Case Digest

FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs.
AGO
MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN
COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO,
respondents. G.R. No. 141994 January 17, 2005
FACTS: Exposé is a radio documentary program hosted by Carmelo Rima and Hermogenes Alegre. Exposé is aired every morning over
DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (FBNI). Exposé is heard over Legazpi City, the Albay municipalities and
other Bicol areas.
JUN ALEGRE: Let us begin with the less burdensome: if you have children taking medical course at AMEC-BCCM, advise them to pass all
subjects because if they fail in any subject they will repeat their year level, taking up all subjects including those they have passed already.
Several students had approached me stating that they had consulted with the DECS which told them that there is no such regulation. If
[there] is no such regulation why is AMEC doing the same?
Second: Earlier AMEC students in Physical Therapy had complained that the course is not recognized by DECS. xxx
Third: Students are required to take and pay for the subject even if the subject does not have an instructor - such greed for money on the part
of AMEC’s administration. Take the subject Anatomy: students would pay for the subject upon enrolment because it is offered by the school.
However there would be no instructor for such subject. Students would be informed that course would be moved to a later date because the
school is still searching for the appropriate instructor.
Rima and Alegre exposed various alleged complaints from students, teachers and parents against Ago Medical and Educational Center-
Bicol Christian College of Medicine (AMEC) and its administrators. Claiming that the broadcasts were defamatory, AMEC and the dean of
AMEC’s College of Medicine, filed a complaint for damages against FBNI, Rima and Alegre.
FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO
MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN
COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO,
respondents. G.R. No. 141994 January 17, 2005
ISSUE: Whether AMEC is entitled to moral damages.

HELD: A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision
expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article
2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of defamation and claim for moral damages.
RICARDO S. SILVERIO, JR., ESSES DEVELOPMENT CORPORATION,
and TRI-STAR FARMS, INC., Petitioners, vs. FILIPINO BUSINESS
CONSULTANTS, INC., Respondent.
G.R. No. 143312. August 12, 2005
FACTS: The parties are wrangling over possession of a 62 hectare-land in Calatagan, Batangas after Esses and Tri-Star
failed to redeem the Calatagan Property from FBCI. During the pendency of the case, FBCI filed an Urgent Ex-Parte
Motion to Suspend Enforcement of Writ of Possession. FBCI pointed out that it is now the new owner of Esses and Tri-
Star having purchased the substantial and controlling shares of stocks of the two corporations. It claimed that since it is
now the owner of the controlling shares of stocks, the property must be awarded in its favor.
ISSUE: Whether FBCI’s acquisition of shares of stocks of Esses and Tristar representing a controlling interest of the two
corporations would also give FBCI a proprietary right over the Calatagan Property owned by both Esses Corp. and
Tristar.
RICARDO S. SILVERIO, JR., ESSES DEVELOPMENT CORPORATION,
and TRI-STAR FARMS, INC., Petitioners, vs. FILIPINO BUSINESS
CONSULTANTS, INC., Respondent.
G.R. No. 143312. August 12, 2005
HELD: A corporation is a juridical person distinct from the members composing it. Properties registered in the name of
the corporation are owned by it as an entity separate and distinct from its members. While shares of stock constitute
personal property, they do not represent property of the corporation. The corporation has property of its own which
consists chiefly of real estate. A share of stock only typifies an aliquot part of the corporation's property, or the right
to share in its proceeds to that extent when distributed according to law and equity but its holder is not the owner
of any part of the capital of the corporation Nor is he entitled to the possession of any definite portion of its
property or assets The stockholder is not a co-owner or tenant in common of the corporate property.
Thus, FBCI’s alleged controlling shareholdings in Esses and Tri-Star merely represent a proportionate or aliquot interest
in the properties of the two corporations. Such controlling shareholdings do not vest FBCI with any legal right or title to
any of Esses and Tri-Star’s corporate properties. As a stockholder, FBCI has an interest in Esses and Tri-Star’s corporate
properties that is only equitable or beneficial in nature. Even assuming that FBCI is the controlling shareholder of Esses
and Tri-Star, it does not legally make it the owner of the Calatagan Property, which is legally owned by Esses and Tri-Star
as distinct juridical persons. As such, FBCI is not entitled to the possession of any definite portion of the Calatagan
Property or any of Esses and Tri-Star’s properties or assets. FBCI is not a co-owner or tenant in common of the
Calatagan Property or any of Esses and Tri-Star’s corporate properties.
SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,
vs.THE HONORABLE COURT OF APPEALS and TRADERS ROYAL
BANK, respondents.
G.R. No. 88013 March 19, 1990
FACTS: The petitioner is a private corporation engaged in the exportation of food products. It buys these products from
various local suppliers and then sells them abroad, particularly in the United States, Canada and the Middle East. Most of
its exports are purchased by the petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a checking account in its branch at Romulo
Avenue, Cubao, Quezon City. On May 25, 1981, the petitioner deposited to its account in the said bank the amount of
P100,000.00, thus increasing its balance as of that date to P190,380.74. 1 Subsequently, the petitioner issued several
checks against its deposit but was surprised to learn later that they had been dishonored for insufficient funds.
As a consequence, the California Manufacturing Corporation sent on June 9, 1981, a letter of demand to the petitioner,
threatening prosecution if the dishonored check issued to it was not made good. It also withheld delivery of the order
made by the petitioner. Similar letters were sent to the petitioner by the Malabon Long Life Trading, on June 15, 1981,
and by the G. and U. Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit line and demanded that
future payments be made by it in cash or certified check. Meantime, action on the pending orders of the petitioner with
the other suppliers whose checks were dishonored was also deferred.
ISSUE: Whether petitioner is entitled to damages due to respondent bank’s negligence.
SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,
vs.THE HONORABLE COURT OF APPEALS and TRADERS ROYAL
BANK, respondents.
G.R. No. 88013 March 19, 1990
HELD: As the Court sees it, the initial carelessness of the respondent bank, aggravated by the lack of promptitude in
repairing its error, justifies the grant of moral damages. This rather lackadaisical attitude toward the complaining
depositor constituted the gross negligence, if not wanton bad faith, that the respondent court said had not been
established by the petitioner. We shall recognize that the petitioner did suffer injury because of the private
respondent’s negligence that caused the dishonor of the checks issued by it. The immediate consequence was that its
prestige was impaired because of the bouncing checks and confidence in it as a reliable debtor was diminished.
The point is that as a business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of
their relationship. In the case at bar, it is obvious that the respondent bank was remiss in that duty and violated that
relationship. What is especially deplorable is that, having been informed of its error in not crediting the deposit in
question to the petitioner, the respondent bank did not immediately correct it but did so only one week later or twenty-
three days after the deposit was made. It bears repeating that the record does not contain any satisfactory explanation
of why the error was made in the first place and why it was not corrected immediately after its discovery. Such
ineptness comes under the concept of the wanton manner contemplated in the Civil Code that calls for the imposition
of exemplary damages.
PHILIPPINE NATIONAL BANK, Petitioner, vs. HYDRO
RESOURCES CONTRACTORS CORPORATION, Respondent.
G.R. No. 167530 March 13, 2013
FACTS: Petitioners DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque Mining and Industrial
Corporation (MMIC). As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC and resumed the business
operations of the defunct MMIC by organizing NMIC.DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except for
five qualifying shares. The members of the Board of Directors of NMIC, were either from DBP or PNB.
Subsequently, NMIC engaged the services of Hercon, Inc. After computing the payments already made by NMIC, Hercon, Inc. found that
NMIC still has an unpaid balance. Hercon, Inc. made several demands on NMIC, including a letter of final demand and when these were
not heeded, a complaint for sum of money was filed in the RTC seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the
amount owing Hercon, Inc.
Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger. This prompted the amendment of the
complaint to substitute HRCC for Hercon, Inc.
Thereafter, President Corazon C. Aquino issued Proclamation No. 50 creating the APT for the expeditious disposition and privatization of
certain government corporations and/or the assets thereof. Pursuant to the said Proclamation, DBP and PNB executed their respective
deeds of transfer in favor of the National Government assigning, transferring and conveying certain assets and liabilities, including their
respective stakes in NMIC. In turn and on even date, the National Government transferred the said assets and liabilities to the APT as
trustee under a Trust Agreement. Thus, the complaint was amended for the second time to implead and include the APT as a defendant.
G.R. No. 167530 March 13, 2013
FACTS: In its answer, NMIC claimed that HRCC had no cause of action. It also asserted that its contract with HRCC was entered into by
its then President without any authority. Moreover, the said contract allegedly failed to comply with laws, rules and regulations
concerning government contracts. NMIC further claimed that the contract amount was manifestly excessive and grossly disadvantageous
to the government. NMIC made counterclaims for the amounts already paid to Hercon, Inc.
DBP, PNB, and APT all invoked lack of cause of action and the defense of being a separate juridical personality of NMIC.
After trial, the RTC as well as the CA rendered a Decision in favor of HRCC. Both Courts pierced the corporate veil of NMIC and held DBP
and PNB solidarily liable with NMIC.
The respective motions for reconsideration of DBP, PNB, and APT were denied. Hence, these consolidated petitions.
ISSUE: Whether there is sufficient ground to pierce the veil of corporate fiction.
G.R. No. 167530 March 13, 2013
HELD: NO, the doctrine cannot be invoked.
In Sarona v. National Labor Relations Commission has defined the scope of application of the doctrine of piercing the corporate veil:
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the
corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to
justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation.
At the same time, Case law lays down a three-pronged test to determine the application of the doctrine piercing the corporate veil based
on the alter ego theory, which is also known as the instrumentality theory, namely:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business
practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust act in contravention of plaintiff’s legal right; and
(3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss complained of.
G.R. No. 167530 March 13, 2013
HELD: The absence of any of these elements prevents piercing the corporate veil.
In applying the alter ego doctrine, the courts are concerned with reality and not form, with how the corporation operated and the
individual defendant’s relationship to that operation. With respect to the control element, it refers not to paper or formal control by
majority or even complete stock control but actual control which amounts to “such domination of finances, policies and practices that
the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal.” In
addition, the control must be shown to have been exercised at the time the acts complained of took place.
While ownership by one corporation of all or a great majority of stocks of another corporation and their interlocking directorates
may serve as indicia of control, by themselves and without more, however, these circumstances are insufficient to establish an
alter ego relationship or connection between DBP and PNB on the one hand and NMIC on the other hand, that will justify the
puncturing of the latter’s corporate cover. This Court has declared that “mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality.” This Court has likewise ruled that the “existence of interlocking directors, corporate officers and
shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations.”
G.R. No. 167530 March 13, 2013
HELD: In this case, nothing in the records shows that the corporate finances, policies and practices of NMIC were dominated by DBP and
PNB in such a way that NMIC could be considered to have no separate mind, will or existence of its own but a mere conduit for DBP and
PNB. On the contrary, the evidence establishes that HRCC knew and acted on the knowledge that it was dealing with NMIC, not with
NMIC’s stockholders. The letter proposal of Hercon, Inc., HRCC’s predecessor-in-interest, regarding the contract for NMIC’s mine
stripping and road construction program was addressed to and accepted by NMIC. The various billing reports, progress reports,
statements of accounts and communications of Hercon, Inc./HRCC regarding NMIC’s mine stripping and road construction program in
1985 concerned NMIC and NMIC’s officers, without any indication of or reference to the control exercised by DBP and/or PNB over
NMIC’s affairs, policies and practices. Also, DBP and PNB maintain an address different from that of NMIC. There was insufficient proof of
interlocking directorates. There was not even an allegation of similarity of corporate officers. Instead of evidence that DBP and PNB
assumed and controlled the management of NMIC, HRCC’s evidence shows that NMIC operated as a distinct entity endowed with its own
legal personality.
In relation to the second element, to disregard the separate juridical personality of a corporation, the wrongdoing or unjust act in
contravention of a plaintiff’s legal rights must be clearly and convincingly established; it cannot be presumed. Without a demonstration
that any of the evils sought to be prevented by the doctrine is present, it does not apply. There being a total absence of evidence pointing
to a fraudulent, illegal or unfair act committed against HRCC by DBP and PNB under the guise of NMIC, there is no basis to hold that
NMIC was a mere alter ego of DBP and PNB.
G.R. No. 167530 March 13, 2013
HELD: As regards the third element, in the absence of both control by DBP and PNB of NMIC and fraud or fundamental unfairness
perpetuated by DBP and PNB through the corporate cover of NMIC, no harm could be said to have been proximately caused by DBP and
PNB on HRCC for which HRCC could hold DBP and PNB solidarily liable with NMIC.
Considering that, under the deeds of transfer executed by DBP and PNB, the liability of the APT as transferee of the rights, titles and
interests of DBP and PNB in NMIC will attach only if DBP and PNB are held liable, the APT incurs no liability for the judgment
indebtedness of NMIC. As such assignee, therefore, the APT incurs no liability with respect to NMIC other than whatever liabilities may
be imputable to its assignors, DBP and PNB.
Thus, only NMIC as a distinct and separate legal entity is liable to pay its corporate obligation to HRCC.
G.R. No. 199687: PACIFIC REHOUSE CORPORATION, Petitioners, vs. COURT
OF APPEALS and EXPORT AND INDUSTRY BANK, INC., Respondents.
G.R. No. 201537: PACIFIC REHOUSE CORPORATION, PACIFIC CONCORDE
CORPORATION, MIZPAH HOLDINGS, INC., FORUM HOLDINGS CORPORATION
and EAST ASIA OIL COMPANY, INC., Petitioners, vs. EXPORT AND INDUSTRY
BANK, INC., Respondent.
FACTS: A complaint was instituted before the RTC against EIB Securities Inc. for unauthorized sale of DMCI shares of private respondents Pacific Rehouse
Corporation, Pacific Concorde Corporation, Mizpah Holdings, Inc., Forum Holdings Corporation, and East Asia Oil Company, Inc.
The RTC rendered judgment on the pleadings, directing the defendant to return the plaintiffs’ DMCI shares, as of judicial demand. On the other hand,
plaintiffs are directed to reimburse the defendant for the buy back price of KPP shares of stocks.
When the Writ of Execution was returned unsatisfied, private respondents moved for the issuance of an alias writ of execution to hold Export and Industry
Bank, Inc. liable for the judgment obligation as E–Securities is “a wholly–owned controlled and dominated subsidiary of Export and Industry Bank, Inc., and
is thus a mere alter ego and business conduit of the latter. E–Securities opposed the motion arguing that it has a corporate personality that is separate and
distinct from petitioner.
The RTC concluded that E–Securities is a mere business conduit or alter ego of petitioner, the dominant parent corporation, which justifies piercing of the
veil of corporate fiction, and issued an alias writ of summons directing defendant EIB Securities, Inc., and/or Export and Industry Bank, Inc., to fully comply
therewith.
Export Bank filed before the Court of Appeals a petition for certiorari with prayer for the issuance of a temporary restraining order seeking the nullification
of the RTC Order. The CA reversed the RTC Order and explained that the alter ego theory cannot be sustained because ownership of a subsidiary by the
parent company is not enough justification to pierce the veil of corporate fiction. The records also do not show that Export Bank has complete control over
the business policies, affairs and/or transactions of E–Securities. It was solely E–Securities that contracted the obligation in furtherance of its legitimate
corporate purpose; thus, any fall out must be confined within its limited liability.
Hence, this petition.

FIRST ISSUE: Whether the RTC enforce the alias writ of execution against Export Bank
HELD: The Court already ruled in Kukan International Corporation v. Reyes, that compliance with the recognized modes of acquisition of
jurisdiction cannot be dispensed with even in piercing the veil of corporate fiction, to wit:
The principle of piercing the veil of corporate fiction, and the resulting treatment of two related corporations as one and the same
juridical person with respect to a given transaction, is basically applied only to determine established liability; it is not available to
confer on the court a jurisdiction it has not acquired, in the first place, over a party not impleaded in a case. Elsewise put, a corporation
not impleaded in a suit cannot be subject to the court’s process of piercing the veil of its corporate fiction. In that situation, the
court has not acquired jurisdiction over the corporation and, hence, any proceedings taken against that corporation and its property
would infringe on its right to due process.
Aguedo Agbayani, a recognized authority on Commercial Law, stated as much:

