FOR : 

     MTS
CC :      LVV
FROM :      ECM/CHS/CLD
SUBJECT :      Investment of FEPI in Uni-Asia/ Centro Verde Project
DATE :      04 10 November 2020
  

Background:

On 12 September 1996, Uni-Asia was incorporated as a real estate holdings company, as follows
(Annex “A”, AOI):
 
                             ACS - Php200,000,000 or 200,000,000 shares at Php1/share
                             Subscribed - Php50,000,000.00
                             Paid up - Php24,875,000.00
 
Incorporator No. of Shares % Amount Paid-up
Subscribed (Php)
Irene Ngan 12,500,000 25.0 3,125,000
Arabelle Lee 4,000,000 8.0 1,000,000
Wilbur Chan 1,650,000 3.3 412,500
Leroy A. Tan 1 1
Alan Yap 14,850,000 29.7 3,712,500
Wilma C. 1 1
Crisostomo
Agate Corporation 8,249,999 16.5 8,249,999
Enterprises, Inc.
LBS Properties, Inc. 8,249,999 16.5 8,249,999
Lorenzo P. Benitez 500,000 1 125,000
TOTAL 50,000,000 100% 24,875,000
Unpaid Balance on subscription 25,125,000
 
It was intended by incorporators for Uni-Asia to enter into a joint venture with FEPI for the subdivision
development of a project in Iloilo City then named Hacienda Verde (“HV”).  Uni-Asia contributed the
parcels for the ProjectHV.  Our records do not contain a copy of the joint venture.   
 
FEPI was not able to develop Hacienda VerdeHV. Thereafter, Sta. Lucia took over and HV was renamed
Centro Verde.
 
Our records show check payment for P20M issued by FEPI to Uni-Asia dated 1 June 1997 as “advance
payment for land holdings re: FEPI: Iloilo project” for Php20M (PB Com Check No 375 dtd 1 June
1997; Annex “B”). 
 
Also, records show a Memo dated 20 Aug 1997 from Atty. Alice Bondoc (“AOB”) to Uni-Asia’s Lorenzo
Benitez regarding the mortgage of FEPI’s properties to secure the loan of Uni-Asia.  The Memo furtherIt
states that FEPI needs to acquire 25% interest of the total issued and outstanding stock of Uni-Asia as a
condition of FEPI agreeing to the martgage, and thus, requests the name of the selling shareholders of
Uni-Asia.   The Memo also states the need for a JV between FEPI and Uni-Asia.  (Annex “C”)
 
In reply a year later (21 Aug 1998), Mr. Benitez gave AOB a list of the selling shareholders for the 25%
stake of FEPI in Uni-Asia, to wit (Annex “D”):
 
Arabelle Lee’s 8% or (4,000,000) shares
Allan Yap’s 8% or (4,000,000 shares);
Agate’s 4% or (2,000,000) shares;
LBS’ 4% (or 2,000,000 shares); and
Benitez’s 1%. or   (500,000 shares
Total 25% or 12,500,000 shares).  
 
It appears that FEPI did mortgage its properties (Paragon units) to secure several PNs of Ui-Asia with
Equitable Banking Corp (EBC) with in the aggregate amount of Php50M (see Annexes  “E”, 1998 letter
from LMI to FEPI; and Annex “F”, Letter of EBC counsel to FEPI[1]).   These loans were used to finance
the acquisition by Uni-Asia of parcels ofthe lots that would form part of the Project.Cento Verde.
 
Although Tthe shareactual assignments to FEPI, however, did not materialize. HoweverNevertheless,
Uni-Asia in several instances made representations and acted as if FEPI is a shareholder of Uni-Asia.
 
a.      Minutes of the Board Meeting of Uni-Asia dated 01 October 2002 (see Annex “G”)
 
Chairman of the Board, Leroy Tan, suggested that FEPI should be formalized as one of the
shareholders of Uni-Asia and the necessary papers be prepared for the said purpose.

1
  
b.      Minutes of the Board Meeting of Uni-Asia dated 09 November 2006 (see Annex “H”)
 
Mr. Tan stated that the issued stock certificates to existing shareholders will be retrieved for
cancellation and replacements will be made once the final sharing is agreed. However, it was
also stated that the contributions of Sta. Lucia and FEPI are still considered advances.
 
In a document with heading “Uni-Asia Properties Inc. Call in equity to date (Iloilo Project) as of 9
November 2006”, FEPI is credited with Php74,618,337.94, which excludes the Php20M under
PBCom check but includes the Php50M PNs of Uni-Asia but excludes the Php20M under PBCom
check[2]. (see Annex “I”). 
 
c.       Uni-Asia Memorandum dated 18 October 2007 addressed to FTS from Ms. Flor A. Ramos,
Project Controller of Uni-Asia for additional Call-In Contribution (1 st 15 Million) (see Annex “J”)
 
Uni-Asia asked FEPI to remit an additional call-in contribution of Php3.3 Million representing
FEPI’s 22.26% share in Uni-Asia, which presupposes that Uni-Asia acknowledged FEPI as one of
its shareholders.  Otherwise, there is no basis for the demand for additional call-in contribution if
FEPI is not a shareholder.
 
d.      Uni-Asia Letter dated 04 December 2007 addressed to FTS as FEPI President from Ms.
Flor A. Ramos, Project Controller of Uni-Asia for additional Call-In Contribution
(2nd 15million) (see Annex “K”)
 
Uni-Asia asked FEPI to remit another call-in contribution amounting to Php3.3 Million
representing its 22.26% share in Uni-Asia. FEPI was further advised that since Mr. Eric Ngan and
Phil Wu Yi have not yet remitted their shares in the first call-in contribution and expressed their
willingness to be diluted, FEPI may absorb their corresponding shares.
 
e.      Uni-Asia Memorandum dated 21 August 2008 addressed to FEPI thru FTS from Ms. Flor A.
Ramos, Project Controller of Uni-Asia for additional Call-In Contribution (2.5 Million)  (see Annex
“L”)
 
Uni-Asia asked FEPI to remit an additional call-in contribution of Php636,000.00 representing
FEPI’s 25.43% (sic) share in Uni-Asia.
 
f.        Uni-Asia Letter dated 12 September 2008 addressed to FTS/FEPI from Ms. Flor A. Ramos,
Project Controller of Uni-Asia (see Annex “M”)
 
Uni-Asia informed FEPI that it committed a mistake in the sharing allotment. The share of FEPI in
Uni-Asia was recomputed to 22.46%.
 
g.       Uni-Asia Letter dated 18 May 2009 addressed to FTS as President of FEPI from Ms. Flor
A. Ramos, Project Controller of Uni-Asia re: Final Sharing and Assignment of Shares of
Stocks  (see Annex “N”)
 
FEPI was allotted 10,423,674 shares in Uni-Asia with a corresponding percentage ownership of
20.85%.
 
h.      Uni-Asia Letter dated 15 October 2009 addressed to FTS as President of FEPI from Ms.
Flor A. Ramos, Project Controller of Uni-Asia with attached Certificate of Stock No. 0013 (“2SC
No. 13”) issued on 01 October 2009 under the name of FEPI for 10,423,674 shares ( Annexes
“O-1” to “O-3”)
 
In the letter, Ramos stated that SC No. 13 was issued to FEPI to formalize FEPI’s ownership in
Uni-Asia. Ramos further assured FEPI that SC No. 13 would serve as an internal document of
Uni-Asia, which FEPI could hold on to as certification of its share in the firm.   This stock
certificate is not on hand with Treasury.
 
