DEVELOPMENT BANK OF THE PHILIPPINES,  vs.

HONORABLE COURT OF
APPEALS and REMINGTON INDUSTRIAL SALES CORPORATION

G.R. No. 126200            August 16, 2001

FACTS:

Marinduque Mining-Industrial Corporation (Marinduque Mining), a corporation engaged

in the mining business., obtained from the Philippine National Bank (PNB) and DBP various
loan accommodations. To secure the loans, Marinduque Mining executed orgages in favor of
PNB and DBP. For failure of Marinduque Mining to settle its loan obligations, PNB and DBP
instituted an extrajudicial foreclosure where PNB and DBP emerged and were declared the
highest bidders. PNB and DBP thereafter assigned and transferred to Nonoc Mining and
Marinduque Mining all their rights, interest and participation over the foreclosed.

Remington Corp. On the other hand, filed a complaint for a sum of money and damages
against Marinduque Mining for the value of the unpaid construction materials and other
merchandise purchased by Marinduque Mining, as well as interest, attorney's fees and the costs
of suit. Remington's include Nonoc Mining, PNB and DBP as co-defendants. Remington Corp.
alleged that the assignment and tranfer made by DBP to Marinduque Mining involves
interlocking directors, hence void.

ISSUE:

Can Remington question the the validity of the transaction made by DBP to Marinduque
Mining

RULING:

No.The rule between corporations with interlocking directors resulting in the prejudice to
one of the corporations does not apply in this case, however, since the corporation allegedly
prejudiced (Remington) is a third party, not one of the corporations with interlocking directors
(Marinduque Mining and DBP). Such issue should be raised by either Marinduque Mining or
DBP not Remington, a third party corporation.
 WENSHA SPA CENTER, INC. AND/OR XU ZHI JIE vs. LORETA T. YUNG

G.R. No. 185122 August 16, 2010

FACTS:

Xu Zhi Jie is its president of Wensha Spa Center, Inc while respondent Loreta T.
Yung was its administrative manager at the time of her termination from employment.
Loreta recounted that she was asked to leave her office because Xu and a Feng Shui master were
exploring the premises.  Later that day, Xu asked Loreta to go on leave with pay for one month. 
She did so and returned on September 10, 2004.  Upon her return, Xu and his wife asked her to
resign from Wensha because, according to the Feng Shui master, her aura did not match that of
Xu. Loreta refused but was informed that she could no longer continue working at Wensha.  That
same afternoon, Loreta went to the NLRC and filed a case for illegal dismissal against Xu and
Wensha the reached the CA. CA however ruled that there was an illegal dismissal and Xu should
be held solidarily liable with Wensha.

ISSUE:

Should Xu be held solidarily liable with Wensha?

RULING:

No. Elementary is the rule that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it and from that of any other legal
entity to which it may be related. "Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality.

In labor cases, corporate directors and officers may be held solidarily liable with the
corporation for the termination of employment only if done with malice or in bad faith. Bad faith
does not connote bad judgment or negligence; it imports a dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty through some motive
or interest or ill will; it partakes of the nature of fraud.
In the subject decision, the CA concluded that petitioner Xu and Wensha are jointly and
severally liable to Loreta. We have read the decision in its entirety but simply failed to come
across any finding of bad faith or malice on the part of Xu.  There is, therefore, no justification
for such a ruling.  To sustain such a finding, there should be an evidence on record that an officer
or director acted maliciously or in bad faith in terminating the services of an employee.
Moreover, the finding or indication that the dismissal was effected with malice or bad faith
should be stated in the decision itself.

CEBU MACTAN MEMBERS CENTER, INC. vs. MASAHIRO TSUKAHARA

G.R. NO. 159624 July 17, 2009

FACTS:

In February 1994, petitioner, through Mitsumasa Sugimoto (Sugimoto), the President and
Chairman of the Board of Directors of CMMCI, obtained a loan amounting to P6,500,000 from
respondent Masahiro Tsukahara. On 13 April 1994, CMMCI, through Sugimoto, obtained
another loan amounting to P10,000,000 from Tsukahara. Sugimoto executed and signed a
promissory note in his capacity as CMMCI President and Chairman, as well as in his personal
capacity. Upon maturity, the seven checks were presented for payment by Tsukahara, but the
same were dishonored by PNB, the drawee bank. After several failed attempts to collect the loan
amount totaling P16,500,000, Tsukahara filed the instant case for collection of sum of money
against CMMCI and Sugimoto.