"23. Piercing the veil of corporate entity applies to determination of liability not of jurisdiction. x x x
This is so because the doctrine of piercing the veil of corporate fiction comes to play only during the trial of the case after the
court has already acquired jurisdiction over the corporation. Hence, before this doctrine can be applied, based on the evidence
presented, it is imperative that the court must first have jurisdiction over the corporation. x x x“
HELD: From the preceding, it is therefore correct to say that the court must first and foremost acquire jurisdiction over the parties; and only then would
the parties be allowed to present evidence for and/or against piercing the veil of corporate fiction. If the court has no jurisdiction over the corporation, it
follows that the court has no business in piercing its veil of corporate fiction because such action offends the corporation’s right to due process.
"Jurisdiction over the defendant is acquired either upon a valid service of summons or the defendant’s voluntary appearance in court. When the defendant
does not voluntarily submit to the court’s jurisdiction or when there is no valid service of summons, ‘any judgment of the court which has no jurisdiction
over the person of the defendant is null and void.’"51 "The defendant must be properly apprised of a pending action against him and assured of the
opportunity to present his defenses to the suit. Proper service of summons is used to protect one’s right to due process.“
SECOND ISSUE: Whether E-Securities is merely an alter ego of Export Bank, that will make the latter liable.
HELD: NO.
E-Securities and Export Bank are two separate and distinct corporations. The Alter Ego Doctrine is not applicable.
“Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the
fiction of the corporate entity of the “instrumentality” may be disregarded. The control necessary to invoke the rule is not majority or even complete stock
control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its
own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of
took place. Moreover, the control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made.”
HELD: The Court has laid down a three–pronged control test to establish when the alter ego doctrine should be operative:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiff’s legal right; and
(3) The aforesaid control and breach of duty must [have] proximately caused the injury or unjust loss complained of.
The absence of any one of these elements prevents ‘piercing the corporate veil’ in applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are
concerned with reality and not form, with how the corporation operated and the individual defendant’s relationship to that operation. Hence, all three
elements should concur for the alter ego doctrine to be applicable.
Ownership by Export Bank of a great majority or all of stocks of E–Securities and the existence of interlocking directorates may serve as badges of control,
but ownership of another corporation, per se, without proof of actuality of the other conditions are insufficient to establish an alter ego relationship or
connection between the two corporations, which will justify the setting aside of the cover of corporate fiction.
The Court has declared that “mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate personality.” The Court has likewise ruled that the “existence of interlocking
directors, corporate officers and shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations.”
Thus, E-Securities is not merely an adjunct, a business conduit or an alter ego of Export Bank. These are two separate and distinct corporation. Export Bank
cannot be held liable in behalf of E-Securities.
VILLA REY TRANSIT, INC., plaintiff-appellant, vs. EUSEBIO E. FERRER,
PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE COMMISSION,
defendants. EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC.,
defendants-appellants.
PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant, vs.
JOSE M. VILLARAMA, third-party defendant-appellee.
G.R. No. L-23893 October 29, 1968
FACTS: Jose Villarama was an operator of a bus transportation pursuant to two certificates of public convenience granted him by the Public Service
Commission (PSC). Later, he sold the certificates to the Pangasinan Transportation Company, Inc. (Pantranco) with the condition that the seller (Villarama)
“shall not for a period of 10 years, apply for any TPU service identical or competing with the buyer.”
Barely three months thereafter, a corporation called Villa Rey Transit, Inc. (the Corporation) was organized with a capital stock of P500,000.00 divided into
5,000 shares of the par value of P100.00 each; P200,000.00 was the subscribed stock; Natividad Villarama (wife of Jose Villarama) was one of the
incorporators, and she subscribed for P1,000.00; the balance of P199,000.00 was subscribed by the brother and sister-in-law of Jose Villarama; of the
subscribed capital stock, P105,000.00 was paid to the treasurer of the corporation, Natividad.
In less than a month after its registration with the SEC, the Corporation bought five certificates of public convenience and 49 buses from one Valentin
Fernando. Later, the Sheriff of Manila levied on 2 of the 5 certificates, in favor of Eusebio Ferrer, judgment creditor, against Fernando, judgment debtor. A
public sale was conducted. Ferrer was the highest bidder. Ferrer sold the two certificates to Pantranco.
The Corporation filed a complaint against Ferrer, Pantranco and the PSC for the annulment of the sheriff’s sale. Pantranco, on its part, filed a third-party
complaint against Villarama, alleging that Villarama and/or the Corporation was disqualified from operating the two certificates in question by virtue of
the previous agreement. The trial court declared null and void the sheriff’s sale of two certificates of public convenience in favor of Ferrer and the
subsequent sale thereof by the latter to Pantranco and declaring Villa Rey Transit, Inc., to be the lawful owner of the said certificates of public convenience.
Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey Transit, Inc. (Corporation) is a distinct and separate entity from
Villarama. Ferrer, for his part, challenges the decision insofar as it holds that the sheriff’s sale is null and void.
VILLA REY TRANSIT, INC., plaintiff-appellant, vs. EUSEBIO E. FERRER,
PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE COMMISSION,
defendants. EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC.,
defendants-appellants.
PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant, vs.
JOSE M. VILLARAMA, third-party defendant-appellee.
G.R. No. L-23893 October 29, 1968
ISSUE: Whether the stipulation between Villarama and Pantranco binds Villa Rey Transit, Inc.
HELD: YES.
The restrictive clause in the contract entered into by the Villarama and Pantranco is also enforceable and binding against the said Corporation. The rule is
that a seller or promisor may not make use of a corporate entity as a means of evading the obligation of his covenant. The evidence has disclosed that
Villarama, albeit was not an incorporator or stockholder of the Corporation, his wife, however, was an incorporator and was elected treasurer of the
Corporation.
The evidence further shows that the initial cash capitalization of the corporation was mostly financed by Villarama; he supplied the organization expenses
and the assets of the Corporation, such as trucks and equipment; there was no actual payment by the original subscribers of the amounts of P95,000.00
and P100,000.00 as appearing in the books; Villarama made use of the money of the Corporation and deposited them to his private accounts; and the
Corporation paid his personal accounts. The foregoing circumstances are strong persuasive evidence showing that Villarama has been too much involved
in the affairs of the Corporation to altogether negate the claim that he was only a part-time general manager. They show beyond doubt that the Corporation
is his alter ego.
The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in
all cases which are within reason and the law. When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the
evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of
knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be
lifted to allow for its consideration merely as an aggregation of individuals.
G.R. No. 220926
LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now
known as CAVITEXINFRASTRUCTURE CORPORATION), Petitioners vs.
ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T. REYES,
SIMEON CUA, VICENTE CUALOPING, HENRY CUALOPING, MARIZA
SANTOSTAN, and MANUEL ESTRELLA, RespondentsG.R. No. 220926 5 July
2017
FACTS: Wincorp extended a credit line to Power Merge and allowed the latter to make drawdowns despite signs that
would show Power Merge’s inability to pay. To secure the Credit Line Agreement and the Amendment to Credit Line
Agreement, Power Merge executed promissory notes obliging itself to pay Wincorp, for itself or as agent for and on
behalf of certain investors the amount of the drawdowns with interest on the maturity of the promissory note. However,
unknown to Ng Wee, the promissory notes were rendered useless by the Side Agreements, simultaneously executed by
Ong and Reyes with the Credit Line Agreement and the Amendment to Credit Line Agreement, which virtually
exonerated Power Merge of its liability on the promissory notes.
ISSUE: Considering Power Merge’s receipt of the said amount, whether it would be iniquitous and immoral to require
Santos-Tan and her codirectors in Wincorp to reimburse Virata of whatever the latter would be required to pay Ng
Wee.

HELD: A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision
expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article
2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of defamation and claim for moral damages.
G.R. No. 220926
LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now
known as CAVITEXINFRASTRUCTURE CORPORATION), Petitioners vs.
ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T. REYES,
SIMEON CUA, VICENTE CUALOPING, HENRY CUALOPING, MARIZA
SANTOSTAN, and MANUEL ESTRELLA, RespondentsG.R. No. 220926 5 July
2017

HELD: It is well-settled that the juridical personality of a corporation may be removed or its corporate veil pierced when
the corporation is just an alter ego of a person or of another corporation. When the corporation becomes a shield for
fraud, illegality or inequity committed against third persons, the corporate veil will, as a result, be disregarded
for the interest of justice.
On the basis of fraud, the Court pierced the corporate veil of Wincorp and held the directors and officers of the latter as
personally liable to Ng Wee. The basis of their liability was grounded on Section 31 of the Corporation Code when they
assented to the grant of the Credit Line Agreement and Amendment to the Credit Line Agreement to Power Merge.
Section 31 of the Corporation Code expressly states:
Section 31. Liability of directors, trustees or officers. – Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
G.R. No. L-69259 January 26, 1988
DELPHER TRADES CORPORATION, and DELPHIN PACHECO,
petitioners, vs. INTERMEDIATE APPELLATE COURT and
HYDRO PIPES PHILIPPINES, INC., respondents.
FACTS: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters of real estate in the
Municipality of Polo (now Valenzuela), Province of Bulacan (now Metro Manila) The said co-owners leased to Construction Components
International Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to
sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions. On August
3, 1974, lessee Construction Components International, Inc. assigned its rights and obligations under the contract of lease in favor of
Hydro Pipes Philippines, Inc. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco. On January 3, 1976,
a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the
former conveyed to the latter the leased property together with another parcel of land also located in Malinta Estate, Valenzuela, Metro
Manila for 2,500 shares of stock of defendant corporation with a total value of P1,500,000.00
ISSUE: Whether the “Deed of Exchange” of the properties executed by the Pachecos on the one hand and the Delpher Trades
Corporation on the other was meant to be a contract of sale.

HELD: We rule for the petitioners. In the case at bar, in exchange for their properties, the Pachecos acquired 2,500 original unissued no
par value shares of stocks of the Delpher Trades Corporation. Consequently, the Pachecos became stockholders of the corporation by
subscription. “The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation,
formed or to be formed.”
The records do not point to anything wrong or objectionable about this “estate planning” scheme resorted to by the Pachecos. “The legal
right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law
permits, cannot be doubted.” (Liddell & Co., Inc. v. The Collector of Internal Revenue, 2 SCRA 632 citing Gregory v. Halvering, 293 U.S.
465, 7 L. ed. 596) Delpher Trades Corp. vs. Intermediate Appellate Court, 157 SCRA 349, No. L-69259 January 26, 1988
G.R. No. L-69259 January 26, 1988
DELPHER TRADES CORPORATION, and DELPHIN PACHECO,
petitioners, vs. INTERMEDIATE APPELLATE COURT and
HYDRO PIPES PHILIPPINES, INC., respondents.
HELD: The “Deed of Exchange” of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of
sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family merely changed their
ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its
claim of a light of first refusal under the lease contract.
BASES CONVERSION AND DEVELOPMENT AUTHORITY,
Petitioner, v. COMMISSIONER OF INTERNAL REVENUE,
Respondent.
G.R. No. 205925, June 20, 2018
FACTS: Bases Conversion and Development Authority (BCDA) filed a petition for review with CTA in order to preserve its right to pursue
its claim for refund of Creditable Withholding Tax (CWT) in the amount of Php122,079,442.53, which was paid under protest. Said
petition was filed with a Request for Exemption from Payment of Filing Fees, the position of BCDA being that it is exempt from the
payment of such fees.
Before the CTA En Banc, the petition was returned and not deemed filed without the payment of
the correct legal fees.
ISSUE: Whether BCDA is exempt from the payment of legal fees.

Respondent.
G.R. No. 205925, June 20, 2018
HELD: Yes. BCDA is a government instrumentality vested with corporate powers. As such, it is exempt from the payment of docket fees.
In order to qualify as a GOCC, one must be organized either as a stock or non-stock corporation. Section 3 of the Corporation Code
defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of
such shares dividends”
Section 6 of R.A. No. 7227 (BCD Act of 1992) provides for BCDA's capitalization, to wit:
Sec. 6. Capitalization. — The Conversion Authority shall have an authorized capital of One hundred billion pesos (P100,000,000,000.00)
which may be fully subscribed by the Republic of the Philippines and shall either be paid up from the proceeds of the sales of its land
assets as provided for in Section 8 of this Act or by transferring to the Conversion Authority properties valued in such amount.
An initial operating capital in the amount of seventy million pesos (P70,000,000.00) is hereby authorized to be appropriated out of any
funds in the National Treasury not otherwise appropriated which shall be covered by preferred shares of the Conversion Authority
retireable within two (2) years.
Based on the foregoing, it is clear that BCDA has an authorized capital of Php100 Billion, however, it is not divided into shares of stock.
BCDA has no voting shares. There is likewise no provision which authorizes the distribution of dividends and allotments of surplus and
profits to BCDA’s stockholders. Hence, BCDA is not a stock corporation.
Respondent.
G.R. No. 205925, June 20, 2018
HELD: Section 8 of R.A. No. 7227 provides an enumeration of BCDA's purposes and their corresponding percentage
shares in the sales proceeds of BCDA. Section 8 likewise states that after distribution of the proceeds acquired from
BCDA's activities, the balance, if any, shall accrue and be remitted to
the National Treasury.

BCDA also does not qualify as a non-stock corporation because it is not organized for any of the purposes
mentioned under Section 88 of the Corporation Code namely charitable, religious, educational, professional,
cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade industry, agricultural
and like chambers, or any combination thereof.

A cursory reading of Section 4 of R.A. No. 7227 shows that BCDA is organized for a specific purpose — to own, hold
and/or administer the military reservations in the country and implement its conversion to other productive uses.

From the foregoing, it is clear that BCDA is neither a stock nor a non-stock corporation. BCDA is a government
instrumentality vested with corporate powers. Under Section 21, Rule 141 of the Rules of Court, agencies and
instrumentalities of the Republic of the Philippines are exempt from paying legal or docket fees. Hence, BCDA is
exempt from the payment of docket fees.
G.R. No. 148076 January 12, 2011
ANTONIO M. CARANDANG, Petitioner, vs. HONORABLE
ANIANO A. DESIERTO, OFFICE OF THE OMBUDSMAN,
Respondent.
FACTS: The Government ordered the sequestration of Radio Philippines Network’s properties, assets, and business. Carandang assumed
office as general manager and chief operating officer of RPN. The latter was charged with grave misconduct together with other RPN
officials before the Ombudsman.
Petitioner sought for the dismissal of the case on the ground that the Ombudsman had no jurisdiction over him because Radio
Pphilippines Network was not a government-owned or -controlled corporation. Carandang moved for reconsideration but was denied by
the Ombudsman and such denial was affirmed by the CA. Hence, this petition.
ISSUE: Whether Radio Philippines Network Inc. is a government-owned or -controlled corporation.
HELD: NO. It is not disputed that the Ombudsman has jurisdiction over administrative cases involving grave misconduct committed by
the officials and employees of government-owned or -controlled corporations; and that the Sandiganbayan has jurisdiction to try and
decide criminal actions involving violations of R.A. 3019 committed by public officials and employees, including presidents, directors
and managers of government-owned or -controlled corporations. The respective jurisdictions of the respondents are expressly defined
and delineated by the law.
Similarly, the law defines what are government-owned or -controlled corporations. For one, Section 2 of Presidential Decree No. 2029
(Defining Government Owned or Controlled Corporations and Identifying Their Role in National Development) states:
G.R. No. 148076 January 12, 2011
ANTONIO M. CARANDANG, Petitioner, vs. HONORABLE
ANIANO A. DESIERTO, OFFICE OF THE OMBUDSMAN,
Respondent.
HELD: Section 2. A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing
governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law is
owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at
least a majority of its outstanding capital stock or of its outstanding voting capital stock.
xxx
(13) government-owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with
functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly
through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its
capital stock.
It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the
Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock.
Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in
RPN’s capital stock being only 32.4%.
G. R. No. 175352 January 18, 2011
DANTE V. LIBAN, REYNALDO M. BERNARDO and SALVADOR M.
VIARI, Petitioners, vs. RICHARD J. GORDON, Respondent.
PHILIPPINE NATIONAL RED CROSS, Intervenor.
FACTS: Respondent filed a motion for partial reconsideration on a Supreme Court decision which ruled that being chairman of the Philippine
National Red Cross (PNRC) did not disqualify him from being a Senator, and that the charter creating PNRC is unconstitutional as the PNRC is a
private corporation and the Congress is precluded by the Constitution to create such. The Court then ordered the PNRC to incorporate itself with
the SEC as a private corporation. Respondent takes exception to the second part of the ruling, which addressed the constitutionality of the statute
creating the PNRC as a private corporation. Respondent avers that the issue of constitutionality was only touched upon in the issue of locus
standi. It is a rule that the constitutionality will not be touched upon if it is not the lis mota of the case.
ISSUE: Was it proper for the Court to have ruled on the constitutionality of the PNRC statute
HELD: In the case at bar, the constitutionality of the PNRC statute was raised in the issue of standing. As such, the Court should not have declared
certain provisions of such as unconstitutional. On the substantive issue, the PNRC is sui generis. It is unlike the private corporations that the
Constitution wants to prevent Congress from creating. First, the PNRC is not organized for profit. It is an organization dedicated to assist
victims of war and administer relief to those who have been devastated by calamities, among others. It is entirely devoted to public
service. It is not covered by the prohibition since the Constitution aims to eliminate abuse by the Congress, which tend to favor
personal gain. Secondly, the PNRC was created in order to participate in the mitigation of the effects of war, as embodied in the Geneva
Convention. The creation of the PNRC is compliance with international treaty obligations. Lastly, the PNRC is a National Society, an
auxiliary of the government. It is not like government instrumentalities and GOCC.
The PNRC is regulated directly by international humanitarian law, as opposed to local law regulating the other mentioned entities. As such, it was
improper for the Court to have declared certain portions of the PNRC statute as unconstitutional. However, it is the stand of Justice Carpio that
there is no mandate for the Government to create a National Society to this effect. He also raises the fact that the PNRC is not sui generis in being
a private corporation organized for public needs. Justice Abad is of the opinion that the PNRC is neither private or governmental, hence it was
within the power of Congress to create.
ALICIA E. GALA, GUIA G. DOMINGO and RITA G. BENSON, petitioners, vs. ELLICE
AGRO-INDUSTRIAL CORPORATION, MARGO MANAGEMENT AND DEVELOPMENT
CORPORATION, RAUL E. GALA, VITALIANO N. AGUIRRE II, ADNAN V. ALONTO,
ELIAS N. CRESENCIO, MOISES S. MANIEGO, RODOLFO B. REYNO, RENATO S.
GONZALES, VICENTE C. NOLAN, NESTOR N. BATICULON, respondents.
G.R. No. 156819 December 11, 2003
FACTS: On March 28, 1979, the spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala,Raul Gala, and Rita Benson, and their
encargados Virgilio Galeon and Julian Jader formed and organized the Ellice Agro-Industrial Corporation.Subsequently, Guia Domingo, Ofelia
Gala, Raul Gala, Virgilio Galeon and Julian Jader incorporated the Margo Management and Development Corporation (Margo).
On November 10, 1982, Manuel Gala sold 13,314 of his shares in Ellice to Margo.
On June 23, 1990, a special stockholders meeting of Margo was held, where a new board of directors was elected. That same day, the newly-
elected board elected a new set of officers. Raul Gala was elected as chairman, president and general manager. Similarly, a special stockholders
meeting of Ellice was held, Likewise, Raul Gala was elected as chairman, president and general manager.
On March 27, 1990, respondents filed against petitioners with the Securities and Exchange Commission (SEC) a petition for the appointment of a
management committee or receiver, accounting and restitution by the directors and officers, and the dissolution of Ellice Agro-Industrial
Corporation for alleged mismanagement, diversion of funds, financial losses. In turn, petitioners initiated a complaint against the respondents
on, praying for, among others, the nullification of the elections of directors and officers of both Margo Management and Development
Corporation and Ellice Industrial Corporation.
ISSUE/S: 1. Whether petitioners contention are correct that the purposes for which Ellice Corp and Margo Corp were organized should be
declared as illegal and contrary to public policy. They claim that the respondents never pursued exemption from land reform coverage in good
faith and instead merely used the corporations as tools to circumvent land reform laws and to avoid estate taxes
2. should the doctrine of piercing the veil of corporate fiction applied in the case
G.R. No. 156819 December 11, 2003
HELD:
1. The best proof of the purpose of a corporation is its articles of incorporation and by-laws. The articles of incorporation
must state the primary and secondary purposes of the corporation, while the by-laws outline the administrative
organization of the corporation, which, in turn, is supposed to insure or facilitate the accomplishment of said purpose.

