CHINA BANKING CORP.

,
V.

PETITIONER

COURT

OF APPEALS AND RESPONDENTS

VALLEY GOLF

AND

COUNTRY CLUB INC.,

GR no. 117604 March 26, 1997 Kapunan, J.

SV: Calapatia ple !e hi" "hare" o# "toc$ %ith Valle& Gol# to C'C. Calapatia #aile to pa& hi" o(li!ation to C'C. C'C #oreclo"e the ple !e "hare" an purcha"e the "hare" at a pu(lic auction. Valle& Gol# later "ol the "a)e "hare" on the !roun that Calapatia #aile to pa& hi" ue" %ith Valle& !ol#. C'C a""aile thi" "u("e*uent "ale o# the "hare" SC: +lthou!h the (&,la%" o# Valle& Gol# pro-i e" that it ha" the ri!ht to "ell (& pu(lic auction the "hare" o# a )e)(er %ho ha" (een po"te a" elin*uent, thi" oe" not )ean that C'C i" (oun (& it. .r per"on" are onl& (oun (& the (&,la%" onl& %hen it ha" actual or con"tructi-e $no%le !e o# the (&,la%" at the ti)e the contract %a" e/ecute . 0n thi" ca"e C'C %a" onl& in#or)e o# the (&,la%" o# Valle& !ol# a#ter Calapatia (eca)e elin*uent an %hen Valle& Gol# "ol the "hare" o# Calapatia. 0t ha no $no%le !e %hen it entere into a ple !e a!ree)ent %ith Calapatia hence, C'C i" not (oun (& the (&,la%"

1. +u!u"t 21, 1974, Galicano Calapatia, Jr. a "toc$hol er #or Valle& !ol# ple !e hi" "toc$ certi#icate no 1219 to China 'an$in! Corp 1C'C2 2. C'C %rote Valle& !ol# re*ue"tin! that the latter recor in it" (oo$" the ple !e a!ree)ent. Valle& !ol# replie an "ai that it %a" ul& note in it" corporate (oo$" .. +u!u"t ., 193. calapatia o(taine a loan o# 420,000 #ro) C'C, thi" %a" "ecure (& the ple !e a!ree)ent "till e/i"tin! 1#ro) 19742 4. Calaptia #aile to pa& hi" o(li!ation, C'C #ile a petition #or e/tra5u icial #oreclo"ure (e#ore 6otar& 4u(lic +ntonio 7. e Vera re*ue"tin! hi) to con uct a pu(lic auction o# the ple !e "toc$. 8. C'C in#or)e Valle&!ol# a(out the #oreclo"ure procee in!" an re*ue"te that the ple !e "toc$ (e tran"#erre to C'C9" na)e an the "a)e (e recor e in the corporate (oo$". Valle& !ol# %rote C'C "a&in! it i" una(le to acce e to C'C9" re*ue"t in -ie% o# Calapatia9" un"ettle account" %ith the clu( 6. :e"pite thi", the notar& pu(lic procee e %ith the pu(lic auction on Sept. 17, 1938 an C'C e)er!e a" the hi!he"t (i er at 420,000. C'C %a" i""ue the corre"pon in! certi#icate o# "ale. 7. 6o-. 21 1938. Valle& Gol# "ent Calapatia a notice e)an in! #ull pa&)ent o# hi" o-er ue account in the a)ount o# 4 13,73..24. the notice %a" #ollo%e (& a e)an later an another notice on 6o-e)(er 1936 #or 42., 43..24.

