1. China Banking VS CA. GR 117604. March 26.

1997*

Securities and Exchange Commission; Actions; Jurisdiction; The better policy in

determining which body has jurisdiction over a case would be to consider not only the
status of relationship of the parties but also the nature of the question that is the subject
of their controversy.—The basic issue we must first hurdle is which body has jurisdiction
over the controversy, the regular courts or the SEC. P.D. No. 902-A conferred upon the
SEC the following pertinent powers: * * * The aforecited law was expounded upon in Viray
v. CA and in the recent cases of Mainland Construction Co., Inc. v. Movilla and Bernardo
v. CA, thus: . . . . The better policy in determining which body has jurisdiction over a case
would be to consider not only the status or relationship of the parties but also the nature
of the question that is the subject of their controversy.

Corporation Law; The purchase of a share or membership certificate at public

auction by a party (and the issuance to it of the corresponding Certificate of Sale)
transfers ownership of the same to the latter and thus entitle it to have the said
share registered in its name as a member.—As to the first query, there is no question
that the purchase of the subject share or membership certificate at public auction by
petitioner (and the issuance to it of the corresponding Certificate of Sale) transferred
ownership of the same to the latter and thus entitled petitioner to have the said share
registered in its name as a member of VGCCI. It is readily observed that VGCCI did not
assail the transfer directly and has in fact, in its letter of 27 September 1974, expressly
recognized the pledge agreement executed by the original owner, Calapatia, in favor of
petitioner and has even noted said agreement in its corporate books. In addition,
Calapatia, the original owner of the subject share, has not contested the said transfer. By
virtue of the afore-mentioned sale, petitioner became a bona fide stockholder of VGCCI
and, therefore, the conflict that arose between petitioner and VGCCI aptly exemplifies an
intra-corporate controversy between a corporation and its stockholder under Sec. 5(b) of
P.D. 902-A.

The proper interpretation and application of a corporation’s by-laws is a subject

which irrefutably calls for the special competence of the SEC.—An important
consideration, moreover, is the nature of the controversy between petitioner and private
respondent corporation. VGCCI claims a prior right over the subject share anchored
mainly on Sec. 3, Art. VIII of its by-laws which provides that “after a member shall have
been posted as delinquent, the Board may order his/her/its share sold to satisfy the
claims of the Club . . .” It is pursuant to this provision that VGCCI also sold the subject
share at public auction, of which it was the highest bidder. VGCCI caps its argument by
asserting that its corporate by-laws should prevail. The bone of contention, thus, is the
proper interpretation and application of VGCCI’s aforequoted bylaws, a subject which
irrefutably calls for the special competence of the SEC.

Corporation Law; By-Laws; In order to be bound, a third party must have acquired
knowledge of the pertinent by-laws at the time the transaction or agreement
between said third person and the shareholder was entered into.—In order to be
bound, the third party must have acquired knowledge of the pertinent by—laws at the
time the transaction or agreement between said third party and the shareholder was
entered into, in this case, at the time the pledge agreement was executed. VGCCI could
have easily informed petitioner of its by-laws when it sent notice formally recognizing
petitioner as pledgee of one of its shares registered in Calapatia’s name. Petitioner’s
belated notice of said by-laws at the time of foreclosure will not suffice.

A membership share is quite different in character from a pawn ticket.—Similarly,

VGCCI’s contention that petitioner is duty-bound to know its by-laws because of Art.
2099 of the Civil Code which stipulates that the creditor must take care of the thing
pledged with the diligence of a good father of a family, fails to convince. The case of Cruz
& Serrano v. Chua A. H. Lee, is clearly not applicable: In applying this provision to the
situation before us it must be borne in mind that the ordinary pawn ticket is a document
by virtue of which the property in the thing pledged passes from hand to hand by mere
delivery of the ticket; and the contract of the pledge is, therefore, absolvable to bearer. It
results that one who takes a pawn ticket in pledge acquires domination over the pledge;
and it is the holder who must renew the pledge, if it is to be kept alive. It is quite obvious
from the aforequoted case that a membership share is quite different in character from a
pawn ticket and to reiterate, petitioner was never informed of Calapatia’s unpaid
accounts and the restrictive provisions in VGCCI’s by-laws.

The term “unpaid claim” in Sec. 63 of the Corporation Code refers to “any unpaid
claim arising from unpaid subscription, and not to any indebtedness which a
subscriber or stockholder may owe the corporation arising from any other
transaction,” such as monthly dues.—Finally, Sec. 63 of the Corporation Code which
provides that “no shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation” cannot be utilized by VGCCI. The
term “unpaid claim” refers to “any unpaid claim arising from unpaid subscription, and
not to any indebtedness which a subscriber or stockholder may owe the corporation
arising from any other transaction.” In the case at bar, the subscription for the share in
question has been fully paid as evidenced by the issuance of Membership Certificate No.
1219. What Calapatia owed the corporation were merely the monthly dues. Hence, the
aforequoted provision does not apply.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Lim, Vigilia & Orencia for petitioner.
Jose F. Manacop for private respondent.
KAPUNAN, J.:

Through a petition for review on certiorari under Rule 45 of the Revised Rules of Court, petitioner China Banking
Corporation seeks the reversal of the decision of the Court of Appeals dated 15 August 1994 nullifying the Securities
and Exchange Commission’s order and resolution dated 4 June 1993 and 7 December 1993, respectively, for lack of
jurisdiction. Similarly impugned is the Court of Appeals’ resolution dated 4 September 1994 which denied petitioner’s
motion for reconsideration.

The case unfolds thus:

 On 21 August 1974, Galicano Calapatia, Jr. (Calapatia, for brevity) a stockholder of

private respondent Valley Golf & Country Club, Inc. (VGCCI, for brevity), pledged his
Stock Certificate No. 1219 to petitioner China Banking Corporation (CBC, for brevity).
o On 16 September 1974, petitioner wrote VGCCI requesting that the
aforementioned pledge agreement be recorded in its books.
o In a letter dated 27 September 1974, VGCCI replied that the deed of pledge
executed by Calapatia in petitioner’s favor was duly noted in its
corporate books.
 On 3 August 1983, Calapatia obtained a loan of P20,000.00 from China Bank,
payment of which was secured by the aforestated pledge agreement still existing
between Calapatia and petitioner.

 Due to Calapatia’s failure to pay his obligation, China Bank, on 12 April 1985, filed a
petition for extrajudicial foreclosure before Notary Public Antonio T. de Vera of
Manila, requesting the latter to conduct a public auction sale of the pledged stock.

o On 14 May 1985, petitioner informed VGCCI of the abovementioned

foreclosure proceedings and requested that the pledged stock be
transferred to its (petitioner’s) name and the same be recorded in the
corporate books.

o However, on 15 July 1985, VGCCI wrote petitioner expressing its inability to

accede to petitioner’s request in view of Calapatia’s unsettled accounts
with the club.

o Despite the foregoing, Notary Public de Vera held a public auction on 17

September 1985 and China Bank emerged as the highest bidder at
 P20,000.00 for the pledged stock. Consequently, petitioner was issued
the corresponding certificate of sale.

