meetin and in appointin t%en Sandi an+a'an Associate Justice Sa+ino de &eon..uestered s%ares in t%e name of pri-ate indi-iduals or entities are s%o3n. t%e pu+lic c%aracter e?ception in Baseco -" 6C// and CoIuan co Jr" -" Ro?as pre-ailL t%at is.9..8.uestered Class MAM s%ares" A motion for lea-e to inter-ene relati-e to AfricaDs M(otion to Cite t%e 6C// and its Accomplices in ContemptM 3as filed +' ET6$" T%e Supreme Court ranted t%e motion for lea-e +ut ET6$ ne-er filed an' pleadin relati-e to AfricaDs motion to cite t%e 6C// in contempt" B' Resolution of 14 0e+ruar' 1551. Jr" to control and super-ise t%e same" &eld [2#$ T%e Cler: of Court.. need not +e +urdened 3it% t%e additional duties of a corporate secretar'" (oreo-er." T%eir motion 3as ranted +' t%e Supreme Court +' Resolution of 1A Januar' 1.uired 3it% ill= otten 3ealt%. t%e Sandi an+a'an finall' resol-ed to den' t%e motions for reconsideration of its Resolution of 13 *ecem+er 1.M it claimin t%at t%e increase in aut%ori>ed capital stoc: 3as necessar' in li %t of t%e re. t%e Sandi an+a'an issued a Resolution of 13 *ecem+er 1. its Resolution of 13 *ecem+er 1. t%e 6C//.8" T%e meetin 3as %eld as sc%eduled and t%e increase in ET6$Ds aut%ori>ed capital stoc: from 6195 (illion to 61"4 Billion 3as Munanimousl' appro-ed"M On 1 April 1.9. rantin t%e 6C// Maut%orit' to cause t%e %oldin of a special stoc:%oldersD meetin of ET6$ for t%e sole purpose of increasin ET6$Ds aut%ori>ed capital stoc: and to -ote t%erein t%e se.. c%allen in t%e Sandi an+a'an Resolutions of 13 *ecem+er 1. Africa filed +efore t%e Supreme Court a motion to cite t%e 6C// Mand its accomplicesM in contempt and Mto nullif' t%e Dstoc:%olders meetin D calledGconducted +' 6C// and its accomplices. t%e Supreme Court up%eld t%e creation of a committee empo3ered to call. assumin t%at t%e Sandi an+a'an %ad suc% po3er.4. t%e Cler: of Court ma' not %a-e t%e re. or (1) purc%ased 3it% pu+lic funds or t%ose affected 3it% pu+lic interest.uestered s%ares re istered in t%e names of pri-ate indi-iduals or entities are alle ed to %a-e +een ac.uestered Class DAD s%ares of stoc:"M T%e 6C//=controlled ET6$ +oard of directors t%us aut%ori>ed t%e ET6$ C%air and Corporate Secretar' to call t%e special stoc:%olders meetin " !otices 3ere sent to t%ose entitled to -ote for a meetin on 18 (arc% 1. in earl' 1. %as t%e po3er to aut%ori>e t%e 6C// to call a stoc:%olders meetin and -ote t%e se. t%e Supreme Court resol-ed to refer t%e 6C//Ds -er' ur ent petition to %old t%e special stoc:%oldersD meetin to t%e Sandi an+a'an for reception of e-idence and resolution" $n compliance t%ere3it%. conduct and super-ise t%e election of t%e +oard of Commercial *a3 ) Cor-oration *a3 200.uestered Class MAM s%ares of stoc:) and 14 0e+ruar' 1551 (den'in reconsideration of t%e *ecem+er 13. and t%e 6C// %ad no ri %t to -ote t%e se. filed a M#ERO @R/E!T 6ET$T$O! 0OR A@TJOR$TO TO JO&* S6EC$A& STOCEJO&*ERSD (EET$!/ 0OR BTJEC SO&E 6@R6OSE O0 $!CREAS$!/ BET6$DsC A@TJOR$FE* CA6$TA& STOCE. 3%o is alread' saddled 3it% Iudicial responsi+ilities... 1.. 3%en t%e se...4. promptin Africa to file on 4 April 1551 +efore t%e Supreme Court a petition for Re-ie3 on Certiorari (/R 1A811A). and not t%e Sandi an+a'an. ( 04 ) .Narratives (Berne Guerrero) inter-ene in /R 15887. etc".3" After t%e parties su+mitted t%eir respecti-e memoranda. t%en t%e t3o= tiered test does not appl'" Rat%er.

< t%e so=called Coconut $ndustr' $n-estment 0und companies (C$$0 companies) and Eduardo CoIuan co Jr" $n connection 3it% t%e se. t. t%e 6C//. send notices and preside at t%e meetin for t%e election of t%e ET6$ Board of *irectorsL and (4) T%is Court %as no Iurisdiction o-er t%e motion to cite t%e 6C// and Mits accomplicesM in contempt and to nullif' t%e stoc:%olders meetin of (arc% 18. 9 1 4 and 1A" On t%e e?plicit premise t%at -ast resources of t%e o-ernment %a-e +een amassed +' former 6resident 0erdinand E" (arcos. free>e orders and pro-isional ta:eo-ers of alle edl' ill= otten companies. estates. inter alia.. empo3ered t%e 6C//. a committee of competent and impartial persons to call. t%e Sandi an+a'an issued a Resolution liftin t%e se. instituted an action for recon-e'ance. accountin . trust accounts. on 31 Jul' 1. real or personal" Amon t%e properties se. restitution and dama es" T%e Sandi an+a'an ruled t%at t%e )rit of Se. t%e Court ruled t%at (1) T%e 6C// cannot -ote se. relati-es.ili--ines vs.uestration of t%e su+Iect @C6B s%ares on t%e round t%at COCO0E* and t%e so=called C$$0 companies %ad not +een impleaded +' t%e 6C// as parties=defendants in its 31 Jul' 1.uestered s%ares to elect t%e ET6$ Board of *irectors or to amend t%e Articles of $ncorporation for t%e purpose of increasin t%e aut%ori>ed capital stoc: unless t%ere is a prima facie e-idence s%o3in t%at said s%ares are ill= otten and t%ere is an imminent dan er of dissipation" (1)T%e ET6$ Stoc: and Transfer Boo: s%ould +e t%e +asis for determinin 3%ic% persons %a-e t%e ri %t to -ote in t%e stoc:%olders meetin for t%e election of t%e ET6$ Board of *irectors" (3) T%e 6C// is entitled to -ote t%e s%ares ceded to it +' Ro+erto S" Benedicto and %is controlled corporations under t%e Compromise A reement. re-ersion. s%ares of stoc:s. +ut not +efore. ) .. accountin . t%e 6C// issued and implemented numerous se. to file and prosecute all cases in-esti ated +' it under EOs 1 and 1" 6ursuant to t%ese la3s. assets and properties. t%e election of t%e ET6$ Board of *irectors" (9) (em+ers of t%e Sandi an+a'an s%all not participate in t%e stoc:%olders meetin for t%e election of t%e ET6$ Board of *irectors" !eit%er s%all a Cler: of Court +e appointed to call suc% meetin and issue notices t%ereof" T%e Sandi an+a'an s%all appoint. 1.uestered +' t%e Commission 3ere s%ares of stoc: in t%e @nited Coconut 6lanters Ban: (@C6B) re istered in t%e names of t%e alle ed .Narratives (Berne Guerrero) directors" Suc% a committee composed of impartial persons :no3led ea+le in corporate proceedin s 3ould pro-ide t%e needed e?pertise and o+Iecti-it' in t%e callin and t%e %oldin of t%e meetin 3it%out compromisin t%e Sandi an+a'an or its officers" T%e appointment of t%e committee mem+ers and t%e delineation of t%e scope of t%e duties of t%e committee ma' +e made pursuant to an a reement +' t%e parties or in accordance 3it% t%e pro-isions of Rule . residences. re-ersion.e :.uestrations. +uildin s.78 Complaint for recon-e'ance. Coco.uino issued E?ecuti-e Orders 1. 1 0iled a se arate o inion to 8hich 1 9oined$ Facts$ $mmediatel' after t%e 1. ( 0. 3it% t%e assistance of t%e Office of t%e Solicitor /eneral and ot%er o-ernment a encies.78.5. or t%e parties ma' a ree to constitute.uestration issued +' t%e Commercial *a3 ) Cor-oration *a3 200. mansions. t%e 6residential Commission on /ood /o-ernment (6C//) 3as created +' E?ecuti-e Order 1 to assist t%e 6resident in t%e reco-er' of t%e ill= otten 3ealt% t%us accumulated 3%et%er located in t%e 6%ilippines or a+road" E?ecuti-e Order 1 stated t%at t%e ill= otten assets and properties are in t%e form of +an: accounts. restitution and dama es (Case 5533) in t%e Sandi an+a'an" On 19 !o-em+er 1. and ot%er :inds of real and personal properties in t%e 6%ilippines and in -arious countries of t%e 3orld" E?ecuti-e Order 1A. condominiums. it ma' -ote t%e same as conser-ator pro-ided t%at t%e 6C// satisfies t%e t3o=tiered test de-ised +' t%e Court in CoIuan co -" Calpo" (A) T%e safe uards laid do3n in t%e case of CoIuan co -" Ro?as s%all +e incorporated in t%e ET6$ Articles of $ncorporation su+stantiall' contemporaneous to. on t%e ot%er %and.8" C 44 Re-u+lic o. 1 0iled a dissentin' o inion to 8hich 4 9oined.an (J): < concur. deposits. s%oppin centers. pro-ided t%at t%e s%ares are first re istered in t%e name of t%e 6C//" T%e 6C// ma' not re ister t%e transfer of t%e (alacaNan and t%e !ieto s%ares in t%e ET6$ Stoc: and Transfer Boo:L %o3e-er. t%en 6resident Cora>on C" A. %is immediate famil'. and close associates +ot% %ere and a+road. ((ana ement Committee) of t%e $nterim Rules of 6rocedure for $ntra=Corporate Contro-ersies insofar as t%e' are applica+le" B $n fine. upon (otion of COCO0E*. /an'ani.uestration of t%e said @C6B s%ares.one million coconut farmers.ed [GRs 147002)04 14 2ecem+er 2001# %n &anc.74 E*SA Re-olution.

uestered s%ares to +e -oted +' t%eir re istered o3ners" T%e -ictor' of t%e re istered s%are%olders 3as fleetin +ecause t%e Court.uestration of t%e su+Iect @C6B s%ares" A mont% t%ereafter. and to perform suc% acts as 3ill normall' follo3 in t%e e?ercise of t%ese ri %ts as re istered stoc:%olders" T%e Repu+lic of t%e 6%ilippines represented +' t%e 6C// filed t%e petition for certiorari" %ssue$ )%et%er t%e 6C// can -ote t%e se. it is aut%ori>ed to -ote t%ese se. t%e' cannot +e deemed le itimate o3ners of @C6B stoc: and cannot +e accorded t%e ri %t to -ote t%em"< On 13 Januar' 1. t%e Sandi an+a'an. on 13 0e+ruar' 1551. as a eneral rule. 5533=B and 5533=0.uired 3it% pu+lic funds some%o3 landed in pri-ate %ands" T%e e?ceptions are +ased on t%e common=sense principle t%at le al fiction must 'ield to trut%L t%at pu+lic propert' re istered in t%e names of non=o3ners is affected 3it% trust relationsL and t%at t%e prima facie +eneficial o3ner s%ould +e i-en t%e pri-ile e of enIo'in t%e ri %ts flo3in from t%e prima facie fact of o3ners%ip" $n s%ort. et al"< filed t%e .78 Constitution" T%e anti= raft court noted t%at t%ou % t%ese entities 3ere listed in an anne? appended to t%e Complaint. o-er 3%ic% t%e 6C// as a mere conser-ator cannot. .uired 3it% alle edl' ill= otten 3ealt%.uestered +' t%e o-ernment. electin t%e +oard of directors" $n response.uent continuation or resettin t%ereof. issued t%e Order. as:in t%e Sandi an+a'an to enIoin t%e 6C// from -otin t%e @C6B s%ares of stoc: re istered in t%e respecti-e names of t%e more t%an one million coconut farmersL and to enIoin t%e 6C// from -otin t%e S(C s%ares re istered in t%e names of t%e 1A C$$0 %oldin companies includin t%ose re istered in t%e name of t%e 6C//" On 17 0e+ruar' 1551.t%e ri %t of COCO0E*.uestered s%ares in t%e name of pri-ate indi-iduals or entities are s%o3n. and (1) )%ere t%e capitali>ation or s%ares t%at 3ere ac.4583.uestered s%ares re istered in t%e names of pri-ate indi-iduals or entities are alle ed to %a-e +een ac. t%e anti= raft court ordered t%e %oldin of elections for t%e Board of *irectors of @C6B" Jo3e-er. t%e Board of *irectors of @C6B recei-ed from t%e ACCRA &a3 Office a letter 3ritten on +e%alf of t%e COCO0E* and t%e alle ed nameless one million coconut farmers... after %earin t%e parties on oral ar ument. et" al" to -ote stoc: in t%eir names at t%e meetin s of t%e @C6B cannot +e conceded at t%is time" T%at ri %t still %as to +e esta+lis%ed +' t%em +efore t%e Sandi an+a'an" @ntil t%at is done.COCO0E*. amon ot%ers.uired 3it% ill= otten 3ealt%.uentl'. declarin t%at . e?ercise acts of dominion" On t%e ot%er %and.pu+lic c%aracter< e?ceptions under 3%ic% t%e o-ernment is ranted t%e aut%orit' to -ote t%e s%ares e?ist (1) )%ere o-ernment s%ares are ta:en o-er +' pri-ate persons or entities 3%oG3%ic% re istered t%em in t%eir o3n names.. 3%en se. Article Q#$$$ of t%e 1. to e?ercise t%eir ri %ts to -ote t%eir s%ares of stoc: and t%emsel-es to +e -oted upon in t%e @nited Coconut 6lanters Ban: (@C6B) at t%e sc%eduled Stoc:%olders2 (eetin on 4 (arc% 1551 or on an' su+se.3.Narratives (Berne Guerrero) Commission 3as automaticall' lifted for 6C//2s failure to commence t%e correspondin Iudicial action 3it%in t%e si?=mont% period endin on 1 Au ust 1. upon motion of CoIuan co. ( 00 ) . demandin t%e %oldin of a stoc:%olders2 meetin for t%e purpose of. if it is a+le to satisf' t%e t3o=tiered test de-ised +' t%e Court in CoIuan co -" Calpo and 6C// -" CoIuan co Jr" T3o clear . t%e Court lifted t%e Restrainin Order and ordered t%e @C6B to proceed 3it% t%e election of its +oard of directors" 0urt%ermore.uestered @C6B s%ares" &eld$ T%e re istered o3ner of t%e s%ares of a corporation e?ercises t%e ri %t and t%e pri-ile e of -otin " T%is principle applies e-en to s%ares t%at are se. t%e 6C// P pursuant to an Order of t%e Sandi an+a'an P su+di-ided Case 5533 into ei %t Complaints (Cases 5533=A to 5533=J)" Si? 'ears later. t%en t%e t3o=tiered test is applied" Jo3e-er. t%e 6C// applied for and 3as ranted +' t%is Court a Restrainin Order enIoinin t%e %oldin of t%e election" Su+se. actin on t%e solicitor eneral2s (otion for ClarificationG(anifestation. until furt%er orders from t%e Court.4583) in t%e Supreme Court" (ean3%ile. it allo3ed t%e se. t%e +oard appro-ed a Resolution callin for a stoc:%olders2 meetin on 4 (arc% 1551 at 3 p"m" On 13 0e+ruar' 1551. t%e Court rendered its final *ecision in /R . 3%en t%e se.78 pro-ided under Section 14.9. nullif'in and settin aside t%e 19 !o-em+er 1.uestered s%ares re istered in t%e names of pri-ate persons and ac. t%e' %ad not +een named as parties=respondents" T%e Sandi an+a'an Resolution 3as c%allen ed +' t%e 6C// in a 6etition for Certiorari (/R . as are all ot%er re istered stoc:%olders of t%e @nited Coconut 6lanters Ban:.5 Resolution of t%e Sandi an+a'an 3%ic% lifted t%e se. et" al" as 3ell as CoIuan co. et al" and Ballares. aut%ori>in COCO0E*. et" al" and Ballares. Commercial *a3 ) Cor-oration *a3 200.Class Action Omni+us (otion< in Sandi an+a'an Ci-il Cases 5533=A. issued a Resolution on 14 0e+ruar' 1.

and t%e distri+ution amon t%em of part of t%e corporate assets +efore t%e dissolution of t%e corporation and t%e li. t%e Court +elie-es t%at t%e o-ernment s%ould +e allo3ed to -ote t%e . amon t%em mac%ineries. to disappear. and treasurer t%ereof" Santos. 6asa'. et" al" t%erefore pra's for Iud ment re. +uildin s. t%us causin t%e complete ruin of t%e corporation and total depreciation of its stoc:s" E-an elista. et" al"Ds residence.uent loss of -alue of its stoc:s" &eld$ T%e inIur' complained of is primaril' to t%e corporation.Narratives (Berne Guerrero) prima facie. et" al" are minorit' stoc:%olders of t%e #itali &um+er Compan'. +ut purposes of -enue. 3are%ouses. +ecause t%e' +elon to it as t%e prima facie +eneficial and true o3ner" T%e Sandi an+a'an committed ra-e a+use of discretion in rossl' contradictin and effecti-el' re-ersin e?istin Iurisprudence. ne lect. refuse to sue.uestered @C6B s%ares came from t%e Coconut Consumer Sta+ili>ation 0und (CCS0). 3%ile Rafael Santos %olds more t%an 95H of t%e stoc:s of said corporation and also is and al3a's %as +een t%e president. t%en in t%at case an' one of t%e stoc:%olders is allo3ed to +rin suit" But in t%at case it is t%e corporation itself and not t%e plaintiff stoc:%older t%at is t%e real propert' in interest. truc:s. %o3e-er.uestered @C6B s%ares 3%ic% are prima facie pu+lic in c%aracter" 44 =van(elista vs. et" al" After %earin . t%e o-ernment s%all -ote t%e s%ares" Jerein. mana er. so t%at suc% dama es as ma' +e reco-ered s%all pertain to t%e Commercial *a3 ) Cor-oration *a3 200. +ut. t%e lo3er court rendered its order. so t%at t%e suit for t%e dama es claimed s%ould +e +' t%e corporation rat%er t%an +' t%e stoc:%olders" T%e stoc:%olders ma' not directl' claim t%ose dama es for t%emsel-es for t%at 3ould result in t%e appropriation +'. 3%ic% pro-ides t%at M!o s%all corporation s%all ma:e or declare an' stoc: or +ond di-idend or an' di-idend 3%atsoe-er from t%e profits arisin from its +usiness. $nc". etc". 3%o are t%e ones called upon to protect t%eir ri %ts. in suc% triple capacit'. alle es t%at Santos resides at 1111 *e3e' Boule-ard. or (1) purc%ased 3it% pu+lic funds or t%ose affected 3it% pu+lic interest. or 3%ere a demand upon t%em to file t%e necessar' suit 3ould +e futile +ecause t%e' are t%e -er' ones to +e sued or +ecause t%e' %old t%e controllin interest in t%e corporation. et" al" %ad t%e ri %t to +rin t%e action for dama es resultin from mismana ement of t%e affairs and assets of t%e corporation +' its principal officer. 5antos [GR *)1721 11 'a" 11. t%e mone' used to purc%ase t%e se.0# %n &anc. 6%ilippines. pro-ince of Ri>al" Ja-in +een ser-ed 3it% summons at t%at place. and a+andonment allo3ed its lum+er concession to lapse and its properties and assets. if t%e officers of t%e corporation. corner &i+ertad Street.uidation of its de+ts and lia+ilities. somet%in 3%ic% cannot +e le all' done in -ie3 of section 14 of t%e Corporation &a3. ot%er3ise :no3n as t%e coconut le-' funds" T%e se.uirin Santos: (1) to render an account of %is administration of t%e corporate affairs and assets: (1) to pa' plaintiffs t%e -alue of t %eir respecti-e participation in said assets on t%e +asis of t%e -alue of t%e stoc:s %eld +' eac% of t%emL and (3) to pa' t%e costs of suit" E-an elista. et" al" also as: for suc% ot%er remed' as ma' +e and e. t%en t%e t3o=tiered test does not appl'" Rat%er. +ut are in fact prima facie pu+lic funds. t%rou % fault. to %a-e +een (1) ori inall' o-ernment s%ares. rantin t%e motion for dismissal" Reconsideration of t%e order 3as denied" E-an elista. or di-ide or distri+ute its capital stoc: or propert' ot%er t%an actual profits amon its mem+ers or stoc:%olders until after t%e pa'ment of its de+ts and t%e termination of its e?istence +' limitation or la3ful dissolution"M But 3%ile it is to t%e corporation t%at t%e action s%ould pertain in cases of t%is nature. ( 07 ) .uired 3it% coco le-ies. t%e pu+lic c%aracter e?ceptions in Baseco -" 6C// and CoIuan co Jr" -" Ro?as pre-ailL t%at is. >e!es (J): ( concur Facts$ Juan *" E-an elista.uestered @C6B s%ares are confirmed to %a-e +een ac.uestioned s%ares. a 6%ilippine corporation or ani>ed for t%e e?ploitation of a lum+er concession in Fam+oan a. not 3it% alle ed ill= otten 3ealt%" As t%e coconut le-' funds are not onl' affected 3it% pu+lic interest. it +ein alle ed t%at SantosD maladministration %as +rou %t a+out t%e ruin of t%e corporation and t%e conse.uita+le" T%e complaint does not i-e E-an elista. Santos filed a motion for t%e dismissal of t%e complaint on t%e round of improper -enue and also on t%e round t%at t%e complaint did not state a cause of action in fa-or of E-an elista. et" al" appealed to t%e Supreme Court" %ssue$ )%et%er E-an elista. and in depri-in t%e o-ernment of its ri %t to -ote t%e se.

Teresita C" #ele> and Jaime (an>anoL SEC Case 58=.991. 3it% &$( endin up controllin 41"9H of t%e s%ares" $n Jul' 1. t%e Board of *irectors of &impan $n-estment Corporation (&$(6A!) appro-ed a resolution of t%e follo3in tenor: MRESO&#E* t%at t%e corporation ma:e a partial pa'ment BforC t%e le al ser-ices of /ilda C" &im in t%e %andlin of -arious cases on +e%alf of.. are paid and t%e e?istence of t%e corporation terminated +' t%e limitation of its c%arter or +' la3ful dissolution in -ie3 of t%e pro-isions of section 14 of t%e Corporation &a3" $t results t%at E-an elista...." &im.9=911A)" Bundan .. t%at t%e Corporate Secretar' +e aut%ori>ed. Ou filed a petition for certiorari +efore t%e SEC En Banc see:in to set aside t%e Order of 9 Januar' 1. t%e Jearin Officer.4. as %e is %ere+' aut%ori>ed.A" *ue to t%e issuance of t%e unsu+scri+ed s%ares to /ilda C" &im. or in-ol-in t%e corporation in t%e amount of 61. et" al"2s (otion to *ismiss.4.an (J): 4 concur Facts$ At a special meetin on 8 Octo+er 1. &im. since t%e' as: t%at Santos ma:e ood t%e losses occasioned +' %is mismana ement and pa' to t%em t%e -alue of t%eir respecti-e participation in t%e corporate assets on t%e +asis of t%eir respecti-e %oldin s" Clearl'. Jo-en and &erios filed a (otion to *ismiss on t%e follo3in rounds: t%at O@ %ad no le al capacit' to sueL t%at t%e complaint failed to state a cause of action a ainst Jo-en and &erios. et" al" filed t%e petition under Rule A9 of t%e Rules of Court" %ssue$ )%et%er Ou2s suit to enforce %er preempti-e ri %ts in a corporation is in t%e nature of a deri-ati-e suit" &eld$ A deri-ati-e suit %as +een defined as . et" al" %a-e +rou %t t%e action not for t%e +enefit of t%e corporation +ut for t%eir o3n +enefit..1 dismissed t%e petition for lac: of merit and lifted t%e preliminar' inIunction pre-iousl' issued" OuDs capacit' to file t%e suit 3as sustained" &im.955"55 to +e paid in e.uirements of t%e la3 for t%e issuance of said s%ares"M On 17 Octo+er 1. t%is cannot +e done until all corporate de+ts. t%e SEC En Banc issued an order rantin t%e petition for certiorari.A. on t%e round t%at it 3as filed +e'ond t%e 15=da' period allo3ed for see:in reconsideration" Ou filed a (otion for &ea-e to Admit Second (otion for Reconsideration dated 1 Jul' 1. Ou and &im +ein si+lin s" Actin on &im..7.919 s%ares from t%e re istration re.uest +efore t%e Corporate and &e al Affairs *epartment of t%e SEC as:in for t%e e?emption of t%e 19. and t%ere +ein no a-aila+le funds to pa' t%e same" RESO&#E* 0@RTJER. issued an Order dated 9 Januar' 1. all of &impan2s aut%ori>ed capital stoc: +ecame full' su+scri+ed. Att'" (anuel 6erea. if t%ere +e an'. et" al" mo-ed for reconsideration +ut 3as denied +' t%e appellate court in a resolution dated 19 (arc% 1.. for 3%ic% t%e directors refuse to sue" $t is a remed' Commercial *a3 ) Cor-oration *a3 200.A.A" On A 0e+ruar' 1. ( 0/ ) .4..an action +rou %t +' minorit' s%are%olders in t%e name of t%e corporation to redress 3ron s committed a ainst it. *im vs. to secure and compl' 3it% necessar' re. and (an>ano filed an Ans3er. and orderin t%e Securities $n-esti ation K Clearin *epartment (S$C*) to %ear t%e ot%er rounds of t%e (otion to *ismiss and to continue t%e case until its final determination" A motion for reconsideration filed +' &im %a-in +een denied.4 3%ic% t%e Jearin Officer also denied" 0rom t%e denial of %er second motion for reconsideration. *itas A" &erios. t%e same +ein found to +e reasona+le.919 s%ares. *im)@u [GR 14/444 11 Fe+ruar" 2001# Third Division. 6atricia &im Ou (Ou).ui-alent -alue in s%ares of stoc: of t%e corporation totalin 19.Narratives (Berne Guerrero) corporation" $n ot%er 3ords. #ele>.uest 3as ranted in a Resolution dated 1A !o-em+er 1. /an'ani. t%e Court of Appeals (CA) in CA=/R S6 A41. t%e petition for re-ie3 3as instituted +efore t%e Court of Appeals" On 31 Jul' 1. filed a complaint a ainst t%e mem+ers of t%e Board of *irectors of &impan 3%o appro-ed t%e aforesaid resolution (/ilda C" &im. 3%ic% 3as denied in an Order dated 19 April 1.. it is a deri-ati-e suit +rou %t +' a stoc:%older as t%e nominal part' plaintiff for t%e +enefit of t%e corporation.4.. t%e Corporate Secretar' Jaime /" (an>ano filed a re. assertin as affirmati-e defenses t%at t%e complaint failed to state a cause of action a ainst t%emL t%at Ou %ad no le al capacit' to sueL and t%at t%e issuance of t%e s%ares in &im2s fa-or 3as +ona fide and -alid pursuant to la3 and &impan2s B'=&a3s" $n turn. 3%ic% is t%e real propert' in interest" Jerein.A. %oldin in a+e'ance t%e resolution of t%e motion to dismiss" Ou filed a (otion for Reconsideration dated 7 April 1. Au usto R" Bundan . )il%elmina #" Jo-en. a sister of &im. and t%at no earnest efforts 3ere e?erted to3ards a compromise.uirements of t%e Re-ised Securities ActL t%e re.. et" al"Ds complaint s%o3s no cause of action in t%eir fa-or" 4.. E-an elista.

nullification of s%ares of stoc:. Jo%n Ooun Jr". re. t%rou % its Jearin Officer. out of a desire to protect and preser-e %er preempti-e ri %ts" @n. t%en Ou ma' not %a-e t%e capacit' to sue" T%e reason is t%at s%e 3ould +e actin in representation of t%e corporation.5. /oc%an Realt' refused. ne3 stoc: certificates in t%e names of t%e Ooun s" On 18 Octo+er 1.91...Narratives (Berne Guerrero) desi ned +' e. it up%eld t%e capacit' of Cecilia /oc%an @' and %er spouse (i uel @'" $t also %eld t%at t%e $ntestate Estate of Jo%n Ooun Sr" 3as an indispensa+le part'" T%e appellate court furt%er ruled t%at t%e cancellation of t%e notice of lis pendens on t%e titles of t%e corporate real estate 3as not Iustified" (oreo-er. Ric%ard Ooun . t%e /oc%ans filed a (otion for cancellation of !otice of &is 6endens" T%e Ooun s opposed t%e said motion" On . Sr" $n 1. it declared t%at t%e Ooun sD (otion for Reconsideration +efore t%e SEC 3as not pro formaL t%us. Este+an /oc%an and Crispo /oc%an as its incorporators" 0eli? /oc%an Sr"Ds dau %ter. +ecause s%e 3as complainin onl' of t%e -iolation of %er preempti-e ri %t under Section 3. its filin tolled t%e appeal period" T%e /oc%ans mo-ed for reconsideration +ut 3ere denied in a Resolution dated 17 *ecem+er 1.8" T%e /oc%ans filed t%e 6etition for Re-ie3 on Certiorari" Commercial *a3 ) Cor-oration *a3 200. remo-al of officers and directors and dama es a ainst #ir inia /oc%an. and t%us.uestiona+l'.4. *ecem+er 1.A. Alice in%erited 95 s%ares of stoc: in /oc%an Realt' from t%e former" Alice died in 1. 6edro /oc%an.uirement on deri-ati-e action necessaril' result in t%e dismissal of t%e complaint" T%e Ooun s filed a 6etition for Re-ie3 3it% t%e Court of Appeals" On 17 0e+ruar' 1. at 3%ic% time all t%e c%ildren %ad reac%ed t%e a e of maIorit'. Tomasa /oc%an.8.an (J): 4 concur Facts$ 0eli? /oc%an and Sons Realt' Corporation (/oc%an Realt') 3as re istered 3it% t%e SEC on June 1. t%e Re ional Trial Court of Ce+u adIudicated 4G1A of t%ese s%ares to %er c%ildren. t%e TRO did not pre-ent %er from pursuin t%at action" 40 Goc. recon-e'ance of propert' impressed 3it% trust." 9 da's later (19 Septem+er).A. Sr". OuDs suit cannot +e c%aracteri>ed as deri-ati-e. lea-in t%e 95 s%ares to %er %us+and. t%e ri %t of first refusal ranted to t%e remainin stoc:%olders +' t%e Articles of $ncorporation" $n 1. t%e real part' in interest is t%e corporation itself. t%e Court of Appeals ruled t%at t%e SEC %ad no Iurisdiction o-er t%e case as far as t%e %eirs of Alice /oc%an 3ere concerned. (arc% 1. (ar' Ooun Jsu and Ale?ander T%omas Ooun (t%e Ooun s)" Ja-in earned di-idends. Sr" died. not t%e s%are%older(s) 3%o actuall' instituted it" $f t%e suit filed +' Ou 3as indeed deri-ati-e in c%aracter. Jo%n... @oun( [GR 141//1 12 'arc. +ecause t%e' 3ere not 'et stoc:%olders of t%e corporation" On t%e ot%er %and. of t%e Corporation Code" S%e 3as merel' pra'in t%at s%e +e allo3ed to su+scri+e to t%e additional issuances of stoc:s in proportion to %er s%are%oldin s to ena+le %er to preser-e %er percenta e of o3ners%ip in t%e corporation" S%e 3as t%erefore not actin for t%e +enefit of t%e corporation" Ruite t%e contrar'.uested /oc%an Realt' to partition t%e s%ares of %is late 3ife +' cancellin t%e stoc: certificates in %is name and issuin in lieu t%ereof.. t%eir fat%er Jo%n Sr". ( 01 ) . Cecilia /oc%an @' and (i uel @' filed a complaint 3it% t%e SEC for issuance of s%ares of stoc: to t%e ri %tful o3ners. 2001# Third Division.A... /an'ani. ranted t%e motion to dismiss and ordered t%e cancellation of t%e notice of lis pendens annotated upon t%e titles of t%e corporate landsL %oldin t%at t%e Ooun s ne-er +een stoc:%olders of record of 0/SRC to confer t%em 3it% t%e le al capacit' to +rin and maintain t%eir action. +' 15 Septem+er 1. an act 3%ic% t%e TRO enIoins %er from doin " Jence. Jo%n Ooun . t%ese stoc:s num+ered 18. s%e 3as suin on %er o3n +e%alf. t%e case cannot +e considered as an intra=corporate contro-ers' 3it%in t%e Iurisdiction of t%e SECL and t%at on t%e alle ation t%at t%e Ooun s +rou %t t%e action as a deri-ati-e suit on t%eir o3n +e%alf and on +e%alf of /oc%an Realt'. (aria 6an !u' /o Tion .99. et" al" (/oc%ans) A !otice of &is 6endens 3as annotated to t%e real properties of t%e corporation" On 14 (arc% 1. Jane Ooun &la+an. *a-id Ooun .41. t%e /oc%ans mo-ed to dismiss t%e complaint alle in t%at: (1) t%e SEC %ad no Iurisdiction o-er t%e nature of t%e actionL (1) t%e t%e Ooun s 3ere not t%e real parties=in= interest and %ad no capacit' to sueL and (3) t%e Ooun sD causes of action 3ere +arred +' t%e Statute of &imitations" T%e motion 3as opposed +' t%e Ooun s" On 1. 3it% 0eli? /oc%an. r%e failure to compl' 3it% t%e Iurisdictional re.8..uit' and %as +een t%e principal defense of t%e minorit' s%are%olders a ainst a+uses +' t%e maIorit'"< $n a deri-ati-e action. accountin . citin as reason.an vs. t%e SEC.A. lea-in t%e s%ares to t%e Ooun s" On 7 0e+ruar' 1.

a pu+lic document. resultin in t%e impairment of t%e capital of t%e Corporation and pre-ented it from ot%er3ise utili>in said amount for its re ular and la3ful +usiness. t%e Cit' 6rosecutor filed t%e $nformation (Criminal Case 179811) for falsification of pu+lic document. 3as arrai ned and trial ensued t%ereafter" *urin t%e trial in t%e (eTC. to 3it: t%e said accused prepared. Boo: !o" $# and Series of 1. its creditors. in -iolation of t%eir duties as directors and officers of t%e Corporation " " ".A.4... &'dia Jao. t%e Complaint alle es all t%e components of a deri-ati-e suit" T%e alle ations of inIur' to t%e Spouses @' can coe?ist 3it% t%ose pertainin to t%e corporation" T%e personal inIur' suffered +' t%e spouses cannot dis. dated 14 April 1. 6a e 11. or ne li ence. +ecause t%e spouses and not t%e corporation 3ere t%e inIured parties" &eld$ T%e follo3in portions of t%e Complaint s%o3s alle ations of inIur' to t%e corporation itself. t%e (eTC ranted C%ua2s motion and ordered Commercial *a3 ) Cor-oration *a3 200. unla3full' and fraudulentl' appropriated BforC t%emsel-es t%e funds of t%e Corporation +' dra3in e?cessi-e amounts in t%e form of salaries and cas% ad-ances " " " and +' ot%er3ise c%ar in t%eir purel' personal e?penses to t%e CorporationML and MT%at t%e pa'ment of 61. ultra -ires acts. as t%e said accused full' 3ell :ne3 t%at said &'dia C" Jao 3as ne-er present durin t%e Annual Stoc:%olders (eetin %eld on April 35.Narratives (Berne Guerrero) %ssue$ )%et%er t%e action filed +' t%e Spouses @' 3as not a deri-ati-e suit.. of four counts of falsification of pu+lic documents pursuant to Article 181B3C in relation to Article 181BAC of t%e Re-ised 6enal Code" T%e c%ar e reads: MT%at on or a+out (a' 13. and t%erefore. respondent Este+an T" /oc%an " " ". did t%en and t%ere 3illfull'. -uisu#. suin on +e%alf of %imself and ot%er stoc:%olders and for t%e +enefit of t%e corporation. premature and partial li. Att'" Juanito /" /arcia and entered in %is !otarial Re istr' as *oc !o" 15. in t%e Cit' of (anila.555"55 +' t%e Corporation to complainant Cecilia /oc%an @' for %er s%ares of stoc: constituted an unla3ful. in furt%er pursuance of t%e said conspirac' and for t%e fraudulent purpose of depressin t%e -alue of t%e stoc: of t%e Corporation and to induce t%e minorit' stoc:%olders to sell t%eir s%ares of stoc: for an inade. 6%ilippines. unla3full' and feloniousl' commit acts of falsification upon a pu+lic document.uestioned transaction occurred. Branc% 11. and t%e corporation is una+le or un3illin to institute suit to remed' t%e 3ron . dul' notari>ed +efore a !otar' 6u+lic. ( 70 ) .. certified. 3%en in trut% and in fact. 1. 1. +' ma:in or causin it to appear in said (inutes of t%e Annual Stoc:%olders (eetin t%at one &O*$A JAO CJ@A 3as present and %as participated in said proceedin s. A--eals [GR 1.ua vs. to 3it: MT%at on information and +elief.uate consideration as aforesaid.. +efore t%e (etropolitan Trial Court ((eTC) of (anila. a sin le stoc:%older ma' institute t%at suit. to t%e dama e and preIudice of t%e Corporation. Att'" E-el'n Sua=E%o and Att'" Ariel Bruno Ri-era appeared as pri-ate prosecutors and presented Jao as t%eir first 3itness" After Jao2s testimon'. as 3ell as at t%e time t%e action 3as filed and durin t%e pendenc' of t%e action" 47 C.155. Elsa C%ua. +ein t%en a pri-ate indi-idual.A and neit%er %as participated in t%e proceedin s t%ereof to t%e preIudice of pu+lic interest and in -iolation of pu+lic fait% and destruction of trut% as t%erein proclaimed" Contrar' to &a3"M T%ereafter. Court o... a ainst 0rancis C%ua +ut dismissed t%e accusation a ainst Elsa C%ua" 0rancis C%ua.. and falsified t%e (inutes of t%e Annual Stoc:%olders meetin of t%e Board of *irectors of t%e Siena Realt' Corporation.in' (J): 4 concur Facts$ On 17 0e+ruar' 1.11.ualif' t%em from filin a deri-ati-e suit on +e%alf of t%e corporation" $t merel' i-es rise to an additional cause of action for dama es a ainst t%e errin directors" T%is cause of action is also included in t%e Complaint filed +efore t%e SEC" T%e Spouses @' %a-e t%e capacit' to file a deri-ati-e suit in +e%alf of and for t%e +enefit of t%e corporation" T%e reason is t%at t%e alle ations of t%e Complaint ma:e t%em out as stoc:%olders at t%e time t%e . to +rin a+out a redress of t%e 3ron done directl' to t%e corporation and indirectl' to t%e stoc:%olders"M Jerein.0714 11 Novem+er 2004 First Division. and of complainants as minorit' stoc:%olders"M As earl' as 1. t%e said accused. t%e Court %as reco ni>ed t%e ri %t of a sin le stoc:%older to file deri-ati-e suits" M)%ere corporate directors %a-e committed a +reac% of trust eit%er +' t%eir frauds.A. treasurer of Siena Realt' Corporation. C%ua mo-ed to e?clude Jao2s counsels as pri-ate prosecutors in t%e case on t%e round t%at Jao failed to alle e and pro-e an' ci-il lia+ilit' in t%e case" $n an Order. filed a complaint=affida-it 3it% t%e Cit' 6rosecutor of (anila c%ar in 0rancis C%ua and %is 3ife.uidation and distri+ution of assets to a stoc:%older.