Attached to the letter is a “Summary” designated as “Uni-Asia Properties, Inc. New Sharing
October 14, 2009” showing how the 10,423,674 shares were arrived at (Annex “O-3”), to wit:
 
FEPI Total amount of contribution:  Php72,839,000.00 or 20.85% for 10,423,674 shares,
to be transferred from:
 
                                           Alan Yap 3,973,818
                                           LBS 2,340,450
                                           PWYC 760,453
                                           Irene Ngan 2,848,953
                                           Lorenzo Benitez 500,000
  

2
Despite the physical delivery to FEPI of SC No. 13, FEPI was never not reflected as a shareholder in the
next succeeding 2010 GIS filed on 11 November 2010 (see Annex “P”), which only showed the ff.
shareholders with all shareholdings, now fully paid.  FEPI was not represented in the Board under the
2010 GIS.
 
Incorporator/Shareholder Incorporation No. of Shares
shares Subscribed
(GIS filed 11 Nov
2010)
Irene Ngan 12,500,000 12,500,000
Arabelle Lee 4,000,000 4,000,000
Wilbur Chan 1,650,000 1,650,000
Leroy A. Tan 1 1
Alan Yap 14,850,000 14,850,000
Wilma C. Crisostomo 1 1
Phil Wu Yi Corp. (NA) 6,249,999
Agate Corporation 8,249,999 5,124,999
Enterprises, Inc.
LBS Properties, Inc. 8,249,999 5,124,999
Wen Peng Xie (NA) 1
Lorenzo P. Benitez 500,000 500,000
TOTAL   50,000,000
  
However, Oon 15 April 2010, FEPI received a check in the amount of Php1,042,500 (BDO check no.
0069785, dated 12 April 2010, see Annex “Q”), with transmittal stating that the amount represents
“partial return of investment equivalent to 20.85% from Uni-Asia Properties, Inc.”.  Purportedly, there was
another check with the same amount remitted to FEPI dated 12 July 2011 but our records do not show
receipt thereof.
 
Records show a document with heading “Uni-Asia Properties Inc. Sources & Uses of Funds Investment
Account” which indicates amounts as of October 2011 (see Annex “R”), where it is shown that FEPI has
advances to Uni-Asia in the total amount of Php78,462,088.96.
 
Per the Minutes of the Board Meeting dated 22 August 2013 (see Annex “S”), Mr. Leroy Tan, President
of Uni-Asia, reminded the Board that some partners, like FEPI, Sta. Lucia, FERC and CARJAL have not
yet been reflected in the SEC.  The Board then arrived at a “consensus that FEPI/GERI will not be treated
as shareholders, though we acknowledge that Uni-Asia owns FEPI/GERI money”, that a new capital
sharing without FEPI/GERI will be made to be furnish to all shareholders and thereafter proceed to
documentation.    The Board also discussed the acquisition of 2 lots for Centro Verde, which will be
financed by additional call-in but “this time excluding FEPI”.
 
In July 2017, MOST LAW, Uni-Asia’s legal counsel, sent a letter to GERI re: return of advances from
FEPI (see  Annex “T”). In the said letter, it mentioned the 2 checks returning the advances by FEPI
amounting to Php2,085,000.00 (dated 12 April 2010 and 12 July 2011), and that another check dated 4
August 2016 for Php7M was remitted by Uni-Asia to FEPI (BDO Manager’s Check, FEPI FAO: GERI),
which was declined by FEPI and returned. It requested a meeting with FEPI to discuss the return of the
advances.
 
In the latest GIS of Uni-Asia filed on February 14, 2019 (see Annex “U”), Sta. Lucia was is already
named as one of the shareholders of Uni-Asia. On the other hand, FEPI is still not reflected as one of its
shareholders.
 
Incorporator/Shareholder Incorporation No. of Shares No. of shares
shares Subscribed subscribed 2018
GIS as of 10 Oct GIS (filed 14 Feb
2010 (filed 11 2019)
Nov 2010)
Irene Ngan 12,500,000 12,500,000 12,500,000
Arabelle Lee 4,000,000 4,000,000 4,000,000
Wilbur Chan 1,650,000 1,650,000 16,500,000
Leroy A. Tan 1 1 1
Alan Yap 14,850,000 14,850,000  
Wilma C. Crisostomo 1 1  
Phil Wu Yi Corp. (NA) 6,249,999  
Agate Corporation 8,249,999 5,124,999 5,124,979
Enterprises, Inc.
LBS Properties, Inc. 8,249,999 5,124,999 5,124,979
Wen Peng Xie (NA) 1 1
       
Lorenzo P. Benitez 500,000 500,000 500,000
Sta Lucia Land, Inc     6,249,999
Sta Lucia Realty & Devt,     8,529,724

3
 Inc.*
Delfin Castro     1
Exequiel Robles     10
Godofredo Jalasco     10
TOTAL 50,000,000 50,000,000 58,561,724
 
* new issuance

Issues/Discussion:

I. Why is FEPI not legally a shareholder of Uni-Asia?  

 
1. Under the law, there are only (2) two ways to become a shareholder: (1) through a
subscription contract (Section 60 of the Corp Code); and (2) through transfer of shares
(Section 63 of the Corp Code).

In this case, it appears that the intention was to convert FEPI’s advances into equity in Uni-Asia by
having the incorporating shareholders assign their shares to FEPI (hereafter, the “Assigning
Shareholders”).  In other words, FEPI’s equity participation was not by way of subscription to the
unissued shares but through transfer of shares.
 
We assume that the Assigning Shareholders will get “paid” by FEPI via the latter’s assignment of its
FEPI’s advances to in Uni-Asia, i.e. an assignment of credit.  Thereafter, these “advances” to Uni-
Asia, which will now be recorded as advances from the Assigning Shareholders, will be converted
into APIC.
 
2. Section 63 of the Corporation Code expressly provides that shares of stocks of a corporation
shall be transferred in accordance with its by-laws.  Under Uni-Asia By-laws[3], “[t]he transfer
shall be valid and binding on the corporation only upon record thereof in the books of the
corporation, cancellation of the certificate surrendered to the Secretary, and issuance of a
new certificate to the transferee”.
 
In SEC-OGC Opinion No. 07-06 dated 19 April 2007 [4], the documentary requirements for the transfer
of shares will depend on whether the stockholder is in possession of the stock certificates covering
his shares.  Iif the stockholder has custody of the stock certificates, the shares may be transferred by
delivery of the certificate indorsed by the stockholder or his authorized representative.owner or other
person legally authorized to make the transfer.  Thus, as long as the stock certificate is duly indorsed
in accordance with Sec. 63 of the Corp Code, the same may considered a valid transfer of the shares
covered by the certificate of stock, even without executing a “deed of assignment” of the shares.  A
“deed of assignment” on the other hand is necessary only when no certificate of stock has
yet been issued or where the same is not in the possession of the transferor.
 