 On 21 November 1985, VGCCI sent Calapatia a notice demanding full payment of his
overdue account in the amount of P18,783.24.8 Said notice was followed by a demand
letter dated 12 December 1985 for the same amount and another notice dated 22
November 1986 for P23,483.24.

o On 4 December 1986, VGCCI caused to be published in the newspaper Daily

Express a notice of auction sale of a number of its stock certificates, to be
held on 10 December 1986 at 10:00 a.m. Included therein was Calapatia’s
own share of stock (Stock Certificate No. 1219).

o Through a letter dated 15 December 1986, VGCCI informed Calapatia of the

termination of his membership due to the sale of his share of stock in
the 10 December 1986 auction.

 On 5 May 1989, petitioner advised VGCCI that it is the new owner of Calapatia’s Stock
Certificate No. 1219 by virtue of being the highest bidder in the 17 September 1985
auction and requested that a new certificate of stock be issued in its name.
o On 2 March 1990, VGCCI replied that “for reason of delinquency” Calapatia’s
stock was sold at the public auction held on 10 December 1986 for
P25,000.00.
 On 9 March 1990, petitioner protested the sale by VGCCI of the subject share of
stock and thereafter filed a case with the Regional Trial Court of Makati for the
nullification of the 10 December 1986 auction and for the issuance of a new stock
certificate in its name.
o On 18 June 1990, the Regional Trial Court of Makati dismissed the
complaint for lack of jurisdiction over the subject matter on the theory that it
involves an intra-corporate dispute and on 27 August 1990 denied
petitioner’s motion for reconsideration.

 On 20 September 1990, petitioner filed a complaint with the Securities and Exchange
Commission (SEC) for the nullification of the sale of Calapatia’s stock by VGCCI; the
cancellation of any new stock certificate issued pursuant thereto; for the issuance of a
new certificate in petitioner’s name; and for damages, attorney’s fees and costs of
litigation.

Ruling of the SEC

 On 3 January 1992, SEC Hearing Officer Manuel P. Perea rendered a decision in

favor of VGCCI, stating in the main that “(c)onsidering that the said share is
delinquent, (VGCCI) had valid reason not to transfer the share in the name of the
petitioner in the books of (VGCCI) until liquidation of delinquency.”
 Consequently, the case was dismissed.
 On 14 April 1992, Hearing Officer Perea denied petitioner’s motion for
reconsideration.
 Petitioner appealed to the SEC en banc and on 4 June 1993, the Commission issued
an order reversing the decision of its hearing officer. It declared thus:
The Commission en banc believes that appellant-petitioner has a prior right over
the pledged share and because of pledgor’s failure to pay the principal debt upon
maturity, appellant-petitioner can proceed with the foreclosure of the pledged
share.

WHEREFORE, premises considered, the Orders of January 3, 1992 and April 14,
1992 are hereby SET ASIDE. The auction sale conducted by appellee-respondent
Club on December 10, 1986 is declared NULL and VOID. Finally, appellee-
respondent Club is ordered to issue another membership certificate in the name
of appellant-petitioner bank.
 SO ORDERED
 VGCCI sought reconsideration of the abovecited order. However, the SEC denied the
same in its resolution dated 7 December 1993.

Ruling of the CA

 The sudden turn of events sent VGCCI to seek redress from the Court of Appeals.
 On 15 August 1994, the Court of Appeals rendered its decision nullifying and setting
aside the orders of the SEC and its hearing officer on ground of lack of jurisdiction
over the subject matter and, consequently, dismissed petitioner’s original complaint.
 The Court of Appeals declared that the controversy between CBC and VGCCI is not
intra-corporate. It ruled as follows:
 In order that the respondent Commission can take cognizance of a case, the
controversy must pertain to any of the following relationships:

a. between the corporation, partnership or association and the public;

b. between the corporation, partnership or association and its
stockholders, partners, members, or officers;
c. between the corporation, partnership or association and the state in
so far as its franchise, permit or license to operate is concerned, and
d. among the stockholders, partners or associates themselves (Union
Glass and Container Corporation vs. SEC, November 28, 1983, 126
SCRA 31).
The establishment of any of the relationship mentioned will not
necessarily always confer jurisdiction over the dispute on the Securities
and Exchange Commission to the exclusion of the regular courts. The
statement made in Philex Mining Corp. vs. Reyes, 118 SCRA 602, that
the rule admits of no exceptions or distinctions is not that absolute. The
better policy in determining which body has jurisdiction over a case
would be to consider not only the status or relationship of the parties but
also the nature of the question that is the subject of their controversy
(Viray vs. Court of Appeals, November 9, 1990, 191 SCRA 308, 322-323).
 Indeed, the controversy between petitioner and respondent bank which involves
ownership of the stock that used to belong to Calapatia, Jr. is not within the
competence of respondent Commission to decide. It is not any of those mentioned in
the aforecited case.
 WHEREFORE, the decision dated June 4, 1993, and order dated December 7, 1993
of respondent Securities and Exchange Commission (Annexes Y and BB, petition)
and of its hearing officer dated January 3, 1992 and April 14, 1992 (Annexes S and
W, petition) are all nullified and set aside for lack of jurisdiction over the subject
matter of the case. Accordingly, the complaint of respondent China Banking
Corporation (Annex Q, petition) is DISMISSED. No pronouncement as to costs in this
instance.
 Petitioner moved for reconsideration but the same was denied by the Court of
Appeals in its resolution dated 5 October 1994.21

ISSUES

The basic issue we must first hurdle is which body has jurisdiction over the
controversy, the regular courts or the SEC.

RULING:

WHEREFORE, premises considered, the assailed decision Court of Appeals is

REVERSED and the order of the SEC en banc dated 4 June 1993 is hereby
AFFIRMED

In defending its actions, VGCCI likewise maintains that petitioner is bound by its by-
laws.
It argues in this wise:
The general rule really is that third persons are not bound by the by-laws of a
corporation since they are not privy thereto (Fleischer v. Botica Nolasco, 47 Phil.
584).

The exception to this is when third persons have actual or constructive knowledge of the
same.

In the case at bar, petitioner had actual knowledge of the bylaws of private respondent
when petitioner foreclosed the pledge made by Calapatia and when petitioner purchased
the share foreclosed on September 17, 1985.

This is proven by the fact that prior thereto, i.e., on May 14, 1985 petitioner even quoted
a portion of private respondent’s by-laws which is material to the issue herein in a letter
it wrote to private respondent.

Because of this actual knowledge of such by-laws then the same bound the petioner as of
the time when petitioner purchased the share.

Since the by-laws was already binding upon petitioner when the latter purchased the
share of Calapatia on September 17, 1985 then the petitioner purchased the said share
subject to the right of the private respondent to sell the said share for reasons of
delinquency and the right of private respondent to have a first lien on said shares as
these rights are provided for in the by-laws very very clearly.