A7A4).. to an' incorporator.555 or 19H of t%e amount of %is su+scription" !o certificate of stoc: 3as issued to %im or. t%e ci-il action for t%e reco-er' of ci-il lia+ilit' arisin from t%e offense c%ar ed s%all +e deemed instituted 3it% t%e criminal action. ( 71 ) . C%ua filed +efore t%e Court of Appeals a petition for certiorari" On 1A June 1551.uent suit a ainst t%e same defendants for t%e same cause of action" $n ot%er 3ords. t%e corporation 3as a necessar' part' to t%e petition filed 3it% t%e RTC and e-en if Jao filed t%e criminal case. Siena Realt' Corporation is an offended part'" Jence.ua non t%at t%e corporation +e impleaded as a part' +ecause not onl' is t%e corporation an indispensa+le part'. e-er' person criminall' lia+le for a felon' is also ci-ill' lia+le" )%en a criminal action is instituted. [GR *)2/120 2. Novem+er 1170# Second Division. t%e criminal complaint includin t%e ci-il aspect t%ereof could not +e deemed in t%e nature of a deri-ati-e suit" 4/ Nava vs. su+scri+er or stoc:%older" On 1 April 1. it is re.44 6o Commercial *a3 ) Cor-oration *a3 200. %er act s%ould not di-est t%e Corporation of its ri %t to +e a part' and present its o3n claim for dama es" C%ua mo-ed for reconsideration +ut it 3as denied in a Resolution dated 15 !o-em+er 1551" Jence. +efore t%e Re ional Trial Court (RTC) of (anila. t%e suin stoc:%older is re arded as a nominal part'. t%e RTC in an order re-ersed t%e (eTC Order" C%ua mo-ed for reconsideration 3%ic% 3as denied" *issatisfied." T%e RTC a-e due course to t%e petition and on 9 Octo+er 1. 3it% t%e corporation as t%e real part' in interest" A deri-ati-e action is a suit +' a s%are%older to enforce a corporate cause of action" T%e corporation is a necessar' part' to t%e suit" And t%e relief 3%ic% is ranted is a Iud ment a ainst a t%ird person in fa-or of t%e corporation" Similarl'. for t%at matter.. 3%ene-er t%e officials of t%e corporation refuse to sue. 3%ere a corporation is an inIured part'. read in relation to Section 13. t%e complaint 3as instituted +' Jao a ainst C%ua for falsif'in corporate documents 3%ose su+Iect concerns corporate proIects of Siena Realt' Corporation" Clearl'. reser-es t%e ri %t to institute it separatel' or institutes t%e ci-il action prior to t%e criminal action" !ot e-er' suit filed in +e%alf of t%e corporation is a deri-ati-e suit" 0or a deri-ati-e suit to prosper.555" 6o paid 61. its po3er to sue is lod ed 3it% its +oard of directors or trustees" An indi-idual stoc:%older is permitted to institute a deri-ati-e suit on +e%alf of t%e corporation 3%erein %e %olds stoc:s in order to protect or -indicate corporate ri %ts. t%e +oard of directors of t%e corporation in t%is case did not institute t%e action a ainst C%ua" Jao 3as t%e one 3%o instituted t%e action" !o3%ere is it stated t%at s%e is filin t%e same in +e%alf and for t%e +enefit of t%e corporation" T%us.=.uired t%at t%e minorit' stoc:%older suin for and on +e%alf of t%e corporation must alle e in %is complaint t%at %e is suin on a deri-ati-e cause of action on +e%alf of t%e corporation and all ot%er stoc:%olders similarl' situated 3%o ma' 3is% to Ioin %im in t%e suit" $t is a condition sine . t%e appellate court promul ated its *ecision den'in t%e petition" T%e Court of Appeals %eld t%at t%e action 3as indeed a deri-ati-e suit..Narratives (Berne Guerrero) t%e complainant2s counsels to +e e?cluded from acti-el' prosecutin Criminal Case 179811" Jao mo-ed for reconsideration +ut it 3as denied" Jao filed a petition for certiorari (SCA . unless t%e offended part' 3ai-es t%e ci-il action. A:uino (J): 4 concur Facts$ Teofilo 6o as an incorporator su+scri+ed to 75 s%ares of 6eers (ar:etin Corporation at 6155 a s%are or a total par -alue of 67. :eers 'ar<etin( Cor-. t%e corporation must +e Ioined as part' +ecause it is its cause of action t%at is +ein liti ated and +ecause Iud ment must +e a res adIudicata a ainst it" Jerein. Siena Realt' Corporation %as a cause of action" And t%e ci-il case for t%e corporate cause of action is deemed instituted in t%e criminal action" Jo3e-er. or are t%e ones to +e sued. +ut it is also t%e present rule t%at it must +e ser-ed 3it% process" T%e Iud ment must +e made +indin upon t%e corporation in order t%at t%e corporation ma' et t%e +enefit of t%e suit and ma' not +rin su+se. for it alle ed t%at petitioner falsified documents pertainin to proIects of t%e corporation and made it appear t%at C%ua 3as a stoc:%older and a director of t%e corporation" Accordin to t%e appellate court. t%e petition +' C%ua" %ssue$ )%et%er t%e criminal complaint 3as in t%e nature of a deri-ati-e suit" &eld$ @nder Section 34 of t%e Corporation Code. or %old t%e control of t%e corporation" $n suc% actions. a stoc:%older ma' inter-ene and defend on +e%alf of t%e corporation" @nder t%e Re-ised 6enal Code.. Branc% 1. if a corporation %as a defense to an action a ainst it and is not assertin it.

t%e trial court dismissed t%e petition" !a-a appealed" %ssue$ )%et%er t%e officers of 6eers (ar:etin Corporation can +e compelled +' mandamus to enter in its stoc: and transfer +oo: t%e sale made +' 6o to !a-a of t%e 15 s%ares formin part of 6oDs su+scription of 75 s%ares. sale. 3it% t%e SEC (SEC Case 537.A). A--eals [GR 120/11 . as contemplated in section 91 of t%e Corporation &a3" As a rule. not to o3n t%em" Suc% foreclosure is not automatic. pra'in t%at an order +e issued directin t%e corporate secretar' of /o 0a' K Co" to re ister t%e stoc: transfers and issue ne3 certificates in fa-or of &im Ta'L and orderin /o 0a' K Co" to pa' all di-idends due and unclaimed on t%e Commercial *a3 ) Cor-oration *a3 200. Court o. %erein. to re ister t%e said 15 s%ares in !a-aDs name in t%e corporationDs transfer +oo:" T%e corporation and t%e Cusis pleaded t%e defense t%at no s%ares of stoc: a ainst 3%ic% t%e corporation %olds an unpaid claim are transfera+le in t%e +oo:s of t%e corporation" After %earin .75. it +ein admitted t%at t%e corporation %as an unpaid claim of 64. is essential for t%e protection of +ot% t%e corporation and its stoc:%olders" 41 *im 8a" vs. &im Ta' filed a M6etition for (andamusM a ainst /o 0a' K Co".44 !a-a filed a mandamus action in t%e Court of 0irst $nstance of !e ros Occidental.uested t%e officers of t%e corporation to re ister t%e sale in t%e +oo:s of t%e corporation" T%e re. S' &im o+li ed %imself to pa' interest on %is loan at t%e rate of 15H per annum from t%e date of t%e e?ecution of said contract" T%e contractual stipulation in t%e pled e s%o3ed t%at &im Ta' 3as merel' aut%ori>ed to foreclose t%e pled e upon maturit' of t%e loans. ( 72 ) . t%e assi nment of corporate s%ares is effecti-e onl' +et3een t%e parties to t%e transaction" T%e deli-er' of t%e stoc: certificate. %o3e-er.an (J): 4 concur Facts$ On 7 Januar' 1. 3it% a total par -alue of 67. t%e s%ares 3%ic% ma' +e alienated are t%ose 3%ic% are co-ered +' certificates of stoc:" T%e t3ent' s%ares in .5. or transfer of stoc:M t%at is supposed to +e recorded in t%e stoc: and transfer +oo:. its e?ecuti-e -ice=president and secretar' respecti-el'. t%e corporation %as a claim on t%e said s%ares for t%e unpaid +alance of 6oDs su+scription" A stoc: su+scription is a su+sistin lia+ilit' from t%e time t%e su+scription is made" T%e su+scri+er is as muc% +ound to pa' %is su+scription as %e 3ould +e to pa' an' ot%er de+t" T%e ri %t of t%e corporation to demand pa'ment is no less incontesta+le" A corporation cannot release an ori inal su+scri+er from pa'in for %is s%ares 3it%out a -alua+le consideration or 3it%out t%e unanimous consent of t%e stoc:%olders" T%us. /uio: e?ecuted a Contract of 6led e in fa-or of &im Ta' 3%ere+' %e pled ed %is 355 s%ares of stoc: in t%e /o 0a' K Compan' $nc" /uio: o+li ed %imself to pa' interest on said loan at t%e rate of 15H per annum from t%e date of said contract of pled e" On t%e same date.555 pa'a+le 3it%in 4 mont%s" To secure t%e pa'ment of t%e aforesaid loan and interest t%ereon. for it must +e done in a pu+lic or pri-ate sale" /uio: and S' &im endorsed t%eir respecti-e s%ares of stoc: in +lan: and deli-ered t%e same to &im Ta'" Jo3e-er. /uio: and S' &im failed to pa' t%eir respecti-e loans and t%e accrued interests t%ereon to &im Ta'" $n Octo+er 1. S' &im e?ecuted a MContract of 6led eM co-erin %is 355 s%ares of stoc: in /o 0a' K Co" @nder said contract.555 15 of %is 75 s%ares" $n t%e deed of sale 6o represented t%at %e 3as Mt%e a+solute and re istered o3ner of t3ent' s%aresM of 6eers (ar:etin Corp" !a-a re.uestion. 3%ic% represents t%e s%ares to +e alienated. /an'ani. S' /uio: secured a loan from &im Ta' in t%e amount of 6A5.555 pa'a+le in 4 mont%s" To secure t%e pa'ment of %is loan. Bacolod Cit' Branc% to compel t%e corporation and Renato R" Cusi and Amparo Cusi. from &im Ta' in t%e amount of 6A5. are not co-ered +' an' certificate of stoc: in 6oDs name" (oreo-er..Narratives (Berne Guerrero) sold to Ricardo A" !a-a for 61. Au(ust 111/# First Division.uest 3as denied +ecause 6o %as not paid full' t%e amount of %is su+scription" !a-a 3as informed t%at 6o 3as delin.555 as t%e +alance due on 6oDs su+scription and t%at t%e 15 s%ares are not co-ered +' an' stoc: certificate" &eld$ T%e transfer made +' 6o to !a-a is not t%e Malienation. t%ere is no clear le al dut' on t%e part of t%e officers of t%e corporation to re ister t%e 15 s%ares in !a-aDs name" As no stoc: certificate 3as issued to 6oL and 3it%out t%e stoc: certificate.555. Alfonso S' &im secured a loan. 3%ic% is t%e e-idence of o3ners%ip of corporate stoc:.uent in t%e pa'ment of t%e +alance due on %is su+scription and t%at t%e corporation %ad a claim on %is entire su+scription of 75 s%ares 3%ic% included t%e 15 s%ares t%at %ad +een sold to !a-a" On 11 *ecem+er 1.555 and for 3%ic% 6o %ad paid onl' 61.

*i-a Cit" %nc. 3%erein %e assi ned %is s%ares.uired o3ners%ip o-er t%e s%ares +' -irtue of no-ation. t%e appellate court de+un:ed &im Ta'Ds claim t%at %e %ad ac. %is o3ners%ip claim %ad no prima facie le to stand on" At +est.555"55.. +ut. 2/ 5e-tem+er 2001# First Division. includin t%ose under t%eir control" $n suc% an e-ent.3 and 15. &im Ta'Ds possession of t%e stoc: certificates came a+out +ecause t%e' 3ere deli-ered to %im pursuant to t%e contracts of pled e" Jis possession as a pled ee cannot ripen into o3ners%ip +' prescription" &im Ta' e?pressl' repudiated t%e pled e. as 3ell as t%ose of 7 ot%er s%are%olders under %is control 3it% a total of 15. a stoc:%older of t%e Rural Ban: of &ipa Cit'. S' &im died" /uio: and t%e $ntestate Estate of Alfonso S' &im. ( 74 ) . nor &im Ta'Ds receipt of di-idends from 1. e?ecuted an A reement 3%erein t%e' ac:no3led ed t%eir inde+tedness to t%e Ban: in t%e amount of 6A. 115 SCRA 915.555. filed t%eir Ans3er=$n=$nter-ention 3it% t%e SEC" After due proceedin s. &im Ta' %as not ac. A-elina.. vs.75 to 1.A48 s%ares. Sr".uired o3ners%ip o-er t%e certificates of stoc: t%rou % e?traordinar' prescription. and 3%et%er lac%es %ad set in 3ere difficult le al issues. pursuant to t%e *ecision of t%e Supreme Court in t%e case of MRural Ban: of Salinas et" al" -ersus Court of Appeals. 4nares5Santia'o (J): 4 concur Facts$ Re'naldo #illanue-a. 3%et%er prescription effecti-el' transferred o3ners%ip of t%e s%ares. t%e SEC promul ated a *ecision. e?ecuted a *eed of Assi nment. on 8 (arc% 1.M %e failed to pro-e t%e le al +asis for t%e secretar' of t%e Corporation to +e compelled to re ister stoc: transfers in fa-or of &im Ta' and to issue ne3 certificates of stoc: under %is name" &im Ta' appealed t%e *ecision of t%e %earin officer to t%e SEC. Court o. t%e Commercial *a3 ) Cor-oration *a3 200. Sr" and %is 3ife. for %im to cause t%e re istration of said s%ares in %is o3n name" &eld$ &im Ta'Ds o3ners%ip o-er t%e s%ares 3as not 'et perfected 3%en t%e Complaint 3as filed" T%e contract of pled e certainl' does not ma:e %im t%e o3ner of t%e s%ares pled ed" 0urt%er.3. as pro-ided for in Article 1131 of t%e Ci-il Code" )%at is re. and stipulated t%at said de+t 3ill +e paid out of t%e proceeds of t%e sale of t%eir real propert' descri+ed in t%e A reement" At a meetin of t%e Board of *irectors of t%e Ban: on 19 !o-em+er 1. t%e SEC %earin officer promul ated a *ecision dismissin &im Ta'Ds Complaint on t%e round t%at alt%ou % t%e SEC %ad Iurisdiction o-er t%e action.9 of t%e Ci-il Code and t%at &im Ta'Ds receipt of di-idends 3as in compliance 3it% Article 1151 of t%e same Code" &im Ta'Ds claim t%at %e %ad ac. s%ould t%e proceeds of t%e sale of said s%ares fail to satisf' in full t%e o+li ation. in fa-or of t%e stoc:%olders of t%e Ban: represented +' its directors Bernardo Bautista. et al".uired o3ners%ip of t%e s%ares +' -irtue of prescription 3as li:e3ise dismissed +' t%e appellate court" &im Ta' +rou %t +efore t%e Supreme Court a 6etition for Re-ie3 on Certiorari in accordance 3it% Rule A9 of t%e Rules of Court" %ssue$ )%et%er &im Ta' is t%e o3ner of t%e s%ares pre-iousl' su+Iected to pled e. Re'naldo #illanue-a. in %is fa-or. 3%et%er t%ere 3as a no-ation of t%e contracts of pled e.uired +' Article 1131 is possession in t%e concept of an o3ner" Jerein. +ut t%at %e 3as alread' t%e o3ner of t%e s%ares" Based on t%e fore oin . nor t%e fact t%at /uio: and S' &im %a-e not instituted an' action to reco-er t%e s%ares since 1.4. onl' 3%en %e filed %is Complaint and claimed t%at %e 3as not a mere pled ee.73. etc. A--eals [GR 124.uire t%e s%ares +' -irtue of a no-ation of t%e contract of pled e" !o-ation cannot +e presumed +' /uio:Ds and S' &imDs indorsement and deli-er' of t%e certificates of stoc: co-erin t%e 455 s%ares.0 8. t%e #illanue-a spouses assured t%e Board t%at t%eir de+t 3ould +e paid on or +efore *ecem+er 31 of t%at same 'earL ot%er3ise.uidate t%eir s%are%oldin s.75" !o-ation is ne-er presumed inferred" .4. %oldin t%at /uio:Ds and S' &imDs indorsement and deli-er' of t%e s%ares 3ere pursuant to Articles 15. of t%e s%ares pled ed to %im" &im Ta' %as failed to esta+lis% a clear le al ri %t" &im Ta'Ds contention t%at %e is t%e o3ner of t%e said s%ares is completel' 3it%out merit" &im Ta' does not %a-e an' o3ners%ip ri %ts at all" At t%e time &im Ta' instituted %is suit at t%e SEC. represented +' Conc%ita &im.uired t%e certificates of stoc: t%rou % e?traordinar' prescription" !eit%er did &im Ta' ac. t%e Ban: 3ould +e entitled to li.Narratives (Berne Guerrero) said certificates to &im Ta'" $n t%e interim.e Rural Ban< o. 3%ic% 3ere unpleaded and unresol-ed 3%en &im Ta' as:ed t%e corporate secretar' of /o 0a' to effect t%e transfer. Jaime Custodio and Octa-io Eati +a:" Sometime t%ereafter. dismissin &im Ta'Ds appeal" On appeal to t%e Court of Appeals. %is contention 3as disputa+le and uncertain" &im Ta' cannot claim to %a-e ac.

uestioned t%e le alit' of t%e said stoc:%oldersD meetin and t%e -alidit' of all t%e proceedin s t%erein" $n repl'. 0rancisco Custodio and Juanita Bautista" On 4 April 1. namel': Bernardo Bautista.9.9" A petition for re-ie3 3as filed +efore t%e Court of Appeals (CA=/R S6 37741).A. t%e stoc:%olders of t%e Ban: met to elect t%e ne3 directors and set of officers for t%e 'ear 1. its directors and officers +efore t%e SEC en +anc" On 8 June 1.uentl'.. t%e #illanue-as filed an Omni+us (otion pra'in t%at t%e said meetin and election of officers sc%eduled on 1A Januar' 1.uas% t%e 3rit of preliminar' inIunction.uestioned t%e le alit' of t%e con-ersion of t%eir s%ares" On 19 Januar' 1. AleIandro Tono an.A.. (arc% 1..uentl'.. t%e +an: et al". t%e #illanue-as. until and unless t%e issue of o3ners%ip and transfer of t%e s%ares in .. a motion for reconsideration 3as ranted on 14 *ecem+er 1. 3%et%er -oluntaril' or in-oluntaril'.A=A473X" Joinin t%em as co=petitioners 3ere Catalino #illanue-a.. and t%at t%e 1.. Aurora &acerna.uirements are: (a) T%ere must +e deli-er' of t%e stoc: certificate: (+) T%e certificate must +e endorsed +' t%e o3ner or %is attorne'=in=fact or ot%er persons le all' aut%ori>ed to ma:e t%e transferL and (c) To +e -alid a ainst t%ird parties. and 3ill not +e entitled to di-idends. t%e #illanue-asD application for t%e issuance of a 3rit of preliminar' inIunction 3as denied +' t%e SEC Jearin Officer on t%e round of lac: of sufficient +asis for t%e issuance t%ereof" Jo3e-er. Januar' 1. et al" and t%e #illanue-as. t%e #illanue-a spouses filed 3it% t%e Securities and E?c%an e Commission (SEC). da's a3a'. as mere assi nees..A.3 Board of *irectors +e allo3ed. it does not necessaril' ma:e t%e transfer effecti-e" Conse.9 and t%e Resolution dated 1. Septem+er 1. Ed ardo Re'es. t%e transfer must +e recorded in t%e +oo:s of t%e corporation" As it is.. Septem+er 1. et al" filed t%e instant petition for re-ie3" %ssue$ )%et%er t%ere 3as -alid transfer of t%e s%ares to t%e Ban:" &eld$ 0or a -alid transfer of stoc:s.uestion is resol-ed 3it% finalit'" Commercial *a3 ) Cor-oration *a3 200..4" T%e +an:. t%e #illanue-as cannot.A. et al" filed an ur ent motion to . and Elena @si" !amed respondents 3ere t%e ne3l'=elected officers and directors of t%e Rural Ban:. compliance 3it% an' of t%ese re.uis%ed t%eir ri %ts as stoc:%olders in fa-or of t%e Ban:" Conse. t%rou % t%eir counsel. a 3rit of preliminar' inIunction 3as issued enIoinin Bautista. 3%ereupon t%eir s%ares of stoc: 3ere con-erted into Treasur' Stoc:s" &ater.9 +e suspended or %eld in a+e'ance. t%e SEC en +anc denied t%e petition for certiorari" A su+se. t%e ne3 set of officers of t%e Ban: informed Att'" $ nacio t%at t%e #illanue-as 3ere no lon er entitled to notice of t%e said meetin since t%e' %ad relin. +e depri-ed of t%eir ri %ts as stoc:%olders. cannot -ote nor +e -oted for. cannot enIo' t%e status of a stoc:%older. . to act as suc%" 1 da' +efore t%e sc%eduled stoc:%olders meetin . t%e Board sent t%em a letter demandin : (1) t%e surrender of all t%e stoc: certificates issued to t%emL and (1) t%e deli-er' of sufficient collateral to secure t%e +alance of t%eir de+t amountin to 63. counsel for t%e #illanue-a spouses.uent motion for reconsideration 3as li:e3ise denied +' t%e SEC en +anc in a Resolution dated 1.3A4. t%ere must +e strict compliance 3it% t%e mode of transfer prescri+ed +' la3" T%e re.9 annual stoc:%oldersD meetin onl' .. assailin t%e Order dated 8 June 1. Att'" Amado $ nacio. in t%e meantime.Narratives (Berne Guerrero) unpaid +alance s%all +e secured +' ot%er collateral sufficient t%erefor" )%en t%e #illanue-a spouses failed to settle t%eir o+li ation to t%e Ban: on t%e due date.A.7"9A" T%e #illanue-as i nored t%e +an:Ds demands. a petition for annulment of t%e stoc:%oldersD meetin and election of directors and officers on 19 Januar' 1..uisites %as not +een clearl' and sufficientl' s%o3n" Still. as 'et. 3%ile t%e assi nment ma' +e -alid and +indin on t%e +an:.9 of t%e SEC en +anc in SEC EB AA5" T%e appellate court up%eld t%e rulin of t%e SEC" Bautista. ( 74 ) . et al" from %oldin t%e stoc:%olders meetin and electin t%e +oard of directors and officers of t%e Ban:" A petition for Certiorari and Annulment 3it% *ama es 3as filed +' t%e Rural Ban:.A" T%e #illanue-as 3ere not notified of said meetin " $n a letter dated 1. insofar as t%e assi ned s%ares are concerned" 6arent%eticall'. t%e SEC Jearin Officer ranted t%e Omni+us (otion +' issuin a temporar' restrainin order pre-entin Bautista. Octa-io Eati +a:. c%allen in t%e propriet' of t%e said 3rit considerin t%at t%e' %ad not 'et recei-ed a cop' of t%e order rantin t%e application for t%e 3rit of preliminar' inIunction" )it% t%e impendin 1. Bautista. et al"Ds motion for reconsideration 3as li:e3ise denied +' t%e Court of Appeals in an Order dated 1. et" al" from actin as directors and officers of t%e +an:" T%ereafter. t%e' 3ere still stoc:%olders entitled to notice of t%e annual stoc:%oldersD meetin 3as sustained +' t%e SEC" Accordin l'. Bautista.. Celso &a' o. . 3it% dama es and pra'er for preliminar' inIunction (SEC Case 51=. Andres /on>ales. Jaime Custodio..7. upon findin t%at since t%e #illanue-asD %a-e not disposed of t%eir s%ares.

1 :once vs. 3it%out suc% recordin ....Narratives (Berne Guerrero) . #icente C" 6once. ) . %a-in su+scri+ed to and full' paid 13. 0e+ruar' 1.8. a transfer of s%ares of stoc: not recorded in t%e stoc: and transfer +oo: of t%e corporation is non=e?istent as far as t%e corporation is concerned" As +et3een t%e corporation on t%e one %and. and its s%are%olders and t%ird persons on t%e ot%er. to record t%e alle ed transfer of stoc:s" 6ursuant to Section 43 of t%e Corporation Code.4. Jr" ranted t%e motion to dismiss in an Order dated 1.955 s%ares of /aid. -uisu#. in -iolation of 6onceDs ri %t to secure t%e correspondin certificate of stoc: in %is name" ACC and /iron mo-ed to dismiss" SEC Jearin Officer Enri. Jr" $n %is complaint. 0rancisco (" /iron Jr". SCRA 49A (1.78)" T%eir motion for reconsideration %a-in +een denied. 6once alle ed. no certificates of stoc: correspondin to t%e 13.. t%e conse. t%e corporation loo:s onl' to its +oo:s for t%e purpose of determinin 3%o its s%are%olders are" $t is onl' 3%en t%e transfer %as +een recorded in t%e stoc: and transfer +oo: t%at a corporation ma' ri %tfull' re ard t%e transferee as one of its stoc:%olders" 0rom t%is time.955 s%ares" 0rom t%e Amended Articles of $ncorporation appro-ed on .9.. ACC and /iron appealed t%e decision of t%e SEC En Banc and t%e resolution den'in t%eir motion for reconsideration to t%e Court of Appeals" $n its decision.uent o+li ation on t%e part of t%e corporation to reco ni>e suc% ri %ts as it is mandated +' la3 to reco ni>e arises" Jence.in' (J): 4 concur Facts$ On 19 Januar' 1." 6once filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er 6once can re. t%e Court of Appeals %eld t%at in t%e a+sence of an' alle ation t%at t%e transfer of t%e s%ares +et3een /aid and 6once 3as re istered in t%e stoc: and transfer +oo: of ACC. 0CC 3as renamed Alsons Cement Corporation (ACC)L t%at from t%e time of incorporation of #CC up to t%e present. filed a complaint 3it% t%e SEC for mandamus and dama es a ainst Alsons Cement Corporation and its corporate secretar' 0rancisco (" /iron.. to ma:e t%e transfer" T%e deed of underta:in 3it% indorsement presented +' 6once does not esta+lis%. amon ot%ers.955 su+scri+ed and full' paid s%ares of /aid 3ere issued in t%e name of 0austo /" /aid andGor 6onceL and t%at despite repeated demands. April 1. to re ister /aid2s s%ares in %is name" &eld$ 0austo /aid 3as an ori inal su+scri+er of ACCDs 13. said t%e appellate court.uire t%e corporate secretar'. ( 7. #CC 3as renamed 0loro Cement Corporation (0CC)L t%at on 11 Octo+er 1. ACC and /iron refused and continue to refuse 3it%out an' Iustifia+le reason to issue to 6once t%e certificates of stoc:s correspondin to t%e 13. t%e Commission En Banc cited t%e Supreme CourtDs rulin in A+eIo -s" *e la Cru>. 6once and 0austo /aid e?ecuted a M*eed of @nderta:in M and M$ndorsementM 3%ere+' t%e latter ac:no3led es t%at t%e former is t%e o3ner of said s%ares and %e 3as t%erefore assi nin Gendorsin t%e same to 6onceL t%at on 15 April 1. t%e transferee ma' not +e re arded +' t%e corporation as one amon its stoc:%olders and t%e corporation ma' le all' refuse t%e issuance of stoc: certificates in t%e name of t%e transferee e-en 3%en t%ere %as +een compliance 3it% t%e re.. on its face. Mt%e complaint for mandamus s%ould +e dismissed for failure to state a cause of action"M 6onceDs motion for reconsideration 3as denied in a resolution dated 15 Au ust 1.4" 6once appealed t%e Order of dismissal" On 4 Januar' 1.47. Alsons Cement Cor-oration [GR 141/02 10 2ecem+er 2002# Second Division.uirements of Section 4A of t%e Corporation Code" T%e stoc: and transfer +oo: is t%e +asis for ascertainin t%e persons entitled to t%e ri %ts and su+Iect to t%e lia+ilities of a stoc:%older" )%ere a transferee is not 'et reco ni>ed as a stoc:%older. t%e corporation is under no specific le al dut' to issue stoc: certificates in t%e transfereeDs name" A petition for mandamus fails to state a cause of action 3%ere it appears t%at t%e petitioner is not t%e re istered stoc:%older and t%ere is no alle ation t%at %e %olds an' po3er of attorne' from t%e re istered stoc:%older. %is ri %t to demand for t%e re istration of t%e Commercial *a3 ) Cor-oration *a3 200.5. eac% s%are %ad a par -alue of 61"55 per s%are" 6once %ad not made a pre-ious re.955 s%ares of said corporationL t%at on 7 0e+ruar' 1. t%e Commission En Banc re-ersed t%e appealed Order and directed t%e Jearin Officer to proceed 3it% t%e case" $n rulin t%at a transfer or assi nment of stoc:s need not +e re istered first +efore it can ta:e co ni>ance of t%e case to enforce 6onceDs ri %ts as a stoc:%older. /iron.uest upon t%e corporate secretar' of ACC... t%at Mt%e late 0austo /" /aid 3as an incorporator of #ictor' Cement Corporation (#CC). 6once failed to state a cause of action" T%us.47.. 1A. from 3%om %e o+tained t%e stoc:s.ue &" 0lores..