ISSUE:

Is CMMCI liable for the loan contracted by its President without a resolution issued by
the CMMCI Board of Directors?

RULING:

A corporate officer or agent may represent and bind the corporation in transactions with
third persons to the extent that [the] authority to do so has been conferred upon him, and this
includes powers which have been intentionally conferred, and also such powers as, in the usual
course of the particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the corporation has caused persons
dealing with the officer or agent to believe that it has conferred.

The bylaws of CMMCI is gives its president the power to borrow money, execute
contracts, and sign and indorse checks and promissory notes, in the name and on behalf of
CMMCI.With such powers expressly conferred under the corporate by-laws, the CMMCI
president, in exercising such powers, need not secure a resolution from the company's board of
directors. We quote with approval the ruling of the appellate court, 

Thus, given the president's express powers under the CMMCI's by-laws, Sugimoto, as the
president of CMMCI, was more than equipped to enter into loan transactions on CMMCI's
behalf. Accordingly, the loans obtained by Sugimoto from Tsukahara on behalf of CMMCI are
valid and binding against the latter, and CMMCI may be held liable to pay such loans.

ARMANDO DAVID vs. NATIONAL FEDERATION OF LABOR UNION and

MARIVELES APPAREL CORPORATION

G.R. NOS. 148263 and 148271-72 April 21, 2009

FACTS:

MAC hired David as IMPEX and Treasury Manager on 16 September 1988. David began
serving as MAC's President in May 1990. David served as President in the nature of a nominee
as he did not own any of MAC's shares. David tendered his irrevocable resignation from MAC
on 30 September 1993. David's resignation was made effective on 15 October 1993. In a
complaint for illegal dismissal dated 12 August 1993, National Federation of Labor Unions
(NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU) alleged that MAC ceased
operations on 8 July 1993 without prior notice to its employees. MAC allegedly gave notice of
its closure on the same day that it ceased operations. MACLU and NAFLU further alleged that,
at the time of MAC's closure, employees who had rendered one to two weeks work were not paid
their corresponding salaries. On 3 January 1994, MACLU and NAFLU filed their position paper
wherein MACLU and NAFLU also moved to implead Carag and David to guarantee satisfaction
of any judgment award in MACLU and NAFLU's favor.

ISSUE:

Should petitioner be held solidarily liable with the corporation?

RULING:

No. Section 31 of the Corporation Code is still the governing law on personal liability of
officers for the debts of the corporation. Section 31 of the Corporation Code provides:

Liability of directors, trustees or officers. - Directors or trustees who willfully and

knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly
and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons. x x x

There was no showing of David willingly and knowingly voting for or assenting to patently
unlawful acts of the corporation, or that David was guilty of gross negligence or bad faith.

HILARIO P. SORIANO and ROSALINDA ILAGAN vs.

PEOPLE OF THE PHILIPPINES, BANGKO SENTRAL NG PILIPINAS (BSP), and
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)

G.R. No. 159517-18               June 30, 2009

FACTS:.

Hilario P. Soriano (Soriano) and Rosalinda Ilagan (Ilagan) were the President and
General Manager, respectively, of the Rural Bank of San Miguel (Bulacan), Inc. (RBSM).
Allegedly, on June 27, 1997 and August 21, 1997, during their incumbency as president and
manager of the bank, petitioners indirectly obtained loans from RBSM. They falsified the loan
applications and other bank records, and made it appear that Virgilio J. Malang and Rogelio
Mañaol obtained loans of ₱15,000,000.00 each, when in fact they did not. Soriano was charged
with violation of Section 83 of Republic Act No. 337 (R.A. No. 337) or the General Banking
Act. On the same date, an information for estafa thru falsification of commercial document was
also filed against Soriano and Ilagan.

ISSUE:

Are petitioners which were charged with violation of DOSRI Rules and estafa constitutes
multiplicity of suits?

RULING:

A DOSRI violation consists in the failure to observe and comply with procedural,
reportorial or ceiling requirements prescribed by law in the grant of a loan to a director, officer,
stockholder and other related interests in the bank, i.e. lack of written approval of the majority of
the directors of the bank and failure to enter such approval into corporate records and to transmit
a copy thereof to the BSP supervising department. The elements of abuse of confidence, deceit,
fraud or false pretenses, and damage, which are essential to the prosecution for estafa, are not
elements of a DOSRI violation. The filing of several charges against Soriano was, therefore,
proper.

CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D. ALMENDRAS, JULIUS

Z. NERI, DOUGLAS L. LUYM, CESAR T. LIBI, RAMONTITO* E. GARCIA and JOSE
B. SALA vs. RICARDO F. ELIZAGAQUE

G.R. No. 160273             January 18, 2008

FACTS:
 Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-
profit and non-stock private membership club, having its principal place of business in Banilad,
Cebu City. Petitioners herein are members of its Board of Directors. In 1996, respondent filed
with CCCI an application for proprietary membership. The application was indorsed by CCCI’s
two (2) proprietary members, namely: Edmundo T. Misa and Silvano Ludo. As the price of a
proprietary share was around the P5 million range, Benito Unchuan, then president of CCCI,
offered to sell respondent a share for only P3.5 million. Respondent, however, purchased the
share of a certain Dr. Butalid for only P3 million. Consequently, on September 6, 1996, CCCI
issued Proprietary Ownership Certificate No. 1446 to respondent. During the meetings dated
April 4, 1997 and May 30, 1997 of the CCCI Board of Directors, action on respondent’s
application for proprietary membership was deferred. In another Board meeting held on July 30,
1997, respondent’s application was voted upon. As shown by the records, the Board adopted a
secret balloting known as the “black ball system” of voting wherein each member will drop a
ball in the ballot box. A white ball represents conformity to the admission of an applicant, while
a black ball means disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous
vote of the directors is required. When respondent’s application for proprietary membership was
voted upon during the Board meeting on July 30, 1997, the ballot box contained one (1) black
ball. Thus, for lack of unanimity, his application was disapproved. On August 6, 1997, Edmundo
T. Misa, on behalf of respondent, wrote CCCI a letter of reconsideration. As CCCI did not
answer, respondent, on October 7, 1997, wrote another letter of reconsideration. Still, CCCI kept
silent. On November 5, 1997, respondent again sent CCCI a letter inquiring whether any member
of the Board objected to his application. Again, CCCI did not reply. Consequently, on December
23, 1998, respondent filed with the Regional Trial Court (RTC), Branch 71, Pasig City a
complaint for damages against petitioners
ISSUE:
Whether in disapproving respondent’s application for proprietary membership with
CCCI, petitioners are liable to respondent for damages, and if so, whether their liability is joint
and several.
RULING
Yes. In rejecting respondent’s application for proprietary membership, we find that
petitioners violated the rules governing human relations, the basic principles to be observed for
the rightful relationship between human beings and for the stability of social order. The trial
court and the Court of Appeals aptly held that petitioners committed fraud and evident bad faith
in disapproving respondent’s applications. This is contrary to morals, good custom or public
policy. Hence, petitioners are liable for damages pursuant to Article 19 in relation to Article 21
of the same Code.
It bears stressing that the amendment to Section 3(c) of CCCI’s Amended By-Laws
requiring the unanimous vote of the directors present at a special or regular meeting was not
printed on the application form respondent filled and submitted to CCCI. What was printed
thereon was the original provision of Section 3(c) which was silent on the required number of
votes needed for admission of an applicant as a proprietary member.

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU vs. THE COURT OF

APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional
Trial Court, NCJR, Makati City, Metro-Manila, and LEY CONSTRUCTION AND
DEVELOPMENT CORPORATION

G. R. No. 123358 February 1, 2000

FACTS:

On June 29, 1993, private respondent Ley Construction and Development Corporation
filed a Complaint for collection of a sum of money with application for preliminary attachment
against petitioner FCY Construction Group, Inc. and Francis C. Yu. Private respondent alleged
that it had a joint venture agreement with petitioner FCY Construction Group, Inc. (wherein
petitioner Francis C. Yu served as President) over the Tandang Sora Commonwealth Flyover
government project, for which it had provided funds and construction materials. The Complaint
was filed in order to compel petitioners to pay its half share in the collections received in the
project as well as those yet to be received therein. In support of its application for a writ of
attachment, private respondent alleged that petitioners were guilty of fraud in incurring the
obligation and had fraudulently misapplied or converted the money paid them, to which it had an
equal share.

ISSUE:

Should petitioner Francis Yu remain as party-defendant?

RULING:

The SC agree that petitioner Francis Yu cannot be made liable in his individual capacity
if he indeed entered into and signed the contract in his official capacity as President, in the
absence of stipulation to that effect, due to the personality of the corporation being separate and
distinct from the persons composing it. However, while we agree that petitioner Francis Yu
cannot be held solidarily liable with petitioner corporation merely because he is the President
thereof and was involved in the transactions with private corporation, we also note that there
exists instances when corporate officers may be held personally liable for corporate acts. Such
exceptions were outlined in Tramat Mercantile, Inc. v. Court of Appeals, as follows

Personal liability of a corporate director, trustee or officer along (although not

necessarily) with the corporation may so validly attach, as a rule, only when 1.He assents (a) to a
patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its
affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or
other persons; 2.He consents to the issuance of watered down stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his written objection thereto; 3.He
agrees to hold himself personally and solidarily liable with the corporation; or 4.He is made, by a
specific provision of law, to personally answer for his corporate action.