Also, in David C. Lao and Jose C. Lao vs. Austria-Martinez, et alDionisio Lao1, the Supreme Court
clarified that:

“A stock certificate, as we very well know, is the evidence of ownership of corporate

stock. If ever the said petitioners acquired shares of stock of the corporation, there is
a need for their acquisition of said shares to be registered in the Stock and Transfer
Book of the corporation. Registration is necessary to entitle a person to exercise the
rights of a stockholder and to hold office as director or other offices. That is why it is
explicitly provided in Section 63 of the Corporation Code of the Philippines that no
transfer of shares of stock shall be valid until the transfer is recorded in the books of
the corporation. An unregistered transfer is not valid as against the corporation.
A transfer must be registered, or at least notice thereof given to the
corporation for the purpose of registration, before the transferee can acquire
any right as against the corporation other than the right to have the transfer
registered. An unrecorded transferee cannot enjoy the status of a stockholder;
he cannot vote nor he voted for. Until the transfer is registered, the transferee
is not a stockholder but an outsider. So, a person who has acquired or purchased
shares of stock of a corporation, and who desires to be recognized as stockholder for
the purpose of voting and exercising other rights of a stockholder, must secure such
a standing by having the acquisition or transfer recorded in the corporate books.”

In this case, FEPI is neither in possession of the stock certificates issued in the name of the
Assigning Shareholders nor did the Assigning Shareholders indorse their stock certificate in favor of
1
G.R. No. 170585 6 October 2008

4
 FEPI.  As aforementioned, no Deed of Assignment by the Assigning Shareholders was ever executed
in favor of FEPIdoes not have a duly endorsed stock certificate from the Assigning Shareholders.
Neither does FEPI have a DOA duly executed by the Assigning Shareholders.    Thus, in the absence
of a valid transfer either by way of delivery/endorsement of the stock certificate or execution of the
deed of assignment, Uni-Asia had neither the legal authority to register a transfer from the Assigning
Shareholders nor to issue the SC No. 13 in the name of FEPI.  The mere advice by Uni-Asia to FEPI
that it can hold on to SC No. 13 as certification of its share in Uni-Asia, which was not registered and
which lacks the requirements for valid transfer, is insufficient.

We also note that on 15 September 2016, Irene Ngan and Arabelle Lee filed a complaint against the
directors and officers of Uni-Asia for inspection of corporate records, and exercise of preemptive
rights, among others (“Complaint”, see Annex “V”).  In the Complaint, Ngan claimed ownership over
her entire 12,500,000 incorporation shares, which negates the assignment of shares to FEPI.   The
Complaint did not mention that Ngan made any assignment of her shares in favor of FEPI.   This
case is set to pre-trial on August 4, 2020.

In sum, sinceassignment/ transfer from the Assigning Shareholders did not materialize, FEPI is not
legally a shareholder of Uni-Asia.

Mandamus will not lie.

In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has
a clear legal right to the thing demanded and that it is the imperative duty of the respondent to
perform the act required. It neither confers powers nor imposes duties and is never issued in doubtful
cases. It is simply a command to exercise a power already possessed and to perform a duty already
imposed.

In the case of Ponce vs. Alsons Cement Corporation, the Supreme Court ruled that “without recording
in the stock and transfer book of the corporation, a transfer of shares of stock is non-existent as far as
the corporation is concerned, the transferee may not be regarded by the corporation as one among
its stockholders and the corporation may legally refuse the issuance of stock certificates in the name
of the transferee even when there has been compliance with the requirements of Section 64 of the
Corporation Code. This is the import of Section 63 which states that "No transfer, however, shall be
valid, except between the parties, until the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred." The situation would be different if the
petitioner was himself the registered owner of the stock which he sought to transfer to a third party,
for then he would be entitled to the remedy of mandamus.

In this case, mandamus will not lie since FEPI is not a registered shareholder of Uni-Asia.

II. However, notwithstanding the fact that FEPI did not become a shareholder by way of
secondary transfer, we canmay argue that FEPI may still be considered a shareholder by way
of subscription.

1. Section 60 of the Corporation Code provides:

Section 60. Subscription contract. – Any contract for the acquisition of unissued

stock in an existing corporation or a corporation still to be formed shall be deemed a
subscription within the meaning of this Title, notwithstanding the fact that the parties
refer to it as a purchase or some other contract. (Emphasis and underlining supplied)

A stock subscription is a contract between the corporation on one side, and the subscriber on the
other, and courts will enforce it for or against either.2

In the instant case, FEPI made the advances to Uni-Asia with the expectation that it will become a
shareholder of Uni-Asia.  Although there was no formal written agreement regarding the subscription
of FEPI, there existed an external and verbal agreement to that effect, which is valid because
contracts are binding on the parties in whatever form they may have been entered into3. Furthermore,
this verbal agreement was acknowledged and confirmed in writing by various documents on record
and certain representations showing FEPI’s ownership of Uni-Asia’s shares, as follows:

1. Various Minutes of Meeting of the Board, which shows that representatives of FEPI (FTS or
NMC) actively took part in the meetings of the board as one of the members of the board. In one
of the Board Meetings (Annex “H”), Mr. Wilbur Chan expressed that he is very pleased with the

2
Velasco vs. Poizat, G.R. No. L-11528, March 15, 1918
3
Article 1356 of the Civil Code.

5
 presence of FTS on board, and other board members. In several occasions, NMC even presided
in the meetings.

In several meetings of the Board of Uni-Asia, Leroy Tan, the Chairman and President of Uni-Asia,
recommended to formalize FEPI as one of the shareholders of Uni-Asia and that there is a need
to cancel the issued stock certificates of existing shareholders and replace them with new stock
certificates based on the agreed final sharing of shares. (See Minutes dated 1 October 2002
[Annex “G”], 9 November 2006 (Annex “H”), and 22 August 2013 (Annex “S”).

2. Transmittal of Stock Certificate No. 13

In the letter dated 15 October 2009 (Annex “O”), Uni-Asia’s Project Controller stated that SC No.
13 was issued to FEPI to formalize FEPI’s ownership in Uni-Asia. Ramos further assured FEPI
that SC No. 13 would serve as an internal document of Uni-Asia, which FEPI could hold on to as
certification of its share in the firm.

A certificate of stock is the evidence of a holder’s interest and status in a corporation. It is a

written instrument signed by the proper officer of a corporation stating or acknowledging that the
person named in the document is the owner of a designated number of shares of its stock. It
is prima facie evidence that the holder is a shareholder of a corporation.4 It expresses the
contract between the corporation and the shareholder.5

It has to be emphasized that FEPI was issued a Certificate of Stock representing its 10,423,674
shares in Uni-Asia. The certificate of stock itself once issued is a continuing affirmation or
representation that the stock described therein is valid and genuine and is at least prima
facie  evidence that it was legally issued in the absence of evidence to the contrary. 

In David C. Lao and Jose C. Lao vs. Austria-Martinez, et al 6, the Supreme Court ruled that while
the burden of proof is on the person claiming he is a shareholder of a company, the burden of
proof is shifted to the company to prove that he is not a shareholder of the company once a stock
certificates are issued. Thus, the burden of proof is now with Uni-Asia to prove that FEPI is not a
bona fide shareholder thereof.