issued a decision on 1... respecti-el'. et al" B/R 1AA41. 8iu et al. t%e Secretar' and 4 directors (includin t%e c%airman) to t%e +oard of directors of 0&A*C" (oreo-er. under suc% circumstances t%e dut'.155 s%ares" 0urt%ermore. Juanita Tan On .ual s%are%oldin s in 0&A*C: t%e On s 3ere to su+scri+e to 1. [GR 144470 / A-ril 2004#E also Tiu.. ( 70 ) . 3as s%ortli-ed +ecause t%e Tius. )illiam T" On and Julia On Alon>o (t%e On s). t%e total sum of 3%ic% (61. vs. +ecause. t%e a+o-e decision 3as partiall' reconsidered +ut onl' insofar as t%e On sD 685 million 3as declared not as a premium on capital stoc: +ut an ad-ance (loan) +' t%e On s to 0&A*C and t%at t%e imposition of interest on it 3as correct" Bot% parties appealed to t%e SEC en +anc 3%ic% rendered a decision on 11 Septem+er 1. et al" -s" On Oon . so as to Iustif' t%e issuance of t%e 3rit of mandamus to compel %im to perform t%e transfer of t%e s%ares to 6once" . t%e SEC.8 decision of t%e Jearin Officer" T%e SEC en +anc confirmed t%e rescission of t%e 6re=Su+scription A reement +ut re-erted to classif'in t%e 685 million paid +' t%e On s as premium on capital and not as a loan or ad-ance to 0&A*C.5 million) 3as used to settle t%e 61.555 s%ares).. t%e' a reed t%at t%e Tius 3ere entitled to nominate t%e #ice=6resident and t%e Treasurer plus 9 directors 3%ile t%e On s 3ere entitled to nominate t%e 6resident. t%rou % t%en Jearin Officer Rolando /" Anda'a. and (3) refusin to i-e t%em t%e office spaces a reed upon" T%e contro-ers' finall' came to a %ead 3%en t%e case 3as commenced +' t%e Tius on 18 0e+ruar' 1. 3%ic% 3as o3ned +' *a-id S" Tiu. Corona (J): 3 concur Facts$ $n 1.4 at t%e Securities and E?c%an e Commission (SEC). t%e mere indorsement of stoc: certificates does not in itself i-e to t%e indorsee suc% a ri %t to %a-e a transfer of t%e s%ares of stoc: on t%e +oo:s of t%e compan' as 3ill entitle %im to t%e 3rit of mandamus to compel t%e compan' and its officers to ma:e suc% transfer at %is demand. rescinded t%e 6re=Su+scription A reement" T%e Tius accused t%e On s of (1) refusin to credit to t%em t%e 0&A*C s%ares co-erin t%eir real propert' contri+utionsL (1) pre-entin *a-id S" Tiu and Cel' O" Tiu from assumin t%e positions of and performin t%eir duties as #ice=6resident and Treasurer. see:in confirmation of t%eir rescission of t%e 6re=Su+scription A reement" After %earin . 635 million (for 355..755 stoc: su+scription t%erein" T%e On s paid in anot%er 685 million 3 to 0&A*C and 615 million to t%e Tius o-er and a+o-e t%eir 6155 million in-estment. t%ere appears no +asis for a clear and indisputa+le dut' or clear le al o+li ation t%at can +e imposed upon t%e corporate secretar'. (ol' Ou /o3. Jo%n Ou and &ourdes C" Tiu (t%e Tius).755 s%ares at 6155"55 eac% in addition to t%eir alread' e?istin su+scription of A95. so t%at a mere indorsee of a stoc: certificate.. %o3e-er. a+sent an alle ation t%at t%e transfer of s%ares is recorded in t%e stoc: and transfer +oo: of ACC. affirmin t%e 1.. to in-est in 0&A*C" @nder t%e 6re=Su+scription A reement t%e' entered into.755 s%ares) to co-er t%eir additional 9A.4. t%e le al o+li ation. %ence. Belen See Ou. and its s%are%olders and t%ird persons on t%e ot%er. (a' 1. as +et3een t%e corporation on t%e one %and. *" Terence O" Tiu. t%e On s and t%e Tius a reed to maintain e. t%e 0irst &andlin: Asia *e-elopment Corporation (0&A*C). t%e On s 3ere i-en t%e ri %t to mana e and operate t%e mall" Accordin l'.5 million mort a e inde+tedness of 0&A*C to 6!B" T%e +usiness %armon' +et3een t%e On s and t%e Tius in 0&A*C."7 million (for A. t%e Tius in-ited On Oon . on 13 0e+ruar' 1.Narratives (Berne Guerrero) transfer and t%e issuance of certificates of stoc:s" @nder t%e pro-isions of our statute touc%in t%e transfer of stoc:. encountered dire financial difficulties" $t 3as %ea-il' inde+ted to t%e 6%ilippine !ational Ban: (6!B) for 61. 3ill not necessaril' +e reco ni>ed as suc% +' t%e corporation and its officers. )ilson T" On . not entitled to Commercial *a3 ) Cor-oration *a3 200. in t%e a+sence of e?press instructions of t%e re istered o3ner to ma:e suc% transfer to t%e indorsee.2 9n( @on( et al.C >esolution o0 S ecial Second Division.. Cel' O" Tiu. t%e On s paid 6155 million in cas% for t%eir su+scription to 1. claimin to +e t%e o3ner. or a po3er of attorne' aut%ori>in suc% transfer" T%us.555 s%ares of stoc: 3%ile t%e Tius committed to contri+ute to 0&A*C a four=store' +uildin and t3o parcels of land respecti-el' -alued at 615 million (for 155.555 s%ares at a par -alue of 6155"55 eac% 3%ile t%e Tius 3ere to su+scri+e to an additional 9A. Anna &" On . (a' 1. t%e construction of t%e (asa ana Citimall in 6asa' Cit' 3as t%reatened 3it% stoppa e and incompletion 3%en its o3ner. t%e corporation loo:s onl' to its +oo:s for t%e purpose of determinin 3%o its s%are%olders are.555 s%ares) and 6A.. is not so clear and indisputa+le as to Iustif' t%e issuance of t%e 3rit" As a eneral rule.8 confirmin t%e rescission sou %t +' t%e Tius" On motion of +ot% parties.5 million" To sta-e off foreclosure of t%e mort a e on t%e t3o lots 3%ere t%e mall 3as +ein +uilt.555.A. Jr".555.7.

since rescission of a su+scription a reement is not one of t%e instances 3%en Commercial *a3 ) Cor-oration *a3 200. from t%e -ie3point of t%e la3. t%e su+scription contract (denominated +' t%e parties as a 6re=Su+scription A reement) 3%ere+' t%e On s in-ested 6155 million for 1.555 unissued s%ares of 0&A*C stoc: allocated to t%e On s" Since t%ese 3ere unissued s%ares.555 s%ares to 1. modif'in t%e SEC order of 11 Septem+er 1. (otion for (odification (of t%e 0e+ruar' 1. t%e Special Second *i-ision of t%is Court %eld oral ar uments on t%e respecti-e positions of t%e parties" On 18 0e+ruar' 1553. affirmin t%e assailed decision of t%e Court of Appeals +ut 3it% t%e modifications t%at t%e 615 million loan e?tended +' t%e On s to t%e Tius s%all earn interest at 11H per annum to +e computed from t%e time of Iudicial demand 3%ic% is from 13 April 1.. t%e Tius did not contract in t%eir personal capacities 3it% t%e On s since t%e' 3ere not sellin an' of t%eir o3n s%ares to t%em" $t 3as 0&A*C t%at did" Considerin t%erefore t%at t%e real contractin parties to t%e su+scription a reement 3ere 0&A*C and t%e On s alone. t%e su+Iect matter of t%e contract 3as t%e 1.7" T%eir motions for reconsideration %a-in +een denied. t%eir assi ns and %eirs" " "M T%erefore. +ot% parties filed separate petitions for re-ie3 +efore t%e Supreme Court" On 1 0e+ruar' 1551. 1551 *ecision)M on 19 (arc% 1551" )illie On filed a separate M(otion for 6artial ReconsiderationM dated 7 (arc% 1551.555 s%ares 3it% a par -alue of 6155 eac%.4L t%at t%e 685 million ad-anced +' t%e On s to t%e 0&A*C s%all earn interest at 15H per annum to +e computed from t%e date of t%e 0&A*C Board Resolution 3%ic% is 1. t%e Supreme Court promul ated its *ecision. t%ere+' -iolatin t%e Trust 0und *octrine and t%e Corporation Code. an increase of t%e aut%ori>ed capital stoc: +ecame necessar' to i-e eac% roup e. Januar' 1553.555 s%ares and t%e Tius to 9A..555. t%e 191 s.155 s%ares to complete 1.. onl' 0&A*C (and certainl' not t%e Tius) %ad t%e le al personalit' to file suit rescindin t%e su+scription a reement 3it% t%e On s inasmuc% as it 3as t%e real part' in interest t%erein" Article 1311 of t%e Ci-il Code pro-ides t%at Mcontracts ta:e effect onl' +et3een t%e parties... t%e Tius su+mitted t%eir memorandum" %ssue [1#$ )%et%er t%e pre=Su+scription A reement e?ecuted +' t%e On s is actuall' a su+scription contract" &eld [1#$ 0&A*C 3as ori inall' incorporated 3it% an aut%ori>ed capital stoc: of 955.uidation" &eld [2#$ T%e rescission of t%e 6re=Su+scription A reement 3ill effecti-el' result in t%e unaut%ori>ed distri+ution of t%e capital assets and propert' of t%e corporation.155 s%ares representin t%e paid=up capital" )%en t%e Tius in-ited t%e On s to in-est in 0&A*C as stoc:%olders. *r" )illie On and t%e rest of t%e mo-ants On filed t%eir respecti-e memoranda" On 17 0e+ruar' 1553..ual (95=95) s%are%oldin s as a reed upon in t%e 6re=Su+scription A reement" T%e aut%ori>ed capital stoc: 3as t%us increased from 955. t%e Tius filed +efore t%e Court a (otion for $ssuance of a )rit of E?ecution" Aside from t%eir opposition to t%e TiusD (otion for $ssuance of )rit of E?ecution. 3it% t%e On s su+scri+in to 1. pointin out t%at t%ere 3as no -iolation of t%e 6re=Su+scription A reement on t%e part of t%e On s. a part' 3%o %as not ta:en part in t%e transaction cannot sue or +e sued for performance or for cancellation t%ereof. t%e Court of Appeals (CA) rendered a decision on 9 Octo+er 1. June 1.555 s%ares" T%us.755 s%ares in 0&A*C for t%eir propert' contri+ution.555. one +et3een t%e On s and 0&A*C.555.555. a ci-il case for rescission on t%e round of +reac% of contract filed +' t%e Tius in t%eir personal capacities 3ill not prosper" Assumin it %ad -alid reasons to do so." m" parcel of land" T%e Court affirmed t%e fact t%at +ot% t%e On s and t%e Tius -iolated t%eir respecti-e o+li ations under t%e 6re=Su+scription A reement" On 19 (arc% 1551.Narratives (Berne Guerrero) earn interest" On appeal..555. t%e partiesD 6re=Su+scription A reement 3as in fact a su+scription contract as defined under Section 45. not +et3een t%e On s and t%e Tius" Ot%er3ise stated.4L and t%at t%e Tius s%all +e credited 3it% A.555 s%ares of stoc: 3as. Title #$$ of t%e Corporation Code" A su+scription contract necessaril' in-ol-es t%e corporation as one of t%e contractin parties since t%e su+Iect matter of t%e transaction is propert' o3ned +' t%e corporation P its s%ares of stoc:" T%us. ( 77 ) . specificall'. amon ot%ers" On 1..755 more s%ares in addition to t%eir A95. t%e On s filed t%eir o3n M(otion for ReconsiderationL Alternati-el'. unless %e s%o3s t%at %e %as a real interest affected t%ere+'" %ssue [2#$ )%et%er t%e rescission of 6re=Su+scription A reement 3ould result in unaut%ori>ed li.555 s%ares 3it% t%e Tius o3nin A95.

47. +ut is limited to purposes reasona+l' related to t%e interest of t%e stoc:%older. 11.uestion t%e letters of credit it %as e?tended for t%e importation +' t%e Repu+lic of t%e 6%ilippines of pu+lic 3or:s e.ui>a of 6u+lic )or:s and Communications. Calino =&am+unao Su ar (ill $nte rated 0armin . $nc". t%e Asst" #ice 6resident and &e al Counsel of t%e Ban: ans3ered petitionerDs letter den'in %is re.uisition of one s%are of stoc: of t%e Ban:. 117. $nc". t%e Ban:.uipment intended for t%e massi-e de-elopment pro ram of t%e 6resident 3as raised" $n -ie3 t%ereof.34 -ersus Ro+erto Benedicto and ot%er *irectors of t%e Ban:. Continental Ore 6%il".3A9 filed on 18 April 1. t%e personalit' of /on>ales to sue t%e +an: and . ( 7/ ) . $nc". /on>ales.48. Ci-il Case 815AA -ersus t%e Board of *irectors of t%e Ban:L t%e !ational $n-estment and *e-elopment Corp". Safar' Central.48. /on>ales instituted t%e petition for mandamus" T%e Court of 0irst $nstance of (anila denied t%e pra'er of /on>ales t%at %e +e allo3ed to e?amine and inspect t%e +oo:s and records of 6!B re ardin t%e transactions mentioned on t%e rounds t%at t%e ri %t of a stoc:%older to inspect t%e record of t%e +usiness transactions of a corporation ranted under Section 91 of t%e former Corporation &a3 (Act !o" 1A9. t%e Commissioner of 6u+lic Ji %3a's.uestionin different transactions entered into +' t%e Ban: 3it% ot%er parties" 0irst amon t%em is Ci-il Case 4.uire one s%are of stoc: from Con ressman Justiniano (ontano 3%ic%. must +e as:ed for in ood fait% for a specific and %onest purpose and not ratif' curiosit' or for speculati-e or -icious purposesL t%at suc% e?amination 3ould -iolate t%e confidentialit' of t%e records of t%e +an: as pro-ided in Section 14 of its c%arter. and A ro=$nc" *e-" Co" or Sara-iaL (1) On 11 (a' 1. 3as transferred in %is name in t%e +oo:s of t%e Ban:" Su+se. Act !o" 1A9..uidation of t%e corporation 3it%out t%e +enefit of prior dissolution in accordance 3it% Sections 118. Cas:uez (J): 3 concur. 6assi ($loilo) Su ar Central. as amended) is not a+solute. &td".4.48. %o3e-er. it is no3 dissipated +' t%e Commercial *a3 ) Cor-oration *a3 200.4. no lon er %olds true under t%e pro-isions of t%e present la3" T%e ar ument of /on>ales t%at t%e ri %t ranted to %im under Section 91 of t%e former Corporation &a3 s%ould not +e dependent on t%e propriet' of %is moti-e or purpose in as:in for t%e inspection of t%e +oo:s of 6!B loses 3%ate-er -alidit' it mi %t %a-e %ad +efore t%e amendment of t%e la3" $f t%ere is an' dou+t in t%e correctness of t%e rulin of t%e trial court t%at t%e ri %t of inspection ranted under Section 91 of t%e old Corporation &a3 must +e dependent on a s%o3in of proper moti-e on t%e part of t%e stoc:%older demandin t%e same. Ci-il Case 84A18 -ersus Alfredo (onteli+ano and t%e *irectors of +ot% t%e 6!B and *B6" On 11 Januar' 1..uest for +ein not ermane to %is interest as a one s%are stoc:%older and for t%e cloud of dou+t as to %is real intention and purpose in ac. (aru+eni $ida Co". Continental Ore. 1 on leave Facts$ Ramon A" /on>ales initiall' instituted se-eral cases in t%e Supreme Court .ili--ine National Ban< [GR *)44420 40 'a" 11/4# First Division. +' /on>ales as a ta?pa'er -ersus Sec" Antonio Ra. Ju+er Corporation. %e e?pressed and made :no3n %is intention to ac. $nc" and t%e construction of t%e 6assi Su ar (ills in $loilo" On Januar' 13. in t%e final anal'sis. filed t%e follo3in cases in-ol-in t%e +an: or t%e mem+ers of its Board of *irectors to 3it: (1) On 17 Octo+er 1.48.ualified pro-ision on t%e ri %t of inspection pre-iousl' contained in Section 91.Narratives (Berne Guerrero) distri+ution of capital assets and propert' of t%e corporation is allo3ed" Rescission 3ill.4. $nc". in %is dual capacit' as a ta?pa'er and stoc:%older.. /on>ales addressed a letter to t%e 6resident of t%e Ban:. RA 1355. as amended. in li %t of %is o3ners%ip of one s%are in t%e +an:" &eld [1#$ T%e un. $nc". as amendedL and t%at /on>ales %as not e?%austed %is administrati-e remedies" /on>ales filed t%e petition for re-ie3" %ssue [1#$ )%et%er /on>alesD can as: for an e?amination of t%e +oo:s and records of 6!B. on t%e follo3in da'..4 GonDales vs. 1.uestin su+mission to loo: into t%e records of its transactions co-erin t%e purc%ase of a su ar central +' t%e Sout%ern !e ros *e-elopment Corp" to +e financed +' Japanese suppliers and financiersL its financin of t%e Ce+u=(actan Brid e to +e constructed +' #"C" 6once. :. Talo su ar (illin Co". 1 concurs in the result.. Allis C%almers and /eneral (otors Corporation" $n t%e course of t%e %earin of said case on 3 Au ust 1. and 115 of t%e Corporation Code" . 35 Au ust 1.uent to %is aforementioned ac. Ci-il Case 81. and Batan as Su ar Central $nc"L and (3) On 7 (a' 1.uirin said s%are" $n -ie3 of t%e Ban:Ds refusal. re. result in t%e premature li.

3%o -iolates or permits t%e -iolation of an' of t%e pro-isions of t%is Act. emplo'ee.89 Associated Ban:in Corporation and Citi>ens Ban: and Trust Compan' mer ed to form Iust one +an:in corporation :no3n as Associated Citi>ens Ban:. ri %ts. or a ent of t%e Ban:.uire into t%eir -alidit'" T%e circumstances under 3%ic% %e ac.uired. assets and propert' of BCBTCC. t%e a reement pro-ides t%at M@pon effecti-e date of t%e (er er. unless +' e?press re.4 Associated Ban< vs. for all intents and purposes. e?cept +' order of a Court of competent Iurisdiction"M On t%e ot%er %and. ( 71 ) .Narratives (Berne Guerrero) clear lan ua e of t%e pertinent pro-ision contained in Section 8A of Batas 6am+ansa Bilan 47" Alt%ou % /on>ales %as claimed t%at %e %as Iustifia+le moti-es in see:in t%e inspection of t%e +oo:s of t%e 6!B. +e t%e date 3%en t%e necessar' papers to carr' out t%is BmCer er s%all %a-e +een appro-ed +' t%e Securities and E?c%an e Commission"M As to t%e transfer of t%e properties of CBTC to ABC. +' t%e Corporation Code of t%e 6%ilippines" T%e pro-ision of Section 8A of Batas 6am+ansa Bl " 47 of t%e ne3 Corporation Code 3it% respect to t%e ri %t of a stoc:%older to demand an inspection or e?amination of t%e +oo:s of t%e corporation ma' not +e reconciled 3it% t%e a+o-e . t%erefore. pro-ided t%at its effecti-it' Ms%all.an (J): 4 concur Facts$ On or a+out 14 Septem+er 1. and t%e Board of *irectors t%e details of t%e inspection or in-esti ation.89 A reement of (er er. franc%ises. all ri %ts. pri-ile es. personal or mi?ed. po3ers. t%e sur-i-in +an:" T%e 14 Septem+er 1. t%e S@R#$#$!/ BA!E.uirements of la3 or of a o-ernment a enc'. and includin BCBTCDsC ood3ill and tradename. 3it%out need of furt%er act or deed. pri-ile es. Court o. officer. in 3%ic% case suc% document or deed s%all +e e?ecuted accordin l'L and all propert'. 3%ic% Associated Ban:in Corporation (ABC) and Citi>ens Ban: and Trust Compan' (CBTC) entered into. its current accounts or deposits +elon in to pri-ate indi-iduals. it is not o-erned. e?cept to satisf' %imself as to t%e trut% of pu+lis%ed reports re ardin certain transactions entered into +' t%e respondent +an: and to in. Commercial *a3 ) Cor-oration *a3 200. corporations. Section 35 of t%e same pro-ides t%at M6enalties for -iolation of t%e pro-isions of t%is Act" P An' director. or ot%er officers desi nated +' la3 to inspect or in-esti ate t%e condition of t%e !ational Ban:. as amended) pro-ides t%at M$nspection +' *epartment of Super-ision and E?amination of t%e Central Ban:" P T%e !ational Ban: s%all +e su+Iect to inspection +' t%e *epartment of Super-ision and E?amination of t%e Central Ban:"M Section 14 t%ereof pro-idest t%at MConfidential information" P T%e Superintendent of Ban:s and t%e Auditor /eneral. nor s%all t%e' i-e an' information relati-e to t%e funds in its custod'. or an' person aidin or a+ettin t%e -iolations of an' of t%e pro-isions of t%is Act. t%e Secretar' of 0inance. immunities. or an' ot%er entit'. +ut it could not +e said t%at %is purpose is ermane to %is interest as a stoc:%older" %ssue [2#$ )%et%er t%e inspection sou %t to +e e?ercised +' /on>ales 3ould +e -iolati-e of t%e pro-isions of 6!BDs c%arter" &eld [2#$ Section 19 of t%e 6!BDs C%arter (RA 1355. %e %as not set fort% t%e reasons and t%e purposes for 3%ic% %e desires suc% inspection. s%all not re-eal to an' person ot%er t%an t%e 6resident of t%e 6%ilippines. 3%et%er real. an' separate or specific deed of con-e'ance to le all' effect t%e transfer or assi nment of an' :ind of propert' BorC asset is re. and all ot%er t%in s in action +elon in to BCBTCC as of t%e effecti-e date of t%e BmCer er s%all +e -ested in BABCC.uoted pro-isions of t%e c%arter of t%e 6!B" $t is not correct to claim. or +ot% suc% fine and imprisonment"M T%e 6%ilippine !ational Ban: is not an ordinar' corporation" Ja-in a c%arter of its o3n.uired one s%are of stoc: in t%e 6!B purposel' to e?ercise t%e ri %t of inspection do not ar ue in fa-or of %is ood fait% and proper moti-ation" Admittedl' %e sou %t to +e a stoc:%older in order to pr' into transactions entered into +' t%e 6!B e-en +efore %e +ecame a stoc:%older" Jis o+-ious purpose 3as to arm %imself 3it% materials 3%ic% %e can use a ainst t%e 6!B for acts done +' t%e latter 3%en /on>ales 3as a total stran er to t%e same" Je could %a-e +een impelled +' a lauda+le sense of ci-ic consciousness. and all de+ts due to BCBTCC on 3%ate-er act. /an'ani. s%all +e punis%ed +' a fine not to e?ceed ten t%ousand pesos or +' imprisonment of not more t%an fi-e 'ears. A--eals [GR 124714 21 !une 111/# First Division. t%at t%e ri %t of inspection under Section 8A of t%e ne3 Corporation Code ma' appl' in a supplementar' capacit' to t%e c%arter of t%e 6!B" . po3ers. as a rule.

555"55 e?clusi-e of interest and ot%er c%ar es" *espite repeated demands t%e defendant failed to pa' t%e amount due" Sarmiento denied t%e c%ar es" On 11 (a' 1. trustee of estates of persons mentall' ill and in e-er' ot%er fiduciar' capacit'. in t%e mer er of t3o or more e?istin corporations. as if suc% references 3ere direct references to BABCC"M T%e fact t%at t%e promissor' note 3as e?ecuted after t%e effecti-it' date of t%e mer er does not militate a ainst t%e +an:" T%e a reement itself clearl' pro-ides t%at all contracts P irrespecti-e of t%e date of e?ecution P entered into in t%e name of CBTC s%all +e understood as Commercial *a3 ) Cor-oration *a3 200. pri-ile es. -ested in BCBTCC s%all not re-ert or +e in an' 3a' impaired +' reason t%ereofL pro-ided. ( /0 ) . t%e S@R#$#$!/ BA!E. 3%ile t%e rest are dissol-ed and all t%eir ri %ts. properties and lia+ilities are ac. does not +ecome effecti-e upon t%e mere a reement of t%e constituent corporations" T%e procedure to +e follo3ed is prescri+ed under t%e Corporation Code" Section 8. and all ot%er ri %ts and interests of BCBTCC as trustee. administrator.88. uardian of estates. Sarmiento 3as declared as if in default for failure to appear at t%e 6re=Trial Conference despite due notice" A (otion to &ift Order of *efault andGor Reconsideration of Order dated 11 (a' 1. duties and underta:in s %a-e +een ori inall' incurred or contracted +' BABCC. and attorne'Ds fees. to all ri %ts. e?ecutor. and all and e-er' ot%er interest of BCBTCC s%all t%ereafter +e effectuall' t%e propert' of BABCC as t%e' 3ere of BCBTCC. 3%et%er contractual or ot%er3ise.71. in case of liti ation e. all references to BCBTCC in an' deed.. assi nee.Narratives (Berne Guerrero) immunities. re istrar of stoc:s and +onds.74.uired +' t%e sur-i-in corporation" Alt%ou % t%ere is a dissolution of t%e a+sor+ed corporations. one of t%e com+inin corporations sur-i-es and continues t%e com+ined +usiness. %o3e-er. or ot%er papers of 3%ate-er :ind or nature and 3%ere-er found s%all +e deemed for all intents and purposes. as 3ell as t%eir lia+ilities" T%e mer er. su+Iect. franc%ises and all appointments. compounded interests. still o3ed Associated Ban: t%e amount of 61. pri-ile es. of said Code re. to date.195. properties as 3ell as lia+ilities pass on to t%e sur-i-in corporation" T%e a reement. as a clause. &oren>o Sarmiento Jr" e?ecuted in fa-or of Associated Ban: a promissor' note 3%ere+' t%e former undertoo: to pa' t%e latter t%e sum of 61.uires t%e appro-al +' t%e Securities and E?c%an e Commission (SEC) of t%e articles of mer er 3%ic%. lia+ilities.uidated dama es.uires all t%eir ri %ts. o+li ations.74" Based on t%e e-idence presented +' t%e +an:. Branc% A7L and t%us dismissin t%e complaint" T%e +an: filed t%e petition for re-ie3" %ssue$ )%et%er $n a mer er. e?pressed or implied. +ut prior to t%e issuance of a certificate of mer er +' t%e Securities and E?c%an e Commission" &eld$ Ordinaril'. t%e sur-i-in corporation %a-e a ri %t to enforce a contract entered into +' t%e a+sor+ed compan' su+se. pro-ided t%at M@pon t%e effecti-e date of t%e BmCer er. t%ere is no 3indin up of t%eir affairs or li.955. t%e Associated Citi>ens Ban: c%an ed its corporate name to Associated Ban: +' -irtue of t%e Amended Articles of $ncorporation" On 8 Septem+er 1. t%at all ri %ts of creditors and all liens upon an' propert' of BCBTCC s%all +e preser-ed and unimpaired and all de+ts. +ecause t%e sur-i-in corporation automaticall' ac.74 *ecision in Ci-il Case 79=311A3. 3H per annum in t%e form of li. %o3e-er. s%all %encefort% attac% to BABCC 3%ic% s%all +e responsi+le t%erefor and ma' +e enforced a ainst BABCC to t%e same e?tent as if t%e same de+ts lia+ilities. t%e trial court ordered Sarmiento to pa' t%e +an: %is remainin +alance plus interests and attorne'Ds fees" Sarmiento appealed" T%e Court of Appeals (in CA=/R C# 14A49) promul ated on 35 Januar' 1. recei-er. duties and underta:in s of BCBTCC. actual or contin ent.74 and Associated Ban: 3as allo3ed to present its e-idence +efore t%e Court e?=parte on 14 Octo+er 1. o+li ations.ui-alent to 15H of t%e amount due" Sarmiento. 3%et%er +' deed or ot%er3ise. Sarmiento a reed to pa' interest at 1AH per annum. set=offs and counterclaims 3%ic% BCBTCC %as or mi %t %a-e and 3%ic% s%all pertain to BABCC" On or a+out 15 (arc% 1. in turn. pri-ile es and po3ers. defenses. must %a-e +een dul' appro-ed +' a maIorit' of t%e respecti-e stoc:%olders of t%e constituent corporations" T%e same pro-ision furt%er states t%at t%e mer er s%all +e effecti-e onl' upon t%e issuance +' t%e SEC of a certificate of mer er" T%e effecti-it' date of t%e mer er is crucial for determinin 3%en t%e mer ed or a+sor+ed corporation ceases to e?istL and 3%en its ri %ts.87" As per said promissor' note.74 3as filed +' SarmientoDs counsel 3%ic% 3as denied +' t%e Court in an order dated 14 Septem+er 1. references to BABCC.4 a decision 3%ic% re-ersed and set aside t%e 18 Octo+er 1. desi nations and nominations.uidation of t%eir assets. promul ated +' t%e Re ional Trial Court of (anila. %o3e-er.555"55 pa'a+le on or +efore 4 (arc% 1. documents.uent to t%e date of t%e mer er a reement. and title to an' real estate.

1.78.83. as a reference to Associated Ban:.9. a complaint for sum of mone' a ainst E&$SCO!. on 14 Septem+er 1. Associated Ban:" Since.. +ut B6$ e?pressl' reIected t%e formula su+mitted to it for not +ein accepta+le" Conse. t%e reference to CBTC in t%e note s%all +e construed. Branc% 1A8. t%e Court of Appeals rendered a *ecision modif'in t%e Iud ment of t%e trial court" E&$SCO! filed a (otion for Reconsideration of t%e *ecision of t%e Court of Appeals 3%ic% 3as.71. Ba+st vs. instituted 3it% t%e Re ional Trial Court of (a:ati.3.358"81.114)" On 15 0e+ruar' 1. lea-in an outstandin inde+tedness in t%e amount of 61.43.Narratives (Berne Guerrero) pertainin to t%e sur-i-in +an:. as of 31 Octo+er 1.171. 3it% interest at t%e rate of 1AH per annum..381"57" On 11 *ecem+er 1. t%e Ban: of t%e 6%ilippine $slands (B6$) and CBTC entered into a mer er. E&$SCO! proposed to con-e' to *B6 +' 3a' of dacion en pa o all its fi?ed assets mort a ed 3it% *B6.. ac.uentl'. 3%ere+' t%e' +ound t%emsel-es Iointl' and se-erall' lia+le to pa' an' e?istin inde+tedness of (@&T$ to CBTC to t%e e?tent of 67. pursuant to t%e Resolution of t%e Board of *irectors of (@&T$ adopted on 31 Au ust 1. A--eals [GR 1141/ 20 !anuar" 2001# L also Eli>alde Steel Consolidated $nc" -s" Court of Appeals B/R 15A419C First Division..87. properties and lia+ilities are ac.71.555"55 eac%" Sometime in Octo+er 1.7)" %ssue [1#$ )%et%er t%e B6$ can institute t%e present case" &eld [1#$ T%ere 3as a -alid mer er +et3een B6$ and CBTC" $t is settled t%at in t%e mer er of t3o e?istin corporations. as pa'ment for its total inde+tedness in t%e amount of 6151.75.55"7A. 3ere opened for E&$SCO! +' CBTC usin t%e credit facilities of 6acific (ulti=Commercial Corporation ((@&T$) 3it% t%e said +an:.733"14" On 17 *ecem+er 1. E&$SCO! o+tained from Commercial Ban: and Trust Compan' (CBTC) a loan in t%e amount of 67. t%e latter clause no lon er specificall' refers onl' to contracts e?istin at t%e time of t%e mer er. 61. Court o. t%e trial court rendered its *ecision in fa-or of B6$" $n due time. E&$SCO! filed a petition for re-ie3 on certiorari (/R" 15A419)" (ean3%ile.88" Su+se.71. E&$SCO! called its creditors to a meetin to announce t%e ta:e=o-er +' *B6 of its assets" $n Octo+er 1. B6$.. 4nares Santia'o (J): 4 concur Facts$ On 7 June 1.851. April 1. E&$SCO! and *B6 e?ecuted a *eed of Cession of 6ropert' in 6a'ment of *e+t" $n June 1. E&$SCO!.73. to a-oid i-in t%e mer er a reement a farcical interpretation aimed at e-adin fulfillment of a due o+li ation" T%us.1" Su+se. Mas if suc% reference B3as aC direct reference toM t%e latter Mfor all intents and purposes"M .74. 3%ile t%e ot%er is dissol-ed and all its ri %ts. Antonio Ro?as C%ua and C%ester /" Ba+st e?ecuted a Continuin Suret's%ip. as successor=in=interest of CBTC. includin its inde+tedness to B6$" T%ereafter. e-idenced +' a promissor' note" Eli>alde Steel Consolidated.87. under t%e -er' pro-isions of t%e mer er a reement.A4. ( /1 ) .519. *B6 proposed formulas for t%e settlement of all of E&$SCO!Ds o+li ations to its creditors. denied in a Resolution dated . no distinction s%ould +e made" T%e clause must %a-e +een deli+eratel' included in t%e a reement in order to protect t%e interests of t%e com+inin +an:sL specificall'. in contrast to t%e earlier afore. on 18 Januar' 1..71" T%e letters of credit. E&$SCO! encountered financial difficulties and +ecame %ea-il' inde+ted to t%e *e-elopment Ban: of t%e 6%ilippines (*B6)" $n order to settle its o+li ations. B6$ %as a ri %t to institute t%e present case" Commercial *a3 ) Cor-oration *a3 200.uired all t%e assets and assumed all t%e lia+ilities of CBTC" (ean3%ile.555. %o3e-er. 3%erein B6$. (@&T$ and Ba+st (Ci-il Case A. one of t%e corporations sur-i-es and continues t%e +usiness. 3%ic% E&$SCO! used to purc%ase tin +lac: plates from !SC" E&$SCO! defaulted in its o+li ation to pa' t%e amounts of t%e letters of credit. Ba+st also filed a petition for re-ie3 3it% t%e Court (/R ."31 and 6155. CBTC opened for E&$SCO! in fa-or of !ational Steel Corporation (!SC) 3 domestic letters of credit in t%e amounts of 61. on t%e ot%er %and.1A5"48 as of 31 Octo+er 1. $nc" (E&$SCO!) defaulted in its pa'ments.uoted pro-ision. (arc% 1. (@&T$ and Ba+st filed t%eir respecti-e notices of appeal" On 1. respecti-el'.uentl'. lea-in an outstandin account. alt%ou % t%e su+Iect promissor' note names CBTC as t%e pa'ee. *B6 formall' too: o-er t%e assets of E&$SCO!.759"83.uired +' t%e sur-i-in corporation" Jence. as t%e sur-i-in corporation.87..8.uentl'. in t%e total amount of 63.

&iu Oe: See. t%e Board of *irectors o+ser-ed t%at certain mem+ers of t%e CJ@RCJ. 3 3%o s%all +e mem+ers of t%e CJ@RCJ" Fealous in up%oldin and uardin t%eir C%ristian fait%. consented to t%e assumption +' *B6 of t%e o+li ations of E&$SCO!" &eld [2#$ *ue to t%e failure of B6$ to re ister its o+Iection to t%e ta:e=o-er +' *B6 of E&$SCO!Ds assets. 3%ic% pro-ides t%at M$f it is +rou %t to t%e notice of t%e Board of *irectors t%at an' mem+er %as failed to o+ser-e an' re ulations and B'= la3s of t%e $nstitution (CJ@RCJ) or t%e conduct of an' mem+er %as +een dis%onora+le or improper or ot%er3ise inIurious to t%e c%aracter and interest of t%e $nstitution. and 0eli? Almeria. includin Alfredo &on . %e did so on +e%alf of and for t%e +an:" E-en rantin ar uendo t%at t%e said account officer 3as not so empo3ered. 3%ose cause of action s%ould +e directed a ainst *B6 as t%e ne3 de+tor" .83. s%all +e mem+ers of t%e (CJ@RCJ)"M T%e procedure for t%e e?pulsion of an errin or dissident mem+er is prescri+ed in Article #$$ (para rap% A) of t%e CJ@RCJ B'=la3s. for reasons :no3n onl' to itself. located at 1A5 Tala'an St". t%e mem+ers of t%e CJ@RCJ -ested upon t%e Board of *irectors t%e a+solute po3er M(to preser-e and protect t%e(ir) fait%M and to admit and e?pel a mem+er of t%e CJ@RCJ" Admission for mem+ers%ip in t%e CJ@RCJ is so e?actin " Onl' Mpersons >ealous of t%e /ospel. t%e sur-i-in corporation in a mer er 3it% CBTC. as t%e Board of *irectors s%all admit to mem+ers%ip. Josep% &im. Sandoval5Dutierrez (J): ) concur. not as mere suret' +ut as su+stitute principal de+tor. ri %ts and pri-ile es in t%e $nstitution"M As earl' as 1. fait%ful in C%urc% 3or: and of sound :no3led e of t%e Trut%. %o3e-er. 1 dissents in se arate o inion Facts$ $n 1. and earmar:ed for t%at purpose t%e amount of 6A.93A"9A for pa'ment to B6$" !ot3it%standin t%e fact t%at a relia+le institution +ac:ed +' o-ernment funds 3as offerin to pa' E&$SCO!Ds de+ts. a reli ious roup :no3n as MT%e C%urc% $n Rue>on Cit' (C%urc% Assem+l' Jall). 3as or ani>ed as Man entit' of t%e +rot%er%ood in C%rist"DD $t 3as re istered in t%e same 'ear 3it% t%e Securities and E?c%an e Commission (SEC) as a non=stoc:. ot%er t%an its desire to preser-e its causes of action and le al recourse a ainst t%e sureties of E&$SCO!" $t must +e remem+ered. B6$Ds o+Iection 3as to t%e proposed pa'ment formula. especiall' after it %ad alread' learned t%at *B6 %ad ta:en o-er t%e assets and assumed t%e lia+ilities of E&$SCO!" $ts failure to do so can onl' mean an ac. not to t%e su+stitution itself" B6$ i-es no co ent reason in 3it%%oldin its consent to t%e su+stitution. %is o+li ation to pa' onl' arises upon t%e principal de+torDs failure or refusal to pa'" T%ere 3as no indication t%at t%e principal de+tor 3ill default in pa'ment" $n fact. insisted in oin after t%e sureties" B6$Ds conduct e-inced a clear and unmista:a+le consent to t%e su+stitution of *B6 for E&$SCO! as de+tor" Jence.71 and t%ereafter. Basa [GRs 144104)04 27 5e-tem+er 2001# L also &im C%e Boon -s" Basa B/Rs 139191= 93C. at t%e creditorsD meetin %eld in June 1.0 *on( vs. *B6.77. 3%ic% %ad stepped into t%e s%oes of E&$SCO!. improper and inIurious to t%e c%aracter and interest of t%e (CJ@RCJ)M +' Mintroducin (to t%e mem+ers) doctrines and teac%in s 3%ic% 3ere not +ased on t%e Jol' Bi+leM and t%e Commercial *a3 ) Cor-oration *a3 200.519. Rue>on Cit'.uiescence in t%e assumption +' *B6 of E&$SCO!Ds o+li ations" As repeatedl' pointed out +' E&$SCO! and (@&T$. e?%i+ited Mconduct 3%ic% 3as dis%onora+le. t%e Board of *irectors ma' +' resolution 3it%out assi nin an' reason t%erefor e?pel suc% mem+er from suc% $nstitution and %e s%all t%en forfeit %is interest. non=profit reli ious corporation for t%e administration of its temporalities or t%e mana ement of its properties" T%e Articles of $ncorporation and B'=la3s of t%e CJ@RCJ decree t%at its affairs and operation s%all +e mana ed +' a Board of *irectors consistin of 4 mem+ers. t%ere 3as a -alid no-ation 3%ic% resulted in t%e release of E&$SCO! from its o+li ation to B6$. &im C%e Boon -s" Basa B/R 138139C Third Division. ( /2 ) .uentl' re istered its o+Iection to t%e su+stitution. B6$. t%e !ational *e-elopment Compan' too: o-er t%e +usiness of E&$SCO! and undertoo: to pa' E&$SCO!Ds creditors. it is deemed to %a-e consented to t%e su+stitution of *B6 for E&$SCO! as de+tor" T%e aut%orit' ranted +' B6$ to its account officer to attend t%e creditorsD meetin 3as an aut%orit' to represent t%e +an:. 3as capa+le of pa'ment" $ts aut%ori>ed capital stoc: 3as increased +' t%e o-ernment" (ore importantl'. Tala'an #illa e. $ncorporatedM (CJ@RCJ). suc% t%at 3%en %e failed to o+Iect to t%e su+stitution of de+tors. B6$ could %a-e su+se.Narratives (Berne Guerrero) %ssue [2#$ )%et%er B6$. t%at 3%ile a suret' is solidaril' lia+le 3it% t%e principal de+tor. and to ensure unit' and uninterrupted e?ercise of t%eir reli ious +elief.