RICARDO A. LLAMADO vs.

COURT OF APPEALS and PEOPLE OF THE PHILIPPINES

G.R. No. 99032 March 26, 1997

FACTS:
 Accused-appellant, Ricardo Llamado, together with Jacinto Pascual, was charged with
violation of Batas Pambansa Blg. 22. Accused Ricardo Llamado and his co-accused Jacinto
Pascual were the Treasurer and President, respectively, of the Pan Asia Finance Corporation.
Private complainant, Leon Gaw, delivered to accused the amount of P180,000.00, with the
assurance of Aida Tan, the secretary of the accused in the corporation, that it will be repaid.
Accused Jacinto Pascual and Ricardo Llamado signed Philippine Trust Company in the amount
of P186,500.00 in the presence of private complainant.The said check was dishonored by the
drawee bank because payment was stopped, and that the check was drawn against insufficient
funds.

ISSUE:

Should petitioner not be held personally liable?

RULING:

Petitioner's argument that he should not be held personally liable for the amount of the check
because it was a check of the Pan Asia Finance Corporation and he signed the same in his
capacity as Treasurer of the corporation, is also untenable. The third paragraph of Section 1 of
BP Blg. 22 states:

Where the check is drawn by a corporation, company or entity, the person or persons who
actually signed the check in behalf of such drawer shall be liable under this Act.

MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO vs.

NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO

G.R. No. 114787 June 2, 1995

FACTS:
 The case originated from a complaint filed with the Labor Arbiter by private respondent
Celso B. Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM")
and its Vice President Manuel P. Centeno. Balbastro alleged that he was employed by MAM as a
pump operator in 1982 . MAM countered that Balbastro was engaged, however, not as an
employee, but as a service contractor. On 23 May 1990, prior to the filing of the complaint,
MAM executed a Deed of Transfer, effective 01 July 1990, in favor of the Rancho Estates Phase
III Homeowners Association, Inc., conveying to the latter all its rights and interests over the
water system in the subdivision.The lower courts ruled in favor of Balbastro holding Centeno
jointly and severally liable with MAM.

ISSUE:

May Centeno be jointly and severally liable with MAM?

RULING:

No. A corporation, being a juridical entity, may act only through its directors, officers
and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but
the direct accountabilities of the corporation they represent. True, solidary liabilities may at
times be incurred but only when exceptional circumstances warrant such as, generally, in the
following cases: 1. When directors and trustees or, in appropriate cases, the officers of a
corporation — (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad
faith  or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of
interest  to the prejudice of the corporation, its stockholders or members, and other persons. 2.
When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto. 3. When a director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the Corporation. 4 When a director, trustee or
officer is made, by specific provision of law, personally liable for his corporate action. In labor
cases, for instance, the Court has held corporate directors and officers solidarily liable with the
corporation for the termination of employment of employees done with malice or in bad faith.14

In the case at Bench, there is nothing substantial on record that can justify, prescinding
from the foregoing, petitioner Centeno's solidary liability with the corporation.

SERGIO F. NAGUIAT, doing business under the name and style SERGIO F. NAGUIAT
ENT., INC., & CLARK FIELD TAXI, INC. Vs. NATIONAL LABOR RELATIONS
COMMISSION (THIRD DIVISION), NATIONAL ORGANIZATION OF
WORKINGMEN and its members, LEONARDO T. GALANG, Et Al