In the October 2009 letter of Uni-Asia, it was stated that the subject Stock Certificate was not
registered and has no stamp, to wit:

“As discussed during the last board meeting, we are releasing Stock Certificates
to formalize ownership to the corporation. Please note that said Certificates
are not registered and have no stamps, but are properly signed by the
President and Corporate Secretary and bearing the corporate seal. These
will serve as internal document of the corporation that the shareholders can hold
on to as certification of their share in the firm.”

Notwithstanding the absence of stamp, it is submitted that the Certificate of Stock is still valid as
the Corporation Code requires only the signature of the President, counter-signed by the
Corporate Secretary, and sealed with the corporate seal, to wit:

Section 63 of The Corporation Code expressly provides for the requirements for a valid transfer of
shares of stocks, to wit:

“Sec. 63. Certificate of stock and transfer of shares. - The capital stock of stock
corporations shall be divided into shares for which certificates signed by the
president or vice president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property
and may be transferred by delivery of the certificate or certificates indorsed by
the owner or his attorney-in-fact or other person legally authorized to make the
transfer.  x x x x” (Emphasis supplied)

Likewise, Section 2 of the By-Laws of Uni-Asia provides:

Section 2. Certificates – Each stockholder shall be entitled to one or more

certificates for such fully paid stock subscription in his name in the books of the
corporation. The certificates shall contain the matters required by law and the
Articles of Incorporation. They shall be in the form and design as may be
determined by the Board of Directors and numbered consecutively. The
certificates, which must be issued in consecutive order, shall bear the

4
Lao v. Lao, G.R. No. 170585, 567 SCRA 558 (2008)Id at 1.
5
Makati Sports Club, Inc. v. Cheng, et al., 635 Phil. 103, 114 (2010).
6
Id at 1.G.R. No. 1705856 October 2008

6
 signature of the President, manually countersigned by the Secretary or
Assistant Secretary, and sealed with the corporate seal.

In this case, Certificate of Stock No. 0013 is properly signed by the President and Corporate
Secretary and bearing the corporate seal.

Moreover, Section 64 of the Corporation Code is unequivocal that upon issuance of a certificate
of stock, it can be presumed that the subscriber has tendered full amount of his subscription
together with interest and expenses, thus:

“Section 64. Issuance of stock certificates. – No certificate of stock shall be

issued to a subscriber until the full amount of his subscription together with
interest and expenses (in case of delinquent shares), if any is due, has been
paid.”

Thus, despite the fact that there was no valid transfer was made from the Assigning
Shareholders to FEPI, we can still argue that FEPI can still be considered a shareholder of Uni-
Asia by way of subscription and that the issuance of the Certificate of Stock issued to FEPI
proves its status as a shareholder thereof.

Unfortunately, the original copy of SC No. 13 cannot be found.

2.2. Notice/s of Equity Call-In

In 2007 and 2008, Uni-Asia called for additional equity call-in from its existing shareholders,
including FEPI, based on their equity contribution. In the 2008 Equity call-in, Uni-Asia asked
FEPI to remit an additional call-in contribution of Php3.3 Million representing FEPI’s 22.26%
share in Uni-Asia. This presupposes that Uni-Asia acknowledged FEPI as one of its
shareholders.  Otherwise, there is no basis for the demand for additional call-in contribution if
FEPI is not a shareholder.

We also note that equity call-in was in fact paid by FEPI based on its books. A total of
Php3,361,500.00 was paid by FEPI as additional equity call-in.

3. Judicial Affidavit of Leroy Tan in the Irene Ngan Case

In his Judicial Affidavit, Leroy Tan admitted that in the October 1, 2002 Board Meeting (Minutes of
Meeting was attached as Exhibit “8” of Leroy Tan’s Affidavit for the Complaint), he brought up the
issue of loans and advances to Uni-Asia and suggested that FEPI should now be formalized as
one of the shareholders.

Tan also presented as Exhibit “9” the breakdown of new sharing among the different personalities
who gave advances as of 15 December 2015. Tan added that the “list will show all the cash
infusion of stockholders as well as other personalities behind the stockholders who also put in
capital who would eventually be stockholders by virtue of their cash infusion as planned by us.”
These stockholders include FEPI.

“Q59: What evidence do you have, if any, that stockholders who contributed money to
Uni-Asia?”

“A: I have a copy of the Minutes of the Meeting dated 1 October 20002, wherein I
brought up the issue of said loans and advances to the board and wherein it was
unanimously agreed upon that the Php8,561,724 advanced by Sta. Lucia should
be considered as equity in Uni-Asia. I also have here with me a breakdown of the
new sharing among the different personalities who gave advances as of 15
December 1015. I repeatedly furnished this list probably ten to fifteen times to all
stockholders in the course of a year or two to keep them abreast of the true state
of investments in the company. This list will show all the cash infusion of
stockholders as well as other personalities behind the stockholders who
also put in capital who would eventually be stockholders by virtue of their
cash infusion as planned by us.”

xxxx

“Q62: What do you mean when you said that those who infused money would become
stockholders?”

“A: There was two-phase plan to equitize the various amounts of money infused into
the company, starting with Sta. Lucia’s initial infusion as the first phase, followed
by a second phase where the rest of the advances would be turned into

7
 equity. Hence, some of the stockholders even listed their children in the list as
their nominees who would hold the shares.”

The shareholders present during the meeting are Wilbur Chan, Arabelle Lee representing Mr. Eric
Ngan and Irene Ngan, and Larry Benitez, who did not oppose Mr. Tan’s suggestions. Also
present is Mr. Noel Cariño, representing FEPI.

In the breakdown of the new sharing mentioned by Mr. Tan in his Judicial Affidavit, FEPI is
included among the different personalities who gave advances amounting to P72,839,000.00 as
of 15 December 2015.
 
4. Verbal Subscription Contract

Section 59 of the Revised Corporation Code on Subscription Contract did not provide any form for the
Subscription Contract:

Section 59. Subscription Contract. - Any contract for the acquisition of unissued

stock in an existing corporation or a corporation still to be formed shall be deemed a
subscription within the meaning of this Title, notwithstanding the fact that the parties
refer to it as a purchase or some other contract.

The Corporation Code did not require the Subscription Contract to be in writing. A verbal contract that
FEPI’s advances were made in consideration for it to become a shareholder of Uni-Asia will do.
Likewise, this verbal agreement is confirmed by the above enumerated documents, records, and
representations (e.g. Various Minutes of Meeting of the Board, Transmittal of Stock Certificate No.
13, Notice/s of Equity Call-In, Judicial Affidavit of Leroy Tan in the Irene Ngan Case) showing FEPI’s
ownership of Uni-Asia’s shares. Verily, contracts are binding on the parties in whatever form they may
have been entered into7.

Moreover, the obligations of FEPI under the subscription contract (e.g. to pay subcription price) has
been fully performed by FEPI. The advances were already released by FEPI in consideration to its
share in Uni-Asia; the consideration thereof was paid as evidenced by the delivery of SC No. 13, the
only thing left to do by Uni-Asia is the recording of SC No. 13 in its book.