. 3%ic% %ad attained finalit'" On 31 Jul' 1. for %is part. et al" Mto correct t%eir 3a'sM and 3arned t%em t%at if t%e' persist in t%eir %i %l' improper conduct. t%e Board of *irectors. Basa. conducted furt%er proceedin s to %ear and decide t%e permissi-e counterclaim and t%ird=part' complaint incorporated in Basa.. t%e' 3ill +e dropped from t%e mem+ers%ip of t%e CJ@RCJL durin Sunda' 3ors%ip at%erin s. et al" su+se. and some responsi+le mem+ers of t%e CJ@RCJ.. t%ose deceased and t%ose 3%om t%e CJ@RCJ %ad lost contact 3it%" All t%e t%en 4 mem+ers of t%e Board. durin its 35 Au ust 1. et al" as mem+ers of t%e CJ@RCJ" 6romptl'. t%e resolution 3as si ned onl' +' *irectors Ant%on' Sa'%eeliam. issued an order in SEC EB Case A7A. et al" filed a motion for reconsideration +ut 3as denied +' t%e appellate court in a resolution dated 17 Au ust 1.3" On 1. et al" filed 3it% t%e SEC en +anc a petition for re-ie3 on certiorari (SEC EB Case A7A). includin t%eir pra'er for inIuncti-e relief to pre-ent &on .3=A971.. *irectors &im C%e Boon.3 for +ein -oid and orderin t%e reinstatement of &on . as mem+ers of t%e Board of *irectors.. Septem+er 1.A. ( /4 ) .3. affirmed t%e 6erea rulin and Mdismissed for lac: of meritM t%e petition" &im C%e Boon et al" did not appeal from t%e decision of t%e SEC en +anc" su+se.. . Tan Jon Eoc.4. et al"Ds supplemental ans3er. in an en +anc decision dated 11 Jul' 1. et al" from interferin and usurpin t%e functions of t%e Board of *irectors" &on . t%e SEC en +anc. 3ere dul' filed 3it% t%e SEC on 13 Septem+er 1. Tan Jon Eoc. et al"Ds t%ird=part' complaintDs pra'er for inIuncti-e relief since t%ere is a case pendin +efore anot%er Jearin Officer in SEC Case A. Josep% &im. ad-ised &on ..Narratives (Berne Guerrero) 6rinciples of 0ait% em+raced +' t%e CJ@RCJ" Confronted 3it% t%is situation..A" &im C%e Boon. filed a motion for reconsideration of t%e same order" @pon denial of %is motion %e also filed 3it% t%e Court of Appeals a petition for re-ie3 (CA=/R S6 A337. (a' 1.uestioned e?pulsion alread' resol-ed +' t%e SEC en +anc in its decision dated 11 Jul' 1. &'dia Basa... includin t%e names of Josep% &im.9" @pon denial of t%e separate motions for reconsideration of +ot% parties. remo-ed from t%e said list certain names of mem+ers. settin aside t%e e?pulsion of certain mem+ers of t%e CJ@RCJ appro-ed +' its Board of *irectors on 35 Au ust 1.A for t%e declaration of nullit' of t%e eneral mem+ers%ip meetin %eld on 11 0e+ruar' 1.7. t%e SEC.4 order of t%e SEC en +anc in SEC EB Case A7A" &on . et al"Ds consolidated petitions and re-ersin t%e 31 Jul' 1. 3%ic% interposed t%e issue as to t%e -alidit' of t%e .A in SEC EB Case 37. et al"Ds conduct 3ill continue to undermine t%e inte rit' of t%e 6rinciples of 0ait% of t%e CJ@RCJ. Ant%on' Sa'%eeliam and Oao C%e:.uentl'. and later a supplemental petition) a ainst *irectors Oao C%e:.3 re ular meetin %eld for t%e purpose of re-ie3in and updatin t%e mem+ers%ip list of t%e CJ@RCJ.3 list of corporate mem+ers%ip" After conductin a %earin on t%e application for a 3rit of preliminar' inIunction.)" T%e SEC. &eandro Basa...3. &im C%e Boon. &'dia Basa and Ant%on' Sa'%eeliam" $t sou %t mainl' t%e annulment of t%e 35 Au ust 1.. namel'. &iu Oe: See.3 mem+ers%ip list and t%e reinstatement of t%e ori inal list on t%e round t%at t%e e?pulsion 3as made 3it%out prior notice and %earin L and pra'ed for t%e issuance of a temporall' restrainin order (TRO) and a 3rit of preliminar' inIunction principall' to enIoin t%e Board of *irectors from %oldin an' election of a ne3 set of directors amon t%e mem+ers named in t%e 35 Au ust 1. Alfredo &on and 0eli? Almeria" T%e' 3ere remo-ed for espousin doctrines inimical or inIurious to t%e 6rinciples of 0ait% of t%e CJ@RCJ" T%e Board also updated t%e list +' remo-in t%e names of t%ose 3%o %a-e mi rated to ot%er countries. &im C%e Boon. to et%er 3it% t%e minutes of t%e meetin . t%rou % a %earin panel..). Sa'%eeliam and Basa filed a petition for re-ie3 3it% t%e Court of Appeals (CA=/R S6 A1991)" Oao C%ec:.7" &on . &eandro Basa. Oao C%ec and &'dia &" Basa M3ere dul' informedM of t%at meetin " Jo3e-er. Ant%on' Sa'%eeliam. et al" ele-ated 6ereaDs order to t%e SEC en +anc -ia a petition for certiorari (SEC EB Case 37. SEC Jearin Officer (anuel 6erea denied t%e same in an order dated 11 0e+ruar' 1. *irectors &im C%e Boon and Tan Jon Eoc did not appear" T%us. &eandro Basa. t%e Court of Appeals promul ated its decision rantin Basa.9 denied t%e motions..uestioned t%eir e?pulsion +' filin 3it% t%e SEC Securities $n-esti ation and Clearin *epartment a petition (SEC Case 5. 3%ic% 3as consolidated 3it% CA=/R S6 A1991)" On 1. &im C%e Boon. &iu Oe: See and ot%ers . Min small roup meetin s and e-en one=on=one personal tal: 3it% t%em"M &on et al" i nored t%ese repeated admonitions" Alarmed t%at &on . et al" filed t%e Commercial *a3 ) Cor-oration *a3 200.. and declined to act on Basa. Oao C%ec and &'dia &" Basa 3%o composed t%e maIorit' of t%e Board" T%e updated mem+ers%ip list appro-ed +' t%e Board on 35 Au ust 1..uentl' filed motions to dismissGstri:e out t%e counterclaim and t%ird=part' complaint" T%e %earin panel in its omni+us order dated 1 Octo+er 1.

t%ere 3as no mention or re. 3%ic% t%e mem+ers %a-e e?pressl' ad%ered to.3 is in accordance 3it% la3" &eld$ T%e B'=la3s of t%e CJ@RCJ. (andala an. 5-ouses Gaston [GR 141101 24 !anuar" 2002# Third Division. t%e onl' re. 3%ic% 3ere su+se. or t%e conduct of an' mem+er %as +een dis%onora+le or improper or ot%er3ise inIurious to t%e c%aracter and interest of t%e CJ@RCJ. et al" 3ere i-en more t%an sufficient notice of t%eir impendin e?pulsion.uirement of mem+ers%ip in an' %omeo3nersD association" 0rom t%at time on.M still t%e Court can not conclude t%at Basa. does not re. ( /4 ) . &on .uirement of prior notice to +e i-en to an errin mem+er +efore %e can +e e?pelledL +ut t%at is %o3 peculiar t%e nature of a reli ious corporation is -is= a=-is an ordinar' corporation or ani>ed for profit" $t must +e stressed t%at t%e +asis of t%e relations%ip +et3een a reli ious corporation and its mem+ers is t%e latterDs a+solute ad%erence to a common reli ious or spiritual +elief " Once t%is +asis ceases.uirements +efore a mem+er can +e e?pelled or remo-ed from t%e mem+ers%ip of t%e CJ@RCJ are: (a) t%e Board of *irectors %as +een notified t%at a mem+er %as failed to o+ser-e an' re ulations and B'=la3s of t%e CJ@RCJ. 3%en SCJA disseminated a +oard resolution 3%ic% decreed t%at onl' its mem+ers in ood standin 3ere to +e issued stic:ers for use in t%eir -e%icles" T%ereafter. t%e' %a-e remained non=mem+ers of SCJA" T%e' also stated t%at an arran ement 3as made 3%erein %omeo3ners 3%o 3ere non=mem+ers of t%e association 3ere issued Mnon= mem+erM atepass stic:ers for t%eir -e%icles for identification +' t%e securit' uards mannin t%e su+di-isionDs entrances and e?its" T%is arran ement remained undistur+ed until sometime in t%e middle of (arc% 1. et al" reall' %a-e no reason to +e3ail t%e lac: of prior notice in t%e B'=la3s" T%e' %a-e 3ai-ed suc% notice +' ad%erin to t%ose B'=la3s" T%e' +ecame mem+ers of t%e CJ@RCJ -oluntaril'" T%e' entered into its co-enant and su+scri+ed to its rules" B' doin so. t%ere is no room for dissension in a reli ious corporation" And 3%ere an' mem+er of a reli ious corporation is e?pelled from t%e mem+ers%ip for espousin doctrines and teac%in s contrar' to t%at of %is c%urc%. Clara &omeo3nersB Association vs. et al"Ds e?pulsion falls 3it%in t%e Constitutional pro-isions on Mprior noticeM or Mdue process. 3it%out assi nin an' reason t%erefor" T%us.7 5ta.7.. 1. enerall'. of t%e same Code. Alfredo &on and 0eli? Almeria from t%e mem+ers%ip of t%e CJ@RCJ +' its Board of *irectors t%rou % a resolution issued on Au ust 35. pro-ides for t%e termination of mem+ers%ip" $t pro-ides t%at M(em+ers%ip s%all +e terminated in t%e manner and for t%e causes pro-ided in t%e articles of incorporation or t%e +'=la3s" Termination of mem+ers%ip s%all %a-e t%e effect of e?tin uis%in all ri %ts of a mem+er in t%e corporation or in its propert'.uentl' consolidated" %ssue$ )%et%er t%e e?pulsion of Josep% &im.1 of t%e Corporation Code.Narratives (Berne Guerrero) petitions for re-ie3. a mem+er 3%o commits an' of t%e causes for e?pulsion enumerated in para rap% A of Article #$$ ma' +e e?pelled +' t%e Board of *irectors. unless ot%er3ise pro-ided in t%e articles of incorporation or t%e +'=la3s"M $n fact. Sta" Clara Su+di-ision. 3%ic% %as +een made e?plicitl' applica+le to reli ious corporations +' t%e second para rap% of Section 15. as s%o3n +' t%e records" . et al" committed a constitutional infraction" &on . 3it%out i-in t%at errin mem+er an' notice prior to %is e?pulsion" T%e resolution need not e-en state t%e reason for suc% action" T%e CJ@RCJ B'=la3 pro-ision on e?pulsion. 1 concurs althou'h he #i'ht call attention to Article )1<4 o0 the Civil Code as and 8hen ertinent$ Facts$ Spouses #ictor (a" /aston and &'dia (" /aston 3ere residents of San Jose A-enue. t%e' are +ound +' t%eir consent" E-en assumin t%at &on . t%e Corporation Code lea-es t%e matter of ecclesiastical discipline to t%e reli ious roup concerned" Section . on t%ree separate incidents.uire t%e Board of *irectors to i-e prior notice to t%e errin or dissident mem+ers in cases of e?pulsion" $n t%e B'=la3 pro-ision..an (J): 3 concur.8A. and at t%e time of purc%ase. /an'ani. #ictor (" Commercial *a3 ) Cor-oration *a3 200. &iu Oe: See. and (+) a resolution is passed +' t%e Board e?pellin t%e mem+er concerned. as p%rased. ma' sound unusual and o+Iectiona+le as t%ere is no re. mem+ers%ip in t%e reli ious corporation must also cease" T%us. t%e esta+lis%ed doctrine in t%is Iurisdiction is t%at suc% action from t%e c%urc% aut%orities is conclusi-e upon t%e ci-il courts" O+-iousl' reco ni>in t%e peculiarit' of a reli ious corporation. Bacolod Cit'" T%e' purc%ased t%eir lots in t%e said su+di-ision sometime in 1. t%rou % a resolution.

namel': Arneil C%ua. *anilo /am+oa. %o3e-er. Spouses #ictor (a" /aston and &'dia (" /aston filed a complaint for dama es 3it% preliminar' inIunctionGpreliminar' mandator' inIunction and temporar' restrainin order +efore t%e Re ional Trial Court in !e ros Occidental at Bacolod Cit' a ainst Santa Clara Jomeo3ners Association (SCJA) t%ru its Board of *irectors. &uis Sarrosa. Ri>>a de la Rama and Securit' /uard Capillo and DJo%n *oeD... (arc% 1. t%e trial court denied t%e said motion 3it%out %o3e-er rulin on t%e additional round of lac: of cause of action" On 17 Au ust 1. and t%e su+di-ision o3ner and a %omeo3nerGlot +u'er" Clearl'... et al"Ds motion for reconsideration in a resolution dated 11 0e+ruar' 1555" SCJA. t%e lo3er court resol-ed to den' SCJA et al"Ds motion to dismiss. findin t%at t%ere e?isted no intra=corporate contro-ers' since t%e Spouses /aston alle ed t%at t%e' %ad ne-er Ioined t%e association" On 17 Jul' 1. 3as re..7. done in t%e presence of ot%er su+di-ision o3ners %ad caused t%e spouses /aston to suffer moral dama e" On 7 April 1.7.uired +' t%e uards on dut' emplo'ed +' SCJA to s%o3 %is dri-erDs license as a prere.7=15118. Jr". et al" su+mitted a (otion for Reconsideration. directl' or indirectl'. t%e Spouses /aston cannot +e compelled to +ecome mem+ers of t%e SCJA +' t%e simple e?pedient of includin t%em in its Articles of $ncorporation and B'=la3s 3it%out t%eir e?press or implied consent" True.. mem+ers%ips in %omeo3nersD associations ma' +e ac.uisite to %is entrance to t%e su+di-ision and to %is residence t%erein despite t%eir :no3in %im personall' and t%e e?act location of %is residence" On 1. t%e proper forum +ein t%e Jome insurance and /uarant' Corporation (J$/C)" To support t%eir claim of intra=corporate contro-ers'. Ernesto 6iccio.. Jocel'n /arcia. SCJA.Narratives (Berne Guerrero) /aston. #ictor (a" /aston 3as %imself pre-ented from enterin t%e su+di-ision and proceedin to %is residential a+ode 3%en securit' uards Ro er Capillo and a MJo%n *oeM lo3ered t%e steel +ar of t%e EA(ETA& ate of t%e su+di-ision and demanded from %im %is dri-erDs license for identification" On 1 April 1. et al". ) . t%e son of t%e spouses /aston 3%o li-es 3it% t%em. +ut t%at is possi+le onl' if t%e o3ners -oluntaril' a ree. SCJA. it ma' +e to t%e mutual ad-anta e of lot o3ners in a su+di-ision to +and t%emsel-es to et%er to promote t%eir common 3elfare. *indo $la an.7. as amended +' E?ecuti-e Orders 939 and . pro-ides Mt%at t%e association s%all +e a non=stoc: corporation 3it% all %omeo3ners of Sta" Clara constitutin its mem+ers%ipML and t%at its +'=la3s contains a pro-ision t%at Mall real estate o3ners in Sta" Clara Su+di-ision automaticall' +ecome mem+ers of t%e associationML amon ot%ers" On 4 Jul' 1. $ncorporated (Ci-il Case . (a" (ila ros #ar as. to declare as null and -oid t%e su+Iect resolution of t%e +oard of directors of SCJA.7.7. RTC=Branc% A.7.5.. et al" stated t%at t%e Articles of $ncorporation of SCJA. addin lac: of cause of action as round for t%e dismissal of t%e case" On 18 Au ust 1. t%ere 3as no annotation s%o3in Commercial *a3 ) Cor-oration *a3 200. SCJA. t%ere is no pri-it' of contract e?ists +et3een SCJA and Spouses /aston" )%en t%e Spouses /aston purc%ased t%eir propert' in 1.. t%e Court of Appeals dismissed t%e 6etition and ruled t%at t%e RTC %ad Iurisdiction o-er t%e dispute" T%e appellate court li:e3ise denied SCJA.7. ot%er t%an t%e said Articles of $ncorporation and B'=la3s.. &oren>o &acson. 3%ic% 3as dul' appro-ed +' t%e Securities and E?c%an e Commission (SEC) on A Octo+er 1. SCJA. SCJA" et al" ele-ated t%e matter to t%e Court of Appeals -ia a 6etition for Certiorari" On 31 Au ust 1. t%ere is no s%o3in t%at t%e Spouses /aston %a-e a reed to +e SCJA mem+ers" T%e appro-al +' t%e SEC of t%e said documents is not an operati-e act 3%ic% +esto3s mem+ers%ip on t%e Spouses /aston +ecause t%e ri %t to associate parta:es of t%e nature of freedom of contract 3%ic% can +e e?ercised +' and +et3een t%e %omeo3ners amon st t%emsel-es. t%e %omeo3nersD association and a %omeo3ner.83. muc% less. and Santa Clara Estate. et al" filed a motion to resol-e its motion to dismiss on round of lac: of cause of action" On 7 Septem+er 1. ( /. et al" filed a motion to dismiss ar uin t%at t%e trial court %ad no Iurisdiction o-er t%e case as it in-ol-ed an intra=corporate dispute +et3een SCJA and its mem+ers pursuant to Repu+lic Act 975.uired in -arious 3a's P often t%rou % deeds of sale. Torrens certificates or ot%er forms of e-idence of propert' o3ners%ip" Jerein.... to +ecome mem+ers of t%e association" True also.7.8A and o+tained Transfer Certificates of Titles T=1149A1 and T=118A41 for &ots 11 and 11 of Bloc: 38 alon San Jose A-enue in Sta" Clara Su+di-ision. Bacolod Cit')L alle in t%at t%e acts of SCJA. t%e trial court issued an order den'in t%e motion" On 1A Septem+er 1. et al" filed t%e petition for re-ie3" %ssue$ )%et%er t%e Spouses /aston are mem+ers of t%e SCJA" &eld$ T%e constitutionall' uaranteed freedom of association includes t%e freedom not to associate" T%e ri %t to c%oose 3it% 3%om one 3ill associate oneself is t%e -er' foundation and essence of t%at partners%ip" 0urt%er.7.

Orti as Center. and e-en a settlement sc%eme proposed +' 6A*CO( in Septem+er 1.555"55 as and for attorne'Ds feesL 3it% costs a ainst 6A*CO(L on t%e round t%at 6A*CO( automaticall' +ecame a mem+er of t%e Association 3%en t%e land 3as sold to T*CL and t%at t%e intent to pass t%e o+li ation to prospecti-e transferees 3as e-ident from t%e annotation of t%e same clause at t%e +ac: of t%e Transfer Certificate of Title co-erin t%e lot" T%e appellate court %eld t%at despite disa-o3al of mem+ers%ip. interests and penalt' c%ar es from April 1. and entered a ne3 one orderin 6A*CO( to pa' t%e Association (1) 643. t%e said lot..Narratives (Berne Guerrero) t%eir automatic mem+ers%ip in t%e SCJA" 0urt%ermore. re.. Orti as Center Association.. includin interests and penalties t%ereon.uentl'.. 6A*CO(Ds mem+ers%ip in t%e Association 3as e-ident from t%ese facts: (1) 6A*CO( 3as included in t%e AssociationDs list of +ona fide mem+ers as of 35 (arc% 1.81A"A5 per mont% from 6A*CO(" T%e corporate +oo:s s%o3ed t%at 6A*CO( o3ed t%e Association 643. 6A*CO( not onl' ac:no3led ed t%em. Davide Jr$ (CJ): 4 concur Facts$ 6adcom Condominium Corporation (6A*CO() o3ns and mana es t%e 6adilla Office Condominium Buildin (6A*CO( Buildin ) located at Emerald A-enue. +' Tierra *e-elopment Corporation (T*C) under a *eed of Sale dated A Septem+er 1.73 to June 1. t%e SCJA reco ni>ed t%at t%ere 3ere su+di-ision lando3ners 3%o 3ere not mem+ers t%ereof. 6A*CO( contended t%at it is a non=stoc:.. 3as one of t%e AssociationDs incorporatorsL and (3) %a-in recei-ed t%e demands for pa'ment.41"A8. not3it%standin t%e pro-isions of its Articles of $ncorporation and B'=la3s" . non=profit association. t%e Court of Appeals re-ersed and set aside t%e trial courtDs decision. ( /0 ) . t%e records are +ereft of an' e-idence t%at 3ould indicate t%at t%e Spouses /aston intended to +ecome mem+ers of t%e SCJA" 6rior to t%e implementation of t%e aforesaid Resolution.uired from t%e Orti as K Compan'. interests and penalties" On 1 Septem+er 1.8A" Amon t%e terms and conditions in t%e deed of sale 3as t%e re. $nc" 3as or ani>ed to ad-ance t%e interests and promote t%e eneral 3elfare of t%e real estate o3ners and lon = term lessees of lots in t%e Orti as Center" $t sou %t t%e collection of mem+ers%ip dues in t%e amount of 61..5" $n -ie3 of 6A*CO(Ds failure and refusal to pa' its arrears in mont%l' dues.. 3as con-e'ed +' T*C in fa-or of 6A*CO( in a *eed of Transfer dated 19 0e+ruar' 1.uests for e?tensions of pa'ment. t%e Association filed a complaint for collection of sum of mone' +efore t%e Re ional Trial Court of 6asi Cit'.41"A8 as and for mem+ers%ip dues in arrears inclusi-e of earned interests and penaltiesL and (1) 619.71. its predecessor=in=interest" $n its ans3er. representin mem+ers%ip dues.89" $n 1. to et%er 3it% impro-ements t%ereon. +ut as:ed for and 3as ranted repeated e?tensions. and e-en proposed a sc%eme for t%e settlement of its o+li ation" 6A*CO( filed t%e petition for re-ie3" %ssue$ )%et%er 6A*CO( can +e compelled to Ioin t%e association pursuant to t%e pro-ision on automatic mem+ers%ip appearin as a condition in t%e *eed of Sale of A Septem+er 1. 6A*CO(Ds 6resident. 9rti(as Center Association [GR 140/07 1 'a" 2002# First Division. &imited 6artners%ip (OC&6)... t%e trial court rendered a decision dismissin t%e complaint" T%e Association appealed t%e case to t%e Court of Appeals (CA=/R C# 455. t%e' and t%e ot%er %omeo3ners 3%o 3ere not mem+ers of t%e association 3ere issued non=mem+er ate pass stic:ers for t%eir -e%iclesL a fact not disputed +' SCJA" T%us.uirement t%at t%e transferee and its successor=in=interest must +ecome mem+ers of an association for realt' o3ners and lon =term lessees in t%e area later :no3n as t%e Orti as Center" Su+se.)" $n its decision of 35 June 1555./ :adcom Condominium Cor-oration vs.3" T%e letters e?c%an ed +et3een t%e parties t%rou % t%e 'ears s%o3ed repeated demands for pa'ment. and t%at t%is o+li ation 3as alle edl' passed on to 6A*CO( 3%en it +ou %t t%e lot from T*C.8A and t%e annotation t%ereof on Commercial *a3 ) Cor-oration *a3 200. it 3as not lia+le for mem+ers%ip dues. 6asi Cit'" T%e land on 3%ic% t%e +uildin stands 3as ori inall' ac.8. it s%ould first appl' for and +e accepted for mem+ers%ip +' t%e latterDs Board of *irectorsL t%at no automatic mem+ers%ip 3as apparentl' contemplated in t%e AssociationDs B'=la3s" 6A*CO( added t%at it could not +e compelled to +ecome a mem+er 3it%out -iolatin its ri %t to freedom of associationL and t%at since it 3as not a mem+er of t%e Association. and for it to +ecome a special mem+er of t%e Association. Branc% 14A (Ci-il Case !o" 43751)" T%e Association a-erred t%at purc%asers of lands 3it%in t%e Orti as Center comple? from OC&6 are o+li ated under t%eir contracts of sale to +ecome mem+ers of t%e Association.9L (1) !arciso 6adilla.

555"55 as e-idenced +' t%e *eed of A+solute Sale" T%ereafter. as lot o3ner. e?cept t%ose alread' annotated at t%e +ac: of said Transfer Certificate of Title A98357"M As t%e pro-ision on automatic mem+ers%ip 3as annotated in t%e Certificate of Title and made a condition in t%e *eed of Transfer in fa-or of 6A*CO(L conse. t%e *E#E&O6ER. t%e sale +ound T*C to compl' 3it% para rap% (/) of t%e co-enants...8.89.88 i-in (anuel *ula' 3it%in 1 'ears or until . %o3e-er. located at Se-ent% Street (no3 Buendia E?tension) and 0"B" Jarrison Street. o3ned a propert' co-ered +' TCT 18775 A and :no3n as *ula' Apartment consistin of 14 apartment units on a 47. ( /7 ) .555"55 3%ic% 3as. *ecem+er 1.uisition of t%e lot pursuant to t%e automatic mem+ers%ip clause annotated in t%e Certificate of Title of t%e propert' and t%e *eed of Transfer" 0urt%ermore. t%e su+Iect propert' 3as sold on 9 April 1.555"55 3%ic% 3as dul' annotated as Entr' 4713. not annotated eit%er in TCT 18775 or TCT 13119" On 1A *ecem+er 1. as 3ell as t%e Common and &imited Common Areas of t%e Condominium proIect mentioned and descri+ed in t%e (aster *eed 3it% *eclaration of Restrictions.83 3%ile at t%e same time mana in t%e *ula' Apartment as %is s%are%oldin s in t%e corporation 3as su+se. *ecem+er 1. 6asa' Cit'" T%e corporation t%rou % its president. (anuel *ula' and t%e spouses #eloso e?ecuted a (emorandum to t%e *eed of A+solute Sale of 13 *ecem+er 1. 6A*CO( is a re ular mem+er of t%e Association" !o application for mem+ers%ip is necessar'" $f at all. a domestic corporation 3it% t%e follo3in as mem+ers of its Board of *irectors: (anuel R" *ula' 3it% 1.uentl' increased +' %is fat%er" On 13 *ecem+er 1. 2ula" =nter-rises vs. under t%e principle of estoppel. from OC&6. Court o. (anuel *ula' +' -irtue of Board Resolution 17 of t%e corporation sold t%e su+Iect propert' to spouses (aria T%eresa and Castrense #eloso in t%e amount of 6355. A--eals [GR 11//1 27 Au(ust 1114# Second Division. (aria #eloso. $nc".uentl'. conditions and restrictions of t%e *eed of Sale" $t 3as a reed +' t%e parties t%at dues s%all +e collected from an automatic mem+er and suc% fees or assessments s%all +e a lien on t%e propert'" T%e stipulation 3as li:e3ise annotated at t%e +ac: of Transfer Certificate of Title A98357 issued to T*C" )%en t%e latter sold t%e lot to 6A*CO( on 19 0e+ruar' 1.uestion 3as +ou %t +' 6A*CO(Ds predecessor=in=interest. +' t%ese presents. mort a ed t%e su+Iect propert' to (anuel A" Torres for a loan of 6195.uare meter lot. s.84. treasurer and eneral mana erL Att'" #ir ilio E" *ula' 3it% 15 s%ares and desi nated as -ice=presidentL &inda E" *ula' 3it% 15 s%aresL Celia *ula'=(endo>a 3it% 15 s%aresL and Att'" 6laridel C" Jose 3it% 15 s%ares and desi nated as secretar'. cedes.84 dated . 1 too* no art Facts$ (anuel R" *ula' Enterprises. free from all liens and encum+rances. 6A*CO( is +arred from disclaimin mem+ers%ip in t%e Association" . from t%e facts or circumstances it enumerated in t%e appellate courtDs decision. acceptance +' t%e Board of *irectors is a ministerial function considerin t%at 6A*CO( is deemed to +e a re ular mem+er upon t%e ac. in TCT 13119" @pon t%e failure of (aria #eloso to pa' Torres.1 'anuel R. t%eir assi ns and %eirs" Since 6A*CO( is t%e successor=in=interest of T*C. Article 1311 of t%e Ci-il Code pro-ides t%at contracts ta:e effect +et3een t%e parties.84.uentl'. #ir ilio *ula' occupied one of t%e unit apartments of t%e su+Iect propert' since 1. and t%us to Ioin t%e Association" &astl'. more or less. t%e automatic mem+ers%ip clause is not a -iolation of its freedom of association" 6A*CO( 3as ne-er forced to Ioin t%e association" $t could %a-e a-oided suc% mem+ers%ip +' not +u'in t%e land from T*C" !o+od' forced it to +u' t%e land 3%en it +ou %t t%e +uildin 3it% t%e annotation of t%e condition or lien on t%e Certificate of Title t%ereof and accepted t%e *eed" 6A*CO( -oluntaril' a reed to +e +ound +' and respect t%e condition.87 to Torres as t%e Commercial *a3 ) Cor-oration *a3 200. 6ocon (J): 3 concur. T*C.45 s%ares and desi nated as president. *ula' Continental Jotel (no3 0rederic: Jotel)" $t e-en %ad to +orro3 mone' from #ir ilio *ula' to +e a+le to continue t%e %otel proIect" As a result of said loan. it follo3s t%at t%e stipulation on automatic mem+ers%ip 3it% t%e Association is also +indin on t%e former" 0urt%er. TCT 18775 3as cancelled and TCT 13119 3as issued to (aria T%eresa #eloso" Su+se. to repurc%ase t%e su+Iect propert' for 6155. o+tained -arious loans for t%e construction of its %otel proIect. t%e *eed of Transfer e?pressl' stated t%at Mfor and in consideration of t%e fore oin premises. 6A*CO( is +ound +' and must compl' 3it% t%e co-enant" (oreo-er. (anuel *ula'.Narratives (Berne Guerrero) Transfer Certificate of Title A98357" &eld$ )%en t%e land in . transfers and con-e's unto t%e COR6ORAT$O! t%e a+o-e=descri+ed parcel of land e-idenced +' Transfer Certificate of Title A98357. 3it%out t%e :no3led e of (anuel *ula'.