VGCCI misunderstood the import of our ruling in Fleischer v. Botica Nolasco Co.:
And moreover, the by-law now in question cannot have any effect on the appellee. He had no knowledge of such by-
law when the shares were assigned to him. He obtained them in good faith and for a valuable consideration. He
was not a privy to the contract created by said by-law between the shareholder Manuel Gonzales and the Botica
Nolasco, Inc. Said by-law cannot operate to defeat his rights as a purchaser.

“An unauthorized by-law forbidding a shareholder to sell his shares without first offering them to the corporation
for a period of thirty days is not binding upon an assignee of the stock as a personal contract, although his
assignor knew of the by-law and took part in its adoption.” (10 Cyc., 579; Ireland vs. Globe Milling Co., 21 R.I., 9.)

“When no restriction is placed by public law on the transfer of corporate stock, a

purchaser is not affected by any contractual restriction of which he had no notice.”
(Brinkerhoff-Farris Trust & Savings Co. vs. Home Lumber Co., 118 Mo., 447.)

“The assignment of shares of stock in a corporation by one who has assented to an

unauthorized by-law has only the effect of a contract by, and enforceable against, the
assignor; the assignee is not bound by such by-law by virtue of the assignment alone.”
(Ireland vs. Globe Milling Co., 21 R.I., 9.)

“A by-law of a corporation which provides that transfers of stock shall not be valid unless
approved by the board of directors, while it may be enforced as a reasonable regulation
for the protection of the corporation against worthless stockholders, cannot be made
available to defeat the rights of third persons.” (Farmers’and Merchants’ Bank of Lineville
vs. Wasson, 48 Iowa, 336.) (Italics ours]

In order to be bound, the third party must have acquired knowledge of the
pertinent by-laws at the time the transaction or agreement between said third party
and the shareholder was entered into, in this case, at the time the pledge
agreement was executed. VGCCI could have easily informed petitioner of its by-laws
when it sent notice formally recognizing petitioner as pledgee of one of its shares
registered in Calapatia’s name.

Petitioner’s belated notice of said by-laws at the time of foreclosure will not suffice. The
ruling of the SEC en banc is particularly instructive:

By-laws signifies the rules and regulations or private laws enacted by the corporation to
regulate, govern and control its own actions, affairs and concerns and its stockholders or
members and directors and officers with relation thereto and among themselves in their
relation to it.

In other words, by-laws are the relatively permanent and continuing rules of action
adopted by the corporation for its own government and that of the individuals composing
it and having the direction, management and control of its affairs, in whole or in part, in
the management and control of its affairs and activities. (9 Fletcher 4166, 1982 Ed.)

The purpose of a by-law is to regulate the conduct and define the duties of the members
towards the corporation and among themselves. They are self-imposed and, although
adopted pursuant to statutory authority, have no status as public law. (Ibid.)

Therefore, it is the generally accepted rule that third persons are not bound by by-laws,
except when they have knowledge of the provisions either actually or constructively.

In the case of Fleischer v. Botica Nolasco, 47 Phil. 584, the Supreme Court held that the
bylaw restricting the transfer of shares cannot have any effect on the transferee of the
shares in question as he “had no knowledge of such by-law when the shares were
assigned to him. He obtained them in good faith and for a valuable consideration. He was
not a privy to the contract created by the by-law between the shareholder x x x and the
Botica Nolasco, Inc. Said by-law cannot operate to defeat his right as a purchaser.” (Ialics
supplied.)

By analogy of the above-cited case, the Commission en banc is of the opinion that said
case is applicable to the present controversy. Appellant-petitioner bank as a third party
can not be bound by appellee-respondent’s by-laws. It must be recalled that when
appellee-respondent communicated to appellant-petitioner bank that the pledge
agreement was duly noted in the club’s books there was no mention of the shareholder-
pledgor’s unpaid accounts. The transcript of stenographic notes of the June 25, 1991
Hearing reveals that the pledgor became delinquent only in 1975. Thus,
appellantpetitioner was in good faith when the pledge agreement was contracted.

The Commission en banc also believes that for the exception to the generally
accepted rule that third persons are not bound by bylaws to be applicable and
binding upon the pledgee, knowledge of the provisions of the VGCCI By-laws must
be acquired at the time the pledge agreement was contracted. Knowledge of said
provisions, either actual or constructive, at the time of foreclosure will not affect pledgee’s
right over the pledged share. Art. 2087 of the Civil Code provides that it is also of the
essence of these contracts that when the principal obligation becomes due, the things in
which the pledge or mortgage consists may be alienated for the payment to the creditor.

In a letter dated March 10, 1976 addressed to Valley Golf Club, Inc., the Commission
issued an opinion to the effect that:
According to the weight of authority, the pledgee’s right is entitled to full protection
without surrender of the certificate, their cancellation, and the issuance to him of new
ones, and when done, the pledgee will be fully protected against a subsequent purchaser
who would be charged with constructive notice that the certificate is covered by the
pledge. (12-A Fletcher 502)

The pledgee is entitled to retain possession of the stock until the pledgor pays or tenders
to him the amount due on the debt secured. In other words, the pledgee has the right to
resort to its collateral for the payment of the debts. (Ibid., 502)
To cancel the pledged certificate outright and the issuance of new certificate to a third
person who purchased the same certificate covered by the pledge, will certainly defeat the
right of the pledgee to resort to its collateral for the payment of the debt.

The pledgor or his representative or registered stockholders has no right to require a

return of the pledged stock until the debt for which it was given as security is paid and
satisfied, regardless of the length of time which have elapsed since debt was created. (12-
A Fletcher 409)
 A bona fide pledgee takes free from any latent or secret equities or liens in favor either of
the corporation or of third persons,if he has no notice thereof, but not otherwise. He also
takes it free of liens or claims that may subsequently arise in favor of the corporation if it
has notice of the pledge, although no demand for a transfer of the stock to the pledgee on
the corporate books has been made. (12-A Fletcher 5634, 1982 ed., citing Snyder v. Eagle
Fruit Co., 75 F2d 739)38

Similarly, VGCCI’s contention that petitioner is duty-bound to know its by-laws because
of Art. 2099 of the Civil Code which stipulates that the creditor must take care of the
thing pledged with the diligence of a good father of a family, fails to convince.

The case of Cruz & Serrano v. Chua A.H. Lee,39 is clearly not applicable:

In applying this provision to the situation before us it must be borne in mind that the
ordinary pawn ticket is a document by virtue of which the property in the thing pledged
passes from hand to hand by mere delivery of the ticket; and the contract of the pledge is,
therefore, absolvable to bearer. It results that one who takes a pawn ticket in pledge
acquires domination over the pledge; and it is the holder who must renew the pledge, if it
is to be kept alive.

It is quite obvious from the aforequoted case that a membership share is quite different in
character from a pawn ticket and to reiterate, petitioner was never informed of
Calapatia’s unpaid accounts and the restrictive provisions in VGCCI’s by-laws.