In Tan vs. SEC8, the Supreme Court had the occasion to declare that a certificate of stock is not
necessary to render one a stockholder in a corporation. But a certificate of stock is the tangible
evidence of the stock itself and of the various interests therein. The certificate is the evidence of the
holder’s interest and status in the corporation, his ownership of the share represented thereby. The
certificate is in law, so to speak, an equivalent of such ownership. It expresses the contract between
the corporation and the stockholder, but it is not essential to the existence of a share in stock or the
creation of the relation of shareholder to the corporation. In fact, it rests on the will of the stockholder
whether he wants to be issued stock certificates, and a stockholder may opt not to be issued a
certificate.

Statute of Frauds not applicable

Long accepted and well settled is the rule that the Statute of Frauds is applicable only to executory contracts —
not to contracts either totally or partially performed. In this case, the obligation of FEPI under the
subscription contract (e.g. to pay subcription price) has been fully performed by FEPI. The advances
were already released by FEPI in consideration to its share in Uni-Asia; the consideration thereof was
paid as evidenced by the delivery of SC No. 13, the only thing left to do by Uni-Asia is the recording
of SC No. 13 in its book.

The facts thus alleged are constitutive of a consummated contract. It matters not that neither the subscription
contract was in writing.

Therefore, in view of the foregoing, it is concluded that the SC No. 13 issued to FEPI shows its status
as a shareholder of the Corporation pursuant to the verbal subscription contract it had with Uni-Asia.

III.   Is there such a thing as "de facto" shareholder?  Can FEPI be considered a “de facto”
shareholder by virtue of its treatment as such by the board/shareholders of Uni-Asia?

No, there is no such thing as “de facto” shareholder. Again, there are only 2 ways for one to become
a shareholder. One is by subscription and the other is by way of transfer of shares. FEPI cannot be
considered a “de facto” shareholder.

A. Why does FEPI have 14 Centro Verde Lots "reserved" in its name?

7
Article 1356 of the Civil Code.
8
206 SCRA 740 (1992)

8
 Per Sales Report dated October 2011 (Annex “W”), 14 Centro Verde Lots were reserved for FEPI.
We have no record to support why Uni-Asia reserved 14 lots to FEPI. However, based on the “List of
Lot for Payment of Loan to Paragon Plaza” (Exhibit “V” of the Judicial Affidavit of Arabelle Lee), the
14 lots were used as payment of “FEPI’s share in the Paragon Plaza (60%) paid thru offsetting”.

Also, it appears that these 14 Centro Verde lots were the subject of the Deed of Assignment dated 11
August 2009 between FEPI and F. Gurrea Construction Incorporated (FGCI) (Annex “X”),. These
14 Centro Verde Lots likewise form part of the lots that were allocated to FEPI, FERC and Uni-Asia
based on the allocation of lots per Revised Sales Plan for Centro Verde Ph. 1 (hereinafter, the
“Allocation Plan”; see Annex “Y”) as the landowner’s share or return of its contribution to the
Centro Verde joint venture project pursuant to the undated and unnotarized Investment Agreement
(see Annex “Z”) by and among Uni-Asia, FEPI, and FERC, as landowners, and Sta. Lucia, as
developer. Under the said Investment Agreement, the parties agreed to develop the 1,624,780 sq.m.
parcels of land in Manduriao and Pavia, Iloilo (the “Centro Verde JV Properties”), which are co-
owned by Uni-Asia, FEPI and FERC, into first class residential subdivision with an 18-hole golf course
and sports club. We are not aware how FEPI became a co-owner of the Centro Verde JV Properties.
However, we assume that FEPI became a co-owner of the Centro Verde JV Properties pursuant to
the advances made by FEPI that was used to acquire the Centro Verde JV Properties.

III. How did the Uni-Asia FS record FEPI's "advances"? 

Uni-Asia did does not mention FEPI in its FS from 2010 to present.

In its 2017 AFS, the ACS of Uni-Asia remains at Php200 Million with issued and outstanding shares
of Php58,561,724 or an increase of Php8,561,724 from the original incorporation shares of
Php50,000.00. The Php8,561,724 increase represents the 8,651,724 additional issuance of shares
in favor of Sta. Lucia Realty Devt. Corp. as a result of conversion of advances to equity conversion.
There is also an entry “Deposit for Future Stock Subscription” in the amount of Php141,438,276.00,
which represents the remaining unissued shares of 141,438,276.  We are unaware if this includes
FEPI.

However, iIn the “Sources & Uses of Funds – January 1996 to August 2016” that was attached as
Exhibit “2” of the Judicial Affidavit of Leroy Tan, FEPI’s advances were recorded as “Advances from
Fil-Estate”. As of August 2016, Advances from Fil-Estate amount to Php72,839,000.00.

IV. What happened to the Php20M in cash received by Uni-Asia from FEPI? This is not in the
breakdown of FEPI advances.

Based on the books of FEPI, total advances made by FEPI to Uni-Asia recorded as “Advances to
Other Realty” is in the total amount of Php98,450,698.98, broken down as follows:

REPORT
DATE REFERENCE PARTICULARS
BALANCE
BEGINNING BALANCES AS OF
31/12/99 JV#990000001 21,250,812.50
12/31/99
To reclass to proper account (per
30/09/01 CAJE1-9-227A SGV instrucion) 73,793,386.48
Payment for Adv./Additional equity
for Uni-Asia, Inc. re: reimbursement
07/01/02 CV#42935 15,000.00
of acceptance fee of Atty. Virgilio
Teraul
Payment for C/A re: acceptance
30/01/02 CV#60357 15,000.00
fee of Atty. Virgilio Teraul
Representing payment for equity of
FEPI to Uni-Asia per Capital call-in
of stockholder per board meeting
23/09/05 HOCD-R#9016 1,500,000.00
dtd. 9/25/05 to defray expenses for
volume DAR conversion order
RFP#21734
Representing payment for equity of
FEPI to Uni-Asia per Capital call-in
of stockholder per board meeting
23/09/05 HOCD-R#9019 1,310,000.00
dtd. 9/25/05 to defray expenses for
volume DAR conversion order
RFP#21734
08/10/08 HOPV#1262 Payment for add'l call-in for 22.46% 561,500.00
share of FEPI for payment to lot
owners in Ph.1 of Centro Verde

9
 Iloilo
TOTAL ADVANCES > > > 98,450,698.98

We assume that the 20 Million Cash Advance (by check dated 1 June 1997) forms part of the
beginning balance of Php21,250,812.50 as of December 31, 1999. See Annex “AA” for the
complete details.

V. If there is no such thing as a “de facto” shareholder, canCan FEPI compel Uni-Asia to convert
FEPI advances into equity? What are the requirements to convert advances into equity?
 
 
While it is true that FEPI is not a shareholder pursuant to the transfer of shares, FEPI can compel
Uni-Asia to convert FEPI advances into equity similar to what Uni-Asia did with Sta. Lucia’s advances
(e.g. conversion of its payables to shareholders and potential investors to equity amounting to
P8,561,724).

As stated earlier, in the Judicial Affidavit of Leroy Tan, he admitted that the cash infusion (advances)
of shareholders as well as other personalities who also put in capital would eventually be
shareholders by virtue of their cash infusion as planned by the original shareholders.