In the case at bar, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly illegal
purposes that petitioners are complaining of. It is well to note that, if a corporation’s purpose, as stated in the Articles of
Incorporation, is lawful, then the SEC has no authority to inquire whether the corporation has purposes other than
those stated, and mandamus will lie to compel it to issue the certificate of incorporation.

Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala spouses from the
coverage of land reform legislation and avoiding estate taxes, we cannot disregard their separate juridical personalities.

G.R. No. 156819 December 11, 2003
HELD:
2.To warrant resort to the extraordinary remedy of piercing the veil of corporate fiction, there must be proof that the
corporation is being used as a cloak or cover for fraud or illegality, or to work injustice, and the petitioners have failed to
prove that Ellice and Margo were being used thus. They have not presented any evidence to show how the separate
juridical entities of Ellice and Margo were used by the respondents to commit fraudulent, illegal or unjust acts. Hence,
this contention, too, must fail.
It is always sad to see families torn apart by money matters and property disputes. The concept of a close corporation
organized for the purpose of running a family business or managing family property has formed the backbone of
Philippine commerce and industry. Through this device, Filipino families have been able to turn their humble, hard-
earned life savings into going concerns capable of providing them and their families with a modicum of material comfort
and financial security as a reward for years of hard work. A family corporation should serve as a rallying point for family
unity and prosperity, not as a flashpoint for familial strife. It is hoped that people reacquaint themselves with the
concepts of mutual aid and security that are the original driving forces behind the formation of family corporations and
use these tenets in order to facilitate more civil, if not more amicable, settlements of family corporate disputes.
COMPANY REGISTRATION AND MONITORING DEPARTMENT AND SECURITY AND
EXCHANGE COMMISSION, En banc v. CHING BEE TRADING CORPORATION
FACTS: CBTC was registered with the SEC on Dec 23, 1960. Its corporate existence being limited to a period of only 50 years, it was to expire on
Dec 23, 2010.
On Dec 22,2010 or 1 day before the last day of its existence, CBTC filed with the Company Registration and Monitoring Department of the SEC ,
an application seeking the approval of its amended articles of incorporation extending its term for another 50 years.
However CRMD refused to accept the application because of CBTC’s failure to state in the required Director’s Certificate that the stockholder,
owning and representing at least 2/3 of its capital stock
On Dec 23, 2010 or just hours before CBTC’s corporate personality expired such a letter was filed pursuant to CRMD processor’s suggestion. On
Jan 6, 2011 however CRMD denied the request citing SEC resolution No.394 as basis. The said resolution contained SEC’s policy of denying the
filing of any amended articles of incorporation extending the corporate life of a corporation whose original term had expired.
CBTC appeal to SEC en banc but likewise denied.
Thus CBTC went to Court Appeals. However the Court of Appeals in its Oct 10,2012 decision and January 14,2013 resolution ordered the SEC to
admit CBTC’s articles of incorporation, reversing the SEC en banc decisions, the CA states that CBTC should have been given reasonable time
with in which to correct or modify any portion in articles following Sec 17 of the corporation code.
Hence in this petition SEC contends that the CA erred in granting CBTC appeal for an extension to file the amended articles of incorporation. It
points out that a corporation seeking to extend corporate term must take all the necessary steps before it life’s expire. Considering that CBTC
failed to file the amended articles of incorporation and to seek approval of the SEC before the expiration of its term on Dec 23, 2010 the SEC
argues that no valid extension of its corporate existence could be allowed.
COMPANY REGISTRATION AND MONITORING DEPARTMENT AND SECURITY AND
EXCHANGE COMMISSION, En banc v. CHING BEE TRADING CORPORATION
ISSUE: Whether CBTC is entitled to an additional time to file its amended articles of incorporation despite its corporation‘s right to exist as an
artificial person ceases.
HELD: The extending of the corporate term must be done within the limited period of 5 years prior to the original or subsequent expiry date.
(CBTC filed the required document DEC 22,2010 obviously with in the period allowed granted by the code to seek extension).
On the ground of rejection of filling due to non-compliance of the requirements of the code Supreme Court however cite the section 17 of the
code which states:
SEC 17: Grounds when articles of incorporation or amendment may be rejected or disapproved. –the Securities and Exchange Commission may
reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the requirements of this code:
Provide, that the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the
articles or amendment.
What the SEC should have done was to give formal notice to CBTC that the latter had one day to cure any defect before CBTC’s life would
expire. That one day, which was lost because of miscommunication would have been enough to complete the process of filing the
application within the period provided for by the Corporation Code and would have sufficed for the approval of the corporate extension
requested. Therefore, CBTC remains entitled to a day to submit all the requirements prescribed by the Corporation Code.
This ruling runs in accord with the doctrine of relation, under the said principle where the delay is due to the neglect of the officer with whom
the certificate is required to file or wrongful refusal on his part to receive the application, the amendments shall take effect from the date the
documents were filed.
G.R. No. 93073 December 21, 1992
REPUBLIC PLANTERS BANK, petitioner, vs. COURT OF
APPEALS and FERMIN CANLAS, respondents.
FACTS: Republic Planters Bank issued 9 promissory notes signed by Shozo Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide
Garment Manufacturing Inc. Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the bank in form of
export advances and letters of credit or trust receipts accommodations. Three years after, the bank filed an action to recover the sums of money
covered by the promissory notes. The complainant was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was
later amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing Corporation it its place. . Canlas alleged
he was not liable personally for the corporate acts that he performed, and that the notes were still blank when he signed them.
His contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing,
Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the contention of the petitioner
Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant
Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes.
ISSUE: Whether the Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation effecting a change of
corporate name.
HELD: The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is
the same corporation with a different name, and its character is in no respect changed.
A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has no
affect on the identity of the corporation, or on its property, rights, or liabilities.
The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or
incurred.
G.R. No. 93073 December 21, 1992
REPUBLIC PLANTERS BANK, petitioner, vs. COURT OF
APPEALS and FERMIN CANLAS, respondents.
HELD: As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by
officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change
of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its
agents if authorized by the Board.
HYATT ELEVATORS AND ESCALATORS CORPORATION,
Petitioner, vs. GOLDSTAR ELEVATORS, PHILS., INC.,*
Respondent.G.R. No. 161026, 24 October 2005
FACTS: "Petitioner Goldstar Elevator Philippines, Inc. is a domestic corporation primarily engaged in the business of marketing, distributing, selling,
importing, installing, and maintaining elevators and escalators, with address at 6th Floor, Jacinta II Building, 64 EDSA, Guadalupe, Makati City.
"On the other hand, private respondent [herein petitioner] Hyatt Elevators and Escalators is a domestic corporation similarly engaged in the business of
selling, installing and maintaining/servicing elevators, escalators and parking equipment, with address at the 6th Floor, Dao I Condominium, Salcedo St.,
Legaspi Village, Makati, as stated in its Articles of Incorporation.. Both engaged in installing, maintaining/servicing of elavators and escalators Hyatt filed
an unfair trade practices and damages against LG industrial systems Co. Ltd, and LG International Corporation alleging that it was appointed as the
exclusive distributor of LG elevators and escalators in the Philippines under Distributorship Agreement LG filed a motion to dismiss alleging that lack of
jurisdiction over the persons of defendant, improper venue and failure to state a cause of action.
Hyatt filed a motion for leave of court to amend the complaint, alleging that LG transferred all assets to a joint venue agreement with Otis elevator
Company of the USA to LG Otis Elevator Company Goldstar filed a Motion to dismiss the amended complaint alleging that venue was improperly laid as
neither the Hyatt, LG or Goldstar itself resided in Mandaluyong city where the case was originally filed.
The RTC denied the motion.
The CA dismissed the case and held that Makati was the principal place of business of both respondent and petitioner, as stated in the latter’s Articles of
Incorporation, that place was controlling for purposes of determining the proper venue.
ISSUE: Whether the “residence” of the corporation is the same one as stated in the Articles of Incorporation.
HELD: Yes, although the Rules of Court do not provide that when the plaintiff is a corporation, the complaint should be filed in the location of its
principal office as indicated in its articles of incorporation. Jurisprudence has, however, settled that the place where the principal office of a
corporation is located, as stated in the articles, indeed establishes its residence. This ruling is important in determining the venue of an action by or
against a corporation, as in the present case.
HELD: Yes, although the Rules of Court do not provide that when the plaintiff is a corporation, the complaint should be filed in the location of its
principal office as indicated in its articles of incorporation. Jurisprudence has, however, settled that the place where the principal office of a
corporation is located, as stated in the articles, indeed establishes its residence. This ruling is important in determining the venue of an action by or
against a corporation, as in the present case.
The resolution of this case rests upon a proper understanding of Section 2 of Rule 4 of the 1997 Revised Rules of Court:
"Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff or any of the principal plaintiff resides, or where the
defendant or any of the principal defendant resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff."
Since both parties to this case are corporations, there is a need to clarify the meaning of "residence." The law recognizes two types of persons: (1) natural
and (2) juridical. Corporations come under the latter in accordance with Article 44(3) of the Civil Code.
Residence is the permanent home -- the place to which, whenever absent for business or pleasure, one intends to return. Residence is vital when dealing
with venue.
A corporation, however, has no residence in the same sense in which this term is applied to a natural person. This is precisely the reason why the Court in
Young Auto Supply Company v. Court of Appeals ruled that "for practical purposes, a corporation is in a metaphysical sense a resident of the place where its
principal office is located as stated in the articles of incorporation.“
Even before this ruling, it has already been established that the residence of a corporation is the place where its principal office is established.
This Court has also definitively ruled that for purposes of venue, the term "residence" is synonymous with "domicile."
HELD: Correspondingly, the Civil Code provides:
"Art. 51. When the law creating or recognizing them, or any other provision does not fix the domicile of juridical persons, the same shall be understood to
be the place where their legal representation is established or where they exercise their principal functions.“
It now becomes apparent that the residence or domicile of a juridical person is fixed by "the law creating or recognizing" it. Under Section 14(3) of the
Corporation Code, the place where the principal office of the corporation is to be located is one of the required contents of the articles of incorporation,
which shall be filed with the Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence of respondent. What needs to be examined is that of petitioner. Admittedly, he latter’s principal
place of business is Makati, as indicated in its Articles of Incorporation. Since the principal place of business of a corporation determines its residence or
domicile, then the place indicated in petitioner’s articles of incorporation becomes controlling in determining the venue for this case.
Petitioner argues that the Rules of Court do not provide that when the plaintiff is a corporation, the complaint should be filed in the location of its principal
office as indicated in its articles of incorporation. Jurisprudence has, however, settled that the place where the principal office of a corporation is located, as
stated in the articles, indeed establishes its residence. his ruling is important in determining the venue of an action by or against a corporation, as in the
present case.
Without merit is the argument of petitioner that the locality stated in its Articles of Incorporation does not conclusively indicate that its principal
office is still in the same place. We agree with the appellate court in its observation that the requirement to state in the articles the place where the
principal office of the corporation is to be located "is not a meaningless requirement. That proviso would be rendered nugatory if corporations were
to be allowed to simply disregard what is expressly stated in their Articles of Incorporation."
HELD: Inconclusive are the bare allegations of petitioner that it had closed its Makati office and relocated to Mandaluyong City, and that respondent was
well aware of those circumstances. Assuming arguendo that they transacted business with each other in the Mandaluyong office of petitioner, the fact
remains that, in law, the latter’s residence was still the place indicated in its Articles of Incorporation. Further unacceptable is its faulty reasoning that the
ground for the CA’s dismissal of its Complaint was its failure to amend its Articles of Incorporation so as to reflect its actual and present principal office.
The appellate court was clear enough in its ruling that the Complaint was dismissed because the venue had been improperly laid, not because of the failure
of petitioner to amend the latter’s Articles of Incorporation.
To insist that the proper venue is the actual principal office and not that stated in its Articles of Incorporation would indeed create confusion and work
untold inconvenience. Enterprising litigants may, out of some ulterior motives, easily circumvent the rules on venue by the simple expedient of closing old
offices and opening new ones in another place that they may find well to suit their needs.“
ANGELES P. BALINGHASAY, RENATO M. BERNABE, ALODIA L. DEL
ROSARIO, CATALINA T. FUNTILA, TERESITA L. GAYANILO, RUSTICO
A. JIMENEZ, ARCELI P. JO, ESMERALDA D. MEDINA, CECILIA S.
MONTALBAN, VIRGILIO R. OBLEPIAS, CARMENCITA R. PARRENO,
EMMA L. REYES, REYNALDO L. SAVET, SERAPIO P. TACCAD,
VICENTE I. VALDEZ, SALVACION F. VILLAMORA, and DIONISIA M.
VILLAREAL, Petitioners, vs. CECILIA CASTILLO, OSCAR DEL
ROSARIO, ARTURO S. FLORES, XERXES NAVARRO,
MARIAANTONIAA. TEMPLO and MEDICAL CENTER PARAÑAQUE,
INC., Respondents. G.R. No. 185664 April 8, 2015
FACTS: The MCPI, a domestic corporation organized in 1977, operates the Medical Center Parañ aque (MCP) located in Dr. A. Santos Avenue,
Sucat, Parañ aque City. Castillo, Oscar, Flores, Navarro, and Templo are minority stockholders of MCPI. Each of them holds 25 Class B shares. On
the other hand, nine of the herein petitioners, namely, Balinghasay, Bernabe, Alodia, Jimenez, Oblepias, Savet, Villamora,Valdez and Villareal, are
holders of Class A shares and were Board Directors of MCPI. The other eight petitioners are holders of Class B shares. The petitioners are part of
a group who invested in the purchase of ultrasound equipment, the operation of and earnings from which gave rise to the instant controversy.
Before 1997, the laboratory, physical therapy, pulmonary and ultrasound services in MCP were provided to patients by way of concessions
granted to independent entities. When the concessions expired in 1997, MCPI decided that it would provide on its own the said services, except
ultrasound.
In 1997, the MCPI’s Board of Directors awarded the operation of the ultrasound unit to a group of investors (ultrasound investors) composed
mostly of Obstetrics-Gynecology doctors. The ultrasound investors held either Class A or Class B shares of MCPI. Among them were nine of the
herein petitioners, who were then, likewise, MCPI Board Directors. The group purchased a Hitachi model EUB-200 C ultrasound equipment
costing ₱850,000.00 and operated the same. Albeit awarded by the Board of Directors, the operation was not yet covered by a written contract.
FACTS: In the meeting of the MCPI’s Board of Directors held on August 14, 1998, seven (7) of the twelve (12) Directors present were part of the
ultrasound investors. The Board Directors made a counter offer anent the operation of the ultrasound unit. Hence, essentially then, the award of
the ultrasound operation still bore no formal stamp of approval.
On February 5, 1999, twelve (12) Board Directors attended the Board meeting and eight (8) of them were among the ultrasound investors. A
Memorandum of Agreement (MOA) was entered into by and between MCPI, represented by its President then, Bernabe, and the ultrasound
investors, represented by Oblepias. Per MOA, the gross income to be derived from the operation of the ultrasound unit, minus the sonologists’
professional fees, shall be divided between the ultrasound investors and MCPI, in the proportion of 60% and 40%, respectively. Come April 1,
1999, MCPI’s share would be 45%, while the ultrasound investors would receive 55%. Further, the ownership of the ultrasound machine would
eventually be transferred to MCPI.
On October 6, 1999, Flores wrote MCPI’s counsel a letter challenging the Board of Directors’ approval of the MOA for being prejudicial to MCPI’s
interest. Thereafter, on February 7, 2000, Flores manifested to MCPI’s Board of Directors and President his view regarding the illegality of the
MOA, which, therefore, cannot be validly ratified.
FACTS: On March 22, 2001, the herein respondents filed with the RTC a derivative suit against the petitioners for violation of Section 31 of the
Corporation Code. Among the prayers in the Complaint were: (a) the annulment of the MOA and the accounting of and refund by the petitioners
of all profits, income and benefits derived from the said agreement; and (b) payment of damages and attorney’s fees.
In their Answer with Counterclaim, the petitioners argued that the derivative suit must be dismissed for non-joinder of MCPI, an indispensable
party. The petitioners likewise claimed that under Section 3213 of the Corporation Code, the MOA was merely voidable. Since there was no proof
that the subsequent Board of Directors of MCPI moved to annul the MOA, the same should be considered as having been ratified. Further, in the
Annual Stockholders Meeting held on February 11, 2000, the MOA had already been discussed and passed upon.
To implead MCPI as a party-plaintiff, the individual respondents filed an Amended Complaint dated September 11, 2001.15 The RTC admitted
the said amended complaint on October 12, 2001.
ISSUE/S: (1) committed an error of law in ignoring the circumstances under which the MOA was conceived and implemented; (2) failed to
consider that the MOA was a very informal agreement meant to address an urgent hospital necessity;
HELD: As acknowledged by the petitioners and aptly pointed out by the respondents, the existence of the circumstances and urgent hospital
necessity justifying the purchase and operation of the ultrasound unit by the investors were not at the outset offered as evidence. Having been
belatedly raised, the aforesaid defenses were not scrutinized during the trial and their truth or falsity was not uncovered. This is fatal to the
petitioners’ cause. The CA thus cannot be faulted for ruling against the petitioners in the face of evidence showing that: (a) there was no
quorum when the Board meetings were held on August 14, 1998 and February 5, 1999; (b) the MOA was not ratified by a vote of two-
thirds of MCPI’s outstanding capital stock; and (c) the Balance Sheets for the years 1996 to 2000 indicated that MCPI was in a financial
position to purchase the ultrasound equipment.
The petitioners harp on their lofty purpose, which had supposedly moved them to purchase and operate the ultrasound unit. Unfortunately, their
claims are not evident in the records. Further, even if their claims were to be assumed as true for argument’s sake, the fact remains that the
Board Directors, who approved the MOA, did not outrightly inform the stockholders about it. The ultrasound equipment was
purchased and had been in operation since 1997, but the matter was only brought up for ratification by the stockholders in the annual
meetings held in the years 2000 to 2003. This circumstance lends no credence to the petitioners’ cause.
The Court thus finds the CA’s ruling anent the invalidity of the MOA as amply supported by both evidence and jurisprudence.
HELD: To prevent unjust enrichment, the ultrasound investors should retain ownership of the equipment.
Article 22 of the New Civil Code provides that "every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." The main objective of
the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.
In the case at bar, the ultrasound investors pooled together the amount of ₱850,000.00, which was used to purchase the equipment. Because of
the MOA’s invalidity, the ultrasound investors can no longer operate the ultrasound unit within MCP. Nonetheless, it is only fair for the ultrasound
investors to retain ownership of the equipment, which they may use or dispose of independently of MCPI.
PEOPLE'S AIRCARGO AND WAREHOUSING CO. INC., petitioner, vs.
COURT OF APPEALS and STEFANI SAÑO, respondents.
G.R. No. 117847 October 7, 1998
FACTS: Petitioner is a domestic corporation, which was organized in the middle of 1986 to operate a customs bonded warehouse at the old
Manila International Airport in Pasay City.
To obtain a license for the corporation from the Bureau of Customs, Antonio Punsalan Jr., the corporation president, solicited a proposal from
private respondent for the preparation of a feasibility study.
Private respondent submitted a letter-proposal dated October 17, 1986 ("First Contract" hereafter) to Punsalan.
Initially, Cheng Yong, the majority stockholder of petitioner, objected to private respondent's offer, as another company priced a similar proposal
at only P15,000.
However, Punsalan preferred private respondent's service because of the latter's membership in the task force, which was supervising the
transition of the Bureau of Customs from the Marcos government to the Aquino administration. Accordingly, private respondent prepared a
feasibility study for petitioner which eventually paid him the balance of the contract price, although not according to the schedule agreed upon.
On January 10, 1987, Andy Villaceren, vice president of petitioner, received the operations manual prepared by private respondent. Petitioner
submitted said operations manual to the Bureau of Customs is connection with the former's application to operate a bonded warehouse;
thereafter, in May 1987, the Bureau issued to it a license to operate, enabling it to become one of the three public bonded warehouses at the
international airport. Private respondent also conducted, in the third week of January 1987 in the warehouse of petitioner, a three-day training
seminar for the latter's employees.
G.R. No. 117847 October 7, 1998
ISSUE: Whether the president of the petitioner-corporation had apparent authority to bind petitioner to the Second Contract
HELD: Petitioner argues that the disputed contract is unenforceable, because Punsalan, its president, was not authorized by its board of directors
to enter into said contract.
The general rule is that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. A
corporation is a juridical person, separate and distinct from its stockholders and members, "having . . . powers, attributes and properties
expressly authorized by law or incident to its existence."
Being a juridical entity, a corporation may board of directors, which exercises almost all corporate powers, lays down all corporate business
policies and is responsible for the efficiency of management, as provided in Section 23 of the Corporation Code of the Philippines: Sec. 23. The
Board of Directors or Trustees. — Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees .
Under this provision, the power and the responsibility to decide whether the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of incorporaration, bylaws, or relevant provisions of law.
However, just as a natural person may authorize another to do certain acts for and on his behalf, the board of directors may validly delegate some
of its functions and powers to officers, committees or agents. The authority of such individuals to bind the corporation is generally derived from
law, corporate bylaws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of
business, viz.:
G.R. No. 117847 October 7, 1998
HELD: A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that authority
to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the
usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by
custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused
persons dealing with the officer or agent to believe that it has conferred.
Apparent authority is derived not merely from practice. Its existence may be ascertained through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with
which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether
within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in
favor of other parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer
with the power to bind the corporation.
Furthermore, private respondent prepared an operations manual and conducted a seminar for the employees of petitioner in accordance with
their contract. Petitioner accepted the operations manual, submitted it to the Bureau of Customs and allowed the seminar for its employees. As a
result of its aforementioned actions, petitioner was given by the Bureau of Customs a license to operate a bonded warehouse. Granting arguendo
then that the Second Contract was outside the usual powers of the president, petitioner's ratification of said contract and acceptance of benefits
have made it binding, nonetheless. The enforceability of contracts under Article 1403(2) is ratified "by the acceptance of benefits under them"
under Article 1405.
Inasmuch as a corporate president is often given general supervision and control over corporate operations, the strict rule that said officer has
no inherent power to act for the corporation is slowly giving way to the realization that such officer has certain limited powers in the transaction
of the usual and ordinary business of the corporation.
G.R. No. 117847 October 7, 1998
HELD: In the absence of a charter or bylaw provision to the contrary, the president is presumed to have the authority to act within the domain of
the general objectives of its business and within the scope of his or her usual duties.