Finally, Sec. 63 of the Corporation Code which provides that “no shares of stock against
which the corporation holds any unpaid claim shall be transferable in the books of the
corporation” cannot be utilized by VGCCI. The term “unpaid claim” refers to “any unpaid
claim arising from unpaid subcription, and not to any indebtedness which a subscriber
or stockholder may owe the corporation arising from any other transaction.”40 In the
case at bar, the subscription for
the share in question has been fully paid as evidenced by the issuance of Membership
Certificate No. 1219.

What Calapatia owed the corporation were merely the monthly dues. Hence, the
aforeqouted provision does not apply

2. PMI Colleges vs NLRC, 1997*

Corporation Law; By-Laws; Since by-laws operate merely as internal rules among the
stockholders, they cannot affect or prejudice third persons who deal with the corporation,
unless they have knowledge of the same.—Neither can we concede that such contract would be
invalid just because the signatory thereon was not the Chairman of the Board which allegedly
violated petitioner’s bylaws. Since by-laws operate merely as internal rules among the
stockholders, they cannot affect or prejudice third persons who deal with the corporation, unless
they have knowledge of the same. No proof appears on record that private respondent ever knew
anything about the provisions of said by-laws. In fact, petitioner itself merely asserts the same
without even bothering to attach a copy or excerpt thereof to show that there is such a provision.
How can it now expect the Labor Arbiter and the NLRC to believe it? That this allegation has
never been denied by private respondent does not necessarily signify admission of its existence
because technicalities of law and procedure and the rules obtaining in the courts of law do not
strictly apply to proceedings of this nature.
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the resolution1 of public respondent National
Labor Relations Commission rendered on August 4, 1995, affirming in toto the December 7, 1994 decision3 of Labor Arbiter
Pablo C. Espiritu declaring petitioner PMI Colleges liable to pay private respondent Alejandro Galvan P405,000.00 in unpaid
wages and P40,532.00 as attorney’s fees.
A chronicle of the pertinent events on record leading to the filing of the instant petition is as follows:

FACTS
 On July 7, 1991, petitioner, an educational institution offering courses on basic
seaman’s training and other marine related courses, hired private Alejandro Galvan
as contractual instructor with an agreement that the latter shall be paid at an hourly
rate of P30.00 to P50.00, depending on the description of load subjects and on the
schedule for teaching the same. Pursuant to this engagement, private respondent
then organized classes in marine engineering.

 Initially, Galvan and other instructors were compensated for services rendered during
the first three periods of the abovementioned contract.

 However, for reasons unknown to private respondent, he stopped receiving payment

for the succeeding rendition of services.

 This claim of non-payment was embodied in a letter dated March 3, 1992, written by
petitioner’s Acting Director, Casimiro A. Aguinaldo, addressed to its President, Atty.
Santiago Pastor, calling attention to and appealing for the early approval and release
of the salaries of its instructors including that of private respondent.

 It appeared further in said letter that the salary of private respondent corresponding
to the shipyard and plant visits and the ongoing on-the-job training of Class on
board MV “Sweet Glory” of Sweet Lines, Inc. was not yet included.

 This request of the Acting Director apparently went unheeded.

 Repeated demands having likewise failed, private respondent was soon constrained to
file a complaint before the National Capital Region Arbitration Branch on September
14, 1993 seeking payment for salaries earned from the following:

(1) basic seaman course Classes 41 and 42 for the period covering October 1991 to
September 1992; (2) shipyard and plant visits and on-the-job training of Classes 41
and 42 for the period covering October 1991 to September 1992 on board M/V
“Sweet Glory” vessel; and
(3) as Acting Director of Seaman Training Course for 3-1/2 months.

 In support of the abovementioned claims, private respondent submitted documentary

evidence which were annexed to his complaint, such as the detailed load and
schedule of classes with number of class hours and rate per hour (Annex “A”); PMI
Colleges Basic Seaman Training Course (Annex “B”); the aforementioned letter-
request for payment of salaries by the Acting Director of PMI Colleges (Annex “C”);
unpaid load of private respondent (Annex “D”); and vouchers prepared by the
accounting department of petitioner but whose amounts indicated therein were
actually never paid to private respondent (Exhibit “E”).

 Private respondent’s claims, as expected, were resisted by petitioner. It alleged that

classes in the courses offered which complainant claimed to have remained unpaid
were not held or conducted in the school premises of PMI Colleges.

 Only private respondent, it was argued, knew whether classes were indeed
conducted. In the same vein, petitioner maintained that it exercised no appropriate
and proper supervision of the said classes which activities allegedly violated certain
rules and regulations of the Department of Education, Culture and Sports (DECS).

 Furthermore, the claims, according to petitioner, were all exaggerated and that, at
any rate, private respondent abandoned his work at the time he should have
commenced the same.

 In reply, private respondent belied petitioner’s allegations contending, among others,

that he conducted lectures within the premises of petitioner’s rented space located at
5th Floor, Manufacturers Bldg., Sta. Cruz, Manila; that his students duly enrolled
 with the Registrar’s Office of petitioner; that shipyard and plant visits were conducted
at Fort San Felipe, Cavite Naval Base; that petitioner was fully aware of said shipyard
and plant visits because it even wrote a letter for that purpose; and that basic
seaman courses 41 and 42 were sanctioned by the DECS as shown by the records of
the Registrar’s Office.

 Later in the proceedings below, petitioner manifested that Mr. Tomas G. Cloma, Jr., a
member of the petitioner’s Board of Trustees wrote a letter to the Chairman of the
Board on May 23, 1994, clarifying the case of private respondent and stating therein,
inter alia, that under petitioner’s by-laws only the Chairman is authorized to sign any
contract and that private respondent, in any event, failed to submit documents on
the alleged shipyard and plant visits in Cavite Naval Base.

 Attempts at amicable settlement having failed, the parties were required to submit
their respective position papers.

Labor Arbiter Ruling:

 Thereafter, on June 16, 1994, the Labor Arbiter issued an order declaring the case
submitted for decision on the basis of the position papers which the parties filed.
Petitioner, however, vigorously opposed this order insisting that there should be a
formal trial on the merits in view of the important factual issues raised. In another
order dated July 22, 1994, the Labor Arbiter impliedly denied petitioner’s opposition,
reiterating that the case was already submitted for decision. Hence, a decision was
subsequently rendered by the Labor Arbiter on December 7, 1994 finding for the
private respondent.

NLRC Ruling:

 On appeal, the NLRC affirmed the same in toto in its decision of August 4, 1995.

 Aggrieved, petitioner now pleads for the Court to resolve the following issues in its
favor, to wit:

Issue:

II. Whether claims for salaries/wages for services relative toon-the-job training and shipboard and
plant visits by instructors, assuming the same were really conducted, have valid bases;

Ruling:

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED for lack of merit
while the resolution of the National Labor Relations Commission dated August 4, 1995 is hereby
AFFIRMED.
SO ORDERED

We see no compelling reason to grant petitioner’s plea; the same must, therefore, be dismissed.

In any event, granting that we may have to delve into the facts and evidence of the parties, we still
find no puissant justification for us to adjudge both the Labor Arbiter’s and NLRC’s appreciation
of such evidence as indicative of any grave abuse of discretion.