G.R. No. 116123 March 13, 1997

FACTS:
 Petitioner CFTI held a concessionaire’s contract with the Army Air Force Exchange
Services ("AAFES") for the operation of taxi services within Clark Air Base. Sergio F. Naguiat
was CFTI’s president, while Antolin T. Naguiat was its vice-president. Like Sergio F. Naguiat
Enterprises, Incorporated ("Naguiat Enterprises"), a trading firm, it was a family-owned
corporation. Individual respondents were previously employed by CFTI as taxicab drivers.
Due to the phase-out of the US military bases in the Philippines, from which Clark Air Base was
not spared, the AAFES was dissolved, and the services of individual respondents were officially
terminated on November 26, 1991. The AAFES Taxi Drivers Association ("drivers’ union") and
CFTI held negotiations as regards separation benefits. They arrived at an agreement that the
separated drivers will be given P500.00 for every year of service as severance pay. Most of the
drivers accepted said amount in December 1991 and January 1992. However, individual
respondents herein refused to accept theirs. Instead they subsequently filed a complaint against
"Sergio F. Naguiat doing business under the name and style Sergio F. Naguiat Enterprises, Inc.,
Army-Air Force Exchange Services (AAFES) with Mark Hooper as Area Service Manager,
Pacific Region, and AAFES Taxi Drivers Association with Eduardo Castillo as President," for
payment of separation pay due to termination/phase-out. The NLRC ruled in favor of private
respondents.

ISSUE:

May Sergio and Antolin Naguiat be held solidarily liable?

RULING:

The Court here finds no application to the rule that a corporate officer cannot be held
solidarily liable with a corporation in the absence of evidence that he had acted in bad faith or
with malice. In the present case, Sergio Naguiat is held solidarily liable for corporate tort
because he had actively engaged in the management and operation of CFTI, a close corporation.

Antolin T. Naguiat was the vice president of the CFTI. Although he carried the title of
"general manager" as well, it had not been shown that he had acted in such capacity.
Furthermore, no evidence on the extent of his participation in the management or operation of
the business was proffered. In this light, he cannot be held solidarily liable for the obligations of
CFTI and Sergio Naguiat to the private respondents.

PROGRESS HOMES and ERMELO ALMEDA, vs. NATIONAL LABOR RELATIONS

COMMISSION, GREGORIO A. MEDRANO, DANTE BAGUIO, JAIME GUAN, JOSE
SAPALARAN, RONNIE DELPINO, DIONISIO FRANCISCO and ELMER BAGUIO

G.R. No. 106212 March 7, 1997

FACTS:
 Petitioner Progress Homes Subdivision (Progress Homes), is a housing project
undertaken by the Ermelo M. Almeda Foundation, Inc. The other petitioner, Ermelo Almeda, is
the President and General Manager of Progress Homes. Private respondents allegedly were
among the workers employed by petitioners in their construction and development of the
subdivision. Forty of these workers, including private respondents, filed before the NLRC
Arbitration Branch a petition for reinstatement, salary adjustment, ECOLA, overtime pay and
13th month pay. Petitioners amicably settled the case with thirty-three of the laborers, leaving
private respondents as the only claimants. Private respondents alleged that they worked as
laborers and carpenters for 8.5 hours a day at a salary below the minimum wage and that when
they demanded payment of the benefits due them, they were summarily dismissed and barred
from entering the workplace. Petitioners denied that private respondents were regular employees
claiming that they were only project employees and that there was no employer-employee
relationship between them.

ISSUE:

Should Almeda be held jointly and severally liable with Progress Homes?

RULING:

The NLRC committed grave abuse of discretion when it affirmed the Labor Arbiter’s
decision holding petitioner Almeda jointly and severally liable with Progress Homes. The Court
has held that corporate directors and officers are solidarily liable with the corporation for the
termination of employment of employees only if the termination is done with malice or in bad
faith. 4 The Labor Arbiter’s decision failed to disclose why Almeda was made personally liable.
There appears no evidence on record that he acted maliciously or in bad faith in terminating the
services of private respondents. 5 Petitioner Almeda, therefore, should not have been made
personally answerable for the payment of private respondents’ salaries.

JOSE O. SIA vs. THE PEOPLE OF THE PHILIPPINES

G.R. No. L-30896 April 28, 1983

FACTS:
 Accused Jose 0. Sia sometime prior to 24 May, 1963, was General Manager of the Metal
Manufacturing Company of the Philippines, Inc. engaged in the manufacture of steel office
equipment. On 31 May, 1963, because his company was in need of raw materials to be imported
from abroad, he applied for a letter of credit to import steel sheets from Mitsui Bussan Kaisha,
Ltd. of Tokyo, Japan, the application being directed to the Continental Bank, herein complainant,
and his application having been approved, the letter of credit was opened on 5 June, 1963 in the
amount of $18,300; and the goods arrived sometime in July, 1963 according to accused himself.
According to Complainant Bank, there was permitted delivery of the steel sheets only upon
execution of a trust receipt. While according to the accused, the goods were delivered to him
sometime before he executed that trust receipt in fact they had already been converted into steel
office equipment by the time he signed said trust receipt. But that the bill of exchange issued for
the purpose of collecting the unpaid account thereon having fallen due neither accused nor his
company having made payment thereon notwithstanding demands. Hence Continental Bank filed
a complaint.