.. Torres filed a petition for t%e issuance of a 3rit of possession a ainst spouses #eloso and (anuel *ula' in &RC Case 18A1=6" Jo3e-er. Torres and Ed ardo 6a+alan. (aria #eloso e?ecuted a *eed of A+solute Assi nment of t%e Ri %t to Redeem in fa-or of (anuel *ula' assi nin %er ri %t to repurc%ase t%e su+Iect propert' from Torres as a result of t%e e?traIudicial sale" As neit%er (aria #eloso nor %er assi nee (anuel *ula' 3as a+le to redeem t%e su+Iect propert' 3it%in t%e one 'ear statutor' period for redemption.79.74" %ssue$ )%et%er t%e sale of t%e su+Iect propert' +et3een spouses #eloso and (anuel *ula' %as no +indin effect on t%e corporation as Board Resolution 17 3%ic% aut%ori>ed t%e sale of t%e su+Iect propert' 3as resol-ed 3it%out t%e appro-al of all t%e mem+ers of t%e +oard of directors and said Board Resolution 3as prepared +' a person not desi nated +' t%e corporation to +e its secretar'" &eld$ Section 151 of t%e Corporation Code of t%e 6%ilippines pro-ides t%at M)%en +oard meetin is unnecessar' or improperl' %eld" @nless t%e +'=la3s pro-ide ot%er3ise.uestion and none of t%em ma:es prompt o+Iection t%ereto in 3ritin " $f a directorsD meetin is %eld 3it%out proper call or notice.75.uentl' a +oard resolution aut%ori>in t%e sale or mort a e of t%e su+Iect propert' is not necessar' to +ind t%e corporation for t%e action of its president" At an' rate. et al" filed t%e petition for re-ie3 on certiorari" *urin t%e pendenc' of t%e petition.Narratives (Berne Guerrero) %i %est +idder in an e?traIudicial foreclosure sale as e-idenced +' t%e Certificate of S%eriffDs Sale issued on 15 April 1. Januar' 1. t%e corporation. et al".uentl' issued to Torres on 13 April 1. 3%en #ir ilio *ula' appeared in court to inter-ene in said case alle in t%at (anuel *ula' 3as ne-er aut%ori>ed +' t%e corporation to sell or mort a e t%e su+Iect propert'. #ir ilio *ula' and !epomuceno Redo-an.71. orderin t%e spouses (analastas and all persons claimin possession under t%em to -acate t%e premisesL and to pa' t%e rents in t%e sum of 6955"55 a mont% from (a' 1.75" On 15 June 1. 3ritten consent t%ereto is si ned +' all t%e directorsL or (1) All t%e stoc:%olders %a-e actual or implied :no3led e of t%e action and ma:e no prompt o+Iection t%ereto in 3ritin L or (3) T%e directors are accustomed to ta:e informal action 3it% t%e e?press or implied ac..5" T%e corporation." On 1 Octo+er 1. Torres died on 3 April 1.555"55 as ot%er e?penses of liti ation and for t%em to pa' t%e costs of t%e suit" T%ereafter or on 18 (a' 1.7. t%e corporation filed an action a ainst spouses #eloso and Torres for t%e cancellation of t%e Certificate of S%eriffDs Sale and TCT 1A8. t%e 3 cases 3ere Iointl' tried and t%e trial court rendered a decision in fa-or of 6a+alan and Torres" !ot satisfied 3it% said decision. unless %e promptl' files %is 3ritten o+Iection 3it% t%e secretar' of t%e corporation after %a-in :no3led e t%ereof"M Jerein. t%e corporation is classified as a close corporation and conse.7=6 3it% t%e t%en Court of 0irst $nstance of Ri>al" On 11 Jul' 1. a corporate action ta:en at a +oard meetin 3it%out proper call or notice in a close corporation is deemed ratified +' t%e Commercial *a3 ) Cor-oration *a3 200.7. filed an action a ainst t%e corporation. et al" appealed to t%e Court of Appeals 3%ic% rendered a decision on 13 Octo+er 1. affirmin t%e trial court decision" On 7 !o-em+er 1... 3it% t%e corporation as inter-enor for eIectment in Ci-il Case 37=71 3it% t%e (etropolitan Trial Court of 6asa' Cit' 3%ic% rendered a decision on 19 April 1. 6a+alan and Torres for t%e annulment of said decision 3it% t%e Re ional Trial Court of 6asa' in Ci-il Case 1775=6" T%ereafter. t%e corporation.75. et al" filed a (otion for Reconsideration 3%ic% 3as denied on 14 Januar' 1.555"55 and 61. sum of mone' and dama es 3it% preliminar' inIunction in Ci-il Case 71.. Torres filed an Affida-it of Consolidation of O3ners%ip 13 3it% t%e Re istr' of *eeds of 6asa' Cit' and TCT 1A8.1 as s%o3n in %is deat% certificate and named Torres= 6a+alan Realt' K *e-elopment Corporation as %is %eir in %is %olo rap%ic 3ill dated 31 Octo+er 1.8. t%e corporation and #ir ilio *ula' filed an action a ainst t%e presidin Iud e of t%e (etropolitan Trial Court of 6asa' Cit'. t%e trial court ordered Torres to implead t%e corporation as an indispensa+le part' +ut t%e latter mo-ed for t%e dismissal of %is petition 3%ic% 3as ranted in an Order dated 7 April 1. until t%e' s%all %a-e -acated t%e premises 3it% interest at t%e le al rateL and to pa' attorne'Ds fees in t%e sum of 61. in fa-or of 6a+alan.uiesce of all t%e stoc:%oldersL or (A) All t%e directors %a-e e?press or implied :no3led e of t%e action in .. an action ta:en t%erein 3it%in t%e corporate po3ers is deemed ratified +' a director 3%o failed to attend. real estate administrator of Torres.87.8. a tenant of *ula' Apartment @nit !o" 7=A for t%e reco-er' of possession. ( // ) . 3as su+se.87" On 15 Jul' 1. in Ci-il Case 7187=6 3it% t%e t%en Court of 0irst $nstance of Ri>al" On 1. an' action +' t%e directors of a close corporation 3it%out a meetin s%all ne-ert%eless +e deemed -alid if: (1) Before or after suc% action is ta:en. a tenant of *ula' Apartment @nit !o" 8=B. 6a+alan and Torres filed an action a ainst spouses 0lorentino and El-ira (analastas.79.8.

represented +' !enita &ee /ruen+er and Re'naldo & /ruen+er . Bloc: 1 of t%e Acropolis /reens Su+di-ision located in t%e *istrict of (urp%'. $nc" (SJSS0$) entered into an a reement 3it% (otoric% Sales Corporation ((SC) for t%e transfer to it of a parcel of land identified as &ot 35.uare meters. t%e fact t%at #ir ilio *ula' on 1A June 1. A*C and (SC entered into a *eed of A+solute Sale 3%ere+' t%e former transferred to t%e latter t%e su+Iect propert'" B' reason of said transfer." On 1 (arc% 1.7. $nc" is t'pical: four=fift%s of its incorporators +ein close relati-es namel'.7.uentl'. (r" Andres T" Co. (anuel *ula'.uiredL t%at SJSS0$ :ne3 t%is from t%e -er' +e innin as it 3as presented a cop' of t%e Transfer of Ri %ts at t%e time t%e A reement 3as si nedL t%at SJSS0$ itself drafted t%e A reement and insisted t%at (rs" /ruen+er accept t%e 6155. (etro (anila. %e is an incorporator and one of t%e +oard of directors desi nated at t%e time of t%e or ani>ation of (anuel R" *ula' Enterprises. SJSS0$ nonet%eless failed to pa' in le al tender 3it%in t%e stipulated period (up to 1 (arc% 1. #ir ilio *ula' failed to do" T%e corporationDs claim t%at t%e sale of t%e su+Iect propert' +' its president.5. containin an area of A1A s. t%e corporation is lia+le for t%e act of (anuel *ula' and t%e sale of t%e su+Iect propert' to Torres +' (anuel *ula' is -alid and +indin " 00 5an !uan 5tructural and 5teel Fa+ricators [GR 1214. 3 c%ildren and t%eir fat%er 3%ose name identifies t%eir corporation" Besides. is re.)L t%at it 3as t%e understandin +et3een (rs" /ruen+er and SJSS0$ t%at t%e Transfer of Ri %tsG*eed of Assi nment 3ill +e si ned onl' upon receipt of cas% pa'mentL t%us t%e' a reed t%at if t%e pa'ment +e in Commercial *a3 ) Cor-oration *a3 200. ( /1 ) . &inda Aduca. $nc" $n ordinar' parlance. SJSS0$ 3as read' 3it% t%e amount correspondin to t%e +alance. despite repeated demands and in utter disre ard of its commitments %ad refused to e?ecute t%e Transfer of Ri %tsG*eed of Assi nment 3%ic% is necessar' to transfer t%e certificate of title" On 4 April 1. t%e said entit' is loosel' referred to as a Mfamil' corporation"M T%e nomenclature.uate to +ind (SC as t%e ot%er si nature. 6resident and C%airman of (SC.an (J): 4 concur Facts$ On 1A 0e+ruar' 1. under Transfer Certificate of Title 3981" SJSS0$ filed t%e complaint for dama es a ainst (SC. did not appear" (SC. %e is -er' muc% pri-' to t%e transactions in-ol-ed" To +e in 3it%. and !enita &ee /ruen+er .7. /an'ani. SJSS0$ paid t%e do3npa'ment in t%e sum of 6155.. t%e Re istr' of *eeds of Rue>on Cit' issued a ne3 title in t%e name of (SC.7.555"55 as earnest mone'L t%at rantin .555"55. San Juan Structural and Steel 0a+ricators. at that ti#e) " As stipulated in t%e A reement of 1A 0e+ruar' 1. Rue>on Cit'. pa'a+le to (SC" SJSS0$ and (SC 3ere supposed to meet in t%e office of SJSS0$ +ut (SCDs treasurer. to spouses #eloso is null and -oid as t%e alle ed Board Resolution 17 3as passed 3it%out t%e :no3led e and consent of t%e ot%er mem+ers of t%e +oard of directors cannot +e sustained" #ir ilio E" *ula'Ds protestations of complete innocence to t%e effect t%at %e ne-er participated nor 3as e-en a3are of an' meetin or resolution aut%ori>in t%e mort a e or sale of t%e su+Iect premises is difficult to +elie-e" On t%e contrar'.. and t%at JR*C is t%e transferor of ri %t in fa-or of (*C" $n its ans3er.. in t%is case. t%e +alance to +e paid on or +efore 1 (arc% 1. as a result of t%e latter2s alle ed +ad fait% in refusin to e?ecute a formal Transfer of Ri %tsG*eed of Assi nment" $t impleaded A*C and J!( Realt' K *e-elopment Corp" (JR*C) as necessar' parties. (SC and !enita &ee /ruen+er interposed as affirmati-e defense t%at t%e 6resident and C%airman of (otoric% did not si n t%e a reement ad-erted toL t%at (rs" /ruen+er Ds si nature on t%e a reement is inade.1 21 5e-tem+er 111/# First Division. since Transfer Certificate of Title (341.7.) 1784 3as in t%e name of A*C.Narratives (Berne Guerrero) a+sent director unless t%e latter promptl' files %is 3ritten o+Iection 3it% t%e secretar' of t%e corporation after %a-in :no3led e of t%e meetin 3%ic%.7. %o3e-er.) 1784 (the lot 8as still re'istered in the na#e o0 ACE Develo #ent Cor oration +ADC. co-ered +' (etro+an: Cas%ierDs C%ec: 55A113. SJSS0$ president.. 3%o 3rote t%e computation of t%e +alance" On 1 (arc% 1. fairl' reflects t%e co%esi-eness of a roup and t%e paroc%ial instincts of t%e indi-idual mem+ers of suc% an a rupation of 3%ic% (anuel R" *ula' Enterprises. if imprecise..uate :no3led e a+out t%e sale of t%e su+Iect propert' to Torres" Conse.89 e?ecuted an affida-it t%at %e 3as a si nator' 3itness to t%e e?ecution of t%e post=dated *eed of A+solute Sale of t%e su+Iect propert' in fa-or of Torres indicates t%at %e 3as a3are of t%e transaction e?ecuted +et3een %is fat%er and Torres and %ad. t%at of (r" Re'naldo /ruen+er .5.7. 3rote a letter to (SC re.uestin for a computation of t%e +alance to +e paid" Said letter 3as coursed t%rou % (SCDs +ro:er. t%erefore. 3it%out admittin . co-ered +' TCT (341. ade. !enita &ee /ruen+er . t%e enforcea+ilit' of t%e a reement.

$S$ leased t%e parap%ernal propert' of Carlos /elanoDs 3ife /uillermina (endo>a=/elano at t%e corner of Canoni o and Otis. or (3) listin its stoc:s in an' stoc: e?c%an e or ma:in a pu+lic offerin of suc% stoc:s is pro%i+ited" 0rom its articles. t%e' 3ill meet at a +an: desi nated +' SJSS0$ 3%ere t%e' 3ill encas% t%e c%ec: and si n t%e Transfer of Ri %tsG*eed... Court o. it is clear t%at (SC is not a close corporation" (SC does not +ecome one eit%er. 3it% t%e primar' purpose of carr'in on a eneral lum+er and sa3mill +usiness" To carr' on t%is +usiness.. or up to 18 Septem+er 1. Branc% 43 (Ci-il Case 7.8" SJSS0$ filed t%e 6etition for Re-ie3 on Certiorari" SJSS0$ ar ues.95"55" T%e said sum 3as ta:en and recei-ed +' Carlos /elano on t%e a reement t%at $S$ could deduct t%e same from t%e mont%l' rentals of t%e leased premises until said cas% ad-ances are full' paid" Out of t%e Commercial *a3 ) Cor-oration *a3 200. too. ma:e a close corporation" 01 Gelano vs. !o-em+er 1."744H to +e accurate. 6aco. +ecause t%e latter is a close corporation" Since MSpouses Re'naldo &" /ruen+er and !enita R" /ruen+er o3ned all or almost all or . ( 10 ) . not e?ceedin t3ent' (15)L (1) All of t%e issued stoc: of all classes s%all +e su+Iect to one or more specified restrictions on transfer permitted +' t%is TitleL and (3) T%e corporation s%all not list in an' stoc: e?c%an e or ma:e an' pu+lic offerin of an' of its stoc: of an' class" !ot3it%standin t%e fore oin . a narro3 distri+ution of o3ners%ip does not. t%at t%e -eil of corporate fiction of (SC s%ould +e pierced. findin t%at !enita &ee /uten+er 3as not aut%ori>ed +' t%e corporation to dispose of t%e propert' as suc% disposition is o-erned +' t%e re.155"55 a mont%" $t 3as 3%ile $S$ 3as leasin t%e aforesaid propert' t%at its officers and directors %ad come to :no3 Carlos /elano 3%o recei-ed from t%e corporation cas% ad-ances on account of rentals to +e paid +' t%e corporation on t%e land" Bet3een 1. onl' after +an:in %ours" On t%e +asis of t%e e-idence.9. petitioner ar ues t%at /ruen+er needed no aut%ori>ation from t%e +oard to enter into t%e su+Iect contract" $t adds t%at. t%e Re ional Trial Court of (a:ati. +ut t%at SJSS0$ informed (rs" /ruen+er of t%e alle ed a-aila+ilit' of t%e c%ec:. +' p%one. of t%e su+scri+ed capital stoc:M 19 of (otoric%. dismissin SJSS0$Ds complaint. t%e Court of Appeals (CA /R C# A4751) modified t%e decision of t%e trial court +' orderin !enita &ee /uten+er to refund or return to SJSS0$ t%e do3npa'ment of 6155. 3%ic% 3as denied +' t%e appellate court on 15 June 1. +ased on t%e fact t%at almost all of t%e s%ares of stoc: of t%e corporation are o3ned +' said treasurer and %er %us+and" &eld$ Section . 1 concurs in result.0 24 Fe+ruar" 11/1# First Division. and on 17 June 1. amon ot%ers.4 of t%e Corporation Code defines a close corporation pro-ides t%at MA close corporation.8.A.. (anila for 61. +ein solel' o3ned +' t%e Spouses /ruen+er t%e compan' can +e treated as a close corporation 3%ic% can +e +ound +' t%e acts of its principal stoc:%older 3%o needs no specific aut%orit'" %ssue$ )%et%er (SC is a close corporation.95 Carlos /elano o+tained from $S$ cas% ad-ances of 619. e?clusi-e of treasur' s%ares. De Castro (J): 3 concur. is one 3%ose articles of incorporation pro-ide t%at: (1) All of t%e corporationDs issued stoc: of all classes..A8 to 14 *ecem+er 1. or (1) a preemption of s%ares is restricted in fa-or of an' stoc:%older or of t%e corporation.uirements of Section A5."744H of its su+scri+ed capital stoc:" T%e mere o3ners%ip +' a sin le stoc:%older or +' anot%er corporation of all or nearl' all of t%e capital stoc: of a corporation is not of itself sufficient round for disre ardin t%e separate corporate personalities" So. Iust +ecause Spouses Re'naldo and !enita /ruen+er o3ned . $nc" ($S$) is a corporation or ani>ed on 18 Septem+er 1.Narratives (Berne Guerrero) c%ec:. 3it%in t%e meanin of t%is Code.. A--eals [GR *)410. a corporation s%all +e deemed not a close corporation 3%en at least t3o=t%irds (1G3) of its -otin stoc: or -otin ri %ts is o3ned or controlled +' anot%er corporation 3%ic% is not a close corporation 3it%in t%e meanin of t%is Code"M T%e articles of incorporation of (SC does not contain an' pro-ision statin t%at (1) t%e num+er of stoc:%olders s%all not e?ceed 15. s%all +e %eld of record +' not more t%an a specified num+er of persons. (etro (anila.. 1 too* no art Facts$ $nsular Sa3mill.A9 3it% a corporate life of 95 'ears. +' itself. Corporation CodeL and t%at !enita &ee /uten+er did not in an'3a' misrepresent %erself to +e aut%ori>ed +' t%e corporation to sell t%e propert' to SJSS0$" T%e trial court also dismissed t%e counterclaim" SJSS0$ appealed" On 17 (arc% 1.=3911) rendered Iud ment.555"55 3%ic% s%e recei-ed from t%e latter" SJSS0$ mo-ed for reconsideration.

145"55" After t%e spouses recei-ed a cop' of t%e decision on 1A Au ust 1.uired period" $ncidentall'. t%ru Att'" /erman &ee. +' de+itin it from t%e corporationDs current account 3it% t%e +an:" Carlos /elano 3as a+le to pa' $S$ t%e amount of 69. until said sum is full' paidL 6995"55. Att'" &ee retired from acti-e la3 practice and Att'" Eduardo 0" Eli>alde too: o-er and prepared memorandum" $n t%e meantime.555"55 attorne'Ds fees" T%e Court also ordered t%e spouses to solidaril' pa' $S$ t%e sum of 6. ot%er3ise :no3n as t%e Corporation &a3. after t%e receipt of t%e spousesD motion to dismiss andGor reconsideration or on 17 Octo+er 1.154"55 includin interests. and i-en to %im. t%e +an: collected from t%e $S$ t%e amount of 6.83..8A issued a resolution den'in t%e aforesaid motion" T%e spouses filed t%e petition for re-ie3" %ssue$ )%et%er a corporation. !o-em+er 1.A.555"55 +ut t%e +alance of 6A.A4"A4 3%ic% t%e spouses failed to pa'" On 1A Jul' 1. 3%ose corporate life %ad ceased +' t%e e?piration of its terms of e?istence.154"55. filed a complaint for collection a ainst t%e spouses +efore t%e Court of 0irst $nstance of (anila" Trial 3as %eld and 3%en t%e case 3as at t%e sta e of su+mittin memorandum.555"55 pa'a+le in 45 da's" 0or failure of Carlos /elano to pa' t%e promissor' note upon maturit'. (a' 1.9.555"55 3%ic% %e refused to pa' despite repeated demands +' $S$" /uillermina (" /elano refused to pa' on t%e round t%at said amount 3as for t%e personal account of %er %us+and as:ed for +'. t%e Court of Appeals rendered a decision modif'in t%e Iud ment of t%e trial court +' %oldin t%e spouses Iointl' and se-erall' lia+le on $S$Ds claim and increasin t%e a3ard of 6A. 3it% interest t%ereon at t%e le al rate from t%e date of t%e filin of t%e complaint until said sum is full' paidL and t%e sum of 61. t%e trial court rendered a decision in fa-or of $S$ orderin Carlos /elano to pa' $S$ t%e sum of 61.83. $S$ t%ru its former directors filed a 6etition for Recei-ers%ip +efore t%e Court of 0irst $nstance of (anil (Special 6roceedin s .95"55 t%ere+' lea-in an unpaid +alance of 615. e?ecuted a Ioint and se-eral promissor' note 3it% Carlos /elano in fa-or of said +an: in t%e amount of 67.154"55 to 67.115"A4 in connection 3it% t%e repair and impro-ement of t%e spousesD residence" On . $S$ amended its Articles of $ncorporation to s%orten its term of e?istence up to 31 *ecem+er 1. 3it%out %a-in underta:en an' step to transfer its assets to a trustee or assi nee" Commercial *a3 ) Cor-oration *a3 200...9. $S$. ( 11 ) .Narratives (Berne Guerrero) aforementioned cas% ad-ances in t%e total sum of 619.A7 to 11 Septem+er 1. 3%ic% petition is still pendin +efore said court" On 9 !o-em+er 1.91... $S$. could still continue prosecutin and defendin suits after its dissolution and +e'ond t%e period of 3 'ears pro-ided for under Act 1A9.154"55 remained unsettled" /uillermina (" /elano refused to pa' on t%e round t%at s%e %ad no :no3led e a+out t%e accommodation made +' $S$ in fa-or of %er %us+and" On 1. partial pa'ment 3as made +' t%e spouses in t%e amount of 6. Carlos /elano 3as a+le to pa' onl' 69. 3it%out %er :no3led e and consent and did not +enefit t%e famil'" On -arious occasions from A (a' 1.1"55 and in -ie3 of t%e cas% discount in fa-or of t%e spousesin t%e amount of 673"55. t%e' came to :no3 t%at t%e $S$ 3as dissol-ed 3a' +ac: on 31 *ecem+er 1.83. (a' 1. to 3ind up its affairs. and appro-ed +' t%e Securities and E?c%an e Commission. t%e spouses filed a motion to dismiss t%e case and or reconsideration of t%e decision of t%e Court of Appeals on rounds t%at t%e case 3as prosecuted e-en after dissolution of $S$ as a corporation and t%at a defunct corporation cannot maintain an' suit for or a ainst it 3it%out first compl'in 3it% t%e re. 3it% interest t%ereon at t%e le al rate from t%e date of t%e filin of t%e complaint until t%e said sum is full' paidL and costs of t%e suit" T%e court dismissed t%e counterclaims of t%e spouses" Bot% parties appealed to t%e Court of Appeals.uirements of t%e 3indin up of t%e affairs of t%e corporation and t%e assi nment of its propert' ri %ts 3it%in t%e re. until said sum is full' paidL and 6A.A4. t%rou % Josep% Tan Ooc Su.45" Jence. +ut t%e trial court 3as not notified of t%e amendment s%ortenin t%e corporate e?istence and no su+stitution of part' 3as e-er made" On 15 !o-em+er 1. $S$ filed a comment on t%e motion to dismiss andGor reconsideration and after t%e parties %a-e filed repl' and reIoinder. in order to accommodate and %elp t%e spouses rene3 pre-ious loans o+tained +' t%em from t%e C%ina Ban:in Corporation. 3it% interest t%ereon at t%e a reed rate of 11H per annum from 4 Octo+er 1. t%e Court of Appeals on 9 Jul' 1.1353).A4"A4.A.45 onl'" T%e amended Articles of $ncorporation 3as filed 3it%.4A and almost A 'ears after t%e dissolution of t%e corporation.495"55 3it% interest t%ereon at t%e le al rate from t%e date of t%e filin of t%e complaint on 1.95"55. t%e amount due $S$ on account of credit purc%ases of lum+er materials is 6. 3it% $S$ ppealin +ecause it insisted t%at +ot% Carlos /elano and /uillermina /elano s%ould +e %eld lia+le for t%e su+stantial portion of t%e claim" On 13 Au ust 1. t%e Spouses /elano also made credit purc%ases of lum+er materials from $S$ 3it% a total price of 61..83.

7. it still %as t%e ri %t until 31 *ecem+er 1. t%ere 3as a su+stantial compliance 3it% Section 87 of t%e Corporation &a3 and as suc%. 3%o..uir'" T%e findin of t%e Commission.. A--eals [GR 142124 ... under Section 88 of t%e Corporation &a3.Narratives (Berne Guerrero) &eld$ )%en $S$ 3as dissol-ed on 31 *ecem+er 1.45. #esa as and Asis promptl' sou %t relief 3it% t%e Court of Appeals contestin t%e rulin of t%e Commission en +anc" T%e appellate court.7 and 18 !o-em+er 1. $S$ could still continue prosecutin t%e present case e-en +e'ond t%e period of 3 'ears from t%e time of its dissolution" 0urt%er. accordin to t%e SECDs e?plicit findin . %o3e-er. in a resolution rendered on 14 (arc% 1555.8" Before t%e %earin officer could start proceedin 3it% t%e case.7)" T%e spouses Raniel as:ed t%e Commission to declare as ille al t%eir e?pulsion from t%e clu+ as it 3as alle edl' done in utter disre ard of t%e pro-isions of its +'=la3s as 3ell as t%e re. t%e' filed a petition for certiorari 3it% t%e SEC En Banc see:in a re-ie3 of t%e %earin officerDs orders" T%e petition 3as a ain denied for lac: of merit. $nc" Teodoro B" #esa as.43 to prosecute in its name t%e present case" After t%e e?piration of said period.4. t%e case 3as instituted on 1..8" T%eir su+se. alle edl' summaril' stripped t%em of t%eir la3ful mem+ers%ip.. must necessaril' prolon t%at period until t%e final termination of said liti ation as ot%er3ise corporations in li. t%e spouses filed a Complaint 3it% t%e Securities and E?c%an e Commission (SEC) on 14 (arc% 1.8 a ainst t%e #esa as and Asis (SEC Case 53=. as t%e administrati-e a enc' tas:ed 3it% amon ot%ers t%e function of re isterin and administerin corporations.8=99. ( 12 ) . 'et t%e counsel 3%o prosecuted and defended t%e interest of t%e corporation in t%e present case and 3%o in fact appeared in +e%alf of t%e corporation ma' +e considered a trustee of t%e corporation at least 3it% respect to t%e matter in liti ation onl'" Said counsel %ad +een %andlin t%e case 3%en t%e same 3as pendin +efore t%e trial court until it 3as appealed +efore t%e Court of Appeals and finall' to t%e Supreme Court" T%erefore. (a' 1. and so 3as t%e motion for its reconsideration in separate orders. t%e corporation ceased to e?ist for all purposes and it can no lon er sue or +e sued" Jo3e-er.uirements of due process" T%e' li:e3ise sou %t t%e annulment of t%e amendments to t%e +'=la3s made on 7 *ecem+er 1. April 1." T%en. somet%in t%at courts s%ould pre-ent" 02 7esa(as vs. 3as dul' re istered and a certificate of incorporation 3as issued in its fa-or" T%e . c%an in t%e annual meetin of t%e clu+ from t%e last Sunda' of Januar' to !o-em+er and increasin t%e num+er of trustees from nine to fifteen" 0inall'.. /uno (J): 4 concur Facts$ Spouses *elfino and Jelenda Raniel are mem+ers in ood standin of t%e &u> #illa e Tennis Clu+. 3it%out due process of la3" T%ereafter. dismissed t%e petition for lac: of merit in a *ecision promul ated on 35 Jul' 1.uestion of 3%et%er t%e clu+ 3as indeed re istered and issued a certification or not is one 3%ic% necessitates a factual in. a corporation t%at %as a pendin action and 3%ic% cannot +e terminated 3it%in t%e 3='ear period after its dissolution is aut%ori>ed under Section 87 to con-e' all its propert' to trustees to ena+le it to prosecute and defend suits +' or a ainst t%e corporation +e'ond t%e 3='ear period" Alt%ou % $S$ did not appoint an' trustee. 3%o claims to +e t%e clu+Ds dul' elected president. in turn. dated 1A Jul' 1. t%e' pra'ed for t%e issuance of a Temporar' Restrainin Order and )rit of 6reliminar' $nIunction" T%e application for TRO 3as denied +' SEC Jearin Officer Soller in an Order dated 1.. +' t%eir o3n admission contained in t%e -arious pleadin s 3%ic% t%e' %a-e Commercial *a3 ) Cor-oration *a3 200. 3it% )ilfred *" Asis.uent mo-e to %a-e t%e rulin reconsidered 3as li:e3ise denied" @npertur+ed. #esa as and Asis filed a motion to dismiss on t%e round t%at t%e SEC lac:s Iurisdiction o-er t%e su+Iect matter of t%e case" T%e motion 3as denied on 9 Au ust 1. Court o. claims to +e its dul' elected -ice=president and le al counsel.uidation 3ould lose 3%at s%ould Iustl' +elon to t%em or 3ould +e e?empt from t%e pa'ment of Iust o+li ations t%rou % a mere tec%nicalit'. %o3e-er. is i-en reat 3ei %t and accorded %i % respect" (oreo-er. 2ecem+er 2001# First Division. respecti-el'" *issatisfied 3it% t%e -erdict. durin t%e time 3%en t%e corporation 3as still -er' muc% ali-e" An' liti ation filed +' or a ainst it instituted 3it%in t%e period.9.. it similarl' denied t%eir motion for reconsideration" #esa as and Asis filed t%e petition for re-ie3 on certiorari" %ssue$ )%et%er t%e clu+ %as alread' ceased to +e a corporate +od'" Jeld: T%e clu+. +ut 3%ic% could not +e terminated.

uino on 1 Januar' 1.ualif' t%e Jud e BenIamin #e a.Narratives (Berne Guerrero) filed in t%e different sta es of t%is case. represented +' 6erfecto #" 0ernande>. of t%e Re ional Trial Court of (anila. t%e Re%a+ilitation Committee su+mitted t%e proposed Re%a+ilitation 6lan of t%e 6#B to t%e (onetar' Board for its appro-al" (ean3%ile.. pro-idin for t%e re%a+ilitation of t%e 6%ilippine #eterans Ban:" T%ereafter. entitled MAn Act To Re%a+ilitate T%e 6%ilippine #eterans Ban: Created @nder Repu+lic Act 3917. at t%e time of t%e institution of t%e case 3it% t%e SEC. 6residin Jud e of Branc% 3.ili--ine 7eterans Ban< =m-lo"ees Cnion)NCB= vs. and most important of all. for t%e purpose of pla'in t%e sports of tennis"M T%ese t3o documents 3ill not suffice" T%e re.. 6ro-idin T%e (ec%anisms T%erefor.1.1 and 3%ic% 3as pu+lis%ed in t%e Official /a>ette on 1A 0e+ruar' 1. t%e Central Ban: of t%e 6%ilippines filed 3it% Branc% 3. of t%e Re ional Trial Court of (anila a 6etition for Assistance in t%e &i..1..uirements mandated +' t%e Corporation Code s%ould %a-e +een strictl' complied 3it% +' t%e mem+ers of t%e clu+" T%e records re-eal t%at no proof 3as offered +' #esa as and Asis 3it% re ard to t%e notice and pu+lication re..8 3%ic% declared Mto continue to consider t%e clu+ as a non=re istered or a non=corporate entit' and Iust a social association of respecta+le and respectin indi-idual mem+ers 3%o %a-e associated t%emsel-es. t%ere is no co enc' in spear%eadin t%e mo-e for its dissolution" #esa as and Asis 3ere t%erefore 3ell a3are of t%e incorporation of t%e clu+ and e-en a reed to et elected and ser-e as its responsi+le officers +efore t%e' reconsidered dissol-in its corporate form" On t%e ot%er %and. t%e SEC Order of *issolution 3as ne-er su+mitted as e-idence" 04 :.uidation of 6%ilippine #eterans Ban: dated 13 (arc% 1.uirements" Similarl' 3antin is t%e proof of t%e +oard mem+ersD certification" &astl'. due to t%e piecemeal %earin s on t%e +enefits. place and o+Iect of t%e meetin for t%ree (3) consecuti-e 3ee:s in a ne3spaper pu+lis%ed in t%e place 3%ere t%e principal office of said corporation is locatedL and if no ne3spaper is pu+lis%ed in suc% place.. #esa as and Asis su+mitted onl' t3o rele-ant documents: t%e (inutes of t%e 0irst Board (eetin %eld on 9 Januar' 1.uidation of t%e 6%ilippine #eterans Ban: (Case S6=31311)" T%ereafter.404 2/ !une 2001# First Division. 6#B filed a (otion to Terminate &i. 6#BE@=!@BE 0ernande> mo-ed to dis. t%e Con ress enacted Repu+lic Act 814. 3%ic% 3as si ned into la3 +' 6resident Cora>on C" A. 3a unan (J): 4 concur Facts$ Sometime in 1. 6#BE@=!@BE and 0ernande> filed 3it% t%e la+or tri+unals t%eir residual claims for +enefits and for reinstatement upon reopenin of t%e +an:" Repu+lic Act 814. and t%e +oard resolution issued on 1A April 1. after sendin suc% notice to eac% stoc:%older or mem+er eit%er +' re istered mail or +' personal deli-er' at least 35 da's prior to said meetin " A cop' of t%e resolution aut%ori>in t%e dissolution s%all +e certified +' a maIorit' of t%e +oard of directors or trustees and countersi ned +' t%e secretar' of t%e corporation" T%e Securities and E?c%an e Commission s%all t%ereupon issue t%e certificate of dissolution"M To su+stantiate t%eir claim of dissolution. 7e(a [GR 10.8. pro-ides in part for t%e reopenin of t%e 6%ilippine #eterans Ban: to et%er 3it% all its +ranc%es 3it%in t%e period of 3 'ears from t%e date of t%e reopenin of t%e %ead office" T%e la3 li:e3ise pro-ides for t%e creation of a re%a+ilitation committee in order to facilitate t%e implementation of t%e pro-isions of t%e same" 6ursuant to said RA 814. And 0or Ot%er 6urposesM. from %earin t%e a+o-e case on rounds of +ias and %ostilit' to3ards petitioners" On 1 Januar' 1. #esa as and Asis t%emsel-es %a-e considered t%e clu+ as a corporation" Ot%er3ise.1 Commercial *a3 ) Cor-oration *a3 200. since t%e 1. t%e dissolution ma' +e effected +' maIorit' -ote of t%e +oard of directors or trustees and +' a resolution dul' adopted +' t%e affirmati-e -ote of t%e stoc:%olders o3nin at least t3o=t%irds (1G3) of t%e outstandin capital stoc: or at least t3o=t%irds (1G3) of t%e mem+ers at a meetin to +e %eld upon call of t%e directors or trustees after pu+lication of t%e notice of time.1. partial pa'ment of t%e sums due to t%e emplo'ees 3ere made" Jo3e-er. ( 14 ) .79.85Ds. t%e clu+ 3as not dissol-ed +' -irtue of an alle ed Board resolution" T%e Corporation Code esta+lis%es t%e procedure and ot%er formal re. filed claims for accrued and unpaid emplo'ee 3a es and +enefits 3it% said court in S6=3131" After len t%' proceedin s. t%en in a ne3spaper of eneral circulation in t%e 6%ilippines..uirements a corporation needs to follo3 in case it elects to dissol-e and terminate its structure -oluntaril' and 3%ere no ri %ts of creditors ma' possi+l' +e preIudiced" Section 117 (#oluntar' dissolution 3%ere no creditors are affected) of t%e Corporation Code pro-ides t%at M$f dissolution of a corporation does not preIudice t%e ri %ts of an' creditor %a-in a claim a ainst it. t%e 6%ilippine #eterans Ban: Emplo'ees @nion=!"@"B"E" (6#BE@=!@BE). man' remain unpaid" On 7 (arc% 1..

disc%ar in lia+ilities and di-idin surplus or loss" On t%e opposite end of t%e spectrum is re%a+ilitation 3%ic% connotes a reopenin or reor ani>ation" Re%a+ilitation contemplates a continuance of corporate life and acti-ities in an effort to restore and reinstate t%e corporation to its former position of successful operation and sol-enc'" $t is cr'stal clear t%at t%e concept of li.911"17 on t%e purc%ase price of t%e aforesaid surplus properties. t%e Collector 3rote t%e Central S'ndicate.uidation 6roceedin s of t%e 6%ilippine #eterans Ban: 3it% Jud e #e a" 6#BE@=!@BE and 0ernande>. 6#BE@= !@BE and 0ernande> learned t%at t%e Central Ban: 3as set to order t%e pa'ment and release of emplo'ee +enefits upon motion of anot%er la3'er.uestin for t%e refund of an alle ed o-erpa'ment of sales ta? in t%e amount of 61. ( 14 ) . t%e S'ndicate deposited 3it% t%e Collector t%e amount of 6A3.. 3rote t%e Collector ad-isin %im t%at t%e 0orei n &i. t%e (onetar' Board issued (onetar' Board Resolution 3A7 3%ic% appro-ed t%e Re%a+ilitation 6lan su+mitted +' t%e Re%a+ilitation Committee" T%ereafter.91. +ut representin t%at *ee Jon &ue e?pected a refund from t%e @"S" /o-ernment on t%e ori inal purc%ase price +ecause of non=deli-er' of -arious items included in t%e contract.uidation Commission %ad i-en %im a refund of 631.1.uidation" &i. and re. t%e Central Ban: issued a certificate of aut%orit' allo3in t%e 6#B to reopen" *espite t%e le islati-e mandate for re%a+ilitation and reopenin of 6#B. t%e Central S'ndicate. 3it% t%e condition t%at t%e -endee corporation 3ould pa' t%e 3 1G1H sales ta? on suc% surplus properties in t%e name and in +e%alf of t%e -endor *ee Jon &ue" $n t%e same letter.. >e!es J&E (J): ? concur Facts$ On or a+out 11 Octo+er 1. connotes a 3indin up or settlin 3it% creditors and de+tors" $t is t%e 3indin up of a corporation so t%at assets are distri+uted to t%ose entitled to recei-e t%em" $t is t%e process of reducin assets to cas%." On 15 April 1. as 3ell as t%e su+se. suc% t%at +ot% cannot +e underta:en at t%e same time" To allo3 t%e li..uidation court can continue 3it% li.1. filed t%e petition for 6ro%i+ition 3it% 6etition for 6reliminar' $nIunction and application for E? 6arte Temporar' Restrainin Order" $n a Resolution.Narratives (Berne Guerrero) 3it% Jud e #e a pra'in t%at t%e li.A7. t%e li.uidation proceedin s of t%e 6%ilippine #eterans Ban: (6#B) 3%en Con ress %ad mandated its re%a+ilitation and reopenin " &eld$ T%e enactment of Repu+lic Act 814.uentl'. t%rou % counsel.A4. in corporation la3.. Jud e #e a %as +een stripped of t%e aut%orit' to issue orders in-ol-in acts of li. t%e (onetar' Board issued a Certificate of Aut%orit' allo3in 6#B to reopen" Sometime in (a' 1.uent de-elopments %as rendered t%e li. informin it t%at t%e in-esti ation made +' t%e Bureau re-ealed t%at it 3as t%e S'ndicate and not *ee Jon &ue t%at %ad actuall' Commercial *a3 ) Cor-oration *a3 200. t%e Collector informed *ee Jon &ue of t%e denial of %is re.uidation proceedin s to continue 3ould seriousl' %inder t%e re%a+ilitation of t%e su+Iect +an:" 04 8an 8ion( Bio vs. a corporation or ani>ed for t%e limited period of t3o 'ears. 3%ile 6#BE@=!@BEDs and 0ernande>Ds claims %a-e +een fro>en to t%eir preIudice" On 3 June 1. %nternal Revenue [GR *)//00 24 9cto+er 11.uidation court functus officio" Conse. on t%e ot%er %and..1. or on A Januar' 1.uidator filed A (otion for t%e Termination of t%e &i. Jud e #e a continued 3it% t%e li..uidation Commission.. t%e ori inal sales ta? due on t%e sales price 3as su+Iect to readIustment and reduction" Su+se.uidation. t%e Supreme Court resol-ed to issue a Temporar' Restrainin Order enIoinin t%e trial court from furt%er proceedin 3it% t%e case" On 11 June 1. and t%at t%erefore.0# %n &anc.1. (O6 Securit' K *etecti-e A enc' (#O6S*A) and its 141 securit' uards filed a (otion for $nter-ention 3it% pra'er t%at t%e' +e e?cluded from t%e operation of t%e Temporar' Restrainin Order issued +' t%e Court" On 3 Au ust 1. on 31 Januar' 1. t%e 6%ilippine #eterans Ban: opened its doors to t%e pu+lic and started re ular +an:in operations" %ssue$ )%et%er a li.uidation proceedin s +e immediatel' terminated in -ie3 of t%e passa e of RA 814. *ee Jon &ue.uidation proceedin s of t%e +an:" (oreo-er.153"17" T%e Collector ordered t%e case in-esti ated" 0our 'ears later.1.895"55 to ans3er for t%e sales ta? collecti+le on t%e purc%ase.uidation is diametricall' opposed or contrar' to t%e concept of re%a+ilitation. dated 7 June 1.1.uest for ta? refund" On t%e same da'.uentl'. addressed a letter to t%e Collector of $nternal Re-enue ad-isin t%e latter of a sale of said corporation +' one *ee Jon &ue of surplus properties purc%ased +' t%e -endor from t%e 0orei n &i. Bureau o.