First. Petitioner places so much emphasis on its argument that private respondent did not
produce a copy of the contract pursuant to which he rendered services.

This argument is, of course, puerile. The absence of such copy does not in any manner negate the
existence of a contract of employment since “(C)ontracts shall be obligatory, in whatever form they
have been entered into, provided all the essential requisites for their validity are present.”9 The
 only exception to this rule is “when the law requires that a contract be in some form in order that
it may be valid or enforceable, or that a contract be proved in a certain way.”

However, there is no requirement under the law that the contract of employment of the kind
entered into by petitioner with private respondent should be in any particular form. While it may
have been desirable for private respondent to have produced a copy of his contract if one really
exists, but the absence thereof, in any case, does not militate against his claims inasmuch as:
“No particular form of evidence is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence to prove the relationship may be admitted.

For, if only documentary evidence would be required to show that relationship, no scheming
employer would ever be brought before the bar of justice, as no employer would wish to come out
with any trace of the illegality he has authored considering that it should take much weightier
proof to invalidate a written instrument. x x x”

At any rate, the vouchers prepared by petitioner’s own accounting department and the letter-
request of its Acting Director asking for payment of private respondent’s services suffice to
support a reasonable conclusion that private respondent was employed with petitioner.

How else could one explain the fact that private respondent was supposed to be paid the amounts
mentioned in those documents if he were not employed?

Petitioner’s evidence is wanting in this respect while private respondent affirmatively stated that
the same arose out of his employment with petitioner.

As between the two, the latter is weightier inasmuch as we accord affirmative testimony greater
value than a negative one.

For the foregoing reasons, we find it difficult to agree with petitioner’s assertion that the absence
of a copy of the alleged contract should nullify private respondent’s claims.

Neither can we concede that such contract would be invalid just because the signatory thereon
was not the Chairman of the Board which allegedly violated petitioner’s by-laws. Since by-laws
operate merely as internal rules among the stockholders, they cannot affect or prejudice
third persons who deal with the corporation, unless they have knowledge of the same.

No proof appears on record that private respondent ever knew anything about the provisions of
said by-laws. In fact, petitioner itself merely asserts the same without even bothering to attach a
copy or excerpt thereof to show that there is such a provision. How can it now expect the Labor
Arbiter and the NLRC to believe it?

That this allegation has never been denied by private respondent does not necessarily signify
admission of its existence because technicalities of law and procedure and the rules obtaining in
the courts of law do not strictly apply to proceedings of this nature.

3. Board of Directors vs Tan

4. Villongco vs Yabut (quorum).

5. Mallare vs A&E, GR 233646, June 16, 2021*
6. NIDC vs Aquino

PADILLA, J.:

These two (2) separate petitions for certiorari and prohibition, with preliminary injunction, seek to
annul and set aside the orders of respondent judge, dated 16 August 1971 and 30 September
1971, in Civil Case No. 14452 of the Court of First Instance of Rizal, entitled Batjak Inc. vs. NIDC et
al."

 The order of 16 August 1971 granted the alternative petition of private respondent Batjak,
Inc. Batjak for short) for the appointment of receiver and denied petitioners' motion to dismiss
the complaint of said private respondent. The order dated 30 September 1971 denied
petitioners' motion for reconsideration of the order dated 16 August 1971.
 The herein petitions likewise seek to prohibit the respondent judge from hearing and/or
conducting any further proceedings in Civil Case No. 14452 of said court.

 Batjak, (Basic Agricultural Traders Jointly Administered Kasamahan) is a Filipino-American

corporation organized under the laws of the Philippines, primarily engaged in the
manufacture of coconut oil and copra cake for export.

 In 1965, Batjak's financial condition deteriorated to the point of bankruptcy.

 As of that year, Batjak's indebtedness to some private banks and to the Philippine National
Bank (PNB) amounted to P11,915,000.00, shown as follows:

Republic Bank P 2,324,000.00

Philippine Commercial and Industrial Bank 1,346,000.00

Manila Banking Corporation 2,000,000.00

Manufacturers Bank 440,000.00

Hongkong and Shanghai Banking Corporation 250,000.00

Foreign Export Advances (against immediate shipment) 555,000.00

PNB export advance line (against immediate shipment) 5,000,000.00

TOTAL 11,915,000.00

 As security for the payment of its obligations and advances against shipments, Batjak
mortgaged its three (3) coco-processing oil mills in Sasa, Davao City, Jimenez, Misamis
Occidental and Tanauan, Leyte to Manila Banking Corporation (Manila Bank), Republic
Bank (RB), and Philippine Commercial and Industrial Bank (PCIB), respectively.

 In need for additional operating capital to place the three (3) coco-processing mills at
their optimum capacity and maximum efficiency and to settle, pay or otherwise liquidate
pending financial obligations with the different private banks, Batjak applied to PNB for
additional financial assistance.

 On 5 October 1965, a Financial Agreement was submitted by PNB to Batjak for

acceptance. The Financial Agreement reads:

 The terms and conditions of the Financial Agreement were duly accepted by Batjak.

Under said Agreement, NIDC would, as it actually did, invest P6,722,500.00 in

Batjak in the form of preferred shares of stock convertible within five (5) years at
par into common stock, to liquidate Batjak's obligations to Republic Bank (RB),
Manufacturers Bank and Trust Company (MBTC) and Philippine Commercial &
Industrial Bank (PCIB), and the balance of the investment was to be applied to
Batjak's past due account of P 5 million with the PNB.

Upon receiving payment, RB, PCIB, and MBTC released in favor of PNB the first
and any mortgages they held on the properties of Batjak.

As agreed, PNB also granted Batjak an export-advance line of P 3 million, later

increased to P 5million, and a standby letter of credit facility in the amount of
 P5,850,000.00. As of 29 September 1966, the financial accomodation that had
been extended by PNB to Batjak amounted to a total of P 14,207,859.51

As likewise agreed, Batjak executed a first mortgage in favor of PNB on all its
properties located at Jimenez, Misamis Occidental and Tanauan, Leyte. Batjak's
plant in Sasa, Davao City was mortgaged to the Manila Bank which, in 1967,
instituted foreclosure proceedings against the same but which were aborted by
the payment by Batjak of the sum of P2,400,000.00 to Manila Bank, and which
amount was advanced to Batjak by NIDC, a wholly-owned subsidiary of PNB. To
secure the advance, Batjak mortgaged the oil mill in Sasa, Davao City to NIDC. 4

Next, a Voting Trust Agreement was executed on 26 October 1965 in favor of NIDC by the
stockholders representing 60% of the outstanding paid-up and subscribed shares of Batjak.
This agreement was for a period of five (5) years and, upon its expiration, was to be subject
to negotiation between the parties. The voting Trust Agreement reads:

VOTING TRUST AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT made and executed by the undersigned stockholders of BATJAK, INC., a
corporation duly organized and existing under the laws of the Philippines, whose names are
hereinbelow subscribed hereinafter caged the SUBSCRIBERS, and the NATIONAL INVESTMENT
AND DEVELOPMENT CORPORATION, hereinafter referred to as the trustee.