Q116: Please explain to us the shareholdings of the companies mentioned by Plaintiff

Lee in the letter.

A: Ms. Arabelle Lee claimed that CARJAL, FERC, Phil Wu Yi, and Sta. Lucia were
new stockholders of Uni-Asia. This is not the case. It was common knowledge
among the original stockholders that CARJAL’s equity was being held by Mr. Joel
Carino and Mr. Godofredo Jalasco, Jr. As to FERC’s alleged equity, it was also
common knowledge that FERC is a Fil-Estate company, with Mr. Joel Carino as
head. As to Phil Wu Yi, its equity came from a sale of shares from LBS
Properties, Inc. and Agate, in accordance with a Deeds of Absolute Sale of
Shares executed by the parties. For Sta. Lucia’s part, its equity was from the
advances it had previously made, which were converted into equity, as
unanimously approved by the stockholders. We all know who are behind
the stockholders of record.

xxxx

Q123: It is not disputed that there was a stockholders and board of directors meeting
held on 04 February 2016. What was discussed during this meeting?

A: One of the important matters discussed in the meeting was the letter of Sta.
Lucia representing that its loan to Uni-Asia amounting to Php8,561,724 be
converted into shares of stock.

Q:124: After discussing Sta. Lucia’s letter with the board and stockholders, what action
was taken, if any?

A: The stockholders unanimously approved the conversion of the debt into

equity. Everyone unanimously agreed to execute waivers of pre-emptive right in
order to facilitate the conversion. The condition was that everyone should waive.

xxxx

Q128: What else was taken up during the 4 February 2016 meeting of the Board of
Directors?

A: The Board authorized the issuance of the 8,561,724 Uni-Asia Shares to

correspond to the debt-equity conversion for advances made by Sta. Lucia
for Uni-Asia. The Board, which also constituted the stockholders,
unanimously voted to execute separate waivers of their preemptive rights
to the shares of stock to simplify the process.

We see no reason why FEPI should be treated differently from Sta. Lucia. Sta. Lucia’s advances to
Uni-Asia amounting to P8,561,724 was converted to equity, while FEPI’s advances was treated as
mere “cash loan” when in fact, in the several documents that the board mentioned Sta. Lucia’s
advances, FEPI’s advances was mentioned in the same category as well as informing the board of its
intention to make FEPI a shareholder, with its advances as equity. Thus, it was the initial intention of
Uni-Asia to treat FEPI and Sta. Lucia’s advances equally; that is, to convert the advances into equity.
It was only in the board meeting held on August 22, 2013, wherein Mr. Tan asked the board on how

10
 to treat FEPI and on how to settle obligations with them that they all agreed that FEPI/GERI will not
be treated as shareholder, though Uni-Asia acknowledge that it owed FEPI/GERI money.

VI. What are the requirements to convert advances into equity? 

Only the approval of the Board (majority vote) is required for conversion of FEPI’s advances into
equity.

A stock corporation is expressly granted the power to issue or sell stocks. The power to issue shares
of stock in a corporation is lodged in the board of directors and no shareholders’ meeting is required
to consider it because additional issuances of shares of stock does not need approval of the
shareholders.9 What is only required is the board resolution approving the additional issuance of
shares. 

In this case, Uni-Asia has a total of remaining unissued shares of 141,438,276. At any rate, the
10,423,674 shares of FEPI may be taken from the unsubscribed portion of Uni-Asia’s ACS. However,
this would be subject to the pre-emptive right of the existing stockholders, thus:

“All stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or
disposition of shares of any class, in proportion to their respective shareholdings, unless such
right is denied by the articles of incorporation or an amendment thereto : Provided, That such
preemptive right shall not extend to shares issued in compliance with laws requiring
stock offerings or minimum stock ownership by the public; or to shares issued in
good faith with the approval of the stockholders representing two-thirds (2/3) of the
outstanding capital stock in exchange for property needed for corporate purposes or
in payment of previously contracted debt.”

In other words, unless with approval of the stockholders representing two-thirds (2/3) of the outstanding
capital stock is obtained, the existing stockholders of Uni-Asia may exercise their preemptive right before the
shares of FEPI may be taken from the unsubscribed portion of Uni-Asia’s ACS.
This is not subject to preemptive right pursuant to Section 38 of the Revised Corporation Code, thus:

“xxx such preemptive right shall not extend xxx in payment of previously contracted debt.”

A. If Uni-Asia refuses conversion, what then is our cause of action against Uni-Asia?

If Uni-Asia refuses conversion, FEPI may file a Complaint with the Regional Trial Court of Taguig City
praying for its declaration as equity shareholder of Uni-Asia with Motion for Production/Inspection of
Document.

FEPI may allege that it is a bona fide shareholder of Uni-Asia as evidenced by SC No. 13 issued in
favor of Uni-Asia in consideration of its advances.

In the case of Lao vs. Lao10, wherein the petitioner filed a Petition before the SEC to be declared as
shareholders of the corporation (now cognizable before the Regional Trial Court pursuant to Interim
Rules of Procedure for Intra-Corporate Controversies [“RA No. 8799”]) the Supreme Court has held
that the party who assails the personality of another party to whom the certificate of stock was
issued, and who appears in the corporate book as shareholder, has the burden of proof to
prove that the latter is not a shareholder of the corporation.

Thus, on the basis of Stock Certificate No. 0013 alone, FEPI may file a Complaint with the Regional
Trial Court of Taguig City praying for its declaration as equity shareholder of Uni-Asia. In which case,
the burden of proof will now be with Uni-Asia to prove that FEPI is not a shareholder of the
corporation.

Similar in the case of Grace Borgona  Insigne, et al. vs.  Abra Valley Colleges, Inc., et al.11, to
establish its stock ownership, FEPI may present various documents showing their ownership of Uni-
Asia’s shares, specifically: admission of Uni-Asia that FEPI will be declared as shareholder pursuant
to its advances, the Judicial Affidavit of Mr. Leroy Tan, SC No. 13, proof of equity call-ins, and the
Minutes of Board Meetings wherein FEPI was among the attendees.

9
Dee v. Securities and Exchange Commission, G.R. Nos. 60502 and 63922, July 16, 1991, 199 SCRA
238, 252.
10
Id at 1.G.R. No. 170585, October 6, 2008
11
July 29, 2015, G.R. No. 204089

11
 In the Abra case, the Supreme Court considered the fact that petitioners served as members of the
Board in the Annual Meeting of Abra as evidence that petitioners are stockholders of the corporation.
Thus:

“And, thirdly, the petitioners adduced competent proof showing that the respondents had
allowed the petitioners to become members of the Board of Directors. According to
the Minutes of the Annual Meeting of Directors and Stockholders of the Abra Valley
College of January 29, 1989, which was among the documents submitted to the trial
court on April 7, 2010 through the Compliance and Manifestation, the petitioners attended
the annual meeting of January 29, 1989 as stockholders of Abra Valley, and participated
in the election of the Board of Directors at which some of them were chosen as members.
Considering that Section 23 of the Corporation Code requires every director to be the
holder of at least one share of capital stock of the corporation of which he is a director,
the respondents would not have then allowed any of the petitioners to be elected to sit in
the Board of Directors as members unless they believed that the petitioners so elected
were not disqualified for lack of stock ownership. Neither did the respondents thereafter
assail their acts as Board Directors. Conformably with the doctrine of estoppel, the
respondents could no longer deny the petitioners’ status as stockholders of Abra Valley.
The application of the doctrine of estoppel, which is based on public policy, fair dealing,
good faith and justice, is only appropriate because the purpose of the doctrine is to forbid
one from speaking against his own act, representations, or commitments to the injury of
another to whom he directed such act, representations, or commitments, and who
reasonably relied thereon. The doctrine springs from equitable principles and the equities
in the case, and is designed to aid the law in the administration of justice where without
its aid injustice might result. The Court has applied the doctrine wherever and whenever
special circumstances of the case so demanded.”