3. :ec 4, 1936. Calle& Gol# cau"e to (e pu(li"he in the ne%"paper :ail& ;/pre"" a notice o# auction "ale o# a nu)(er o# it" "toc$ certi#icate" inclu in! the "hare" o# "toc$ o# Calapatia. Valle& !ol# in#or)e Calapatia that the& ha-e ter)inate hi" )e)(er"hip ue to the "ale o# hi" "hare o# "toc$ 9. C'C a -i"e Valle& Gol# that it i" the ne% o%ner o# Calapatia9" "toc$ certi#icate (& -irtue o# a pu(lic auction an re*ue"te that a ne% certi#icate o# "toc$ (e i""ue in it" na)e a. Valle& !ol#: #or rea"on o# elin*uenc&, Calapatia9" "toc$ %a" "ol at a pu(lic auction #or 428,000 10.C'C prote"te the "ale (& Valle& !ol# an #ile a ca"e %ith the R7C Ma$ati #or nulli#ication o# the auction ate :ec. 10 1936 1#act < 32 an #or the i""uance o# a ne% "toc$ certi#icate in it" na)e. a. R7C i")i""e the co)plaint #or lac$ o# 5uri" iction, it in-ol-e" an intra,corporate )atter. MR enie 11.C'C #iel a co)plaint %ith the S;C #or the nulli#ication o# the "ale o# Calapatia9 "toc$ to Valle& !ol#, cancellation o# a ne% certi#icate i""ue pur"uant to the "ale an i""uance o# a ne% certi#icate in C'C9" na)e. a. S;C hearin! o##icer Manuel 4erea ren ere a eci"ion in #a-or o# Valle& Gol#. Ca"e %a" i")i""e . MR enie (. C'C appeale to the S;C en (anc an the latter re-er"e the eci"ion o# the hearin! o##icer an eclare that C'C ha" a prior ri!ht o-er the ple !e "hare an (ecau"e o# Calapatia9" #ailure to pa& C'C upon )aturit&, C'C can procee %ith the #oreclo"ure o# the ple !e "hare. . MR (& Valle& Gol# enie 12.Valle& Gol# %ent to the C+ %hich nulli#ie the eci"ion o# the S;C an it" hearin! o##icer on !roun o# lac$ o# 5uri" iction o-er the "u(5ect )atter, it i" not intra,corporate. MR (& C'C enie . 1..=ence, thi" petition #or re-ie% on certiorari un er Rule 48.

ISSUES: 1. WON SEC has ju !s"!#$!%& %'( $h( #as(. YES ). Wh% %*&s $h( sha (s %+ s$%#, %+ Ca-a.a$!a/ CBC

1. S;C ha" 5uri" iction o-er the ca"e S;C %a" !i-en ori!inal an e/clu"i-e 5uri" iction to hear an eci e ca"e" in-ol-in! contro-er"ie" ari"in! out o# intra,corporate or partner"hip (-a$!%&s 0($*((& a&" a1%&2 s$%#,h%-"( s, )e)(er" or a""ociate"> (et%een an&

or all o# the) an the corporation, partner"hip or a""ociation o# %hich the& are "toc$hol er", )e)(er" or a""ociate", re"pecti-el&> an (et%een "uch corporation, partner"hip or a""ociation an the State in"o#ar a" it concern" their in i-i ual #ranchi"e or ri!ht to e/i"t a" "uch entit& a)on! other" o 7he purcha"e o# the "u(5ect "hare or )e)(er"hip certi#icate at pu(lic auction (& C'C tran"#erre o%ner"hip o# the "a)e to C'C an entitle it to ha-e the "ai "hare re!i"tere in it" na)e a" a )e)(er o# Valle& Gol#. Valle& !ol# i not a""ail thi" tran"#er irectl& an e/pre""l& reco!ni?e the ple !e a!ree)ent e/ecute (& Calapatia in #a-or o# C'C. Valle& Gol# e-en note the ple !e a!ree)ent in it" corporate (oo$". Calapatia al"o i not *ue"tion the tran"#er. 'ecau"e o# thi", C'C (eca)e a (ona #i e "toc$hol er o# Valle& Gol#, there#ore the con#lict aro"e (et%een petitioner an Valle& !ol#, an the contro-er"& i" an intra,corporate contro-er"& (et%een a corporation an it" "toc$hol er Va--(3 2%-+ #-a!1s a . !% !2h$ %'( $h( su0j(#$ sha ( a&#h% (" 1a!&-3 %& s(#. 4 A $ VIII %+ !$s 035-a*s %hich pro-i e" that @a#ter a )e)(er "hall ha-e (een po"te a" elin*uent, the (oar )a& or er hi"AherAit" "hare "ol to "ati"#& the clai)" o# the clu(B 0t i" pur"uant to thi" pro-i"ion that Valle& Gol# "ol the "hare at pu(lic auction o# %hich it %a" the hi!he"t (i er. 0t ar!ue" that it" (&,la%" "houl pre-ail SC: there i" a nee #or the proper interpretation o# the (&,la%" an thi" call" #or the "pecial co)petence o# the S;C.