WITNESSETH:

WHEREAS, the SUBSCRIBERS are owners respectively of the capital stock of the BATJAK, INC.
(hereinafter called the CORPORATION) in the amounts represented by the number of shares set
fort opposite their respective names hereunder;

AND WHEREAS, with a view or establishing a safe and competent management to operate the
corporation for the best interest of all the stockholders thereof, and as mutually agreed between
the SUBSCRIBERS and the TRUSTEE, this Voting Trust Agreement has been executed under the
following terms and conditions.

NOW THEREFORE, the undersigned stockholders, in consideration of the premises and of the
mutual covenants and agreements herein contained and to carry out the foregoing purposes in
order to vest in the TRUSTEE the voting rights of the shares of stock held by the undersigned in
the CORPORATION as hereinafter stated it is mutually agreed as follows:

1. PERIOD OF DESIGNATION — For a period of five (5) years from and after date hereof, without
power of revocation on the part of the SUBSCRIBERS, the TRUSTEE designated in the manner
herein provided is hereby made, constituted and appointed as a VOTING TRUSTEE to act for and
in the name of the SUBSCRIBERS, it being understood, however, that this Voting Trust
Agreement shall, upon its expiration be subject to a re-negotiation between the parties, as may be
warranted by the balance and attending circumstance of the loan investment of the TRUSTEE or
otherwise in the CORPORATION.

2. ASSIGNMENT OF STOCK CERTIFICATES UPON ISSUANCE — The undersigned stockholders

hereby transfer and assign their common shares to the capital stock of the CORPORATION to the
extent shown hereunder:

JAMES A. KEISTER 21,500 shares

JOHNNY LIEUSON 20,300 shares

CBM FINANCE & INVESTMENT

CORP. (C.B. Mendoza, Pres.) 5,000 shares

ALEJANDRO G. BELTRAN 4,000 shares

ESPERANZA A. ZAMORA 3,000 shares

CIRIACO B. MENDOZA 2,000 shares

FIDELA DE GUZMAN 2,000 shares

LLOYD D. COMBS 2,000 shares

RENATO B. BEJAR 200 shares

TOTAL 60,000 shares

to the TRUSTEE by virtue of the provisions hereof and do hereby authorize the Secretary of the
CORPORATION to issue the corresponding certificate directly in the name of the TRUSTEE and
on which certificates it shall appear that they have been issued pursuant to this Voting Trust
Agreement and the said TRUSTEE shall hold in escrow all such certificates during the term of the
Agreement. In turn, the TRUSTEE shall deliver to the undersigned stockholders the
corresponding Voting Trust certificates provided for in Sec. 36 of Act No. 1459.

3. VOTING POWER OF TRUSTEE — The TRUSTEE and its successors in trust, if anym shall have
the power and it shall be its duty to vote the shares of the undersigned subject hereof and
covered by this Agreement at all annual, adjourned and special meetings of the CORPORATION
on all questions, motions, resolutions and matters including the election of directors and such
matters on which the stockholders, by virtue of the by-laws of the CORPORATION and of the
existing legislations are entitled to vote, which may be voted upon at any and all said meetings
and shall also have the power to execute and acknowledge any agreements or documents that
may be necessary in its opinion to express the consent or assent of all or any of the stockholders
of the CORPORATION with respect to any matter or thing to which any consent or assent of the
stockholders may be necessary, proper or convenient.

4. FILING of AGREEMENT — An executed copy of this Agreement shall be filed with the
CORPORATION at its office in the City of Manila wherever it may be transfered therefrom and
shall constitute irrevocable authority and absolute direction of the officers of the CORPORATION
whose duty is to sign and deliver stock certificates to make delivery only to said voting trustee of
the shares and certificates of stock subject to the provisions of this Agreement as aforesaid. Such
copy of this Agreement shall at all times be open to inspection by any stockholder, as provided by
law.

5. DIVIDEND — the full and absolute beneficial interest in the shares subject of this Agreement
shall remain with the stockholders executing the same and any all dividends which may be
declared by the CORPORATION shall belong and be paid to them exclusively in accordance with
their stockholdings after deducting therefrom or applying the same to whatever liabilities the
stockholders may have in favor of the TRUSTEE by virtue of any Agreement or Contract that may
have been or will be executed by and between the TRUSTEE and the CORPORATION or between
the former and the undersigned stockholders.

6 COMPENSATION; IMMUNITY — The TRUSTEE or its successor in trust shall not receive any
compensation for its serviceexcept perhaps that which the CORPORATION may grant to the
TRUSTEE's authorized representative, if any. Expenses costs, champs, and other liabilities
incurred in the carrying out of the but herein established or by reason thereof, shall be paid for
with the funds of the CORPORATION. The TRUSTEE or any of its duly authorized representative
shall incur no liability by reason of any error of law or of any matter or thing done or omitted
under this Agreement, except for his own individual malfeasance.

7. REPRESENTATION — The TRUSTEE, being a corporation and a juridical person shall

accomplish the foregoing objectives and perform its functions under this Agreement as well as
enjoy and exercise the powers, privileges, rights and interests herein established through its duly
authorized and accredited re resentatives . p with full authority under the specific appointment or
designation or Proxy.
8. IRREVOCABILITY — This Agreement shall during its 5-year term or any extension thereof be
binding upon and inure to the benefit of the undersigned stockholders and their respective legal
representatives, pledges, transferees, and/or assigns and shall be irrevocable during the said
terms and/or its extension pursuant to the provisions of paragraph 1 hereof. It is hereby
understood and the undersigned stockholders have bound as they hereby bind themselves to
make a condition of every pledge, transfer of assignment of their interests in the CORPORATION
that the interests and participation so pledged, transferred or assigned is evidenced by
annotations in the certificates of stocks or in the books of the corporation, shall be subject to this
Agreement and the same shall be binding upon the pledgees, transferees and assigns while the
trust herein created still subsists.

9. TERMINATION — Upon termination of this Agreement as heretofore provided, the certificates

delivered to the TRUSTEE by virtue hereof shall be returned and delivered to the undersigned
stockholders as the absolute owners thereof, upon surrender of their respective voting trust
certificates, and the duties of the TRUSTEE shall cease and terminate.

10. ACCEPTANCE OF TRUST — The TRUSTEE hereby accepts the trust created by this
Agreement under the signature of its duly authorized representative affixed hereinbelow and
agrees to perform the same in accordance with the term/s hereof.

IN WITNTESS HEREOF, the undersigned stockholders and the TRUSTEE by its representatives,
have hereunto affixed their signatures this 26 day of October, 1965 in the City of Manila,
Philippines.