We note that in the 9 November 2006 meeting (see Annex H), Mr. Carino recognized the “presence
of Atty. Santos on the board”. However, Atty. Santos or Mr. Cariño were never reflected as members
of the Board in any of the GIS of Uni-Asia.

Mandamus will not lie.

In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has
a clear legal right to the thing demanded and that it is the imperative duty of the respondent to
perform the act required. It neither confers powers nor imposes duties and is never issued in doubtful
cases. It is simply a command to exercise a power already possessed and to perform a duty already
imposed.

In the case of Ponce vs. Alsons Cement Corporation, the Supreme Court ruled that “without recording
in the stock and transfer book of the corporation, a transfer of shares of stock is non-existent as far as
the corporation is concerned, the transferee may not be regarded by the corporation as one among
its stockholders and the corporation may legally refuse the issuance of stock certificates in the name
of the transferee even when there has been compliance with the requirements of Section 64 of the
Corporation Code. This is the import of Section 63 which states that "No transfer, however, shall be
valid, except between the parties, until the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred." The situation would be different if the
petitioner was himself the registered owner of the stock which he sought to transfer to a third party,
for then he would be entitled to the remedy of mandamus.

In this case, mandamus will not lie since FEPI is not a registered shareholder of Uni-Asia.

B. How do we pierce the corporate veil in this regard? 

Although a corporation has a personality separate and distinct from those of its shareholders,
directors, or officers, such separate and distinct personality is merely a fiction created by law for the
sake of convenience and to promote the ends of justice. The corporate personality may be
disregarded, and the individuals composing the corporation will be treated as individuals, if the
corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong;
as an alter ego, an adjunct, or a business conduit for the sole benefit of the shareholders. 12 In other
words, the veil of corporate fiction could be pierced when it was used as a shield to perpetrate a fraud
or to confuse legitimate issues.

However, note that piercing the corporate veil in order to hold corporate officers personally liable for
the corporation’s debts requires that "the bad faith or wrongdoing of the director must be established
clearly and convincingly  [as] [b]ad faith is never presumed."13

12
Light Rail Transit Authority v. Venus, Jr., G.R. No. 163782, March 24, 2006, 485 SCRA 361
13
Francisco v. Mallen, Jr., 645 Phil. 369, 376 (2010)

12
 In this case, the Assigning Shareholders were fully aware that FEPI was supposed to be recognized
as one of the shareholders of Uni-Asia in consideration to its advances. Except for Mr. Allan Yap who
was not present during the Board Meetings when the matter concerning FEPI advances was raised,
none of the Assigning Shareholders made any objection. In the Ngan complaint, shareholders
Arabelle Lee and Irene Ngan even sent a letter to Uni-Asia asking the status of FEPI whether it is a
shareholder, investor or creditor of Uni-Asia. Clearly, Lee and Ngan had knowledge of the
arrangement to make FEPI a shareholder of Uni-Asia. Thus, they cannot just renege from Uni-Asia’s
obligation to recognize FEPI as one of its shareholders as initially agreed upon.

VII. Can FEPI compel the designated transferring shareholders to proceed to assign their shares
to FEPI, as was originally agreed with then Uni-Asia?   If these shareholders refuse, what civil
and criminal actions can we file against them? Do we consider the advances made by FEPI to
Uni-Asia payments for the sale of the shares of these transferring shareholders to FEPI, but
that the proceeds were instead remitted to Uni-Asia for an on behalf of the transferring
shareholders (which means that these should be advances from these designated
shareholders). 
 
FEPI can compel some of the designated Assigning Shareholders to assign their shares to FEPI as
was originally agreed with then Uni-Asia. Except for Lorenzo Benitez (who in his letter dated 21
August 1998 consented to the transfer), none of the Assigning Shareholders (e.g. Irene Ngan, Allan
Yap, LBS Properties Inc., Agate Corp., Philippine Wu Yi Corp.) appears on record that they agreed to
the arrangement. However, the Assigning Shareholders (except for Allan Yap and Agate Corp) who
acted as directors and were present during the Board Meetings also did not object when the matter
concerning FEPI advances was raised.. Thus, they are deemed estopped from claiming they do not
know of the arrangement or the proposed transfer/assignment of shares to FEPI.

Estoppel arises when one, by his acts, representations, or admissions, or by his silence when he
ought to speak out, intentionally or through culpable negligence induces another to believe certain
facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the
former is permitted to deny the existence of such facts.14

The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and
justice, and its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably relied thereon.
Said doctrine springs from equitable principles and the equities of the case. It is designed to aid the
law in the administration of justice where without its aid injustice might result.'15

IV. If FEPI is considered an investor of Uni-Asia, what can it recover from Uni-Asia?   What can
FEPI recover from Uni-Asia as a Lender?    It seems Uni-Asia wants to return the advances on
the theory of "rejected" investment to forego payment of interest.   

An investor typically parts away with his money in the form of equity in a business. In return, he gets
to be an owner of a business, receives dividends from the profits declared by the company, and
receives value appreciation in his investment if he decides to sell his shares at a higher value. An
investor cannot expect to get interest payments or refund of his capital in a business. He can only get
refund of his capital by either selling his shares or if the company decides to go into voluntary
liquidation and shut down.

A lender, however, expects to get back his capital along with interest as specified in the contract.
However, the degree to which a lender is able to recover their money in the case of default by the
borrower will depend on how strong the collateral or security he possesses against the borrower’s
assets. The Lender is even in a more precarious situation if they have no collateral or security. In this
instance they may never recover their debt should the borrower remain unable to pay.16

FEPI may be considered as an investor since its advances were made in the form of equity in Uni-
Asia, in the expectation that it will become shareholders of Uni-Asia.

Should Uni-Asia refuse to recognize FEPI as its shareholder and refuse to convert the advances into
equity, FEPI may demand reimbursement of its advances from Uni-Asia without interest.with interest
after profits or gains are generated by Uni-Asia’s Centro Verde project.