Hence, it has been held in other jurisdictions that the president of a corporation possesses the power to enter into a contract for the corporation,
when the "conduct on the part of both the president and the corporation [shows] that he had been in the habit of acting in similar matters on
behalf of the company and that the company had authorized him so to act and had recognized, approved and ratified his former and similar
actions." Furthermore, a party dealing with the president of a corporation is entitled to assume that he has the authority to enter, on behalf of the
corporation, into contracts that are within the scope of the powers of said corporation and that do not violate any statute or rule on public policy.
RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO,
FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.
G.R. No. 137686, 8 February 2000
FACTS: Marife O. Niñ o knows the five (5) parcels of land described in paragraph 6 of the petition which are located in Bombon, Camarines Sur
and that they are the ones possessing them which were originally owned by her grandparents, During the lifetime of her grandparents,
respondents mortgaged the said five (5) parcels of land and two (2) others to the petitioner Rural Bank of Milaor as shown by the Deed of Real
Estate Mortgage and the Promissory Note.
Her grandparents were not able to redeem the mortgaged properties consisting of seven (7) parcels of land and so the mortgage was foreclosed
and thereafter ownership thereof was transferred to the petitioner bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in
the possession of the respondents because these five (5) parcels of land described in paragraph 6 of the petition were sold by the petitioner bank
to the parents of Marife O. Niñ o as evidenced by a Deed of Sale executed in January 1988.
The aforementioned five (5) parcels of land subject of the deed of sale, have not been, however transferred in the name of the parents of Merife O.
Niñ o after they were sold to her parents by the petitioner bank because according to the Assessor’s Office the five (5) parcels of land, subject of
the sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale registered with the Register of Deeds of
Camarines Sur. The Register of Deeds, however, informed her that the document of sale cannot be registered without a board resolution of the
petitioner Bank. Marife Niñ o then went to the bank, showed to if the Deed of Sale, the tax declaration and receipt of tax payments and requested
the petitioner for a board resolution so that the property can be transferred to the name of Renato Ocfemia the husband of petitioner Francisca
Ocfemia and the father of the other respondents having died already.
The petitioner bank refused her request for a board resolution and made many alibis. Because of this, Marife O. Niñ o brought the matter to her
lawyer and the latter wrote a letter on December 22, 1995 to the petitioner bank inquiring why no action was taken by the board of the request
for the issuance of the resolution considering that the bank was already fully paid for the consideration of the sale since January 1988 as shown
by the deed of sale itself.
G.R. No. 137686, 8 February 2000
FACTS: On January 15, 1996 the petitioner bank answered respondents’ lawyer’s letter informing the latter that the request for board resolution
ha[d] already been referred to the board of directors of the petitioner bank with another request that the latter should be furnished with a
certified machine copy of the receipt of payment covering the sale between the respondents and the petitioner. This request of the petitioner
bank was already complied with by Marife O. Niñ o even before she brought the matter to her lawyer.
After several days from receipt of the letter when Marife O. Niñ o went to the petitioner again and reiterated her request, the manager of the
petitioner bank told her that they could not issue the required board resolution as the petitioner bank had no records of the sale. Because of this
Merife O. Niñ o already went to their lawyer and had this petition filed..
The trial court granted the Petition. As noted, the CA affirmed the RTC Decision.
ISSUE: Whether the board of directors of a rural banking corporation be compelled to confirm a deed of absolute sale of real property owned by
the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking
corporation
HELD: The present Petition has no merit.
Respondents initiated the present proceedings, so that they could transfer to their names the subject five parcels of land; and subsequently, to
mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother. For the property to be transferred in their names,
however, the register of deeds required the submission of a board resolution from the bank confirming both the Deed of Sale and the authority of
the bank manager, Fe S. Tena, to enter into such transaction. Petitioner refused.
G.R. No. 137686, 8 February 2000
HELD: Respondents based their action before the trial court on the Deed of Sale, the substance of which was alleged in and a copy thereof was
attached to the Petition for Mandamus. The Deed named Fe S. Tena as the representative of the bank. Petitioner, however, failed to specifically
deny under oath the allegations in that contract. In fact, it filed no answer at all, for which reason it was declared in default. In failing to file its
answer specifically denying under oath the Deed of Sale, the bank admitted the due execution of the said contract. Such admission means that it
acknowledged that Tena was authorized to sign the Deed of Sale on its behalf. Thus, defenses that are inconsistent with the due execution and the
genuineness of the written instrument are cut off by an admission implied from a failure to make a verified specific denial.
In any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts. After the
execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes due thereon. If the bank management
believed that it had title to the property, it should have taken some measures to prevent the infringement or invasion of its title thereto and
possession thereof.
In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation
knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the
public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through
such agent, be estopped from denying the agent’s authority.
Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the board
resolution sought by respondent’s. Having authorized her to sell the property, it behooves the bank to confirm the Deed of Sale so that the
buyers may enjoy its full use. In this light, the Court finds it proper to assess the bank treble costs, in addition to the award of damages.
ENGINEERING GEOSCIENCE, INC., Petitioner,v PHILIPPINE
SAVINGS BANK, Respondent.
G.R. No. 187262, SECOND DIVISION, January 10, 2019
FACTS: EGI obtained a loan from PSBank in the principal amount of Php24, 064,000.00 Pesos as evidenced by a Promissory Note dated February
14, 1990. To secure the loan, EGI, through its President, Jose Rolando Santos, executed a Real Estate Mortgage on February 13, 1990 in favor of
PSBank over two parcels of land. EGI was only able to make partial payments on its loan as it fell due based on the agreed schedule of payment,
and made no further payments to PSBank. Thus, PSBank invoked the acceleration clause under the promissory note and sent a demand letter
dated February 11, 1991 demanding full payment of its loan obligation.
PSBank's demand letter went unheeded, prompting PSBank to file a petition for extra-judicial foreclosure of mortgage with the Office of the Ex-
Officio Sheriff, Regional Trial Court of Quezon City. The foreclosure sale was set on June 26, 1991 but the same did not push through on account
of the Complaint with Prayer for Writ of Preliminary Injunction and Restraining Order filed by EGI before the trial court. The trial court issued an
Order dated August 26, 1991 granting EGI's prayer for issuance of writ of preliminary injunction and effectively enjoined PSBank from
proceeding with the foreclosure sale.
EGI still failed to comply with the terms and conditions thereof. Thus, petitioner PS Bank was constrained to file a Motion for Execution of the
trial court's 1993 Decision on their compromise agreement. Accordingly, a Writ of Execution was issued in favor of PSBank.
Accordingly, a Deed of Absolute Sale was executed by the Branch Clerk, as attorney-in-fact of EGI, in favor of PSBank over EGI's mortgaged
properties in accordance with the terms set in the 1993 Decision. After the properties were registered under its name, PSBank filed an Ex-Parte
Motion for the Issuance of a Writ of Possession, which was granted by the trial court.
ISSUE: Whether Jose Rolando Santos (the President of EGI) was authorized to enter the compromise agreement with PSBank
HELD: The Court agrees with EGI that there is nothing in the records that shows that Santos had the express authority to represent EGI in
filing a complaint before the trial court, or even enter into any compromise agreement on behalf of EGL Aside from its bare allegations,
PSBank was not able to present any evidence which would show that Santos indeed had the authority to represent EGL PSBank was not
able to show any evidence of a board authority, a special power of attorney, or even a secretary's certificate that EGI issued in favor of
Santos. Neither was PSBank able to show that it was not necessary for Santos to present a Board Resolution that authorizes him to file
the Complaint and enter into the Compromise Agreement because EGI's By-Laws expressly authorize him to do so. However, in its
eagerness to repudiate Santos' acts, EGI failed to substantiate how and when Santos lost his status as Company President, and how Santos was
able to proceed with his misrepresentations before the Board of Directors regarding the payment of the loan obligation.
The promissory notes from 1984 to 1990 were all signed by Santos as EGI’s President. EGI did not bother to inform PSBank about the change in
Santos' status despite previously holding him out as a person with authority to transact in its name. EGI also did not address how it will comply
with the terms of the loan obligation. Moreover, in the same manner that EGI has been decrying the lack of explicit authority from its Board of
Directors, we also expect nothing less than minutes of a Board Meeting, or even a Board Resolution, which removed Santos as Company
President, or denounced his lack of authority to act in EGI's name.
A corporation, as a juridical entity, acts through its board of directors. The board exercises almost all corporate powers, lays down all corporate
business policies, and is responsible for the efficiency of management. The general rule is that, in the absence of authority from the board of
directors, no person, not even its officers, can validly bind a corporation.
HELD: The records of the case show no evidence that EGI authorized Santos to file a Complaint and enter into a Compromise Agreement
on its behalf. Neither was there any showing that EGI's By-Laws authorize its President to do such acts. EGI’s grant of authority to
Santos, however, falls under the doctrine of apparent authority. Under this doctrine, acts and contracts of the agent, as are within the
apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been
conferred, bind the principal. Furthermore, the principal's liability is limited only to third persons who have been led reasonably to
believe by the conduct of the principal that such actual authority exists, although none was actually given.
Apparent authority is determined only by the acts of the principal and not by the acts of the agent. EGI does not repudiate the act of Santos in
signing the Promissory Notes; in fact, EGI made partial payments, offering the authority of Santos to borrow and sign the Promissory Notes. EGI,
however, repudiates the act of Santos in entering into the Compromise Agreement extending the repayment of the loan under the Promissory
Notes, which extension is actually beneficial to EGI.
In fact, the Compromise Agreement bought time for EGI to pay the loan under the Promissory Notes but EGI still failed to pay. Having availed of
benefits under the Compromise Agreement, EGI is estopped from repudiating it. Since EGI's Board of Directors questioned Santos' authority to
enter into a Compromise Agreement only after 12 years, laches had already set in.
WESTERN INSTITUTE OF TECHNOLOGY, INC., HOMERO L.
VILLASIS, DIMAS ENRIQUEZ, PRESTON F. VILLASIS & REGINALD F.
VILLASIS, petitioner, vs. RICARDO T. SALAS, SALVADOR T. SALAS,
SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS, RICHARD S.
SALAS & HON. JUDGE PORFIRIO PARIAN, respondents.
G.R. No. 113032, 21 August 1997
FACTS: Private respondents, Ricardo T. Salas, Salvador T. Salas, Soledad Salas-Tubilleja, Antonio S. Salas, and Richard S. Salas, belonging to the
same family, are the majority and controlling members of the Board of Trustees of Western Institute of Technology, Inc. (WIT), a stock
corporation engaged in the operation, among others, of an educational institution. According to Homero L. Villasis, Dimas Enriquez, peston F.
Villasis, and Reginald F. Villasis, the minority stockholders of WIT, sometime in June 1986 in the principal office of WIT, a Special Board Meeting
was held.
In attendance were other members of the Board including Reginald Villasis. Prior to said Special Board Meeting, copies of notice thereof were
distributed to all Board Members. The notice allegedly indicated that the meeting included Item 6 which states that “Possible implementation of
Art. III, Sec. 6 of the Amended By-Laws of Western Institute of Technology, Inc. on compensation of all officers of the corporation.”
In said meeting, the Board of Trustees passed Resolution 48, series 1986, granting monthly compensation to Salas, et. al. as corporate officers
retroactive 1 June 1985, in the following amounts:
“Chairman 9,000.00/month,
Vice Chairman P3,500.00/month,
Corporate Treasurer P3,500.00/month and
Corporate Secretary P3,500.00/month,
retroactive June 1, 1985 and the ten percentum of the net profits shall be distributed equally among the ten members of the Board of Trustees.
This shall amend and supercede any previous resolution.”
Homero Villasis, Preston Villasis, Reginald Villasis and Dimas Enriquez filed an affidavit-complaint against Salas, et. al. before the Office of the
City Prosecutor of Iloilo, as a result of which 2 separate criminal informations, one for falsification of a public document under Article 171 of the
Revised Penal Code and the other for estafa under Article 315, par. 1(b) of the RPC, were filed.
G.R. No. 113032, 21 August 1997
FACTS: The charge for falsification of public document was anchored on Salas, et. al.’s submission of WIT’s income statement for the fiscal year
1985-1986 with the Securities and Exchange Commission (SEC) reflecting therein the disbursement of corporate funds for the compensation of
Salas, et. al. based on Resolution 4, series of 1986, making it appear that the same was passed by the board when in truth, the same was actually
passed on 1 June 1986, a date not covered by the corporation’s fiscal year 1985-1986.
Thereafter, trial for the two criminal cases, was consolidated. After a full-blown hearing, Judge Porfirio Parian handed down a verdict of acquittal
on both counts without imposing any civil liability against the accused therein. Villasis, et. al. filed a Motion for Reconsideration of the civil
aspect of the RTC Decision which was, however, denied.
A Motion for Intervention was filed before this Court by Western Institute of Technology, Inc., disowning its inclusion in the petition and
submitting that Atty. Tranquilino R. Gale, counsel for Villasis, et. al., had no authority whatsoever to represent the corporation in filing the
petition. Intervenor likewise prayed for the dismissal of the petition for being utterly without merit. The Motion for Intervention was granted.
ISSUE: Whether the grant of compensation to Salas, et. al. is valid.
HELD: Directors or trustees, as the case may be, are not entitled to salary or other compensation when they perform nothing more than
the usual and ordinary duties of their office.
G.R. No. 113032, 21 August 1997
HELD: This rule is founded upon a presumption that directors/trustees render service gratuitously, and that the return upon their shares
adequately furnishes the motives for service, without compensation. Under Section 30 of the Corporation Code, there are only two (2) ways by
which members of the board can be granted compensation apart from reasonable per diems: (1) when there is a provision in the by-laws fixing
their compensation; and (2) when the stockholders representing a majority of the outstanding capital stock at a regular or special stockholders’
meeting agree to give it to them.
Also, the proscription, however, against granting compensation to director/trustees of a corporation is not a sweeping rule. Worthy of note is
the clear phraseology of Section 30 which state: “The directors shall not receive any compensation, as such directors.”
The phrase as such directors is not without significance for it delimits the scope of the prohibition to compensation given to them for services
performed purely in their capacity as directors or trustees. The unambiguous implication is that members of the board may receive
compensation, in addition to reasonable per diems, when they render services to the corporation in a capacity other than as
directors/trustees. Herein, resolution 48, s. 1986 granted monthly compensation to Salas, et. al. not in their capacity as members of the board,
but rather as officers of the corporation, more particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western Institute of
Technology.
Clearly, therefore, the prohibition with respect to granting compensation to corporate directors/trustees as such under Section 30 is not
violated in this particular case.
Consequently, the last sentence of Section 30 which provides that “In no case shall the total yearly compensation of directors, as such directors,
exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year” does not likewise find application in
this case since the compensation is being given to Salas, et. al. in their capacity as officers of WIT and not as board members.
PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION V.
LAZATIN-MAGAT
G.R. No. L-78133, 18 October 1988
FACTS: Primelink is a domestic corporation engaged in real estate development. Rafaelito W. Lopez is its President and Chief Executive Officer.

the Lazatins are co-owners of two (2) adjoining parcels of land, with a combined area of 30,000 square meters, located in Tagaytay City and
covered by Transfer Certificate of Title (TCT) No. T-108484 of the Register of Deeds of Tagaytay City.