7he (etter polic& in eter)inin! %hich (o & ha" 5uri" iction o-er a ca"e %oul (e to con"i er not onl& the "tatu" or relation"hip o# the partie" (ut al"o the nature o# the *ue"tion that i" the "u(5ect o# the contro-er"&. o 7he nee #or the S;C9" technical e/perti"e cannot (e o-er,e)pha"i?e in-ol-in! a" it oe" the )eticulou" anal&"i" an correct interpretation o# a corporation"9 (&,la%" a" %ell a" the applica(le pro-i"ion" o# the corporation co e in or er to eter)ine the -ali it& o# Valle& Gol#9" clai)". S;C too$ proper co!ni?ance o# the in"tant ca"e Valle& !ol# ar!ue" that C'C i" e"toppe #ro) en&in! it" earlier po"ition in the #ir"t co)plaint that it #ile (e#ore the R7C o# Ma$ati that there i" no intra,corporate relation" (et%een it"el# an the Valle& !ol# =elloC Valle& Gol# in the "a)e procee in!" (e#ore the R7C o# Ma$ati cate!oricall& "tate that the ca"e (et%een it"el# an petitioner i" intra,corporate an in"i"te that it i" the S;C an not the re!ular court" %hich ha" 5uri" iction. 7hi" i" the rea"on

%h& R7C i")i""e the ca"e %hich lea to C'C9" #ilin! a co)plaint (e#ore the S;C. 2. SC cho"e not to re)an the ca"e "ince it i" in the po"ition to re"ol-e the i"pute an (ecau"e onl& *ue"tion" o# la% %ere rai"e . Valle& !ol#: ple !e a!ree)ent i" null an -oi #or lac$ o# con"i eration (ecau"e the ple !e a!ree)ent %a" entere into on +u!u"t 21, 1974 (ut the loan or pro)i""or& note %hich it "ecure %a" o(taine (& Calapatia )uch later or onl& on +u!u"t ., 193. o o SC: thi" contention i" un)eritouriou" 7he ple !e a!ree)ent "tipulate that the ple !e %ill al"o "tan a" "ecurit& #or an& #uture a -ance)ent" that Calapatia )a& procure #ro) C'C. 7he pro)i""or& note o# +u!u"t ., 193. in the a)ount o# 420,000 %a" (ut a rene%al o# the #ir"t pro)i""or& note co-ere (& the "a)e ple !e a!ree)ent.

Valle& !ol# al"o in"i"t" that (ecau"e Calapita #aile to "ettle hi" elin*uent account", it ha the ri!ht to "ell the "hare in *ue"tion in accor ance %ith it" (&,la%". o SC: 6o. Valle& Gol# (e!an "en in! notice" o# elin*uenc& to calapatia a+$( it %a" in#or)e (& C'C o# the #oreclo"ure procee in! initiate a!ain"t Calapatia9" ple !e "hare. C'C %a" not in#or)e o# the o-er ue account" until Valle& !ol# it"el# "ol the ple !e "hare at another pu(lic auction. '& oin! "o, Valle& !ol# i"re!ar e C'C9" ri!ht" a" ple !ee. 0t e-en #aile to !i-e petitioner notice o# "ai auction "ale. 7hi" (elie" Valle& Gol#9" clai) o# !oo #aith Valle& Gol# in"i"t" that it i" (oun (& it" (&,la%". Valle& Gol#: Genera rule i" that .r per"on" are not (oun (& the (&,la%" o# the corporation. ;/ception: %hen . r per"on" ha-e actual or con"tructi-e $no%le !e o# the "a)e. C'C ha actual $no%le !e %hen C'C e-en *uote a portion o# Valle& Gol#9" (&,la%" %hich i" )aterial to the i""ue in a letter it %rote to Valle& Gol#. 7hi" )ean" that C'C %a" (oun (& the (&, la%" o# Valle&,!ol# an C'C purcha"e the "ai "hare "u(5ect to the ri!ht o# Valle& Gol# to "ell the "ai "hare #or rea"on" o# elin*uenc& an the ri!ht o# Valle& Gol# to ha-e a #ir"t lien on "ai "hare" a" the"e are pro-i e #or in the (&,la%".