ISSUE:

May petiioner be held criminaly liable with the corporation?

RULING:

The performance of the act is an obligation directly imposed by the law on the
corporation. Since it is a responsible officer or officers of the corporation who actually perform
the act for the corporation, they must of necessity be the ones to assume the criminal liability;
otherwise this liability as created by the law would be illusory, and the deterrent effect of the
law, negated.

In the absence of an express provision of law making the petitioner liable for the criminal
offense committed by the corporation of which he is a president as in fact there is no such
provisions in the Revised Penal Code under which petitioner is being prosecuted, the existence
of a criminal liability on his part may not be said to be beyond any doubt. In all criminal
prosecutions, the existence of criminal liability for which the accused is made answerable must
be clear and certain. The maxim that all doubts must be resolved in favor of the accused is
always of compelling force in the prosecution of offenses. This Court has thus far not ruled on
the criminal liability of an officer of a corporation signing in behalf of said corporation a trust
receipt of the same nature as that involved herein. In the case of Samo vs. People, L-17603-04,
May 31, 1962, the accused was not clearly shown to be acting other than in his own behalf, not
in behalf of a corporation.

RICARDO A. NAVA vs. PEERS MARKETING CORPORATION, RENATO R. CUSI and

AMPARO CUSI

G.R. No. L-28120 November 25, 1976

FACTS:

On April 2, 1966 Po sold to Ricardo A. Nava for two thousand pesos twenty of his eighty
shares. In the deed of sale Po represented that he was "the absolute and registered owner of
twenty shares" of Peers Marketing Corporation. Nava requested the officers of the corporation to
register the sale in the books of the corporation. The request was denied because Po has not paid
fully the amount of his subscription. Nava was informed that Po was delinquent in the payment
of the balance due on his subscription and that the corporation had a claim on his entire
subscription of eighty shares which included the twenty shares that had been sold to Nava. On
December 21, 1966 Nava filed this mandamus action h to compel the corporation and Renato R.
Cusi and Amparo Cusi, its executive vice-president and secretary, respectively, to register the
said twenty shares in Nava's name in the corporation's transfer book. The respondents in their
answer pleaded the defense that no shares of stock against which the corporation holds an unpaid
claim are transferable in the books of the corporation.

ISSUE:

May the corporation issue certificate of shares in favor of Nava which he acquired fro Po
without the shares being fully paid?

RULING:

A corporation cannot release an original subscriber from paying for his shares without a
valuable consideration (Philippine National Bank vs. Bitulok Sawmill, Inc.,
L-24177-85, June 29, 1968, 23 SCRA 1366) or without the unanimous consent of the
stockholders (Lingayen Gulf Electric Power Co., Inc. vs. Baltazar, 93 Phil 404).

Under the facts of this case, there is no clear legal duty on the part of the officers of the
corporation to register the twenty shares in Nava's name, Hence, there is no cause of action
for mandamus.

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION vs. RADSTOCK

SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION

G.R. No. 178158               December 4, 2009

FACTS:
 Sometime between 1978 and 1981, Basay Mining Corporation (Basay Mining), now
CDCP Mining Corporation, an affiliate of CDCP, obtained loans from Marubeni Corporation of
Japan (Marubeni). A CDCP official issued letters of guarantee for the loans, committing CDCP
to pay solidarily. However, there was no CDCP Board Resolution authorizing the issuance of the
letters of guarantee. CDCP Mining secured the Marubeni loans when CDCP and CDCP Mining
were still privately owned and managed. Marubeni loans to CDCP Mining remained unpaid. On
20 October 2000the PNCC Board of Directors15 (PNCC Board) passed Board Resolution
admitting PNCC’s liability to Marubeni. In January 2001, Marubeni assigned its entire credit to
Radstock. Radstock immediately sent a notice and demand letter to PNCC. On 17 August 2006,
PNCC and Radstock entered into the Compromise Agreement. Sison, a shareholder of PNCC
filed a case to annul the agreeent made by PNCC and Radstock.

ISSUE:

Does Sison have legal standing?

RULING:

Sison has legal standing to challenge the Compromise Agreement. Although there was no
allegation that Sison filed the case as a derivative suit in the name of PNCC, it could be fairly
deduced that Sison was assailing the Compromise Agreement as a stockholder of PNCC. In such
a situation, a stockholder of PNCC can sue on behalf of PNCC to annul the Compromise
Agreement.