The Lazatins and Primelink, represented by Lopez, in his capacity as President, entered into a Joint Venture Agreement for the development of
the aforementioned property into a residential subdivision to be known as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged
themselves to contribute the two parcels of land as their share in the joint venture. For its part, Primelink undertook to contribute money, labor,
personnel, machineries, equipment, contractor’s pool, marketing activities, managerial expertise and other needed resources to develop the
property and construct therein the units for sale to the public.
The parties agreed that any unsettled or unresolved misunderstanding or conflicting opinions between the parties relative to the interpretation,
scope and reach, and the enforcement/implementation of any provision of the agreement shall be referred to Voluntary Arbitration in
accordance with the Arbitration Law.
The Lazatins agreed to subject the title over the subject property to an escrow agreement. Conformably with the escrow agreement, the owner’s
duplicate of the title was deposited with the China Banking Corporation. However, Primelink failed to immediately secure a Development Permit
from Tagaytay City, and applied the permit only on August 30, 1995. On October 12, 1995, the City issued a Development Permit to Primelink.
The Lazatins, through counsel, demanded that Primelink comply with its obligations under the JVA, otherwise the appropriate action would be
filed against it to protect their rights and interests. This impelled the officers of Primelink to meet with the Lazatins and enabled the latter to
review its business records/papers.
LAZATIN-MAGAT
G.R. No. L-78133, 18 October 1988
ISSUE: Whether the improvements made by Primelink should also be turned over under the possessions of the Latazins although such
improvements does not prayed for.
HELD: As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent on any
particular issue, the general principles of partnership may be resorted to.
In Aurbach v. Sanitary Wares Manufacturing Corporation, the Supreme Court discussed the following points regarding joint ventures and
partnership: The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to
mean an organization formed for some temporary purpose. It is, in fact, hardly distinguishable from the partnership, since elements are similar –
community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed
for the execution of a single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under
the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783,
Civil Code). It would seem therefore that, under Philippine law, a joint venture is a form of partnership and should thus be governed by the laws of
partnership. The Supreme Court has, however, recognized a distinction between these two business forms, and has held that although a corporation
cannot enter into a partnership contract, it may, however, engage in a joint venture with others.
However, the trial court was not precluded from awarding possession of the improvements on the parcels of land to respondents in its decision.
Section 2(c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought but it may add as general prayer for such further
or other relief as may be deemed just and equitable. Even without the prayer for a specific remedy, proper relief may be granted by the court if
the facts alleged in the complaint and the evidence introduced so warrant. The court shall grant relief warranted by the allegations and the proof
even if no such relief is prayed for. The prayer in the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not
otherwise specifically prayed for.
LAZATIN-MAGAT
G.R. No. L-78133, 18 October 1988
HELD: The trial court was not proscribed from placing respondents in possession of the parcels of land and the improvements on the
said parcels of land. It bears stressing that the parcels of land, as well as the improvements made thereon, were contributed by the
parties to the joint venture under the JVA, hence, formed part of the assets of the joint venture. The trial court declared that
respondents were entitled to the possession not only of the parcels of land but also of the improvements thereon as a consequence of
its finding that petitioners breached their agreement and defrauded respondents of the net income under the JVA.
PHILIP TURNER and ELNORA TURNER, Petitioners, vs.
LORENZO SHIPPING CORPORATION, Respondent.
G.R. No. 157479, 24 November 2010
FACTS: Philip Turner and Elnora Turner (the Turners) held 1,010,000 shares of stock of Lorenzo Shipping Corp. (LSC). LSC decided to amend its
articles of incorporation to remove the stockholders pre-emptive rights to newly issued shares of stock. Feeling that the corporate move would
be prejudicial to their interest as stockholders, the Turners voted against the amendment and demanded payment of their shares. LSC found the
fair value of the shares demanded by the Turners unacceptable. The disagreement on the valuation of the shares led the parties to constitute an
appraisal committee pursuant to Section 82 of the Corporation Code.
Subsequently, the Turners demanded payment based on the valuation of the appraisal committee, plus 2%/month penalty from the date of their
original demand for payment, as well as the reimbursement of the amounts advanced as professional fees to the appraisers. LSC however refused
the Turners demand, explaining that pursuant to the Corporation Code, the dissenting stockholders exercising their appraisal rights could be
paid only when the corporation had unrestricted retained earnings to cover the fair value of the shares, but that it had no retained earnings at the
time of the petitioners demand, as borne out by its Financial Statements for Fiscal Year 1999 showing a deficit of P72,973,114.00 as of December
31, 1999. Upon the LSC’s refusal to pay, the Turners sued the latter for collection and damages (Civil Case No. 01-086) in the Regional Trial Court
(RTC).
Thereafter, the Turners filed their motion for partial summary judgment which was opposed by LSC.
ISSUE: Whether dissenting stockholders can recover the value of their shareholding.
HELD: NO.
A stockholder who dissents from certain corporate actions has the right to demand payment of the fair value of his or her shares.
PHILIP TURNER and ELNORA TURNER, Petitioners, vs.
LORENZO SHIPPING CORPORATION, Respondent.
G.R. No. 157479, 24 November 2010
HELD: NO.
This right, known as the right of appraisal, is expressly recognized in Section 81 of the Corporation Code, to wit:
Section 81. Instances of appraisal right. – Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value
of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares,
or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of
corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as
provided in the Code; and
3. In case of merger or consolidation.
Clearly, the right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation
substantially prejudicing the rights of the stockholders. It does not vest unless objectionable corporate action is taken. It serves the
purpose of enabling the dissenting stockholder to have his interests purchased and to retire from the corporation.
ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA
and SECURITIES & EXCHANGE COMMISSION, petitioners,
vs.COURT OF APPEALS and IGLESIA NI CRISTO, respondents.
G.R. No. 117897, 14 May 1997.
FACTS: The Islamic Directorate Of The Philippines ("IDP") was incorporated with the primary purpose of establishing a mosque, school, and
other religious infrastructures in Quezon City. IDP purchased a 49,652-square meter lot in Tandang Sora, QC, which was covered by TCT Nos. RT-
26520 (176616) and RT-26521 (170567).

When President Marcos declared martial law in 1972, most of the members of the 1971 Board of Trustees ("Tamano Group") flew to the Middle
East to escape political persecution.

Thereafter, two contending groups claiming to be the IDP Board of Trustees sprung: the Carpizo group and Abbas group.

In a suit between the two groups, SEC rendered a decision in 1986 declaring both groups to be null and void. SEC recommeded that the a new by-
laws be approved and a new election be conducted upon the approval of the by-laws. However, the SEC recommendation was not heeded.

In 1989, the Carpizo group passed a Board Resolution authorizing the sale of the land to Iglesia Ni Cristo ("INC"), and a Deed of Sale was
eventually executed.

In 1991, the Tamano Group filed a petition before the SEC questioning the sale.

Meanwhile, INC filed a suit for specific performance before RTC Branch 81 against the Carpizo group. INC also moved to compel a certain Leticia
Ligon (who is apparently the mortgagee of the lot) to surrender the title.
ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA
and SECURITIES & EXCHANGE COMMISSION, petitioners,
vs.COURT OF APPEALS and IGLESIA NI CRISTO, respondents.
G.R. No. 117897, 14 May 1997.
FACTS: The Tamano group sought to intervene, but the intervention was denied despite being informed of the pending SEC case. In 1992, the Court
subsequently ruled that the INC as the rightful owner of the land, and ordered Ligon to surrender the titles for annotation. Ligon appealed to CA and SC,
but her appeals were denied.

In 1993, the SEC ruled that the sale was null and void . On appeal CA reversed the SEC ruling.
ISSUE: Whether the sale between the Carpizo group and INC is null and void.
HELD: YES. Since the SEC has declared the Carpizo group as a void Board of Trustees, the sale it entered into with INC is likewise void. Without a valid
consent of a contracting party, there can be no valid contract.
In this case, the IDP, never gave its consent, through a legitimate Board of Trustees, to the disputed Deed of Absolute Sale executed in favor of INC.
Therefore, this is a case not only of vitiated consent, but one where consent on the part of one of the supposed contracting parties is totally wanting.
Ineluctably, the subject sale is void and produces no effect whatsoever.
Further, the Carpizo group failed to comply with Section 40 of the Corporation Code, which provides that: "a corporation may, by a majority vote of its
board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets...
when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in case of non-stock
corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly called for the purpose...."
The subject lot constitutes the only property of IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate property and assets of IDP.
For the sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the
corporation should have been obtained. These twin requirements were not met in the case at bar.
ALFREDO MONTELIBANO, ET AL., plaintiffs-appellants, vs.
BACOLOD-MURCIA MILLING CO., INC., defendant-appellee.
G.R. No. L-15092 May 18, 1962
FACTS: Montelibano et al. are sugar planters adhered to the Bacolod-Murcia Milling Co., Inc’s sugar central mill under identical milling contracts
originally executed in 1919. In 1936, it was proposed to execute amended milling contracts, increasing the planters’ share of the manufactured
sugar, besides other concessions. To this effect, a printed Amended Milling Contract form was drawn up.
The Board of Directors of Bacolod-Murcia Milling Co., Inc. adopted a resolution granting further concessions to the planters over and above those
contained in the printed Amended Milling Contract on August 10, 1936.
The printed Amended Milling Contract was signed by the Appellants on September 10, 1936, but a copy of the resolution was not attached to the
printed contract until April 17, 1937.
In 1953, the appellants initiated an action, contending that 3 Negros sugar centrals had already granted increased participation to their planters,
and that under paragraph 9 of the resolution of August 20, 1936, the appellee had become obligated to grant similar concessions to the
appellants herein.
The Bacolod-Murcia Milling Co., inc., resisted the claim, urging that the resolution in question was null and void ab initio, being in effect a
donation that was ultra vires and beyond the powers of the corporate directors to adopt.
ISSUE: Whether the act of the BOD ultra vires

ALFREDO MONTELIBANO, ET AL., plaintiffs-appellants, vs.
BACOLOD-MURCIA MILLING CO., INC., defendant-appellee.
G.R. No. L-15092 May 18, 1962
HELD: NO.
As the resolution in question was passed in good faith by the board of directors, it is valid and binding, and whether it will cause losses or
decrease the profits of the central, the court has no authority to review them.
It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of
a corporation, and the court is without authority to substitute its judgment of the board of directors; the board is the business manager
of the corporation, and so long as it acts in good faith its orders are not reviewable by the courts.
It must be remembered that the controverted resolution was adopted by appellee corporation as a supplement to, or further amendment of, the
proposed milling contract, and that it was approved on August 20, 1936, twenty-one days prior to the signing by appellants on September 10, of
the Amended Milling Contract itself; so that when the Milling Contract was executed, the concessions granted by the disputed resolution had
been already incorporated into its terms.
PMI COLLEGES, petitioner, vs. THE NATIONAL LABOR RELATIONS
COMMISSION and ALEJANDRO GA LVA N, respondents.
G.R. No. 121466, 15 August 1997
FACTS: In 1991, PMI Colleges hired the services of Alejandro Galvan to teach in the said institution. However, PMI defaulted from paying the
remunerations due to Galvan. Galvan made demands but were ignored by PMI Colleges. Eventually, Galvan filed a labor case against PMI Colleges.
Galvan got a favorable judgment from the Labor Arbiter and this was affirmed by the NLRC. On appeal, PMI Colleges reiterated, among others,
that the employment of Galvan is void because it did not comply with its by-laws. Apparently, the by-laws require that an employment contract
must be signed by the Chairman of the Board of PMI Colleges. PMI Colleges asserts that Galvan’s employment contract was not signed by the
Chairman of the Board.
ISSUE: Whether Galvan’s employment contract is void for failure to produce a copy thereof.
HELD: The absence of such copy does not in any manner negate the existence of a contract of employment since” Contracts shall be obligatory, in
whatever form they have been entered into, provided all the essential requisites for their validity are present.” 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.
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.
MARY E. LIM, represented by her Attorney-in-fact, REYNALDO V.
LIM, Petitioner, vs. MOLDEX LAND, INC., 1322 ROXAS
BOULEVARD CONDOMINIUM CORPORATION, and JEFFREY
JAMINOLA, EDGARDO MACALINTAL, JOJI MILANES, and
CLOTHILDA ANNE ROMAN, in their capacity as purported
MENDOZA, and LEONEN,JJ. members of the Board of Directors of
1322 Golden Empire Corporation,, Respondents.
G.R. No. 206038, 25 January 2017
FACTS: Lim is a registered unit owner of 1322 Golden Empire Tower a condominium project of Moldex Land, Inc., a real estate company engaged in the
construction and development of high-end condominium projects and in the marketing and sale of the units thereof to the general public. Condocor, a non-
stock, non-profit corporation, is the registered condominium corporation for the Golden Empire Tower. Lim, as a unit owner of Golden Empire Tower, is a
member of Condocor.
Condocor held its annual general membership meeting. Its corporate secretary certified, and Jaminola, as Chairman, declared the existence of a quorum
even though only 29 of the 108 unit buyers were present. The declaration of quorum was based on the presence of the majority of the voting rights,
including those pertaining to the 220 unsold units held by Moldex through its representatives. Lim, through her attorney-in-fact, objected to the validity of
the meeting. The objection was denied. Thus, Lim and all the other unit owners present, except for one, walked out and left the meeting.
Despite the walkout, the individual respondents and the other unit owner proceeded with the annual general membership meeting and elected the new
members of the Board of Directors for 2012-2013.
Consequently, Lim filed an election protest before the RTC. Said court, however, dismissed the complaint holding that there was a quorum during the July
21, 2012 annual membership meeting; that Moldex is a member of Condocor, being the registered owner of the unsold/unused condominium units,
parking lots and storage areas; and that the individual respondents, as Moldex’s representatives, were entitled to exercise all membership rights, including
the right to vote and to be voted.
ISSUE/S: Whether there has been a quorum.