SC: Valle& !ol# )i"un er"too the rulin! in Dlei"cher -. 'otica 6ola"co Co. 0n or er to (e (oun the .r part& )u"t ha-e ac*uire the $no%le !e o# the pertinent (&,la%" at the ti)e the tran"action or a!ree)ent (et%een "ai thir part& an the "harehol er %a" entere into. 0n thi" ca"e the ti)e the ple !e a!ree)ent %a" e/ecute . Valle& Gol# coul ha-e ea"il& in#or)e C'C o# it" (&,la%" %hen it "ent notice #or)all& reco!ni?in! C'C a" ple !ee o# one o# it" "hare" re!i"tere in Calapatia9" na)e. C'C9" (elate notice o# "ai (&,la%" at the ti)e o# #oreclo"ure %ill not "u##ice. S;C en (anc9" rulin!: '&,la%" "i!ni#ie" the rule" an re!ulation" or pri-ate la%" enacte (& the corporation to re!ulate, !o-ern an control it" o%n action", a##air" an concern" an it" "toc$hol er" or )e)(er" an irector" an o##icer" %ith relation thereto an a)on! the)"el-e" in their relation to it. 0n other %or ", (&,la%" are the relati-el& per)anent an continuin! rule" o# action a opte (& the corporation #or it" o%n !o-ern)ent an that o# the in i-i ual" co)po"in! it an ha-in! the irection, )ana!e)ent an control o# it" a##air", in %hole or in part, in the )ana!e)ent an control o# it" a##air" an acti-itie" 7he purpo"e o# a (&,la% i" to re!ulate the con uct an e#ine the utie" o# the )e)(er" to%ar " the corporation an a)on! the)"el-e". Th(3 a ( s(-+5!1.%s(" a&", a-$h%u2h a"%.$(" .u sua&$ $% s$a$u$% 3 au$h% !$3, ha'( &% s$a$us as .u0-!# -a*. C'C a" a thir part& can not (e (oun (& Valle& !ol#E" (&, la%". 0t )u"t (e recalle that %hen Valle& !ol# co))unicate to C'C that the ple !e a!ree)ent %a" ul& note in the clu(E" (oo$" there %a" no )ention o# Calapatia9" unpai account". Kno%le !e o# the pro-i"ion" o# the VGC0 '&,la%" )u"t (e ac*uire at the ti)e the ple !e a!ree)ent %a" contracte . Kno%le !e o# "ai pro-i"ion", either actual or con"tructi-e, at the ti)e o# #oreclo"ure %ill not a##ect C'CE" ri!ht o-er the ple !e "hare 7o cancel the ple !e certi#icate outri!ht an the i""uance o# ne% certi#icate to a thir per"on %ho purcha"e the "a)e certi#icate co-ere (& the ple !e, %ill certainl& e#eat the ri!ht o# the ple !ee to re"ort to it" collateral #or the pa&)ent o# the e(t. 7he ple !or or

hi" repre"entati-e or re!i"tere "toc$hol er" ha" no ri!ht to re*uire a return o# the ple !e "toc$ until the e(t #or %hich it %a" !i-en a" "ecurit& i" pai an "ati"#ie , re!ar le"" o# the len!th o# ti)e %hich ha-e elap"e "ince e(t %a" create Valle& Gol# conten " that C'C i" ut& (oun to $no% it" (&,la%" (ecau"e o# +rt. 2099 o# the ci-il co e %hich "tipulate" that the cre itor )u"t ta$e care o# the thin! ple !e %ith the ili!ence o# a !oo #ather o# a #a)il& o Me)(er"hip "hare i" *uite i##erent #ro) a pa%n tic$et 1 a ocu)ent (& -irtue o# %hich the propert& in the thin! ple !e pa""e" #ro) han to han (& )ere eli-er& o# the tic$et.2

Sec. 6. o# the Corporation Co e %hich pro-i e" that Fno "hare" o# "toc$ a!ain"t %hich the corporation hol " an& unpai clai) "hall (e tran"#era(le in the (oo$" o# the corporationF cannot (e utili?e (& Valle& Gol#. o 7he ter) Funpai clai)F re#er" to Fan& unpai clai) ari"in! #ro) unpai "u("cription, an not to an& in e(te ne"" %hich a "u("cri(er or "toc$hol er )a& o%e the corporation ari"in! #ro) an& other tran"action 7he "u("cription #or the "hare ha" (een #ull& pai a" e-i ence (& the i""uance o# the certi#icate o# "toc$. Calapatia o%e" the )onthl& ue" not the "u("cription o# the "toc$.

C+ eci"ion R;V;RS;:. S;C en (anc or er +DD0RM;: Ju"tin 'ene ict +. Moreto