METROBANK

vs.
CENTRO DEVELOPMENT CORP.

FACTS:
 Centro Development Corporation (Centro), with BOD approval, its president Go Eng Uy
was authorized to mortgage its properties and assets to secure the medium-term loan of
P 84 million

 Executed a Mortgage Trust Indenture (MTI) with the Bank of the Philippines Islands
(BPI).
 Under the MTI, respondent Centro expressed its desire to obtain from time to time loans
and other credit accommodations from certain creditors for corporate and other
business purposes
 To secure these obligations from different creditors, respondent Centro
constituted a continuing mortgage on all or substantially all of its
properties and assets in favor of BPI, the trustee.

 Later on, the MTI was amended, appointing Metrobank as the successor-trustee of the
MTI. It is worth noting that this MTI did not amend the amount of the total obligations
covered by the previous MTIs.
 On a side note, Chongking Kehyeng, Manuel Co Kehyeng and Quirino Kehyeng, allegedly
discovered that the properties of respondent Centro had been mortgaged, and that the
MTI that had been executed appointing petitioner as trustee
 the Kehyengs allegedly questioned the mortgage of the properties through letters
addressed to Go Eng Uy and Jacinta Go
 They alleged that they were not aware of any board or stockholders'
meeting when petitioner was appointed as successor-trustee of BPI in
the MTI
 Meanwhile, during the period April 1998 to December 1998, San Carlos obtained
additional loans, bringing the total principal amount of P812,793,513.23 from petitioner
Metrobank.
 San Carlos failed to pay these outstanding obligations despite demand.
 Thus, petitioner, as trustee of the MTI, enforced the conditions thereof and initiated
foreclosure proceedings.
 Before the scheduled foreclosure date, on 3 August 2000, respondents herein filed a
Complaint for the annulment of the 27 September 1994 MTI with a prayer for a
temporary restraining order (TRO) and preliminary injunction at Branch 138 of the RTC
of Makati City
 The bone of contention in Civil Case No. 00-942 was that since the
mortgaged properties constituted all or substantially all of the corporate
assets, the amendment of the MTI failed to meet the requirements of
Section 40 of the Corporation Code on notice and voting requirements.
Under this provision, in order for a corporation to mortgage all or
substantially all of its properties and assets, it should be authorized by
the vote of its stockholders representing at least 2/3 of the outstanding
capital stock in a meeting held for that purpose.

ISSUE/S: Whether the requirements of Section 40 of the Corporation Code was complied with in
the execution of the MTI

HELD: Sec. 40 is NOT APPLICABLE in this case.

Reading carefully the Secretary's Certificate, it is clear that the main purpose of the
directors' Resolution was to appoint petitioner as the new trustee of the previously executed
and amended MTI. Going through the original and the revised MTI, we find no substantial
amendments to the provisions of the contract. We agree with petitioner that the act of
appointing a new trustee of the MTI was a regular business transaction. The appointment
necessitated only a decision of at least a majority of the directors present at the meeting in
which there was a quorum, pursuant to Section 25 of the Corporation Code.
The second paragraph of the directors' Resolution No. 005, s. 1994, which empowered
Go Eng Uy "to sign the Real Estate Mortgage and all documents/instruments with the said bank,
for and in behalf of the Company which are necessary and pertinent thereto," must be
construed to mean that such power was limited by the conditions of the existing mortgage, and
not that a new mortgage was thereby constituted.
Thus, Section 40 of the Corporation Code finds no application in the present case, as
there was no new mortgage to speak of under the assailed directors' Resolution.