Whether the resolutions and the election are valid.
G.R. No. 206038, 25 January 2017
HELD: There has been no quorum. There was no valid meeting thus the election of the respondents was invalid.
In corporate parlance, the term "meeting" applies to every duly convened assembly either of stockholders, members, directors, trustees, or managers for
any legal purpose, or the transaction of business of a common interest. Under Philippine corporate laws, meetings may either be regular or special. A
stockholders' or members' meeting must comply with the following requisites to be valid:
1. The meeting must be held on the date fixed in the By-Laws or in accordance with law;
2. Prior written notice of such meeting must be sent to all stockholders/members of record;
3. It must be called by the proper party;
4. It must be held at the proper place; and
5. Quorum and voting requirements must be met.
Of these five (5) requirements, the existence of a quorum is crucial. Any act or transaction made during a meeting without quorum is rendered of no force
and effect, thus, not binding on the corporation or parties concerned.
In relation thereto, Section 52 of the Corporation Code of the Philippines (Corporation Code) provides:
Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a
majority of the outstanding capital stock or a majority of the members in the case of non-stock corporations.
Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for non-stock corporations, only those who are actual,
living members with voting rights shall be counted in determining the existence of a quorum.
G.R. No. 206038, 25 January 2017
HELD: To be clear, the basis in determining the presence of quorum in non-stock corporations is the numerical equivalent of all members who
are entitled to vote, unless some other basis is provided by the By-Laws of the corporation. The qualification "with voting rights" simply
recognizes the power of a non-stock corporation to limit or deny the right to vote of any of its members. To include these members without
voting rights in the total number of members for purposes of quorum would be superfluous for although they may attend a particular
meeting, they cannot cast their vote on any matter discussed therein.
JOSELITO MUSNI PUNO (as heir of the late Carlos Puno),
Petitioner, vs. PUNO ENTERPRISES, INC., represented by JESUSA
PUNO, Respondent.
G.R. No. 177066, 11 September 2009
FACTS: Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises, Inc. On March 14, 2003, petitioner
Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated a complaint for specific performance against respondent. Petitioner
averred that he is the son of the deceased with the latter’s common-law wife, Amelia Puno. As surviving heir, he claimed entitlement to the rights
and privileges of his late father as stockholder of respondent. Respondent filed a motion to dismiss on the ground that petitioner did not have the
legal personality to sue because his birth certificate names him as “Joselito Musni Muno.” Apropos, there was yet a need for a judicial declaration
that “Joselito Musni Puno” and “Joselito Musni Muno” were one and the same.The court ordered that the proceedings be held in abeyance,
ratiocinating that petitioner’s certificate of live birth was no proof of his paternity and relation to Carlos L. Puno.
Petitioner submitted the corrected birth certificate with the name “Joselito M. Puno,” certified by the Civil Registrar of the City of Manila, and the
Certificate of Finality thereof. To hasten the disposition of the case, the court conditionally admitted the corrected birth certificate as genuine and
authentic and ordered respondent to file its answer within fifteen days from the order and set the case for pretrial.
ISSUE: Whether the CA erred in not ruling that the Joselito Puno is entitled to the reliefs demanded he being the heir of the late carlos puno, one
of the incorporators of the respondent corporation.
HELD: The petition is without merit.
Petitioner failed to establish the right to inspect respondent corporation’s books and receive dividends on the stocks owned by Carlos L. Puno.
JOSELITO MUSNI PUNO (as heir of the late Carlos Puno),
Petitioner, vs. PUNO ENTERPRISES, INC., represented by JESUSA
PUNO, Respondent.
G.R. No. 177066, 11 September 2009
Petitioner anchors his claim on his being an heir of the deceased stockholder. However, we agree with the appellate court that petitioner was not
able to prove satisfactorily his filiation to the deceased stockholder; thus, the former cannot claim to be an heir of the latter.
A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is no showing that the
putative father had a hand in the preparation of the certificate. The local civil registrar has no authority to record the paternity of an illegitimate
child on the information of a third person. As for the baptismal certificate, we have already decreed that it can only serve as evidence of the
administration of the sacrament on the date specified but not of the veracity of the entries with respect to the child’s paternity.
Upon the death of a shareholder, the heirs do not automatically become stockholders of the corporation and acquire the rights and
privileges of the deceased as shareholder of the corporation. The stocks must be distributed first to the heirs in estate proceedings,
and the transfer of the stocks must be recorded in the books of the corporation. Section 63 of the Corporation Code provides that no
transfer shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation. During such interim period,
the heirs stand as the equitable owners of the stocks, the executor or administrator duly appointed by the court being vested with the legal title
to the stock. Until a settlement and division of the estate is effected, the stocks of the decedent are held by the administrator or executor.
Consequently, during such time, it is the administrator or executor who is entitled to exercise the rights of the deceased as stockholder.
Thus, even if petitioner presents sufficient evidence in this case to establish that he is the son of Carlos L. Puno, he would still not be allowed to
inspect respondent’s books and be entitled to receive dividends from respondent, absent any showing in its transfer book that some of the shares
owned by Carlos L. Puno were transferred to him. This would only be possible if petitioner has been recognized as an heir and has participated in
the settlement of the estate of the deceased.
ADERITO Z. YUJUICO and BONIFACIO C. SUMBILLA, Petitioners,
vs. CEZAR T. QUIAMBAO and ERIC C. PILAPIL, Respondents.
G.R. No. 180416, 2 June 2014
FACTS: During the annual stockholder’s meeting of STRADEC, petitioner Yujuico was elected as president and chairman of the company. Yujuico replaced
Quiambao, the respondent. STRADEC appointed Sumbilla as Treasurer and Blando as Corporate Secretary. During the stockholders’ meeting, Yujuico
demanded Quiambao for the turnover of the corporate records of the company, particularly the accounting files, ledgers, journals and other records of the
corporation’s business. Quiambao refused and caused the removal of the corporate records of STRADEC from the company’s principal office. Blando
likewise demanded Pilapil, the previous corporate secretary, for the turnover of the stock and transfer book of STRADEC. Pilapil refused. Thus, the
petitioners filed a complaint against respondents for the violation of Section 74 in relation to Section 144 of the Corporation Code.
ISSUE: Whether the respondents can be held liable under Section 74 in relation to Section 144 of the Corporation Code.
HELD: NO. A criminal action based on the violation of a stockholder’s right to examine or inspect the corporate records and the stock and transfer book of
a corporation under the 2nd and 4th paragraphs of Section 74 of the Corporation Code can only be maintained against corporate officers or any other
persons acting on behalf of such corporation.
Violations of the 2nd and 4th paragraphs of Sec. 74 contemplates a situation wherein a corporation, acting thru one of its officers or agents, denies the
right of any of its stockholders to inspect the records, minutes and the stock and transfer book of such corporation.
The petitioner’s complaint failed to establish that respondents were acting on behalf of STRADEC. Instead, it was revealed that respondents are merely
outgoing officers of STRADEC who, for some reason, withheld and refused to turn-over the company records of STRADEC, and that STRADEC is actually
merely trying to recover custody of the withheld records.
Thus, petitioners are not actually invoking their right to inspect the records and the stock and transfer book of STRADEC under Sec. 74. What they
seek to enforce is the proprietary right of STRADEC to be in possession of such records and book. Such right, though certainly legally enforceable by other
means, cannot be enforced by a criminal prosecution based on a violation of the 2nd and 4th paragraphs of Sec. 74. Therefore, the criminal case is
dismissed for lack of probable cause.
SUMIFRU (PHILIPPINES) CORPORATION (surviving entity in a
merger with Davao Fruits Corporation and other Companies),
Petitioners vs. BERNABE BAYA, Respondents
G.R. No. 188269, 17 April 2017
FACTS: The instant case stemmed from a complaint for, inter alia, illegal/constructive dismissal filed by Baya against AMS Farming Corporation
(AMSFC) and Davao Fruits Corporation (DFC) before the NLRC. Baya alleged that he had been employed by AMSFC since February 5, 1985, and
from then on, worked his way to a supervisory rank on September 1, 1997. As a supervisor, Baya joined the union of supervisors, and eventually,
formed AMS Kapalong Agrarian Reform Beneficiaries Multipurpose Cooperative (AMSKARBEMCO), the basic agrarian reform organization of the
regular employees of AMSFC.
In June 1999, Baya was reassigned to a series of supervisory positions in AMSFC’s sister company, DFC, where he also became a member of the
latter’s supervisory union while at the same time, remaining active at AMSKARBEMCO. Later on and upon AMSKARBEMCO’s petition before the
Department of Agrarian Reform (DAR), some 220 hectares of AMSFC’s 513-hectare banana plantation were covered by the Comprehensive
Agrarian Reform Law. Eventually, said portion was transferred to AMSFC’s regular employees as Agrarian Reform Beneficiaries (ARBs), including
Baya.
Thereafter, the ARBs explored a possible agribusiness venture agreement with AMSFC, but the talks broke down, prompting the Provincial
Agrarian Reform Officer to terminate negotiations and, consequently, give AMSKARBEMCO freedom to enter into similar agreement with other
parties.
When AMSFC learned that AMSKARBEMCO entered into an export agreement with another company, it summoned AMSKARBEMCO officers,
including Baya, to lash out at them and even threatened them that the ARBs’ takeover of the lands would not push through. After refusing to
betray his cooperative, Baya received a letter stating that his secondment with DFC has ended, thus, ordering his return to AMSFC. However, upon
Baya’s return to AMSFC he was informed that there were no supervisory positions available; thus, he was assigned to different rank-and-file
positions instead.
G.R. No. 188269, 17 April 2017
FACTS: In their defense, AMSFC and DFC maintained that they did not illegally/constructively dismiss Baya, considering that his termination
from employment was the direct result of the ARBs’ takeover of AMSFC’s banana plantation through the government’s agrarian reform program.
They even shifted the blame to Baya himself, arguing that he was the one who formed AMSKARBEMCO and, eventually, caused the ARBs’
aforesaid takeover. LA ruled in Baya’s favor. NLRC reversed and set aside the LA’s ruling. CA set aside the NLRC ruling and reinstated that of the
LA with modification.
ISSUE: Whether Sumifru should be held solidarily liable with AMSFC’s for Baya’s monetary awards.
Sumifru’s contention that it should only be held liable for the period when Baya stayed with DFC as it only merged with the latter and not with
AMSFC is untenable. Section 80 of the Corporation Code of the Philippines clearly states that one of the effects of a merger is that the surviving
company shall inherit not only the assets, but also the liabilities of the corporation it merged with, to wit:
Section 80. Effects of merger or consolidation. – The merger or consolidation shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in
the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all
the duties and liabilities of a corporation organized under this Code;
G.R. No. 188269, 17 April 2017
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises
of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to
shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed
transferred to and vested in such surviving or consolidated corporation without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any
pending claim, action or proceeding brought by or against any of such constituent corporations may be prosecuted by or against the surviving or
consolidated corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such
merger or consolidation.
In this case, it is worthy to stress that both AMSFC and DFC are guilty of acts constitutive of constructive dismissal performed against Baya. As
such, they should be deemed as solidarily liable for the monetary awards in favor of Baya. Meanwhile, Sumifru, as the surviving entity
in its merger with DFC, must be held answerable for the latter’s liabilities, including its solidary liability with AMSFC arising herein.
Verily, jurisprudence states that “in the merger of two existing corporations, one of the corporations survives and continues the
business, while the other is dissolved and all its rights, properties and liabilities are acquired by the surviving corporation,” as in this
case.
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION,
Petitioner, v. UNOCAL PHILIPPINES, INC. (NOW KNOWN AS
CHEVRON GEOTHERMAL PHILIPPINES HOLDINGS, INC.),
Respondent.
G.R. No. 190187 September 28, 2016
FACTS: Philippine Geothermal, Inc. Employees Union is a legitimate labor union that stands as the bargaining agent of the rank-and-file
employees of Unocal Philippines. Unocal Philippines, formerly known as Philippine Geothermal, Inc., is a foreign corporation incorporated under
the laws of the State of California, United States of America, licensed to do business in the Philippines for the “exploration and development of
geothermal resources as alternative sources of energy.” It is a wholly owned subsidiary of Union Oil Company of California (Unocal California),
which, in turn, is a wholly owned subsidiary of Union Oil Corporation (Unocal Corporation).
Unocal Philippines operates two (2) geothermal steam fields in Tiwi, Albay and Makiling, Banahaw, Laguna, owned by the National Power
Corporation.
On April 4, 2005, Unocal Corporation executed an Agreement and Plan of Merger (Merger Agreement) with Chevron Texaco Corporation
(Chevron) and Blue Merger Sub, Inc. (Blue Merger). Blue Merger is a wholly owned subsidiary of Chevron. Under the Merger Agreement, Unocal
Corporation merged with Blue Merger, and Blue Merger became the surviving corporation. Chevron then became the parent corporation of the
merged corporations: After the merger, Blue Merger, as the surviving corporation, changed its name to Unocal Corporation.
On January 31, 2006, Unocal Philippines executed a Collective Bargaining Agreement with the Union.
However, on October 20, 2006, the Union wrote Unocal Philippines asking for the separation benefits provided for under the Collective
Bargaining Agreement. According to the Union, the Merger Agreement of Unocal Corporation, Blue Merger, and Chevron resulted in the closure
and cessation of operations of Unocal Philippines and the implied dismissal of its employees.
ISSUE: Whether the merger resulted to cessation of employees.