(SGD) JAMES A. KEISER (SGD) JOHNNY LIEUSON

Stockholder Stockholder

CBM FINANCE & INVESTMENT CORPORATION

By: (SGD) C.B. MENDOZA

President

ESPERANZA A. ZAMORA (SGD) ALEJANDRO G. BELTRAN

By: (SGD) MARIANO ZAMORA Stockholder

ESPERANZA A. ZAMORA

(SGD) FIDELA DE GUZMAN (SGD) CIRIACO B. MENDOZA

Stockholder Stockholder

(SGD) RENATO B. BEJAR (SGD) LLOYD D. COMBS

Stockholder Stockholder

NATIONAL INVESTMENT AND

DEVELOPMENT CORPORATION

By:

(SGD) IGNACIO DEBUQUE JR.

Vice-President 5

 In July 1967, forced by the insolvency of Batjak, PNB instituted extrajudicial

foreclosure proceedings against the oil mills of Batjak located in Tanauan, Leyte
 and Jimenez, Misamis Occidental. The properties were sold to PNB as the highest
bidder.

 One year thereafter, or in September 1968, final Certificates of Sale were issued by the
provincial sheriffs of Leyte 6 and Misamis Occidental 7 for the two (2) oil mills in Tanauan
and Jimenez in favor of PNB, after Batjak failed to exercise its right to redeem the
foreclosed properties within the allowable one year period of redemption. Subsequently,
PNB transferred the ownership of the two (2) oil mills to NIDC which, as aforestated, was
a wholly-owned PNB subsidiary.

 As regards the oil mill located at Sasa, Davao City, the same was similarly foreclosed
extrajudicial by NIDC. It was sold to NIDC as the highest bidder. After Batjak failed to
redeem the property, NIDC consolidated its ownership of the oil mill.

 Three (3) years thereafter, or on 31 August 1970, Batjak represented by majority

stockholders, through Atty. Amado Duran, legal counsel of private respondent Batjak,
wrote a letter to NIDC inquiring if the latter was still interested in negotiating the renewal
of the Voting Trust Agreement.

 On 22 September 1970, legal counsel of Batjak wrote another letter to NIDC informing
the latter that Batjak would now safely assume that NIDC was no longer interested in the
renewal of said Voting Trust Agreement and, in view thereof, requested for the turn-over
and transfer of all Batjak assets, properties, management and operations.

 On 23 September 1970, legal counsel of Batjak sent stin another letter to NIDC, this time
asking for a complete accounting of the assets, properties, management and operation of
Batjak, preparatory to their turn-over and transfer to the stockholders of Batjak.

 NIDC replied, confirming the fact that it had no intention whatsoever to comply with the
demands of Batjak.

 On 24 February 1971, Batjak filed before the Court of First Instance of Rizal a special
civil action for mandamus with preliminary injunction against herein petitioners docketed
as Civil Case No. 14452.

 On 14 April 1971, in said Civil Case No. 14452, Batjak filed an urgent ex parte motion for
the issuance of a writ of preliminary prohibitory and mandatory injunction. On the same
day, respondent judge issued a restraining order "prohibiting defendants (herein
petitioners) from removing any record, books, commercial papers or cash, and leasing,
renting out, disposing of or otherwise transferring any or all of the properties,
machineries, raw materials and finished products and/or by-products thereof now in the
factory sites of the three (3) modem coco milling plants situated in Jimenez, Misamis
Occidental, Sasa, Davao City, and Tanauan, Leyte."

 The order of 14 April 1971 was subsequently amended by respondent judge upon an ex
parte motion of private respondent Batjak so as to include the premises of NIDC in
Makati and those of PNB in Manila, as among the premises which private respondent
Batjak was authorized to enter in order to conduct an inventory.

 On 24 April 1971, NIDC and PNB filed an opposition to the ex parte application for the
issuance of a writ of preliminary prohibitory and mandatory injunction and a motion to
set aside restraining order.

 Before the court could act on the said motion, private respondent Batjak filed on 3 May
1971 a petition for receivership as alternative to writ of preliminary prohibitory and
mandatory injunction. 16 This was opposed by PNB and NIDC .

 On 8 May 1971., NIDC and PNB filed a motion to dismiss Batjak's complaints. 18
  On 16 August 1971, respondent judge issued the now assailed order denying petitioners'
motion to dismiss and appointing a set of three (3) receivers. NIDC moved for
reconsideration of the aforesaid order. 20 On 30 September 1971, respondent judge
denied the motion for reconsideration. 21

 Hence, these two (2) petitions, which have been consolidated, as they involve a resolution
of the same issues. In their manifestation with motion for early decision, dated 25 August
1986, private respondent, Batjak contends that the NIDC has already been abolished or
scrapped by its parent company, the PNB.

Ruling

After a careful study and examination of the records of the case, the Court finds and holds for the
petitioners.

In their motion to dismiss Batjaks complaint, in Civil Case No. 14452, NIDC and PNB raised
common grounds for its allowance, to wit:

1. This Honorable Court (the trial court) has no jurisdiction over the subject of the action or suit;

2. The venue is improperly laid; and

3. Plaintiff has no legal capacity to sue.

In addition, PNB contended that the complaint states no cause of action (Rule 16, Sec. 1, Par. a,
c, d & g, Rules of Court).

In support of the third ground of their motion to dismiss, PNB and NIDC contend that Batjak's
complaint for mandamus is based on its claim or right to recovery of possession of the three (3)
oil mills, on the ground of an alleged breach of fiduciary relationship.

Noteworthy is the fact that, in the Voting Trust Agreement, the parties thereto were NIDC and
certain stockholders of Batjak.

Batjak itself was not a signatory thereto. Under Sec. 2, Rule 3 of the Rules of Court, every action
must be prosecuted and defended in the name of the real party in interest. Applying the rule in
the present case, the action should have been filed by the stockholders of Batjak, who executed
the Voting Trust Agreement with NIDC, and not by Batjak itself which is not a party to said
agreement, and therefore, not the real party in interest in the suit to enforce the same.

In addition, PNB claims that Batjak has no cause of action and prays that the petition for
mandamus be dismissed. A careful reading of the Voting Trust Agreement shows that PNB was
really not a party thereto. Hence, mandamus will not lie against PNB.

Moreover, the action instituted by Batjak before the respondent court was a special civil action
for mandamus with prayer for preliminary mandatory injunction. Generally, mandamus is
not a writ of right and its allowance or refusal is a matter of discretion to be exercised on
equitable principles and in accordance with well-settled rules of law, and that it should never be
used to effectuate an injustice, but only to prevent a failure of justice. The writ does not issue as
a matter of course. It will issue only where there is a clear legal right sought to be enforced. It will
not issue to enforce a doubtful right. A clear legal right within the meaning of Sec. 3, Rule 65 of
the Rules of Court means a right clearly founded in or granted by law, a right which is
enforceable as a matter of law.
Applying the above-cited principles of law in the present case, the Court finds no clear right in
Batjak to be entitled to the writ prayed for. It should be noted that the petition for mandamus
filed by it prayed that NIDC and PNB be ordered to surrender, relinquish and turn-over to Batjak
the assets, management, and operation of Batjak particularly the three (3) oil mills and to make
the order permanent, after trial, and ordering NIDC and PNB to submit a complete accounting of
the assets, management and operation of Batjak from 1965. In effect, what Batjak seeks to
recover is title to, or possession of, real property (the three (3) oil mills which really made up the
assets of Batjak) but which the records show already belong to NIDC. It is not disputed that the
mortgages on the three (3) oil mills were foreclosed by PNB and NIDC and acquired by them as
the highest bidder in the appropriate foreclosure sales. Ownership thereto was subsequently
consolidated by PNB and NIDC, after Batjak failed to exercise its right of redemption. The three
(3) oil mills are now titled in the name of NIDC. From the foregoing, it is evident that Batjak had
no clear right to be entitled to the writ prayed for. In Lamb vs. Philippines (22 Phil. 456) citing the
case of Gonzales V. Salazar vs. The Board of Pharmacy, 20 Phil. 367, the Court said that the writ
of mandamus will not issue to give to the applicant anything to which he is not entitled by law.