73. t%e Solicitor=/eneral mo-ed for t%e dismissal of t%e appeal on t%e round t%at t%e Central S'ndicate no lon er %ad t%e capacit' to sue +ecause its term of e?istence %ad e?pired on 19 Au ust 1. Dutierrez Jr$ (J): 4 concur Facts$ $n June 1. t%e Court of Ta? Appeals issued a resolution dismissin t%e appeal. A--eals [GR 11124 2/ Fe+ruar" 11/1# Third Division. Re+ollido vs. on t%e round t%at 3%ate-er Iud ment it 3ould render in fa-or of t%e /o-ernment 3ould +e unenforcea+le a ainst t%e s'ndicate +ecause it is a non=e?istin entit'" 0rom t%is resolution. alle in t%at alt%ou % t%e corporation %ad one defunct. if it +e true t%at t%e S'ndicate t%ereafter %ad no personalit' to dispute t%e assessment. it 3ould +e e. t%e Board of *irectors and t%e stoc:%olders of 6epsi Cola adopted its amended articles of incorporation to s%orten its corporate term in accordance 3it% Section 115 of t%e Corporation Code follo3in t%e procedure laid do3n +' Section 38 (po3er to e?tend or s%orten t%e corporate term) and Section 14 (amendment of t%e articles of incorporation) of t%e same Code" $mmediatel' after suc% amendment or on June 14. of t%e S'ndicate. for t%e purpose of 3indin up its affairsL and in t%e case of t%e Central S'ndicate.uestion (commonl' :no3n us t%e M('ster' 6ileM) from t%e 0orei n &i. to pa' t%e corporationDs ta? lia+ilit' or else +e %eld criminall' lia+le under t%e $nternal Re-enue Code" @ltimatel'. mana er and president. t%e Collector 3rote *a-id S'cip and Ou E%e T%ai. t%e Collector issued a final definiti-e rulin reaffirmin t%e deficienc' assessment a ainst t%e S'ndicateL from 3%ic% rulin t%e latter appealed to t%e Court of Ta? Appeals" $n t%e Court of Ta? Appeals. its officers and directors not onl' stood lia+le for t%e assessment +ut %ad also +een t%reatened to +e %eld criminall' lia+le t%ereforL and offered to +e su+stituted as appellants" After %earin t%e ar uments of +ot% parties.8.89.uestionin t%e le alit' of t%e assessment precisel' on t%e round t%at t%e corporation is non=e?istent. after it %ad +een or ani>ed.uestionin t%e le alit' of t%e assessment precisel' on t%e round t%at t%e corporation is non= e?istent.91" On t%is +asis. ( 1. ) .537"35 and 19H surc%ar e of 64. on 9 Au ust 1."97 or a total sum of 633. and t%e findin s of t%e Bureau t%at t%e corporation %ad no e?istin properties to satisf' t%e assessment. t%e t%ree 'ears e?pired in 1. t%e' 3ould +e %eld personall' lia+le as successors=in=interest to t%e corporate propert'" T%e appeal s%ould not %a-e +een dismissed +ut t%at t%e Court of Ta? Appeals s%ould %a-e allo3ed t%e su+stitution of its former officers and directors as parties= appellants. and %as no lon er capacit' to sue" &eld$ $t is true t%at sections 88 and 87 of our Corporation &a3 contemplate t%at corporate e?istence can +e prolon ed onl' for t%ree 'ears from and after t%e termination of t%e corporate term.Narratives (Berne Guerrero) purc%ased t%e surplus oods in .73. plus t%e amount of 6355"55 as penalt'" Because of t%e refusal of t%e S'ndicate to pa' t%e deficienc' assessment.uall' true t%at no -alid assessment could +e imposed on a corporation t%at no lon er %ad Iuridical personalit'" $n an' e-ent. 6epsi Cola caused t%e pu+lication of a notice of dissolution and t%e assumption of lia+ilities +' 6E6S$CO in a ne3spaper of eneral circulation" (ean3%ile. and %as no lon er capacit' to sue" T%e o-ernment can not adopt inconsistent stands and t%ere+' depri-e t%e officers and directors of t%e defunct corporation of t%e remed' to . since t%e' are proper parties in interest in so far as t%e' ma' +e (and in fact are) %eld personall' lia+le for t%e unpaid deficienc' assessments made +' t%e Collector of $nternal Re-enue a ainst t%e defunct S'ndicate" 0.uestion t%e -alidit' and correctness of t%e assessment for 3%ic%.9A. made it appear t%at t%e oods 3ere sold to it +' *ee Jon &ue.8"77. a -e%icular accident occured on 1 Commercial *a3 ) Cor-oration *a3 200. as s%o3n +' its Articles of $ncorporation attac%ed to t%e motion to dismiss" T%e S'ndicate opposed t%e motion. t%e o-ernment can not insist on ma:in a ta? assessment a ainst a corporation t%at no lon er e?ists and t%en turn around and oppose t%e appeal . Court o. t%e S'ndicate appealed to t%e Supreme Court on petition for re-ie3" %ssue$ )%et%er t%e o-ernment can insist on ma:in a ta? assessment a ainst a corporation t%at no lon er e?ists and at t%e same time oppose t%e appeal . 13 and 35. respecti-el'.uidation CommissionL t%at t%e properties 3ere in-oiced in t%e name of *ee Jon &ue in trust for t%e S'ndicate +ecause it 3as t%en onl' in t%e process of incorporationL and t%at t%e S'ndicate. to e-ade pa'ment of sales ta? on its sellin prices to t%e pu+licL and assessed t%e S'ndicate a deficienc' sales ta? of 618. 1. if sustained.A7.

t%e Court of Appeals ranted t%e petition on t%e round of lac: of Iurisdiction rulin t%at t%ere 3as no -alid ser-ice of summons" T%e appellate court stated t%at an' Iud ment rendered a ainst 6epsi Cola after its dissolution is a Mlia+ilit'M of 6E6S$CO 3it%in t%e contemplation of t%e underta:in .7AL (8) 615.11"55. 3%en t%e default Iud ment +ecame final and e?ecutor'. for t%e e?penses incurred +' Crisostomo Re+ollido in %irin anot%er -e%icle to transport sc%ool pupilsL (9) 6151.74.. et al" %ad a -alid cause of action for dama es a ainst 6epsi Cola" T%e la3 pro-ides t%at a corporation 3%ose corporate term %as ceased can still %e made a part' to suit" @nder para rap% 1. (a:ati.79" T%e' 3ere ordered to pa' (1) 611. as moral dama es due Crisostomo Re+ollidoL (. on 4 Au ust 1.79.114"15. 6E6S$CO 3as alread' occup'in t%e place of +usiness of 6epsi Cola at Rico en Buildin . lia+ilities and o+li ations 3%ic% it assumed in a 3ritten underta:in e?ecuted on 11 June 1. @SA. et al" filed a motion for e?ecution. 6E6S$CO opposed t%e motion for e?ecution and mo-ed to -acate t%e Iud ment on t%e round of lac: of Iurisdiction" 6E6S$CO .7A.7A. a dissol-ed corporation Ms%all ne-ert%eless +e continued as a +od' corporate for t%ree (3) 'ears after t%e time 3%en it 3ould %a-e +een so dissol-ed. amon ot%ers. $nc". Rule 1A of t%e Rules of Court on t%e manner of ser-ice upon a pri-ate domestic corporation and Section 1A of t%e same rule on ser-ice upon a pri-ate forei n corporation" On 1A Au ust 1. for t%e purpose of prosecutin and defendin suits +' or a ainst it and ena+lin it to settle and close its affairs. t%ere 3as proper ser-ice of summons upon 6epsi Cola" On 18 Au ust 1.7A to 35 (arc% 1. a motion for reconsideration filed +' Re+ollido.79" At t%at time. in-ol-in a (a>da (ini+us used as a sc%ool+us 3it% 6late !um+er !)E=393 o3ned and dri-en +' Crisostomo Re+ollido and 0ernando #alencia.5.79..7A.) A sum e. Crisostomo Re+ollido. a cop' of 3%ic% 3as recei-ed no lon er +' 6epsi Cola +ut +' 6E6S$CO.Narratives (Berne Guerrero) (arc% 1.79L (4) 615. t%e s%eriff of t%e lo3er court ser-ed t%e summons addressed to 6epsi Cola and Al-a" $t 3as recei-ed +' one !enette Sison 3%o represented %erself to +e t%e aut%ori>ed person recei-in court processes as s%e 3as t%e secretar' of t%e le al department of 6epsi Cola" 6epsi Cola failed to file an ans3er and 3as later declared in default" T%e lo3er court %eard t%e case e?=parte and adIud ed 6epsi Cola and Al-a Iointl' and se-erall' lia+le for dama es in a decision rendered on 1A June 1. t%e petition" %ssue [1#$ )%et%er 6epsi Cola. for t%e %ospitali>ation and medical e?penses of #alenciaL (1) 6314"39 as e?penses for t%e medical treatment of Ed3in Re+ollidoL (3) 6. t%e dissol-ed corporation. as and for attorne'Ds feesL and (15) T%e costs of suit" On 9 Au ust 1. Section 111 of t%e Corporation Code. A uirre Street.79.73. *ecem+er 1. #alencia and Ed3in Re+ollido filed Ci-il Case 7113 for dama es a ainst 6epsi Cola and Al-a +efore t%e Re ional Trial Court of (a:ati" On 11 Septem+er 1.155"55. to dispose of and con-e' its Commercial *a3 ) Cor-oration *a3 200. Rule 1A of t%e Rules of Court" $t remanded t%e case to t%e lo3er court and ordered t%at 6E6S$CO +e summoned and +e i-en its da' in court" On 18 !o-em+er 1.78.7A. is t%e real part' in interest to 3%om summons s%ould +e ser-ed in t%e ci-il case for dama es" &eld [1#$ Re+ollido.555"55. of settlin 6epsi ColaDs de+ts. +ut ser-ice of summons s%ould +e made upon 6E6S$CO itself in accordance 3it% Section 1A. for %a-in +een issued 3it%out Iurisdiction" On 1.141". $nc" and dri-en +' Al+erto Al-a" T%e dissolution of 6epsi Cola as appro-ed +' t%e Securities and E?c%an e Commission (SEC) materiali>ed on 1 (arc% 1. for t%e repair of and cost of replacement parts of t%e (a>da (ini+us +elon in to Crisostomo Re+ollidoL (A) 614. one da' after t%e accident occurred" On 8 Au ust 1. ( 10 ) . preparator' to t%e e?pected dissolution of 6epsi Cola" Reali>in t%at t%e Iud ment of t%e lo3er court 3ould e-entuall' +e e?ecuted a ainst it. representin t%e unpaid salaries of #alencia for t%e period from (arc% to *ecem+er 1. &e aspi #illa e.555"55. et al" 3as denied" Jence. 6E6S$CO filed a special ci-il action for certiorari and pro%i+ition 3it% t%e appellate court to annul and set aside t%e Iud ment of t%e lo3er court and its order den'in t%e motion to -acate t%e Iud ment. as moral dama es due #alenciaL (7) 615.ui-alent to 15H of t%e total amount due. as unreali>ed mont%l' net income due Re+ollido. (etro (anila" 6E6S$CO.755"55. t%e lo3er court denied t%e motion of 6E6S$CO %oldin t%at despite t%e dissolution and t%e assumption of lia+ilities +' 6E6S$CO. a forei n corporation or ani>ed under t%e la3s of t%e State of *ela3are.uestioned t%e -alidit' of t%e ser-ice of summons to a mere cler:" $t in-o:ed Section 13. et al" from June 1. %eld offices %ere for t%e purpose. respecti-el' and a truc: trailer 3it% 6late !um+er !RJ=911 o3ned at t%at time +' 6epsi Cola Bottlin Compan' of t%e 6%ilippines. Re+ollido.

Dto +rin %ome to t%e corporation notice of t%e filin of t%e action"M Jerein. %o3e-er. i"e" on (arc% 1. mana er. ne-ert%eless since it appears t%at t%e summons and complaint 3ere in fact recei-ed +' t%e corporation t%rou % its said cler:.Narratives (Berne Guerrero) propert' and to distri+ute its assets. una+le to pursue reco-er' for 3ron s committed +' t%e corporation +efore its dissolution" Since 6%ilippine la3 reco ni>es t%e lia+ilit' of a dissol-ed corporation to an a rie-ed creditor. Rule 1A mandates t%at M$f t%e defendant is a corporation or ani>ed under t%e la3s of t%e 6%ilippines or a partners%ip dul' re istered. 1.7A 3%ic% is t%e date of t%e accident and 3%en 6epsi Cola alle edl' committed t%e 3ron " %ssue [2#$ )%et%er t%e ser-ice of summons t%rou % (s" !enette C" Sison. s%ould not lea-e Re+ollido. process in t%e action ma' +e ser-ed upon t%e same person upon 3%om t%e process could +e ser-ed +efore t%e dissolution"M Still.41C). a li+eral interpretation of Section 13. ser-ice ma' +e made on t%e president. 389 p 1d 111 B1. 6E6S$CO %ad t%e o+li ation to act upon t%e summons recei-ed and to defend 6epsi Cola pursuant to t%e underta:in it e?ecuted on 11 June 1. or 3%et%er (iss Sison 3or:s for 6E6S$CODs le al department. is illustrati-e of t%e manner +' 3%ic% ser-ice can ne-ert%eless +e made despite t%e deat% of t%e entit'L i"e" M3%en an action t%at mi %t %a-e +een instituted a ainst a forei n or domestic corporation 3%ile it 3as a oin concern is instituted after its dissolution. Rule 1A %as +een adopted in t%e case of / K / Tradin Corporation -" Court of Appeals (197 SCRA A44 B1. secretar'. et al" a ainst 6epsi Cola and its dri-er arose not at t%e time 3%en t%e complaint 3as filed +ut 3%en t%e acts or omission constitutin t%e cause of action accrued. 3it% t%e rule on ser-ice of summons" $ndeed t%e purpose of said rule as a+o-e stated to assure ser-ice of summons on t%e corporation %ad t%ere+' +een attained" T%e need for speed' Iustice must pre-ail o-er a tec%nicalit'"M T%e rationale for t%e rule on ser-ice of summons upon a defendant corporation Mto render it reasona+l' certain t%at t%e corporation 3ill recei-e prompt and proper notice in an action a ainst it or to insure t%at t%e summons +e ser-ed on a representati-e so inte rated 3it% t%e corporation t%at suc% person 3ill :no3 3%at to do 3it% t%e le al papers ser-ed on %im" $n ot%er 3ords. it 3as %eld t%at a Mdefendant corporation is su+Iect to suit and ser-ice of process e-en t%ou % dissol-ed"M !o3%ere in t%e Corporation Code is t%ere an' special pro-ision on %o3 process s%all +e ser-ed upon a dissol-ed defendant corporation" T%e a+sence of an' suc% pro-ision. it is +ut lo ical for t%e la3 to allo3 ser-ice of process upon a dissol-ed corporation" Ot%er3ise.77C) t%at Malt%ou % it ma'+e true t%at t%e ser-ice of summons 3as made on a person not aut%ori>ed to recei-e t%e same. as 6E6S$CO claims. et al" 3it%out an' remed'. t%e ri %t of action of Re+ollido. t%en a corporation t%at +ecame in-ol-ed in lia+ilities mi %t escape t%e pa'ment of its Iust o+li ations +' merel' surrenderin its c%arter. cas%ier. ( 17 ) . a ent or an' of its directors"M T%e case of CastleDs Administrator -" Acro en Coal Co". and not of 6epsi Cola. t%e Court finds t%at t%ere 3as su+stantial compliance. upon 6epsi Cola operates to -est Iurisdiction upon 6E6S$CO" &eld [2#$ At t%e time of t%e issuance and receipt of t%e summons. su+stanti-e ri %ts 3ould +e lost +' t%e mere lac: of e?plicit tec%nical rules" T%e Rules of Court on ser-ice of summons upon a pri-ate domestic corporation is also applica+le to a corporation 3%ic% is no lon er a oin concern" Section 13. +ut not for t%e purpose of continuin t%e +usiness for 3%ic% it 3as esta+lis%ed"M T%e rationale for e?tendin t%e period of e?istence of a dissol-ed corporation is t%at Mt%is continuance of its le al e?istence for t%e purpose of ena+lin it to close up its +usiness is necessar' to ena+le t%e corporation to collect t%e demands due it as 3ell as to allo3 its creditors to assert t%e demands a ainst it" $f t%is 3ere not so. t%e fact t%at t%e summons 3as recei-ed t%rou % (iss Sison is not disputed +' t%e parties" )%et%er summons 3as ser-ed t%rou % t%e secretar' of t%e le al department 3%o acted as a ent of 6epsi Cola. as claimed +' Re+ollido et al". $ncorporation (81 !( 1. 6epsi Cola 3as alread' dissol-ed" T%e Court is of t%e opinion t%at ser-ice is allo3ed in suc% a situation" $n t%e American case of Cra3ford -" Refiners Co=operati-e Association. and t%us defeat its creditors or reatl' %inder and dela' t%em in t%e collection of t%eir demands" T%is course of conduct on t%e part of corporations t%e la3 in Iustice to persons dealin 3it% t%em does not permit" T%e person 3%o %as a -alid claim a ainst a corporation.73" )%omsoe-er (iss Sison 3as actin for in recei-in t%e summons t%ere is no Commercial *a3 ) Cor-oration *a3 200. 3%et%er it arises in contract or tort s%ould not +e depri-ed of t%e ri %t to prosecute an action for t%e enforcement of %is demands +' t%e action of t%e stoc:%olders of t%e corporation in a reein to its dissolution" T%e dissolution of a corporation does not e?tin uis% o+li ations or lia+ilities due +' or to it"M Jerein.

done in June 1. 3it% t%e appro-al of t%e *epartment of &a+or of t%e 6%ilippines" *e la Osa 3as emplo'ed as (1) painter 3it% an %ourl' rate of S1"19 from (arc% 1. purc%ases (sales) or ser-ice contracts" Concrete and specific solicitations +' a forei n firm. et al" filed t%e petition for re-ie3 on certiorari" %ssue [1#$ )%et%er t%e mere act +' a non=resident forei n corporation of recruitin 0ilipino 3or:ers for its o3n use a+road.44.49. 3%et%er called DliaisonD offices.44. Rule 1A +ecause t%e purpose of notice 3as satisfied" As t%ere 3as proper ser-ice of summons to +ind 6epsi Cola.47. as 3ell as %is s3in s%ift and ra-e'ard s%ift premiums at t%e rate of 95H per cent of %is +asic salar'" 0(C. %e rendered o-ertime ser-ices dail'.47" Su+se. 1. 0(C admits t%at (r" Catuira represented it in t%e 6%ilippines Mfor t%e purpose of ma:in arran ements for t%e appro-al +' t%e *epartment of &a+or of t%e emplo'ment of 0ilipinos 3%o are recruited +' t%e Compan' as its o3n emplo'ees for assi nment a+road"M $n effect. re ardless of 3%et%er t%e contracts are actuall' reduced to 3ritin . not actin independentl' of t%e forei n firm. de la Osa interposed an opposition t%ereto" Said motion 3as denied +' t%e Court in its Order issued on 11 Jul' 1.48. it transacts +usiness in its name and for its o3n account. after trial.Narratives (Berne Guerrero) . Ma*asiar (J): 2 concur Facts$ 0acilities (ana ement Corporation and J" S" *re'er are domiciled in )a:e $sland 3%ile J" #" Catuira is an emplo'ee of 0(C stationed in (anila" &eonardo dela Osa 3as emplo'ed +' 0(C in (anila. t%e p%rase Mdoin +usinessM %as +een e?emplified 3it% illustrations. ( 1/ ) .uired onl' +' 3a' of ser-ice of summons in literal compliance 3it% Section 1A.uasi=delict" 00 Facilities 'ana(ement Cor-oration vs. inclusi-e" Je furt%er a-erred t%at from *ecem+er. t%e decision of t%e lo3er court a ainst 6epsi Cola rendered on 1A June 1.47.4. Re+ollido. et al" $n a petition filed on 1 Jul' 1. et al" filed a motion to dismiss t%e su+Iect petition on t%e round t%at t%e Court %as no Iurisdiction o-er t%e case. et al" %ad no :no3led e of t%e le al dissolution and t%e underta:in assumed +' 6E6S$CO" T%e pu+lication of t%e notice of dissolution and t%e assumption of lia+ilities. inclusi-eL (3) %ouse+o' 3it% an %ourl' rate of S1"33 from *ecem+er 1. inclusi-eL (1) %ouse+o' 3it% an %ourl' rate of S1"14 from *ecem+er 1. +ut rendered 3or: in )a:e $sland. de la 9sa [GR *)4/041 20 'arc.uestion t%at t%e notice of t%e action 3as promptl' deli-ered eit%er to 6epsi Cola or 6E6S$CO 3it% 3%om s%e is admittedl' connected" T%ere 3as su+stantial compliance 3it% Section 13. unless pro-ed ot%er3ise" ??? (15) An' ot%er act or acts t%at impl' a continuit' of commercial dealin s or arran ements. +ut %e 3as not paid +ot% o-ertime and ni %t s%ift premiums despite %is repeated demands from 0(C. amon t%em +ein as follo3s: MM(1) Solicitin orders.uentl'. s3in s%ift and ra-e'ard s%ift differentials" Su+se. and contemplate to t%at e?tent t%e performance of Commercial *a3 ) Cor-oration *a3 200. Rule 1A.49 to Au ust 1.4A to !o-em+er 1. et al" cannot +e faulted for %a-in +rou %t t%e case namin 6epsi Cola as one of t%e defendants so t%at t%e summons 3as addressed onl' to t%e defendants named t%erein and not to 6E6S$CO" At t%e time of t%e commencement of t%e suit +elo3.44 to (arc% 18 1. et al" 3%o 3ere not 'et creditors %a-in a claim upon a . Re+ollido.81.79 is -alid and enforcea+le a ainst 6E6S$CO" E-en assumin t%at Iurisdiction o-er 6E6S$CO can +e ac. in a decision dated 1A 0e+ruar' 1. inclusi-eL and (A) cas%ier 3it% an %ourl' rate of S1"A5 from Au ust 1. 1171# First Division. et al" to pa' de la Osa %is o-ertime compensation.73 or 7 mont%s +efore t%e -e%icular accident. dela Osa sou %t %is reinstatement 3it% full +ac:3a es. s%all constitute doin +usiness e-en if t%e enterprise %as no office or fi?ed place of +usiness in t%e 6%ilippinesL (1) appointin a representati-e or distri+utor 3%o is domiciled in t%e 6%ilippines. implementin RA 9A99.47. as 3ell as t%e reco-er' of %is o-ertime compensation. 0(C. and not in t%e name or for t%e account of t%e principalL ??? (A) Openin offices. and on 1A (a' 1. amountin to ne otiation or fi?in of t%e terms and conditions of sales or ser-ice contracts. inclusi-e.uentl' on 3 (a' 1. ordered 0(C. t%e Court of $ndustrial Relations..49 to Au ust. (r" Catuira 3as alle ed to +e a liaison officer representin 0(C in t%e 6%ilippines" @nder t%e rules and re ulations promul ated +' t%e Board of $n-estments 3%ic% too: effect 3 0e+ruar' 1. and t%at t%is entire period 3as di-ided into s3in and ra-e'ard s%ifts to 3%ic% %e 3as assi ned. a encies or +ranc%es. cannot ser-e as a notice to Re+ollido. unless said representati-e or distri+utor %as an independent status. i"e".48. in la3 doin +usiness in t%e 6%ilippines" &eld [1#$ $n its motion to dismiss. 1.4A.4A to !o-em+er 1. 3%ic% too: effect 35 Septem+er 1.

=astern 5.341. is not +arred from see:in redress from courts in t%e 6%ilippines (suc% as in earlier cases of Aetna Casualt' K Suret' Compan'. and deli-er' at. -s" 6acific Star &ine. if a forei n corporation." T%e pac:a es disc%ar ed from t%e #ESSE& num+ered 1. pac:a es in +ad Commercial *a3 ) Cor-oration *a3 200. $nc"" T%e s%ipment 3as co-ered +' Bill of &adin !o" 11 for transportation to. or on an' of its officers or a ents 3it%in t%e 6%ilippines"M $ndeed. for as lon as %e remains an emplo'ee of 0(C"M $t is a fact t%at 3%en t%e summons for 0(C 3as ser-ed on Catuira %e 3as still in t%e emplo' of t%e 0(C" Jence. etc" B/R &=1475.47 %ad to appoint Jaime #" Catuira. ) on leave Facts$ +D> E5343?). S" EaIita K Co". $nc" T%e s%ipment 3as insured 3it% Jome $nsurance compan' under its Car o 6olic' AS=83839 D3it% a-era e termsD for 6.341 coils of Blac: Jot Rolled Copper )ire Rods" T%e said #ESSE& is o3ned and operated +' Eastern S%ippin &ines" T%e s%ipment 3as co-ered +' Bill of &adin O=(A=.A5"79 :ilos as a ainst its in-oiced 3ei %t of 14A. Ermita. 35 pac:a es of Ser-ice 6arts of 0arm E.159"54 under its $nsurance 6olic' AS=83433" T%e coils disc%ar ed from t%e #ESSE& num+ered 1. 3it% 83 coils loose and partl' cut.i--in( *ines [GR *)444/2 20 !ul" 11/4# L also Jome $nsurance -s" !edllo'd &iInen B/R &=3A373C First Division. +' -irtue of 3%ic% Jome $nsurance +ecame su+ro ated to t%e ri %ts and actions of t%e 6%elps *od e" Jome $nsurance made demands for pa'ment a ainst t%e Eastern S%ippin and t%e An el Jose Transportation for reim+ursement of t%e aforesaid amount +ut eac% refused to pa' t%e same"M +D> E5343?3.15. or a non=resident Ioint stoc: compan' or association. SS D!E*ER R$J!D o3ned +' !" #" !edllo'd &iInen. and 17 coils entan led.3"19 :ilos. and An el Jose Transportation $nc" 0or t%e lossGdama e suffered +' t%e car o. a fortiori. accordin to t%e claims presented +' t%e 6%elps *od e a ainst Jome $nsurance. and represented in t%e 6%ilippines +' its local a ent.948"8. pac:a es 3it% . or in t%e pro ressi-e prosecution of.145"AA.48. in compliance 3it% Act 1A74 as implemented +' *epartment of &a+or Order $# dated 15 (a' 1. t%e 1. t%at same corporation cannot claim e?emption from +ein sued in 6%ilippine courts for acts done a ainst a person or persons in t%e 6%ilippines" 07 &ome %nsurance Com-an" vs. on +e%alf of Atlas Consolidated (inin K *e-elopment Corporation. (anila Mas a ent for 0(C 3it% aut%orit' to e?ecute Emplo'ment Contracts and recei-e. Rule 1A of t%e Rules of Court 3%ic% pro-ides t%at M$f t%e defendant is a forei n corporation. ( 11 ) . of 3%ic% se-en pac:a es 3ere found to +e in +ad order" )%at $nternational Jar-ester ultimatel' recei-ed at its 3are%ouse 3as t%e same num+er of 1. le al ser-ices from and +e +ound +' processes of t%e 6%ilippine Courts of Justice. (anila.. of 3%ic% 93 3ere in +ad order" )%at t%e 6%elps *od e ultimatel' recei-ed at its 3are%ouse 3as t%e same num+er of 1. $n (ent%olatum -s" (an aliman. On or a+out 13 Januar' 1. and East+oard !a-i ation -s" Juan Osmael K Co"). or 1. on t%e o-ernment official desi nated +' la3 to t%at effect. if t%ere +e no suc% a ent. Japan. 0(C. commercial ain or of t%e purpose and o+Iecti-e of t%e +usiness or ani>ation"M %ssue [2#$ )%et%er 0(C %as +een Mdoin +usiness in t%e 6%ilippinesM so t%at t%e ser-ice of summons upon its a ent in t%e 6%ilippines -ested t%e Court of 0irst $nstance of (anila 3it% Iurisdiction" &eld [2#$ 0(C ma' +e considered as Mdoin +usiness in t%e 6%ilippinesM 3it%in t%e scope of Section 1A (Ser-ice upon pri-ate forei n corporations). partl' cut. 3it% arri-al notice to 6%elps *od e Copper 6roducts Corporation of t%e 6%ilippines at (anila" T%e s%ipment 3as insured 3it% t%e Jome $nsurance Compan' a ainst all ris:s in t%e amount of 61.C. in +e%alf of t%at corporation.341 coils 3ere found to 3ei %t 143.7. doin +usiness in t%e 6%ilippines. 1311 A" (a+ini.975. and 3%ic% %ad to +e considered as scrap" @pon 3ei %in at 6%elps *od eDs 3are%ouse. Jome $nsurance paid t%e 6%elps *od e under its insurance polic' t%e amount of 63. t%e Jansa Transport Eontor s%ipped from Bremen.uipment and $mplements on +oard t%e #ESSE&. 1.. or t%e e?ercise of some of t%e functions normall' incident to. not en a ed in +usiness in t%e 6%ilippines. in fa-or of $nternational Jar-ester (acleod.341 coils. t%e Eastern S%ippin . t%e Colum+ian 6%ilippines. ser-ice ma' +e made on its resident a ent desi nated in accordance 3it% la3 for t%at purpose or.94 l+s"..Narratives (Berne Guerrero) acts or 3or:s. /erman'. s%ipped on +oard t%e SS Eastern Jupiter from Osa:a.44..93A"55 :ilos or a net lossGs%orta e of 9. Dutierrez Jr$ (J): 4 concur. On or a+out 11 *ecem+er 1.

uirement of re istration affects onl' t%e remed'" Si nificantl'. A'ala A-enue. lea-in 9 cases in +ad order" T%e contents of t%ese 9 pac:a es s%o3ed se-eral items missin in t%e total amount of S131"1AL 3%ile t%e contents of t%e undeli-ered 1 pac:a e 3ere -alued at S3. (r" #ictor J" Bello. of t%e Corporation &a3 imposed a penal sanction P imprisonment for not less t%an 4 mont%s nor more t%an 1 'ears or pa'ment of a fine not less t%an 6155"55 nor more t%an 61. %as +een re3orded in terms of non=access to courts and administrati-e a encies in order to maintain or inter-ene in an' action or proceedin " T%e pro%i+ition a ainst doin +usiness 3it%out first securin a license is no3 i-en penal sanction 3%ic% is also applica+le to ot%er -iolations of t%e Corporation Code under t%e eneral pro-isions of Section 1AA of t%e Code" $t is. of t%e old Corporation &a3" Section 133 of t%e present Corporation Code pro-ides t%at M!o forei n corporation transactin +usiness in t%e 6%ilippines 3it%out a license. not necessar' to declare t%e contract null and -oid e-en as a ainst t%e errin forei n corporation" T%e penal Commercial *a3 ) Cor-oration *a3 200. t%erefore. or a total of S919"75 or 61. Jome $nsurance %ad alread' secured t%e necessar' license to conduct its insurance +usiness in t%e 6%ilippines" $n +ot% cases.1A. +' -irtue of 3%ic% Jome $nsurance +ecame su+ro ated to t%e ri %ts and actions of $nternational Jar-ester" *emands 3ere made on !"#" !edllo'd &iInen and $nternational Jar-ester for reim+ursement t%ereof +ut t%e' failed and refused to pa' t%e same"M )%en t%e insurance contracts 3%ic% formed t%e +asis of t%ese cases 3ere e?ecuted. Jome $nsurance %ad not 'et secured t%e necessar' licenses and aut%orit'L +ut 3%en t%e complaints in t%ese t3o cases 3ere filed.Narratives (Berne Guerrero) order" Out of t%ese . t%e contents of 3 out of t%e 7 cases 3ere also found to +e complete and intact. of t%e Corporation &a3 3as to su+Iect t%e forei n corporation doin +usiness in t%e 6%ilippines to t%e Iurisdiction of 6%ilippine courts" T%e Corporation &a3 must +e i-en a reasona+le. Ri>al"M T%e Court of 0irst $nstance of (anila. (a:ati. t%e Supreme Court ruled in t%e leadin case of (ars%all )ells Co" -" Jenr' )" Elser K Co" (A4 6%il" 85) t%at t%e o+Iect of Sections 47 and 4. a forei n corporation licensed to do +usiness at %e time of t%e filin of t%e case. 3%en t%e tendenc' is to re=e?amine t%e political +oundaries separatin one nation from anot%er insofar as t%e' define +usiness re.uestion t%at t%e contracts are enforcea+le" T%e re. Jome $nsurance made t%e a-erment re ardin its capacit' to sue. not an undul' %ars%. Section 4. Jome $nsurance paid $nternational Jar-ester under its $nsurance Car o 6olic' t%e amount of 61. suit or proceedin in an' court or administrati-e a enc' in t%e 6%ilippinesL +ut suc% corporation ma' +e sued or proceeded a ainst +efore 6%ilippine courts or administrati-e tri+unals on an' -alid cause of action reco ni>ed under 6%ilippine la3s"M T%e old Section 4. 1 pac:a e 3as accepted +' $nternational Jar-ester in ood order due to t%e ne li i+le dama es sustained" @pon inspection at $nternational Jar-esterDs 3are%ouse. Batas 6am+ansa 47.7. pac:a es. s%all +e permitted to maintain or inter-ene in an' action. dismissed t%e complaints in +ot% cases.1A decision are e-en more rele-ant toda' 3%en 3e commercial relations are -ie3ed in terms of a 3orld econom'. t%e forei n corporation or its assi nee ma' not maintain an' suit for t%e reco-er' of an' de+t. or demand 3%ate-er" T%e Corporation &a3 is silent on 3%et%er or not t%e contract e?ecuted +' a forei n corporation 3it% no capacit' to sue is null and -oid a+ initio" Still. interpretation 3%ic% does not %amper t%e de-elopment of trade relations and 3%ic% fosters friendl' commercial intercourse amon countries" T%e o+Iecti-es enunciated in t%e 1.7" 0or t%e s%ort=deli-er' of 1 pac:a e and t%e missin items in 9 ot%er pac:a es.A14".555"55 or +ot% in t%e discretion of t%e court" T%ere is a penalt' for transactin +usiness 3it%out re istration" And insofar as liti ation is concerned. 3%ic% 3ere consolidated" %ssue$ )%et%er Jome $nsurance. %as t%e capacit' to sue for claims on contracts made 3%en it %as no license 'et to do +usiness in t%e 6%ilippines" &eld$ As earl' as 1.A"44. t%e Corporation Code of t%e 6%ilippines %as corrected t%e am+i uit' caused +' t%e 3ordin of Section 4. %o3e-er. ( 100 ) . as t%at it Mis a forei n insurance compan' dul' aut%ori>ed to do +usiness in t%e 6%ilippines t%rou % its a ent. claim. of le al a e and 3it% office address at Oledan Buildin .uirements or restrict mar:etin conditions" T%e court distin uis%ed +et3een t%e denial of a ri %t to ta:e remedial action and t%e penal sanction for non=re istration" $nsofar as transactin +usiness 3it%out a license is concerned. t%ere is no . Branc% Q#$$. on t%e round t%at Jome $nsurance %ad failed to pro-e its capacit' to sue" Jome $nsurance filed t%e petitions for re-ie3 on certiorari. or its successors or assi ns.A14".