Respondent.
HELD: NO. G.R. No. 190187 September 28, 2016
A merger is a consolidation of two or more corporations, which results in one or more corporations being absorbed into one surviving
corporation. The separate existence of the absorbed corporation ceases, and the surviving corporation “retains its identity and takes
over the rights, privileges, franchises, properties, claims, liabilities and obligations of the absorbed corporation(s).”
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of Unocal Corporation, then the merger of Unocal
Corporation with Blue Merger and Chevron does not affect respondent or any of its employees. Respondent has a separate and distinct
personality from its parent corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does not result in the dismissal of its employees.
Respondent.
The effects of a merger are provided under Section 80 of the Corporation Code:
SEC. 80. Effects of merger or consolidation. — The merger or consolidation, as provided in the preceding sections shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the
plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of
each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to
shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be taken and
deemed to be transferred to and vested in such surviving or consolidated corporation without further act or deed; and
5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any
claim, action or proceeding pending by or against any of such constituent corporations may be prosecuted by or against the surviving or
consolidated corporation, as the case may be. Neither the rights of creditors nor any lien upon the property of any of such constituent
corporations shall be impaired by such merger or consolidation.
Although this provision does not explicitly state the merger’s effect on the employees of the absorbed corporation, Bank of the Philippine Islands
v. BPI Employees Union-Davao Chapter Federation of Unions in BPI Unibank has ruled that the surviving corporation automatically assumes the
employment contracts of the absorbed corporation, such that the absorbed corporation’s employees become part of the manpower complement
of the surviving corporation.
Respondent.
Merger is not one of the circumstances where the employees may claim separation pay. The only instances where separation pay may be
awarded to petitioner are: (a) reduction in workforce as a result of redundancy; (b) retrenchment or installation of labor-saving devices; or (c)
closure and cessation of operations.
The terms do not provide that a merger is one of the instances where petitioner may claim separation benefits for its members. Neither can these
circumstances be interpreted as to contemplate a merger with another corporation. In any case, if the parties intended that petitioner ought to
be granted separation pay in case of a merger, it should have been explicitly provided for in the contract. Absent this express intention, petitioner
cannot claim separation pay been explicitly provided for in the contract. Absent this express intention, petitioner cannot claim separation pay.
REV. LUIS AO-AS, REV. JOSE LAKING, EUSQUICIO GALANG, REV. ISABELO
MONONGGIT, REV. EDWINO MERCADO, REV. DANIEL PONDEVIDA, REV.
TEODORICO TARAN and DR. BENJAMIN GALAPIA, Petitioners, vs. HON.
COURT OF APPEALS, THOMAS P. BATONG, JUANITO BASALONG, AUGUSTO
CATANGI, PAUL GARCIA, QUIDO RIVERA, VICTORIO Y. SAQUILAYAN and
DANILO ZAMORA, Respondents.
G.R. No. 128464 June 20, 2006
FACTS: The Lutheran Church in the Philippines (LCP) is a religious organization duly registered with the Securities and Exchange Commission on
May 8, 1967. Its members are comprised of the Lutheran clergymen and the local Lutheran congregations in the Philippines which, at the time of
its incorporation, was divided into three districts, namely: the North Luzon District (NLD); the South Luzon District (SLD); and the Mindanao
district (MDD).
The governing body of the LCP is its national board of directors (LCP Board) which was originally composed of seven (7) members serving a
term of two years. Six members of the LCP Board are elected separately in district conferences held in each district, with two members
representing each district – the elected district president becomes the clergy representative to the LCP Board and the other is a lay
representative to the LCP Board. The seventh member of the Board is the National President of the LCP who is elected at large in a national
convention held in October of every even-numbered year.
During the 1976 LCP national convention, a resolution was passed dividing the North Luzon district (NLD) into two districts: the NLD Highland
District (NLHD) and the NLD Lowland District (NLLD) -- thereby increasing the number of directors from seven (7) to nine (9). Again in the 1984
LCP national convention, a resolution was passed creating another district, namely, the Visayan Islands District (VID) thereby increasing further
the number of directors to eleven (11). Both resolutions were passed pursuant to Section 2 of Article 7 of the LCP By-Laws which provides that:
"LCP in convention may form additional districts as it sees fit".
Since the addition of two or more districts, an eleven (11) member board of directors representing the five (5) districts managed the LCP without
any challenge from the membership until several years later when certain controversies arose involving the resolutions of the Board terminating
the services of the LCP business manager and corporate treasurer since 1979, Mr. Eclesio Hipe.
G.R. No. 128464 June 20, 2006
FACTS: The termination of Mr. Hipe sparked a series of intracorporate complaints lodged before the Securities and Exchange Commission (SEC).
For the first time, the legality of the eleven (11) member Board was put in issue as being in excess of the number of directors provided in the
Articles of Incorporation since no amendments were made thereto to reflect the increase.
During the hearings on the application for creation of a management committee, [the Batong group] filed an Urgent Motion to Suspend the
Proceedings of the Case in view of an amicable settlement agreed upon by the parties entitled "A FORMULA FOR CONCORD". However,
notwithstanding the FORMULA FOR CONCORD, the SEC-SICD denied [the Batong group’s] motion to suspend proceedings.
ISSUE: Whether the creation of a management is not warranted by the facts of the case
HELD: Refusal to allow stockholders (or members of a non-stock corporation) to examine books of the company is not a ground for appointing a
receiver (or creating a management committee) since there are other adequate remedies, such as a writ of mandamus. Misconduct of corporate
directors or other officers is not a ground for the appointment of a receiver where there are one or more adequate legal action against the
officers, where they are solvent, or other remedies.
The appointment of a receiver for a going corporation is a last resort remedy, and should not be employed when another remedy is available.
Relief by receivership is an extraordinary remedy and is never exercised if there is an adequate remedy at law or if the harm can be... prevented
by an injunction or a restraining order. Bad judgment by directors, or even unauthorized use and misapplication of the company's funds, will not
justify the appointment of a receiver for the corporation if appropriate relief can otherwise be had.
G.R. No. 128464 June 20, 2006
HELD: The fact that the President of the LCP needs the concurrence of only two other directors to authorize the release of surplus
funds plainly contradicts the conclusion of conspiracy among the presently 11-man board. Neither does the fact that the Board of
Directors of the LCP prepares the annual budget and the annual auditing of properties of the LCP justify the conclusion that the alleged
acts of respondent Batong was done in concert with the other directors. There should have been evidence that such dissipation took
place with the... knowledge and express or implied consent of most or the entire board. Good faith is always presumed. As it is the
obligation of one who alleges bad faith to prove it, so should he prove that such bad faith was shared by all persons to whom... he
attributes the same.
LITTON MILLS, INC., Petitioner, v. COURT OF APPEALS and GELHAAR
UNIFORM COMPANY, INC., Respondents.
G.R. No. 94980. May 15, 1996.
FACTS: Petitioner Litton Mills, Inc. (Litton) entered into an agreement with Empire Sales Philippines Corporation (Empire), as local agent of
private respondent Gelhaar Uniform Company (Gelhaar), a corporation organized under the laws of the United States, whereby Litton agreed to
supply Gelhaar 7,770 dozens of soccer jerseys. The agreement stipulated that before it could collect from the bank on the letter of credit, Litton
must present an inspection certificate issued by Gelhaar’s agent in the Philippines, Empire Sales, that the goods were in satisfactory condition.
Litton sent four shipments totaling 4,770 dozens of the soccer jerseys between December 2 and December 30, 1983. A fifth shipment, consisting
of 2,110 dozens of the jerseys, was inspected by Empire from January 9 to January 19, 1984, but Empire refused to issue the required certificate
of inspection.
Alleging that Empire’s refusal to issue a certificate was without valid reason, Litton filed a complaint with the Regional Trial Court for specific
performance. Litton alleged that under the terms of the letter of credit, the goods should be shipped not later than January 30, 1984; that the
vessel stipulated to carry the shipment was scheduled to receive the cargo only on January 27, 1984; and that the letter of credit itself was due to
expire on February 14, 1984. Litton sought the issuance of a writ of preliminary mandatory injunction to compel Empire to issue the inspection
certificate covering the 2,110 dozen jerseys and the recovery of compensatory and exemplary damages, costs, attorney’s fees and other just and
equitable relief.
It moved to dismiss the case and to quash the summons on the ground that Gelhaar was a foreign corporation not doing business in the
Philippines, and as such, was beyond the reach of the local courts.
It contended that Litton failed to allege and prove that Gelhaar was doing business in the Philippines, which they argued was required by the
ruling in Pacific Micronisian Lines, Inc. v. Del Rosario before summons could be served under Rule 14, Sec. 14.
G.R. No. 94980. May 15, 1996.
FACTS: Litton opposed the motion. On the other hand, Empire moved to dismiss on the ground of failure of the complaint to state a cause of
action since the complaint alleged that Empire only acted as agent of Gelhaar; that it was made party-defendant only for the purpose of securing
the issuance of an inspection certificate; and that it had already issued such certificate and the shipment had already been shipped on time.
For his part, Atty. Remie Noval claimed that he had been authorized by Gelhaar to appear for it in the case; that he had in fact given legal advice to
Empire and his advice had been transmitted to Gelhaar; that Gelhaar had been furnished a copy of the answer; that Gelhaar denied his authority
only on December of 1984; and that the belated repudiation of his authority could be only an afterthought because of problems which had
developed between Gelhaar and Empire. (Gelhaar refused to pay Empire for its services as agent). Nevertheless, Atty. Noval withdrew his
appearance with respect to Gelhaar.
On September 24, 1986, the trial court issued an order denying for lack of merit Gelhaar’s motion to dismiss and to quash the summons. It held
that Gelhaar was doing business in the Philippines, and that the service of summons on Gelhaar was therefore valid. Gelhaar filed a motion for
reconsideration, but its motion was denied.
Gelhaar then filed a special civil action of certiorari with the Court of Appeals, which on August 20, 1990, set aside the orders of the trial court.
The appellate court held that proof that Gelhaar was doing business in the Philippines should have been presented because, under the doctrine
of Pacific Micronisian, this is a condition sine qua non for the service of summons under Rule 14, Sec. 14 of the Rules of Court, and that it was
error for the trial court to rely on the mere allegations of the complaint.
Consequently, the appellate court ordered the trial court to issue anew summons to be served on Empire Sales Philippines Corporation, after the
allegation in the complaint that Gelhaar was doing business in the Philippines had been established.
G.R. No. 94980. May 15, 1996.
ISSUE: Whether Gelhaar, a foreign corporation is doing business in the Philippines
HELD: We sustain petitioner’s contention based on the first ground, namely, that the trial court acquired jurisdiction over Gelhaar by
service of summons upon its agent pursuant to Rule 14, Sec. 14.
First. The appellate court invoked the ruling in Pacific Micronisian, in which it was stated that the fact of doing business must first be established
before summons can be served in accordance with Rule 14, Sec. 14.
The petitioner opines that the phrase," The fact of doing business in the Philippines must first be established in order that summons be made and
jurisdiction acquired," used in the above pronouncement, would indicate that a mere allegation to that effect in the complaint is not enough —
there must instead be proof of doing business. In any case, the petitioner points out, the allegations themselves did not sufficiently show the fact
of its doing business in the Philippines.
It should be recalled that jurisdiction and venue of actions are, as they should so be, initially determined by the allegations of the complaint.
Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, otherwise jurisdiction would become
dependent almost entirely upon the defendant. The fact of doing business must then, in the first place, be established by appropriate allegations
in the complaint. This is what the Court should be seen to have meant in the Pacific Micronisian case. The complaint, it is true, may have been
vaguely structured but, taken correlatively, not disjunctively as the petitioner would rather suggest, it is not really so weak as to be fatally
deficient in the above requirement.
Hence, a court need not go beyond the allegations in the complaint to determine whether or not a defendant foreign corporation is doing
business for the purpose of Rule 14, Sec. 14.
G.R. No. 94980. May 15, 1996.
HELD: In the case at bar, the allegation that Empire, for and in behalf of Gelhaar, ordered 7,770 dozens of soccer jerseys from Litton and
for this purpose Gelhaar caused the opening of an irrevocable letter of credit in favor of Litton is a sufficient allegation that Gelhaar
was doing business in the Philippines.
Second. Gelhaar contends that the contract with Litton was a single, isolated transaction and that it did not constitute "doing business."
Reference is made to Pacific Micronisian in which the only act done by the foreign company was to employ a Filipino as a member of the
crew on one of its ships. This court held that the act was an isolated, incidental or casual transaction, not sufficient to indicate a
purpose to engage in business.
It is not really the fact that there is only a single act done that is material. The other circumstances of the case must be considered. Thus, in Wang
Laboratories, Inc. v. Mendoza, it was held that where a single act or transaction of a foreign corporation is not merely incidental or casual but is of
such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, such act will be
considered as constituting doing business. This Court referred to acts which were in the ordinary course of business of the foreign corporation.
In the case at bar, the trial court was certainly correct in holding that Gelhaar’s act in purchasing soccer jerseys to be within the ordinary course
of business of the company considering that it was engaged in the manufacture of uniforms. The acts noted above are of such a character as to
indicate a purpose to do business.
In accordance with Rule 14, Sec. 14, service upon Gelhaar could be made in three ways: (1) by serving upon the agent designated in accordance
with law to accept service of summons; (2) if there is no resident agent, by service on the government official designated by law to that effect;
and (3) by serving on any officer or agent of said corporation within the Philippines. Here, service was made through Gelhaar’s agent, the Empire
Sales Philippines Corp. There was, therefore, a valid service of summons on Gelhaar, sufficient to confer on the trial court jurisdiction over the
person of Gelhaar.
FREDCO MANUFACTURING CORPORATION Petitioner, vs.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD
UNIVERSITY), Respondents.
G.R. No. 185917 June 1, 2011
FACTS: Petitioner Fredco Manufacturing filed a petition to cancel the registration of respondent’s mark ‘Harvard Veritas Shield Symbol’ used in
products such as bags and t-shirts. Fredco alleges that the mark ‘Harvard’ was first used and registered by New York Garments, a domestic
corporation and its predecessor-in-interest, used in its clothing articles. Respondent Harvard University on the other hand, alleges that it is the
lawful owner of the name and mark in numerous countries worldwide including in the Philippines which was used in commerce as early as
1872. Respondent further contend that it never authorized any person to use its name or mark in connection with any goods in the Philippines.
The IPO Bureau of Legal Affairs cancelled respondent’s registration of the mark but only over the goods which are confusingly similar with that
of petitioner. IPO reversed the decision. CA affirmed.
ISSUE: Whether respondent’s trade name is infringed.
HELD: YES. Fredco’s use of the mark “Harvard,” coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false
connection with Harvard University. On this ground alone, Fredco’s registration of the mark “Harvard” should have been disallowed. Indisputably,
Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor
New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo.
Under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether the trade name forms part of a
trademark, is protected “without the obligation of filing or registration.” “Harvard” is the trade name of the world famous Harvard University, and
it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is
entitled to protection in the Philippines of its trade name “Harvard” even without registration of such trade name in the Philippines. This means
that no educational entity in the Philippines can use the trade name “Harvard” without the consent of Harvard University. Likewise, no entity in
the Philippines can claim, expressly or impliedly through the use of the name and mark “Harvard,” that its products or services are authorized,
approved, or licensed by, or sourced from, Harvard University without the latter’s consent.
FREDCO MANUFACTURING CORPORATION Petitioner, vs.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD
UNIVERSITY), Respondents.
G.R. No. 185917 June 1, 2011
HELD: Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are
afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own
countries are obligated to accord similar protection to Philippine nationals.
Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:
Section 37. Rights of foreign registrants. — Persons who are nationals of, domiciled in, or have a bona fide or effective business or
commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-
names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to
the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as
the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section.
Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name
forms part of a trademark, is protected "without the obligation of filing or registration."
Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby
directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants
other than its original owners or users.
COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES
CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS
CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and
WARNER BROTHERS, INC., petitioners,
vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO,
respondents.
G.R. No. 110318 August 28, 1996
FACTS: The National Bureau of Investigation has engaged in an anti-film piracy drive by investigating various video establishments in
Metro Manila involving cases violating PD No. 49, as amended, including Sunshine Home Video Inc. (“Sunshine”),owned and operated by
Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila. On November 14, 1987, NBI Senior Agent Lauro C.
Reyes applied for a search warrant with the court a quoagainst Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted
films, which the court granted .In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized
various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by Columbia Pictures, Inc. et al(Columbia et
al.)Thereafter, the court has lifted the search warrant which it had therefore issued after a series of motions, up until the CA.In the SC, Sunshine
challenged Columbia et al’s legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines.
Sunshine’s contention: Columbia et al, being foreign corporations, should have such license to be able to maintain an action in Philippine courts.
Sunshine point to the fact that Columbia et al are the copyright owners or owners of exclusive rights of distribution in the Philippines of
copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of
“doing business in the Philippines” under Section 1(f) (1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing
business in the Philippines, Section 133 of Batas Pambansa Blg.68, or the Corporation Code of the Philippines, denies them the right to maintain
a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant.
Columbia et al’s contention: Columbia et al denied that they are doing business in the Philippines and contend that Sunshine have not adduced
evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange
Commission. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of
doing business nor establish the presumption of doing business.
respondents.
G.R. No. 110318 August 28, 1996
ISSUE: Whether Columbia et al were “doing business” in the Philippines, thus,needs to be licensed before having a legal standing in Philippine
courts
HELD: NO.
No, foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to
take recourse to our courts. As acts constitutive of “doing business,” the fact that Columbia et al are admittedly copyright owners or owners of
exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business
which would require them to obtain a license before they can sue upon acause of action in local courts. Neither is the appointment of Atty. Rico
V. Domingo as attorney-in-fact of Columbia et al., with express authority pursuant to a special power of attorney.
Based on Article 133 of the Corporation Code and gauged by such statutory standards, Columbia et al are not barred from maintaining
the present action. There is no showing that, under our statutory or case law, Columbia et al are doing, transacting, engaging in or carrying on
business in the Philippines as would require obtention of a license before they can seek redress from our courts.
No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to
conduct or transact business in the Philippines.
Article 125 and Article 133 of the Corporation Code of the Philippines, as interpreted, says that any foreign corporation not doing business in the
Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction
of the court. It is not the absence of the prescribed license but “doing business” in the Philippines without such license which debars the foreign
corporation from access to our courts .
respondents.
G.R. No. 110318 August 28, 1996
HELD: NO.
In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity
to bring an action. Such license is not necessary if it is not engaged in business in the Philippines.
No general rule or governing principles can be laid down as to what constitutes “doing” or “engaging in” or “transacting” business. Each case
must be judged in the light of its own peculiar environmental circumstances. The true tests, however, seem to be whether the foreign corporation
is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and
turned it over to another.
Authorities agrees that a foreign corporation is “doing,” “transacting,” “engaging in,” or “carrying on” business in the State when, and
ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some
substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual,
sporadic, or occasional transactions and isolated acts.
The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence
has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and
subject of its organization.
respondents.
G.R. No. 110318 August 28, 1996
HELD: NO.
As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents
of the State, where such contracts are consummated outside the State.
In fact, a view is taken that a foreign corporation is not doing business in the state merely because sales of its product are made there or other
business furthering its interests is transacted thereby an alleged agent, whether a corporation or a natural person, where such activities
are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business. It is
generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to
the products sold are not a doing of business by the corporation.
Likewise, a foreign corporation which sells its products to persons styled “distributing agents” in the State, for distribution by them, is not doing
business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy
exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. Merely engaging in
litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation.
MANUEL V. BAVIERA, Petitioner, vs. ESPERANZA PAGLINAWAN, in her capacity
as Department of Justice State Prosecutor; LEAH C. TANODRA-ARMAMENTO, In
her capacity as Assistant Chief State Prosecutor and Chairwoman of Task Force
on Business Scam; JOVENCITO R. ZUNO, in his capacity as Department of Justice
Chief State Prosecutor; STANDARD CHARTERED BANK, PAUL SIMON MORRIS,
AJAY KANWAL, SRIDHAR RAMAN, MARIVEL GONZALES, CHONA REYES, MARIA
ELLEN VICTOR, and ZENAIDA IGLESIAS, Respondents.G.R. No. 168380, 8
February 2007
FACTS: Manuel Baviera, petitioner in these cases, was the former head of the HR Service Delivery and Industrial Relations of Standard Chartered
Bank-Philippines. SCB did not comply with the conditions set forth by the BSP. Although unregistered with the SEC, SCB was able to sell securities
worth around P6 billion to some 645 investors.
Petitioner entered into an Investment Trust Agreement with SCB wherein he purchased US$8,000.00 worth of securities upon the bank’s
promise of 40% return on his investment and a guarantee that his money is safe. After six (6) months, however, petitioner learned that the value
of his investment went down to US$7,000.00. He tried to withdraw his investment but was persuaded by Antonette de los Reyes of SCB to hold on
to it for another six (6) months in view of the possibility that the market would pick up. The trend in the securities market, however, was bearish
and the worth of petitioner’s investment went down further to only US$3,000.00.
On July 15, 2003, petitioner filed with the Department of Justice (DOJ), represented herein by its prosecutors, public respondents, a complaint
charging the above-named officers and members of the SCB Board of Directors and other SCB officials, private respondents, with syndicated
estafa. petitioner also filed with the DOJ a complaint for violation of Section 8.19 of the Securities Regulation Code against private respondents,
On February 23, 2004, the DOJ rendered its Joint Resolution dismissing all the complaints and counter-charges filed the herein parties. Petitioner
filed with the Court of Appeals a petition for certiorari alleging that the DOJ acted with grave abuse of discretion amounting to lack or excess of
jurisdiction tantamount to lack or excess of jurisdiction in holding that the complaint should have been filed with the SEC.
ISSUE: Whether the Court of Appeals erred in concluding that the DOJ did not commit grave abuse of discretion in dismissing petitioner’s
complaint for violation of Securities Regulation Code.
MANUEL V. BAVIERA, Petitioner, vs. ESPERANZA PAGLINAWAN, in her capacity as
Department of Justice State Prosecutor; LEAH C. TANODRA-ARMAMENTO, In her
capacity as Assistant Chief State Prosecutor and Chairwoman of Task Force on
Business Scam; JOVENCITO R. ZUNO, in his capacity as Department of Justice Chief
State Prosecutor; STANDARD CHARTERED BANK, PAUL SIMON MORRIS, AJAY
KANWAL, SRIDHAR RAMAN, MARIVEL GONZALES, CHONA REYES, MARIA ELLEN
VICTOR, and ZENAIDA IGLESIAS, Respondents.G.R. No. 168380, 8 February 2007
HELD: NO.
All criminal complaints for violations of this Code and the implementing rules and regulations enforced or administered by the Commission shall
be referred to the Department of Justice for preliminary investigation and prosecution before the proper court.
A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it must first be referred to an administrative
agency of special competence, i.e., the SEC. Under the doctrine of primary jurisdiction, courts will not determine a controversy involving a
question within the jurisdiction of the administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the specialized knowledge and expertise of said administrative tribunal to determine technical and intricate
matters of fact.
The Securities Regulation Code is a special law. Its enforcement is particularly vested in the SEC. Hence, all complaints for any violation of the
Code and its implementing rules and regulations should be filed with the SEC. Where the complaint is criminal in nature, the SEC shall indorse
the complaint to the DOJ for preliminary investigation and prosecution as provided in Section 53.1 earlier quoted.
We thus agree with the Court of Appeals that petitioner committed a fatal procedural lapse when he filed his criminal complaint directly with the
DOJ. Verily, no grave abuse of discretion can be ascribed to the DOJ in dismissing petitioner’s complaint.
NORMA D. CACHO and NORTH STAR INTERNATIONAL TRAVEL,
INC., Petitioners vs. VIRGINIA D. BALAGTAS, Respondent
G.R. No. 202974
FACTS: Petitioner Balagtas alleged that she was a former employee of respondent TQ Travel Solutions/North Star International Travel, Inc., a
corporation duly registered with the SEC. She also alleged that she was one of the original incorporators-directors of the said corporation and,
when it started its operations in 1990, she was the General Manager and later became the Executive Vice President/Chief Executive Officer.
After 14 years of service in the said corporation, petitioner was placed under 30 days preventive suspension pursuant to a Board Resolution
passed by the Board of Directors of the respondent Corporation due to her alleged questionable transactions. She was notified by private
respondent Norma Cacho of her suspension and ordered to explain in writing to the Board of Directors her alleged fraudulent transactions
within 5 days from said notice.
While under preventive suspension, petitioner wrote a letter to private respondent Norma Cacho informing the latter that she was assuming her
position as Executive Vice-President/Chief Executive Officer however, she was prevented from re-assuming her position. Petitioner also wrote a
letter to the Audit Manager inquiring about the status of the examination of the financial statement of respondent corporation which request
was, however, ignored. Consequently, petitioner filed a complaint claiming that she was constructively and illegally dismissed.
In their defense, respondents averred that the majority of the Board of Directors of respondent corporation decided to suspend petitioner for 30
days due to the questionable documents and transactions she entered into without authority. The preventive suspension was meant to prevent
petitioner from influencing potential witnesses and to protect the respondent corporation's property. Subsequently, the Board of Directors
constituted an investigation committee tasked with the duty to impartially assess the charges against petitioner.
G.R. No. 202974
FACTS: LA RULING: Balagtas was illegally dismissed
NLRC RULING: The NLRC's findings are as follows: First, through a Board resolution passed Balagtas was elected as North Star's Executive Vice
President and Chief Executive Officer, as evidenced by a Secretary's Certificate. Second respondent Balagtas had in fact admitted occupying these
positions, apart from being one of North Star's incorporators. And, third, the position of "Vice President" is a corporate office provided in North
Star's by-laws.
Based on these findings, the NLRC ruled that respondent Balagtas was a corporate officer of North Star at the time of her dismissal and not a
mere employee. A corporate officer's dismissal is always an intra-corporate controversy, a subject matter falling within the Regional Trial Court's
(RTC) jurisdiction. Thus, the Labor Arbiter and the NLRC do not have jurisdiction over Balagtas's Complaint.
Aggrieved, respondent Balagtas moved for reconsideration but was denied. Thus, she elevated the case to the Court of Appeals via a petition for
certiorari.
CA RULING: In ruling that the present case does not involve an intra-corporate controversy, the Court of Appeals applied a two-tier test, viz.: (a)
the relationship test, and (b) the nature of controversy test.
G.R. No. 202974
FACTS: Applying the relationship test, the Court of Appeals explained that no intra-corporate relationship existed between respondent Balagtas
and North Star. While respondent Balagtas was North Star's Chief Executive Officer and Executive Vice President, petitioners North Star and
Cacho failed to establish that occupying these positions made her a corporate officer. First, respondent Balagtas held the Chief Executive Officer
position as a mere corporate title for the purpose of enlarging North Star's corporate image. According to North Star's by-laws, the company
President shall assume the position of Chief Executive Officer. Thus, respondent Balagtas was not empowered to exercise the functions of a
corporate officer, which was lawfully delegated to North Star's President, petitioner Cacho. And, second, petitioner North Star's By-laws only
enumerate the position of Vice President as one of its corporate officers. The NLRC should not have assumed that the Vice President position is
the same as the Executive Vice President position that respondent Balagtas admittedly occupied.
ISSUE: Whether Balagtas is a corporate officer as defined by the Corporation Code, Case Law, and North Star's By-Laws.
HELD: Respondent Balagtas's dismissal is an intra-corporate controversy.
At the onset, We agree with the appellate court's ruling that a two-tier test must be employed to determine whether an intra-corporate
controversy exists in the present case, viz.: (a) the relationship test, and (b) the nature of the controversy test.
G.R. No. 202974
HELD: A. Relationship Test
A dispute is considered an intra-corporate controversy under the relationship test when the relationship between or among the disagreeing
parties is any one of the following: (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 as far as its franchise, permit or license to operate is concerned; and (d) among the stockholders, partners, or associates themselves.
In the present case, petitioners Cacho and North Star allege that respondent Balagtas, as petitioner North Star's Executive Vice President, was its
corporate officer. On the other hand, while respondent Balagtas admits to have occupied said position, she argues she was Executive Vice
President merely by name and she did not discharge any of the responsibilities lodged in a corporate officer.
The Executive Vice President position is one of the corporate offices provided in petitioner North Star's By-laws.
The rule is that corporate officers are those officers of a corporation who are given that character either by the Corporation Code or by the
corporation's by-laws.
Section 25 of the Corporation Code explicitly provides for the election of the corporation's president, treasurer, secretary, and such other officers
as may be provided for in the by-laws. In interpreting this provision, the Court has ruled that if the position is other than the corporate president,
treasurer, or secretary, it must be expressly mentioned in the bylaws in order to be considered as a corporate office.
G.R. No. 202974
HELD: ARTICLE IV: OFFICERS