A derivative action is a suit by a stockholder to enforce a corporate cause of

action. Under the Corporation Code, where a corporation is an injured party, its power to sue is
lodged with its board of directors or trustees. However, an individual stockholder may file a
derivative suit on behalf of the corporation to protect or vindicate corporate rights whenever the
officials of the corporation refuse to sue, or are the ones to be sued, or hold control of the
corporation. In such actions, the corporation is the real party-in-interest while the suing
stockholder, on behalf of the corporation, is only a nominal party.

ANTHONY S. YU, ROSITA G. YU and JASON G. YU vs.

JOSEPH S. YUKAYGUAN, NANCY L. YUKAYGUAN, JERALD NERWIN L.
YUKAYGUAN, and JILL NESLIE L. YUKAYGUAN, [on their own behalf and on behalf
of] WINCHESTER INDUSTRIAL SUPPLY, INC.

G.R. No. 177549               June 18, 2009

FACTS:
 Herein petitioners are members of the Yu Family. Herein respondents composed the
Yukayguan Family. Petitioners and the respondents were all stockholders of Winchester
Industrial Supply, Inc. (Winchester, Inc.). On 15 October 2002, respondents filed against
petitioners a verified Complaint for Accounting, Inspection of Corporate Books and Damages
through Embezzlement and Falsification of Corporate Records and Accounts. The said
Complaint was filed as a derivative suit on behalf of Winchester, Inc. Respondents averred that
petitioners, who are officers of the Winchester, Inc. were misappropriating the funds and
properties of Winchester,

ISSUE:

Does the respondetns have legal standing to sue in behalf of the corporation?

RULING:

The general rule is that where a corporation is an injured party, its power to sue is lodged
with its board of directors or trustees. Nonetheless, an individual stockholder is permitted to
institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect
or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the
ones to be sued, or hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest. A derivative action
is a suit by a shareholder to enforce a corporate cause of action. The corporation is a necessary
party to the suit. And the relief which is granted is a judgment against a third person in favor of
the corporation. Similarly, if a corporation has a defense to an action against it and is not
asserting it, a stockholder may intervene and defend on behalf of the corporation. 43 By virtue of
Republic Act No. 8799, otherwise known as the Securities Regulation Code, jurisdiction over
intra-corporate disputes, including derivative suits, is now vested in the Regional Trial Courts
designated by this Court pursuant to A.M. No. 00-11-03-SC promulgated on 21 November 2000.

VIRGINIA O. GOCHAN ET. AL. vs. RICHARD G. YOUNG ET. AL.

G.R. No. 131889 March 12, 2001

FACTS:
 Felix Gochan Sr.s daughter, Alice, mother of [herein respondents], inherited 50 shares of
stock in Gochan Realty from the former. Alice died in 1955, leaving the 50 shares to her
husband, John Young, Sr. In 1962, the RTC adjudicated 6/14 of these shares to her children,
herein [respondents] Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary
Young Hsu and Alexander Thomas Young. Five days later (25 September), at which time all the
children had reached the age of majority, their father John Sr., requested Gochan Realty to
partition the shares of his late wife by cancelling the stock certificates in his name and issuing in
lieu thereof, new stock certificates in the names of [herein respondents]. On 17 October 1979,
respondent Gochan Realty refused, citing as reason, the right of first refusal granted to the
remaining stockholders by the Articles of Incorporation. On 21, 1990, John, Sr. died, leaving the
shares to the [respondents]. On 8 February 1994, [respondents] Cecilia Gochan Uy and Miguel
Uy filed a complaint with the SEC for issuance of shares of stock to the rightful owners,
nullification of shares of stock, reconveyance of property impressed with trust, accounting,
removal of officers and directors and damages against respondents.

ISSUE:

Did respondents instituted a derivative suit?

RULING:

In the present case, the Complaint alleges all the components of a derivative suit. The
allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. The
personal injury suffered by the spouses cannot disqualify them from filing a derivative suit on
behalf of the corporation. It merely gives rise to an additional cause of action for damages
against the erring directors. This cause of action is also included in the Complaint filed before
the SEC.

The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit
of the corporation. The reason is that, as earlier discussed, the allegations of the Complaint make
them out as stockholders at the time the questioned transaction occurred, as well as at the time
the action was filed and during the pendency of the action.

RICARDO L. GAMBOA, ET. AL. vs.