2. On the appointment of receiver.

A receiver of real or personal property, which is the subject of the action, may be appointed by the
court when it appears from the pleadings that the party applying for the appointment of receiver
has an interest in said property. 25 The right, interest, or claim in property, to entitle one to a
receiver over it, must be present and existing.

As borne out by the records of the case, PNB acquired ownership of two (2) of the three (3) oil
mills by virtue of mortgage foreclosure sales. NIDC acquired ownership of the third oil mill also
under a mortgage foreclosure sale. Certificates of title were issued to PNB and NIDC after the
lapse of the one (1) year redemption period. Subsequently, PNB transferred the ownership of the
two (2) oil mills to NIDC. There can be no doubt, therefore, that NIDC not only has possession of,
but also title to the three (3) oil mills formerly owned by Batjak. The interest of Batjak over the
three (3) oil mills ceased upon the issuance of the certificates of title to PNB and NIDC confirming
their ownership over the said properties. More so, where Batjak does not impugn the validity of
the foreclosure proceedings. Neither Batjak nor its stockholders have instituted any legal
proceedings to annul the mortgage foreclosure aforementioned.

Batjak premises its right to the possession of the three (3) off mills on the Voting Trust
Agreement, claiming that under said agreement, NIDC was constituted as trustee of the assets,
management and operations of Batjak, that due to the expiration of the Voting Trust Agreement,
on 26 October 1970, NIDC should tum over the assets of the three (3) oil mills to Batjak. The
relevant provisions of the Voting Trust Agreement, particularly paragraph 4 & No. 1 thereof, are
hereby reproduced:

NOW THEREFORE, the undersigned stockholders, in consideration of the premises and of the
mutual covenants and agreements herein contained and to carry out the foregoing purposes in
order to vest in the TRUSTEE the voting right.8 of the shares of stock held by the undersigned in
the CORPORATION as hereinafter stated it is mutually agreed as follows:

1. PERIOD OF DESIGNATION — For a period of five (5) years from and after date hereof, without
power of revocation on the part of the SUBSCRIBERS, the TRUSTEE designated in the manner
herein provided is hereby made, constituted and appointed as a VOTING TRUSTEE to act for and
in the name of the SUBSCRIBERS, it being understood, however, that this Voting Trust
Agreement shall, upon its expiration be subject to a re-negotiation between the parties, as may be
warranted by the balance and attending circumstance of the loan investment of the TRUSTEE or
otherwise in the CORPORATION.

and No. 3 thereof reads:

3. VOTING POWER OF TRUSTEE — The TRUSTEE and its successors in trust, if any, shall have
the power and it shall be its duty to vote the shares of the undersigned subject hereof and
covered by this Agreement at all annual, adjourned and special meetings of the CORPORATION
on all questions, motions, resolutions and matters including the election of directors and all such
matters on which the stockholders, by virtue of the by-laws of the CORPORATION and of the
 existing legislations are entitled to vote, which may be voted upon at any and all said meetings
and shall also have the power to execute and acknowledge any agreements or documents that
may be necessary in its opinion to express the consent or assent of all or any of the stockholders
of the CORPORATION with respect to any matter or thing to which any consent or assent of the
stockholders may be necessary, proper or convenient.

From the foregoing provisions, it is clear that what was assigned to NIDC was the power to vote
the shares of stock of the stockholders of Batjak, representing 60% of Batjak's outstanding
shares, and who are the signatories to the agreement. The power entrusted to NIDC also included
the authority to execute any agreement or document that may be necessary to express the
consent or assent to any matter, by the stockholders. Nowhere in the said provisions or in any
other part of the Voting Trust Agreement is mention made of any transfer or assignment to NIDC
of Batjak's assets, operations, and management. NIDC was constituted as trustee only of the
voting rights of 60% of the paid-up and outstanding shares of stock in Batjak. This is confirmed
by paragraph No. 9 of the Voting Trust Agreement, thus:

9. TERMINATION — Upon termination of this Agreement as heretofore provided, the certificates

delivered to the TRUSTEE by virtue hereof shall be returned and delivered to the undersigned
stockholders as the absolute owners thereof, upon surrender of their respective voting trust
certificates, and the duties of the TRUSTEE shall cease and terminate.-

Under the aforecited provision, what was to be returned by NIDC as trustee to Batjak's
stockholders, upon the termination of the agreement, are the certificates of shares of stock
belonging to Batjak's stockholders, not the properties or assets of Batjak itself which were
never delivered, in the first place to NIDC, under the terms of said Voting Trust Agreement.

In any event, a voting trust transfers only voting or other rights pertaining to the shares
subject of the agreement or control over the stock. The law on the matter is Section 59,
Paragraph 1 of the Corporation Code (BP 68) which provides:

Sec. 59. Voting Trusts — One or more stockholders of a stock corporation may create a voting
trust for the purpose of confering upon a trustee or trusties the right to vote and other rights
pertaining to the shares for a period not exceeding five (5) years at any one time: ... 26

The acquisition by PNB-NIDC of the properties in question was not made or effected under the
capacity of a trustee but as a foreclosing creditor for the purpose of recovering on a just and valid
obligation of Batjak.

Moreover, the prevention of imminent danger to property is the guiding principle that governs
courts in the matter of appointing receivers. Under Sec. 1 (b), Rule 59 of the Rules of Court, it is
necessary in granting the relief of receivership that the property or fired be in danger of loss,
removal or material injury.

In the case at bar, Batjak in its petition for receivership, or in its amended petition therefor, failed
to present any evidence, to establish the requisite condition that the property is in danger of
being lost, removed or materially injured unless a receiver is appointed to guard and preserve it.

7. CIR vS CA. 1999*

8. Halley vs Printwell, May 30, 2011*
9. [Ong Yong vs Tiu, April 8. 2003* Lincoln Philippines vs CA, 1998*
10. Bitong vs CA, 1998*
11. Chemphil Export vs CA, Dec. 12, 1995* (mortgage of shares)
12. Guy vs Guy, GR189486. Sept. 5. 2012* (street certificate)
13. Tee Ling Kiat vs Ayala Corp., March 7, 2018*
14. Enano Bote vs Alvarez, GR 223572, Nov. 10, 2020*
15. ISnG vs Khan. 1989
16. Cua vs Ocampo, Dec. 4, 2009*