Octo+er 1. $nc". t%at its a ent is (r" #ictor J" Bello. to t%e ad-anta e of its principal. 3ere +usiness transactions in t%e 6%ilippines.11. eac% case must +e Iud ed in t%e li %t of its peculiar en-ironmental circumstances" T%e true test. %nc. is a Eansas corporation 3%ic% manufactures M(ent%olatum. it cannot no3. featured +' t%e dismissal of t%e case on . (a:ati" T%ese are all t%e a-erments re. t%e (ent%olatum Co". is its e?clusi-e distri+utin a ent in t%e 6%ilippines aut%ori>ed +' it to loo: after and protect its interests" On 14 June 1. t%e (ent%olatum Co". June 1. maintain t%e action %ere for t%e reason t%at t%e distin uis%in features of t%e a ent +ein %is representati-e c%aracter and deri-ati-e aut%orit'. and contemplates. %ad e?ecuted in -ie3 of t%e la3. t%rou % its a ent. as trade mar: for its products" T%e (an aliman +rot%ers prepared a medicament and sal-e named M(ent%olimanM 3%ic% t%e' sold to t%e pu+lic pac:ed in a container of t%e same si>e. +ein a forei n corporation doin +usiness in t%e 6%ilippines 3it%out t%e license re.uired in section 4. (ent%olatum. t%e lac: of capacit' at t%e time of t%e e?ecution of t%e contracts 3as cured +' t%e su+se. $nc".34.1. re-ersed. on 1. and t%e 6%ilippine=American *ru . $nc".. and t%at +' section 4. and t%at its office address is t%e Oledan Buildin at A'ala A-enue.M a medicament and sal-e adapted for t%e treatment of colds. re istered 3it% t%e Bureau of Commerce and $ndustr' t%e 3ord.38.M and directin t%em to render an accountin of t%eir sales and profits and to pa' dama es" After a protracted trial. t%e purpose and o+Iect of its or ani>ation" Jerein. etc" could prosecute t%e instant action 3it%out %a-in secured t%e license re.A5. (ent%olatum Co". t%e (ent%olatum Co". Co". 'an(aliman [GR 47701 27 !une 1141# First Division.1. $nc". etc" filed t%e petition for certiorari" %ssue$ )%et%er (ent%olatum. t%e performance of acts or 3or:s or t%e e?ercise of some of t%e functions normall' incident to. rectal irritation and ot%er e?ternal ailments of t%e +od'" T%e 6%ilippine=American *ru Co". t%e reco nition of t%e le al status of a forei n Commercial *a3 ) Cor-oration *a3 200. (arc% 1. t%e Court of 0irst $nstance of (anila. c%apped s:in. on 1. $nc". 1. and its su+se. rendered Iud ment in fa-or of (ent%olatum. of t%e Corporation &a3. t%e decision of t%e trial court 3as. insect +ites. $nc".uired +' section 47 of t%e Corporation &a3. seems to +e 3%et%er t%e forei n corporation is continuin t%e +od' or su+stance of t%e +usiness or enterprise for 3%ic% it 3as or ani>ed or 3%et%er it %as su+stantiall' retired from it and turned it o-er to anot%er" T%e term implies a continuit' of commercial dealin s and arran ements. of t%e Corporation &a3" &eld$ !o eneral rule or o-ernin principle can +e laid do3n as to 3%at constitutes Mdoin M or Men a in inM or Mtransactin M +usiness" $ndeed. etc" $n t%e Court of Appeals (CA=/R A4548). to t%at e?tent.Narratives (Berne Guerrero) sanction for t%e -iolation and t%e denial of access to 6%ilippine courts and administrati-e +odies are sufficient from t%e -ie3point of le islati-e polic'" Jerein. Rule 7 of t%e Rules of Court" Jome $nsurance sufficientl' alle ed its capacit' to sue" 0/ 8. at least" )%ate-er transactions t%e 6%ilippine= American *ru Co". nasal irritations. and in pro ressi-e prosecution of. $nc" instituted an action in t%e Court of 0irst $nstance (C0$) of (anila a ainst Anacleto (an aliman. $nc". t%e 6%ilippine=American *ru Co". claim an independent standin in court" 0urt%er. $nc". %as +een doin +usiness in t%e 6%ilippines +' sellin its products %ere since t%e 'ear 1. it ma' not prosecute t%is action for -iolation of trade mar: and unfair competition" !eit%er ma' t%e 6%ilippine=American *ru Co".olatum Co. color and s%ape as M(ent%olatum"M As a conse. and on 11 Januar' 1.uent re istration is also stren t%ened +' t%e procedural aspects of t%ese cases" Jome $nsurance a-erred in its complaints t%at it is a forei n insurance compan'. M(ent%olatumM.e 'ent. t%at it is aut%ori>ed to do +usiness in t%e 6%ilippines. vs. said tri+unal %oldin t%at t%e acti-ities of t%e (ent%olatum Co". $nc".uired +' Section A. it ma' not maintain t%e suit" (ent%olatum. 0lorencio (an aliman and t%e *irector of t%e Bureau of Commerce for infrin ement of trade mar: and unfair competition (Ci-il case A7799)" (ent%olatum. ( 101 ) . Eaurel (J): 3 concur.uent reinstatement on April A.uence of t%ese acts of t%e (an alimans. 1 dissents Facts$ T%e (ent%olatum Co".39. etc" pra'ed for t%e issuance of an order restrainin Anacleto and 0lorencio (an aliman from sellin t%eir product M(ent%oliman. %o3e-er.34 for failure of plaintiffDs counsel to attend. etc" suffered dama es from t%e diminution of t%eir sales and t%e loss of ood3ill and reputation of t%eir product in t%e mar:et" On 1 Octo+er 1.

contendin t%at Eri:s %ad no le al capacit' to sue" $n an Order dated 7 (arc% 1. 3it% a . t%e appellate court (CA /R C# A1189) affirmed said order as it deemed t%e series of transactions +et3een Eri:s and Enri. A--eals [GR 11//44 0 Fe+ruar" 1117# Third Division.1= 1383 for t%e reco-er' of SSA1. /an'ani. firm. t%e trial court dismissed t%e action on t%e round t%at Eri:s is a forei n corporation doin +usiness in t%e 6%ilippines 3it%out a license" On appeal and on 19 Januar' 1. entit' or corporation in t%e 6%ilippinesL and an' ot%er act or acts t%at impl' a continuit' of commercial dealin s or arran ements. plus interest t%ereon and dama es" Enri. not merel' a+sence of t%e prescri+ed license. vs. T%at t%e p%rase Ddoin +usinessD s%all not +e deemed to include mere in-estment as a s%are%older +' a forei n entit' in domestic corporations dul' re istered to do +usiness.Narratives (Berne Guerrero) corporation is a matter affectin t%e polic' of t%e forum. commercial ain or of t%e purpose and o+Iect of t%e +usiness or ani>ation: 6ro-ided.uipment used for industrial fluid control and 6#C pipes and fittin s for industrial uses" On -arious dates co-erin t%e period Januar' 18 P Au ust 14. -al-es and pipes for industrial purposes.ue> not to +e an Misolated or casual transaction"M T%us. 1. Court o.. doin +usiness under t%e name and st'le of *elrene EB Controls Center andGor EB Earmine Commercial. 3%et%er called DliaisonD offices or +ranc%esL appointin representati-es or distri+utors domiciled in t%e 6%ilippines or 3%o in an' calendar 'ear sta' in t%e countr' for a period or periods totalin one %undred ei %t(') (175) da's or moreL participatin in t%e mana ement. for Enri. ( 102 ) .ue>.1. ser-ice contracts. openin offices.. -al-es. 0"O"B" Sin apore.an (J): 4 concur Facts$ Eri:s 6te" &td" is a non=resident forei n corporation en a ed in t%e manufacture and sale of elements used in sealin pumps. +ut t%e latter failedGrefused to do so" On 17 Au ust 1. suit or proceedin in an' court or administrati-e a enc' of t%e 6%ilippinesL +ut suc% corporation ma' +e sued or proceeded a ainst +efore 6%ilippine courts or administrati-e tri+unals on an' -alid cause of action reco ni>ed under 6%ilippine la3s"M T%e pro-ision pro%i+its. super-ision or control of an' domestic +usiness. is reser-ed" 01 =ri<s :te."43 or its e.7.uirement of section 4.uipment and Suppl' Co" -s" Re'es re ardin t%e c%aracter of t%e ri %t in-ol-ed s%ould not +e construed in t%e dero ation of t%e polic'= determinin aut%orit' of t%e State" T%e ri %t of (ent%olatum conditioned upon compliance 3it% t%e re. Branc% 137.ue> to settle %is account. pipes and control e.5=da' credit term" Su+se. Jr".ue> responded 3it% a (otion to *ismiss. or t%e e?ercise of some of t%e functions normall' incident to.9. is pro%i+ited from maintainin an action to collect pa'ment t%erefor in 6%ilippine courts" &eld$ Section 133 of t%e Corporation Code pro-ides t%at M!o forei n corporation transactin +usiness in t%e 6%ilippines 3it%out a license. or its successors or assi ns..uipment. s%all +e permitted to maintain or inter-ene in an' action.M or Mtransactin M +usiness" T%e Corporation Code itself does not define suc% terms" To fill t%e ap. and contemplate to t%at e?tent t%e performance of acts or 3or:s.ue>Ds account. t%e e-olution of its statutor' definition %as produced a rat%er all= encompassin concept in Repu+lic Act 85A1 in t%is 3ise: MT%e p%rase Ddoin +usinessD s%all include solicitin orders..3. of t%e Corporation &a3 to protect its ri %ts. demands 3ere made +' Eri:s upon Enri.3. 6#C pipes and fittin s" T%e transfers of oods 3ere perfected in Sin apore. +ut it also +ars a forei n corporation Mdoin +usinessM in t%e 6%ilippines 3it%out suc% license access to 6%ilippine courts" A forei n corporation 3it%out suc% license is not ipso facto incapacitated from +rin in an action" A license is necessar' onl' if it is Mtransactin or doin +usinessM in t%e countr'" Jo3e-er.uentl'. t%ere is no definiti-e rule on 3%at constitutes Mdoin .ui-alent in 6%ilippine currenc'. ordered and recei-ed from Eri:s 6te" &td" -arious elements used in sealin pumps. and t%e distinction dra3n in 6%ilippine Corporation &a3 is an e?pression of t%e polic'" T%e eneral statement made in )estern E. Ci-il Case . andGor t%e e?ercise of ri %ts as suc% in-estorL nor %a-in a nominee director or officer to represent its interests in suc% corporationL Commercial *a3 ) Cor-oration *a3 200.. t%e appellate court li:e3ise found Eri:s to +e 3it%out le al capacit' to sue" Eri:s filed t%e petition for re-ie3" %ssue$ )%et%er a forei n corporation 3%ic% sold its products 14 times o-er a fi-e=mont% period to t%e same 0ilipino +u'er 3it%out first o+tainin a license to do +usiness in t%e 6%ilippines. -al-es and control e. *elfin Enri. %o3e-er.M Men a in in. Eri:s filed 3it% t%e Re ional Trial Court of (a:ati. *td. and in pro ressi-e prosecution of.

. interests and o+li ations under t%e principal and complementar' loan a reements.ue>.M and presuma+l' to preser-e its international credit standin .uipment used for industrial fluid control and 6#C pipes and fittin s for industrial use" T%us.555"55 3as funded +' t%e Ban: of !o-a Scotia. in fulfillment of its underta:in under t%e MSupport and Stand+' Credit A reement. (arcopper li:e3ise e?ecuted a M*eed of Assi nmentM in fa-or of (R Joldin s" @nder its pro-isions. t%e sale +' Eri:s of t%e items co-ered +' t%e receipts. 6lacer *ome.555"55 3as sourced from A*BDs ordinar' capital resources.. since in t%e usual course of commercial transactions. BaFar [GR 14/104 11 A-ril 2002# Third Division. its rant and e?tension of .. pure and simple" 0urt%er.uentl'.8 A*B assi ned to (R Joldin s all its ri %ts. -al-es and control e. 3as actuall' carried out in t%e pro ressi-e prosecution of commercial ain and t%e pursuit of t%e purpose and o+Iect of its +usiness. assumed (arcopperDs o+li ation to A*B in t%e amount of @SS17.ue> for e-er' purc%ase made.uo a ainst Enri. (arindu. more t%an t%e s%eer num+er of transactions entered into.5=da' credit terms to Enri.555.1. a reed to %a-e its su+sidiar' corporation.555"55 to finance t%e latterDs minin proIect at Sta" Cru>.A93. in an MAssi nment A reementM dated 15 (arc% 1. ( 104 ) . Commercial *a3 ) Cor-oration *a3 200.uirin a domicile for t%e purpose of +usiness 3it%out first ta:in t%e steps necessar' to render it amena+le to suits in t%e local courts" Jerein.Narratives (Berne Guerrero) nor appointin a representati-e or distri+utor domiciled in t%e 6%ilippines 3%ic% transacts +usiness in its o3n name and for its o3n account"M T%e accepted rule in Iurisprudence is t%at eac% case must +e Iud ed in t%e li %t of its o3n en-ironmental circumstances" $t s%ould +e :ept in mind t%at t%e purpose of t%e la3 is to su+Iect t%e forei n corporation doin +usiness in t%e 6%ilippines to t%e Iurisdiction of 6%ilippine courts" $t is not to pre-ent t%e forei n corporation from performin sin le or isolated acts. it is en a ed in t%e manufacture and sale of elements used in sealin pumps. e?ecuted a MSupport and Stand+' Credit A reementM 3%ere+' t%e latter" a reed to pro-ide (arcopper 3it% cas% flo3 support for t%e pa'ment of its o+li ations to A*B" To secure t%e loan. t%e Court cannot see %o3 Eri:sD +usiness dealin s 3ill fit t%e cate or' of Misolated transactionsM considerin t%at its intention to continue and pursue t%e corpus of its +usiness in t%e countr' %ad +een clearl' esta+lis%ed" $t %as not presented an' con-incin ar ument 3it% e. a reed to e?tend to (arcopper (inin Corporation ((arcopper) a loan in t%e a re ate amount of @SSA5. +ut to +ar it from ac..M +ot% dated A !o-em+er 1. credit is e?tended onl' to customers in ood standin or to t%ose on 3%om t%ere is an intention to maintain lon =term relations%ip" T%e series of transactions in . unar ua+l' s%o3s an intention to continue transactin 3it% Enri..uall' con-incin e-idence for t%e Court to rule ot%er3ise" Accordin l' and inelucta+l'. Eri:s must +e %eld to +e incapacitated to maintain t%e action a . co-erin su+stantiall' all of its ((arcopperDs) properties and assets in (arindu. A*B and 6lacer *ome.uantit' are merel' e-idence of suc% intention" T%e p%rase Misolated transactionM %as a definite and fi?ed meanin .ue" T%e principal loan of @SS19.1" )%en (arcopper defaulted in t%e pa'ment of its loan o+li ation. (M*eed of Real Estate and C%attel (ort a e. +ut more upon t%e nature and c%aracter of t%e transactions" /i-en t%e facts of t%e case. t%e intention of an entit' to continue t%e +od' of its +usiness in t%e countr'" T%e num+er and .uantit' of t%e transactions.eri. 3%ic% are part and parcel of its main product line. Asian *e-elopment Ban: (A*B). a multilateral de-elopment finance institution.ue" $t 3as re istered 3it% t%e Re ister of *eeds on 11 !o-em+er 1. (6lacer *ome).M and MSupport and Stand+' Credit A reementM)" On 7 *ecem+er 1.8. (R Joldin .ue>" 70 'R &oldin(s *td.555. (arcopper e?ecuted in fa-or of A*B a M*eed of Real Estate and C%attel (ort a eM dated 11 !o-em+er 1. -al-es. 3%ile t%e complementar' loan of @SS19. and pipes for industrial purposes. a clear and unmista:a+le intention on t%e part of Eri:s to continue t%e +od' of its +usiness in t%e 6%ilippines is more t%an apparent" As alle ed in its complaint. i"e" a transaction or series of transactions set apart from t%e common +usiness of a forei n enterprise in t%e sense t%at t%ere is no intention to en a e in a pro ressi-e pursuit of t%e purpose and o+Iect of t%e +usiness or ani>ation" )%et%er a forei n corporation is Mdoin +usinessM does not necessaril' depend upon t%e fre. a forei n corporation 3%ic% o3ns A5H of (arcopper.. vs.1. $nc". Sandoval Dutierrez (J): 4 concur Facts$ @nder a M6rincipal &oan A reementM and MComplementar' &oan A reement. +ut more importantl'.uestion could not %a-e +een isolated or casual transactions" )%at is determinati-e of Mdoin +usinessM is not reall' t%e num+er or t%e . 5.555.A95"51" Conse. a participatin finance institution" On e-en date.uenc' of its transactions. &td".

its assi ns andGor successors=in=interest all of its ((arcopperDs) properties. plus interest and c%ar es until full' paidL to pa' an amount e.1). at t%is earl' sta e and 3it% (R Joldin sD acts or transactions limited to t%e assi nment contracts. presided +' Jud e &eonardo 6" Ansaldo. it cannot +e said t%at it %ad performed acts intended to continue t%e +usiness for 3%ic% it 3as or ani>ed" $t ma' not +e amiss to point out t%at t%e purpose or +usiness for 3%ic% (R Joldin s 3as or ani>ed is not discerni+le in t%e records" !o effort 3as e?erted +' t%e Court of Appeals to esta+lis% t%e ne?us +et3een (R Joldin sD +usiness and t%e acts supposed to constitute Mdoin +usiness"M T%us. 3%et%er t%e assi nment contracts 3ere incidental to (R Joldin sD +usiness or 3ere continuation t%ereof is +e'ond determination" T%e Court of AppealsD %oldin t%at (R Joldin s 3as determined to +e Mdoin +usinessM in t%e 6%ilippines is +ased mainl' on conIectures and speculation" $n concludin t%at t%e Munmista:a+le intentionM of (R Joldin s is to continue (arcopperDs +usiness.doin +usiness"< &eld [1#$ Batas 6am+ansa 47.7 at t%e (arcopper mine site" Ja-in learned of t%e sc%eduled auction sale.uipment" To et%er 3it% s%eriff 0erdinand (" Jandusa' of t%e RTC. minin e. (arindu. (R Joldin s ser-ed an MAffida-it of T%ird=6art' ClaimM upon t%e s%eriffs on 14 Au ust 1. it +ein a forei n corporation doin +usiness in t%e 6%ilippines 3it%out licenseL (+) an inIunction 3ill amount Mto sta'in t%e e?ecution of a final Iud ment +' a court of co=e.. s%eriff.. Iurisprudence %as supplied t%e deficienc' and %as %eld t%at t%e term Mimplies a continuit' of commercial dealin s and arran ements. ( 104 ) . a complaint for rei-indication of properties. (arcopper. it appeared t%at on 8 (a' 1. and contemplates. assertin its o3ners%ip o-er all (arcopperDs minin properties. transfers. t%e RTC of (anila issued a 3rit of e?ecution pendin appeal directin Carlos 6" BaIar. %a-in +een adopted 3it% some . t%e Court of Appeals rendered a *ecision affirmin t%e trial courtDs decision" (R Joldin s filed t%e 6etition for Re-ie3 on Certiorari" %ssue [1#$ )%et%er (R Joldin sD participation under t%e MAssi nment A reementM and t%e M*eed of Assi nmentM constitutes .. etc".. (R Joldin s commenced 3it% t%e RTC of Boac. to re. e.. BaIar issued t3o notices settin t%e pu+lic auction sale of t%e le-ied properties on 18 Au ust 1. and o-er all its stoc:s of scrap iron and unser-icea+le minin e.uipment and facilities +' -irtue of t%e M*eed of Assi nment"M @pon t%e denial of its MAffida-it of T%ird=6art' ClaimM +' t%e RTC of (anila. t%e performance of acts or 3or:s or t%e e?ercise of some of t%e functions normall' incident to.4=75573.. to t%at e?tent. suc% as Repu+lic Act 85A1 (0orei n $n-estment Act of 1.M is silent as to 3%at constitutes doin M or Mtransactin M +usiness in t%e 6%ilippines" 0ortunatel'..M and as ma' +e o+ser-ed. one common denominator amon t%em all is t%e concept of Mcontinuit'"M T%e e?pression Mdoin +usinessM s%ould not +e i-en suc% a strict and literal construction as to ma:e it appl' to an' corporate dealin 3%ate-er" At t%is earl' sta e and 3it% (R Joldin sD acts or transactions limited to t%e assi nment contracts.Narratives (Berne Guerrero) (arcopper assi ns. Solid+an: Corporation (Solid+an:) o+tained a 6artial Jud ment a ainst (arcopper from t%e RTC. BaIar issued t3o notices of le-' on (arcopperDs personal and real properties.894"7.85. and s%eriffs BaIar and Jandusa' (Ci-il Case . Branc% 14. (arindu. and Repu+lic Act 9A99" T%ere are ot%er statutes definin t%e term Mdoin +usiness.8.uire (arcopper Mto pa' t%e sums of mone' to satisf' t%e 6artial Jud ment"M T%ereafter. (anila.ualifications in -arious pieces of le islation in 6%ilippine Iurisdiction.. ot%er3ise :no3n as MT%e Corporation Code of t%e 6%ilippines.A. 6ro%i+ition and (andamus (CA=/R S6 A.7.. orderin (arcopper to pa' Solid+an: %e amount if 6J6 91.ue..uestion +' t%e timin of t%eir e?ecution and re istration"M @nsatisfied.ue. Branc% . in Ci-il Case . (R Joldin s ele-ated t%e matter to t%e Court of Appeals on a 6etition for Certiorari. cedes and con-e's to (R Joldin s. Jud e Ansaldo denied (R Joldin sD application for a 3rit of preliminar' inIunction on t%e round t%at (a) (R Joldin s %as no le al capacit' to sue. it cannot +e said t%at it %ad performed acts intended to continue t%e +usiness for 3%ic% it 3as or ani>ed" Jerein. t%e Court Commercial *a3 ) Cor-oration *a3 200.7.7= 13)" $n an Order dated 4 Octo+er 1. 3it% pra'er for preliminar' inIunction and temporar' restrainin order a ainst Solid+an:. and in pro ressi-e prosecution of.114)" On 7 Januar' 1.ui-alent to 15H of a+o-e=stated amount as attorne'Ds feesL and to pa' t%e costs of suit" @pon Solid+an:Ds motion.uipment and facilities" (ean3%ile.ual and concurrent IurisdictionLM and (c) t%e -alidit' of t%e MAssi nment A reementM and t%e M*eed of Assi nmentM %as +een Mput into serious . Boac. t%e purpose and o+Iect for 3%ic% t%e corporation 3as or ani>ed"M T%e traditional case la3 definition %as metamorp%osed into a statutor' definition.

uested t%at t%e financial +id of $CTS$ s%ould +e set aside" !e-ert%eless.. an in-itation offerin to t%e pri-ate sector t%e opportunit' to de-elop and operate a modern marine container terminal 3it%in t%e Su+ic Ba' 0reeport Fone" Out of 8 +idders 3%o responded to t%e pu+lis%ed in-itation. $nc" and @nicol (ana ement Ser-ices. (R Joldin sD pa'ment of @SS17. t%e Su+ic Ba' (etropolitan Aut%orit' (SB(A) ad-ertised in leadin national dail' ne3spapers and in one international pu+lication. or t%e mere commission of a tort" $n t%ese instances.ualification e-aluation conducted +' t%e SB(ADs Tec%nical E-aluation Committee (SB(A=TEC) T%ese are: (1) $nternational Container Terminal Ser-ices..Narratives (Berne Guerrero) of Appeals %an s on t%e 3o++l' premise t%at Mt%ere is no ot%er 3a' for petitioner to reco-er its %u e financial in-estments 3%ic% it poured into (arcopperDs re%a+ilitation 3it%out it (petitioner) continuin (arcopperDs +usiness in t%e countr'"M A+sent o-ert acts of (R Joldin s from 3%ic% 3e ma' directl' infer its intention to continue (arcopperDs +usiness. $nc" to assist in t%e e-aluation of t%e +ids and in t%e ne otiation process after t%e 3innin +idder is c%osen" All t%e consultants.9=743" R6S$ t%us re. 3as as follo3s: (1) $CTS$. R6S$ formall' protested t%at $CTS$ is le all' +arred from operatin a second port in t%e 6%ilippines +ased on E?ecuti-e Order 111 and *epartment of Transportation and Communication (*OTC) Order . more particularl' t%e proposed ro'alt' fee of eac% +idder.orit" (5B'A) [GR 141407 41 Au(ust 2000# First Division. and instead a-e $CTS$ 8 da's 3it%in 3%ic% to respond to t%e letter=protest lod ed +' R6S$" T%e J66& Ioined in R6S$Ds protest. t%e alle ed Mintention of (R Joldin s to continue (arcopperDs +usinessM could %a-e no +asis for at t%at time. t%e ser-ices of 3 international consultants recommended +' t%e )orld Ban: for t%eir e?pertise 3ere %ired +' SB(A to e-aluate t%e +usiness plans su+mitted +' eac% of t%e +idders.ualified +idders after passin t%e pre=. t%e MSupport and Stand+' Credit A reementM 3as e?ecuted A 'ears prior to (arcopperDs insol-enc'. representin a consortium composed of J66&. ) . t%e Supreme Court cannot i-e its concurrence" Si nificantl'. ( 10. contracts.A93.ison :orts :. after suc% re-ie3 and e-aluation unanimousl' concluded t%at J66&Ds Business 6lan 3as Mfar superior to t%at of t%e t3o ot%er +idders"M Jo3e-er. &an don and Sea% 6%ilippines. t%e openin of t%e sealed financial +ids proceeded Munder ad-isementM relati-e to t%e protest si nified +' R6S$" T%e financial +ids. e-en +efore t%e sealed en-elopes containin t%e +iddersD proposed ro'alt' fees could +e opened at t%e appointed time and place. and to ensure t%at t%ere 3ould +e a transparent and compre%ensi-e re-ie3 of t%e su+mitted +ids" T%e SB(A also %ired t%e firm of *a-is. or transactions of forei n corporations are not re arded as a doin or carr'in on of +usiness" T'pical e?amples of t%ese are t%e ma:in of a sin le contract. (arcopperDs fate cannot 'et +e determined" $n t%e final anal'sis. (R Joldin s 3as en a ed onl' in isolated acts or transactions" Sin le or isolated acts.4 +' t%e SB(ADs 6re=. $nc" ($CTS$)L (1) a consortium consistin of Ro'al 6ort Ser-ices. t%ere is no purpose to do an' ot%er +usiness 3it%in t%e countr'" 71 &utc. unaccompanied +' its acti-e use in furt%erance of t%e +usiness for 3%ic% it 3as formed. sale.uence of t%e transactions t%at transpired" Also.ualified +ecause it 3as alread' operatin t%e (anila $nternational Container 6ort Commercial *a3 ) Cor-oration *a3 200. is insufficient in itself to constitute doin +usiness" 0urt%er.ili--ines *imited vs. lon +efore (R Joldin s assumed (arcopperDs de+t to A*B and +ecame t%eir assi nee under t%e t3o assi nment contracts. @SS15"95 TE@L and (3) R6S$. %ence. a -ie3 su+scri+ed upon +' man' aut%orities is t%at t%e mere o3ners%ip +' a forei n corporation of a propert' in a certain state. t%ere alread' e?isted a MSupport and Stand+' Credit A reementM +et3een A*B and 6lacer *ome 3%ere+' t%e latter +ound itself to pro-ide cas% flo3 support for (arcopperDs pa'ment of its o+li ations to A*B" 6lainl'. statin t%at $CTS$ s%ould +e dis. 5u+ic Ba" 'etro-olitan Aut. /uoco Joldin s (6%ils"). purc%ase.4.ualification. Bids and A3ards Committee (SB(A=6BAC)" T%ereafter. $nc" and J6C Jam+ur 6ort Consultin /(BJ (R6S$)L and (3) Jutc%ison 6orts 6%ilippines &imited (J66&). $nc" All 3 . 1 concurs in result Facts$ On 11 0e+ruar' 1. 4nares5Santia'o (J): 3 concur.A95"11 to A*B 3as more of a fulfillment of an o+li ation under t%e MSupport and Stand+' Credit A reementM rat%er t%an an in-estment" T%at (R Joldin s %ad to step into t%e s%oes of A*B as (arcopperDs creditor 3as Iust a necessar' le al conse. @SS98"75 TE@L (1) J66&.uired to su+mit t%eir respecti-e formal +id pac:a e on or +efore 1 Jul' 1. sale 3it% t%e ta:in of a note and mort a e in t%e state to secure pa'ment t%erefor. @SS19"57 TE@" T%e SB(A=6BAC decided to suspend t%e announcement of t%e 3innin +id. or note.ualified +idders 3ere re. %o3e-er. 3 3ere declared +' t%e SB(A as .

as 3ell as t%e reports of t%e t%ree international e?perts and t%e consultanc' firm %ired +' t%e SB(A" On 1. J66& learned t%at t%e SB(A %ad accepted t%e +ids of $CTS$ and R6S$ 3%o 3ere t%e onl' +idders 3%o . strictl' follo3 t%e criteria for +id e-aluation pro-ided for in pars" (c) and (d). for specific performance.. recommendin t%at t%e 6resident direct SB(A C%airman /ordon to consider re=e-aluatin t%e financial +ids su+mitted +' t%e parties. R6S$ and t%e Office of t%e 6resident filed separate Ans3ers=in=$nter-ention to t%e complaint opposin t%e reliefs sou %t +' complainant J66&" )%ile t%e case +efore t%e trial court 3as pendin liti ation...8" T%en on A !o-em+er 1. mandator' inIunction and dama es" $n due time. 3%ic% 3ould i-e rise to ine-ita+le conflict of interest +et3een t%e ($C6 and t%e Su+ic Ba' Container Terminal facilit'" On 19 Au ust 1. $CTS$ filed a similar appeal +efore t%e Office of t%e 6resident" On 35 Au ust 1. 3%ic% 3as a3arded t%e concession for t%e operation and de-elopment of t%e Su+ic Ba' Container Terminal" $n a letter dated 1A Septem+er 1. t%e SB(A sent notices to J66&. t%e SB(A=6BAC issued a resolution reIectin t%e +id of $CTS$ +ecause Msaid +id does not compl' 3it% t%e re.uentl'.Narratives (Berne Guerrero) (($C6).uestin t%em to declare t%eir interest in participatin in a re+iddin of t%e proposed proIect" On 15 Octo+er 1. t%e COA s%ould acti-el' participate to determine 3%ic% of t%e financial +ids is more ad-anta eousL (9) $n addition.4. on A Au ust 1. t%e J66&. $CTS$ filed a letter=appeal 3it% SB(ADs Board of *irectors re.4. a reed to focus t%e ree-aluation of t%e +ids in accordance 3it% t%e e-aluation criteria and t%e detailed components contained in t%e Tender *ocument. for a3ardin t%e contract to J66&" On 14 April 1. R6S$ and t%e E?ecuti-e Secretar' see:in to o+tain a pro%i+itor' inIunction" Commercial *a3 ) Cor-oration *a3 200.8" J66& filed t%e petition a ainst SB(A. t%e SB(A Board issued a Resolution. $CTS$. all t%e parties s%ould +e i-en ample opportunit' to elucidate or clarif' t%e componentsGIustification for t%eir respecti-e financial +ids in order to ensure fair pla' and transparenc' in t%e proceedin sL and (4) T%e 6residentDs aut%orit' to re-ie3 t%e final a3ard s%all remain"M T%e recommendation of C6&C Ca'etano 3as appro-ed +' 6resident Ramos" A cop' of 6resident RamosD %and3ritten appro-al 3as sent to t%e SB(A Board of *irectors" Accordin l'.uo on 17 Octo+er 1. Branc% 89.. t%en E?ecuti-e Secretar' Ru+en Torres su+mitted a memorandum to t%e Office of t%e 6resident recommendin t%at anot%er re+iddin +e conducted" Conse.4.uestin t%e nullification and re-ersal of t%e resolution reIectin $CTS$Ds +id 3%ile a3ardin t%e same to J66&" But e-en +efore t%e SB(A Board could act on t%e appeal.8. includin all rele-ant information leaned from t%e +iddin documents. feelin a rie-ed +' t%e SB(ADs failure and refusal to commence ne otiations and to e?ecute t%e Concession A reement despite its earlier pronouncements t%at J66& 3as t%e 3innin +idder... t%e SB(A Board of *irectors su+mitted to t%e Office of t%e 6resident t%e results of t%e re=e-aluation of t%e +id proposals" !ot3it%standin t%e SB(A BoardDs recommendations and action a3ardin t%e proIect to J66&.. 3it% t%e concurrence of representati-es of t%e Commission on Audit.8.uo in an Order dated 3 !o-em+er 1. filed a complaint a ainst SB(A +efore t%e Re ional Trial Court (RTC) of Olon apo Cit'. declarin t%at t%e +est possi+le offer and t%e most ad-anta eous to t%e o-ernment is t%at of J66&.8" T%e said motion 3as denied +' t%e court a .uirements of t%e tender documents and t%e la3s of t%e 6%ilippines"M T%e follo3in da'. $CTS$. Septem+er 1.8.8. $CTS$ and R6S$ re. t%e Office of t%e 6resident issued a (emorandum directin t%e SB(A Board of *irectors to refrain from si nin t%e Concession Contract 3it% J66& and to conduct a re+iddin of t%e proIect" $n t%e meantime. 6art B (1) of t%e Tender *ocumentL (A) $n t%e re=e-aluation.ualified" $n order to enIoin t%e re+iddin 3%ile t%e case 3as still pendin . ( 100 ) ... t%en C%ief 6residential &e al Counsel (C6&C) Renato &" Ca'etano su+mitted a memorandum to t%en 6resident 0idel #" Ramos. t%e Resident Om+udsman for t%e *OTC filed a complaint a ainst mem+ers of t%e SB(A=6BAC +efore t%e Office of t%e Om+udsman for alle ed -iolation of Section 3(e) of Repu+lic Act 351. J66& recei-ed a cop' of t%e minutes of t%e pre=+id conference 3%ic% stated t%at t%e 3innin +idder 3ould +e announced on 9 *ecem+er 1. t%e SB(A Board. ta:in into consideration all t%e follo3in factors: (1) Reinstate $CTS$Ds +idL (1) *isre ard all ar uments relatin to Mmonopol'ML (3) T%e re= e-aluation must +e limited to t%e partiesD financial +ids" Considerin t%at t%e partiesD +usiness %a-e +een accepted (passed).8.4... J66& filed a motion for maintenance of t%e status .. t%e E-aluation and 6reliminar' $n-esti ation Bureau of t%e Office of t%e Om+udsman issued a Resolution a+sol-in t%e mem+ers of t%e SB(A=6BAC of an' lia+ilit' and dismissin t%e complaint a ainst t%em" On 8 Jul' 1.