14
Huyatid v. Huyatid, Jan. 4, 1978)
15
Philippine National Bank v. Court of Appeals, 94 SCRA 368 (1979)
16
https://nairametrics.com/2019/07/11/why-the-difference-between-an-investor-and-a-lender-can-determine-how-you-get-your-money-
back/

13
 In the case of the President of Philippine Deposit Insurance Corporation as Liquidator of Pacific
Banking Corporation vs. Reyes et. al.17, it has been settled that an investment cannot be assured of a
dividend or an interest on the amount invested, thus:

“An "investment" is an expenditure to acquire property or other assets in order to

produce revenue. It is the placing of capital or laying out of money in a way intended
to secure income or profit from its employment. "To invest" is to purchase securities
of a more or less permanent nature, or to place money or property in business
ventures or real estate, or otherwise lay it out, so that it may produce a revenue or
income.

Thus, unlike a deposit of money or a loan that earns interest, the investment of the
Singaporeans cannot be assured of a dividend or an interest on the amount invested.
For, interests or dividends are granted only after profits or gains are generated.

We therefore agree with the Court of Appeals in holding that the amount of
US$2,531,632.18 remitted by the Singaporeans to PaBC was not a loan or
forbearance of money in favor of PaBC. Hence No. II-1 of the above-quoted
guidelines in Eastern Shipping Lines does not come into play. Neither can we apply
Central Bank Circular No. 416, which imposes the rate of 12% per annum on loans
and forbearance of money. Nor can No. II-2 of the above-quoted guidelines be
invoked because, as correctly pointed out by the Liquidator, the closure of the PaBC
did not constitute a breach of obligation. Article 2209 of the Civil Code, which was
relied upon by the Court of Appeals, does not find application either. That Article,
which provides for 6% interest per annum, governs when there is a delay in the
payment of a sum of money. Such is not the case here.

Thus, the Court of Appeals’ award of 6% interest on the Singaporeans’ equity

investment as actual or compensatory damages from the date of its remittance until
the closure of PaBC has no leg to stand on and must, therefore, be deleted.

The interest that may be awarded as actual or compensatory damages in this case is
that provided in No. II-3 of the afore-quoted guidelines. Upon the finality of the Order
of 11 September 1992, the award of US$2,531,632.18 representing the
Singaporeans’ equity investment became a judgment debt. As such, it shall bear an
interest of 12% per annum from the finality of the Order until its full satisfaction.”

In this case, since FEPI’s advances were made in the expectation that it will become shareholders of
Uni-Asia, the same can be considered as a form of investment, which cannot beis assured of a
dividend or an interest on the amount invested after profits or gains are generated by Uni-Asia’s
Centro Verde project..

Also, even iIf the advances are considered a loan, the same will still not earn interest as no interest
was agreed upon by the parties. Article 1956 of the Civil Code requires interest to be stipulated in
writing for it to be due.

However, FEPI may charge interest on the advances from the time of demand (whether judicial or
extrajudicial) per Monetary Board of the Bangko Sentral ng Pilipinas (BSP-MB) Circular No. 799.

B. Why does FEPI have 14 Centro Verde Lots "reserved" in its name?

Per Sales Report dated October 2011 (Annex “W”), 14 Centro Verde Lots were reserved for FEPI.
We have no record to support why Uni-Asia reserved 14 lots to FEPI. However, based on the “List of
Lot for Payment of Loan to Paragon Plaza” (Exhibit “V” of the Judicial Affidavit of Arabelle Lee), the
14 lots were used as payment of “FEPI’s share in the Paragon Plaza (60%) paid thru offsetting”.

Also, it appears that these 14 Centro Verde lots were the subject of the Deed of Assignment dated 11
August 2009 between FEPI and F. Gurrea Construction Incorporated (FGCI) (Annex “X”),. These
14 Centro Verde Lots likewise form part of the lots that were allocated to FEPI, FERC and Uni-Asia
based on the allocation of lots per Revised Sales Plan for Centro Verde Ph. 1 (hereinafter, the
“Allocation Plan”; see Annex “Y”) as the landowner’s share or return of its contribution to the
Centro Verde joint venture project pursuant to the undated and unnotarized Investment Agreement
(see Annex “Z”) by and among Uni-Asia, FEPI, and FERC, as landowners, and Sta. Lucia, as
developer. Under the said Investment Agreement, the parties agreed to develop the 1,624,780 sq.m.
parcels of land in Manduriao and Pavia, Iloilo (the “Centro Verde JV Properties”), which are co-
owned by Uni-Asia, FEPI and FERC, into first class residential subdivision with an 18-hole golf course
and sports club. We are not aware how FEPI became a co-owner of the Centro Verde JV Properties.
However, we assume that FEPI became a co-owner of the Centro Verde JV Properties pursuant to
the advances made by FEPI that was used to acquire the Centro Verde JV Properties.

17
G.R. No. 154973, June 21, 2005.

14
Recommendations/actions that we may take in order to enforce FEPI's rights:

1. Request for inspection of Uni-Asia’s Stock Transfer Book to verify if the Certificate of
Stock No. 0013 is recorded.
2. However considering that Uni-Asia does not recognize FEPI as a shareholder, we are
certain that the request for inspection will be dismissed outright.
3. If inspection is denied, or if inspection is granted and it is confirmed that FEPI is not a
registered shareholder of FEPI, then FEPI should demand from Uni-Asia to register the
shares of FEPI in its Stock Transfer Book.
4. If Uni-Asia refuses to register, FEPI may file a Complaint for Specific Performance with
the Regional Trial Court of Taguig City praying for its declaration as equity shareholder of
Uni-Asia with Motion for Production/Inspection of Document.
5. Alternatively, FEPI may demand payment of its advances.

[1]
 See Annex “B” for the copy of check and voucher; Annex “C” for the letter showing FEPI became a 3rd party mortgagor (using several
Paragon units) to secure four (4) PNs of Uni-Asia in the aggregate amount of Php50M with EBC; and Annex “D” for the letter from EBC
counsel threatening to foreclose on the Paragon mortgage for failure of Uni-Asia to pay its debts, which interest now total Php72M inclusive
of Php12M attorney’s fees).
[2]
 Equitable Bank Loans                  Php            5,000,000.00               dated 3/6/97 (PN 152522)
15,000,000.00             dated 3/12/97 (PN 152575)
24,000,000.00             dated 3/24/97 (PN 152706)
  6,000,000.00             dated 4/3/97 (PN 152807)
25,000,000.00             dated 5/27/97 (EB 1038282)
Interest advances by Uni-Asia                        (2,507,986.13)             dated 1/31/98
PDIC – PBCOM                                                     716,324.07              dated 5/26/98(Check No. 0461505)
Thelma Labordo                                                 100,000.00                dated 08/2000 (Check No. 155863)
BOC-001462                                                     1,310,000.00             dated 9/26/05 (BOC 001462)
Total advances                             Php        74,618,337.94
 
[3]
 Section 3, Article 1 of Uni-Asia’s By-laws.
[4]
 Addressed to Atty. Augusto G. Panlilio.
[5]
 In the case of the President of Philippine Deposit Insurance Corporation as Liquidator of Pacific Banking Corporation vs. Reyes et. al.[5], it
was held that “[a]n "investment" is an expenditure to acquire property or other assets in order to produce revenue. It is the placing of
capital or laying out of money in a way intended to secure income or profit from its employment. "To invest" is to purchase securities of a
more or less permanent nature, or to place money or property in business ventures or real estate, or otherwise lay it out, so that it may
produce a revenue or income.”
[6]
 Article 1956 of the Civil Code.

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