Section 1. Election/ Appointment - Immediately after their election, the Board of Directors shall formally organize by electing the Chairman, the
President, one or more Vice-President (sic), the Treasurer, and the Secretary, at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper.
Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary
at the same time.
Clearly, there may be one or more vice president positions in petitioner North Star and, by virtue of its by-laws, all such positions shall be
corporate offices.
Consequently, the next question that begs to be asked is whether or not the phrase "one or more vice president" in the above-cited provision of
the by-laws includes the Executive Vice President position held by respondent Balagtas.
In ruling that respondent Balagtas was not a corporate officer of petitioner North Star, the Court of Appeals pointed out that the NLRC should not
have assumed that the "Vice President" position is the same as the "Executive Vice President" position that Balagtas admittedly occupied. In
other words, that the exact and complete name of the position must appear in the by-laws, otherwise it is an ordinary office whose occupant shall
be regarded as a regular employee rather than a corporate officer.
G.R. No. 202974
HELD: The appellate court's interpretation of the phrase "one or more vice president" unduly restricts one of petitioner North Star's inherent
corporate powers, viz.: to adopt its own by-laws, provided that it is not contrary to law, morals, or public policy for its internal affairs, to regulate
the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its
affairs.
The use of the phrase "one or more" in relation to the establishment of vice president positions without particular exception indicates an
intention to give petitioner North Star's Board ample freedom to make several vice-president positions available as it may deem fit and in
consonance with sound business practice.
To require that particular designation/variation of each vice-president be specified and enumerated is to invalidate the by-laws' true intention
and to encroach upon petitioner North Star's inherent right and authority to adopt its own set of rules and regulations to govern its internal
affairs. Whether the creation of several vice-president positions in a company is reasonable is a question of policy that courts of law should not
interfere with. Where the reasonableness of a by-law is a mere matter of judgment, and one upon which reasonable minds must necessarily
differ, a court would not be warranted in substituting its judgment instead of the judgment of those who are authorized to make bylaws and who
have exercised their authority.
Thus, by name, the Executive Vice President position is embraced by the phrase "one or more vice president" in North Star's by-laws.
G.R. No. 202974
HELD: Respondent Balagtas was appointed by the Board as petitioner North Star's Executive Vice President.
While a corporate office is created by an express provision either in the Corporation Code or the By-laws, what makes one a corporate officer is
his election or appointment thereto by the board of directors. Thus, there must be documentary evidence to prove that the person alleged to be a
corporate officer was appointed by action or with approval of the board.
On the other hand, respondent Balagtas assails the validity of the above-cited Secretary's Certificate for being forged and fabricated. However,
aside from these bare allegations, the NLRC observed that she did not present other competent proof to support her claim. To the contrary,
respondent Balagtas even admitted that she was elected by the Board as petitioner North Star's Executive Vice President and argued that she
could not be removed as such without another valid board resolution to that effect. To support this claim, respondent Balagtas submitted the
very same Secretary's Certificate as an attachment to her Position Paper before the Labor Arbiter.
When Article IV, Section 4 is read together with Section 1 thereof, it is clear that while petitioner North Star may have one or more vice
presidents and the President is authorized to determine each one's scope of work, their appointment or election still devolves upon the Board.
At this point, it is best to emphasize that the manner of creation (i.e., under the express provisions of the Corporation Code or by-laws) and the
manner by which it is filled (i.e., by election or appointment of the board of directors) are sufficient in vesting a position the character of a
corporate office.
Respondent Balagtas also denies her status as one of petitioner North Star's corporate officers because she was not listed as such in petitioner
North Star's 2003 General Information Sheet (GIS).
This is of no moment.
G.R. No. 202974
HELD: The GIS neither governs nor establishes whether or not a position is an ordinary or corporate office. At best, if one is listed in the GIS as
an officer of a corporation, his/her position as indicated therein could only be deemed a regular office, and not a corporate office as it is defined
under the Corporation Code.
Based on the above discussion, as Executive Vice President, respondent Balagtas was one of petitioner North Star's corporate officers. Thus,
there is an intra-corporate relationship existing between the parties.
B. Nature of the Controversy Test
The existence of an intra-corporate controversy does not wholly rely on the relationship of the parties. The incidents of their relationship must
also be considered. Thus, under the nature of the controversy test, the disagreement must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the parties' correlative rights and obligations under the Corporation Code
and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.
The Court consistently ruled that a corporate officer's dismissal is always a corporate act, or an intra-corporate controversy which arises
between a stockholder and a corporation. "The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise of
deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as officer
or as agent or employee, is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist.“
G.R. No. 202974
HELD: In other words, the dismissal must relate to any of the circumstances and incidents surrounding the parties' intra-corporate relationship.
To be considered an intra-corporate controversy, the dismissal of a corporate officer must have something to do with the duties and
responsibilities attached to his/her corporate office or performed in his/her official capacity.
Respondent Balagtas's claim of dismissal without prior authority from the Board reveals her understanding that the appointment and removal of
a corporate officer like the Executive Vice President could only be had through an official act by the Board. And, second, she sought separation
pay in lieu of reinstatement to her former positions, one of which was as Executive Vice President. Even her prayer for full back wages,
allowances, commissions, and other monetary benefits all relate to her corporate office.
Cacho and North Star described in detail the latter's fund disbursement process, emphasizing respondent Balagtas's role as the one who
approves payment vouchers and the signatory on issued checks-responsibilities specifically devolved upon her as the vice president. And as the
vice president, respondent Balagtas actively participated in the whole process, if not controlled it altogether. As a result, petitioners Cacho and
North Star accused respondent Balagtas of gravely abusing the confidence the Board has reposed in her as vice president and misappropriating
company funds for her own personal gain.
From these, it is clear that the termination complained of is intimately and inevitably linked to respondent Balagtas's role as petitioner North
Star's Executive Vice President: first, the alleged misappropriations were committed by respondent Balagtas in her capacity as vice president,
one of the officers responsible for approving the disbursements and signing the checks. And, second, these alleged misappropriations breached
petitioners Cacho's and North Star's trust and confidence specifically reposed m respondent Balagtas as vice president.
That all these incidents are adjuncts of her corporate office lead the Court to conclude that respondent Balagtas's dismissal is an intra-corporate
controversy, not a mere labor dispute.
GLOBAL BUSINESS HOLDINGS, INC. (formerly Global Business
Bank, Inc.), Petitioner, vs. SURECOMP SOFTWARE, B.V.,
Respondent.
G.R. No. 173463, 13 October 2010
FACTS: Global Business Holdings merged with Asian Banking Corporation (ABC), with the former as the surviving corporation. Prior to the
merger, ABC had an existing software license agreement with Surecomp Software, a foreign corporation in the Netherlands for the ABC’s bank
operation system for a period of twenty years. After the merger, Global Business holdings found the software unusable, and therefore terminated
the contract with Surecomp Software. As a result of the early termination, Surecomp filed an action for breach of contract with damages before
the Philippine RTC. Global Business moved to dismiss the case on the ground that Surecomp had no capacity to sue because it was doing business
in the Philippines without a license. RTC ruled in favor of Surecomp hodling that Global Business, being the successor in interest of ABC is
estopped from denying Surecomps capacity to sue, to which the CA agreed, hence this petition.
ISSUE: Whether Global Business Holdings is estopped from denying Surecomp’s capacity to sue.
HELD: YES. As a general rule, a corporation has a legal status only within the state or territory in which it was organized. In order to subject a
foreign corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from the Securities and Exchange
Commission and appoint an agent for service of process, without which it cannot institute a suit in the Philippines. The exception to this rule is
the doctrine of estoppel. A foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen
or a Philippine entity that had contracted with and benefited from it. A party is estopped from challenging the personality of a corporation after
having acknowledged the same by entering into a contract with it. The principle is applied to prevent a person contracting with a foreign
corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the
benefits of the contract.
CRESENCIO M. ROCAMORA, FLORACION RAFOLS-PEDERO, CONCEPCION
PABLEO and REGIONAL DIRECTOR OF THE COMMISSION ON AUDIT
(Region VII), petitioners, vs. RTC-Cebu (Branch VIII), ROBERTO GALVEZ,
ANTONIO NICDAO, TEODULFO REGIS, JUSTINO BO-OC, ERLINDA CUENCO,
ANTONIO PADILLA, LOPE TUDTUD (for himself and in behalf of the heirs
of Emiliano Tudtud), PRIMITIVO BRIONES, OSCAR GARCES NAPISA,
DAVID GARCES (represented by Oscar G. Napisa), ROGELIO SANTIANEZ,
BENITO BERMEJO and CONCORDIO OPULENTISIMA, respondents.
G.R. No. L-65037 November 23, 1988
FACTS: Private respondents filed a complaint against the herein petitioners in the respondent court for specific performance, i.e., payment of the
compensation due them, plus damages and attorney's fees. They were joined later in an amended complaint dated May 20, 1982, by the six other
private respondents who were to take a common stand with the original complainants.
The plaintiffs alleged that their properties had been taken by the government without payment to them, despite their repeated demands, of the
agreed compensation; this consisted of the estimated cost of the improvements and the value of the land at the rate of P350.00 per square meter.
In his answer, petitioner Rocamora declared that he had recommended such payment but the vouchers he had approved for this purpose were
not passed in audit by the other defendants. For their part, the representatives of the COA averred that they could not approve the claims because
they covered the value of the entire buildings and were not limited to the extent of the damage sustained by the owners. he claims had been
returned to the MPH for the necessary adjustments, which were still pending. By way of special and affirmative defenses, they also argued that
their decision had not yet been appealed to the Commission on Audit conformably to law and as required by the doctrine of exhaustion of
administrative remedies. Furthermore, the compensation should be determined not by negotiation but in accordance with the formula fixed by
P.D. 76.
the Trial Judge ruled in favor of the plaintiffs and ordered the payment to them of their respective claims for compensation as prayed for in their
complaint plus attorney's fees and costs.
G.R. No. L-65037 November 23, 1988
ISSUE: Whether the taking of the cognizance of the case despite plaintiff’s failure to exhaust administrative remedies.
HELD: We affirm the salutary rule that decisions of administrative authorities must first be appealed to their superiors in the executive department before
resort to judicial review may be permitted; otherwise, the case may be dismissed for lack of a cause of action.
This is based on sound public policy and practical grounds. One reason is that the administrative superiors, if given a chance, can and will correct the
mistakes of their subordinates, thus rendering judicial intervention unnecessary. Another is that administrative authorities are presumed to be experts
in their respective fields of specialization and their decisions should as a rule not be disturbed by the courts of justice, which cannot claim
similar knowledgeability. A third justification is that these decisions are usually reviewable only in the special civil actions of certiorari,
prohibition and mandamus, which are not accepted except only where there is no plain, speedy and adequate remedy available to the petitioner.
No less important is the consideration that by withholding action until the administrative remedies have been exhausted, the judiciary will be
observing the doctrine of separation of powers and according deference to the acts of a coordinate department of the government.
But the doctrine of exhaustion of administrative remedies is not an inflexible rule. In fact, it yields to many accepted exceptions. As we have
noted in a number of cases, exhaustion is not necessary where inter alia there is estoppel on the part of the party invoking the doctrine; where
the challenged administrative act is patently illegal, amounting to lack of jurisdiction; where there is unreasonable delay or official inaction that
will irretrievably prejudice the complainant; where the amount involved is relatively small so as to make the rule impractical and oppressive; nd
where the question involved is purely legal and will ultimately have to be decided anyway by the courts of justice. At least two of these
exceptions are applicable to the case at bar.
G.R. No. L-65037 November 23, 1988
HELD: In the first place, it appears that the administrative officers have sat on this case for as long as nine months, during which as many as eight
endorsements were made from office to office in an apparently endless discussion and denial of the complainants' claims for compensation. Even the
supposed adjustment of the appraisals to be made by the Ministry of Public Highways was still pending after the complaint was filed and when the
defendants submitted their answer. The matter was apparently hibernating in the doldrums of bureaucratic indecision and inaction. In the meantime, the
complainants remained unpaid despite their repeated demands.
GOVERNMENT SERVICE, INSURANCE SYSTEM, Petitioner, vs.
THE HON. COURT OF APPEALS, (8TH DIVISION), ANTHONY V. ROSETE,
MANUEL M. LOPEZ, FELIPE B. ALFONSO, JESUS F. FRANCISCO, CHRISTIAN S.
MONSOD, ELPIDIO L. IBAÑEZ, and FRANCIS GILES PUNO, Respondents.
G.R. No. 183905
FACTS: GSIS, a major shareholder in Meralco, was distressed over the proxy validation proceedings and the resulting certification of proxies in
favor of the Meralco Management. The proceedings were presided over by Meralco’s assistant corporate secretary and chief legal counsel instead
of the person duly designated by Meralco’s Board of Directors. Thus, GSIS moved before the SEC to declare certain proxies, those issued to herein
private respondents, as invalid. Private respondents contend that dispute in the validity of proxies is an election contest which falls under the
trial court’s jurisdiction. GSIS argues there was no election yet at the time it filed its petition with the SEC, hence no proper election contest over
which the regular courts may have jurisdiction.
ISSUE: Whether the proxy challenge is an election contest cognizable by the regular courts.
HELD: YES.
Section 2, Rule 6 of the Interim Rules broadly defines the term “election contest” as encompassing all plausible incidents arising from the election
of corporate directors, including: (1) any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation,
(2) the validation of proxies, (3) the manner and validity of elections and (4) the qualifications of candidates, including the proclamation of
winners.
Under Section 5(c) of Presidential Decree No. 902-A, in relation to the SRC, the jurisdiction of the regular trial courts with respect to election-
related controversies is specifically confined to “controversies in the election or appointment of directors, trustees, officers or managers of
corporations, partnerships, or associations.” Evidently, the jurisdiction of the regular courts over so-called election contests or controversies
under Section 5(c) does not extend to every potential subject that may be voted on by shareholders, but only to the election of directors or
trustees, in which stockholders are authorized to participate under Section 24 of the Corporation Code.
GOVERNMENT SERVICE, INSURANCE SYSTEM, Petitioner, vs.
THE HON. COURT OF APPEALS, (8TH DIVISION), ANTHONY V.
ROSETE, MANUEL M. LOPEZ, FELIPE B. ALFONSO, JESUS F.
FRANCISCO, CHRISTIAN S. MONSOD, ELPIDIO L. IBAÑEZ, and
FRANCIS GILES PUNO, Respondents.
HELD: YES. G.R. No. 183905
The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on
matters unrelated to the cases enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in
relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on
proxy solicitation, should be properly seen as an election controversy within the original and exclusive jurisdiction of the trial courts
by virtue of Section 5.2 of the SRC in relation to Section 5(c) of Presidential Decree No. 902-A.
That the proxy challenge raised by GSIS relates to the election of the directors of Meralco is undisputed. The controversy was engendered by the
looming annual meeting, during which the stockholders of Meralco were to elect the directors of the corporation. GSIS very well knew of that
fact.

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FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs.

ISSUE: Whether AMEC is entitled to moral damages.

HELD: NO, the doctrine cannot be invoked.

Hence, this petition.

Aguedo Agbayani, a recognized authority on Commercial Law, stated as much:

Section 31 of the Corporation Code expressly states:

ISSUE: Whether BCDA is exempt from the payment of legal fees.

ISSUE: Whether Radio Philippines Network Inc. is a government-owned or -controlled corporation.

CBTC appeal to SEC en banc but likewise denied.

The RTC denied the motion.

HELD: Correspondingly, the Civil Code provides:

HELD: The present Petition has no merit.

ISSUE: Whether the grant of compensation to Salas, et. al. is valid.

3. In case of merger or consolidation.

ISSUE: Whether the act of the BOD ultra vires

ISSUE/S: Whether there has been a quorum.

HELD: The petition is without merit.

HELD: The petition is without merit.

ISSUE: Whether the merger resulted to cessation of employees.

ISSUE: Whether Gelhaar, a foreign corporation is doing business in the Philippines

ISSUE: Whether respondent’s trade name is infringed.

FACTS: LA RULING: Balagtas was illegally dismissed

HELD: Respondent Balagtas's dismissal is an intra-corporate controversy.

HELD: A. Relationship Test

HELD: ARTICLE IV: OFFICERS

B. Nature of the Controversy Test

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