O%io. it is onl' Iust t%at said forei n corporation +e not allo3ed to in-o:e t%em in our courts 3%en t%e need arises" M)%ile forei n in-estors are al3a's 3elcome in t%is land to colla+orate 3it% us for our mutual +enefit. ( 107 ) .A1 !ort% (eridian Street. Court o. t%e parties entered into a second contract (RBS 3837) on 3 !o-em+er 1. and one of its su+di-isions MCapital Cit' 6roduct Compan'M (Capital Cit') %as its office in Colum+us.Narratives (Berne Guerrero) %ssue$ )%et%er J66& %as t%e le al capacit' to e-en see: redress from t%e Court" &eld$ J66& is a forei n corporation. it %as often +een %eld t%at a sin le act or transaction ma' +e considered as Mdoin +usinessM 3%en a corporation performs acts for 3%ic% it 3as created or e?ercises some of t%e functions for 3%ic% it 3as or ani>ed" T%e amount or -olume of t%e +usiness is of no moment. and t%us does not su+mit itself to 6%ilippine la3s. Dutierrez Jr$ (J): 4 concur. /uoco Joldin s (6%ils") $nc" and @nicol (ana ement Ser-ices. and @nited Coconut Oil (ills.uired to secure suc% licenseL (3) t%at on 11 Au ust 1. A--eals [GR *)01.uirement t%at forei n corporations must +e licensed to do +usiness in t%e 6%ilippines to +e a+le to file and prosecute an action +efore 6%ilippines courts" T%ere is no eneral rule or o-ernin principle laid do3n as to 3%at constitutes Mdoin M or Men a in inM or Mtransactin M +usiness in t%e 6%ilippines" Eac% case must +e Iud ed in t%e li %t of its peculiar circumstances" T%us. entered into a contract (RBS 3499) 3%erein Comp%il undertoo: to sell and deli-er and Capital Cit' a reed to +u' 955 lon tons of crude coconut oil to +e deli-ered in Octo+erG!o-em+er 1. Capital Cit' and Coconut Oil (anufacturin (6%il") $nc" (Comp%il) 3it% t%e latter actin t%rou % its +ro:er Rot%sc%ild Bro:era e Compan'. for t%e doctrine of lac: of capacit' to sue is +ased on considerations of sound pu+lic polic'" Accordin l'. Sto:el' #an Camp" $nc" filed a complaint a ainst Bana%a3 (illin Corporation.455L t%at to settle Capital Cit'Ds loss under t%e contract. t%at determines 3%et%er a forei n corporation needs a license or not" T%e primar' purpose of t%e license re. t%e' must +e prepared as an indispensa+le condition to respect and +e +ound +' 6%ilippine la3 in proper cases"M T%e re.87 at t%e c"i"f price of @SS5"35Gl+" +ut Comp%il failed to deli-er t%e coconut oil so t%at Capital Cit' co-ered its coconut oil needs in t%e open mar:et at a price su+stantiall' in e?cess of t%e contract and sustained a loss of @SS153. it is t%e performance +' a forei n corporation of t%e acts for 3%ic% it 3as created. $nc". $ndianapolis. $nc". it is onl' J66& t%at %as +rou %t t%e contro-ers' +efore t%e Court. @"S"A"L (1) t%at Sto:el' and Capital Cit' 3ere not en a ed in +usiness in t%e 6%ilippines prior to t%e commencement of t%e suit so t%at Sto:el' is not licensed to do +usiness in t%is countr' and is not re.uired"M $n t%is re ard. re ardless of -olume of +usiness. @"S"A" and %as its principal office at . or ani>ed and e?istin under t%e la3s of t%e Britis% #ir in $slands" )%ile t%e actual +idder 3as a consortium composed of J66&. Tam+untin Tradin Corporation.71. namel'. J66& must +e %eld to +e incapacitated to +rin t%e petition for inIunction +efore t%e Supreme Court for it is a forei n corporation doin +usiness in t%e 6%ilippines 3it%out t%e re. Aurora Consolidated Securities and $n-estment Corporation.19Gl+"L (A) t%at t%e second contract states t%at Mit is a 3as% out Commercial *a3 ) Cor-oration *a3 200. April 1. for e-en a sin ular act cannot +e merel' incidental or casual if it indicates t%e forei n corporationDs intention to do +usiness" 6articipatin in t%e +iddin process constitutes Mdoin +usinessM +ecause it s%o3s t%e forei n corporationDs intention to en a e in +usiness %ere" T%e +iddin for t%e concession contract is +ut an e?ercise of t%e corporationDs reason for creation or e?istence" T%us. 1 too* no art Facts$ On .87 3%erein Comp%il undertoo: to +u' and Capital Cit' a reed to sell 955 lon tons of coconut crude oil under t%e same terms and conditions +ut at an increased c"i"f" price of @SS5"3.uirement is to compel a forei n corporation desirin to do +usiness 3it%in t%e 6%ilippines to su+mit itself to t%e Iurisdiction of t%e courts of t%e state and to ena+le t%e o-ernment to e?ercise Iurisdiction o-er t%em for t%e re ulation of t%eir acti-ities in t%is countr'" $f a forei n corporation operates a +usiness in t%e 6%ilippines 3it%out a license. and t3o ot%er corporations.24 41 !ul" 11/0# Second Division. Antam Consolidated.uirement of a license is not intended to put forei n corporations at a disad-anta e.uisite license" 72 Antam Consolidated vs. Sto:el' alle ed: (1) t%at it is a corporation or ani>ed and e?istin under t%e la3s of t%e state of $ndiana. @"S"A". $nc" (@nicom) for collection of sum of mone'" $n its complaint. ar uin t%at it is suin onl' on an isolated transaction to e-ade t%e le al re.87. $ndiana. it %as +een %eld t%at Ma forei n compan' in-ited to +id for $BR* and A*B international proIects in t%e 6%ilippines 3ill +e considered as doin +usiness in t%e 6%ilippines for 3%ic% a license is re.

Antam. Antonio 6" Tam+untin .455"55" )%en t%is failed t%e t%ird transaction 3as entered into +' t%e Commercial *a3 ) Cor-oration *a3 200. +ein a forei n corporation not licensed to do +usiness in t%e 6%ilippines. so to settle Capital Cit'Ds loss. et al".455 for 955 lon tons +elo3 t%e t%en current mar:et price of A3"1 centsGl+" and +' deli-erin said . et al" in an amount sufficient to satisf' an' lien of Iud ment t%at Sto:el' ma' o+tain in its action" $n support of t%is pro-isional remed' and of its cause of action a ainst Antam.71. dated 15 Au ust 1. Antam. Sto:el' opted to tr' to pus% t%rou % 3it% t%e transaction to reco-er t%e amount of @SS153. et al" filed a motion for reconsideration +ut t%e same 3as denied" Jence. at t%e c"i"f" price of @SS5"3A19Gl+"L (9) t%at t%e latter price 3as . ( 10/ ) . t%e appellate court dismissed t%e petition" Antam. Sto:el' alle ed t%at: 1) After demands 3ere made +' respondent on Comp%il. in li %t of t%ree transactions it entered into 3it% Comp%il. Antam.uantit' of crude coconut oil to +e deli-ered in AprilG(a' 1. t%e latter still refuses to pa' t%e same" Sto:el' furt%er pra'ed t%at a 3rit of attac%ment +e issued a ainst an' and all t%e properties of Antam.71.71.455"55 3%ic% is t%e same amount of loss t%at Capital Cit' sustained under t%e first contractL t%at Comp%il a ain failed to pa' said amount.71. Antam. it entered into a t%ird contract 3it% Comp%il on 1A Januar' 1.555"55 and den'in t%e motion to dismiss +' Antam. 3%ic% is t%e onl' su+stantial asset of Bana%a3 is a+out to +e sold or remo-ed so t%at unless pre-ented +' t%e Court t%ere 3ill pro+a+l' +e no assets of Bana%a3 to satisf' its claim" On 15 April 1.8. Jr". Antam. t%e Tam+untin s ceased to +e directors and officers of Comp%il and 3ere replaced +' t%eir fi-e emplo'ees. et al" 3ere supposed to +u' +ac: t%e crude coconut oil t%e' s%ould %a-e deli-ered to t%e respondent in an amount 3%ic% 3ill earn t%e latter a profit of @SS153. Sto:el' filed a motion for reconsideration to reduce t%e attac%ment +ond" On 11 June 1. $nc" %as t%e capacit' to sue. et al". et al" filed a petition for certiorari +efore t%e $ntermediate Appellate Court" On 1A June 1. et al" 3as +ecause it 3anted to reco-er t%e loss it sustained from t%e failure of Comp%il. etc" 3it%out license" &eld$ T%e transactions entered into +' Sto:el' 3it% Comp%il.19 from Capital Cit' +' pa'in t%e latter t%e sum of @SS153. 3%o 3ere mana ers of Tam+untin Ds pa3ns%ops and said emplo'ees caused t%e name of Comp%il to +e c%an ed to MBana%a3 (illin CorporationM and aut%ori>ed one of t%e Tam+untin s. t%e trial court issued an order. Antam. t%e' filed t%e petition for certiorari and pro%i+ition 3it% pra'er for temporar' restrainin order" %ssue$ )%et%er Sto:el' #an Camp. et al" are not a series of commercial dealin s 3%ic% si nif' an intent on t%e part of Sto:el' to do +usiness in t%e 6%ilippines +ut constitute an isolated one 3%ic% does not fall under t%e cate or' of Mdoin +usiness"M T%e onl' reason 3%' Sto:el' entered into t%e second and t%ird transactions 3it% Comp%il.uantit' of coconut oil to Capital Cit' at t%e discounted price.Narratives (Berne Guerrero) a ainst RBS 3499M so t%at Comp%il 3as supposed to repurc%ase t%e undeli-ered coconut oil at @S S5"3. et al" filed a motion to dismiss t%e complaint on t%e round t%at Sto:el'.555"55" On 3 June 1. ot%er t%an Comp%il.71. Comp%il 3as to %a-e settled its @SS153.455 lia+ilit' to Capital Cit'L (4) t%at Comp%il failed to deli-er t%e coconut oil so Capital Cit' notified t%e former t%at it 3as in defaultL (8) t%at Capital Cit' sustained dama es in t%e amount of @SS189. 3%o 3as at t%at time neit%er a director nor officer of Bana%a3 to sell its oil millL 1) @nicom %as ta:en o-er t%e entire operations and assets of Bana%a3 +ecause t%e entire and outstandin capital stoc: of t%e latter 3as sold to t%e formerL 3) All of t%e issued and outstandin capital stoc: of Comp%il are o3ned +' t%e Tam+untin s 3%o 3ere t%e directors and officers of Comp%il and 3%o 3ere t%e ones 3%o +enefited from t%e sale of Bana%a3Ds assets or s%ares to @nicomL A) All of t%e petitioners e-aded t%eir o+li ation to respondent +' t%e de-ious sc%eme of usin Tam+untin emplo'ees to replace t%e Tam+untin s in t%e mana ement of Bana%a3 and disposin of t%e oil mill of Bana%a3 or t%eir entire interests to @nicomL and 9) Respondent %as reasona+le cause to +elie-e and does +elie-e t%at t%e coconut oil mill.179. %as no personalit' to maintain t%e suit" T%ereafter. et al" to deli-er t%e crude coconut oil under t%e first transaction and in order to i-e t%e latter a c%ance to ma:e ood on t%eir o+li ation" $nstead of ma:in an outri %t demand on Comp%il. et al" on t%e round t%at t%e reason cited t%erein does not appear to +e indu+ita+le" Antam."19 centsGl+" or @SS153. Antam. reducin t%e attac%ment +ond to 6955.555L and (7) t%at after repeated demands from Comp%il to pa' t%e said amount. t%e trial court ordered t%e issuance of a 3rit of attac%ment in fa-or of Sto:el' upon t%e latterDs deposit of a +ond in t%e amount of 61.455"55 it lost" T%is e?plains 3%' in t%e second transaction. 3%erein t%e latter undertoo: to sell and deli-er and Capital Cit' a reed to +u' t%e same .8. Comp%il.

in -irtue of 3%ic% it a reed to act as t%e latterDs +ro:er for t%e purc%ase and sale of futures contracts in t%e @"S"L (1) t%at pursuant to t%e contract.734"18. Comp%il. a 6%ilippine corporation and a compan' ser-icin (& 0uturesD customersLM (3) t%at from t%e outset. +ein a forei n corporation not doin +usiness in t%e 6%ilippines. $nc". 1. orders to +u' and sell futures contracts 3ere transmitted to (& 0@T@RES +' t%e &ara Spouses Mt%rou % t%e facilities of (errill &'nc% 6%ilippines. t%e Trial Court promul ated an Order sustainin t%e motion to dismiss.M and t%at it Mdid not %a-e a license from t%e Securities and E?c%an e Commission to operate as a commodit' tradin ad-isor (i"e". promptin Sto:el' to file t%e suit +elo3" 0rom t%ese facts alone. 3it% le al interest from t%e date of demand until full pa'mentL (+) e?emplar' dama es in t%e sum of at least 6955.78. et al" 3%ic% 3ill cate ori>e it as a forei n corporation doin +usiness in t%e 6%ilippines" Sto:el'.. t%e total amount of suc% discount +ein @SS153. " " " essentiall' functionin as a +ro:er (e?ecutin ) orders to +u' and sell futures contracts recei-ed from its customers on @"S" futures e?c%an es"M $n its complaint (& 0@T@RES alle ed (1) t%at on 17 Septem+er 1. %ad no license to operate as a Mcommodit' andGor financial futures +ro:er"M On t%e fore oin essential facts.78. from 1. said spouses +ecame inde+ted to (& 0@T@RES for t%e ensuin +alance of @S S7A. furnis%es ad-ice on commodit' futures to persons 3%o trade in futures contractsM)L (A) t%at in line 3it% t%e a+o-e mentioned a reement and t%rou % said (erill &'nc% 6%ilippines. dul' or ani>ed and e?istin under and +' -irtue of t%e la3s of t%e state of *ela3are. vs. Court o. Antam. Mand entit' 3%ic%. includin Mstoc: inde? futuresM for four 'ears or so. Antam. $nc". 3%o in turn.78 on t%e rounds t%at (1) (& 0@T@RES %ad Mno le al capacit' to sueM and (1) its Mcomplaint states no cause of action since it is not t%e real part' in interest"M On 11 Januar' 1. $nc" ((& 0@T@RES) filed a complaint 3it% t%e Re ional Trial Court at Rue>on Cit' a ainst t%e Spouses 6edro (" &ara and Elisa /" &ara for t%e reco-er' of a de+t and interest t%ereon. i"e". and attorne'Ds fees" $n its complaint (& 0@T@RES descri+ed itself as (a) Ma non=resident forei n corporation. after trial. Malle in t%at t%e transactions 3ere null and -oid +ecause (errill &'nc% 6%ilippines. (errill &'nc% futures. Futures vs. Antam. t%e 6%ilippine compan' ser-icin accounts of (& 0utures. does not need to o+tain a license to do +usiness in order to %a-e t%e capacit' to sue" 73 Mentholatum Inc. 1 too* no art Facts$ On 13 !o-em+er 1. dama es.78. and t%e spouses 3ere dul' ser-ed 3it% summons" T%e spouses filed a motion to dismiss dated 17 *ecem+er 1. Antam.455"55" @nfortunatel'. A--eals [GR 17/10 24 !ul" 1112# First Division. et al" and Sto:el' and t%at 3as t%e deli-er' +' t%e former of 955 lon tons of crude coconut oil to t%e latter.77.M and (1) for Iud ment. not doin +usiness in t%e 6%ilippines.73 to Octo+er.55L and (c) attorne'Ds fees and e?penses of liti ation as ma' +e pro-en at t%e trial" 6reliminar' attac%ment issued e? parte on 1 *ecem+er 1. t%ere 3as onl' one a reement +et3een Comp%il. 73 Phil 524 (see case entry 6 ! 74 'errill *"nc. 6arvasa (CJ): 3 concur. t%e &ara Spouses M:ne3 and 3ere dul' ad-ised t%at (errill &'nc% 6%ilippines.13"A1 t%en o3in +' (& 0@T@RES to t%e &ara Spouses. not +ein a +ro:er. t%ere +ein more or less re ular accountin and correspondin remittances of mone' (or creditin or de+itin ) made +et3een t%e spouses and (& 0@T@RESL (9) t%at +ecause of a loss amountin to @S S145. (& 0@T@RES pra'ed (1) for a preliminar' attac%ment a ainst t%e spousesD properties Mup to t%e -alue of at least 61.73 it entered into a 0utures Customer A reement 3it% t%e spouses (Account 137=11141). directin t%e Commercial *a3 ) Cor-oration *a3 200. 3%ic% t%e latter as:ed t%em to pa'L (4) t%at t%e &ara Spouses %o3e-er refused to pa' t%is +alance."4.734"18 at t%e applica+le e?c%an e rate on date of pa'ment. t%e &ara Spouses acti-el' traded in futures contracts."95. sentencin t%e spouses to pa' (& 0@T@RES: (a) t%e 6%ilippine peso e.8A.148. Mangaliman. @"S"A"LM as 3ell as (+) a Dfutures commission merc%antD dul' licensed to act as suc% in t%e futures mar:ets and e?c%an es in t%e @nited States. must pa' t%e correspondin price for t%e same" T%e t%ree seemin l' different transactions 3ere entered into +' t%e parties onl' in an effort to fulfill t%e +asic a reement and in no 3a' indicate an intent on t%e part of Sto:el' to en a e in a continuit' of transactions 3it% Comp%il. $nc" 3as not a +ro:er in futures contracts. et al" failed to deli-er a ain. incurred in respect of 3 transactions in-ol-in Minde? futures.555. et al" 3ere supposed to sell crude coconut oil to t%e respondent at a discounted rate. it can +e deduced t%at in realit'. ( 101 ) .13. $nc".M and after settin t%is off a ainst an amount of @S S89.Narratives (Berne Guerrero) parties 3%ere+' Comp%il.ui-alent of S7A.

and 3%et%er t%e' 3ere so far a3are of t%e a+sence of t%e re. and 3it%out (&6$ +ein aut%ori>ed to operate as a commodit' futures tradin ad-isor" T%ese are t%e factual findin s to +ot% t%e Trial Court and t%e Court of Appeals" T%ese.uit' dictate t%at.8A. (& 0@T@RES appealed to t%e Supreme Court on certiorari" %ssue [1#$ )%et%er (& 0@T@RES 3as doin +usiness in t%e 6%ilippines 3it%out license" &eld [1#$ T%e facts on record ade. in 3%ic% t%e &aras alle edl' suffered a loss in t%e sum of @SS145.uisite licenses on t%e part of (& 0@T@RES and its 6%ilippine correspondent. muc% earlier" $n fact. and t%at on se-eral occasions t%e latter recei-ed account documents and mone' in connection 3it% t%ose transactions" /i-en t%ese facts. spanned a period of 8 'earsL and t%e' e-identl' found t%ose relations to +e of suc% profita+ilit' as 3arranted t%eir maintainin t%em for t%at not insi nificant period of timeL ot%er3ise. and %ad e?ecuted all t%ese transactions 3it%out (& 0@T@RES +ein licensed to so transact +usiness %ere. accordin to t%e &aras t%emsel-es. (& 0@T@RES %ad credited t%e &aras 3it% t%e amount of @S S 89. a corporation or ani>ed in t%is countr'. %ad done so at all times t%rou % (errill &'nc% 6%ilippines.Narratives (Berne Guerrero) dismissal of t%e case and disc%ar in t%e 3rit of preliminar' attac%ment" $t later denied (& 0@T@RESDs motion for reconsideration. t%e issue of 3%et%er t%e &aras are in trut% lia+le to (& 0@T@RES and if so in 3%at amount. and in relation to t%ose transactions %ad made pa'ments to.734"18. at t%e -er' least."4. as to +e estopped from alle in t%at fact as a defense to suc% lia+ilit'. @S S7A.L t%at in relation to t%is loss. +' Order dated 1. t%e &aras did transact +usiness 3it% (& 0@T@RES t%rou % its a ent corporation or ani>ed in t%e 6%ilippines. t%e Court of Appeals affirmed t%e Trial CourtDs Iud ment" $ts motion for reconsideration %a-in +een denied. no aut%orit' to act as +ro:er for it. and recei-ed mone' from it for se-eral 'ears Yt%e &ara Spouses are estopped to impu n (& 0@T@RES capacit' to sue t%em in t%e courts of t%e forum" &eld [2#$ T%e &aras recei-ed +enefits enerated +' t%eir +usiness relations 3it% (& 0@T@RES" T%ose +usiness relations. t%us reducin t%eir de+t to @S S7A.8A.734"18" /i-en t%ese facts. a denial su+se."4. %ad indeed done +usiness 3it% t%e &ara Spouses in t%e 6%ilippines o-er se-eral 'ears.uatel' esta+lis% t%at (& 0@T@RES.uita+le for t%e &aras to e-ade pa'ment of an ot%er3ise le itimate inde+tedness due and o3in to (& 0@T@RES upon t%e plea t%at it s%ould not %a-e done +usiness in t%is countr' in t%e first place..13"A1 t%en due to t%em. if indeed t%e last transaction e?ecuted +' (& 0@T@RES in t%e &arasDs +e%alf %ad resulted in a loss amountin to @S S145. s%ould +e -entilated and adIudicated on t%e merits +' t%e proper trial court" Commercial *a3 ) Cor-oration *a3 200. it 3ould appear . and assumin t%at t%e &ara Spouses 3ere a3are from t%e outset t%at (& 0@T@RES %ad no license to do +usiness in t%is countr' and (&6$.. 0e+ruar' 1. it is reasona+l' certain t%at t%e' 3ould %a-e terminated t%eir dealin s 3it% (& 0@T@RES muc%. (&6$. operatin in t%e @nited States.uite ine.77" (& 0@T@RES appealed to t%e Court of Appeals" $n its o3n decision promul ated on 18 !o-em+er 1. t%e Supreme Court %as +een cited to no circumstance of su+stance to 3arrant re-ersal of said Appellate CourtDs findin s or conclusions in t%is case" 0urt%er. e-en as re ards t%eir last transaction. +ut t%e &aras %ad refused to pa' (for t%e reasons alread' a+o-e stated)" %ssue [2#$ )%et%er Y in li %t of t%e fact t%at t%e &aras 3ere full' a3are of its lac: of license to do +usiness in t%e 6%ilippines.. %ad no license eit%er to operate as a Mcommodit' andGor financial futures +ro:er"M Considerations of e. (&6$.5. it +ein unnecessar' to determine 3%et%er t%is domestic firm 3as (&6$ ((errill &'nc% 6%ilippines. t%e &aras nonet%eless still recei-ed some monetar' ad-anta e. or t%at its a ent in t%is countr'. $nc" ((&6$). for (& 0@T@RES credited t%em 3it% t%e amount of @S S89. ( 110 ) . $nc") or (errill &'nc% 6ierce 0enner K Smit% ((&6$Ds alle ed predecessor)" T%e fact is t%at (& 0@T@RES did deal 3it% futures contracts in e?c%an es in t%e @nited States in +e%alf and for t%e account of t%e &ara Spouses. too..13"A1 P 3%ic% it ((& 0@T@RES) t%en admittedl' o3ed t%e spouses P and t%ereafter sou %t to collect t%e +alance.uentl' affirmed +' t%e Court of Appeals" 6rescindin from t%e proposition t%at factual findin s of t%e Court of Appeals are enerall' conclusi-e. are t%e conclusions of t%e Securities K E?c%an e Commission 3%ic% denied (&6$Ds application to operate as a commodit' futures tradin ad-isor.

Ant%on' C%oo. 3it% t%e consent of $nte rated Silicon..401/ 14 A-ril 2004# First Division. and Sum of (one' 3it% Reple-in.Specific 6erformance. +efore t%e Re ional Trial Court.1 -oluntaril' in%i+ited %imself in Ci-il Case 3113=1551=C" T%e case 3as re=raffled and assi ned to Branc% 39. in t%e alternati-e. for its part. and ordered t%e dismissal of Ci-il Case 3113=1551=C" A ilent filed t%e petition for re-ie3" %ssue [1#$ )%et%er a forei n corporation 3it%out a license is incapacitated from +rin in an action in 6%ilippine courts" &eld [1#$ A forei n corporation 3it%out a license is not ipso facto incapacitated from +rin in an action in 6%ilippine courts" A license is necessar' onl' if a forei n corporation is . Te' Boon Tec: and 0rancis E%or (Ci-il Case 3115=51= C). A(ilent 8ec. %nte(rated 5ilicon 8ec. $nte rated Silicon. for .. t%e trial court denied t%e (otion to *ismiss and ranted A ilent2s application for a 3rit of reple-in" )it%out filin a motion for reconsideration. t%e same +ranc% 3%ere Ci-il Case 3115=1551=C is pendin " On 11 Au ust 1551. on t%e rounds of lac: of A ilent2s le al capacit' to sueL litis pendentiaL forum s%oppin L and failure to state a cause of action" On A Septem+er 1551.Specific 6erformance and *ama es< a ainst A ilent and its officers Tan Bian Ee. A ilent filed a separate complaint a ainst $nte rated Silicon. et" al". are current mem+ers of $nte rated Silicon2s +oard of directors. &im C%in Jon . 3%o returned t%ese processes on t%e claim t%at %e 3as not t%e re istered a ent of A ilent" &ater. &a una. mac%ineries and t%e materials to +e used for fi+er=optic components 3%ic% 3ere left in t%e plant of $nte rated SiliconL and t%at t%e latter +e ordered to pa' actual and e?emplar' dama es and attorne'2s fees" $nte rated Silicon. %e entered a special appearance to assail t%e court2s Iurisdiction o-er t%e person of A ilent" On 1 Jul' 1551. 3as to consi n ra3 materials to $nte rated SiliconL transport mac%iner' to t%e plant of $nte rated SiliconL and pa' $nte rated Silicon t%e purc%ase price of t%e finis%ed products" T%e #AASA %ad a fi-e='ear term. upon motion filed +' $nte rated Silicon. alle in t%at A ilent +reac%ed t%e parties2 oral a reement to e?tend t%e #AASA" $nte rated Silicon t%us pra'ed t%at A ilent +e ordered to e?ecute a 3ritten e?tension of t%e #AASA for a period of fi-e 'ears as earlier assured and promisedL to compl' 3it% t%e e?tended #AASAL and to pa' actual. +e innin on 1 April 1. and *ama es<. $nte rated Silicon 3as to locall' manufacture and assem+le fi+er optics for e?port to J6=Sin apore" J6=Sin apore. Teo% Eian /on . Jean Ea' (" dela Cru>. Jean Ea' (" dela Cru> and Rolando T" !acilla.nolo(" :.uipment.. [GR 1.. Branc% . $nte rated Silicon filed a complaint for .nolo(ies 5in(a-ore vs. and Rolando T" !acilla are its former mem+ers" T%e Iuridical relation amon t%e -arious parties in t%e case can +e traced to a 9='ear #alue Added Assem+l' Ser-ices A reement (#AASA). +e issued orderin $nte rated Silicon.4 +et3een $nte rated Silicon and t%e Je3lett=6ac:ard Sin apore (6te") &td".. 155H forei n o3ned. et" al" filed a petition for certiorari 3it% t%e Court of Appeals" $n t%e meantime. e?emplar' dama es and attorne'2s fees" On 1 June 1551.1 (Ci-il Case 3113=1551=C)" A ilent pra'ed t%at a 3rit of reple-in or. Septem+er 1. ( 111 ) . 4nares5Santia'o (J): 4 concur Facts$ A ilent Tec%nolo ies Sin apore (6te"). 3%ile Joanne Eate (" dela Cru>. a 3rit of preliminar' mandator' inIunction. J6=Sin apore assi ned all its ri %ts and o+li ations in t%e #AASA to A ilent" On 19 (a' 1551.transactin < or . entered into on 1 April 1. Reco-er' of 6ossession. et" al" filed a (otion to *ismiss in Ci-il Case !o" 3113=1551=C. Teo% Ean Sen . Sin apore Components Operation (J6=Sin apore)" @nder t%e terms of t%e #AASA.Narratives (Berne Guerrero) 7. set aside t%e assailed Order of t%e trial court dated A Septem+er 1551. +' its o3n admission. Jud e Antonio S" 6o>as of Branc% . 3it% a pro-ision for annual rene3al +' mutual 3ritten consent" On 1.ili--ines Cor-. et" al"2s petition for certiorari. is not licensed to do +usiness in t%e 6%ilippines" $nte rated Silicon Tec%nolo ' 6%ilippines Corporation is a pri-ate domestic corporation. Teo% Eian Sen and Ant%on' C%oo. et" al" to immediatel' return and deli-er to A ilent its e. Calam+a. summons and a cop' of t%e complaint 3ere ser-ed on Att'" Ramon Ruisum+in .4.doin +usiness< in Commercial *a3 ) Cor-oration *a3 200. 3%ic%. 6reliminar' (andator' $nIunction. Joanne Eate (" dela Cru>. moral. &td" is a forei n corporation. (ala'sian nationals. t%e Court of Appeals ranted $nte rated Silicon. 3%ic% is en a ed in t%e +usiness of manufacturin and assem+lin electronics components" Teo% Eian Jon .

doin +usiness< in t%e 6%ilippines" Section 1 of t%e $mplementin Rules and Re ulations of t%e 0$A (as amended +' RA 718.1 (0$A.doin <.uipment 3it% a local compan' to +e used in t%e processin of products for e?portL (8) Collectin information in t%e 6%ilippinesL and (7) 6erformin ser-ices au?iliar' to an e?istin isolated contract of sale 3%ic% are not on a continuin +asis.transactin < +usiness in t%e 6%ilippines. it can sue +efore 6%ilippine courts on an' transaction" %ssue [2#$ )%et%er A ilent 3as doin +usiness in t%e 6%ilippines" &eld [2#$ T%e c%allen e to A ilent2s le al capacit' to file suit %in es on 3%et%er or not it is doin +usiness in t%e 6%ilippines" Jo3e-er. suit or proceedin in an' court or administrati-e a enc' of t%e 6%ilippinesL +ut suc% corporation ma' +e sued or proceeded a ainst +efore 6%ilippine courts or administrati-e tri+unals on an' -alid cause of action reco ni>ed under 6%ilippine la3s"M T%e aforementioned pro-ision pre-ents an unlicensed forei n corporation .uired license. A ilent cannot +e deemed to +e . t%e Court %eld t%at an unlicensed forei n corporation doin +usiness in t%e 6%ilippines ma' +rin suit in 6%ilippine courts a ainst a 6%ilippine citi>en or entit' 3%o %ad contracted 3it% and +enefited from said corporation" Suc% a suit is premised on t%e doctrine of estoppel" A part' is estopped from c%allen in t%e personalit' of a corporation after %a-in ac:no3led ed t%e same +' enterin into a contract 3it% it" T%is doctrine of estoppel to den' corporate e?istence and capacit' applies to forei n as 3ell as domestic corporations" T%e application of t%is principle pre-ents a person contractin 3it% a forei n corporation from later ta:in ad-anta e of its noncompliance 3it% t%e statutes c%iefl' in cases 3%ere suc% person %as recei-ed t%e +enefits of t%e contract" T%e principles re ardin t%e ri %t of a forei n corporation to +rin suit in 6%ilippine courts ma' t%us +e condensed in four statements: (1) if a forei n corporation does +usiness in t%e 6%ilippines 3it%out a license. t%e Corporation Code itself is silent as to 3%at acts constitute doin or transactin +usiness in t%e 6%ilippines" An anal'sis of t%e rele-ant case la3. it needed no license +efore it can sue +efore our courts" Commercial *a3 ) Cor-oration *a3 200. or .doin +usiness< in t%e 6%ilippines" $nte rated Silicon. ser-icin t%e same. et" al"2s contention t%at A ilent lac:s t%e le al capacit' to file suit is t%erefore de-oid of merit" As a forei n corporation not doin +usiness in t%e 6%ilippines. . t%ere is no definiti-e rule on 3%at constitutes .. as amended +' RA 718. s%all +e permitted to maintain or inter-ene in an' action.en a in in<.) pro-ides t%at t%e follo3in s%all not +e deemed . A ilent2s acti-ities in t%e 6%ilippines 3ere confined to (1) maintainin a stoc: of oods in t%e 6%ilippines solel' for t%e purpose of %a-in t%e same processed +' $nte rated SiliconL and (1) consi nment of e. in conIunction 3it% Section 1 of t%e $mplementin Rules and Re ulations of t%e 0orei n $n-estments Act of 1.doin +usiness<. t%e acti-it' to +e underta:en in t%e 6%ilippines is one t%at is for profit=ma:in " Jerein. or its successors or assi ns. a 6%ilippine citi>en or entit' 3%ic% %as contracted 3it% said corporation ma' +e estopped from c%allen in t%e forei n corporation2s corporate personalit' in a suit +rou %t +efore 6%ilippine courtsL and (A) if a forei n corporation does +usiness in t%e 6%ilippines 3it% t%e re. 3ould demonstrate t%at t%e acts enumerated in t%e #AASA do not constitute . and similar incidental ser-ices" B' and lar e.Narratives (Berne Guerrero) t%e countr'" Section 133 of t%e Corporation Code pro-ides t%at M!o forei n corporation transactin +usiness in t%e 6%ilippines 3it%out a license. to constitute . it cannot sue +efore t%e 6%ilippine courtsL (1) if a forei n corporation is not doin +usiness in t%e 6%ilippines.). suc% as installin in t%e 6%ilippines mac%iner' it %as manufactured or e?ported to t%e 6%ilippines.doin +usiness< in t%e 6%ilippines from accessin our courts" $n a num+er of cases.doin +usiness<: (1) (ere in-estment as a s%are%older +' a forei n entit' in domestic corporations dul' re istered to do +usiness.uipment 3it% $nte rated Silicon to +e used in t%e processin of products for e?port" As suc%. %o3e-er. ( 112 ) . trainin domestic 3or:ers to operate it. it needs no license to sue +efore 6%ilippine courts on an isolated transaction or on a cause of action entirel' independent of an' +usiness transactionL (3) if a forei n corporation does +usiness in t%e 6%ilippines 3it%out a license. +' t%e clear terms of t%e #AASA. andGor t%e e?ercise of ri %ts as suc% in-estorL (1) Ja-in a nominee director or officer to represent its interest in suc% corporationL (3) Appointin a representati-e or distri+utor domiciled in t%e 6%ilippines 3%ic% transacts +usiness in t%e representati-e2s or distri+utor2s o3n name and accountL (A) T%e pu+lication of a eneral ad-ertisement t%rou % an' print or +roadcast mediaL (9) (aintainin a stoc: of oods in t%e 6%ilippines solel' for t%e purpose of %a-in t%e same processed +' anot%er entit' in t%e 6%ilippinesL (4) Consi nment +' a forei n entit' of e.

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