HON. OSCAR R. VICTORIANO ET. AL

G.R. No. L-40620 May 5, 1979

FACTS:

Petitioner were sued by private respondents to nullify the issuance of 823 shares of stock
of the Inocentes de la Rama, Inc. in favor of the said petitioners. Responednts are the owners of
1,328 shares of stock of the Inocentes de la Rama, Inc., a domestic corporation, with an
authorized capital stock of 3,000 shares, with a par value of P100.00 per share, 2,177 of which
were subscribed and issued, thus leaving 823 shares unissued. The petitioners alleged that, to
gain control over the corporation, the respondents elected themselves as officers and sold the
remaining shares to Gamboa et. al. which were elected as BOD.

ISSUE:

Is the derivative suit a proper remedy of the petitioners?

RULING:

An individual stockholder is permitted to institute a derivative suit on behalf of the

corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever the
officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the
corporation. In such actions, the suing stockholder is regarded as a nominal party, with the
corporation as the real party in interest. In the case at bar, however, the plaintiffs are alleging and
vindicating their own individual interests or prejudice, and not that of the corporation. At any
rate, it is yet too early in the proceedings since the issues have not been joined. Besides,
misjoinder of parties is not a ground to dismiss an action. 

CATALINA R. REYES vs. HON. BIENVENIDO A. TAN, as Judge of the Court of First
Instance of Manila, Branch XIII and FRANCISCA R. JUSTINIANI

G.R. No. L-16982             September 30, 1961

FACTS:

The Board of Directors of Roxas-Kalaw Textile Mills, Inc approved a resolution

designating one Dayaram as co-manager with the specific understanding that he was to act as
defendant Wadhumal Dalamal's designee. Petitioners herein, also shareholders of the
corporation, alleged that Dalamal committed an act in fraud of the corporation and that
petitioners and some members of the board of directors urged respondent to proceed against
Dalamal, exposing his offense to the Central Bank, and to initiate suit against Dalamal for his
fraud against the corporation but refused to proceed against Dalamal and instead continued to
deal with the Indian Commercial Company to the damage and prejudice of the corporation.

ISSUE:

May a derivative suit be insttuted?

RULNG:

It is well settled in this jurisdiction that where corporate directors are guilty of a breach of
trust — not of mere error of judgment or abuse of discretion — and intracorporate remedy is
futile or useless, a stockholder may institute a suit in behalf of himself and other stockholders
and for the benefit of the corporation, to bring about a redress of the wrong inflicted directly
upon the corporation and indirectly upon the stockholders. An illustration of a suit of this kind is
found in the case of Pascual vs. Del Saz Orozco (19 Phil. 82), decided by this Court as early as
1911. In that case, the Banco Español-Filipino suffered heavy losses due to fraudulent
connivance between a depositor and an employee of the bank, which losses, it was contended,
could have been avoided if the president and directors had been more vigilant in the
administration of the affairs of the bank. The stockholders constituting the minority brought a
suit in behalf of the bank against the directors to recover damages, and this over the objection of
the majority of the stockholders and the directors. This court held that the suit could properly be
maintained. (64 Phil., Angeles vs. Santos [G.R. No. L-43413, prom. August 31, 1937] p. 697).

CANDIDO PASCUAL vs. EUGENIO DEL SAZ OROZCO, ET AL

G.R. No. L-5174            March 17, 1911

FACTS:

That during the years 1903, 1904, 1905, and 1907 the defendants and appellees, without
the knowledge, consent, or acquiescence of the stockholders, deducted their respective
compensation from the gross income instead of from the net profits of the bank, thereby
defrauding the bank and its stockholders of approximately P20,000 per annum; that though due
demands has been made upon them therefor, defendants refuse to refund to the bank the sums so
misappropriated, or any part thereof; that defendants constitute a majority of the present board of
directors of the bank, who alone can authorize an action against them in the name of the
corporation, and that prior to the filing of the present suit plaintiff exhausted every remedy in the
premises within this banking corporation.

ISSUE:

May a derivative suit be instituted?

RULING:

So it seems to be settled by the Supreme Court of the United States, as a matter of

substantive law, that a stockholder in a corporation who was not such at the time of the
transactions complained of, or whose shares had not devolved upon him since by operation of
law, can not maintain suits of this character, unless such transactions continue and are injurious
to the stockholder, or affect him especially and specifically in some other way.

We are, therefore of the opinion, and so hold, that the judgment appealed from, sustaining
the demurrer to the first cause of action should be, and the same is hereby reversed; and the
judgment sustaining the demurrer to the second cause of action should be, and is hereby
affirmed, without any special ruling as to costs. The record will be returned to the court whence
it came for further proceedings in accordance with this decision. So ordered.